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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
Magnifier glass focus on USD dollar and Yuan banknote with USA and China flag .It is symbol of economic tariffs trade war ,tax barrier and tech competition which it effect to global economy concept.

Four Big Flaws in Trump’s Threat to China Over the Dollar

by Dean Baker

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Last week Donald Trump made a bizarre threat on his Truth Social site that he would impose 100 percent taxes on the imports (tariffs) from any country that doesn’t take a pledge to not move away from the dollar as its reserve currency.  Donald Trump’s Big Fear Exists Only in His Imagination  The threat was bizarre for several reasons. First, he seemed to imagine that the BRICS countries (Brazil, Russia, India, China, and South Africa) and their allies are in the process of setting up an alternative currency to the dollar.  This would be very hard to imagine since this group of countries has little in common other than feeling marginalized by the United States, West Europe, and the international institutions they have established. Agreeing on rules for a common currency involves considerable haggling and is difficult even among countries that are similar in their economies, history, and culture. Ask the countries in the euro zone. Bringing this group together in a common currency seems a long shot even one or two decades out. So, Trump was making some grand threat against a development that will almost certainly not happen. Oh well, always good to be cautious. Who Cares If They Establish Their Own Currency? Trump’s ignorance of trade and finance issues really shines through on this one. Paul Krugman has been working hard trying to educate the public on the meaning of a reserve currency.  First of all, there is not a single reserve currency. There is no law that requires all international payments be made in dollars, and many in fact are not. If businesses find it more convenient to sell in euros or yen, there is nothing that prevents them from doing so. It’s not clear if Donald Trump is unaware of this fact or thinks that he somehow will police all the transactions in the world and require them to be done in dollars. Central banks also hold currencies in reserve to cover international payments and to support their own currency in the event of a crisis. The dollar is the predominant reserve currency, but not the only one. Central banks also hold euros, British pounds, Japanese yen, and even Swiss francs. Perhaps Trump wants to monitor the currency holdings of central banks and start raising the tax on imports from any country where dollar holdings fall below a certain level. That seems a pretty whacky way to set trade policy (it would violate most of our trade agreements), but about par for Donald Trump economic policy. The Dollar as a Reserve Currency Undermines Donald Trump’s Dream of Balanced Trade  Insofar as having the dollar as the world’s leading reserve currency matters, its main benefit would be increasing demand for the currency and thereby driving up its value relative to other currencies. This would be good in the sense that it makes it cheaper for people in the United States to buy items imported from other countries.  The effect is not likely to be very large. The overwhelming reason for wanting to hold dollars is to invest in US financial assets, like stock and bonds, both public and private. As long as investors think the United States has a strong and stable economy, they will want to have dollars to be able to invest here.  If the United States were just another reserve currency, like the euro, then fewer dollars would be held as reserves and for carrying through transactions. This would likely mean the dollar was valued somewhat less against other currencies, but it is unlikely that the drop would be more than 5-10 percent. This is the sort of movement in the dollar we see all the time over the course of a year or two. It usually does not get much attention. For example, the dollar rose by more than 5.0 percent against the euro between May of 2021 and the end of the year, and it seems no one noticed. More importantly for this issue, insofar as being the leading reserve currency raises the value of the dollar, it goes the wrong way in terms of Donald Trump’s goals on trade policy. Donald Trump seems to want the United States to have balanced trade or even a trade surplus.  A higher valued dollar directly undermines the effort to achieve this goal. If the dollar is higher valued against other currencies, it makes imports cheaper for people in the United States. That means we will buy more imports.  If the dollar is higher valued against other currencies it means that foreigners will have to use more of their own currency to buy a dollar. That makes our exports more expensive for them. If our exports are more expensive, people living in foreign countries will buy less of exports. If we buy more imports, and sell fewer exports, then our trade deficit will be larger. This means that Donald Trump’s quest to preserve the dollar’s status as the premier reserve currency goes completely against his goal of reducing the trade deficit. Donald Trump’s 100 Percent Tariff Will Hurt Us Much More Than It Will Hurt China The United States provides a valuable export market for China, but it would require some very strange arithmetic to imagine that China somehow needs the US market for its prosperity. First, it is worth getting an idea of the volume of exports at stake. The US had imported $322 billion in goods from China through September of this year, which puts it on a course to import roughly $430 billion for the year. By comparison, China’s GDP on a purchasing power parity basis is projected to be $37.1 trillion this year using a purchasing power parity (PPP) measure of GDP, while it would be $18.3 trillion using an exchange rate measure. This means that its exports to the US would be equal to 1.2 percent of its GDP using the PPP measure, and 2.3 percent using the exchange rate measure. The difference between these two measures is that the PPP measure uses a common set of prices across countries for all goods and services. It means that it prices a haircut and a heart operation at the same price in the United State and China, as well as every other country. By contrast, the exchange rate measure takes the country’s GDP calculated in its own currency and then converts it to dollars at the current exchange rate. The large difference between the two measures is explained by the fact that many services cost much less in China than in the United States and other wealthy countries. For example, renting a comparable apartment or getting a doctor’s exam would cost far less in China than it would in the United States. While for many purposes, such as comparing living standards, the PPP measure is appropriate, in this case the exchange rate measure is probably the right one. We are asking how much demand China would lose in its economy if it is cut off from the US market. Since the goods sold internationally are likely priced in China close to their prices internationally, the demand loss would be larger than would be indicated by their share of its GDP measured in PPP terms.  This means that in the extreme case where China loses its entire US export market, demand in its economy would fall by 2.3 percent, before taking account of any multiplier effects. This is far from trivial, but it is not likely to lead China’s economy to collapse. By comparison, when the housing bubble collapsed in the United States in 2006-2008, the share of residential construction in GDP dropped by 4.0 percentage points.  That drop gave the US a severe recession, but it is important to keep in mind the economic problem we are describing. This would be a story of inadequate demand in the economy. This can be counteracted by the government spending more money, which we did to some extent with the stimulus package enacted under President Obama in 2008-09 and with an even larger package under President Biden in 2021-22.  There may be political considerations that act as obstacles to large-scale stimulus in China, as there are here, but there is no economic reason that China could not boost its economy in a way that replaces the demand lost from the U.S. export market. If China’s government chose, it could even borrow a trick from the US playbook and send $2,000 checks to everyone in the country and put Donald Trump’s name on the check. That would hardly be a crisis from China’s standpoint. The picture looks much worse from the US standpoint. We will be paying substantially more for the $430 billion in goods that we had been buying from China. It would be necessary to look at possible substitutes for these imports on a sector-by-sector basis, but let’s say on average that the additional cost for the replacement its is 40 percent of the price of the goods from China. In that case, we would be paying an extra $170 billion a year, roughly $1,400 per family, to cover the additional cost.  The reason this looks worse from the US standpoint than the Chinese standpoint is that China just needs to create a new source of demand, which its government can do directly by giving people money. On the other hand, the United States is seeing the cost of a number of items rise, in effect seeing a shortage of supply comparable to what happened with the supply chain crisis during the pandemic.  Most governments would not deliberately inflict this sort of pain on its population without a good cause, but Donald Trump prides himself on being unorthodox. This threat over the dollar’s status as a reserve currency certainly is unorthodox.

Energy & Economics
Press Conference by European Commission President Ursula von der LEYEN and Mario DRAGHI on the Report on the Future of EU Competitiveness in Brussels, Belgium on September 9, 2024.

