Dragoman Digest

Gulf rivalries continue to simmer in Sudan despite Iran War

The Iran War has only added to the geopolitical complexity of Sudan’s proxy laden conflict

The civil war between Sudan’s Armed Forces (SAF) and the rebel paramilitary Rapid Support Forces (RSF) has been a focal point of tensions between the UAE and Saudi since its outbreak in 2023. The SAF – the armed forces of the internationally recognised Sudanese government – has received political and diplomatic support from Saudi Arabia, while the RSF has received surreptitious military and logistics support from the UAE. Led by former Sudanese Armed Forces Chief, Muhammad Hamdan Dagalo, the RSF has asserted control over half of the country. Despite losing Khartoum and its wealthy Nile corridor last year, the RSF’s military resilience has been supported by its mining interests in Darfur, and the support of Sudan’s UAE-aligned neighbours. Except for Egypt and Eritrea, which have supported the SAF, there is evidence to suggest that every other country bordering Sudan has allowed the RSF to operate on its territory. Reportedly, Ethiopia has hosted an RSF camp with thousands of fighters near the Sudanese border. The RSF has also used numerous UAE businesses to sell gold mined in Darfur.

The Iran War’s reshaping of regional priorities ultimately makes any sort of peace agreement more unlikely in the shorter term. With the Strait of Hormuz’s closure, secure access to the Red Sea and the Horn of Africa’s trade routes via Sudan has become ever more important to Abu Dhabi. The US, which has attempted conflict resolution through the Quad initiative (Saudi Arabia, Egypt and the UAE), now appears reluctant to pressure the UAE over its support of the RSF. In its most recent sanctions package, the US imposed sanctions on two Colombian companies which it accused of supplying mercenaries to the RSF, whilst tellingly avoiding sanctioning their UAE-based partners.

Saudi Arabia remains a major player. Riyadh recently used its financial leverage to prevent Pakistan from entering into a US$1.5 billion arms deal with the SAF. Without the US, however, Saudi likely lacks the means to decisively end the conflict. The diminishing chances of a speedy resolution compounds Sudan’s misery. The 19 million Sudanese already facing acute hunger will endure further food insecurity given current disruption to fuel, shipping and fertiliser supply chains.

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US-EU target rare earths cooperation to diversify supply chains

Tensions exist between Washington’s unilateral measures and its broader multilateral efforts 

In April last year, China unveiled a highly potent geopolitical weapon. Its extensive export controls on seven heavy rare earth elements and related metals and magnets, threatened widespread closures of factory lines across the US and EU. Despite a tentative trade truce with China, the US has continued efforts to reduce reliance on China, which controls 90 percent of rare earths processing.

In recent days, EU Trade Commissioner Maros Sefcovic and US Secretary of State Marco Rubio signed a memorandum of understanding over critical minerals, signaling the latest allied effort. Among the trade measures discussed were coordinated stockpiles and bilaterally coordinated price floors. A price floor would set a minimum reference price for rare earths and would be aimed at making Western projects economically viable amid competition from lower cost and heavily subsidised Chinese peers. The US$110 per kg floor price for neodymium-praseodymium included in the Pentagon’s offtake agreement with MP Materials last year is already serving as an industry benchmark. Pilot projects to test how the price floor mechanism would work in practice are expected before the end of the year.

This latest framework builds on a plethora of initiatives in Washington that in practice may undermine any proposed bilateral action plan. Most notable is Project Vault, the US Export-Import Bank’s (Exim) US$12 billion stockpile plan. Under Exim’s plan, the US will buy and store emergency supplies of critical minerals and rare earths. However, with the entire market for rare earths being valued at around US$6 billion, funding outlays of this size would likely severely limit the EU’s ability to access available non-Chinese supply. More broadly, there are major uncertainties around how an EU-US price floor would work in practice. The adjustable tariff policies favoured by Washington to maintain the integrity of price floors remain contentious in Brussels. The renewed push for a coordinated response stands as a tacit acknowledgement from Washington that unilateral measures alone will be unable to overcome China’s stranglehold.

China eyes relative advantage in dealing with second-order effects of Hormuz closure

China is much less vulnerable to urea supply disruption than many other major economies

The crisis in global supply chains from the effective closure of the Strait of Hormuz extends well beyond oil and gas. Flows of hydrocarbon-based feedstocks for industrial and agricultural production – such as sulphur and urea – are also impacted.

For most countries the impacts – reduced supply, increased prices – are negative. For China, the impacts are mixed, and potentially of relative advantage in some areas. One such area is in urea – a key input as fertilizer in global agricultural production. Saudi Arabia (and Egypt) are the world’s largest exporters of urea, which is produced from reforming natural gas. About 40 percent of global supplies normally transit the Strait of Hormuz. China, however, is a large urea producer. China has used its abundant supplies of coal to achieve near self-sufficiency in urea production, with around 80 percent of urea being produced via coal-based gasification processes. This has significantly reduced China’s exposure to volatile LNG prices– at least for the purposes of the production and trade in urea.

China has also been developing a urea export industry. Urea from China accounts for 20 percent of fertilizer imports in major agricultural producers such as Brazil, Indonesia and Thailand. While Beijing has restricted exports to protect the domestic market in the immediate wake of the Iran conflict, China will benefit from ongoing constraints on supplies from the Persian Gulf, and the accompanying price increases (up from around US$400/tonne FOB before the war to more than US$750). Indeed, urea stands to emerge as a key global commodity through 2026 and 2027, with China well placed to employ its market position to strategic effect. Offering supply security is an emerging source of strategic leverage.

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