Subscribe to our weekly newsletters for free

Subscribe to an email

If you want to subscribe to World & New World Newsletter, please enter
your e-mail

Diplomacy
Create a sleek, futuristic background for a technology summit, featuring a glowing digital map of africa on a blue background. the design should include modern tech elements like neon circuits, digital grids, and abstract data streams, all in vibrant

The politics of locationality: Interrogating AI development, locational (dis)advantage and governance in Africa

by Vincent Obia

Abstract The paper considers the question of location in the development and governance of artificial intelligence in Africa. The discussion draws from ideas on locational advantage and the mix of factors that affect inequalities in AI development and how this influences the ability that countries have to shape AI norms, cultures and governance. It analyses policy documents and internet databases to highlight Africa’s place in AI development, the continent’s governance approach and the symbiotic relationship that explains the influence of advanced countries and tech corporations in the AI landscape. Based on this, it proposes the concept of the ‘politics of locationality’ to extend our understanding of how the power resident in AI systems is associated with their primary situatedness and how this reality, in turn, (re)produces imbalances and unequal opportunities for Africa in AI development and governance. It concludes with implications for Africa’s contribution to global AI cultures, design and governance at this time of pressing need for well-balanced AI policies. KeywordsAI governance, culture, ethics, inequality, locational advantage, politics of locationality Introduction The race for supremacy in AI development and governance has gathered pace among leading countries such as the US, European nations and China (Bradford, 2023). Many of the largest AI companies and models trace their origins to these countries and benefit from massive investments in computing, data and skills (Moorosi, 2024). By contrast, African countries mainly boast of AI startup ecosystems coordinated by technology hubs such as Kenya’s ‘Silicon Savannah’ (Eke et al., 2023) and African journalists have had to grapple with tools like ChatGPT, given the relevance of generative AI for media production (Gondwe, 2023). Although many of these experiences show Africa’s creative potential in the AI sector, as well as its growing market for AI technologies and tools (Okolo et al., 2023), there remain complex historical, cultural, political, legal, economic, labour and data factors that the continent faces in its drive towards AI development and governance. This mix of factors is a subject that scholars have considered to varying degrees (Muldoon and Wu, 2023; Png, 2022). I build on this by examining the question of locationality within that mix and how locationality helps to explain aspects of the symbiotic relationship between countries and platforms in shaping AI design and governance principles within a global context. My discussion sits at the intersection of critical media studies (Ott and Mack, 2014), digital geopolitics (Wong, 2021) and AI studies (Crawford, 2021), seeking to demonstrate why AI, understood as a political tool for constructing knowledge and generating maps of meaning, should be situated. This focus on situatedness further ties into studies on economic geography and locational advantage (Dunning, 1998; Iammarino and McCann, 2013), which explain why multinationals such as AI companies are more likely to choose certain locations as headquarters and how these locations are better placed to acquire greater leverage and power. It relates to the understanding that the location where a technology company is headquartered has considerable influence to shape that company’s decisions (Sargsyan, 2016), presupposing that advanced AI development confers locational advantage on the place where this development is primarily domiciled, making it a locus of power in shaping global AI ethics, norms and governance. This presupposition is what I interrogate by asking: How do issues around the location of AI development explain the impact that African countries have to shape AI design, cultures and governance in light of inequalities between advanced nations and the majority world? This question is crucial as it indicates which countries are better positioned as key definers of AI at a time when the design, norms, ethics, principles and governance of the technology are being concretised. It also leads to my argument on what I call the ‘politics of locationality’ as a concept to advance our understanding of how the primary situatedness of leading AI companies in advanced locations (such as the Global North) reveals inequalities in AI development and governance in the majority world. In this paper, advanced locations refer to the US, Europe and China – following Bradford’s (2023) description of them as the three digital empires, having the capacity not only to define the digital ecosystem in line with their cultures and priorities, but also shape the digital values of other countries that fall under their influence. The discussion that follows flows through a review of the literature, my methodology and findings, culminating in my argument on the politics of locationality. Locationality and the mix of factors in AI development Across the AI landscape, ethical principles are vital because they guide AI development, design and governance (Tidjon and Khomh, 2022). In Africa, some of the ethical and cultural values that researchers contend should guide AI development include ubuntu (communal humaneness), humanism and indigenous knowledge (Nayebare, 2019; Mhlambi and Tiribelli, 2023). Not enough of this has been realised, however, given that AI technologies on the continent remain a largely Western import (Eke et al., 2023). Nonetheless, home-grown African AI systems have been on the rise, evident in the creation of technology centres such as Kenya’s ‘Silicon Savannah’, Ethiopia’s ‘Sheba Valley’ and Nigeria’s ‘Yabacon Valley’ (Eke et al., 2023). The centres serve as ecosystems that provide leverage for AI startups that are supported by communities such as Data Science Nigeria and Deep Learning Indaba (Nuwer, 2024). Okolo et al. (2023) found that there are at least 102 of these startups in Africa. But they face challenges ranging from limited infrastructure for energy and computing-intensive technology and lack of expertise (Nuwer, 2024). These challenges presuppose that AI development on the continent is likely to lag behind global advancements – with implications for the influence that the continent has as a place from which AI norms, ethics and governance are shaped. The US remains a dominant player in shaping AI ethics and governance. Chan et al. (2021), for instance, observe that the US is predominant in the AI development space, in line with its economic and cultural dominance and China follows closely behind, pointing to a US-China tech war in digital geopolitics (Wong, 2021). China, in particular, has exported AI facial recognition and smart city technologies to Africa, serving as the continent’s largest foreign ICT investor (Lin, 2024), with increasing access to African datasets (Okolo et al., 2023) – a worrying trend. Also, investments in AI still concentrate in countries like the US and China, with only 1% of global venture capital flows into Africa (Moorosi, 2024). This means profits from AI development are typically reinvested in the leading countries, creating further disparities between them and the majority world (Chan et al., 2021). Although major tech companies (e.g. Google and Microsoft) have invested in Africa by establishing AI labs in African countries, Chan et al. (2021) note that it is common for staff working in these labs to be based in advanced countries. These major AI companies have also diversified their locational presence by outsourcing some operations through an international division of labour across Africa. But they tend to do so in exploitative ways such as hiring low-wage data annotators, highlighting the continent’s locational disadvantage (Ludec et al., 2023). What this points to is the relation of labour and capital, which further underscores Muldoon and Wu’s (2023) description of the global AI supply chain as colonial, since it is actualised through an international division of digital labour that extracts value from labour in the majority world for the benefit of Western technological companies. It also reinforces hegemonic knowledge production through Western values and knowledge that marginalise non-Western alternatives (Muldoon and Wu, 2023). This hegemonic knowledge production leads to questions on the role of the human in the machine, since AI is not based on abstract models, but is embedded in human agency and cultural values (Natale and Guzman, 2022). Additionally, this hegemonic knowledge production not only ties into discourses on power in critical media studies (Ott and Mack, 2014), but also on the relevance of AI for creative and cultural work (Lee, 2022) – as seen in the use of ChatGPT, which, African journalists say, is built on a poor and non-representative African corpus and perpetuates stereotypes of the continent (Gondwe, 2023). What the foregoing, therefore, indicates are the mix of historical, technological, economic, labour and cultural factors that underpin AI development and deployment in Africa’s locational context, with implications for governance outcomes. AI governance and digital regulation in Africa In terms of governance, state actors in Africa have drawn up policy and legal instruments at local levels and are only just taking part in global multistakeholder conversations. Examples of these multistakeholder fora include the AI Governance Alliance of the World Economic Forum (2025), where three African countries (Rwanda, South Africa and Kenya) are represented and the Global Partnership on Artificial Intelligence (2025), where Senegal is the only African country. It is unclear what influence African countries wield in multistakeholder bodies like these, but the indication is that inclusion is usually performative and exists for ‘virtue signalling and promotional purposes’ (Png, 2022: para. 17). At continental and regional levels, Plantinga et al. (2024) observe that African countries have increasingly turned towards AI strategies, but without considering how feasible these are to implement and their suitability to local contexts. There are also data localisation laws, which stipulate that data be stored and processed in the location where they are generated, with restrictions on data transfers across borders (Giovane et al., 2023). These laws, which point to the geographical relevance of data, have been introduced by at least 16 African countries, including Mauritius, Lesotho and Ivory Coast; they are also present in legal instruments on data protection, financial transactions, cybersecurity and telecommunications in several countries across the continent (CIPESA, 2022). Locationality is therefore the underlying principle in data localisation, underscoring the importance of data for AI control and governance. Sargsyan (2016: 2224), for instance, notes: ‘countries that host intermediaries’ data centres and offices have more opportunities to exercise influence over companies’ decisions and claim jurisdiction over data stored in their territory.’ What is crucial here is the presence of data centres which is vital for AI production, and African countries face challenges in relation to data, since the continent’s data centre landscape is nascent although growing (DCByte, 2023). When it comes to enforcement, only a few countries have been successful in imposing local laws and claiming jurisdiction over data stored in data centres, the most successful being the US (Sargsyan, 2016: 2231). This underscores the difficulties of AI policy implementation that African governments face, since, as CIPESA (2022) notes, there is barely any evidence that data localisation laws have been enforced in Africa. Where implementation has been more practicable is in the imposition of internet taxes on users in countries like Guinea, Benin, Uganda and Zimbabwe (Bergére, 2019). The infrastructure platforms through which governments enforce the taxes are local Internet Service Providers (ISPs) and telecommunication providers (Bergére, 2019). The same process finds expression in the imposition of internet bans in Africa – enforcement targets usage disruption and is done through local ISPs (Parks and Thompson, 2020). African countries ordinarily enjoy a positive balance of power in comparison with local ISPs. Also, the fact that major tech and AI companies can be banned from operating or delivering services in any African country points to the power that the state has to impose controls as a means of last resort. Users can also deploy collective action against AI companies (Fratini and Musiani, 2024). All these highlight the diverse ways in which power and governance are contested at local levels but say little about the place that Africa holds in contributing to and shaping AI ethics, governance and worldviews in the global sense. If, as Sargsyan (2016) notes, the location where a technology company is headquartered has significant powers to influence the decisions of the technology company, then what does Africa’s record in AI development imply for its ability to shape AI design, ethics, cultures and governance? This question is what I aim to answer in interrogating the relevance of the politics of locationality for AI in Africa. Method To this end, I draw from a methodological approach informed by textual analysis of AI policy documents and critical analysis of internet databases containing the location associated with AI companies/models. For the AI policy documents, I focussed on three domains. The first domain concerned the AI policies of African countries, where I selected the AI Strategies of four countries: Mauritius (Mauritius AI Strategy, 2018), Egypt (Egypt AI Strategy, 2021), Rwanda (Rwandan National AI Policy, 2022) and Nigeria [draft] (Nigerian AI Strategy, 2024), representing South, North, East and West Africa respectively. I also reviewed the African Union’s (2024) AI Strategy. Mauritius, Egypt and Rwanda are particularly relevant because they are the first three countries to introduce AI strategies in Africa. I chose AI strategies because they comprise one of the major emphases for policymakers on the continent (Maslej et al., 2024). I analyse the strategies based on themes, which I developed after reviewing and coding the texts. The second domain included the AI policies of leading global players in AI: the US, EU and China. Here, my analysis aimed to ascertain whether these policies mandate AI firms to develop their technologies in line with principles and standards upheld by the leading countries. The third domain included the policies of some of the largest AI companies/models: OpenAI and Gemini (for the US), Darktrace (for the UK) and UBTECH and Qwen (for China). My aim was to examine whether these AI companies/models subject their policies and practices to the countries or places where they are headquartered. For the database searches, I accessed and reviewed the following to ascertain the location of AI companies globally: Datamation (see Jungco, 2024), AI Directory (2024) and the Companies Market Capitalisation (2024). I also drew from sources such as Epoch AI (2024), the Emerging Technology Observatory’s (2024) AI Country Activity Tracker and the AI Index Report (Maslej et al., 2024). Overall, my goal was to assess Africa’s place in AI development in comparison with the leading countries in AI before considering the leverage that locationality affords to nations when it comes to AI design, ethics and governance – the underlying premise for the politics of locationality. Locational advantage and AI development in Africa While acknowledging the mix of factors that comprise AI development, my findings focus on locationality by considering the number of AI companies headquartered in Africa and elsewhere. Here, I found that most AI companies are headquartered in advanced countries, with many of the largest AI companies being in the US. These are companies that have significant capitalisation as listed on the Companies Market Cap to scale globally and invest in AI infrastructure and models that fundamentally impact societies. Jungco’s (2024) review shows that the overwhelming majority (80%) of these companies are based in the US (81 out of 101 companies). The closest to this was the UK, which had eight companies out of 101. India and Canada had three each; China and Germany had two each; and Israel and Hong Kong had one each. The same is true for data compiled by AI Directory (2024) and the Companies Market Capitalisation (2024). I compiled the three listings (Jungco, 2024; AI Directory and the Companies Market Cap) and removed duplicates. The combined list comprised 234 of the largest AI companies (see Table 1), ranging from Apple valued at $3.3 trillion to FR8Tech valued at $2.1 million. The outcome shows that at 73%, the US is the undoubted leader. It is followed by India (5.98%), the UK (5.56%), China (2.99%) and Canada (2.56%). There is no African country on the list.   There is a similar outcome for data on notable AI models, such as OpenAI’s ChatGPT, Alibaba’s Qwen and Meta’s Llama. Table 2 shows that, when isolating for AI models owned by organisations or entities that come from only one country, two-thirds (67.7%) of these notable AI models are traceable to the US. Again, no other country comes close; the closest countries are the UK, China, Canada and Germany. Maslej et al. (2024), in the AI Index, also show that foundation AI models, which are the basis for generative AI, are far more prevalent in the US. Again, there are no entries for Africa.   If Africa does not serve as a headquarter for the largest AI companies or models, what then can be said about AI startups? To answer this, I consulted the 2024 AI Country Activity Tracker, which presents data on the number of approved AI patents based on country locations, including patents for AI startups. The data, presented in Table 3, show that Africa is only ahead of the Middle East; even at this, Africa accounts for only 0.000006% or 157 of the 250,224 AI patents captured in the tracker. And only three African countries account for the continent’s figures: South Africa (139 patents), Morocco (17 patents) and Kenya (1 patent). Although this figure of 157 is slightly more than the 102 startups that Okolo et al. (2023) provided, the conclusions are similar: Africa has some way to go in making up for AI development in the future.   