Press statement by President von der Leyen on the occasion of the Mercosur leaders' meeting

by Ursula von der Leyen

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Ladies and Gentlemen, Today marks a truly historic milestone. Let me begin by thanking the Chief Negotiators for their dedication and determination. They worked tirelessly, over many years, for an ambitious and balanced agreement – and they succeeded. The bond between Europe and the Mercosur countries is truly one of the strongest in the world. It is a bond anchored in trust, enriched by a shared heritage, that spans centuries of mutual learning and growth. In fact, exactly 30 years ago, in 1994, my predecessor Jacques Delors stood here in Montevideo. He met with your father, dear Luis, who was then President of Uruguay. Together they shared a bold vision. A vision of deeper integration, not only within Europe and Mercosur, but also between them. Today, in Montevideo, we are turning that vision into reality. We are strengthening this unique partnership as never before. And in doing so, we are sending a clear and powerful message to the world. First, in an increasingly confrontational world, we demonstrate that democracies can rely on each other. This agreement is not just an economic opportunity, it is a political necessity. We are like-minded partners. We both believe that openness and cooperation are the true engines of progress and prosperity. I know that strong winds are blowing in the opposite direction – towards isolation and fragmentation. But this agreement is our clear response. We stand together on the global stage, as partners. Second, we are sending a message to our people and businesses in our regions: This agreement was designed with your interests at heart. It is made to work for you. It means: more jobs – and good jobs – more choices and better prices. The European Union and Mercosur create one of the largest trade and investment partnerships the world has ever seen. We are taking barriers down and we are allowing investments in. We are forming a market of over 700 million consumers. This partnership will strengthen entire value chains; it will develop strategic industries; it will support innovation; and it will create jobs and values, on both sides of the Atlantic. Third, we are showing the world that trade can – and must – be guided by values. Trade agreements are more than economic frameworks. They are a way to build communities of shared values. The EU-Mercosur agreement reflects our steadfast commitment to the Paris Agreement and to the fight against deforestation. President Lula's efforts to protect the Amazon are welcome and necessary. But preserving the Amazon is a shared responsibility of all humanity. This agreement ensures that investments respect Mercosur's extraordinary yet fragile natural heritage. My fourth message is that, economically, this is a win-win agreement. Europe is already a leading investment and trade partner for Mercosur. So you know how we do business together. We are focused on fairness and mutual respect. EU-Mercosur will bring meaningful benefits to consumers and businesses, on both sides. It will facilitate European investments in strategic industries across all Mercosur countries: like sustainable mining, renewable energy and sustainable forest products, just to name a few. It will also make it easier to invest in sectors that directly impact the people's daily lives. For example, expanding the electricity grid to rural and remote areas and advancing digitalisation across the region. Finally, let me address my fellow Europeans: This agreement is a win for Europe. 60,000 companies are exporting to Mercosur today – 30,000 of them are small and medium-sized enterprises. They benefit from reduced tariffs, simpler customs procedures and preferential access to some critical raw materials. This will create huge business opportunities. To our farmers: We have heard you, listened to your concerns and we are acting on them. This agreement includes robust safeguards to protect your livelihoods. EU-Mercosur is the biggest agreement ever, when it comes to the protection of EU food and drinks products. The agreement protects 350 EU geographical indications. In addition, our European health and food standards remain untouchable. This is the reality – the reality of an agreement that will save EU companies EUR 4 billion worth of export duties per year while expanding our markets and opening new opportunities for growth and jobs on both sides. I want to thank President Lacalle Pou for hosting this Summit and for bringing us together in Montevideo. This is a good day for Mercosur, a good day for Europe and a landmark moment for our shared future. A whole generation dedicated their effort, vision and determination to bring this agreement to life. Now, it is our turn to honour that legacy. Let us ensure that this agreement delivers on its promises and serves the generations to come. Thank you very much.

Energy & Economics
Inscription BRICS 2024, Kazan, Russia on a blue background. Official blue logo signage of the BRICS summit 2024 Russia in Kazan. Russia, Kazan, October 26, 2024

Latin American Prospects for BRICS

by Tatiana Vorotnikova

Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском The BRICS Summit held in Kazan October 22–24, 2024, highlighted several defining developments regarding Latin American countries that will play a significant role in the continent's political and economic evolution soon. With the inclusion of two regional states as associate members of the bloc, Latin American presence in the pool of developing nations striving to expand their influence in shaping a new world order is set to increase. Bolivia and Cuba joined BRICS as partners alongside 11 other countries: Algeria, Belarus, Vietnam, Indonesia, Kazakhstan, Malaysia, Nigeria, Thailand, Turkey, Uganda, and Uzbekistan. Together with the core BRICS countries and new members who joined the bloc a year earlier, they form a fundamentally new framework for international cooperation, where the diversity of participants creates a platform for a polyphonic dialogue. While the general outline of their interests aligns, each country has its own priorities and expectations from its participation in BRICS. Interests of Bolivia The multinational state of Bolivia is developing a left-oriented economic model, in which fundamental importance is given to the social redistribution of state revenues, received mainly from the exploitation of the country's resource potential. Bolivia has significant hydrocarbon reserves, primarily natural gas, as well as the largest lithium reserves on the planet, the volume of which is estimated at more than 21 million tons. While the export of Bolivian hydrocarbons (mainly to neighboring Brazil and Argentina) remains a traditional source of budget revenues, the lithium industry has relatively recently become a priority for the country's foreign economic activity. The nationalization of lithium in 2008 marked the beginning of efforts to develop deposits. However, for a number of reasons, including difficulties in attracting investment, the lack of a technological base, and resistance from indigenous populations and local environmental organizations, full-scale exploitation of the deposits—aside from some pilot projects—was never realized. Only in 2021, two Chinese and a Russian company, Uranium One Group, which is part of the management circuit of the State Corporation Rosatom, received a tender for development. By joining BRICS as a partner, La Paz hopes to strengthen its position as a supplier of lithium raw materials to the global market. Given the scale of national reserves of this metal, the Bolivian government is interested in expanding the number of international investors. La Paz is ready to engage with its partners in other fields, such as energy resources and food production. BRICS countries already occupy leading positions in Bolivia's foreign economic relations. Firstly, we are talking about Brazil ($3.5 billion), China ($3.5 billion), and India (about $2 billion), which imports large volumes of Bolivian gold. In addition to trade, China is actively investing in Bolivian infrastructure and technology projects. The significance of collaboration with Russia continues to increase. The lithium agreement is part of a broader strategy between the two governments to encourage investment in key sectors. On the sidelines of the Kazan summit, Presidents Luis Arce Catacora and Vladimir Vladimirovich Putin held a bilateral meeting to discuss joint nuclear technologies (a unique high-mountain Nuclear Research and Technology Center (NRTC) for the peaceful use of nuclear energy has been established in Bolivia, built by Russian specialists), along with cooperation in education, lithium contracts, and other agendas that align the interests of the two countries. Additionally, La Paz and Moscow share common principles for shaping a global order and advocate for the creation of a multipolar world. At the same time, it is important to consider Bolivia's complex domestic political situation and the conditions under which the country will approach the 2025 general elections. The dispute over the presidential candidacy threatens to completely dismantle the political project that has been unfolding in the country since 2006. Social divisions and economic crises are fostering a deep sense of uncertainty and pessimism within Bolivian society regarding the country's development prospects. BRICS could present a new opportunity for economic breakthroughs, provided the current course is maintained after the elections. However, it is also possible that with the rise of opposition forces, Bolivia might follow the path of Argentina, which, as is known, withdrew from joining the bloc after a change of power. Cuban Expectations For Cuba, international support from BRICS countries represents a chance to overcome the prolonged and multifaceted crisis that the island cannot resolve on its own. Havana sees its main goals as countering unilateral American restrictive measures and seeking alternative sources of financing.   