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By Ken Stibler, Noah Berman and Nojan Rostami. Executive editor: Dan Keeler

Africa

Sahel coup states form new bloc

Burkina Faso, Niger and Mali formed a new confederation this week after breaking away from the regional bloc ECOWAS, which has said it will kick out each of these Sahel states in response to coups, the Guardian reports.

The Alliance of Sahel States (AES) will operate similarly to the bloc from which it split. It will allow for the free flow of goods across borders, pool resources for infrastructure development, and seek investment in the agriculture, energy, and mining sectors, according to a joint communique.

ECOWAS said the new group put the region at risk of “disintegration,” and that it would put $500 million in funding for economic development in the three coup countries at risk. 

• ECOWAS asks Senegal’s leader to try to convince breakaway states to return (AP)

In other ways, AES’ ambitions are larger than ECOWAS’ ever were. Speaking at a summit last weekend, Mali’s interim leader Assimi Goïta said the confederation’s member countries would move “beyond individual national identities,” RFI reports. “Instead of citizens of Mali, Burkina Faso, or Niger, we’ll refer to ourselves as people of the AES.

Zimbabwe looks to deepen carbon trading market

Zimbabwe is finalizing plans for a framework that will allow for the sale of government-backed carbon credits to companies and other countries by the end of this year, Environment Minister Sithembiso Nyoni said on Thursday. The country is hoping its new structure will comply with rules the UN is crafting to govern carbon.

A voluntary market is currently in place, but it is not heavily regulated—or highly respected as a bona fide way to offset emissions.

Zimbabwe and many other lower-income countries are looking to capitalize on those rules, whose rubber stamp could be a boon to African markets. Last year, Zimbabwe announced plans to take 30% of revenue from carbon-credit projects for the first decade of their operation, with the remainder going to developers. Kenya and other major African issuers of carbon credits have sought similar rules.  

Kenyan president dismisses cabinet in wake of protests

Kenyan President William Ruto fired almost his entire cabinet this week as protests against his government continued despite his decision to scrap a controversial tax bill, the New York Times reports. Ruto said that only the foreign minister, Musalia Mudavadi, would keep his job.

The tax bill was aimed at alleviating Kenya’s reliance on debt, but those taxes would have heightened the already-severe cost of living crisis in Kenya, where inflation has made staple goods like food and fuel increasingly expensive. Ruto abandoned the bill in the face of massive protests at the end of June, announcing instead that he would reduce his own budget and audit Kenya’s public debt.

But the new plan hit a snag this week, when Kenya’s Supreme Court ruled that Ruto did not have the authority to order the audit. Ruto earlier said Kenya would borrow an additional $1.3 billion to offset the lost revenue from scrapping the tax proposal. Credit ratings firm Moody’s this week downgraded Kenya’s debt even deeper into junk territory.

Asia

New deregulatory rules set to juice Vietnam’s renewables sector

Vietnam is making it easier for private firms to purchase electricity directly from producers, a change that will accelerate solar, wind, and other renewable energy production, Nikkei reports. 

Previously businesses had to buy energy from the state-owned monopoly Vietnam Electricity, which required them to purchase electricity from the country’s aging grid, leading to major blackouts in recent years. Channeling electricity directly from producer to purchaser is more efficient.

The rule’s success in increasing the feasibility of renewables in Vietnam could position the country to better utilize its Just Energy Transition Partnership (JETP), a $15 billion program designed to accelerate the county’s green transition. Optimism abounded about Vietnam’s green future after the deal was signed into December 2022, but the country’s ongoing reliance on coal has somewhat clouded the arrangement’s future.

Azerbaijan will launch $500m climate fund backed by state oil company

Oil-dependent Azerbaijan will use its petrodollars to raise at least $500 million for green projects before hosting the UN COP29 climate conference in November, a senior official said this week. Azeri officials hope that the fund will be bolstered by investment from other fossil fuel producers, the FT reports.

Azerbaijan is the second oil state in a row to host the annual conference, which brings together thousands of climate activists, policymakers and businesses. But its climate investments are far smaller so far than the $30 billion announced by last year’s host, the UAE. 

Azerbaijan established the climate fund after opposition from Gulf states led the country to scrap proposed plans for global taxes on fossil fuel companies, Reuters reports. Many diplomats and environmentalists criticized the decision to hold the conference in Dubai, and are incredulous that the event is again being held in a fossil-fuel producing country, let alone one that lacks the ability to mobilize large sums toward climate finance.

UN official’s visit stirs questions of Pakistan’s deportation of Afghan refugees

UN High Commissioner for Refugees Filippo Grandi praised Pakistan for pausing its plan to deport Afghan refugees in talks with senior Pakistani officials this week. There was only one problem. Pakistan denies that it has suspended the deportation plan.