All these show that although Africa provides labour and data for AI companies globally and is poised to be a significant market as internet connectivity spreads (Access Partnership, 2024), it barely serves as a headquarter for AI companies, particularly the largest ones. This underscores Africa’s nascent standing in AI development and suggests that African countries will likely be constrained in their ability to shape wider AI ethics, cultures and governance. It perhaps explains why no African country has passed AI legislation into law (although some attempts are underway), with focus instead on AI task forces, national policies and strategies (Maslej et al., 2024). I turn next to the analysis of these strategies to examine the policy approach to AI development and governance in Africa. Analysing AI strategies in Africa My analysis of the AI strategies/policies of Mauritius, Egypt, Rwanda, Nigeria and the AU shows that they coalesce around four main themes: AI adoption for economic growth, AI partnership and collaboration, improving AI ethics and governance and strengthening local AI capacity. The focus on AI for economic growth is understandable, given that AI’s potential for economic transformation is a major attraction. This focus, which is present in all the strategies, highlights how AI can enhance economic development in various sectors (see in particular, the Mauritian Strategy). But more important, in the context of my discussion, are the inequalities in international cooperation and multistakeholder governance that the strategies point towards. To establish this, I refer to Pillar Two of the Nigerian AI Strategy, which underscores the need for partnership and collaboration among local and international stakeholders to leverage AI expertise and resources. The Rwandan AI Policy also recommends international partnerships and collaboration in AI development. But collaborations, especially with international private actors, highlight the need to evaluate where the major partners come from. These partners can collaborate with African countries and invest in AI, but they still operate primarily by rules set in their home countries, even if they also subscribe to laws in subsidiary countries (I establish this point in the next section). The exception would be collaboration within the continent, as can be found in the Egyptian and AU Strategies. The third theme, which focusses on ethics and governance, acknowledges the risks of AI and the need to mitigate them. It considers the importance of having AI principles such as fairness, transparency and accountability (see the Nigerian Strategy). The AU Strategy also mentions the need to guard against bias and risks to African values, indigenous knowledge and cultural heritage. This is connected to the AU’s Agenda 2063, which has a media and culture mandate to support inclusive and ethical AI through values such as ubuntu. But the plan to address these risks, for the most part, points to multistakeholder governance. The Egyptian Strategy, for instance, seeks to ‘actively contribute to global efforts and playing an active role in AI in different international fora’ (Section 5.1). Rwanda’s Policy also intends to ‘actively contribute to shaping responsible AI principles and practices in international platforms’ (Key Policy Recommendation 14). Likewise, the AU Strategy promotes a ‘multi-tiered governance approach’ (Section 2.4.1). They highlight a move towards greater inclusivity in international governance – hence the use of the word ‘actively’ in many of the strategies. My point, however, is that no matter how ‘actively’ African countries intend to influence AI cooperation, ethics and governance, there is a need to first reckon with Africa’s standing in AI development. Policymakers on the continent seem to have recognised this reality, and it is noticeable in their focus on strengthening local AI capacity. The AU Strategy, for instance, notes that Africa faces challenges around lack of computing platforms, limited data for training AI models and a scarce supply of AI skills, observing that, as of 2023, all the world’s supercomputers are located in only 30 countries. The Nigerian Strategy also recognises the need to build ‘affordable and localised infrastructure foundations and the compute capacity’ (Section 1.4.2) by making high-performance computing available. In Rwanda and Egypt, there is emphasis on AI training in schools. Evident here is a recognition that the continent lags behind in AI development, although it has a growing AI startup ecosystem and an unsaturated market for AI. It underscores the need to interrogate AI development, the locational advantages and disadvantages it represents and its links to governance inequalities. I argue that this should be a major consideration in Africa, based on what I describe as the politics of locationality. The politics of locationality Having established the foundational basis for my argument, I now define the politics of locationality as the way in which the power resident in Big Tech and AI systems is associated with their primary situatedness in places of advanced technological and AI development and how this underlying reality, in turn, (re)produces imbalances and unequal opportunities for AI development and governance faced by countries in the majority world, particularly Africa. The politics of locationality highlights the mix of advantages that countries such as the US, China and those in Europe where the largest AI companies are headquartered have. By contrast, African countries, despite advances that have been made in the AI startup ecosystem and state policy interventions, suffer from a range of disadvantages in locational, political, economic, cultural, data, labour and historical spheres. Addressing this mix of disadvantages is what the continent needs to become a location of influence from which the values, ethics and governance that circumscribe AI can be shaped. To expand on my argument, I refer to the AI policies of some of the largest companies and the guiding principles for AI that leading tech countries have drafted. Take OpenAI for instance. The OpenAI (2024) Terms of Use specify that dispute resolution between the company and users anywhere in the world would be coordinated by National Arbitration and Mediation, headquartered in New York. The law that governs the arbitration is the US Federal Arbitration Act. It adds that, ‘California law will govern these Terms’ and ‘claims arising out of or relating to these Terms will be brought exclusively in the federal or state courts of San Francisco, California’ (see Governing Law Section). This is not surprising, given that OpenAI is headquartered in San Francisco. Also, for Gemini (2024), owned by Google, the governing law of its User Agreement is the laws of New York, and the Agreement is seen as a ‘contract wholly entered into and wholly performed within the State of New York’ (see Governing Law Section). I found a similar pattern in the UK and China. In the UK, Darktrace (2024), an AI cybersecurity firm, notes that the governing law of its Master Services Agreement is the laws of England and Wales, except if the customer is located in the US, in which case the laws of California apply. In China, Section VII of the Terms of Use of UBTECH (2023), an AI robotics firm, states: ‘The establishment, effectiveness, performance, interpretation and dispute resolution of this [user] agreement are subject to the laws of the People’s Republic of China (excluding Hong Kong, Macau, Taiwan).’ The same goes for Alibaba’s Qwen (2023), which is covered by the Alibaba Cloud International Website Terms of Use, the governing law of which is that of Singapore, where Alibaba has its office in the Asia Pacific. Hence, I note that AI companies uphold the laws of the countries where they are headquartered, and they subject the governance of their technologies to these laws. AI companies have also come under sustained pressure to develop rules according to the values, ethics and standards of their host nations, thanks, in part, to the dictates of digital geopolitics and the competition for AI supremacy. The US, for instance, had the Biden Administration’s Executive Order on Safe, Secure and Trustworthy Artificial Intelligence (US Executive Order, 2023), through which it sought to promote an AI market that emphasises US innovation and leadership on AI (Section 2(h)) and the need to encourage international partners to support the voluntary commitments of US AI companies (Section 11(a)(ii)). But these voluntary commitments are underpinned by the need for US leadership and ‘to ensure that artificial intelligence is aligned with values shared by all Americans’ (proposed National AI Commission Act (2023), Section 3(g)(1)). The Biden Executive Order was replaced in January 2025 by the Trump AI Executive Order, aptly named, ‘Removing Barriers to American Leadership in Artificial Intelligence.’ All these underscore that a key intention of US policy is that the design of AI mirrors America’s geopolitical leadership, cultural norms, ethics and jurisprudence. A similar line of argument applies to Europe and China. In Europe, the first clause of the European Union (2024) AI Act says its purpose is to lay ‘a uniform legal framework’ for AI development and deployment ‘in accordance with Union values’ (Section 1) and it supports the ‘European human-centric approach to AI and being a global leader’ in AI development (Section 8). In China, there is the Generative AI Measures released in August 2023. The regulation includes a stipulation that generative AI technologies should not produce content that incite the ‘subversion of national sovereignty or the overturn of the socialist system’ (Henshall, 2023: para. 2). The same ethos is evident in China’s 2023 Management of Deep Synthesis of Internet information Services enacted by the Cyberspace Administration of China (2022). It mandates that in developing products such as AI, companies must abide by Chinese laws, correct political direction and value orientation. This was clearly evident in the January 2025 roll out of DeepSeek, a China-based AI assistant, which when asked about Tiananmen Square, refused to answer, saying it follows ‘ethical guidelines’ and added: ‘I respect the laws and cultural contexts in which I operate’ (author’s conversation with DeepSeek). It goes to show that expansive or restrictive design and deployment of AI technologies are subject to the value system prevalent in their originating countries. Hence, the politics of locationality sustains the different visions that leading tech countries have of AI in their battle for supremacy – visions that are not necessarily inclusive of African perspectives even though they find expression on the continent through pervasive deployment and usage. Conclusion In this paper, I have examined the importance of the location of AI companies and, by so doing, introduced the politics of locationality as a concept to extend our understanding and explain the standing that nations have in AI development and how this translates to the influence they wield in AI governance. My discussion showed that although Africa has a growing AI startup ecosystem, a burgeoning user market base and state influence in policymaking, the continent still faces a mix of disadvantages in historical, technological, political, legal, economic, labour and data spheres. This mix reveals the locational disadvantage that confronts Africa as a place from which AI ethics, cultures and governance can be shaped in the global sense. It relates to Hassan’s (2023) point on the ‘lack of African AI innovations that are rooted in the local context but [have] the potential to compete at the global scale’ (p. 1430). What I found was that AI companies that have global scale and presence are headquartered mainly in leading tech countries (the US, China and European nations) and have subjected themselves to the governing laws of these countries. Conversely, the laws and policies of leading tech countries mandate that these companies, among other things, embed the respective country’s ethos, values and cultures into AI systems. The link between AI systems and cultural values as outlined in this paper, therefore, points to the connection between media and cultural studies and AI. In particular, the paper highlights the importance of considering how AI is produced and shaped by cultural understandings, and how AI further projects, shapes and extends culture. It suggests the need for greater research emphasis on the connections between media, AI and culture, given that AI represents the intersection of human labour, machine learning, infrastructure (e.g. data centres), mineral resources (e.g. lithium), media inputs (vast troves of data: information, texts, pictures, videos, maps, and codes) and classification systems that all combine to transform AI models into mechanics of knowledge construction (Crawford, 2021). The outcome are mediated outputs (e.g. AI responses to prompts and automated decisions) – outputs that simultaneously represent and transform culture, even as they are shaped by it. Equally crucial and more important, in the context of this paper, is the need to consider the locationality of it all. By this I mean the globalised and complex interaction of locations in AI development and governance that potentially determines whose culture is elevated and whose culture is progressively silenced in a relationship defined by hegemony and inequality. Key to understanding this hegemony-inequality mix is the principle of locational advantage, which Iammarino and McCann (2013) describe as a two-way relationship between multinationals and their locational headquarters, noting that just as location is becoming increasingly vital for multinationals, so also are multinationals progressively more important for location (i.e. cities or countries). It underscores my argument on the politics of locationality, which shows that just as large AI firms need locations, such as the US or China, that have the right mix of advantages to serve as headquarters, so also do leading tech countries need and use these firms in setting the cultural and governance paradigm for AI technologies. This structural makeup reflects the imbalances in AI development, explaining why AI governance systems exist within institutional-heterogenous regimes that reproduce Global North dominance (Png, 2022). Addressing these imbalances is what African countries, supported by the AU, should focus on, and there are initial signs that African countries are starting to do this (as seen in the AI strategies). However, a bolder and more robust approach to AI development that is attuned to Africa’s unique sociopolitical context and economic evolution is needed to confront the imbalances tied to the politics of locationality. By so doing, Africa can be positioned to assume locational advantage, with important consequences for inclusive AI and the contribution of global majority countries to the cultures and values embedded in AI systems and the ethics and frameworks by which they are governed. AcknowledgmentsThe author extends appreciation to the editors and reviewers for their helpful and constructive comments, and also to the participants at the 2023 International Symposium on AI Cultures at the University of Turin for their feedback – all of which strengthened the article.Declaration of conflicting interestsThe author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the Leverhulme Trust as part of an Early Career Fellowship. The University of Sheffield provided open access funding.ORCID iDVincent Obia https://orcid.org/0000-0003-1650-9103ReferencesAccess Partnership (2024) Tech Policy Trends 2024. Available at: https://accesspartnership.com/tech-policy-trends-2024-the-global-south-is-the-new-epicentre-of-internet-governance-innovation/ (accessed 4 January 2025).African Union (2024) Continental artificial intelligence strategy. Available at: https://au.int/sites/default/files/documents/44004-doc-EN-_Continental_AI_Strategy_July_2024.pdf (accessed 10 October 2024).AI Directory (2024) Database of artificial intelligence & machine learning companies. Available at: https://www.aidirectory.org/ (accessed 10 September 2024).Bergére C (2019) “Don’t tax my megabytes”: Digital infrastructure and the regulation of citizenship in Africa. International Journal of Communication 13: 4309–4326.Bradford A (2023) Digital Empires: The Global Battle to Regulate Technology. New York, NY: Oxford University Press. Crossref.Chan A, Okolo CT, Terner Z, et al. (2021) The limits of global inclusion in AI development. arXiv. Crossref. PubMed.CIPESA (2022) Which way for data localisation in Africa? Available at: https://cipesa.org/wp-content/files/briefs/Which_Way_for_Data_Localisation_in_Africa___Brief.pdf (accessed 16 December 2024).Companies Market Capitalisation (2024) Largest AI companies by market capitalization. Available at: https://companiesmarketcap.com/artificial-intelligence/largest-ai-companies-by-marketcap/#google_vignette (accessed 5 September 2024).Crawford K (2021) The Atlas of AI: Power, Politics, and the Planetary Costs of Artificial Intelligence. New Haven: Yale University Press.Cyberspace Administration of China (2022) Provisions on the management of deep synthesis of internet information services. Available at: https://www.cac.gov.cn/2022-12/11/c_1672221949354811.htm (accessed 12 October 2024).Darktrace (2024) Master services agreement. Available at: https://cdn.prod.website-files.com/626ff4d25aca2edf4325ff97/66fc2bc0317776db72ac418c_Darktrace%20MSA%20v2.0%202024-10-01.pdf (accessed 4 October 2024).DCByte (2023) Africa’s key data centre markets. Available at: https://africadca.org/wp-content/uploads/2023/07/Title_Africas-Key-Data-Centre-Markets.pdf (accessed 17 December 2024).Dunning JH (1998) Location and the multinational enterprise: A neglected factor? Journal of International Business Studies 29(1): 45–66. Crossref. Web of Science.Egypt AI Strategy (2021) Egypt National Artificial Intelligence strategy. Available at: https://mcit.gov.eg/Upcont/Documents/Publications_672021000_Egypt-National-AI-Strategy-English.pdf (accessed 5 July 2023).Eke DO, Wakunuma K, Akintoye S (2023) Introducing responsible AI in Africa. In: Eke DO, Wakunuma K, Akintoye S (eds) Responsible AI in Africa: Challlenges and opportunities. Chan, Switzerland: Palgrave Macmillan, pp.1–11. Crossref.Emerging Technology Observatory (2024) AI Country Activity Tracker. Available at: https://cat.eto.tech/?countryGroups=Africa%2CAsia%20Pacific%2CEurope%2CLatin%20America%20and%20the%20Caribbean%2CNorthern%20America%2COceania&dataset=Patent&expanded=Summary-metrics (accessed 7 September 2024).Epoch AI (2024) Notable AI models. Available at: https://epoch.ai/data/notable-ai-models?view=table#explore-the-data (accessed 7 September 2024).European Union (2024) Artificial Intelligence Act. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202401689 (accessed 25 January 2025).Fratini S, Musiani F (2024) Data localization as contested and narrated security in the age of digital sovereignty: The case of Switzerland. Information, Communication & Society: 1–19. Crossref. Web of Science.Gemini (2024) User Agreement. Available at: https://www.gemini.com/legal/user-agreement#section-business-day (accessed 4 October 2024).Giovane CD, Ferencz J, López-González J (2023) The nature, evolution and potential implications of data localisation measures. OECD Trade Policy Papers, No. 278. Paris, France: OECD Publishing.Global Partnership on Artificial Intelligence (2025) GPAI Members. Available at: https://gpai.ai/community/ (accessed 7 January 2025).Gondwe G (2023) CHATGPT and the Global South: How are journalists in sub-Saharan Africa engaging with generative AI? Online Media Global Communication 2(2): 228–249. Crossref.Hassan Y (2023) Governing algorithms from the South: A case study of AI development in Africa. AI & Society 38: 1429–1442. Crossref. Web of Science.Henshall W (2023) How China’s new AI rules could affect U.S. companies. Times, 19 September.Iammarino S, McCann P (2013) Multinationals and Economic Geography: Location, Technology and Innovation. Cheltenham: Edward Elgar. Crossref.Jungco KG (2024) 100 top AI companies trendsetting in 2024. Available at: https://www.datamation.com/featured/ai-companies/ (accessed 9 September 2024).Lee H-K (2022) Rethinking creativity: Creative industries, AI and everyday creativity. Media, Culture & Society 44(3): 601–612. Crossref. Web of Science.Lin B (2024) Beyond authoritarianism and liberal democracy: Understanding China’s artificial intelligence impact in Africa. Information, Communication & Society 27(6): 1126–1141. Crossref. Web of Science.Ludec CL, Cornet M, Casilli AA (2023) The problem with annotation. Human labour and outsourcing between France and Madagascar. Big Data & Society 10(2): 1–13. Crossref.Maslej N, Fattorini L, Perrault R, et al. (2024) The AI index 2024 annual report. Available at: https://aiindex.stanford.edu/wp-content/uploads/2024/05/HAI_AI-Index-Report-2024.pdf (accessed 23 September 2024).Mauritius AI Strategy (2018) Maritius Artificial Intelligence strategy. Available at: https://ncb.govmu.org/ncb/strategicplans/MauritiusAIStrategy2018.pdf (accessed 20 June 2023).Mhlambi S, Tiribelli S (2023) Decolonizing AI Ethics: Relational Autonomy as a Means to Counter AI Harms. Topoi 42: 867–880. Crossref. Web of Science.Moorosi N (2024) Better data sets won’t solve the problem — we need AI for Africa to be developed in Africa. Nature 636: 276. Crossref. PubMed. Web of Science.Muldoon J, Wu BA (2023) Artificial intelligence in the colonial matrix of power. Philosophy & Technology 36(80): 1–24.Natale S, Guzman AL (2022) Reclaiming the human in machine cultures: Introduction. Media, Culture & Society 44(4): 627–637. Crossref. Web of Science.National AI Commission Act (2023) National AI Commission Act (H.R.4223). Available at: https://www.congress.gov/bill/118th-congress/house-bill/4223/text (accessed 4 October 2024).Nayebare M (2019) Artificial intelligence policies in Africa over the next five years. XRDS 26(2): 50–54 Crossref.Nigerian AI Strategy (2024) National Artificial Intelligence strategy [draft]. Available at: https://ncair.nitda.gov.ng/wp-content/uploads/2024/08/National-AI-Strategy_01082024-copy.pdf (accessed 4 October 2024).Nuwer R (2024) Africa’s newest resource could be a game-changer for the global south. Nature, 19 September.Okolo CT, Aruleba K, Obaido G (2023) Responsible AI in Africa—Challenges and opportunities. In: Eke DO, Wakunuma K, Akintoye S (eds) Responsible AI in Africa: Challenges and Opportunities. Chan, Switzerland: Palgrave, pp.35–64. Crossref.OpenAI (2024) Terms of Use. Available at: https://openai.com/policies/row-terms-of-use/ (accessed 4 October 2024).Ott BL, Mack RL (2014) Critical Media Studies: An Introduction. West Sussex: Wiley Blackwell.Parks L, Thompson R (2020) The slow shutdown: Information and Internet regulation in Tanzania from 2010 to 2018 and impacts on online content creators. International Journal of Communication 14: 4288–4438. Web of Science.Plantinga P, Shilongo K, Mudongo O, et al. (2024) Responsible artificial intelligence in Africa: Towards policy learning. Data & Policy 6: e72. Crossref. Web of Science.Png M-T (2022) At the tensions of South and North: Critical roles of Global South stakeholders in AI governance. In: Bullock JB, Chen Y-C, Himmelreich J, et al. (eds) The Oxford Handbook of AI Governance. Oxford: Oxford University Press. Crossref.Qwen (2023) Alibaba cloud international website terms of use. Available at: https://www.alibabacloud.com/help/en/legal/latest/alibaba-cloud-international-website-terms-of-use-alibaba-cloud-international-website-terms-of-use (accessed 8 October 2024).Rwandan National AI Policy (2022) The national AI policy. Available at: https://rura.rw/fileadmin/Documents/ICT/Laws/Rwanda_national_Artificial_intelligence_Policy.pdf (accessed 5 July 2023).Sargsyan T (2016) Data localization and the role of infrastructure for surveillance, privacy, and security. International Journal of Communication 10: 2221–2237. Web of Science.Tidjon LN, Khomh F (2022) The different faces of AI ethics across the world: A principle-implementation gap analysis. arXiv. Crossref.UBTECH (2023) Terms of Use. Available at: https://www.ubtrobot.com/en/privacy/termOfUse (accessed 4 October 2024).US Executive Order (2023) Executive order on the safe, secure, and trustworthy development and use of artificial intelligence. Available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2023/10/30/executive-order-on-the-safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence/ (accessed 10 January 2024).Wong PN (2021) Techno-Geopolitics: US-China Tech War and the Practice of Digital Statecraft. London: Routledge. Crossref.World Economic Forum (2025) AI Governance Alliance - Our partners. Available at: https://initiatives.weforum.org/ai-governance-alliance/partners#countries=Africa (accessed 7 January 2025).