Cuba maintains trade relations with all BRICS countries, though their share in Cuba’s total trade turnover remains relatively small. China holds a leading position, accounting for approximately 13% of Cuban foreign trade. The most significant growth in trade turnover occurred between 2005 and 2015, but in recent years, Cuban-Chinese relations have seen a decline. In 2018, Cuba joined China's Belt and Road Initiative, but it has yet to yield substantial results.   Latin American countries account for a third of Cuba's foreign trade, with Brazil representing only 3.2%. The expansion of trade and economic ties with Russia has led to an increase in trade turnover to 7%. Thus, enhancing the intensity of external economic relations remains one of Cuba’s primary objectives. At the same time, the primary obstacle to achieving this remains the U.S. economic embargo, which Cuba consistently urges the international community to oppose. While there was a thaw in bilateral relations during Barack Obama's presidency, with mutual efforts to find compromises on key issues, neither side is willing to fully abandon its positions.   It should also not be assumed that Havana’s rapprochement with BRICS signals a complete abandonment of efforts to establish constructive engagement with Washington. The United States will continue to be a focal point for Cuban attention. However, given the new dynamics in the White House following the recent elections, it will be challenging for Havana to maintain the current status quo and avoid heightened pressure that could follow from the hegemon. Contradictions Between Venezuela and Brazil  One of the countries that shares Cuba's aspirations is Venezuela, which is under severe Western sanctions and grappling with a deep economic crisis. Caracas primarily relies on support from Russia and China. However, Venezuela's relationships with other BRICS members are far more complex.   For instance, Venezuelan-Indian ties are primarily based on India's demand for oil from the Bolivarian Republic. Under pressure from U.S. sanctions, India ceased purchasing “black gold” from Caracas in 2019 but remains open to resuming cooperation if restrictions are eased.   At the same time, Delhi provides no political support to the Venezuelan government, and the prospect of expanding ties in other areas appears unlikely. The veto on Venezuela's inclusion in the BRICS group of partners, driven by Brazil’s position, exposed deep contradictions within the region and intensified divisions among representatives of the left wing of Latin America's political spectrum. The fact that Brazil—the only country representing the region within BRICS—became the obstacle for Venezuela caused significant backlash and sharp rejection from Caracas. For Nicolás Maduro and his administration, potential membership in BRICS represents a key foreign policy objective. Maduro's close ties with Russia and strong relations with some Asian and African nations suggested high chances of acceptance. Furthermore, Venezuela maintains robust connections with several BRICS members, including Iran and China, with which it signed a comprehensive strategic partnership agreement in 2023 (similar agreements exist between Beijing and only Russia, Belarus, and Pakistan). Until recently, no open opposition to Venezuela's accession to BRICS had been observed. Venezuela and Brazil have a history of strained diplomatic relations, which were severed in 2019 after then-Brazilian President Jair Bolsonaro recognized opposition leader Juan Guaidó as Venezuela’s interim president. Ties were restored only in 2023 with the return of Luiz Inácio Lula da Silva to Brazil’s presidency. However, relations began to deteriorate again after Venezuela’s presidential elections in July 2024, in which Nicolás Maduro was declared the winner. The election results remain unrecognized by many countries, including Brazil, which officially called for the release of electoral protocols and withheld recognition of the Venezuelan government’s legitimacy. The growing rift between the two nations was exacerbated by Brazil’s veto on Venezuela’s inclusion in BRICS, leading to a sharp response from Caracas. In addition to issuing strong statements against Brazil, Maduro recalled his ambassador for consultations. Given that Brazil is set to chair BRICS in 2025, the current tensions have significantly diminished Venezuela’s chances of membership until relations with Brasília are restored. Considering the steadfastness and consistency of Itamaraty in implementing its foreign policy, this issue is likely to be postponed indefinitely. Brazil’s Aspirations   As of today, Brazil remains the only Latin American country represented in BRICS as a full-fledged member. It plays a key role on the global stage in advancing the Global South's agenda.   A central figure in this process is Luiz Inácio Lula da Silva, who, during his two presidential terms (2003–2006, 2007–2011), pursued an active policy of fostering closer ties with developing nations in Asia and Africa. His commitment to a multilateral approach in foreign policy reflects Brazil’s national tradition of positioning itself as a regional power with global ambitions. The rotation of BRICS chairmanship, coupled with the extension of Dilma Rousseff's tenure as head of the New Development Bank, appears to enhance Brazil’s prospects for expanding its role within the group and globally. In a challenging domestic political landscape, where the government faces significant opposition from a large segment of society, international achievements will be crucial for Luiz Inácio Lula da Silva.   While Brazil struggles to consolidate its Latin American neighbors and act as a driver of regional integration, its current diplomacy has shifted focus to global initiatives. Participation in international affairs is an integral part of Brazil's national identity. Its historical tradition of engaging in multilateral forums as a regional leader, combined with its accumulated diplomatic expertise, has positioned Brazil as a significant actor on the world stage. This allows the country to wield influence far exceeding that of a developing nation burdened by substantial internal socio-economic challenges and lacking the military capabilities of great powers. Brazil’s vision for a world based on international rules, where every nation has a voice, reflects its aspiration to advance a fairer global order. Through BRICS, Brazil seeks to promote this ideal, leveraging the group’s potential to amplify its influence on the global stage. External Factors Several other Latin American countries, such as Honduras, Nicaragua (both submitted applications ahead of the 2024 Kazan summit), and Colombia, have expressed their desire to join the bloc. This demonstrates a broad interest and intent to deepen cooperation within the Global South paradigm.   Additionally, Argentina's accession to BRICS, which was renounced by President Javier Milei, is likely to remain on the agenda and may be revisited in the future. Considering that an invitation from BRICS was extended and Argentina's political landscape is subject to radical shifts, the prospect of joining the bloc could materialize if pro-BRICS forces return to power in Buenos Aires. Finally, U.S. policy toward the region under Donald Trump’s administration will play a significant role in shaping the participation of Latin American countries in BRICS. While Trump’s cabinet is not yet fully formed and clear policy directions have not been outlined, various speculations are fueling uncertainty and raising expectations among different groups, without providing a clear picture. What is evident, however, is that Latin American countries once again find themselves needing to react to steps taken by the northern hegemon. Attempts to establish independent policies, undertaken over recent decades by many governments in the region, primarily leftist ones, have yet to yield the desired results or become an established reality. As a result, how these nations shape their foreign policies, including in other areas, will, to a certain extent, depend on Washington’s influence. In this context, BRICS, not only for newcomers like Cuba and Bolivia, could serve as a point of leverage to reduce dependence on the United States and create alternative paths for their foreign economic and political engagement. In a world of global uncertainty, Latin American countries are seeking effective mechanisms to advance and strengthen their positions.  Forms of international cooperation, like those provided by the BRICS format, are emerging as essential tools in this effort. This collaboration holds the potential to be both mutually enriching and highly beneficial.

