At the end of November, Turkish President Recep Tayyip Erdogan delivered the keynote address at a forum for the country’s national public broadcaster and reaffirmed his support for Gaza. Seyma Yildirim, a Turkish pro-Palestinian activist in the audience, knew that the moment to speak up had come. “I felt compelled to highlight the inconsistency between the stated support for Palestine and the actions on the ground,” she said.

Yildirim and eight others from the Turkish activist group A Thousand Youths for Palestine shouted, “Stop fueling genocide!” in front of live television cameras, calling attention to under-the-radar Turkish oil exports to Israel. Though less visible than arms sales, oil exports are a vital component of Israel’s war machine. As the protesters were escorted from the room, Erdogan’s response was vehement: “Do not be the mouthpiece of Zionists here.”

Erdogan has long made support for Palestinians central to his image as a champion of Sunni Muslims around the world, especially after the Oct. 7, 2023, Hamas attack and the Israeli military assault on Gaza that followed. After initially offering himself as a mediator in the conflict, Erdogan expressed outright support for Hamas and denounced Israel as a “terrorist state [that] is implementing a policy of total genocide against our Palestinian brothers.”

Relations between Turkey and Israel, restored in 2022 after a four-year freeze over the killing of 60 Palestinians by Israeli security forces at the Gaza border, were severed anew last year. On April 9, 2024, Turkey halted exports of products from 54 categories, including construction materials, to Israel. A few weeks later, Turkey halted all bilateral trade. This trade was worth $6.8 billion in 2023, 76 percent of it comprising Turkish exports—primarily steel, construction materials, and mechanical devices.

Erdogan has since said Turkey has “severed all ties” with Israel. The embargo continues amid the cease-fire between Israel and Hamas that came into effect on Jan. 19, and the Turkish leader has pledged to “intensify” efforts to hold Israeli leaders accountable for war crimes.

But researchers with Stop Fuelling Genocide, a campaign to pressure governments to halt energy sales to Israel that is backed by the lobbying organization Progressive International, have produced evidence, shared with the media, showing that cargo ships carrying oil are still traveling from Turkey to Israel despite the embargo and trying to cover their tracks.

Using marine tracking data, port logs, satellite images, and eyewitness testimony, the researchers followed the Seavigour, a crude oil tanker that departed Turkey’s Ceyhan port on Oct. 28, 2024, heading in the direction of Israel. Two days later, it turned off its tracking device. When it came back online after seven days, the Seavigour was heading directly away from the Israeli coast and toward Sicily. Upon docking in Riposto, Italy, it was significantly lighter than when it left Turkey. Between those dates, satellite images showed a tanker visually matching the Seavigour docking at Israel’s Ashkelon port on Nov. 5, according to research notes seen by Foreign Policy. Additional research released to the media in December suggests that other tankers are using the same tactics.

Turkey denies that any shipments are leaving its ports for Israel. On Nov. 10, 2024, the Turkish energy ministry issued a notice insisting that claims of continuing oil exports were “baseless” and that all companies and parties operating from Ceyhan port, from where shipments to Israel would usually depart, are compliant with Turkey’s public embargo.

Yet the issue is more complex than such denials suggest. Oil exports are not simple transactions between two countries but complex diplomatic and legal agreements between multiple state and corporate entities. In this case, oil exports to Israel also implicate one of Turkey’s strongest allies: Azerbaijan. While fully halting oil exports would pose few political costs for Erdogan with regard to Israel, it would be a blow to Turkey’s finances and potentially one of its most important regional relationships—a price it appears that Erdogan is not willing to pay.

Turkey has few energy resources of its own, but it is a major energy transit country, which both brings money into the state coffers and confers diplomatic power. It is crisscrossed by pipelines that bring gas and oil from Azerbaijan, Iraq’s Kurdistan region, and Russia to Turkey and onward to Europe. One of the two oil pipelines transiting through Turkey, which runs from Iraq to Ceyhan, was shut down in 2023 due to a dispute between Ankara and Baghdad. The other, the Baku-Tbilisi-Ceyhan (BTC) pipeline, has been active since 2006, bringing Azerbaijani crude oil from under the Caspian Sea through Georgia and on to Turkey’s Mediterranean coast, where shipments to Israel depart.

