The Russian Export Center (REC) is created as a state specialized institute to support Russian export to foreign markets. It has a group of companies that provides comprehensive financial and non-financial support to Russian export-oriented companies and industries in the single window format.
One of the key tasks is to interact with relevant ministries and departments in the sphere of improving and developing foreign trade of the Russian Federation to Europe, Latin America, Asia and Africa.
In this interview, Peter Fradkov, General Director of the Russian Export Center (REC), discusses some aspects of Russian trade operations, strategies and challenges as well as future plans in the direction of Africa during a recent meeting with Kester Kenn Klomegah, an independent researcher and a policy consultant on African affairs in the Russian Federation and Eurasian Union.
Could you please tell us about the Russian Export Center and why it was established as a subsidiary of Vnesheconombank in 2015?
In recent years, Russia has been making every effort to avoid the “raw-materials” export model and focus on developing export-oriented industries. The launch of the Russian Export Center was a key step towards the development of a full-fledged national export support system. Previously, the exporter had to apply to various authorities on different issues. In the course of time it became clear that it was necessary to create a “one-stop-shop” for exporters to receive a full range of services and support their products in foreign markets.
The reason behind creating a Russian Export Center within Vnesheconombank, based on the mandate of Vnesheconombank as a development institution, was the need to unite the Center, the EXIAR insurance agency and Roseximbank in one group in order to offer our customers a full range of financial and non-financial services, to provide Russian exporters with ample tools for entering foreign markets.
With a focus on South Africa, is there any possibility for it to be used as a gateway to reach the market of southern African region? Do you also plan to develop or localize production centers and cooperate or compete with other foreign producers there?
Let me address the last question first. It is unlikely that upon entering the South African market, Russian companies will pursue any competition objectives. On the other hand, they are not afraid of competition, as Russian industrial products, primarily machinery, are quite competitive and can occupy positions not only in the market of South Africa, but also in other African countries. Russian manufacturers have a number of specific competitive advantages. Let’s take, for example, agricultural machinery. The main advantage of Russian products as compared to the counterparts by major foreign manufacturers is a lower price and almost the same level of capacity, quality and useful life. Moreover, the cost of operation, including maintenance, repairs, etc. is often lower than that of the foreign competitors worldwide. Considering the fact that Africa has 60% of the world’s resources of untreated but agriculturally suitable land, we recognize remarkable opportunities for supplies of agricultural machinery, fertilizers, plant protection products and other solutions to improve the efficiency of agricultural activities in African countries.
Besides, a number of Russian companies operating in South Africa, such as Rosatom, Rostselmash, and Renova are implementing educational programs to train local specialists for the subsequent operation and maintenance of equipment, facilities or plants built with Russian support. This is an important contribution to the social development of the African country.
As for the plan to establish production there, it is a very interesting form of cooperation, which the Russian companies are now considering. And what matters here is that a reliable partner has to be chosen. In this context, cooperation with local and foreign producers in South Africa looks very promising The Russian Export Center takes an active part in the development of state support measures to create a service and repair infrastructure for Russian companies operating abroad, the launch of which is scheduled for the next year. The Republic of South Africa offers good conditions for the creation of joint manufacturing facilities and opportunities for them to enter the markets of the South African Customs Union (SACU) and the Southern African Development Community (SADC) countries in the future.
Do you also think there is a lot of potential in terms of raising trade and economic cooperation between the African continent and Russia? Doing business in Africa is not easy but what kind of approach do you envisage to adopt?
Today, African countries are taking an increasingly active part in the global political and economic space. The Soviet Union made a significant contribution to the social and economic development of African countries by building large industrial and infrastructure facilities and helping to establish national education and health care systems. However, in the 1990s the Russian-African relations came virtually to a standstill. At present, Russia’s foreign trade turnover with Africa is about 12 billion US dollars, which is a rather modest achievement. Nevertheless, the African continent remains a rather promising market for Russian industrial goods.
When working with exporters, we are witnessing increasing understanding that Africa is a new global market with a population of more than 1 billion people, with great potential for economic growth and, accordingly, consumption.
On the other hand, I can’t recall of any special difficulties, inherent to the Russian-African business partnership. Perhaps, I should point out a still insufficient awareness of the real economic opportunities, market conditions and specific counterparts in African markets by Russian businesses and, accordingly, poor awareness of capabilities of Russian partners incumbents by Africans.