Energy & Economics
Graph Falling Down in Front Of Kenya Flag. Crisis Concept

Kenya’s economy: how is the government tackling the big challenges?

by Seth Weisz

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Kenya’s government faces the challenge of meeting its debt obligations, while avoiding further unrest. President William Ruto must find ways to raise money, manage the economic recovery from Covid-19 and respond to the threat of climate change. William Ruto was elected as Kenya’s fifth president in September 2022. He had previously served ten years as deputy president and came into office with broad international support. In May 2024, Ruto embarked on the first state visit to the United States by an African leader in 16 years. That same month, his government proposed a raft of taxes designed to reduce Kenya’s budget shortfall – the fiscal deficit is projected to be 4.3% of GDP in 2024/25. The measures were encouraged by the International Monetary Fund (IMF), which had loaned Kenya $2.3 billion to meet the financial obligations resulting from Covid-19 and existing debt-servicing costs. The taxes were drafted into a bill comprising mostly VAT measures, which would place a disproportionate burden on poorer Kenyans. As a result, thousands of citizens, led by the younger generation, took to the streets in protest. This culminated in them storming the parliament buildings on 25 June, with around 50 protesters being killed. The next day, the president declined to sign the bill. Two weeks later, he dismissed his entire cabinet. What are the roots of Kenya’s debt crisis? In the last 15 years, Kenya’s debt has risen significantly. Government debt totalled a manageable 39% of GDP in 2010; by March 2023, it stood at 68% of GDP. This rise in debt is the result of a surge in borrowing between 2013 and 2022, under Uhuru Kenyatta’s administration. Following strong growth rates in the early 2000s, Kenyatta took out large loans to pay for infrastructure projects. Many of these did not result in enough economic growth to cover their costs. One often-cited example of this excessive borrowing is the $5.3 billion loan from China to pay for the Standard Gauge Railway (SGR) project linking the port city of Mombasa and the capital, Nairobi. Many of these infrastructure projects were victims of corruption, which siphoned money away from large loans. In particular, significant allegations of embezzlement have been levelled over the allocation of the Eurobonds (large international loans) secured by the Kenyan government in 2014 and 2018. The government lost at least 567.4 billion Kenyan shillings ($4.4 billion) to corruption between 2013 and 2018 alone, according to estimates from consulting firm Odipo Dev. Over the last ten years, Kenya has consistently ranked between 120th and 140th out of 180 countries in Transparency International’s corruption perception index. During this period, the Kenyan shilling has also lost 31% of its value against the US dollar. This has helped Kenyan exporters, particularly those that export to the United States (9.8% of exports). The dollars that Kenya receives from exporting have been vital to its debt repayment, especially because the country imports more than it exports. Its trade deficit sat at around $18 billion, according to 2022 figures. The shilling’s drop in value poses a significant problem for the treasury. Kenya’s $80 billion debt pile is mostly denominated in dollars, and the depreciation of the shilling has made these repayments significantly harder. Figure 1: Kenyan shilling ten-year exchange rate with the US dollar Source: xe.com The Kenyan government is not solely at fault for the accumulation of debt. IMF managing director Kristalina Georgieva called Kenya an ‘innocent bystander’ to external shocks after visiting in May 2023. She was referring primarily to the pandemic, which had caused dramatic short-term rises in unemployment and food security, and to the drought and inflation that followed. Where there is a country in debt distress, such as Kenya, there is often an irresponsible lender as well as the borrower. Campaign group Debt Justice points out that Kenya’s credit dried up after the pandemic, when developing countries were generally seen as riskier lending options. As a result, it had to turn to World Bank and IMF loans, and eventually bonds with double-digit interest rates. In the words of the African Forum on Debt and Development (AFRODAD), Kenya’s debt was the result of ‘a combination of irresponsible lending by developing partners… and an unsatiable appetite to borrow by the government of Kenya.’ In May 2020, the World Bank upgraded Kenya’s risk of debt distress from moderate to high. The pandemic depressed Kenyan exports and economic growth, and the government’s strong fiscal response magnified the existing budget deficit. At this point, both the World Bank and the IMF still viewed Kenya’s debt as fundamentally sustainable. What role has China played in Kenya’s debt burden? Since the Kenyatta administration started borrowing vast sums of money from China in 2013, the Asian giant has been accused of indulging in ‘debt-trap diplomacy’. Many Kenyans fear that the collateral for China’s $5.3 billion loan for the SGR is the strategic Mombasa port. Specifically, if Kenya is forced to default, it has been argued that China will seize the port. Similar accusations have dogged Chinese projects in Uganda and Zambia. In the last financial year, Kenya has repaid China $1.18 billion, a third of which comprised interest payments. Nonetheless, China’s role in Kenya’s debt crisis has probably been overstated. Kenya owes China approximately $6 billion, out of a total of $70 billion of debt. The World Bank and the IMF have judged the $2 billion Eurobond to be the more decisive factor in Kenya’s default risk. While Kenyatta’s government did borrow excessively from China, those loans at least resulted in completed infrastructure projects. The challenges that Kenya faces with Chinese loan repayments are mostly representative of its wider debt struggles. Chinese loans are dollar-denominated, and repaid at 3% above the benchmark global interest rate. What happened in 2024? In 2024, Kenya faced a looming June deadline to repay a $2 billion Eurobond issued in 2014. The IMF stepped in with a $941 million loan in January, bringing the organisation’s total exposure to Kenya to $4.4 billion. To cover the rest of its shortfall, Kenya issued an international bond of $1.5 billion, with an interest rate of 10.4%. The second loan was met with relief by international markets, which no longer feared an immediate Kenyan debt default. Many observers see this level of interest payment as a stark warning of financial ill health. Indeed, six of the 15 countries to issue bonds at 9.5% or higher interest rates since 2008 have eventually defaulted, according to Morgan Stanley analysts. In return for the low-interest loan from the IMF, Ruto’s government agreed to raise taxes. It introduced a finance bill in May 2024, outlining plans to raise 346 billion Kenyan shillings ($2.68 billion). It was these proposals that triggered the country’s mass protests. In the end, the president refused to sign the bill into law after these protests, which had culminated in the storming of Kenya’s parliament on 25 June. At least 50 demonstrators were killed in the violence, bringing worldwide attention to Kenya’s political and economic struggles. Who is protesting and why does it matter? Debt repayment is a controversial topic in many developing countries. Since the so-called ‘third world debt crisis’ in the 1980s, many have been mired in debt. The IMF provided emergency loans to affected countries throughout the 1980s. But these loans were conditional on austerity measures being implemented, privatisation programmes introduced and the countries’ economies opened to foreign capital. As a result, the IMF is frequently accused of seeking to influence the economic strategy of poor countries. Many Kenyan protesters took this line, decrying the IMF programme for tax rises and spending cuts in order to finance Kenya’s debt to the West as colonial. Many debt specialists around the world have sympathised with this view. Binaifer Nowrojee, president of the Open Society Foundations, noted that Kenyans make up just some of the three billion people living ‘in countries that are spending more on servicing their debt than public spending on education or health’. The Ruto government faces the challenge of overcoming the debt crisis and convincing the population to accept measures needed to do so. The protesters are predominantly urban, young and poor – the Kenyans who feel squeezed in the current economy. One study indicates that youth unemployment could be as high as 67%. For example, to buy a motorbike – often critical for employment – young people are forced to turn to microloans, which often leave them in inescapable debt. Kenya’s biggest cities have been at the heart of the anti-tax protests since the movement escalated on 18 June – 57 of the 215 protests took place in just seven cities. Many of the protesters left rural areas in search of economic opportunity and better government services but were left disappointed with the opportunities available. The demonstrators generally see themselves as existing outside civil society. One study finds that the wave of African protests since 2010 have typically been led by ‘political society’ (Branch and Mampilly, 2015). These are the most impoverished urban workers, who have little interaction with the state and tend to accomplish their aims through direct demonstration rather than the electoral system. Where does Kenya go from here? The IMF’s communications director has apologised to Kenyans, but maintains that an austerity programme is critical for the country’s economic health. So long as Ruto’s government seeks to avoid a default, the IMF is likely to insist on its measures being passed. Ruto responded to the 25 June events by branding the demonstrations as ‘treasonous’. He later moderated his position, dismissing almost his entire cabinet on 11 July. The new cabinet includes four members of the opposition Orange Democratic Movement (ODM), led by political opponent Raila Odinga. Demonstrations continue against the government, albeit to a lesser extent than in June. In order to address these, Ruto will have to accept that the ‘political society’ behind the protests is not allied to the ODM. Thus far, protesters have not shown themselves to be wedded to a party political or ethnic identity. Their demands – to bring down inequality, introduce measures against corruption and end police brutality – will require political will. Ignoring the protests, on the other hand, risks another crisis. Now that indirect tax rises are too politically toxic, the government must find other ways to increase its revenue. The obvious pivot is to raise direct taxes, particularly income tax and corporation tax. Kenya has a GDP per capita of $1,949, ranking 17 out of 48 countries in sub-Saharan Africa. The treasury has historically struggled to convert this into revenue. A recent study finds that Kenya’s tax revenue is equivalent to just 16.5%, down from a high of 17.5% in 2017 (OECD, 2023; KRA, 2024). This puts Kenya below the African average in both tax and non-tax revenue, and far below the Western average of 30-40%. Increasing direct tax revenue in sub-Saharan Africa is easier said than done. Prior to independence, colonial governments built tax bases that relied on controlling the movement of goods in and out of the territory (Cooper, 2002). Modern African states – many of which are poor and sparsely populated – have also relied on indirect taxes (Herbst, 2000). The IMF’s encouragement of Kenya to move away from indirect taxes on trade (that is, tariffs) towards taxing consumer expenditure (VAT) has damaged the government’s ability to collect taxation on a natural source. In common with some other African countries, state infrastructure is generally more effective at taxing trade since it is more regulated and accessible to the public authorities than domestic consumer spending. A short-term return to tariffs on foreign goods would be risky. It would be likely to result in higher consumer prices and increased costs of production for Kenyan companies. In the longer term, the government may need to expand formal employment and seek to bring in higher-wage jobs in order to expand the tax base (Cheeseman and Griffiths, 2005). For the time being, Kenya has averted a default. IMF loan interest rates are minimal, and the country won’t have to start repayments on its $1.5 billion bond until 2029. There are also some positive indicators. Kenya’s tax revenue in 2023/24 was $18.8 billion, an 11.1% increase on the previous year (at $16.4 billion). Economic growth rates are stable, at around 5.5% year-on-year. Nonetheless, Kenya is still spending 60% of its revenue on debt servicing, half of which goes to interest repayments alone. The situation is close to unsustainable and, without changes, the country could be facing a negotiated default in the coming years. What about inflation? Central Bank of Kenya (CBK) has a mixed record of managing inflation. The country has seen inflation averaging 6.5% over the last decade. The impact of Covid-19 and Russia’s invasion of Ukraine brought further rises, but this has been contained at 7.7%, broadly in line with the sub-Saharan average of 7.1%. Figure 2: Inflation in Kenya, 2014-24 Source: World Bank The rise in the value of the shilling in 2024 may begin to translate into a further reduction in inflation, but this is is unlikely to be sustainable. Kenya’s foreign exchange reserves have seen significant volatility, as the country has repaid and subsequently issued large bonds. The CBK’s reserves total around $7 billion – enough to cover less than four months’ worth of imports. If these reserves fall further, then foreign investors may withdraw from Kenya, depreciating the shilling and inducing higher inflation. What about climate change in Kenya? Kenya has suffered repeated droughts over the last decade, with that of 2021-22 being particularly severe. In late 2022, 4.3 million people faced severe food insecurity, as a result of the country’s worst drought for 40 years. Approximately 2.6 million livestock deaths were attributed to the drought. Food prices jumped temporarily by 60-90%. In a country where agriculture comprises 33% of production and exports are predominantly horticultural, food insecurity is widespread. Climate change poses a major challenge to Kenya and its neighbours. Kenyan farmers are vulnerable to increasingly variable rainfall – 98% of agriculture in the country does not use irrigation. The economic damage from droughts – which interrupt work, school and medical appointments and thus have knock-on effects on health and education – is costing Kenya 2-2.8% of GDP every year. By 2050, the crop yields of staples such as maize, rice, coffee and tea are likely to drop by 40-45%. By 2055, food prices are expected to be between 75-90% higher in relative value (World Bank, 2022). Kenya’s ability to develop climate resilience, through effective land and water management, will be vital for its economic health in the next few years.