Energy & Economics
Commodity and alternative asset, gold bar and crypto currency Bitcoin on rising price graph as financial crisis or war safe haven, investment asset or wealth concept.

Assessing Bitcoin and Gold as Safe Havens Amid Global Uncertainties: A Rolling Window DCC-GARCH Analysis

by Anoop S Kumar , Meera Mohan , P. S. Niveditha

Abstract We examine the roles of Gold and Bitcoin as a hedge, a safe haven, and a diversifier against the coronavirus disease 2019 (COVID-19) pandemic and the Ukraine War. Using a rolling window estimation of the dynamic conditional correlation (DCC)-based regression, we present a novel approach to examine the time-varying safe haven, hedge, and diversifier properties of Gold and Bitcoin for equities portfolios. This article uses daily returns of Gold, Bitcoin, S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. Our results show that Gold is a better safe haven than the two, while Bitcoin exhibits weak properties as safe haven. Bitcoin can, however, be used as a diversifier and hedge. This study offers policy suggestions to investors to diversify their holdings during uncertain times. Introduction Financial markets and the diversity of financial products have risen in both volume and value, creating financial risk and establishing the demand for a safe haven for investors. The global financial markets have faced several blows in recent years. From the Global Financial Crisis (GFC) to the outbreak of the pandemic and uncertainty regarding economic policy measures of governments and central banks, the financial markets including equity markets around the world were faced with severe meltdowns. This similar behavior was observed in other markets including equity and commodity markets, resulting in overall uncertainty. In this scenario, the investors normally flock toward the safe-haven assets to protect their investment. In normal situations, investors seek to diversify or hedge their assets to protect their portfolios. However, the financial markets are negatively impacted when there are global uncertainties. Diversification and hedging methods fail to safeguard investors’ portfolios during instability because almost all sectors and assets are negatively affected (Hasan et al., 2021). As a result, investors typically look for safe-haven investments to safeguard their portfolios under extreme conditions (Ceylan, 2022). Baur and Lucey (2010) provide the following definitions of hedge, diversifier, and safe haven: Hedge: An asset that, on average, has no correlation or a negative correlation with another asset or portfolio. On average, a strict hedge has a (strictly) negative correlation with another asset or portfolio.Diversifier: An asset that, on average, has a positive correlation (but not perfect correlation) with another asset or portfolio. Safe haven: This is the asset that in times of market stress or volatility becomes uncorrelated or negatively associated with other assets or a portfolio. As was previously indicated, the significant market turbulence caused by a sharp decline in consumer spending, coupled with insufficient hedging opportunities, was a common feature of all markets during these times (Yousaf et al., 2022). Nakamoto (2008) suggested a remedy by introducing Bitcoin, a “digital currency,” as an alternative to traditional fiduciary currencies (Paule-Vianez et al., 2020). Bitcoin often described as “Digital Gold” has shown greater resilience during periods of crises and has highlighted the potential safe haven and hedging property against uncertainties (Mokni, 2021). According to Dyhrberg (2016), the GFC has eased the emergence of Bitcoin thereby strengthening its popularity. Bouri et al. (2017) in their study indicate that Bitcoin has been viewed as a shelter from global uncertainties caused by conventional banking and economic systems. Recent research has found that Bitcoin is a weak safe haven, particularly in periods of market uncertainty like the coronavirus disease 2019 (COVID-19) crisis (Conlon & McGee, 2020; Nagy & Benedek, 2021; Shahzad et al., 2019; Syuhada et al., 2022). In contrast to these findings, a study by Yan et al. (2022) indicates that it can function as a strong safe haven in favorable economic times and with low-risk aversion. Ustaoglu (2022) also supports the strong safe-haven characteristic of Bitcoin against most emerging stock market indices during the COVID-19 period. Umar et al. (2023) assert that Bitcoin and Gold are not reliable safe-havens. Singh et al. (2024) in their study reveal that Bitcoin is an effective hedge for investments in Nifty-50, Sensex, GBP–INR, and JPY–INR, at the same time a good diversifier for Gold. The study suggests that investors can incorporate Bitcoin in their portfolios as a good hedge against market volatility in equities and commodities markets. During the COVID-19 epidemic, Barbu et al. (2022) investigated if Ethereum and Bitcoin could serve as a short-term safe haven or diversifier against stock indices and bonds. The outcomes are consistent with the research conducted by Snene Manzli et al. (2024). Both act as hybrid roles for stock market returns, diversifiers for sustainable stock market indices, and safe havens for bond markets. Notably, Bhuiyan et al. (2023) found that Bitcoin provides relatively better diversification opportunities than Gold during times of crisis. To reduce risks, Bitcoin has demonstrated a strong potential to operate as a buffer against global uncertainty and may be a useful hedging tool in addition to Gold and similar assets (Baur & Lucey, 2010; Bouri et al., 2017; Capie et al., 2005; Dyhrberg, 2015). According to Huang et al. (2021), its independence from monetary policies and minimal association with conventional financial assets allow it to have a safe-haven quality. Bitcoins have a substantial speed advantage over other assets since they are traded at high and constant frequencies with no days when trading is closed (Selmi et al., 2018). Additionally, it has been demonstrated that the average monthly volatility of Bitcoin is higher than that of Gold or a group of international currencies expressed in US dollars; nevertheless, the lowest monthly volatility of Bitcoin is lower than the maximum monthly volatility of Gold and other foreign currencies (Dwyer, 2015). Leverage effects are also evident in Bitcoin returns, which show lower volatilities in high return periods and higher volatilities in low return times (Bouri et al., 2017; Liu et al., 2017). According to recent research, Bitcoins can be used to hedge S&P 500 stocks, which increases the likelihood that institutional and retail investors will build secure portfolios (Okorie, 2020). Bitcoin demonstrates strong hedging capabilities and can complement Gold in minimizing specific market risks (Baur & Lucey, 2010). Its high-frequency and continuous trading further enrich the range of available hedging tools (Dyhrberg, 2016). Moreover, Bitcoin spot and futures markets exhibit similarities to traditional financial markets. In the post-COVID-19 period, Zhang et al. (2021) found that Bitcoin futures outperform Gold futures.Gold, silver, palladium, and platinum were among the most common precious metals utilized as safe-haven investments. Gold is one such asset that is used extensively (Salisu et al., 2021). Their study tested the safe-haven property of Gold against the downside risk of portfolios during the pandemic. Empirical results have also shown that Gold functions as a safe haven for only 15 trading days, meaning that holding Gold for longer than this period would result in losses to investors. This explains why investors buy Gold on days of negative returns and sell it when market prospects turn positive and volatility decreases (Baur & Lucey, 2010). In their study, Kumar et al. (2023) tried to analyse the trends in volume throughout futures contracts and investigate the connection between open interest, volume, and price for bullion and base metal futures in India. Liu et al. (2016) in their study found that there is no negative association between Gold and the US stock market during times of extremely low or high volatility. Because of this, it is not a strong safe haven for the US stock market (Hood & Malik, 2013). Post-COVID-19, studies have provided mixed evidence on the safe-haven properties of Gold (Bouri et al., 2020; Cheema et al., 2022; Ji et al., 2020). According to Kumar and Padakandla (2022), Gold continuously demonstrates safe-haven qualities for all markets, except the NSE, both in the short and long term. During the COVID-19 episode, Gold’s effectiveness as a hedge and safe-haven instrument has been impacted (Akhtaruzzaman et al., 2021). Al-Nassar (2024) conducted a study on the hedge effectiveness of Gold and found that it is a strong hedge in the long run. Bhattacharjee et al. (2023) in their paper examined the symmetrical and asymmetrical linkage between Gold price levels and the Indian stock market returns by employing linear autoregressive distributed lag and nonlinear autoregressive distributed lag models. The results exhibit that the Indian stock market returns and Gold prices are cointegrated. According to the most recent study by Kaczmarek et al. (2022), Gold has no potential as a safe haven, despite some studies on the COVID-19 pandemic showing contradictory results. The co-movements of Bitcoin and the Chinese stock market have also normalized as a result of this epidemic (Belhassine & Karamti, 2021). Widjaja and Havidz (2023) verified that Gold was a safe haven asset during the COVID-19 pandemic, confirming the Gold’s safe-haven characteristic. As previously pointed out, investors value safe-haven investments in times of risk. Investors panic at these times when asset prices fall and move from less liquid (risky) securities to more liquid (safe) ones, such as cash, Gold, and government bonds. An asset must be bought and sold rapidly, at a known price, and for a reasonably modest cost to be considered truly safe (Smales, 2019). Therefore, we need to properly re-examine the safe-haven qualities of Gold and Bitcoin due to the mixed evidences regarding their safe-haven qualities and the impact of COVID-19 and the war in Ukraine on financial markets. This work contributes to and deviates from the body of existing literature in the following ways. We propose a novel approach in this work to evaluate an asset’s time-varying safe haven, hedge, and diversifier characteristics. This research examines the safe haven, hedging, and diversifying qualities of Gold and Bitcoin against the equity indices; S&P 500, CAC 40, and NSE 50. Through the use of rolling window estimation, we extend the methodology of Ratner and Chiu (2013) by estimating the aforementioned properties of the assets. Comparing rolling window estimation to other conventional techniques, the former will provide a more accurate representation of an asset’s time-varying feature. This study explores the conventional asset Gold’s time-varying safe haven, hedging, and diversifying qualities during crises like the COVID-19 pandemic and the conflict in Ukraine. We use Bitcoin, an unconventional safe-haven asset, for comparison. Data and Methodology We use the daily returns of three major equity indices; S&P500, CAC 40, and NSE 50 from January 3, 2018, to October 15, 2022. The equity indices were selected to represent three large and diverse markets namely the United States, France, and India in terms of geography and economic development. We assess safe-haven assets using the daily returns of Gold and Bitcoin over the same time. Equity data was collected from Yahoo Finance, Bitcoin data from coinmarketcap.com, and Gold data from the World Gold Council website. Engle (2002) developed the DCC (Dynamic Conditional Correlation)-GARCH model, which is frequently used to assess contagion amid pandemic uncertainty or crises. Time-varying variations in the conditional correlation of asset pairings can be captured using the DCC-GARCH model. Through employing this model, we can analyse the dynamic behavior of volatility spillovers. Engle’s (2002) DCC-GARCH model contains two phases; 1. Univariate GARCH model estimation2. Estimation of time-varying conditional correlation. For its explanation, mathematical characteristics, and theoretical development, see here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578] Results and Discussion The outcomes of the parameters under the DCC-GARCH model for each of the asset pairs selected for the investigation are shown in Table 1.   First, we look at the dynamical conditional correlation coefficient, ρ.The rho value is negative and insignificant for NSE 50/Gold, NSE 50 /BTC, S&P500/Gold, and S&P500/BTC indicating a negative and insignificant correlation between these asset pairs, showing Gold and Bitcoin as potential hedges and safe havens. The fact that ρ is negative and significant for CAC 40/Gold suggests that Gold can be a safe haven against CAC 40 swings. The asset pair CAC/BTC, on the other hand, has possible diversifier behavior with ρ being positive but statistically insignificant. Next, we examine the behavior of the DCC-GARCH parameters; α and β. We find that αDCC is statistically insignificant for all the asset pairs, while βDCC is statistically significant for all asset pairs. βDCC quantifies the persistence feature of the correlation and the extent of the impact of volatility spillover in a particular market’s volatility dynamics. A higher βDCC value implies that a major part of the volatility dynamics can be explained by the respective market’s own past volatility. For instance, the NSE 50/Gold’s βDCC value of 0.971 shows that there is a high degree of volatility spillover between these two assets, with about 97% of market volatility being explained by the assets’ own historical values and the remainder coming from spillover. Thus, we see that the volatility spillover is highly persistent (~0.8) for all the asset pairs except NSE 50/BTC. The results above show that the nature of the dynamic correlation between the stock markets, Bitcoin and Gold is largely negative, pointing toward the possibility of Gold and Bitcoin being hedge/safe haven. However, a detailed analysis is needed to confirm the same by employing rolling window analysis, and we present the results in the forthcoming section. We present the rolling window results for S&P500 first. We present the regression results for Gold in Figure 1 and Bitcoin in Figure 2   Figure 1. Rolling Window Regression Results for S&P500 and Gold.Note: Areas shaded under factor 1 represent significant regression coefficients. In Figure 1, we examine the behavior of β0 (intercept term), β1, β2, and β3 (partial correlation coefficients). The intercept term β0 will give an idea about whether the asset is behaving as a diversifier or hedge. Here, the intercept term shows significance most of the time. However, during 2018, the intercept was negative and significant, showing that it could serve as a hedge during geopolitical tensions and volatilities in the global stock market. However, during the early stages of COVID-19, we show that the intercept is negative and showing statistical significance, suggesting that Gold could serve as a hedge during the initial shocks of the pandemic. These findings are contrary to the results in the study by Tarchella et al. (2024) where they found hold as a good diversifier. Later, we find the intercept to be positive and significant, indicating that Gold could act as a potential diversifier. But during the Russia-Ukraine War, Gold exhibited hedge ability again. Looking into the behavior of β1, which is the partial correlation coefficient for the tenth percentile of return distribution shows negative and insignificant during 2018. Later, it was again negative and significant during the initial phases of COVID-19, and then negative in the aftermath, indicating that Gold could act as a weak safe haven during the COVID-19 pandemic. Gold could serve as a strong safe haven for the SP500 against volatility in the markets brought on by the war in Ukraine, as we see the coefficient to be negative and large during this time. From β2 and β3, the partial correlation coefficients of the fifth and first percentile, respectively, show that Gold possesses weak safe haven properties during COVID-19 and strong safe haven behavior during the Ukraine crisis. Next, we examine the characteristics of Bitcoin as a hedge/diversifier/safe haven against the S&P500 returns. We present the results in Figure 2.   