As I already said, what really matters for Russian companies is to find potential partners and distributors. Many companies do not possess competencies for searching foreign partners. Any successful project which came to exist had very often a spontaneous nature and was forged due to some historical experience, exhibitions or some other events. And we haven’t undertaken any focused effort based on modelling of business processes to find dealers and distributors. Russian Export Center actively engages in tackling this issue in order to reconcile consistently supply and demand with each other.
What are your key focus, products and services? Would you also focus on big companies and who are your potential clients? And what about medium-size enterprises?
Customers of the Russian Export Center include representatives of very different industries: machine building, agro-industrial complex, IT, chemicals, pharmaceuticals, and many others. Our customers cooperate with countries in Asia, CIS, Africa, South America and Europe. The important thing is Russian Export Center deals with both major businesses and small and medium-sized exporters. Of course, the goals and opportunities of these companies vary. The medium- and small-sized exporters e.g. submit inquiries relating to non-financial support, search for partners, analysis of foreign markets, educational services in the field of exports. The major players are more interested in financial and insurance support. Russia is a big country, so we pay special attention to working with regions. According to data for 2016, a significant proportion of REC customers (about 70%) accrued exactly to the regional companies. And it comes without surprise since the vast majority of manufacturing companies are located in the regions. We are pleased to witness a higher interest shown by the regional companies in entering African markets, most of these companies represent small and medium businesses.
So, what are the key challenges here with regard to the latest economic developments which are faced by other foreign players on the African continent now?
Currently, lots of countries worldwide are intensifying efforts to get a foothold in Africa. Russia has traditionally and historically built very good, trust-based relations with the African continent. At the same, I should notice that trade and economic relations with many countries do not meet the achieved level of political relations. Trade turnover could be much more sizable in terms of both quality and numbers and both sides could experience such growth.
Reinforcement of positions of Russian exporters in Africa requires creation of certain conditions. The main one of them is penetration into the market. We are often faced with discriminatory barriers, which are there not because we are from Russia, but because we have just not thought about how to remove these barriers. For example, in some African countries we deal with the fact that European or American companies have to pay really low customs dues or do not have to pay them at all, while we often have to pay away 20-40 % custom duties, for example, for cars or cement. The government authorities, both intergovernmental commissions and the Russian Export Center, are primarily concerned with removing barriers for Russian exporters and opening up foreign markets for them.
What do you hope to achieve over the long term in the market in Africa? Describe the African market and say your final words to your potential clients who are located in different countries and regions in Africa?
Global goal of the Russian Export Center is to create favorable conditions for the growth of Russian exports. Being a key state institution for export support, the Government of Russia has set important tasks before us. This year we are to involve more than 6.5 thousand new companies in export activities and also support export deliveries worth at least $ 20 billion.
The world of today has gone global, and without the integration of world trade into the processes business scaling would be impossible. Our primary task is to gradually change the thinking of Russian entrepreneurs, who are often skceptical about entering foreign markets, including African ones. Secondly, we strive to promote the image of Russia as a producer of diverse and high-quality products. For this purpose, the Russian Export Center has launched a program to promote Russian goods and services under a single country brand “Made in Russia”. And in this context, Africa is a very important partner for us, though not an easy one.
Currently, the REC Group which includes EXIAR and Roseximbank has developed a comprehensive line of financial and non-financial instruments for the support of Russian companies in foreign markets operating or going to enter the African markets. In my opinion, the key products are financing of goods supplies (including, credits to the buyer or the buyer’s bank), insurance of export contracts and international investments, issuance of guarantees. The potential customers in Africa should be aware that the beneficiaries and consumers of these governments support measures are not just our exporters since we additionally arrange financing for supply of products and take other special support measures which are in fact assumed by the Russian state. Thus, the Russian Export Center aims to reach a mutually beneficial, long-term cooperation with our African partners.
Analysing the Russia Report: Separating the Wheat from the Chaff
The long-awaited Russia Report has finally been released by the UK Parliament’s Intelligence and Security Committee. However, whether it has lived up to all of its anticipants’ expectations is rather a matter of debate. While countless media pundits and pseudo-experts on both sides are already caught up in a frenzy of harvesting it for out-of-context quotes to aid them in their battles against Russia or Britain, Conservatives or Labour, Putin, Johnson or Corbyn, political scientists and security analysts are more likely to find the Report lacking in objectivity and rather revealing Britain’s political plans than making any significant contribution to the existing knowledge on Russia.