Energy & Economics
Exhaust stacks from coal fired power plant emitting waste products to atmosphere.

Humanity rejects the climate crisis and surpasses a new emissions threshold in 2024

by Pablo Rivas

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском While the IPCC warns that we should reach the emissions peak this year, greenhouse gases released into the atmosphere will grow by 0.8%, according to the annual report from the Global Carbon Project presented this Wednesday at COP29. A cold shower in the middle of the Climate Summit, or rather, a scorching one. The independent organization Global Carbon Project (GCP), specialized in quantifying greenhouse gas emissions from fossil fuel combustion, has released its latest research. The 2024 edition of the Global Carbon Budget projects, with just over a month and a half left in the year, total annual emissions from fossil fuels to reach 37.4 billion tons of carbon dioxide (CO2). This represents a 0.8% increase compared to 2023 — with a possible error range from a 0.3% decrease to a 1.9% increase — marking a new unprecedented record at the worst possible moment. In the crucial year in which, according to the Intergovernmental Panel on Climate Change (IPCC), humanity should reach its emissions peak if it wants any chance of avoiding a global average temperature rise of 1.5°C, not only has a new historical high been reached, but there is also "no signal" that the world has reached the peak of emissions from fossil industries, warn the team behind the research presented this Wednesday. As Professor Pierre Friedlingstein from the University of Exeter’s Global Systems Institute, who coordinated the study, laments, "we still don’t see any signs that fossil fuel burning has peaked." The figures are actually more concerning, as the emissions from the "changes in land use" —which include deforestation caused by humans and their agroindustry — will add 4.2 billion tons of CO2 (GtCO2). This means that we will emit 41.6 billion tons of CO2 into the atmosphere, one billion more than last year, a period that was already a record. More coal, more oil, and more gas amid the acceleration of the climate crisis Despite significant progress in decarbonization, emissions from the three main fossil fuels will increase in 2024. The GCP’s projection is that coal emissions will rise by 0.2%, with coal responsible for 41% of emissions from fossil fuels; oil emissions will increase by 0.9%, with oil burning accounting for 32% of emissions; and gas emissions will grow by 2.4%, contributing 21% of total fossil fuel emissions. On the other hand, emissions from the cement industry, which account for 4% of global emissions, will decrease by 2.8% in 2024, mainly due to a reduction in the EU, although they will increase in China, the United States, and India, according to the research. By economic poles, while the EU — responsible for 7% of global emissions — will reduce its emissions by 3.8% this year, the United States, accounting for 13% of the total annual emissions, will only reduce them by 0.6%. China, the leading polluting power, with 32% of global annual emissions, is projected to increase its emissions by 0.2%, although the projected range suggests it could end the year with a slight decrease. Another emission hub, India, which produces 8% of greenhouse gases, will increase its emissions by 4.6% in 2024. In the rest of the world, where 38% of global emissions are produced, the forecast is an increase of 1.1%. The GCP highlights the growing importance of aviation and maritime transport in the emissions inventory: their emissions are expected to increase by 7.8%, although they remain below their 2019 level. An unprecedented concentration of gases in human history The report, conducted by researchers from over 80 institutions worldwide, including the universities of Exeter and East Anglia (UK), Ludwig-Maximilian University of Munich (Germany), and the CICERO Center for International Climate Research (Norway), provides an overview of emissions over the past decade. While they mention a certain stagnation in the past decade regarding the total greenhouse gases released into the atmosphere, the reality is that emissions continue to rise, and the previous decade (2004-2013) saw strong emission growth, with an annual increase of around 2%. Such figures mean that the concentration of CO2 in the atmosphere continues to rise. Just two weeks ago, the World Meteorological Organization (WMO) warned of a new record for greenhouse gas concentrations last year: an annual average of 420 parts per million (ppm) for CO2. In addition, surface concentrations of 1,935 parts per billion (ppb) of methane (CH4) and 336.9 ppb of nitrous oxide (N2O) were recorded. These represent increases of 151%, 265%, and 125%, respectively, compared to pre-industrial levels. "During 2023, CO2 emissions caused by massive wildfires and a possible reduction in carbon absorption by forests, combined with persistently high CO2 emissions from the burning of fossil fuels for human and industrial activities, drove the observed increase in concentrations," stated the WMO Annual Bulletin on Greenhouse Gases. Never in human history has the atmosphere been so laden with these gases, which have been released at an unprecedented speed: in twenty years, CO2 concentrations have increased by 11.4%. It is expected that atmospheric CO2 levels will reach 422.5 parts per million in 2024, 2.8 ppm higher than in 2023 and 52% above pre-industrial levels. Half-full glass However, at GCP, there is room for hope amid all the discouraging figures. "Despite another increase in global emissions this year, the latest data shows evidence of widespread climate action, with the growing penetration of renewable energy and electric vehicles displacing fossil fuels, and the decrease in deforestation emissions in recent decades, now confirmed for the first time," says Corinne Le Quéré, Research Professor at the Royal Society in the School of Environmental Sciences at the University of East Anglia. In the same vein, Dr. Glen Peters from the CICERO Center in Oslo points out that "there are many signs of positive progress at the country level, and a sense that a peak in global fossil CO2 emissions is imminent." A total of 22 countries, accounting for a combined 23% of global fossil CO2 emissions, have reduced their emissions in the 2014-2023 decade. Furthermore, countries within the Organization for Economic Co-operation and Development (OECD), in the group of wealthier nations, increased their emission reduction rates in the last decade compared to the previous one, from 0.9% to 1.4%. In the non-OECD group (excluding China), emissions growth decreased from 4.9% in the 2004-2013 decade to 1.8% in 2014-2023. However, Peters warns that "the global peak remains elusive" and emphasizes that "climate action is a collective issue, and while gradual emission reductions are occurring in some countries, increases continue in others." Another positive note is that, globally, emissions from the change in land use have decreased by 20% in the last decade, although they are expected to increase in 2024 under this category. While permanent CO2 removal through reforestation and afforestation (new forests) is offsetting emissions, it is only compensating for about half of the emissions from permanent deforestation. The GCP also issues a direct message to proponents of techno-optimism: "Current levels of technology-based carbon dioxide removal (excluding nature-based methods such as reforestation) account for only about one-millionth of the CO2 emitted by fossil fuels," they emphasize.This article was translated and licensed under CC BY-SA 3.0 ES (Atribución-CompartirIgual 3.0 España)

Energy & Economics
Central America countries, colored political map. Subregion of the Americas, between Mexico and Colombia, consisting of Belize, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and Panama.

The 4-letter catastrophe that is haunting Latin America: Corporate Colonialism through ISDS