• Pakistan reaches $7b loan deal with IMF (FT) 

Pakistan announced last October that it would deport all unregistered Afghan migrants. The policy sparked deep concern among human rights groups, which called it a “violation of refugee and international human rights law.”

Islamabad has since made some concessions, including by extending the right to stay in the country for some 1.5 million Afghan refugees who hold legal documents—at least until next June.

Middle East

Oil companies operating in Iraqi Kurdistan agree to route oil sales through Baghdad

A consortium representing international oil companies operating in Iraqi Kurdistan have agreed to form direct sales agreements with Iraq’s centralized oil marketing agency. Signing such agreements would end years of independent sales and revenue-sharing for the semi-autonomous region of Iraqi Kurdistan, depriving the devolved government of much needed revenues and consolidating centralized, federal control of Iraq’s oil and gas resources. 

This move would theoretically end the year-old freeze on oil exports from Iraqi Kurdistan via pipelines through Turkey—some 450,000 barrels per day—by resolving the conflict over the proper authorization of such exports.

• Kurdish oil smuggling to Iran flourishes (Reuters)

The move follows an official statement by the Kurdistan Regional Government supporting direct centralized sales as a resolution to the legal impasse, which followed Kurdistan Democratic Party leader Masoud Barzani’s visit to Baghdad for “constructive and purposeful dialogue” on resolving such long standing disputes between semi-autonomous Kurdistan and the Iraqi federal government in Baghdad. 

Syria’s diplomatic normalization picks up pace

Saudi Arabia and Syria this week resumed their first regular direct commercial aviation flights in 12 years, achieving another milestone in the process of normalizing diplomatic relations between the countries following the breakout of Syria’s civil war in 2011. Reopening the commercial air travel line builds on progress made earlier in May, when private charter flights shuttled Syrian pilgrims to Mecca for the Hajj.

Syria’s ambassador to Saudi Arabia hailed the “process of development in relations between the two brotherly countries.” Meanwhile, Syria’s normalization process with Turkey continues apace, with RussianPresident Vladimir Putin signaling his opposition to reconciliation talks in Iraq, and instead throwing his weight behind Recep Tayyip Erdoğan’s proposal of a multilaterally mediated summit in Turkey. 

Europe

Turkey lands $1b Chinese EV investment

China’s leading electric vehicle manufacturer, BYD, has committed to invest $1 billion in Turkish EV production facilities, the Daily Sabah reports. The plant, slated to begin operations in late 2026, will have an annual capacity of 150,000 vehicles and create approximately 5,000 jobs. 

• Turkey is back for emerging market investors (FT Opinion)

The move will allow BYD to sidestep potential EU tariffs on Chinese-made EVs and capitalize on Turkey’s established automotive industry. The investment comes at a critical juncture as both the EU and Turkey implement protective measures against Chinese vehicle imports.

For Turkey, this deal represents a significant boost to its ambitions in the EV sector and its broader economic reform agenda. The country is actively courting foreign investments in advanced green technology, with officials indicating ongoing discussions with other European and Asian automakers. 

Ukraine goes green in energy sector rebuild 

Russia’s attacks on Ukraine’s energy sector, which have destroyed approximately half of its peak electricity production, are prompting the embattled country to embed renewable energy into the foundation of its power system, the Washington Post reports. The country is transitioning from large thermal power plants to a decentralized system comprising renewable energy sources, battery storage and small gas-fired turbines.

This strategic shift, spearheaded by Ukrenergo CEO Volodymyr Kudrytskyi, is designed to create a more resilient and eco-friendly energy network that is less susceptible to targeted strikes. But the plan faces significant challenges, including attracting investment to a country at war, especially for long-term projects.

The proposed system, involving thousands of small gas turbines alongside wind and solar farms, could generate between 0.5 and 1 gigawatt of power this winter. However, the transition will require billions of dollars and take years to fully implement and its success will hinge on creating an efficient regulatory framework for a decentralized grid. 

Latin America

Argentines turn to crypto as hedge against inflation and devaluation

Cryptocurrency adoption is surging in Argentina as its citizens grapple with a 276% annual inflation rate, Forbes reports. The country leads Latin America in crypto usage relative to population size, with 2.5 million Argentines visiting major crypto exchanges in 2023.

This surge in adoption is primarily driven by a flight from the rapidly devaluing peso, as Argentines seek refuge in stablecoins, particularly Tether (USDT), to preserve their purchasing power.

The country’s libertarian President Javier Milei has signaled openness to dollarization and competing currencies, which could further legitimize crypto use. However, major exchanges operating in Argentina, including Binance, have yet to register with the national securities regulator, highlighting the potential risks of using cryptocurrencies. 

Latin American nations double down on oil and gas projects

Latin America is seeing a quiet resurgence of oil exploration and production activity, with at least 16 countries involved in approximately 50 major new oil and gas projects, the Guardian reports. Brazil and Guyana are emerging as new powerhouses, expected to register two of the three largest increases in fossil fuel exports by 2035 while Argentina is on track to export natural gas by 2027.