First of all, it is necessary to point out that the Report is not an impartial piece of analysis but rather a biased text that seems to use a number of framing techniques in order to promote certain agenda. It begins with an outline of a fairly one-sided “Us vs Them” narrative, in the spirit of Teun van Dijk’s “ideological square,” of selfless Britain extending the helping hand to malicious Russia just for Vladimir Putin to fool the West over and over again. While mentioning the death of former double agent Alexander Litvinenko in late 2006 (allegedly organised by the Russian state) as the moment of Russia’s metamorphosis into an “established threat,” the distinguished authors seem to omit the “Spy Rock” scandal which had revealed Britain’s less-than-friendly spy activity in Russia earlier that year. In the same fashion, it is Moscow (rather than Washington) that believes in the “might is right” world order, “flouting the Rules Based International Order” is a privilege that cannot be bestowed upon non-Western democracies and the zero-sum game concept is, apparently, exclusive to the foreign policy decision-making of the Kremlin, which seems to be intent on “damaging the West” because it’s “good for Russia.” Moreover, the authors attribute Russia’s view of NATO and EU having “a far more aggressive posture towards it than they do in reality” to “paranoia” rather than the military build-up along their borders with Russia, regular military exercises in the region and the economic sanctions.
Hence, with the aid of rather primitive framing tools the introduction sets a very subjective tone for the rest of the Report and has more in common with an average article in The Economist than with a serious government document. However, this is hardly surprising taking into account the line-up of “witnesses” among whom are an American journalist who has indeed worked for The Economist and Washington Times and has been a staunch critic of Russia, a British writer whose books may well be mistaken for pulp fiction with titles such as Spies, Lies and How Russia dupes the West, leaving little to the imagination, and an American-British businessman who has been convicted on charges of tax evasion in Russia and has been one of the initiators of the infamous Magnitsky Act, as well as two essentially more respectable gentlemen who nevertheless are not particularly known for a neutral stance on Russia either. Unfortunately, the quality of sources also varies significantly across the Report, ranging from the undisputedly reputable GCHQ to the likes of BuzzFeed and vague references. All of the above means that one must apply a strong discursive filter when reading the Report in order to separate the wheat from the chaff.
In spite of its ontologically anti-Russian angle embedded within the introduction, the Report does nevertheless make a number of correct (albeit obvious) observations. Among them are the “inheritances from the USSR and its status as a victor of the Second World War” in the form of the nuclear weapons and permanent seat on the UN Security Council as some of Russia’s primary strengths. The report also notes how Russia’s “large and powerful” armed forces and heavily-resourced intelligence services, as well as “lack of strong independent public bodies and the fusion of government and business” (i.e. centralised power) allow it to “leverage all its intelligence, military and economic power at the same time,” which gives Moscow a significant strategic (i.e. speed) advantage over Britain with its less centralised and more cumbersome bureaucracy. The Report also identifies some of Russia’s weaknesses, such as its relatively small population, weak economy and “lack of reliable partners or cultural influence outside of the former USSR.” The Report also does a good job at defining Russia’s “relatively limited” aims in terms of playing the dominant role in its traditional sphere of influence (former USSR) and keeping its current leadership intact.
Nonetheless, it must be acknowledged that a substantial part of the Report is dedicated to recycling the mainstream media’s standard anti-Russian propaganda schemata and regurgitating the already-voiced UK government positions on Russia’s alleged complicity in Litvinenko’s assassination, Salisbury incident, 2016 US elections outcome, failed Montenegro coup, Brexit and even the Scottish referendum. However, the Report does also introduce some new information, such as GCHQ reports of GRU actors “orchestrating phishing attempts” against a number of Government departments and “indiscriminate and reckless cyber-attacks targeting public institutions, businesses, media and sport,” as well as apparent “links between serious and organised crime groups and Russian state activity,” which certainly are points of concern that must be addressed by Her Majesty’s Government.