by Bettina Müller

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Countries not abiding by corporate rules? No problem, foreign investors have got a powerful tool at hand to get it their way: Investor-State Dispute Settlement, commonly known as ISDS, is a mechanism inscribed in many Bilateral Investment Treaties (BITs) and Free Trade Agreements (FTAs). If governments decide to change regulations to better protect the environment or our climate, if they cancel mining concession due to social unrest, next thing you know, your country is being served with a corporate claim often worth hundreds of millions of dollars. ISDS is shrinking policy space all around the world, but there is one region particularly affected: Latin America and the Caribbean. Out of the 1332 Investor-State Dispute Settlement (ISDS) claims known world-wide, 380 correspond to Latin American and Caribbean (LAC) States. This is close to 30% of all claims. Most of these claims derive from conflicts over mining concession, be it minerals or oil and gas. In times of a sky-rocketing demand for minerals for the energy transition, digitalization and militarization, these corporate claims by foreign investors are likely to increase.  It was back in the 1990s when countries in Latin America and the Caribbean, pushed by the International Monetary Fund, the World Bank and the neoliberal zeitgeist, signed most of the international agreements which today tie their hands and make every policy which might affect corporate profits and benefit people a potentially costly endeavour. A tribunal of three arbitrators decides over the investor´s complaint behind closed doors, ignoring national laws or the Constitution. These tribunals are administered by international dispute settlement centres, the most important being the World Bank’s “International Centre for Investment Dispute Settlement” (ICSID). Yes, the same World Bank that pressured countries to sign agreements with “investment protection provisions” in the first place. Three quarters of all claims against LAC countries have been decided before an ICSID tribunal. To date, countries in the region have been asked to pay more than 33 billion dollars to investors, based on ISDS claims. This is more than the entire amount, plus one third, that climate catastrophes have cost the region between 1970 and 2021. We could thus call ISDS a “corporate catastrophe”. Our full report(external link) takes a deep dive into the full extent of this catastrophe. The case of Mexico Mexico is one of the countries most affected by corporate ISDS claims. With 55 claims until the end of June 2024, Mexico is the third most sued country in the region, just behind Argentina and Venezuela. In fact, in 2023 there was no country in the world that had received more ISDS claims world-wide than Mexico. Mexico is a sad example of how reforming a countries investment protection regime will not stop claims from coming, in fact, it might even incentivise investors.  In 2021, the USA, Mexico and Canada updated their North American Free Trade Area (NAFTA) to become the United States-Mexico-Canada Agreement. Canada completely scrapped the use of ISDS from the agreement, while it was limited to certain breaches and investments, e.g. in the oil, gas and power generation sector, between the US and Mexico. A grace period of three years was decided in which the ISDS clause in NAFTA would still be applicable and co-exist with the USMCA. In only 3 years, Mexico was hit with 15 ISDS claims under NAFTA, in all of which investors also invoked the USMCA. This is 40% of all ISDS claims brought against Mexico under NAFTA since 1997.  Mexico is also facing some of the most terrible mining claims which add up to more than 6 billion-dollars, half of the total amount claimed by investors against Mexico. One of these mining claims was registered by the US firm Odyssey Marine Exploration in 2019 because it was not granted the environmental permits it needed to advance its offshore subsoil phosphate mining project off the coast of Baja California Sur, giving in to the opposition of fishing groups. The new government of Claudia Sheinbaum which just took office on 1 October 2024 would be well advised to revise the Mexican investment protection regime to stop such claims from coming. This report(external link) gives a detailed look at the case of Mexico.  The case of Honduras And then there is Honduras.  This small Central American country has been recently hit with an avalanche of ISDS claims based on different instruments, BITs, FTAs, as well as contracts and an investment law. We are talking about 19 claims in total, 14 of which were registered only since last year in 2023. Many of these ISDS claims are related to irregular investments made  by the government of Juan Orlando Hernández (2013-2022), who was just sentenced to 45 years in prison for crimes related to drug-trafficking and the possession and use of weapons.  One of these claims is particularly outrageous:  Honduras Próspera vs. Honduras. In this whooping 10.5 billion dollar claim (one third of Honduras GDP in 2023) a group of US investors is going against an unanimous decision made by the Honduran Congress to abolish the so-called ZEDEs (zona de empleo y desarrollo económico), which were set up in the years after the coup d´etat in 2009. These ZEDEs create so-called “model cities”, in which specific pro-investment laws and regulations are put in place, essentially leaving the territory and how it is ruled to the investors. This cessation of national sovereignty was in contradiction of the national Constitution and had caused much social conflict due to the displacement of local communities and the destruction of the environment. When running for office, Xiomara Castro promised to derogate the law that enabled their existence – which is what she did. To learn more about these and other ISDS claims linked to illicit investments in Honduras, check out this latest report. Conclusion This corporate catastrophe can and must be stopped. In times in which countries and even entire country blocks such as the European Union are deciding to exit investment protection deals due to their detrimental impacts on policies thought to protect people, the environment and our climate, all governments world-wide must act and exit investment protection deals that contain ISDS provisions. Article under Attribution-Noncommercial-No Derivative Works 3.0 licence, conditions are found here https://www.tni.org/en/copyright-creative-commons-licence The articel was originally published by the tni in english. Translation done by WNWJ

Energy & Economics
Ecowas passport in African hand, African holding two Green Nigerian Passports with map in the background