Figure 2. Rolling Window Regression Results for S&P500 and Bitcoin.Note: Areas shaded under factor 1 represent significant regression coefficients. Like in the previous case, we begin by analysing the behavior of the intercept coefficient, which is β0. As mentioned earlier the intercept term will give a clear picture of the asset’s hedging and diversifier property. In the period 2018–2019, the intercept term is positive but insignificant. This could be due to the large volatility in Bitcoin price movements during the period. It continues to be minimal (but positive) and insignificant during 2019–2020, indicating toward weak diversification possibility. Post-COVID-19 period, the coefficient shows the significance and positive value, displaying the diversification potential. We see that the coefficient remains positive throughout the analysis, confirming Bitcoin’s potential as a diversifier. Looking into the behavior of β1 (the partial correlation coefficient at tenth percentile), it is positive but insignificant during 2018. The coefficient is having negative sign and showing statistical significance in 2019, suggesting that Bitcoin could be a good safe haven in that year. This year was characterized by a long list of corporate scandals, uncertainties around Brexit, and tensions in global trade. We can observe that throughout the COVID-19 period, the coefficient is showing negative sign and negligible during the March 2020 market meltdown, suggesting inadequate safe-haven qualities. However, Bitcoin will regain its safe-haven property in the coming periods, as the coefficient is negative and significant in the coming months. The coefficient is negative and shows statistical significance during the Ukrainian crisis, suggesting strong safe-haven property. Only during the Ukrainian crisis could Bitcoin serve as a safe haven, according to the behavior of β2, which displays the partial correlation coefficient at the fifth percentile. Bitcoin was a weak safe haven during COVID-19 and the Ukrainian crisis, according to β3, the partial correlation coefficient for the first percentile (coefficient negative and insignificant). According to the overall findings, Gold is a stronger safe haven against the S&P 500’s swings. This result is consistent with the previous studies of Triki and Maatoug (2021), Shakil et al. (2018), Będowska-Sójka and Kliber (2021), Drake (2022), and Ghazali et al. (2020), etc. The same analysis was conducted for the CAC 40 and the NSE 50; the full analysis can be found here [insert the next link in “the word here” https://journals.sagepub.com/doi/10.1177/09711023251322578]. However, it is important to highlight the respective results: In general, we may say that Gold has weak safe-haven properties considering CAC40. We can conclude that Bitcoin’s safe-haven qualities for CAC40 are weak. We can say that Gold showed weak safe-haven characteristics during the Ukraine crisis and good safe-haven characteristics for the NSE50 during COVID-19. We may say that Bitcoin exhibits weak safe haven, but strong hedging abilities to NSE50. Concluding Remarks In this study, we suggested a new method to evaluate an asset’s time-varying hedge, diversifier, and safe-haven characteristics. We propose a rolling window estimation of the DCC-based regression of Ratner and Chiu (2013). Based on this, we estimate the conventional asset’s time-varying safe haven, hedging, and diversifying properties during crises like the COVID-19 pandemic and the conflict in Ukraine. For comparison purposes, we include Bitcoin, a nonconventional safe-haven asset. We evaluate Gold and Bitcoin’s safe haven, hedging, and diversifier properties to the S&P 500, CAC 40, and NSE 50 variations. We use a rolling window of length 60 to estimate the regression. From the results, we find that Gold can be considered as a better safe haven against the fluctuations of the S&P 500. In the case of CAC 40, Gold and Bitcoin have weak safe-haven properties. While Bitcoin demonstrated strong safe-haven characteristics during the Ukraine crisis, Gold exhibited strong safe-haven characteristics during COVID-19 for the NSE 50. Overall, the findings indicate that Gold is the better safe haven. This outcome is consistent with earlier research (Będowska-Sójka & Kliber, 2021; Drake, 2022; Ghazali et al., 2020; Shakil et al., 2018; Triki & Maatoug, 2021). When it comes to Bitcoin, its safe-haven feature is weak. Bitcoin, however, works well as a diversifier and hedge. Therefore, from a policy perspective, investing in safe-haven instruments is crucial to lower the risks associated with asset ownership. Policymakers aiming to enhance the stability of financial portfolios might encourage institutional investors and other market players to incorporate Gold into their asset allocations. Gold’s strong safe-haven qualities, proven across various market conditions, make it a reliable choice. Gold’s performance during crises like COVID-19 highlights its potential to mitigate systemic risks effectively. Further, Bitcoin could also play a complementary role as a hedge and diversifier, especially during periods of significant volatility such as the Ukraine crisis. While Bitcoin’s safe-haven characteristics are relatively weaker, its inclusion in a diversified portfolio offers notable value and hence it should not be overlooked. Further, policymakers may consider how crucial it is to monitor dynamic correlations and periodically rebalance portfolios to account for shifts in the safe haven and hedging characteristics of certain assets. Such measures could help reduce the risks of over-reliance on a single asset type and create more resilient portfolios that can better withstand global economic shocks. For future research, studies can be conducted on the estimation of the rolling window with different widths. This is important to understand how the safe-haven property changes across different holding periods. Further, more equity markets would be included to account for the differences in market capitalization and index constituents. This study can be extended by testing these properties for multi-asset portfolios as well. We intend to take up this study in these directions in the future. Data Availability StatementNot applicable.Declaration of Conflicting InterestsThe authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.FundingThe authors received no financial support for the research, authorship, and/or publication of this article.ReferencesAkhtaruzzaman M., Boubaker S., Lucey B. M., & Sensoy A. (2021). Is gold a hedge or a safe-haven asset in the COVID-19 crisis? Economic Modelling, 102, 105588. Crossref. Web of Science.Al-Nassar N. S. (2024). Can gold hedge against inflation in the UAE? A nonlinear ARDL analysis in the presence of structural breaks. PSU Research Review, 8(1), 151–166. Crossref.Barbu T. C., Boitan I. A., & Cepoi C. O. (2022). Are cryptocurrencies safe havens during the COVID-19 pandemic? A threshold regression perspective with pandemic-related benchmarks. Economics and Business Review, 8(2), 29–49. Crossref.Baur D. G., & Lucey B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45(2), 217–229. Crossref.Będowska-Sójka B., & Kliber A. (2021). Is there one safe-haven for various turbulences? The evidence from gold, Bitcoin and Ether. The North American Journal of Economics and Finance, Elsevier, 56, 101390. Crossref.Belhassine O., & Karamti C. (2021). Contagion and portfolio management in times of COVID-19. Economic Analysis and Policy, 72, 73–86. Crossref. PubMed. Web of Science.Bhattacharjee A., Das J., & Kumar S. (2023). Evaluating the symmetrical and asymmetrical linkage between gold price and Indian stock market in the presence of structural change. NMIMS Management Review, 31(4), 288–297. Crossref. Web of Science.Bhuiyan R. A., Husain A., & Zhang C. (2023). Diversification evidence of Bitcoin and Gold from wavelet analysis. Financial Innovation, 9(1), 100. Crossref. PubMed. Web of Science.Bouri E., Azzi G., & Dyhrberg A. H. (2017). On the return-volatility relationship in the Bitcoin market around the price crash of 2013. Economics, 11(1), 2. Crossref.Bouri E., Gupta R., Tiwari A. K., & Roubaud D. (2017). Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions. Finance Research Letters, 23, 87–95. Crossref. Web of Science.Bouri E., Shahzad S. J. H., Roubaud D., Kristoufek L., & Lucey B. (2020). Bitcoin, gold, and commodities as safe havens for stocks: New insight through wavelet analysis. The Quarterly Review of Economics and Finance, 77, 156–164. Crossref. Web of Science.Brenner M., & Galai D. (1989). New financial instruments for hedge changes in volatility. Financial Analysts Journal, 45(4), 61–65. Crossref.Capie F., Mills T. C., & Wood G. (2005). Gold as a hedge against the dollar. Journal of International Financial Markets, Institutions and Money, 15(4), 343–352. Crossref.Ceylan Ö. (2022). Hedging Effectiveness of the VIX ETPs: An analysis of the time-varying performance of the VXX. In Handbook of research on new challenges and global outlooks in financial risk management (pp. 384–401). IGI Global. Crossref.Cheema M. A., Faff R., & Szulczyk K. R. (2022). The 2008 global financial crisis and COVID-19 pandemic: How safe are the safe haven assets? International Review of Financial Analysis, 83, 102316. Crossref. PubMed. Web of Science.Conlon T., & McGee R. (2020). Safe haven or risky hazard? Bitcoin during the COVID-19 bear market. Finance Research Letters, 35, 101607. Crossref. PubMed. Web of Science.Demir E., Gozgor G., Lau C. K. M., & Vigne S. A. (2018). Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation. Finance Research Letters, 26, 145–149. Crossref. Web of Science.Drake P. P. (2022). The gold-stock market relationship during COVID-19. Finance Research Letters, 44, 102111. Crossref. PubMed. Web of Science.Dwyer G. P. (2015). The economics of Bitcoin and similar private digital currencies. Journal of Financial Stability, 17, 81–91. Crossref. Web of Science.Dyhrberg A. H. (2015). Hedging capabilities of bitcoin. Is it the virtual gold? Finance Research Letters, 1–6. https://doi.org/10.1016/j.frl.2015.10.025Dyhrberg A. H. (2016). Hedging capabilities of bitcoin. Is it the virtual gold? Finance Research Letters, 16, 139–144. https://doi.org/10.1016/j.frl.2015.10.025 Web of Science.Engle R. (2002). Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics, 20(3), 339–350. Crossref. Web of Science.Ghazali M. F., Lean H. H., & Bahari Z. (2020). Does gold investment offer protection against stock market losses? Evidence from five countries. The Singapore Economic Review, 65(02), 275–301. Crossref.Hasan M. B., Hassan M. K., Rashid M. M., & Alhenawi Y. (2021). Are safe haven assets really safe during the 2008 global financial crisis and COVID-19 pandemic? Global Finance Journal, 50, 100668. Crossref. PubMed.Hood M., & Malik F. (2013). Is gold the best hedge and a safe haven under changing stock market volatility? Review of Financial Economics, 22(2), 47–52. Crossref.Huang Y., Duan K., & Mishra T. (2021). Is Bitcoin really more than a diversifier? A pre-and post-COVID-19 analysis. Finance Research Letters, 43, 102016. Crossref.Ji Q., Zhang D., & Zhao Y. (2020). Searching for safe-haven assets during the COVID-19 pandemic. International Review of Financial Analysis, 71, 101526. Crossref. PubMed. Web of Science.Kaczmarek T., Będowska-Sójka B., Grobelny P., & Perez K. (2022). False safe haven assets: Evidence from the target volatility strategy based on recurrent neural network. Research in International Business and Finance, 60, 101610. Crossref. Web of Science.Kumar A. S., & Padakandla S. R. (2022). Testing the safe-haven properties of gold and bitcoin in the backdrop of COVID-19: A wavelet quantile correlation approach. Finance Research Letters, 47, 102707. Crossref. PubMed. Web of Science.Kumar M. A., Swathi J., Pallavi T. A., & Bavana S. (2023). Volume progression and price–volume relationship of commodity futures: Case of bullion and base metals. NMIMS Management Review, 31(4), 265–274. https://doi.org/10.1177/09711023241230463 Web of Science.Liu C. S., Chang M. S., Wu X., & Chui C. M. (2016). Hedges or safe havens—Revisit the role of gold and USD against stock: A multivariate extended skew-t copula approach. Quantitative Finance, 16(11), 1763–1789. Crossref.Liu R., Zhichao S., Wei G., & Wang W. (2017). GARCH model with fat-tailed distributions and Bitcoin exchange rate returns. Journal of Accounting, Business and Finance Research, 1(1), 71–75. https://doi.org/10.2139/ssrn.3666106 Crossref.Mokni K. (2021). When, where, and how economic policy uncertainty predicts Bitcoin returns and volatility? A quantiles-based analysis. The Quarterly Review of Economics and Finance, 80, 65–73. Crossref.Nagy B. Z., & Benedek B. (2021). Higher co-moments and adjusted Sharpe ratios for cryptocurrencies. Finance Research Letters, 39, 101543. Crossref. Web of Science.Nakamoto S. (2008). Bitcoin: A peer-to-peer electronic cash system. Bitcoin. https://bitcoin.org/bitcoin.pdfOkorie D. I. (2020). Could stock hedge Bitcoin risk(s) and vice versa? Digital Finance, 2(1), 117–136. Crossref.Paule-Vianez J., Prado-Román C., & Gómez-Martínez R. (2020). Economic policy uncertainty and Bitcoin. Is Bitcoin a safe-haven asset? European Journal of Management and Business Economics, 29(3), 347–363. Crossref.Ratner M., & Chiu C. C. J. (2013). Hedging stock sector risk with credit default swaps. International Review of Financial Analysis, 30, 18–25. Crossref. Web of Science.Salisu A. A., Raheem I. D., & Vo X. V. (2021). Assessing the safe haven property of the gold market during COVID-19 pandemic. International Review of Financial Analysis, 74, 101666. Crossref. PubMed. Web of Science.Saxena S., & Villar A. (2008). Hedging instruments in emerging market economies. Financial globalisation and emerging market capital flows. BIS Papers, 44, 71–87.Selmi R., Mensi W., Hammoudeh S., & Bouoiyour J. (2018). Is Bitcoin a hedge, a safe haven or a diversifier for oil price movements? A comparison with gold. Energy Economics, 74, 787–801. Crossref. Web of Science.Shahzad S. J. H., Bouri E., Roubaud D., Kristoufek L., & Lucey B. (2019). Is Bitcoin a better safe-haven investment than gold and commodities? International Review of Financial Analysis, 63, 322–330. Crossref. Web of Science.Shakil M. H., Mustapha I. H. M., Tasnia M., & Saiti B. (2018). Is gold a hedge or a safe haven? An application of ARDL approach. Journal of Economics, Finance and Administrative Science, 23(44), 60–76. Crossref.Singh V. V., Singh H., & Ansari A. (2024). Bitcoin as a distinct asset class for hedging and portfolio diversification: A DCC-GARCH model analysis. NMIMS Management Review, 32(1), 7–13. Crossref. Web of Science.Smales L. A. (2019). Bitcoin as a safe haven: Is it even worth considering? Finance Research Letters, 30, 385–393. Crossref. Web of Science.Snene Manzli Y., Alnafisah H., & Jeribi A. (2024). Safe haven ability of energy and agricultural commodities against G7 stock markets and banking indices during COVID-19, Russia–Ukraine War, and SVB collapse: Evidence from the wavelet coherence approach. Discrete Dynamics in Nature and Society, 2024(1), 2587000. Crossref.Syuhada K., Suprijanto D., & Hakim A. (2022). Comparing gold’s and Bitcoin’s safe-haven roles against energy commodities during the COVID-19 outbreak: A vine copula approach. Finance Research Letters, 46, 102471. Crossref. PubMed. Web of Science.Tarchella S., Khalfaoui R., & Hammoudeh S. (2024). The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre-and post-COVID-19 periods. Research in International Business and Finance, 67, 102125. Crossref. Web of Science.Triki M. B., & Maatoug A. B. (2021). The GOLD market as a safe haven against the stock market uncertainty: Evidence from geopolitical risk. Resources Policy, 70, 101872. Crossref. Web of Science.Umar Z., Bossman A., Choi S. Y., & Teplova T. (2023). The relationship between global risk aversion and returns from safe-haven assets. Finance Research Letters, 51, 103444. Crossref. Web of Science.Ustaoglu E. (2022). Safe-haven properties and portfolio applications of cryptocurrencies: Evidence from the emerging markets. Finance Research Letters, 47, 102716. Crossref. Web of Science.Widjaja M., & Havidz S. A. H. (2023). Are gold and cryptocurrency a safe haven for stocks and bonds? Conventional vs Islamic markets during the COVID-19 pandemic. European Journal of Management and Business Economics (ahead-of-print).Yan Y., Lei Y., & Wang Y. (2022). Bitcoin is a safe-haven asset and a medium of exchange. Axioms, 11(8), 415. Crossref.Yousaf I., Plakandaras V., Bouri E., & Gupta R. (2022). Hedge and safe haven properties of gold, US Treasury, Bitcoin, and Dollar/CHF against the FAANA companies and S&P 500 (Department of Economics, Working Paper Series No. 2022–27). University of Pretoria.Zhang Y., Zhu P., & Xu Y. (2021). Has COVID-19 changed the hedge effectiveness of bitcoin? Frontiers in Public Health, 9. https://doi.org/10.3389/fpubh.2021.704900