In Ceyhan, where the pipeline terminates and the crude is loaded onto cargo ships, signs of the connection with Azerbaijan are everywhere. There is a Turkey-Azerbaijan Brotherhood Park, boasting a monument inscribed with a map of the pipeline’s route and fronted by statues of modern Turkey’s founder, Mustafa Kemal Ataturk, and former Azerbaijani President Heydar Aliyev. (The terminal itself is named after Aliyev.) Relations between the two countries have been fraternal since the collapse of the Soviet Union, but more recently Turkey gained favor by providing significant support to Azerbaijan’s recapture of the Nagorno-Karabakh region from Armenia.

However, the two countries diverge on Israel. Though Erdogan is a vocal supporter of the Palestinian cause, Azerbaijan is a close albeit unusual ally of Israel. Since 2011, the Azerbaijan-Israel relationship has been galvanized by Israeli arms sales to Azerbaijan and Azerbaijani oil sales to Israel. Last January, prior to Turkey’s embargo, Israel was the biggest importer of Azerbaijani oil, purchasing $297 million of crude that month alone, all exported through Ceyhan. (Foreign Policy asked Azerbaijan’s energy ministry and SOCAR, the state oil company, whether exports to Israel through the BTC pipeline are continuing but did not receive a response.)

The corporate interests involved add another layer of complexity. Though Azerbaijan, Turkey, and Georgia signed the deal to build the pipeline, it is operated by BTC Co. Of the company’s 11 shareholders, the biggest is BP. The others are energy companies based in Azerbaijan, France, Hungary, India, Japan, Norway, Turkey, and the United States. Each company has the right to independently sell its share of the produced oil.

Under the Host Government Agreement that Turkey signed with this consortium in 1999, it can only halt the passage of oil through the pipeline in the case of natural disasters, a war on Turkish soil that Turkey has not initiated, or international embargoes. It cannot unilaterally impose a ban on oil from the BTC going to Israel; if it were to do so, it would be liable for compensating stakeholders.

All of this means that, according to the BTC contracts, Turkey cannot block oil shipments to Israel without first securing consensus from the other stakeholders or incurring large penalties. This could give Erdogan an easy scapegoat for the embargo issue; legally, Turkey’s hands are tied. (Turkey’s energy ministry and communications directorate did not respond to requests for comment on whether it was able to impose a unilateral embargo.)

Rather than explaining this, however, Erdogan has doubled down on his pro-Palestinian credentials while Turkey reaps the financial benefits of the oil shipments. Last November, Ozlem Zengin, a deputy with Erdogan’s Justice and Development Party (AKP), revealed to parliament that Turkey earns $1.27 per barrel of oil through the BTC pipeline. With 700,000 barrels flowing through the pipeline daily, that amounts to almost $325 million per year in revenue—a vital source of foreign currency as Turkey tries to reduce its account deficit.

Activists argue that despite the terms of the BTC agreements, Turkey has the power under international law to block oil exports to Israel. Turkey is a signatory to the U.N. Genocide Convention, which obligates it to prevent and punish acts of genocide. As a party to the International Court of Justice’s genocide case against Israel, Turkey also has legal grounds to use its position at the terminal of the BTC pipeline to block exports to Israel, said Naji Muhammed, a campaigner with Global Energy Embargo for Palestine, a U.K.-based lobbying group. “This legal obligation to prevent genocide supersedes any contractual issues,” he said.

For Erdogan, this headache is not going away anytime soon. “People are beginning to understand how the transfer of energy and the genocide are connected,” Muhammed said. Domestically, the allegations are riling much of Erdogan’s religious and pro-Palestinian voter base, particularly young conservatives. Already, the Stop Fuelling Genocide reports detailing the continuing oil exports have triggered protests and brought together political foes—leftists and conservative Muslims—to speak out against the double standards.

The revelations could also create problems for Erdogan internationally, subjecting him to the same accusations of hypocrisy toward Israel that he often levels against Western countries. This could tarnish his reputation in the Muslim world and his attempts to gain leverage over the West in a rapidly shifting Middle East.

With the fall of Syrian President Bashar al-Assad, Erdogan is positioning himself to wield political influence over the new government in Damascus. Ibrahim Kalin, Turkey’s spy chief, traveled to Damascus just four days after Assad fled, and several of Syria’s new ministers have direct ties to Turkey. The United States is already using Turkey as its back channel to Hayat Tahrir al-Sham, the militant group that ousted Assad, sidelining other regional powers.