Confederation of Sahel States and Disintegration of ECOWAS

by Tatyana Denisova , Sergey Kostelyanets

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском On July 6, 2024, the military leaders of Mali (Assimi Goïta), Niger (Abdourahamane Tchiani) and Burkina Faso (Ibrahim Traoré) signed a treaty establishing the Confederation of Sahel States, or, more precisely, the Confederation of the Alliance of Sahel States—retaining the acronym AES (Alliance des États du Sahel in French). The document was signed in Niamey, Niger, during the summit of the Alliance of Sahel States, a military pact formed by the same countries on September 17, 2023. The Confederation’s founding signaled the determination of the governments of the three Sahel nations, which came to power via a series of military coups in 2020–2023, to chart a joint course of political and economic development. The AES was announced after Burkina Faso, Mali and Niger withdrew in January 2024 from the Economic Community of West African States (ECOWAS)—a regional bloc that urged the trio’s leaders to restore civilian rule in their countries. At the opening of the Niamey summit, Niger’s military leader said, inter alia, that his “people have irrevocably turned their back on ECOWAS” and that the new alliance would be a community immune to the “stranglehold of foreign powers.” At the same time, the three leaders reaffirmed their commitment to the principles and objectives of the UN and the African Union. They asserted that by forming the Confederation, the three countries would strengthen their sovereignty and more effectively counter terrorism and external Western influence. The charter of the AES stipulates that “any violation of the sovereignty and territorial integrity of one or more Contracting Parties shall be considered as an aggression against the other Parties and shall give rise to a duty of assistance and relief by all the Parties, individually or collectively, including the use of armed force.” From Alliance to Confederation The first step towards political and economic integration of the three countries was the establishment of the Alliance of Sahel States on September 17, 2023, which grouped a total of over 72 million people and is primarily aimed at building a trilateral architecture of collective defense. The decision to set up the Alliance was taken after negotiations in Ouagadougou in early September 2023 between representatives of the three nations and a delegation from the Russian Defense Ministry, headed by Deputy Defense Minister Yunus-Bek Yevkurov. In other words, Russia played its role in founding the AES, thereby assuming certain obligations to support the Alliance’s counterterrorism efforts. The prospect of deeper integration of Mali, Niger and Burkina Faso was first raised in late 2023, and in early July 2024, after Yevkurov’s next visit to the Sahel (Mali and Niger), the Confederation of Sahel States was established. The inaugural summit, in addition to security and military cooperation, addressed further trilateral cooperation in the socio-economic sphere. This suggests that the AES’s scope of activity will likely include the construction of new industrial facilities and the expansion of ties in areas such as energy, finance, healthcare, education, agriculture and natural resource management, as well as mining, transport, combating cybercrime, ICT development, sports and employment. The AES leaders decided to establish an investment bank and a stabilization fund, which, however, will only function if they can secure sufficient funding. Furthermore, the countries agreed to pool their resources to build large-scale transport and communications infrastructure, facilitate trade and the free movement of goods and people, and invest in various sectors of the economy. One example that demonstrates the feasibility of these plans is Niger’s agreement to sell 150 million liters of diesel to Mali at almost half the going rate, supporting a nation plagued by enduring electricity shortages. The three leaders also reaffirmed the decision taken after the meeting of the Alliance’s foreign ministers on May 17, 2024, to coordinate diplomatic actions and formulate common approaches to relations with external partners, although combating terrorism seems likely to remain the Confederation’s main priority. The trio has on many occasions pointed to the key reasons behind their collective actions: the failure of the AU and ECOWAS to provide adequate support in the fight against jihadists; “illegal sanctions” that harm the people of Burkina Faso, Mali and Niger; and ECOWAS’s unwillingness and/or inability to break free from Western influence. In other words, this integration is driven not only by the desire for collective security, but also by the pushback to the former colonial ruler, France (with which the trio has severed all defense ties), and, more broadly, the collective West, which has clearly underestimated the Sahel’s frustration with years of ineffective military intervention [1]. As a result, French military contingents and most U.S. troops have withdrawn from the three nations, with Russian forces taking their place. So the Confederation’s main stated goal is to support one another in combating terrorism (the Sahel accounts for 43% of the world’s terrorism-related deaths). The Niamey summit saw calls to put an end to this scourge. The leader of Burkina Faso, in particular, addressed the forum participants with the following words: “In our veins runs the blood of those valiant warriors who fought and won for us this land that we call Mali, Burkina and Niger. In our veins runs the blood of those valiant warriors who helped the whole world rid itself of Nazism and many other scourges. In our veins runs the blood of those valiant warriors that were deported from Africa to Europe, America, Asia … and who helped to build those countries as slaves. In our veins runs the blood of worthy men, robust men, men who stood tall…” Yet this raises the question: will the armies of these three nations, which previously struggled to tackle the “Islamist evil,” grow much stronger if they come together? After all, the conflict in Mali involved military personnel from many African nations, not to mention Europeans, yet the problem of terrorism persisted. In some areas of all three countries, Islamists are “successfully” replacing public authorities and drawing recruits from the local population, and these processes have not stopped after the Alliance was established, nor after the Confederation was formed. Attacks on various facilities and civilians continue—in the first half of 2024, the number of victims of Islamist violence in the three countries exceeded 300, a significant increase compared to the same period in 2023. The AES has taken pride in routing the insurgents from the Malian town of Kidal in November 2023, but it is still unclear how lasting the trio’s victory in this direction has been. Or is all hope now pinned on Russia? The security landscape in the Sahel varies from country to country but remains very complex throughout the region. This is partly because the armed conflicts in the three nations have different origins and are not purely “Islamist.” In fact, disputes between herders and farmers, which all past governments of the trio tried and failed to resolve, pose a major and perhaps even greater threat to stability than the confrontation with the Tuareg. Meanwhile, this matter has not even been taken up by the military, possibly because it stems from socio-economic issues, and solving such problems is far more difficult than political or military ones. In response to instability, the regimes are tightening the screws and becoming more repressive, with opposition figures being arrested. Although references to Western experts may seem out of place in the context of today’s global upheavals, history has shown that increased repressiveness is a common feature of all illegitimate regimes, and governments that came to power through military coups are illegitimate by definition. If the military leaders fail to achieve significant breakthroughs soon in ensuring security, reconciling herders with farmers (whose conflict, exacerbated by Islamists, is only aggravated amid climate change in the Sahel), providing basic services to citizens and more, public discontent will grow and likely lead to more military coups, throwing the future of the Confederation into question. While the trio’s leaders currently enjoy at least the appearance of public support, if they do not hold elections in the next few years, there will be someone in their inner circle tempted to take their place. Especially since the military withdrew their countries from ECOWAS without consulting the public, which now fears the potential introduction of a visa regime between the trio and other West African nations. As of now, the Confederation has yet to prove itself as a solid union to the point where one can predict either positive or negative outcomes for its future. True, various joint projects are being set up—so far only on paper—ranging from food security and water resource management to energy, transport and ICT development, but these plans are financially fragile, and their implementation remains a distant goal. The three nations still use the CFA franc, with France controlling most of their foreign currency assets. The AES’s activities are apparently supposed to be funded through “membership fees,” but this has always been a major stumbling block. For ECOWAS, for example, the timely payment of dues has been intractable throughout the 50 years of its existence. For landlocked Mali, Niger and Burkina Faso, the smooth functioning of logistics corridors for receiving goods from other continents is critical. This brings into focus the need to form a customs union and restore “working” relations with neighboring states—Benin and Côte d’Ivoire—which have recently soured, particularly due to plans to establish U.S. military bases in these countries. The Sahel is rich in natural resources—uranium, gold, iron ore, lithium, tin, copper, zinc, manganese, limestone, phosphates, marble, salt, gypsum and oil—but will the trio manage to extract them on their own (though jointly) in commercial quantities to gain economic sovereignty, not just political one? Or all hopes are again pinned on Russia, China, Turkey, Iran and other non-Western nations? And if so, is “sovereignty” the right word here? Of course, “dependence” on Russia, for example, would differ from neocolonialism by ensuring “fairness” and “equality between partners,” as evidenced by recent contacts between Moscow and the trio. The factor of ECOWAS The original mission of ECOWAS, established in 1975, was to achieve economic integration of the countries in West Africa, which involved establishing free trade zones, facilitating the free movement of labor, goods and capital across national borders, introducing a common currency—the eco—as well as improving and expanding regional infrastructure such as highways, railroads, seaports, airports, gas and oil pipelines, and more. There were also plans for joint energy projects and the development of shared communication, banking and customs systems, among others. In 1990, a trade liberalization scheme was formally adopted, which entailed gradual elimination of customs duties, and, indeed, by 2001, duties on raw materials and semi-finished products had been abolished, a common customs nomenclature was compiled, and free movement of labor was achieved. However, even at that time, more effective regional integration was hindered by the participation of certain West African nations in other groupings. In 1994, the French-speaking countries of the region (Benin, Burkina Faso, Côte d'Ivoire, Mali, Niger, Senegal and Togo) along with Portuguese-speaking Guinea-Bissau, founded the West African Economic and Monetary Union (WAEMU), where a duty-free trade regime has been in place since 1996, excluding only agricultural products and aviation equipment. The members of this union—now except for the Sahel trio—have consistently resisted deeper economic integration within ECOWAS, largely because of their alignment in all spheres of life with France, which continues to provide them with substantial financial and political-military support as the former colonial power. Moreover, the nations dominating WAEMU—Côte d'Ivoire and Senegal—are reluctant to see Nigeria as a regional leader. But these are subjective reasons for the slowdown in integration. Meanwhile, there are also several objective reasons why virtually no economic project within ECOWAS has been brought to fruition. ECOWAS was founded as an economic community and operated in an environment where most countries in the region had extremely low levels of economic development, the export commodity structure was monocultural and largely uniform, and the member states’ leaders had noticeable political disagreements. These and other divisive factors meant that integration processes were often more symbolic than practical and that the impact of free trade zones was weak. Civil wars and political conflicts—which erupted in individual countries time and again but had a negative effect both on the security of the region as a whole and on integration processes—made it inevitable that ECOWAS would gradually shift its focus from economic issues to political-military ones, especially since one of the Community’s founding documents, the 1978 Protocol on Non-Aggression, stated that economic integration could only be achieved in an atmosphere of peace and mutual understanding among member states. ECOWAS has an extensive sanctions toolkit, which is used against its member states in the event of their “disobedience.” The regional bloc imposed extremely tough sanctions on Mali and Niger in the early 2020s. In Niger, for example, the prices of rice and sorghum rose by over 16%, wheat and maize by 12%, millet by 6.4% and meat by 5.2% after the sanctions were imposed. Moreover, a $400 million deal to export crude oil from Niger to