Diplomacy
China flag painted on a clenched fist. Strength, Power, Protest concept

The international reconfiguration's process towards multipolarity. The role of China as an emerging power

by Rachel Lorenzo Llanes

Abstract The international system is currently undergoing a process of reconfiguration that is having an impact on all areas of global development. In this process of reordering power relations, there is a tendency to move towards multipolarity, leaving behind the unipolar coalition established after the Second World War. In this context, several emerging powers are gaining increasing international power, which has led to changes in the hierarchy of power on the international geopolitical chessboard. Such is the case of the People's Republic of China, which has established itself not only as a power of great impact and relevance in the Asian region, but also in the entire international system. Namely, the management of the government and the Party in terms of innovation, industrialization, informatization, productivity, expansion and internationalization of its economic model, positions this country as the most dynamic center of the international economy. Evidencing that alternative models to the capitalist system are possible and viable, which strengthens the trend towards a systemic transition and multipolarity in the International System Introduction In the last two decades, a set of geopolitical and geoeconomic tensions and conflicts have become evident, with significant implications extending throughout the International System. As a result, we are currently experiencing a convulsion of the established order, giving way to a process of new global reconfigurations. In this context, several researchers and academics such as Jorge Casals, Leyde Rodríguez, Juan Sebastián Schulz, among others, have noted that these conditions have led to a crisis and hegemonic transition process, with a trend toward multipolarity in which the Asia-Pacific region is gaining increasing relevance. This article, titled "The International Reconfiguration’s Process Towards Multipolarity: The Role of China as an Emerging Power," is dedicated to analyzing the position of this country within the current international reconfiguration of power. Accordingly, the first section will systematize some essential guidelines to understand the current crisis and the decline of the hegemonic order established in the post-World War II period. The second section will address China's positioning amid the international reconfiguration of power. In this regard, it is important to note that China's rapid rise highlights how development management aligned with the Sustainable Development Goals can lead to a shift in the paradigm of international relations, as well as power reconfigurations that challenge the current balance of forces. Thus, it can be affirmed that China's rise constitutes a decisive element within the current trend toward multipolarity. DevelopmentNew International Order: Approaches to the Multipolar Reconfiguration of the International System The current international context is marked by a process of crisis. This crisis reflects the fact that the world order no longer aligns with the correlation of forces that gave rise to it during the post-World War II period. It is not a circumstantial crisis, but rather the interlinking of various interconnected crises that span across all sectors of life. That is to say, the effects of one crisis often become the causes of another, involving economic, political, social, cultural, ethical, moral, technological, commercial, and environmental components. In other words, it is a structural and systemic crisis—one that cannot be resolved unless a similarly systemic transformation occurs. To gain greater clarity, it is important to consider that the consolidation of the capitalist system brought about the process of globalization. This, in turn, introduced large-scale production and technological development capable of increasing output. This process, along with other characteristics of the system, has exponentially accelerated social inequalities between developed and developing countries. It has also led to strategic tensions over the control of resources, raw materials, and inputs, resulting in geopolitical conflicts. Furthermore, the capitalist system has imposed an extremely high environmental cost, demonstrating that it is exceeding both its own limits and those of the planet. Specifically, in its constant pursuit of profit and maximization of gains, negative environmental impacts are not factored into cost-benefit analyses, leading to widespread environmental degradation. Among other harms caused by the system, we observe a decline in investment rates, an increase in public debt, loss of autonomy in monetary policy, rising unemployment levels, reductions in real wages, and growing inequality, among others. In short, capitalism has become an unsustainable system whose primary concern is profit generation—something that is currently entirely incompatible with environmental preservation and the responsible use of natural resources. Therefore, it can be affirmed that some of its most alarming effects include: vast amounts of currency without backing, increasingly concentrated in fewer hands; acceleration of capital concentration in the West; rising military expenditures; and environmental pollution and destruction (Casals, J., 2023). On the other hand, it is necessary to clarify that, for a particular state to be considered hegemonic, it must not only exert its influence predominantly within the system of international relations; its hegemonic role must also be linked to the founding and establishment of a universally accepted concept of world order. That is, the majority of other states must recognize it as such and identify with the model promoted by the hegemon. Therefore, it is not merely a matter of a hierarchical order among states, but rather the adoption of a dominant model of production that involves those states. As a result, certain mechanisms or general rules of conduct are established for the participating states. For this reason, a hegemonic crisis involving the dominant actor in the system of international relations leads to a crisis in the social, economic, political, and institutional structures upon which that actor’s dominance was built. In light of these elements, we currently observe a set of powers within the International System that are vying to establish a new distribution of power—one that moves away from the unipolar coalition led by the United States following World War II. From this perspective, Juan Sebastián Schulz asserts: “A hegemonic crisis occurs when the existing hegemonic state lacks either the means or the will to continue steering the interstate system in a direction broadly perceived as favorable—not only for its own power, but also for the collective power of the dominant groups within the system.” (Schulz, J. S., 2022) As a result, strategic alliances have been formed and new power groups have emerged that influence international relations.These blocs are precisely what the new polarity is forming around, increasingly reinforcing the trend toward multipolarity. This is a system in which hegemonic influence is not determined by a single power, but by two, three, or more. In this regard, Juan Sebastián Schulz further notes that a process of insubordination is becoming evident, particularly in the Western peripheries. As a consequence, several countries have begun to criticize the configuration of the contemporary world order, initiating efforts to organize and propose alternative models (Schulz, J. S., 2022). This reveals the emergence of a new kind of power hierarchy, generating a global order in which a diversity of forces and actors prevails. In this context, China has experienced rapid growth, thereby contributing to the trend toward multipolarity. While this does not imply that the United States will cease to be one of the central powers in the system of international relations—given its considerable global influence—it is evident that there is a noticeable decline in the dominance it held during the unipolar era that emerged after the collapse of the USSR in 1991. This process of intersystemic transition unfolds in various phases. First, there is an observable economic transition marked by a shift in the center of gravity of the global economy toward emerging and developing economies. This shift is accompanied by a necessary technological transition, characterized by a new struggle—this time to lead the technological revolution. These changes, in turn, must be supported by a political transition. Currently, countries from the Global South have gained increasing prominence on the international stage [1]. From this foundation, a geopolitical transition is also underway, where the center of gravity and decision-making—once concentrated in the Anglo-Saxon West—is shifting toward the Asia-Pacific region. Finally, a cultural or civilizational transition is taking place, wherein the previously dominant value system is giving way to the rise of a new worldview. Based on this, the phases of the transition process can be outlined as follows: Existence of a stable order that brings together the majority of nation-states in the International System. - A crisis of legitimacy begins to affect the established global order. - A deconcentration and delegitimization of power emerges, impacting the hegemonic power. - An arms race and formation of alliances ensue in an attempt to preserve the hierarchical order by any means. This leads to a widespread crisis and the rise and emergence of new actors. - A necessary resolution of the international crisis. - Renewal of the system. (Schulz, J. S., 2022) In light of the above, it can be stated that a “new international order” is taking shape. Its manifestations are multifaceted, such as: - The rise of movements and associations of states that serve as alternatives to the neoliberal order. - Emerging powers like China and Russia are gaining strength in various sectors of the international geopolitical arena. - Russia's confrontation with NATO in the context of the conflict with Ukraine. - Sanctions imposed by the United States on various NATO and European Union countries have strengthened the BRICS nations. - The incorporation of new members into BRICS can be seen as an attempt to counterbalance the economic and political dominance of the United States and the European Union. - The expansion of anti-imperialist and anti-neoliberal integration mechanisms that promote South-South cooperation, such as the G-77 + China group. - The financial sanctions imposed by the West on Russia in the context of the Ukraine conflict have sparked a debate about the viability of the international monetary system and the role of the U.S. dollar as a reserve currency. - China and Russia conduct transactions in yuan and sell oil in this currency to Iran, Venezuela, and Gulf countries. China has increased its economic and political influence in the world, which can be seen as a challenge to U.S. hegemony. Its leadership within BRICS and its growing role in the global economy may be indicators of a shift in the balance of power. All these developments reflect a growing awareness within the International System of States regarding the importance of international cooperation to address global challenges such as the climate crisis, pandemics, and food security. They also serve as indicators that a transformation is underway in the way countries interact with each other, resulting in a shift in the economic, political, and strategic center of gravity. In this context, the United States has unleashed a global hybrid war as a desperate attempt to defend and maintain its hegemonic position, which once appeared unshakable in the postwar world. To this end, it has targeted China, as the latter represents its main threat in the economic and scientific-technological order. From this perspective, tensions between the United States and China have significantly deteriorated since the Republican administration of President Donald Trump. Beginning in 2017, his policy took on an aggressive stance toward China, manifesting through a trade war and economic attacks aimed at preserving U.S. global hegemony. This demonstrates that, in response to a process of decline already underway, nationalist and protectionist efforts intensified in the U.S., with policies targeting some of the emerging pillars of the crisis-ridden world order—China being a primary example. Under the administration of Joseph Biden, the focus shifted toward competition, emphasizing the commitment to protect U.S. sovereignty from potential Chinese threats. A significant shift in U.S. foreign policy toward Taiwan became evident with the approval of arms sales to Taiwan in August 2023, which escalated tensions in the region (Collective of Authors). Furthermore, in recent years, the United States has increasingly worked to generate geopolitical and geoeconomic motivations aimed at fostering tensions between China and Russia, potentially sparking conflict between the two. It has strengthened alliances with neighboring countries of these powers—most notably Taiwan and Ukraine—which has triggered concerns and tensions in both nations. A containment policy has also been deployed, including the imposition of trade barriers and tariffs on Chinese products; restricting Chinese companies’ access to U.S. technology and markets; and promoting the diversification of supply chains to reduce dependence on China. Nevertheless, the ongoing sanctions and restrictions have only served to reaffirm the shared survival interests of both powers, strengthening corporate ties and relations between them. These actions also reflect the growing concern among U.S. power groups over the decline of their hegemonic dominance. The Emergence of China and Its Role in the Transition Toward Multipolarity In a previous article titled "The Synergy Between Economy and Environment in China Through the Achievement of the Sustainable Development Goals," (‘La sinergia entre economía y medio ambiente en China mediante la consecución de los Objetivos de Desarrollo Sostenible’) the process of socioeconomic transformations experienced in the People's Republic of China over the past decade was discussed. These transformations have been primarily aimed at revitalizing the nation in preparation for its centenary in 2049. This strategy is rooted in aligning the Centenary Goals with the Sustainable Development Goals (SDGs) set for 2030, under the leadership of the Communist Party and the momentum driven by President Xi Jinping. The results of this strategy have had an impact not only on the Asian Giant itself—now a decisive actor in the Asian region—but also on the international order as a whole. As a result, China has emerged as a powerful rising power, with promising prospects for further elevating its development standards. This is backed by sustained GDP growth, averaging between 6% and 8% annually, indicating a robust economy. In addition, China holds vast foreign exchange reserves, granting it economic stability and the capacity to withstand potential external shocks. It also invests heavily in modern infrastructure and cutting-edge sectors such as artificial intelligence, 5G technology, and renewable energy—all of which enhance its competitiveness and lay the groundwork for long-term sustainable growth (Lagarde, CH). Nonetheless, China has also had to confront significant challenges in its gradual and progressive approach to the desired development model. Among these is the environmental cost associated with its rapid economic growth. For instance, China still experiences high levels of greenhouse gas (GHG) emissions, along with air, water, and soil pollution. In response, measures have been implemented such as the establishment of a national monitoring network and the replacement of coal heating systems in Beijing. Efforts have also been made to purify water resources polluted by industrial processes, and imports of solid waste have been reduced to help decontaminate soils affected by industrial and agricultural activities (González, R., 2023). In general, the development of renewable energy and a circular economy model is being promoted to enable a gradual transition toward a green economy, grounded in the concept of an ecological civilization. For this reason, China’s new era is committed to scientific and technological innovation as a means of driving economic growth that is both sustainable and capable of ensuring a higher quality of life for its population. This, in turn, leads gradually toward a new model of political leadership and economic management. In this regard, Jin Keyu, Professor of Economics at the London School of Economics and Political Science (LSE), has stated that “trillions of dollars of investment are needed for the global green transition, and China is going to play an essential role in that transformation” (Feingold, S., 2024). Based on the aforementioned elements, various authors such as Dr. C. Charles Pennaforte, Dr. C. Juan Sebastián Schulz, Dr. C. Eduardo Regalado Florido, among others, have indicated that the millenary nation represents a threat to the hegemony held by the United States since World War II. Consequently, it is recognized that a process of hegemonic crisis and transition is currently underway, with the Asia-Pacific region emerging as the center of gravity of the global power, thereby contributing to the multipolar transformation of the International System. The authors of “Is China Changing the World?” argue that “market socialism with “Chinese characteristics” must gradually and more clearly diverge from capitalism if it is to embody a genuinely alternative path for all of humanity.” In pursuit of this goal, China bases its policy of peaceful coexistence on five fundamental principles:Respect for sovereignty and territorial integrity, regardless of a country's size, power, or wealth. Mutual non-aggression Non-interference in the internal affairs of other countries, acknowledging that each nation has the right to freely choose its own social system and path of development. Equality and mutual benefit Peaceful coexistence. (Herrera, R.; Long, Z.; and Andréani, T., 2023) The rise of China as a major international power under these principles has been consolidating since 2012 under the leadership of Xi Jinping and the Communist Party of China (CPC), gaining particular momentum from 2020 to the present. Thus, China has not only become the leading power within the Asian regional balance but has also expanded its presence across Europe, Africa, and Latin America—primarily through loans, investments, and multilateral cooperation initiatives such as the Forum on China-Africa Cooperation (FOCAC) in Africa and the China-CELAC Forum in Latin America. In addition, China has positioned itself as a leader in several sectors, and it is projected that its economy may surpass that of the United States, increasing its Gross Domestic Product (Rodríguez, L., 2022). It has also undergone a process of opening up, energizing both its international trade and its overall foreign relations, all under the control of the Government and the Party. This, combined with its rise and development initiatives, has made China a focal point of interest for many countries within the International System seeking to jointly advance projects based on cooperation, the principle of shared advantage, and multilateralism. In this regard, the white paper "China and the World in the New Era," published by the Central Committee of the Communist Party of China in 2019, states: “The world is moving rapidly toward multipolarity, diverse models of modern development, and collaboration in global governance. It is now impossible for a single country or bloc of countries to dominate world affairs. Stability, peace, and development have become the common aspirations of the international community.” (People’s Republic of China, 2019. Quoted in Schulz, J. S., 2022) Undoubtedly, this rise has become a source of concern for U.S. power groups, which have increasingly applied geostrategic pressure. Notably, the United States has strengthened military alliances with India, Japan, and Australia in an effort to encircle China and attempt to control or obstruct its maritime routes—this also being a manifestation of the intensification of the imperialist arms race. Nonetheless, China has maintained its development strategy and, as part of it, has strengthened its diplomatic network and its relations with multiple countries across all world regions. For all these reasons, China has become the most dynamic center of the global economy. Notably, it went from representing 4% of global GDP in 1960 to 16% in 2020—undeniable evidence of rapid economic growth. Moreover, it has become the world’s largest exporter of goods and also the leading importer, establishing itself as a major industrial power. In this regard, United Nations data reveal that China leads global industrial production, accounting for 30% of the total. This figure surpasses other industrial powers such as the United States (16%), Japan (7%), Germany (5.7%), and South Korea (3.2%) (Schulz, J. S., 2022). In addition, China has remained the world’s leading manufacturing power for approximately 15 consecutive years, according to statements from the Ministry of Industry and Information Technology at the beginning of this year. This sector alone has contributed over 40% to overall growth. Likewise, in 2024, China experienced a significant increase in foreign investment, reflecting its interest in strengthening international cooperation for development. Efforts are also underway for urban renewal in 2024, with around 60,000 projects being implemented across various cities. These initiatives are primarily aimed at transforming underdeveloped neighborhoods and creating smarter urban areas (Embassy of the Republic of Cuba in the People's Republic of China, 2025). In this regard, the following graphs illustrate the value of China’s international trade during the 2016–2024 period, highlighting a strong presence of exports compared to imports. A second chart shows China's global export share, where it holds a dominant position.   Thus, China has risen as a center of power in the international system, with leadership not only in the economic domain but also in science and technology. At the same time, it has promoted a series of investments and a process of internationalizing its national currency. Accordingly, the Asian Giant offers an alternative model of development—one that is more comprehensive and sustainable—allowing it to propel the new phase of Chinese development. This phase aims not only to fulfill the dream of national rejuvenation but also to ensure the survival of its unique political, economic, and social model. Nevertheless, the significant challenges of sustaining growth cannot be overlooked. From this perspective, experts believe that new avenues of growth will be necessary for China to maintain the trajectory it has been experiencing. Specifically, the country must continue expanding its industrial sector while strengthening areas such as artificial intelligence, digital financial services, and green technologies (Feingold, S., 2024). It is also important to highlight the projected continuity and leadership of the Chinese government, with Xi Jinping identified as a key figure in the implementation of the Sustainable Development Goals (SDGs) in China, in conjunction with the socioeconomic transformation strategy toward the 2049 centenary. This has been pursued through the defense of multilateralism, economic openness, and international integration and cooperation in support of global development. Conclusions In light of the above, a decline in U.S. hegemony can be observed, even though this process is not linear—nor is it certain whether any single power or coalition has come to occupy a hegemonic position. What is clear, however, is the existence of a trend toward multipolarity, driven by emerging powers and the strategic ties they are establishing. This is giving rise to a non-hegemonic reconfiguration of power blocs, which are building a multilateral and multipolar institutional framework. It can also be affirmed that China has become the most dynamic center of the global economy. This has been supported by its growth strategy focused on industrialization, digitalization, innovation, productivity, expansion, and internationalization of its development model—while maintaining a strong emphasis on environmental sustainability. A range of key initiatives and development projects have been implemented to support the country's rise, consolidating its role in the multipolar reconfiguration of the International System. All of this has been essential in driving China’s new phase of development and contributing to the broader process of multipolar transformation. Undoubtedly, China’s rapid ascent represents a significant challenge to the International System, as it reflects a shift in international relations and a transformation in the distribution and hierarchy of global power. Notes [1] It is important to clarify that the so-called Global South should not be equated with the Third World, as the distinction between the First and Third Worlds is primarily based on economic and technological differences, which do not align with the current circumstances of the International System of States. In contrast, the term Global South emerges from a new geopolitical perspective that arose in the post–Cold War context, driven by the need to promote South-South cooperation. Moreover, it does not refer to a geographically defined region, as it includes nations from Latin America, the Caribbean, Africa, and the Asia-Pacific.Revista Política Internacional | Volumen VII Nro. 2 abril-junio de 2025. https://doi.org/10.5281/zenodo.15103898This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0). The opinions and contents of the published documents are solely the responsibility of their authors.ReferencesCasals, J. (2023). “El Nuevo orden global: amenazas y oportunidades”. Cuadernos de Nuestra América. Nueva época. No.5. RNPS: 2529.Colectivo de autores. “Crisis de hegemonía y ascenso de China. Seis tendencias para una transición”. Tricontinental. Instituto Tricontinental de Investigacion social. Buenoos Aires. Libro digital, PDF, Archivo Digital: descarga y online.Embajada de la República de Cuba en la República Popular China. (2025). Boletín informativo China-22 de enero de 2025. Oficina de Información y Análisis. Embajada de Cuba en República Popular China. Redacción y envío desde info3@embacuba.cn.Feingold, S. (2024). "¿Hacia dónde va la economía china?". World Economic Forum. Recuperado de: https://es.weforum.org/stories/2024/07/hacia-dondeva-la-economia-de-china/García-Herrero, A. (2024). "10 puntos y 18 gráficos sobre la política económica de Xi Jinping tras el tercer pleno". El Grand Continent. Recuperado de: https:// legrandcontinent.eu/es/2024/09/19/esta-china-estancada-10-puntos-y-18-graficos-sobre-la-politicaeconomica-de-xi-jinping-tras-el-tercer-pleno/González, R. (2023). " Medio ambiente en China: Impactos y respuestas del Partido y el Gobierno". CIPI. Recuperado de: www.cipi.cu/medio-ambiente- en-china-impactos-y-respuestas-del-partido-y-gobierno/Lagarde, CH. "Impulsar el crecimiento económico y adaptarse al cambio". Fondo Monetario Internacional. Discursos. Recuperado de: https://www.imf.org/ es/News/Articles/2016/09/27/AM16-SP09282016- Boosting-Growth-Adjusting-to-ChangePereira, CM (2022): “La reemergencia de China frente a la globalización neoliberal y el desafío de la conformación de un mundo multipolar”. Cuadernos de Nuestra America. Nueva Época. No. 05. RNPS: 2529.Schulz, J S. (2022). “Crisis sistémica del orden mundial, transición hegemónica y nuevos actores en el escenario global”. Cuadernos de Nuestra América. Nueva Época. No.03. RNPS: 2529. Bibliografía consultadaAmbrós, I. (2021). “ El Partido Comunista y los desafíos internos de China en el siglo XX”. Recuperado de: https://www.ieee.es/Galerias/fichero/cuadernos/ CE_212/Cap_1_El_Partido_C omunista_y_los_desafios_internos.pdfBanco Mundial (BM). (2023). Recuperado de: https:// datos.bancomundial.org/indicator/NY.GDP.PCAP. KD?locations=CNBBC News Mundo. (2021). "Cómo consiguió China erradicar la pobreza extrema (y las dudas que despierta ese triunfal anuncio del gobierno de Xi". Recuperado de: https://www.bbc.com/mundo/noticias-internacional-56205219Boy, M. (2020). “ Crisis económica y medio ambiente: ¿cómo promover un desarrollo sustentable?”. Recuperado de: https://culturacolectiva.com/opinion/crisis-economica-y-medio-ambiente- mariana-boy-columna-opinion/García, A. (2021). “La globalización neoliberal en crisis”. Recuperado de http://www.cubadebate.cu/opinion/2021/08/30/la-globalizacion-neoliberal-en- crisisGonzález, R. (2020). “El Quinto Pleno del XIX Comité Central del Partido Comunista abre una nueva etapa para China” en “Transiciones del Siglo XXI y China: China y perspectivas post pandemia II”. Libro digital.Herrera, R; Long, Z y Andréani, T. (2023). “¿Está China transformando el mundo?”. Revista Política Internacional. Volumen V. Nro. 1 enero-marzo de 2023.ISSN 2707-7330.Liu, X. y González G. (2021) “El XIV Plan Quinquenal 2021- 2025: reto para el nuevo modelo de desarrollo económico de China”. México y la Cuenca del Pacífico. Vol 10, núm. 30. Recuperado de https://www.scielo.org. mx/pdf/mcp/v10n30/2007-5308-mcp-10-30-57.pdfOtero, M (2022). “La prosperidad común y la circulación dual: el nuevo modelo de desarrollo de China”. Recuperado de: https://www.realinstitutoelcano.org/analisis/la-prosperidad-comun-y-lacirculacion-dual-el-nuevo-modelo-de-desarrollo-de-china/Regalado, E. y Molina, E. (Coord.) (2021). “China y sus relaciones internacionales”. Asociación Venezolana de Estudios sobre China (AVECH) / CEAA / ULA – Centro de Investigaciones de Política Internacional (CIPI, Cuba), Libro digital.Rodríguez, L. (2022). “Configuración multipolar del sistema internacional del siglo XXI”. Revista Política Internacional. Volumen IV Nro. 1 enero-marzo de 2022. ISSN 2707-7330.Weiss, A. (2024). "La frágil fortaleza económica de Estados Unidos". The Economist. Recuperado de: https:// www.lavanguardia.com/dinero/20240212/9516764/ economia-eeuu- fortaleza-fragil-ia-bolsa-mercados. htmlYang, W. (2015). "La Planificación y Recomendaciones del XIII Plan Quinquenal". Recuperado de: https:// politica-china.org/wp- content/uploads/6sei-yangweimin-ES.pdf .