But if anger among Muslims across the region over Turkey’s continued dealings with Israel were to grow, it might stymie Erdogan’s influence in Damascus, given Israel’s ongoing occupation of Syrian territory.

As for Yildirim, who faces a maximum sentence of four years and eight months in prison for her protest, she sees little hope for a change in Turkish policy. In her eyes, Erdogan is trying to silence those who highlight the gulf between his rhetoric and reality. “Erdogan consistently avoids addressing, or outright denies, the significant trade and business dealings with Israel, particularly those involving large corporations and substantial financial interests,” Yildirim said. “That is a stark reality we cannot ignore.”

Source: Foreignpolicy.com

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Chinese artificial intelligence lab DeepSeek shocked the world on Jan. 20 with the release of its product “R1,” an AI model on par with global leaders in performance but trained at a much lower cost.

Former Intel CEO Pat Gelsinger referred to the new DeepSeek R1’s breakthrough in a LinkedIn post as a “world class solution.” Artificial Analysis’s AI Model Quality Index now lists two DeepSeek models in its ranking of the top 10 models, with DeepSeek’s R1 ranking second only to OpenAI’s o1 model.

It’s not the first time that this Hangzhou-based AI lab has impressed the industry. Funded by parent company High-Flyer—once among China’s top four quantitative hedge funds—the lab has consistently pushed boundaries in AI innovation with its open-source models. In May 2024, DeepSeek’s V2 model sent shock waves through the Chinese AI industry—not just for its performance, but also for its disruptive pricing, offering performance comparable to its competitors at a much lower cost.

The launch of the open-source V2 model disrupted the market by offering API pricing at only 2 RMB (about 25 cents) per million tokens—about 1 percent of ChatGPT-4 Turbo’s pricing, significantly undercutting almost all Chinese competitors. For context, API pricing refers to the cost that companies charge users to access their AI services over the internet, measured by how much text (or “tokens”) the AI processes. A token can be as small as a word or a part of a word.

In December 2024, DeepSeek gained even more attention in the worldwide AI industry with its then-new V3 model. The V3 model was already better than Meta’s latest open-source model, Llama 3.3-70B in all metrics commonly used to evaluate a model’s performance—such as reasoning, coding, and quantitative reasoning—and on par with Anthropic’s Claude 3.5 Sonnet. Even more impressively, this model was released just two months after Anthropic’s latest model launched and in the same month that Meta unveiled Llama 3.3. Once again, DeepSeek’s latest R1 model came only four months after Open AI released a preview version of its o1 model in September 2024.

The gap between Chinese AI labs and their U.S. competitors has rapidly narrowed, and the industry has continued to move at an astonishing pace since the late 2022 release of GPT-3—the first large language model (LLM) that ignited the global AI frenzy, Previously, many U.S. policymakers and business leaders (including former Google CEO Eric Schmidt) believed that the United States held a few years’ lead over China in AI—a belief that appears to be clearly inaccurate now.

U.S.-China AI competition is becoming ever more heated on the industry side, and both governments are taking a strong interest. DeepSeek’s founder and CEO Liang Wenfeng was spotted in a recent meeting with Chinese Premier Li Qiang as the only representative of the AI industry in the room. The week after DeepSeek’s R1 release, the Bank of China announced its “AI Industry Development Action Plan,” aiming to provide at least 1 trillion yuan ($137 billion) over the next five years to support Chinese AI infrastructure build-outs and the development of applications ranging from robotics to the low-earth orbit economy.

The Bank of China’s latest AI initiative is merely one of the many projects that Beijing has pushed in the industry over the years. Back in 2017, the Chinese State Council announced the “New Generation AI Development Plan”—a grand set of strategic guidelines aiming to make China a global leader in AI by 2030, with intermediate milestones to enhance AI infrastructure, research, and broader industry integration by 2025. Since 2017, more than 40 policy and regulatory initiatives have been introduced—with goals ranging from enhancing AI infrastructure to ensuring AI safety and governance.

This includes recent initiatives such as the AI Capacity-Building Action Plan in September, the AI Safety and Governance Framework 1.0, introduced the same month, and the AI Industry Standards System Guidance, published in July 2024.

While these initiatives demonstrate some commitment, the Chinese government has so far played more of a guiding and regulatory role than an investment role in shaping the sector. This contrasts with industries such as semiconductors, electric vehicles (EVs), and solar panels, where the government plays a more pivotal role in development.