The International Energy Agency (IEA) projects that oil exports from the region will grow strongly as countries such as Brazil, Guyana, Argentina, Ecuador, Mexico and Suriname bet on oil as a source of wealth and economic growth—even as the global market for fossil fuels is expected to start shrinking by the end of the decade.

While proponents argue that less-developed countries have a right to exploit their natural resources for economic development, critics warn of the long-term risks associated with heavy investment in fossil fuels. The IEA cautions that new projects could face significant commercial risks if the world succeeds in transitioning to net-zero emissions by 2050. 

Global

IMF hails EM resilience in the face of global tightening

Emerging markets have demonstrated unprecedented resilience in the face of global monetary tightening, according to the IMF. Despite historically high US interest rates and a strong dollar, capital flows into emerging markets (excluding China) have reached their highest level since 2018, totaling $110 billion or 0.6 percent of GDP last year. 

This IMF attributes the resilience to stronger fundamentals, including more robust fiscal, monetary and financial policy frameworks, as well as more effective implementation of policies and tools. However, the report says there has been a broader retrenchment in global gross capital flows, with inflows declining from 5.8% to 4.4% of world GDP between 2017-19 and 2022-23, and significant shifts in the distribution of flows.

The US has increased its share of global gross inflows and outflows, while China and financial centers have seen substantial declines.

What We’re Reading 

Côte d’Ivoire’s ruling party paves way for president to seek fourth term (Bloomberg)

Can NNPC’s ‘war mode’ save Nigeria’s struggling oil sector? (The Africa Report)

Guinea-Bissau and China upgrades ties (Africanews)

Ethiopia PM becomes first foreign leader to visit Sudan’s army chief in war capital (Sudan Tribune)

Ethiopia and South Sudan agree to build alternate oil pipeline route (Sudan Tribune)

Damaged pipeline piles misery on South Sudan (Voice of America)

South Sudan’s president sacks finance minister, sixth since 2020 (Reuters)

New UK PM Starmer kills Rwanda deportation plan (BBC)

Conflict in DRC threatens trade in key metals, UN experts say (Bloomberg)

Algeria’s desalination ambitions to come with heavy financial burden (Al Monitor)

Egypt’s remittances reach $2.7b in boost to foreign reserves (Al Monitor)

Pakistan’s rooftop solar boom shines spotlight on power crisis (Nikkei)

Bangladesh PM Hasina calls on Chinese businesses to invest (Dhaka Tribune)

Tens of thousands of people protest job quotas in Bangladesh (NYT)

Thailand plans $14b cash handouts for later this year (Reuters)

Indonesia president-elect plans major debt increase (FT)

Indonesia calls for more US investment in its critical minerals (Bloomberg)

Malaysia nears maritime trade deal with Singapore (SCMP)

Georgia’s ‘EU Accession Frozen’ (The Moscow Times)

Non-oil sector drives Oman’s Q1 2024 GDP up to $27.15b (Economy Middle East)
Iran stocks surge on reformist win in presidential election (Donyaye Eqtesad)

Iraq halts financial transactions in Chinese yuan under US pressure (bne IntelliNews)

Oil production in Iraq’s Kirkuk jumps to 360,000 bpd (Oilprice.com)

First-ever sustainable sukuk issuance out of Kuwait (Akin Gump Press Release)

Saudi Arabia warned G-7 against seizing frozen Russian state assets, threatened to dump EU bonds (Bloomberg)

Saudi Aramco set to raise $6b from three-part bond sale (Reuters)

Saudis warned G-7 over Russia seizures with debt-sale threat (Bloomberg)

Middle East startups see funding fall by 34% in first half of 2024 (Al Monitor)

Serbia’s nuclear energy quest opens geopolitical flash point for China, Russia and the West (Radio Free Europe)

Cuba raises pressure on private business (Reuters)

Panama’s president favors joining Mercosur (Mercopress)

Chilean lithium to be eligible for US tax break (Reuters)

Meeting between Brazil’s and Bolivia’s leaders ushers in new era (Mercopress)

Global lithium sector eyes Argentina’s salt flats on tech test run (Reuters)

Argentina’s Milei inks political pact to bolster economic plan (Reuters)

Opinion: The irrelevance of Mercosur (The Economist)

Debt is dragging down the developing world (Foreign Affairs)

We are committed to providing FMN readers with a free weekly digest of politically unbiased, succinct and clear news and information from frontier and small emerging markets.

Please consider becoming a paid supporter to help cover some of our costs and support our continued development of sharp markets-focused coverage and new informational products. Paid subscribers will also gain exclusive access to our quarterly EM/FM report that aggregates EM insights from 25 major banks, international institutions and consultancies.