Diplomacy
Korea-Africa Future Partnership Conference in Jongno-gu, Seoul

A comparison between South Korea’s Rice Belt Initiative and China’s BRI Initiative, their role in Africa, and development projects in Egypt

by Nadia Helmy

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском My analysis of South Korean relations with Egypt and a comparison with China, my academic and research specialty, comes as Egypt and South Korea celebrate the 30th anniversary of the establishment of diplomatic relations on April 14, 2025. Relations between the two countries have witnessed continuous development, encompassing various political, economic, cultural, and educational fields over the past three decades. Egyptian-Korean relations date back to 1948, when Egypt officially recognized the independence of the Republic of South Korea. Egyptian-South Korean cooperation currently extends to development cooperation for the next five years to meet development requirements, promote the transition to a green economy, and expand sustainable infrastructure projects.  Especially with South Korea's selection of Egypt as a strategic partner in its development cooperation plans for the period 2022-2026. While China is investing in its massive Belt and Road Initiative, and Russia is using its security arms to strengthen its presence in Africa, South Korea is focusing on a different kind of belt related to food security. The South Korea-led Rice Belt Initiative, particularly within the African continent, aims to boost rice production in African countries by introducing high-yielding rice varieties, providing seeds, providing training, and supporting irrigation systems. Through partnerships with eight African countries, most notably Cameroon, Gambia, Ghana, Guinea-Bissau, Kenya, Senegal, and Uganda, South Korea is investing in agricultural capacity building and promoting rice cultivation and distribution in these and other African countries to enhance food security through partnerships between South Korea and African countries.  Through major South Korean initiatives, such as official development assistance, capacity building programs, technology transfer, and the Rice Belt, South Korea aims to bridge the development gap and strengthen its role as a pivotal global power. With the arrival of US President “Trump” in his second term, following a series of trade wars against China during his first term and his increase in tariffs on China by more than 100%, relations between the United States and China have become fraught with tension, especially with China's firm response to the US administration with a policy of reciprocal retaliation, Beijing's reciprocal increase in tariffs imposed on US goods and products, and even China's imposition of trade restrictions on US companies operating within its territory, particularly those owned by the well-known American businessman “Elon Musk”. Here we see the extent to which South Korea currently benefits from the tensions between the Chinese and American superpowers, as it is a smaller player in managing relations between the major powers.  This is precisely what Keun Lee, former vice chairman of the National Economic Advisory Council to the South Korean president, winner of the 2014 Schumpeter Prize, and author of “China: Technological Leapfrogging and Economic Catch-Up: A Schumpeterian Perspective”, which is issued by: (Oxford University Press, 2022), in this aforementioned book, Keun Lee analyzes the situation for South Korea and the nature of the dispute between China and the United States, emphasizing that South Korean companies are reaping significant benefits from the trade and technological restrictions imposed by the United States on China, which have at least slowed the “Sinicization” of manufacturing and global value chains. Since South Korea and China produce a large number of the same goods and types, such as: (consumer electronics, batteries, cars, ships), and more, according to Keun Lee’s analysis, the less China’s share of the American and Western market diminishes, the more South Korea will have. Indeed, Western and American sanctions, in particular, imposed on the Chinese tech giant Huawei, have given a boost.  Strong sales of wireless systems produced by Samsung. Similarly, if Chinese industry has less access to Western technology, it is likely to turn to South Korean companies. South Korea is attempting to capitalize on this by adopting a new development strategy for partnerships with Egypt and other African countries, and holding the first South Korea-Africa summit in June 2024. Here, we can draw a simple comparison between the development roles of China and South Korea within the African continent. China primarily focuses on its massive financial power through its Belt and Road Initiative, as well as its efforts to fundamentally change the nature of African countries. What is interesting is that South Korea, which possesses significant strengths, has decided to join the bandwagon to win in Africa. South Korea is keen to move away from following the Chinese model in Africa. As noted during the first South Korea-Africa summit in June 2024, South Korea is serving as a bridge or communication channel in the international community as a responsible middle power, based on its own development experience compared to China.  Noting South Korea's keenness to avoid presenting itself as a strong competitor to China or others within the African continent The modern history of South Korean relations with Africa begins with the Korean War on June 25, 1950, with the participation of units from the Ethiopian and South African armies within the United Nations forces. This included the “Mehal Sevare Unit”, the bodyguard unit of the Ethiopian emperor, which was sent to support South Korea, despite Ethiopia being one of the poorest countries in the world at the time. This Ethiopian aid contributed to building friendly and special relations between the two countries after the war ended. As a result, an African Union office in South Korea was established within the Ethiopian embassy, and the South Korean government established a memorial garden in honor of the Ethiopian soldiers who participated in the war in support of South Korea. Given the importance of the partnership with South Korea, President El-Sisi's keenness during his visit to South Korea was to enhance the Egyptian state's efforts to localize South Korean industry in Egypt, reflecting the promising prospects for diverse and anticipated Egyptian partnerships with South Korea. Here, we find President El-Sisi's commitment to localizing South Korean technology in Egypt, which was clearly demonstrated by the localization of the South Korean railway car industry in Egypt in the Suez Canal Economic Zone. This aims to gradually enhance Egyptian local content and bolster Egyptian supply efforts to markets in the Arab region and Africa, through Egyptian partnerships between the public and private sectors in South Korea. Therefore, we find President Sisi keen to benefit from South Korean expertise in localizing technology and attracting foreign investment, which contributes to the creation of approximately 5,000 job opportunities for Egyptian youth in the Suez Canal Economic Zone, achieving social and economic progress in the region. On the development front, South Korea is keen to provide development grants to Egypt and all African countries, through the “Korea International Cooperation Agency” (KOICA), especially in the fields of higher education, intellectual property, vocational training, information technology, establishing an electronic system for government procurement, women's economic empowerment, and combating violence. Meanwhile, South Korea's concessional development financing is diversified, covering (railways, subway car manufacturing, knowledge transfer programs, and government capacity building programs). Egyptian-South Korean cooperation has increased in light of the strategic partnership between the two countries, particularly in light of South Korea's selection of Egypt as its strategic partner in development cooperation for the next five years.  Many South Korean projects in Egypt are being financed through the concessional financing window provided by the Korea Economic Development Cooperation Fund (KEDCF), a subsidiary of the Export-Import Bank of Korea. This was evident in a $460 million South Korean development financing agreement with Egypt to implement the project to manufacture and supply 40 train units (320 cars) for the second and third lines of the Greater Cairo Metro. South Korean companies also have a significant presence in the New Administrative Capital and the Suez Canal Development Corridor, most notably Hyundai Rotem in the Suez Canal Economic Zone. The Hyundai Rotem Group includes more than 14 South Korean companies operating in three main sectors: trains and railway equipment, military industries related to land weapons, heavy machinery and equipment, energy infrastructure, and iron and steel. It is also a leading company in modern technologies related to the use of hydrogen fuel in vehicles and equipments. Egyptian-South Korean relations are diverse across several fields, not limited to development cooperation efforts between the two countries, but also extend to trade, investment, and culture, with many South Korean companies investing in Egypt in various fields, such as technology, communications, electronics, and others. During his recent visit to South Korea, the Egyptian government and Egyptian President Abdel Fattah el-Sisi were keen to advance cooperation with the South Korean side and provide full support for South Korean investments in Egypt, encompassing a wide variety of fields. Korea is one of Egypt's most important trading partners in East Asia. South Korea is also an important source for the transfer of industrial expertise and technology to Egypt.  There are many areas of potential cooperation between South Korea and Egypt in the Dabaa nuclear power plant projects, the most prominent of which, are: (joint manufacturing in the electronics sector, where Korean products for Samsung and LG are manufactured by Egyptians). Furthermore, 90% of Egypt's electronics exports are conducted in cooperation with South Korea. In addition, there is fruitful cooperation between the two countries in electric vehicle projects, seawater desalination, and railway development projects. In 2022, South Korea announced a $1 billion loan to Egypt from the South Korean Development Cooperation Fund. This comes as part of South Korea's efforts to build a cooperative partnership with Egypt and promote sustainable development between the two countries. This agreement also aims to conclude trade agreements and expand the scope of South Korean cooperation with Egypt in the environmentally friendly transportation, maritime, and space development sectors. At the same time, both countries agree on the importance of overcoming the climate crisis, especially after Egypt hosted the (COP27 international climate conference) in Sharm El-Sheikh. In recent years, South Korea has been seeking to create a state of rapprochement with the African continent, especially Egypt. The first Korea-Africa summit, held in early June 2024, marked a historic milestone, as South Korean ex-President “Yoon Suk-yeol” and leaders from 48 African countries met to deepen trade and economic cooperation. This led to the convening of the Korea-Africa Summit, a new initiative launched by South Korea to support cooperation with African countries in light of the challenges facing countries worldwide, particularly food security, climate challenges, and supply chain issues. Given Egypt's prominent position in Africa, South Korea sought to establish a strategic partnership with Africa, particularly Egypt, based on three axes: promoting trade and investment to achieve economic development and confronting global challenges, such as: (climate change and food security, and promoting peace, security, and cooperation in international forums). During the first Africa-South Korea summit, South Korean ex-President Yoon announced South Korea's commitment to increasing development assistance to Africa, pledging $10 billion over the next six years. This significant financial support underscores South Korea's interest in Africa's vast mineral wealth and its potential as a major export market. In his closing remarks, ex-President “Yoon” stated that: “the important Minerals Dialogue launched by South Korea and Africa sets an example for a stable supply chain through mutually beneficial cooperation and contributes to the sustainable development of mineral resources worldwide”. On the Chinese side, given the Chinese government's commitment to holding China-Africa summits, known as “FOCAC”, since 2002, which bring together most African leaders, these China-Africa summits hold significant significance for Western governments and the US administration. While Washington maintains its primary military alliance in East Asia through U.S. Forces Korea—stationing approximately 28,500 troops in South Korea—its growing concern also extends to Africa, where China’s expanding influence, exemplified by the China-Africa summits, represents a new source of geopolitical friction and tension in U.S.-China relations. Through its advanced economic ties with African countries, China provides significant assistance to African regimes that the United States and Europe are seeking to pressure to review their records on human rights, good governance, monopoly policy, and other issues. Sino-African relations have also witnessed rapid development, especially in the economic field, which China prefers as an easy and acceptable path in its dealings with developing countries, whether in the form of trade exchange, loans, grants, or investment gifts. These are characterized by the absence of political conditionality, which distinguishes them from their Western counterparts and makes them acceptable to poor African societies, both at the official and opular levels. This facilitates the task of the Chinese actor in penetrating these societies until Beijing became the main trading partner of the African continent, as Beijing considers its relations with Africans an important part of its strategy to enhance its economic and political influence at the global level and to be the center of the circle for these countries within the concept of its soft and quiet power, within the framework of the policy of relations between the countries of the South-South.  To this end, China seeks to increase its political position within the African continent and address African sensitivities, which are burdened with negative perceptions of Western colonialism. This is achieved by talking about reforming international institutions and glorifying national sovereignty, which was rediscovered after the Western colonial withdrawal from Africa. China also declares its solidarity with the countries of the South through economic positions and development promises. This is the same kind of talk that Africans hear from major powers like Beijing, in the face of Western ambitions. Based on this, we understand the extent of competition between China and South Korea in Egypt and other African countries, and their adoption of African summit policies through solidarity and development cooperation with Egypt and across the African continent, with African countries' ambitions to diversify their businesses, they are pushing both Beijing and Seoul to embrace their vision of building a multipolar world, the right of Africans to a permanent seat on the Security Council after UN reform, opposition to colonialism in all its new forms and manifestations, and the depoliticization of domestic issues such as human rights and democracy, among others.

Defense & Security
world map of ethiopia and bordering countries sudan kenya somalia and eritrea

Ethiopia-Somalia Tensions: Power Dynamics and Extra-Regional Actors in the Red Sea Region