Meanwhile, Chinese firms are pursuing AI projects on their own initiative—though sometimes with financing opportunities from state-led banks—in the hopes of capitalizing on perceived market potential. This became particularly evident after ChatGPT-3 showcased breakthroughs in AI technology, which then prompted major technology giants such as Baidu, Alibaba, Tencent, and ByteDance to dive into LLM development.

It took major Chinese tech firm Baidu just four months after the release of ChatGPT-3 to launch its first LLM, Ernie Bot, in March 2023. In a little more than two years since the release of ChatGPT-3, China has developed at least 240 LLMs, according to one Chinese LLM researcher’s data at Github. These range from models created by the aforementioned leading tech giants Tas well as start-ups—such as MiniMax, Zhipu AI, Moonshot AI, and 01.AI—to those developed by prestigious academic institutions, including Peking University and Tsinghua University.

This rapid development underscores the significant progress and focus on AI in China, with industry insiders now remarking that it would be strange not to have an in-house AI model today.

A compelling example of this trend is Xiaomi, a company traditionally focused on consumer electronics and—more recently—the EV sector.

Even Xiaomi is now increasingly venturing into the AI space, developing its own LLM, which highlights the widespread integration of AI development across various sectors in China. Another example is Meituan, a company traditionally focused on delivery services, which has also developed its own LLM and deployed AI assistants on its platform.

Moving forward, DeepSeek’s success is poised to significantly reshape the Chinese AI sector. DeepSeek’s open-source model offers invaluable technical guidance, enabling local tech giants to quickly adopt and build upon its cutting-edge approach with their extensive resources. It will also provide a viable road map for medium- or small-size LLM developers to compete with tech giants in spite of limited resources.

Chinese LLM developers are likely to rapidly optimize DeepSeek’s innovations and deploy them at a pace that poses a serious challenge to U.S. companies. DeepSeek’s reasoning model—an advanced model that can, as OpenAI describes its own creations, “think before they answer, producing a long internal chain of thought before responding to the user”—is now just one of many in China, and other players—such as ByteDance, iFlytek, and MoonShot AI—also released their new reasoning models in the same month.

Moreover, DeepSeek’s success could inject fresh confidence into investors and local policymakers to double down on industry support. Confidence is key—over the past two years, China has faced record-low funding from the private equity and venture capital industry due to concerns about the rapidly shifting regulatory and unfavorable macroeconomic environment.

But DeepSeek’s impact will not be limited to the Chinese AI industry. It will further pervade Silicon Valley beyond its V2 and V3 models. Indeed, a report published in the Information in late January suggested that the biggest U.S. open-sourced player, Meta, is “scrambling” to catch up with the “know-how” from DeepSeek’s V3 and R1 models. DeepSeek’s R1 is MIT-licensed, which allows for commercial use globally. In a recent interview with CNBC, Perplexity CEO Aravind Srinivas shared a similar view.

In Washington, there is an increasingly heated debate over whether the United States’ export control-driven containment strategy needs an overhaul.

Analysts such as Paul Triolo, Lennart Heim, Sihao Huang, economist Lizzi C. Lee, Jordan Schneider, Miles Brundage, and Angela Zhang have already weighed in on the policy implications of DeepSeek’s success. Analysts generally agree on two points: one, that DeepSeek’s model is the real deal, and two, that China’s AI industry is rapidly narrowing the gap with the United States.

Yet it would be unfair to label U.S. export controls on high-end AI chips and semiconductors, introduced in batches in October 2022 and October 2023, as entirely ineffective. Chinese firms such as SMIC have clearly faced challenges, such as low yield rates for advanced 7 nanometer (7 nm) chips and limited progress in advancing beyond the 7 nm node as demonstrated by Huawei’s latest 7 nm smartphone processors and Ascend 910B graphics processing units (GPUs)—critical chips to power AI—manufactured by SMIC’s 7 nm process node.

This shows that export control does impact China’s ability to obtain or produce AI accelerators and smartphone processors—or at least, its ability to produce those chips manufactured with advanced nodes 7 nm and below.