China via a pipeline linking the Agadem field to Benin’s port was delayed and put at risk. Even after ECOWAS lifted its sanctions, Benin chose not to reopen its land border (apparently under the influence of Paris), which further strained relations between the two nations. In all fairness, it should be noted that ECOWAS generally opts for diplomatic means to resolve various disputes, including those resulting from military coups, so the imposition of sanctions against some of the continent’s poorest countries and their expulsion from the organization were extraordinary precedents. While it may be tempting to see such actions as evidence of the Community’s “noble” intentions to uphold a principled stance on illegal changes of power, there was clearly some external influence in the cases of Mali and later Niger (Burkina Faso was not sanctioned). France relies on uranium supplies, with Niger accounting for 20% of total imports, so the Elysee’s desire to “teach the Sahel states a lesson” is quite “understandable.” Especially since Nigerien authorities in the summer of 2024 revoked the licenses of France’s Orano and Canada’s GoviEx to exploit uranium deposits. The 2001 ECOWAS Protocol on Democracy and Good Governance provided for the imposition of sanctions, including suspension of loans, discontinuation of aid program funding and more, if member states fail to comply with their commitments. However, in January 2022, after Bamako announced its decision to extend the transition period by five years, citing internal political instability, ECOWAS not only suspended Mali’s membership in the organization, but also imposed diplomatic, economic and trade sanctions against this country. These included freezing Mali’s assets in the central banks of the Community’s member states, closing land and air borders and imposing an export ban on all goods (with the exception of materials for the control of COVID-19, oil products and electricity), which dealt a heavy blow to the economy of this landlocked nation that imports 70% of its food and depends on humanitarian aid supplies. Some of the sanctions were lifted only in July 2022, a month after the Goïta government agreed to a 24-month transition period. Niger, which saw a military coup on July 30, 2023 that ousted civilian President Mohamed Bazoum, faced sanctions in February 2024. As part of these restrictions, land and air borders between Niger and other ECOWAS member states were closed, accounts of Niger’s state-owned enterprises in the ECOWAS Central Bank were frozen and financial assistance was suspended. Immediately after the developments in July, ECOWAS issued an ultimatum, giving the coup leaders a one-week deadline to reinstate deposed President Bazoum and threatening to use force. However, military intervention never materialized, although the ECOWAS Standby Force was activated for potential deployment in Niger. The very fact that ECOWAS could issue such a threat to one of its members undoubtedly alarmed the leaders of the three nations (and others), who are closely connected in various ways. As a result, their trust in the bloc was shattered, which led them to take further action—quit the association and form new alliances. They also believed that ECOWAS not only failed to help them in combating Islamic extremism, but instead weakened their positions by imposing sanctions. Indeed, ECOWAS, which in the 1990s and 2010s sought to diversify its economic ties and political contacts with the outside world, has in recent years adopted a pro-Western stance on many international issues, which is not surprising since the direction of any organization is largely shaped by the views of its leaders and sponsors. Regardless of who holds the rotating one-year ECOWAS chairmanship, Nigeria has always played first fiddle in the bloc and will continue to do so for a long time, as it shoulders nearly half of the Community’s expenses, including most of the funding for its peacekeeping operations. As the saying goes, “he who pays the piper calls the tune.” Nigeria’s current president, Bola Tinubu, who also chairs ECOWAS, spent nearly a decade studying, working and living in the United States. From the moment he came to power in 2023, he has been determined to cultivate ties with the West, primarily with the U.S. and the UK, but also with France. The position of Nigeria and ECOWAS toward the trio is a vivid testimony to the enduring significance of the “role of the individual in history”: a country that had maintained friendly relations with Russia for decades is now gradually distancing itself from it and shifting its foreign policy orientation. For better or worse, after the coup in Niger and a harsher response from ECOWAS compared to the events in Mali and Burkina Faso, relations between the trio and the Community broke down, with Bamako and Ouagadougou expressing their readiness to leave the organization. As a result, on January 28, 2024, despite the Community’s decision to lift sanctions against Niamey, the governments of Niger, Burkina Faso and Mali announced their withdrawal from ECOWAS, driving the process of regional disintegration further. Shortly before that, the Sahel trio had one after another pulled out of the G5 Sahel—Mali in the spring of 2022, Burkina Faso and Niger in November 2023—leading to its collapse (the G5S had also included Mauritania and Chad). After the Confederation was founded, ECOWAS signaled its willingness to negotiate the possible return of Burkina Faso, Mali, and Niger to the Community, especially since it had not received any formal notice of their departure, even though the proper procedure requires member states wishing to leave the bloc to provide one year's notice. The three countries made their announcement in January 2024, which should have given the ECOWAS a chance to try to convince them to reconsider their decision until January 2025, but the trio ignored the procedural rules and refused to continue fulfilling their obligations to ECOWAS. It seems that ECOWAS leaders have not yet come to understand that the trio is fighting not only for survival in the face of the Islamist threat, but also for an overhaul of trade and economic patterns, which subject underdeveloped nations to severe exploitation by developed powers. The Republic of the Niger, for example, is unhappy that despite being the world’s fourth largest producer of uranium and lighting up a third of France, 80% of its population has no electricity. So Niger has had to seek help from Nigeria, which, incidentally, cut off electricity supply after the July 2023 coup. In response to the establishment of the Confederation, the head of one of the Community’s bodies, the ECOWAS Commission, Omar Alieu Touray, said the three countries risked “diplomatic and political isolation,” the loss of millions of euros in investments and the possible introduction of visa requirements for their citizens wishing to travel to ECOWAS member states. Touray also warned that in addition to the numerous threats to peace and security along with economic challenges, there was also a risk of disintegration of the region, as ECOWAS on the one hand and the AES on the other become increasingly entangled in the conflict between non-African powers. As France and the U.S. are strengthening military ties with some ECOWAS countries (notably Côte d’Ivoire), the three AES members have established military relations with Russia after expelling Western troops. But is the rift between the AES and ECOWAS truly so noticeable? For example, on July 18, 2024, a delegation from the ECOWAS Water Resources Management Centre visited Burkina Faso to mark the 49th anniversary of the Water Museum’s founding. Since many countries in the region, including key players like Nigeria, Ghana, Côte d’Ivoire and Senegal, stand to lose economically from strained relations with Burkina Faso, Mali and Niger, which are important trade partners, it seems that efforts to bring these “prodigal children” back into the Community’s fold will continue until they result in either a positive or negative outcome. There have been speculations about the possible withdrawal of Burkina Faso, Mali and Niger from WAEMU, which also imposed sanctions against these nations. However, since the trio has not yet developed the banking and financial infrastructure necessary for an independent system and cannot quickly ditch the CFA franc, which is used by WAEMU member states, their stance toward this currency union remains neutral. The founding of the Confederation raises questions—not least about the future of regional cooperation in West Africa. As Burkina Faso, Mali and Niger have decided to chart their own course, ECOWAS’s role and policies are likely to change, although it is still unclear in what direction. There is also concern among the African public that the AES may attract into “their ranks” other countries grappling with similar issues and disillusioned with the regional bloc. For example, the idea of closing French military bases in Senegal has already been floated. Developing relations with Russia and other non-Western nations Russia has become a new strategic ally for the Sahel nations in their fight against Islamists, who are active across the three countries. Supported by the Russian military, Mali’s army has managed, as noted above, to retake the northeastern town of Kidal from insurgents in November 2023. Since April 2024, a mechanism for coordination between the militaries has been in the works, and operations are underway to divide the territory under Islamist control, which stretches from eastern Mali through northern Burkina Faso to Niger. Trade and economic cooperation are also expanding: since September 2023, several Russian private and state-owned companies have signed agreements with the AES countries in areas such as mining, industrial construction and others. While Russia focuses primarily on food security (Moscow shipped 50,000 tonnes of free grain to the Sahel in 2023) and developing the digital economy, China and Turkey are making inroads into energy production and mining precious and rare-earth metals. Moreover, Niger’s agreement to bring the extraction of these resources under the Confederation’s control reflects the trio’s willingness for deeper cooperation with Beijing and Ankara.***Without a doubt, the decision of the three nations to exit ECOWAS and form the Confederation demonstrates their readiness to strengthen their sovereignty, yet they did so amid resentment over sanctions and euphoria from their own assertiveness and growing ties with Russia. These steps cannot but deserve respect, especially against the backdrop of the turbulent geopolitical situation around the world and widespread, and largely valid, discussions that major European powers, including France, are losing their autonomy in foreign policy issues. Announcing the establishment of an integration project is one thing; strengthening it and making use of the benefits of cooperation is quite another. A telling example is ECOWAS, which has not become a truly effective economic or political community in the fifty years of its existence and now is even starting to fall apart. The problem for the AES is that “strengthening sovereignty” in its member states will take place in the context of weak economies, further strained by wars and conflicts, and lingering reliance on various forms of external aid, a habit that will take time to break. At the same time, dismantling the long-standing patterns of cooperation with the West, particularly with the former colonizer, cannot be done overnight. French enterprises and specialists—engineers, doctors, teachers, oil workers and others—are still working in the three countries; many families are linked to France through relatives living and children studying and working there; political, business and creative elites own real estate in France. In other words, it is too early to speak of a complete break with the former colonial ruler, although, of course, the three regimes see the Confederation as an opportunity to distance themselves from the legacy of French colonialism and the Françafrique policy. Ibrahim Traoré, for example, spoke very strongly against France’s presence in Africa at the Niamey summit. But speeches alone cannot bring about real change. In the context of its “return” to Africa, Russia appears determined—quite justifiably so—to support the AES in many, if not all, of its endeavors, but their outcomes will largely depend on the consistency and persistence of the military leaders of Burkina Faso, Mali and Niger in defending their current ideals. It seems that relations between the members of the Confederation of Sahel States and Russia will deepen, especially since the AES sent a letter to the UN Security Council President in August 2024 condemning Ukraine (which could not but be welcomed by Moscow) for supporting terrorism in the Sahel and demanded that the Security Council prevent Kiev’s subversive actions in Africa. This primarily refers to the Islamist attack on a convoy of Russian and Malian soldiers in northern Mali, in which Ukrainian militants were confirmed to have participated by Ukraine itself. As a result, Bamako and Niamey broke off diplomatic relations with Kiev, and on August 7, 2024, Mali and Niger petitioned the Security Council to investigate Ukraine’s support for rebel groups in the Sahel. As the leaders of the three nations affirmed in their joint statement at the Niamey summit, they “have taken full responsibility before history.” However, only time will tell what the results of these actions—the withdrawal from ECOWAS and the creation of the AES—will be. In any case, the process of polarization in Africa between pro-Western nations and alliances on the one hand, and those trying to escape neocolonial dependence on the other, has already started and seems to have become irreversible. 1. Filippov V.R. African Policy of French President E. Macron: Chronicle of Actions and Evolution of Ideas. M.: IAS RAS, 2023.

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.