by Federico Donelli

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Signed in 2024, the Ethiopia-Somaliland Memorandum of Understanding (MoU) has reshaped regional dynamics, potentially granting Ethiopia sea access via Berbera in exchange for Somaliland’s recognition. This move challenged Somalia’s territorial integrity and prompted Mogadishu to align itself with Egypt, Eritrea, and Djibouti against Ethiopia. While the crisis reflects Ethiopia’s strategic push for a maritime presence, it also captures Somaliland’s long-standing quest for independence. In the wider Red Sea region, regional tensions are exacerbated by extra-regional actors which include the UAE, Turkey, France, and Saudi Arabia, all of which have their own interests therein. Although, external actors do not directly cause conflict, their involvement emboldens local actors and escalates rivalries. Hence, the Red Sea region has a growing importance in contemporary global geopolitics. Ethiopia-Somaliland MoU: Geopolitical Ambitions and the Quest for Recognition The year 2024 began with the signing of a Memorandum of Understanding between Ethiopia and Somaliland. The latter, formerly British Somaliland, was part of Somalia, from which it unilaterally seceded after Siad Barre’s regime collapsed in 1991. Since then, Somaliland has been self-ruled and is considered a de facto state. However, the Hargheisa authority does not enjoy any international legal recognition. If implemented, the agreement with Addis Ababa would give Somaliland its first significant de jure recognition. In return, the Hargheisa authorities would grant Ethiopia access to the sea through the port of Berbera and the concession of a coastal area for military use. The situation revolves around three key regional players: Ethiopia, Somalia, and Somaliland. Each of these actors has engaged in activities driven by its own objectives and strategic priorities. Ethiopia’s decision is influenced by several practical economic and strategic factors. Following the Eritrean War in the early 1990s, Ethiopia lost its Red Sea ports and became the world’s most populous landlocked country. Since 1998, Djibouti’s ports have handled 95 per cent of trade to and from Addis Ababa. Sea access through Djibouti costs Ethiopia between $1.5 and $2 billion annually which Ethiopia’s rulers, since 2019, begun to express more strongly that they consider this spending excessive and unsustainable in the medium to long term. To reduce Addis Ababa’s dependence on Djiboutian ports, the government of Prime Minister Abiy Ahmed believes it is necessary to find a viable alternative. Before the MoU, Ethiopia had considered several alternatives to Djibouti, including Eritrea, Somalia, and Kenya. The idea of developing an economic and trade corridor between Addis Ababa and the port of Berbera on the Gulf of Aden began to take shape in the final months of 2023. Somaliland’s main port has been operated by the Emirati company – DP World since 2015, which has developed its infrastructure and increased its cargo transit capacity. Ethiopia estimates that it can divert between 12 and 15 per cent of the total volume passing through Djibouti’s ports to Berbera and, in the long term, connect its industrial zones to several trade corridors. From a strategic point of view, Ethiopian assessments are influenced by Addis Ababa’s national role conception. Ethiopia sees itself as the leading regional power because of its history and traditional economic and political weight in the region. Consequently, Ethiopian elites perceive the Red Sea and the Gulf of Aden as their natural strategic spheres. For this reason, the Ethiopian Institute of Foreign Affairs recently announced the ‘Grand Strategy of the Two Waters.’ The new agenda aims to expand the sphere of national interest and action eastwards towards the sea, unlike in the past when the focus of Ethiopia’s strategic projection was mainly on the Nile Basin. Indeed, Ethiopia’s ambitions as a regional power are challenged by its lack of a maritime gateway. For Addis Ababa, having a presence in the Red Sea would provide two strategic benefits: first, it would strengthen its standing in the region; second, it would bolster Ethiopia’s international role by enhancing cooperation in multilateral anti-piracy efforts. In short, the Ethiopian government sees maritime projection as a strategic resource and a gateway to the geopolitics of the coming decades, which will focus on Asia and the Indo-Pacific in particular. Therefore, one of the key clauses of the MoU allows Ethiopia to establish a military outpost in Lughaya, a town overlooking the Gulf of Aden, for at least fifty years. According to Ethiopian plans, the naval base will become the headquarters of the nascent Ethiopian navy. For Somaliland, the MoU represents a further step on the difficult path to independence. In the past year, the issue of Somaliland’s independence has gained renewed attention and relevance. This pursuit of self-determination is deeply rooted in a historical context that stretches back to the 19th century, predating the regime of Siad Barre. The Somalilanders’ path began during a pivotal time when the British Empire established agreements with various Somali clans, particularly the Gadabuursi, Issa, and Habr Awal. In 1884, the region was officially designated as British Somaliland, a protectorate that enjoyed a measure of autonomy and governance, distinguishing it from the colonial dominance exerted by Italian authorities in southern Somalia. Following the unification of Somaliland with the Trust Territory of Somalia in 1960, the social, economic, and political conditions of the people of Somaliland began to deteriorate, leading to widespread discontent and a strong desire for independence. Over time, the Siad Barre regime cast a long shadow over Somaliland, leading to widespread discrimination and marginalisation. The political and economic machinations of the central government often neglected the aspirations of the Somaliland people, fuelling a growing sense of injustice. In this context, collective memory became a powerful cornerstone of identity, highlighting the stark contrasts between Somaliland’s struggles and Somalia’s divergent trajectories in the turbulent post-Siad Barre era. Hargheisa’s quest for independence is rooted in historical grievances and reflects the unique identities and trajectories of its people. The Somaliland narrative often draws comparisons with the current situation in the rest of Somalia. Over the past three decades, this de facto state has made significant progress towards sustainable institutional and administrative development albeit on a very limited budget. The democratisation process is also crucial to further the development of Somaliland’s independence. The recent national elections held last November demonstrated the political maturity of all parties involved. The peaceful transfer of power from the defeated government to the electoral process is a remarkable event in the region and stands out as one of the few such instances in the continent. The achievements of the institution-building process in Somaliland are even more striking when compared to the path taken by Somalia. Somalia’s Diplomatic Counterbalance and the Emergence of an Anti-Ethiopian Block  The signing of the MoU by Ethiopia and Somaliland raised concerns among regional actors, particularly Somalia. As Somaliland is formally and legally recognised as an integral part of Somalia, there were fears that Hargeisa’s claims to independence were gaining momentum. Mogadishu was particularly concerned that Ethiopia’s official recognition of Somaliland’s claims could trigger a domino effect, leading other regional and extra-regional actors to follow suit. Therefore, Somalia saw Ethiopia’s actions as a deliberate act of intimidation that threatened its territorial integrity at a sensitive time for its political future. Somalia faces several challenges, including the struggle to establish an effective institutional framework, particularly with regard to the relationship between the central government and the federal states, and also the fight against the terrorist group – al-Shabaab. In response to the MoU, the Somali executive, led by President Hassan Sheikh Mahmoud, launched an intense diplomatic campaign to prevent its implementation and recognition by the international community. Somalia has sought support from regional organisations such as the Intergovernmental Authority on Development (IGAD), the East African Community (EAC), and the African Union (AU). In doing so, Somalia has consolidated alliances with both regional and extra-regional actors. As a result, the dynamics between these three actors – Somalia, Ethiopia, and Somaliland have become increasingly intertwined. Mogadishu’s natural anti-Ethiopian partners are two of Addis Ababa’s historical rivals: Eritrea and Egypt. Compared to 2018, the year of normalisation between Ethiopia and Eritrea, the situation today is very different. The positions of Eritrean President Isaias Afwerki and Prime Minister Abiy Ahmed quickly diverged following the signing of the Pretoria Agreement (2022), which ended the two-year conflict in Tigray. Eritrea, which had supported the Ethiopian military campaign, refused to negotiate with the Tigrayan authorities, represented by the Tigrayan People’s Liberation Front (TPLF). The distance between the two leaders has widened as Ethiopia’s claims to the sea have grown. Indeed, Asmara fears that Ethiopia is eyeing its ports, a fear fuelled by the rhetoric of Abiy and other Ethiopian leaders. Conversely, Isaias has used his leadership and many regional relationships to foster a kind of ‘anti-Ethiopian coalition’. One significant change has been Egypt’s increasing involvement in the region. Mogadishu’s rapprochement with Cairo was formalised in August 2024 with the signing of a defence agreement. This agreement centres on Egypt’s intention to support Somalia’s request for the withdrawal of all Ethiopian troops currently stationed in Somalia as part of the African Union peacekeeping mission (formerly known as Atmis, replaced by the Aussom mission on 1 January 2025). The strengthening of Somali-Egyptian relations, supported by Asmara and involving Djibouti through a security cooperation agreement, has consolidated an anti-Ethiopian bloc. This alignment represents a significant shift in the regional balance and illustrates Egypt’s changing Africa policy. Since 2020, Egypt has reaffirmed the importance of its southern relations. President Abdel Fattah al-Sisi has gradually reassessed Egypt’s African relations and promoted a geopolitical strategy that emphasises a north-south axis, rather than the east-west axis that dominated in previous decades. The Red Sea region, including the Nile Basin, is now a key part of this new strategic framework, which is shaped by Egypt’s historical rivalry with Ethiopia. Between the two states, the balance on the Nile has changed. The construction of the Grand Ethiopian Renaissance Dam (GERD) has given Ethiopia a strategic advantage over Egypt. Egypt therefore had to adapt its approach to the ongoing dynamics by deciding to expand the areas of contention toward the sea. Tensions between Ethiopia and Somalia therefore provided an opportunity to increase Egypt’s footprint in the region. Regional Tensions and Extra-regional Actors in the Red Sea The MoU signed by Ethiopia and Somaliland has opened a new phase in tensions. The focus of regional tensions is shifting to the coastal areas, particularly the Red Sea and the Gulf of Aden, which are marked by a number of security and defence agreements. Common strategic interests underpin the alignment of the anti-Ethiopian bloc, which includes Somalia, Djibouti, Eritrea, and Egypt. Somalia views any legal recognition of Somaliland’s independence as an existential threat. For Djibouti, the economic damage from increased trade through Berbera is marginal but potentially devastating to its fragile internal balance of power. Eritrea perceives Ethiopia as an ongoing threat, and the current Ethiopian government is seen by Asmara as highly unreliable, raising concerns about a potential escalation of violence along their shared borders. Finally, for Egypt, the assessment of its regional position is of particular importance. Traditionally, Cairo has regarded the waters between Suez and Aden as its ‘lake’. As a result, like Addis Ababa, it regards the entire region as part of its sphere of influence. The United Arab Emirates (UAE) and Turkey are among the most active players in the region. The UAE has supported the MoU to capitalise on investments in Berbera and Addis Ababa. Turkey, on the other hand, has taken a more balanced approach, thanks to its strong political and commercial ties with Ethiopia and Somalia. For Ankara, however, Somalia’s integrity must not be questioned. Following their rapprochement in 2021, the UAE and Turkey have maintained good relations. Despite their different strategies and some disagreements, both nations share a common interest in maintaining a central role in regional affairs. Other extra-regional players, such as France and Saudi Arabia, are also active in the background. France supports the MoU as part of its ongoing efforts to increase its presence in East Africa, which began at the same time as its withdrawal from the Sahel region. Its base in Djibouti is destined to become more central to French policy as French military presence in West Africa is being reduced. French officials see this increased influence in regional affairs as essential to France’s future interests in the Indo-Pacific region. Meanwhile, Saudi Arabia, whose geopolitical focus is shifting from the Gulf to the Red Sea, opposes the implementation of the agreement between Ethiopia and Somaliland. It seeks to counter regional projects promoted by the UAE. This might be as a result of the long-standing political rift between the two Gulf monarchies. Extra-regional actors do not directly cause an increase in regional conflicts. Rather, it is local actors who, feeling empowered by their connections with these extra-regional partners, perceive their environment as more permissive and gain the confidence to take assertive actions that they may not have considered before. Understanding these dynamics sheds light on why Ethiopia and Somaliland decided to sign the MoU at this historic moment. This perspective also helps to explain other regional crises, such as the civil war in Sudan and the conflict in Tigray. The different transformations in the international system have created a context in which local actors can seek multiple forms of external support. Increased alignment and overlap between local and regional rivalries has increased the willingness of actors to take assertive action, leading to a general increase in inter- and intra-state tensions. However, the flexible nature of alliances can also mitigate the risk of the trickle-down effect that often accompanies such alliances. This work is licensed under the Creative Commons Attribution-Non Commercial 4.0 International License (CC BY-NC 4.0): https://creativecommons.org/licenses/by-nc/4.0/

Energy & Economics
With Interim President of Burkina Faso Ibrahim Traore. Photo: Alexander Ryumin, TASS

Russian and waiting

by William Decourt , Spenser Warren

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Western missteps in Africa are creating an opening for Russia to deepen its influence. Recent protests against International Monetary Fund (IMF)-imposed austerity measures have rocked several African states. Kenya, a long-time partner of the United States and a key contributor to UN peacekeeping operations in Haiti, experienced violent clashes between government security forces and anti-austerity protestors over tax hikes in a controversial finance bill. Simultaneously, many protesters saw Kenyan engagement in Haiti as footing the bill for American security interests while ordinary Kenyans struggled to make ends meet. Soon after, similar protests against IMF measures spread to Nigeria. Analysts and locals are concerned that spreading protests may threaten stability across Africa. Citizens of other countries continue to voice their displeasure with the political and economic status quo through protest (in Mozambique) and at the ballot box (in Botswana). IMF loans come with significant stipulations, including reforms to financial systems and governance. Critics of these conditions frequently malign the IMF as a violator of sovereignty. Changes to economic and governing models, combined with high debts and economic stress, increase the costs of everyday products and diminish purchasing power across the continent. To many ordinary citizens, the West is benefiting from the fruit of African resources while hindering Africans’ access to the global economy. Publics in these countries demand alternatives to IMF funding, protesting governments to oppose IMF-imposed austerity. Youth, an increasingly important demographic, are especially active. Many of these young people are college-educated but fail to secure adequately paid employment in skilled industries. The informal economy is growing but increasingly separated from formal and international economies. IMF austerity measures are driving the continent to economic crisis and protest that may have lasting effects anathema to US foreign policy and the liberal international order. Some already see China as a viable alternative, although public opinion of Chinese influence is mixed. Elsewhere, faded Cold War memories make Russia a relatively unknown economic and political alternative. So, while recent Western actions in Africa have put long term relationships at risk, Russia is slowly increasing its influence on the continent. In fact, the Kremlin has already taken action and is engaged in the politics surrounding the various debt crises in African nations. African countries owe debts to multiple international actors, including Russia. However, Moscow has forgiven debts owed by many of these countries, coupling debt relief with additional economic benefits, including an influx of grains and energy resources. It has also deepened defense cooperation with several African countries. This cooperation often includes contracts for weapons sales and the deployment of irregular military units, including the Wagner Group. Diplomatic actions such as the above have led some protestors to see Russia as a viable alternative to IMF funding and partnerships with the US and Europe. In a visual representation of this phenomenon, protestors have been seen waving Russian flags at mass gatherings across Africa. Russia appears to receive the greatest support in the Sahel, where governments have failed to curb political instability and deliver on economic development promises. Publics in the region were already angry with the continued postcolonial military presence of France, and Russia took advantage. Mass publics are not the only actors seeking alternatives, ruling elites also see Russia as an attractive partner. Russian defense cooperation and the presence of irregular forces bolster these regimes in the face of increasing civilian protests over poor governance or human rights. Still, Russia has not yet made the gains it could. The war in Ukraine is hurting Africans and contributing to economic stress as global grain prices have skyrocketed. Some perceive Russia as exacerbating the problems of failed governance through its use of Wagner Group formations to back corrupt officials, protect corporate interests, and bolster unpopular governments. Russian interest in the region is also less significant than in the Middle East, Eastern Europe, or the Arctic, where Russia has more proximate strategic, economic, and political goals. Rather than rushing in, Russia’s economic presence in Africa is slowly advancing Moscow’s goals on the international stage. When Russia sought to undermine financial, technological, and energy sanctions from the West as a result of its invasion of Ukraine, it turned to Africa to find new consumers for food products, energy, and arms. Already, in the wake of the invasion, only half of the continent voted to condemn Russia. Such voting patterns at the UN indicate greater support for Russia in Africa than in other regions around the world, even if distrust of Russia remains high in some parts of the continent. Forecasted crises could increase Russian influence on the continent as well. Shocks generated by the African debt crisis could become a proximate cause for geopolitical and geoeconomic shifts. Rapid demographic changes and disastrous climate events (e.g., droughts and floods) exacerbate existing economic and migratory challenges. Since the tentacles of Russian economic and security influence, as well as misinformation, are already present in Africa, such future crises could pull multiple African states further into Russian orbit, and away from Western countries and institutions. Further alignment of African states with Russia would have several drawbacks. Russia would discourage democratization and use security assistance to bolster dictators across the continent. Environmentally sustainable development is also likely to be hampered. Russia may increase the extraction of natural resources in environmentally damaging ways. Additionally, Russian energy exports will be oil and gas, eroding the already significant investment and progress in green energy development many African political economies have made. As Western missteps create openings for Russia to gain a foothold in Africa, they also set the stage for other global powers to capitalize on the vacuum. Chinese-built infrastructure in Africa also contributed to debt burdens, but unlike Western approaches tied to IMF austerity measures, China is recalibrating its strategy. By shifting to smaller projects with lower debt exposure and promoting green energy development overseas, China positions itself as a more appealing partner. This strategy not only bolsters China’s domestic solar and EV industries but also enhances its soft power by responding to local economic needs. Moreover, as Western policy blunders alienate African publics and governments, both Russia’s and China’s influence may grow. Russia’s gains in the region could indirectly strengthen China’s position by fostering broader skepticism of Western-led systems, aligning African leaders more closely with Beijing’s geopolitical goals, including its stance on Taiwan. Africa is a burgeoning continent. One in four humans will be African by 2050. If the US and Europe pass on opportunities to engage with a continent of emerging green development powers and an increasingly educated demographic bulge, Western policies will undermine their own power and influence in the international order. Russia’s quiet increase in trade and security assistance offers an established alternative. Meaning ultimately, both Russia and China, may play the long game, gaining incremental support from a region of one billion people at a time. This work is licensed under the Creative Commons Attribution 4.0 International License (CC BY 4.0) [add link: https://creativecommons.org/licenses/by/4.0/]

Energy & Economics
Trump - Putin - Flags

The World Awaits Change

by Andrei Kortunov

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском “Changes! We’re waiting for changes!” proclaimed Viktor Tsoi nearly 40 years ago, at the dawn of the Soviet perestroika. If one were to summarize the multitude of diverse and contradictory events, trends, and sentiments of the past year in a single phrase, it would be that the modern world is eagerly awaiting change. Much like the former USSR in the 1980s, few today can clearly define what these changes should entail or what their ultimate outcome will be. Yet, the idea of maintaining the status quo has evidently found little favor with the public over the past year. This impatient anticipation of change was reflected, for instance, in the outcomes of numerous elections held over the past 12 months across the globe. In total, more than 1.6 billion people went to the polls, and in most cases, supporters of the status quo lost ground. In the United States, the Democrats suffered a resounding defeat to the Republicans, while in the United Kingdom, the Conservatives were decisively beaten by the Labour Party. In France, Emmanuel Macron's once-dominant ruling party found itself squeezed between right-wing and left-wing opposition, plunging the Fifth Republic into a deep political crisis. The seemingly stable foundations of political centrism were shaken in Germany, South Korea, and Japan. Even the party of the highly popular Indian Prime Minister Narendra Modi failed to retain its parliamentary majority after the elections, and in South Africa, the African National Congress led by Cyril Ramaphosa also lost its majority. Pessimists might argue that abandoning the status quo in itself solves no problems, and the much-anticipated changes, as the final years of the Soviet Union demonstrated, do not necessarily lead to positive outcomes. Replacing cautious technocrats with reckless populists often backfires, affecting those most critical of the entrenched status quo. Optimists, on the other hand, would counter that the rusted structures of state machinery everywhere are in desperate need of radical modernization. They would add that the costs inevitably associated with maintaining the existing state of affairs at all costs far outweigh any risks tied to attempts to change it. The international events of the past year are also open to various interpretations. Pessimists would undoubtedly point out that none of the major armed conflicts carried over from 2023 were resolved in 2024. On the contrary, many of them showed clear tendencies toward escalation. For instance, in late summer, Ukraine launched an incursion into the Kursk region of Russia, and in mid-November, the U.S. authorized Kyiv to use long-range ATACMS missiles against targets deep within Russian territory. Meanwhile, the military operation launched by Israel in Gaza in the fall of 2023 gradually expanded to the West Bank, then to southern Lebanon, and by the end of 2024, to parts of Syrian territory adjacent to the Golan Heights. From the optimists' perspective, however, the past year demonstrated that the disintegration of the old international system has its limits. A direct military confrontation between Russia and NATO did not occur, nor did a large-scale regional war break out in the Middle East, the Taiwan Strait, or the Korean Peninsula. The economic results of 2024 are equally ambiguous. On one hand, the global economy remained heavily influenced by geopolitics throughout the year. The process of “technological decoupling” between the U.S. and China continued, and unilateral sanctions firmly established themselves as a key instrument of Western foreign policy. On the other hand, the world managed to avoid a deep economic recession despite the numerous trade and investment restrictions. Global economic growth for the year is expected to reach around 3%, which is quite respectable for such turbulent times, especially considering that the long-term effects of the COVID-19 pandemic have not yet been fully overcome. In 2024, the average annual global temperature exceeded pre-industrial levels by more than 1,5 °C for the first time, crossing another critical “red line”. However, the UN Climate Change Conference (COP29) held in November in Baku fell short of many expectations. At the same time, China reached its peak carbon emissions by the end of the year, achieving this milestone a full five years ahead of previously announced plans. In the past year, the UN Security Council managed to adopt only 12 resolutions, mostly of a humanitarian nature, clearly reflecting the declining effectiveness of this global governance body. For comparison, in 2000, the Security Council approved 29 resolutions, including key decisions on conflict resolution in the Balkans and Africa. At the same time, 2024 saw continued efforts to explore new formats for multilateral cooperation, including mechanisms within the BRICS group, which held its 16th summit in Kazan for the first time in its newly expanded composition. With enough imagination, one can easily find evidence in the past 12 months to confirm any omen or superstition traditionally associated with leap years. However, all these signs and superstitions predicting upheavals and catastrophes—while aligning with the pessimistic conclusions about the year now ending—do not apply to the year ahead. Human nature, after all, tends to lean more towards optimism than pessimism; if it were the other way around, we would still be living in caves. As they bid farewell to a difficult and challenging year, people around the world continue to hope for better times. And the mere act of hoping for the best is already significant in itself. As Johann Wolfgang von Goethe aptly remarked, “Our wishes are forebodings of our capabilities, harbingers of what we are destined to achieve”. Originally published in Izvestia.