Chinese firms also stockpiled GPUs before the United States announced its October 2023 restrictions and acquired them via third-party countries or gray markets after the restrictions were put in place. These loopholes should be limited by former President Joe Biden’s recent AI diffusion rule—which has proved to be a very controversial regulation in the industry as industry believe the regulations could undermine U.S. AI firm’s global competitiveness by limiting their chip sales abroad, but will take some time and strong enforcement to be effective, given that it has a 120-day comment period and complicated enforcement.

These stockpiled chips have enabled Chinese AI firms to train models on GPUs (e.g. H100, H800, and A100) not too inferior to the ones that U.S. labs are using while advancing domestic alternatives such as Huawei’s Ascend 910B and upcoming 910C GPUs.

That said, export controls have pressured Chinese firms by limiting access to next-generation chips, such as Nvidia’s latest Blackwell GPUs—which began shipping globally in the fourth quarter of 2024 but remain out of reach for China—as well as Nvidia’s next-gen Rubin-series GPU. As these latest generation GPUs have better overall performance and latency than previous generations, they will give U.S. AI labs a hardware and computing edge over Chinese firms, though DeepSeek’s success proves that hardware is not the only deciding factor for a model’s success—for now.

Nonetheless, there is little doubt that U.S. export controls over the past two years have acted as a significant catalyst for Chinese innovation and investment, particularly in sectors such as AI and semiconductors that are directly impacted by these regulatory restrictions. In response, the Chinese government has ramped up its support for key industries, viewing them as crucial for national competitiveness.

This policy shift, coupled with the increasing market potential driven by AI as well as additional market opportunities created by the absence of U.S. companies in China, has attracted a growing number of domestic players. This includes companies such as Huawei, Biren, and Moore Threads in the GPU space, along with semiconductor manufacturing and equipment firms such as SMIC, AMEC, and Naura, which are eager to secure government backing or capitalize the market.

Pressure on hardware resources, stemming from the aforementioned export restrictions, has spurred Chinese engineers to adopt more creative approaches, particularly in optimizing software to overcome hardware limitations—an innovation that is visible in models such as DeepSeek.

The United States’ increasing restrictions have also fostered increased collaboration across the domestic AI value chain, from upstream to downstream, enabling closer partnerships between Chinese companies and in many cases facilitating growing ties between the Chinese government and private sectors. These developments significantly accelerate the pace of domestic innovation, further strengthen local supply chains, and undermine foreign firms’ ability to gain a foothold in China. As a result, China’s technological advancements are increasingly notable in the space of semiconductor and AI, as some experts have already pointed out.

Together, these developments really call into question about the U.S. export control-driven approach and its ability to strike a balance between limiting China’s progress in critical technologies and inadvertently accelerating advancements in these areas. This is a vital question that remains largely unaddressed in Washington.

The rationale behind the U.S. strategy is that by restricting China’s access to advanced AI hardware and limiting its capacity to produce such hardware, the United States can maintain and expand its technological edge in AI, solidifying its global leadership and strengthening its position in the broader strategic competition with China.

However, while the administration of former President Joe Biden has introduced general guidelines on AI governance and infrastructure, there have been few major and concrete initiatives specifically aimed at enhancing U.S. AI competitiveness.

The flaw in this strategy is the focus solely on slowing down competitors without prioritizing the acceleration of domestic innovation and development. As highlighted by Lee, the aforementioned economist, key measures to boost the country’s AI competitiveness must be pursued. Additionally, considering the potential downside of an export control-led strategy laid out earlier, future export controls should be implemented with greater caution, supported by thorough cost-benefit analyses

The U.S. strategy cannot rely on the assumption that China will fail to overcome restrictions. Instead, it must be grounded in a proactive and measured policy framework that ensures that the U.S. outpaces China in AI development if the goal is to prevail in this competition.

In the coming weeks and months, several key developments are likely.

Chinese AI companies, including DeepSeek, will face increased scrutiny from the United States. The Trump administration may also lay out more detailed plan to bolster AI competitiveness in the United States, potentially through new initiatives aimed at supporting the domestic AI industry and easing regulatory constraints to accelerate innovation.

Finally, both the public and private sectors are likely to intensify efforts to address what some are calling a “Sputnik moment” in AI. These developments all point to an increasingly intense U.S.-China technological competition.

As Trump said on Jan. 27, “The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing to win.” While Trump’s Stargate project is a step toward enhancing U.S. AI competitiveness, there’s a long road ahead.

Source: Foreignpolicy.com

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