Energy & Economics
Middle East Conflict. Conceptual photo

How might a wider Middle East conflict affect the global economy?

by Ahmet Kaya

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The world economy is underperforming as a result of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainty around the US election. An escalation of conflict in the Middle East could increase uncertainties, harming inflation reduction efforts and hurting growth. It has been over a year since the Hamas-led attack on Israel. Israel’s response in Gaza has resulted in widespread destruction and significant loss of life. The conflict has since expanded beyond Gaza, involving the Houthis in Yemen, Hezbollah in Lebanon and Iranian strikes targeting Israel. In addition to the awful humanitarian cost of the conflicts, the war and the possibility of its further expansion pose significant repercussions for the global economy. This article discusses three potential ways in which the current conflict and a wider conflict in the Middle East could affect the global economy. Increased geopolitical uncertainties First and foremost, an escalation of the Middle East conflict could lead to greater geopolitical uncertainties. Figure 1 shows the evolution of the geopolitical risk (GPR) and geopolitical acts (GPRA) indices (Caldara and Iacoviello, 2022) – these are text-based measures of heightened uncertainties due to adverse geopolitical events such as wars, terrorism and international tensions. (See this article for more discussion about these measures.) Following the Hamas-led attack on 7 October 2023, both the overall GPR index and its ‘war and terror acts’ component spiked strongly, to a level higher than that seen during the ISIS attack in Paris in November 2015. Both indices eased significantly in the months following October 2023 despite the continuation of the conflict. But they jumped again following Israel’s attack on southern Lebanon in September 2024. As of mid-October 2024, the GPR and GPRA remain, respectively, 21% and 35% higher than their historical averages.   What might be the consequences of such elevated levels of risk? Research tells us that higher geopolitical risk raises oil prices (Mignon and Saadaoui, 2024). It also reduces global investment and increases inflation (Caldara et al, 2022). Greater geopolitical risk has a significantly negative impact on business and consumer confidence in several advanced economies (de Wet, 2023). This is because consumers typically cut non-essential spending and businesses postpone investment decisions during turbulent times. This reduces firm-level investment, particularly for businesses with higher initial investment costs and greater market power (Wang et al, 2023). Higher geopolitical risks also reduce global trade and financial flows, causing greater volatility in capital flows in emerging markets (Kaya and Erden, 2023). Oil production cuts and higher energy prices The second way in which the Middle East conflict could affect the global economy is its impact on energy prices, both directly through production cuts and indirectly through greater uncertainties. In response to Israel’s actions against its neighbours, the Organization of the Petroleum Exporting Countries (OPEC) could reduce oil production to penalise countries supporting Israel. A similar action in the 1970s led to a significant jump in oil prices, which contributed to years of stagflation, with higher global inflation and recessions in major economies. Before Israel's attack on Lebanon at the end of September, oil prices had been declining due to falling demand, particularly from China. On the supply side, oil production had increased in Canada and the United States, countering the production cuts by OPEC, and Saudi Arabia was expected to increase oil production from December. But the situation quickly reversed following Israel’s attack on Lebanon. Oil prices jumped by nearly $10 per barrel within a week, before easing by around $5 per barrel. While the immediate oil price impact of Israel’s attack has mostly faded, the potential for higher oil (and other energy) prices still poses a risk to global inflation and economic activity (Liadze et al, 2022). To provide further context for the potential scale of this impact, we can show what would happen if oil and gas prices were to remain $10 higher for two years than the baseline levels projected in the Summer Global Economic Outlook from the National Institute of Economic and Social Research (NIESR), using NIESR’s Global Macroeconometric Model (NiGEM). The results demonstrate that the $10 rise in oil and gas prices increases inflation by around 0.7 percentage points in major economies in the first year (see Figure 2). The impact is higher in China, where the economy relies relatively more on oil imports for its strong manufacturing industries. The inflationary pressures persist for two years despite central banks’ efforts to curb inflation by increasing interest rates.   The effect of higher oil and gas prices on real GDP is shown in Figure 3. In the scenario described above, GDP would fall by 0.1-0.2% in major economies immediately. Partly due to higher interest rates, real GDP would continue to weaken for three years following the shock. After this, economic activity would start to return to base levels as oil and gas prices revert to their levels in the baseline forecast.   Increased shipping costs and supply chain disruptions A wider conflict in the Middle East could also affect the economy through higher shipping costs and supply chain disruptions. Houthi attacks on commercial ships in the Red Sea in late 2023 showed that such disruptions can have a huge impact on global trade through shipping, which comprises 80% of world trade volume. Following the rocket attacks by the Houthi rebels, some commercial shipping re-routed from the Red Sea to the Cape of Good Hope, leading to significant delays in travel times and increased freight costs. As a result, the Shanghai Containerized Freight Index – a measure of sea freight rates – rose by around 260% in the second quarter of 2024 with additional disruptions to supply chains. Our analysis shows that an increase of 10 percentage points in shipping cost inflation can lead to import prices rising by up to around 1% and consumer inflation increasing by around 0.5% in OECD countries. As Figure 4 shows, the impact of shipping costs on inflation shows its full effects over six quarters. This means that inflationary concerns could be with us for the next year and a half as a result of higher shipping costs that may emerge from any possible escalation of the Middle East conflict.   Wider economic implications and policy responses While rising geopolitical risk and increased oil and shipping costs can each individually exert upward pressure on inflation and may slow down economic activity in the global economy, the combined impacts are likely to be greater. Countries with stronger trade and financial ties to the Middle East and those that rely heavily on oil imports as an input for domestic production would be most affected. On the monetary policy front, central banks may have to take a more hawkish stance in response to rising inflationary pressures from the Middle East conflict. This could lead to higher interest rates, which would further dampen economic activity, particularly in an environment where there are already recessionary concerns in some major economies. Beyond its immediate economic implications, an escalation of the Middle East conflict could trigger large-scale displacement of people, which would increase economic and social pressures on neighbouring countries. Many countries may also have to increase their military spending in response to growing regional tensions. Given that public debt levels are already elevated in many countries due to successive shocks to the global economy over the past decade, any additional defence spending could come at the expense of public infrastructure investments that would otherwise boost productivity growth. Overall, the global economy is already underperforming as a result of the lagged effects of tight monetary policies, weaker global trade, a slowing Chinese economy and uncertainties surrounding the upcoming US election and possible changes to US trade policy. A potential escalation of conflict in the Middle East could exacerbate the situation by increasing uncertainties, harming efforts to bring down inflation and reducing global GDP growth. Over the medium and long term, it could further damage the global economy, with the possibility of refugee crises as well as increased defence spending, making the effects more complex and longer lasting. This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Diplomacy
16th BRICS Summit family photograph (2024)

BRICS Summit 2024 — everything, everywhere, all at once?

by Priyal Singh

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Ushering in a multipolar order requires a streamlined and coherent political agenda – not unfocused expansion.  The 16th BRICS Summit in Kazan, Russia, concluded last week with the usual grand declaration of the group’s commitments, concerns and aspirations.  Many media headlines, particularly in Western countries, focused on how the summit and BRICS generally, symbolised Moscow’s ability to circumvent the fallout of sanctions by turning to the global south. In this way, BRICS is indirectly viewed as a threat to Western efforts to isolate Russia, weaken its power projection capabilities, and end its invasion of Ukraine.  Western governments and analysts often struggle to frame BRICS’s evolution beyond a binary, zero-sum narrative in which the group is a key geopolitical challenge to the Western-dominated international order. This interpretation places the forces of democracy and liberal political values in one camp and authoritarian governments in another, with certain developing countries caught in the middle, trying to play one side off the other for their own benefit.  There is some merit to these kinds of headlines. Russia and China are primarily major status-quo powers. Both have been permanent United Nations Security Council (UNSC) members since its establishment. Moscow was the ‘other pole’ in the international order for most of the 20th century, a position Beijing is working towards. And the foreign policy goals of both place them in confrontation with the United States and its Western allies.  BRICS may be on a path towards unnecessary substantive bloat, and away from its core business.  So, are these two countries in a position to champion the global south’s cause, and why haven’t more representative bodies like the Non-Aligned Movement played a more prominent role?  The preoccupation with Russia and China detracts from BRICS’s broader, underlying geopolitical project – the need for global south countries to reform and shape the international order’s future direction on their own terms.  These include greater representation and agency in global policy- and decision-making bodies and facilitating greater freedom to trade, invest and borrow money outside the Western-dominated financial system. They also include a more just and equitable global power balance that reflects modern realities.  In pursuing these aims, BRICS countries have made steady progress on developing a shared strategic agenda for increased cooperation across various policy domains.  The Kazan summit’s 32-page outcomes declaration covers almost everything from reforming the UNSC and Bretton Woods institutions to climate change, biodiversity and conservation. It also covers challenges from global crises, conflicts and terrorism and a suite of economic development, health, education, science and cultural exchange-related issues.  A group of democracies, autocracies and theocracies speaking with one voice on human rights and democracy is absurd.  The group’s ballooning cooperation agenda may indicate progress. But it could also signify the limits of its diverse members’ ability to agree on ‘hard’ political and security matters central to the core business of reforming the international order.  The expansion of BRICS’ substantive agenda and its membership dilutes its primary purpose and reinforces the binary, zero-sum Western narrative its members constantly try to shed.  Tangible, albeit gradual, progress on establishing intra-BRICS institutions and processes such as the Interbank Cooperation Mechanism, the cross-border payment system and its independent reinsurance capacity suggest that BRICS’ clout and credibility are growing.  These initiatives could enable members to pursue their international economic objectives without the constraints and transactional costs associated with traditional financial bodies like the World Bank and International Monetary Fund. Ideally, this would improve their relative positions of global power and influence, and help deliver a more multipolar international order.  In contrast, deepening cooperation on big cat conservation, while important, doesn’t serve that purpose. Nor does facilitating youth exchanges on sports and healthy lifestyles or championing a BRICS alliance for folk dance. Including these kinds of initiatives in BRICS’ growing agenda detracts from its core objectives.  A streamlined agenda would divert attention from the contradictions and geopolitical manoeuvring of BRICS’ members.  More worryingly, this suggests that BRICS’ diverse constellation of member states is pursuing the path of least resistance – expanding their cooperation in every direction, hoping something eventually sticks.  Instead of doubling down on hard strategic questions about a shared conception of multipolarity, and the steps necessary to reform global governance and security institutions, BRICS seems to be heading for greater expansion and formalisation. And with that come the risks, challenges and institutional dependencies that have led to the stagnation and ineffectiveness plaguing more established international organisations in recent years.  Perhaps the group’s core members recognise that they have very different ideas of what constitutes multipolarity. Russia (and China to an extent) envisage much more than global institutional reforms, focusing instead on reimagining international norms and core principles.  These differences are also reflected in BRICS’ expanding membership. It seems Russian and Chinese enthusiasm has been curbed by other founding members, who prefer a ‘partner country’ model for future growth. This contrasts with the full membership offers to Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and UAE in 2023. (Argentina’s new political administration declined, and the Saudis have remained non-committal.)    Most worrying, however, is BRICS’ preoccupation with promoting democracy, human rights and fundamental freedoms. There is no doubt that these terms are increasingly politicised and rife with double standards – among developing nations with mixed political systems and traditionally liberal, Western democracies. However, for BRICS to meaningfully champion normative values, its members must at least attempt to commit to common political governance systems in their own countries.  Having a group of partner nations composed of progressive constitutional democracies and closed repressive autocracies and theocracies attempting to speak with one voice on promoting human rights, democracy and fundamental freedoms is absurd. It reeks of empty political rhetoric at best, and Orwellian double-speak at worst.  This again dilutes BRICS’ key messages, undermines its important core business, and detracts from the significant progress being made towards a common strategic agenda.  BRICS primary goal moving forward should be to trim the fat.  A streamlined annual working agenda would divert attention away from its individual member states' contradictions and geopolitical manoeuvring. With a focus on addressing the international system’s failures, institutional reform and greater representation for global south countries in policy- and decision-making bodies could be prioritised.  This seems unlikely though, if this year’s summit is anything to go by. By following the path of least resistance, BRICS may be setting itself on a course towards increasing and unnecessary substantive bloat, and away from its core business.  Only time will tell if certain members are willing to be more assertive and correct course before they are too far down a path impossible to pivot away from. 

Defense & Security
Red Sea - IMG_0150.JPG

Navigating the Red Sea: Addressing threats and harnessing potential

by Frederic Gateretse-Ngoga , Farea Al-Muslimi , Lisa Boström , Veera Tuomala

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском Photo credit: Flickr/Sailing Nomad - https://creativecommons.org/licenses/by-nc-nd/2.0/ Ambassador Frederic Gateretse-Ngoga, Farea Al-Muslimi, Lisa Boström and Veera Tuomala In recent months, the Red Sea has drawn global attention, particularly due to Houthi attacks on shipping in the Bab el-Mandeb Strait, as well as the deal between Ethiopia and the self-declared Republic of Somaliland on access to the Gulf of Aden, which sparked a dispute with Somalia. The rising tensions and increasing military responses risk worsening conflicts in a highly volatile region. The renewed focus on the Red Sea, however, also provides an opportunity to redouble commitment to multilateralism and enhance the collective action needed to address threats facing the region. This blog post gives an overview of current issues in the region and possible ways to address them, building on the outcomes of a panel discussion at the 2024 Stockholm Forum on Peace and Development. Geopolitical competition in the Red Sea region The Red Sea has become a major flashpoint for global and regional contestation, with local, regional and global conflict dynamics deeply intertwined. Regional and global powers are constructing naval bases and military installations around the Red Sea to enhance their power projection, fuelling existing tensions and exacerbating ongoing conflicts. This has aggravated already dire humanitarian conditions, contributing to fragility across the Horn of Africa, the Middle East and North Africa. In Sudan, competition between Gulf states is widely considered a driving factor behind the civil war. In Somalia and Yemen, external influences have fuelled internal disputes and aggravated tensions, undermining state-building efforts and incurring particularly devastating consequences in Yemen. Climate change and a scramble for scarce natural resources and critical commodities, including water, agricultural land and food supplies, may reinforce this dynamic. Gulf states, in particular, have invested billions in agriculture and manufacturing in the Horn of Africa in recent years to secure food production and tap into the region’s burgeoning labour markets. Regional insecurity escalates Insecurity in the Red Sea region reached a critical point in early 2024 when the Houthi attacks on ships in the Red Sea, the Gulf of Aden and the Bab el-Mandeb Strait in response to the ongoing conflict in Gaza, further threatening regional and international stability, upending trade and disrupting global markets. In response, the United States and the United Kingdom carried out airstrikes against targets in Yemen, while the European Union took a more defensive approach with the launch of Operation ASPIDES to protect vessels. This escalation delayed peace negotiations in Yemen, weakening the fragile trust needed to agree on an extended ceasefire and a roadmap to peace. The Houthi attacks also further compounded humanitarian challenges, disrupting the flow of essential goods and humanitarian aid to the Horn of Africa and the Red Sea region more widely, thus worsening shortages and human suffering. In Sudan around 26 million people, more than half the population, are suffering acute food insecurity. In Yemen, around 22 million people are in need of humanitarian assistance, with about 17 million facing acute food insecurity. Instability on both coasts has also increased migration across the Red Sea. The number of migrants from the Horn of Africa arriving in Yemen has nearly tripled in recent years, with tens of thousands making the dangerous crossing annually in search of better economic opportunities. Additionally, the rise in piracy off the coast of Somalia has exacerbated regional insecurity, with reports of coordination between the Houthis and the Al-Shabaab armed group in the Horn, increasing the risk of human trafficking and forced migration. Opportunities to strengthen multilateralism, cooperation and collective action The barriers to effective cooperation in the Red Sea region are significant but not insurmountable. Historical rivalries and political instability have eroded trust among countries in the region, and the diverse priorities and strategic interests of these countries complicate collaboration. Despite these challenges, the region holds immense potential for growth and development. The strategic location and resources of countries on both shores, if harnessed constructively and collectively, could spur economic prosperity and regional stability. However, the region can realize its potential and accelerate socio-economic development only through inclusive growth, innovation and addressing long-standing developmental challenges. In this regard, prioritizing economic and regional integration is critical to unlocking the region’s vast potential. Indeed, the geographical proximity between the Horn of Africa and Yemen across the Bab el-Mandeb Strait has brought about initiatives such as the Bridge of the Horns, proposed in 2007 between Djibouti and Yemen, which represented a bold vision for a more integrated, peaceful and prosperous region. While the project did not materialize, it is symbolic of the potential for deep and mutually beneficial economic, cultural and political ties across the Red Sea. While there are currently no operational overarching mechanisms or forums for multilateral cooperation around the region, the establishment in 2020 of the Red Sea Council—formally the Council of Arab and African States bordering the Red Sea and the Gulf of Aden—could fill this gap. Once operational, it could help to mitigate tensions and foster cooperation towards a shared vision for the region. Moving forward There are several areas where enhanced cooperation is achievable and could benefit the Red Sea region as a whole. For example, establishing joint coastal patrols and information-sharing mechanisms could significantly enhance maritime security and combat piracy, smuggling and terrorism along the vital maritime corridor. Developing regional trade agreements and infrastructure projects could boost economic growth and interdependence, reducing the likelihood of conflict. Collaborative efforts to address climate change, manage shared water resources and protect marine ecosystems could promote sustainability and reduce resource-related tensions. Coordinating humanitarian responses and development programmes could address the root causes of instability, such as poverty, food insecurity, and poor access to education and healthcare. Finally, establishing platforms for dialogue and mediation could help to resolve disputes peacefully, preventing the escalation of conflicts. By focusing on these areas, the countries of the Red Sea region could move towards a more cooperative, stable and prosperous future. Strengthening cooperation through robust multilateral frameworks is vital to addressing the factors that underpin regional insecurity as well as to promoting sustainable development. Regional solutions should be led by the region, rather than relying on external entities whose priorities and resources are currently focused elsewhere. Countries on both coasts of the Red Sea need to view each other as partners for common goals and stability, prioritizing cooperation to connect their needs and interests effectively. As United Nations Secretary-General António Guterres notes in the New Agenda for Peace, rebuilding consensus around shared norms and developing new ways for states to act cooperatively is crucial to addressing collective challenges and meeting shared objectives. SIPRI is pleased to share a series of guest blog posts from partners of the 2024 Stockholm Forum on Peace and Development. This blog builds on a panel discussion at the Forum on the topic ‘Red Sea Security in a Time of Disorder’, which was organized by CMI–Martti Ahtisaari Peace Foundation.