Unfortunately, the findings such as the aforementioned revelations are rather scarce, as much of the new information provided to the Committee by GCHQ and other Agencies has been redacted. For instance, when assessing the potential connection between “bots and trolls” and the alleged Russian interference in the EU referendum the Committee had apparently contacted MI5, requesting evidence, and the Agency’s response, as documented in the Report, was as follows: “MI5 initially provided just six lines of text. It stated that ***, before referring to academic studies.” In the same fashion, the section discussing instrumentalisation of GCHQ and SIS for open source research ends with “However, we have found *** which suggests that ***. ***.” While such heavy redaction may well be necessary for security reasons, they nevertheless obfuscate the essence of the Report and reduce its potential utility as a credible source.
Apart from the section on cyber security there are also sections on “Disinformation and Influence campaigns,” which reinforces the idea that any narrative contrary to that of the Western media is “disinformation” (e.g. RT and Sputnik), and on “Russian expatriates,” which gives relatively accurate description of the “Londongrad” phenomenon whereby the UK’s lax financial regulations of the previous decades have resulted in Britain becoming a “laundromat” for illicit finances of various Russian businessmen who have come to be “well integrated into the UK business and social scene” by co-opting a variety of people — from PR specialists and lawyers to members of the House of Lords — into their schemes.
However, what is of greater interest are a number of initiatives that seem to be explicitly and implicitly promoted in this document, as they may well be implemented in due course. First of all, one can observe a series of statements about the GCHQ, SIS, MI5, MI6 and NCA being under-resourced, both financially and personnel-wise, especially in regard to their Russia desks. Also, a notion of the Agencies seemingly avoiding taking the lead and feeling somewhat secondary in terms of the responsibility for “the active defence of the UK’s democratic processes” seems to be implied several times throughout the Report. These recurring themes suggest that one of the Report’s key goals is to secure more funding for the Agencies, so that they are able to launch new recruitment campaigns and expand their Russia-related operations, and to potentially give the Agencies more powers. Another recurring theme is the cumbersome bureaucracy, which seems to impede Britain’s capacity for rapid response, and the need for “greater cohesion,” which suggests that another aim of the Report may well be to initiate a process of de-bureaucratisation (in respect of the Intelligence sector) and maybe even centralisation of power to some degree.
The Report is also apparently promoting tighter control in regards to social media companies (requirement for social media companies to co-operate with MI5) and firmer grip on the UK business community and even the Lords (e.g. potential introduction of an equivalent of US Foreign Agents Registration Act is mentioned rather unequivocally), not to mention highlighting the issue of Russian media outlets in the UK (RT in particular). We may therefore expect to see a McCarthyist-style witch hunt that would target anyone with “Russian connections,” potential “Kremlin agents” — from the usual suspects such as RT and wealthy Russians to British politicians, lawyers and businesspersons of all sorts. Most important of all, the Report seems to advocate for a more aggressive/offensive strategy towards Russia — from development of stronger Cyber Offensive capabilities and curbing of the Russian influence in the former USSR to pressuring countries with moderate and friendly stances towards Russia to review their foreign policy programs (e.g. France is mentioned several times throughout the Report and is portrayed as a victim of Russia unwilling to confront its alleged aggressor) and “leading international action” against Russia’s influence elsewhere in the world alongside the US, with the post-Salisbury purge of Russian diplomats portrayed as somewhat of a benchmark and a diplomatic success.
Finally, as far as dialogue is concerned, there is an acknowledgement of the need for “limited channels of communication with the Russian government,” “direct conversations” as means of reducing “the risk of miscommunication and escalation of hostilities” and utilising “opportunities to de-conflict military activities in areas where both the UK and Russia have active military presences.” However, the Report rules out “any public move towards a more allied relationship with Russia at present.” Furthermore, with Whitehall’s long-term strategy to develop “a Russia that chooses to co-operate, rather than challenge or confront” being mentioned more than once makes one wonder if a gradual regime change strategy is not completely off the table.
All in all, the Russia Report has not revealed anything new in terms of the official UK stance on Russia and has rather reinforced the previously voiced positions of HMG. However, it has revealed a number of initiatives, which, if implemented, may not only decrease any influence Moscow may currently have within the UK, but may well mean a new hybrid offensive against Russia, which is highly likely to lead to overstraining of resources on both sides and further deterioration of Russo-British relations.
From our partner RIAC
Russia’s Troubles with Its “String of Pearls”
An important part of Russia’s grand strategy in terms of foreign policy is its purposeful creation and management of conflict zones across the post-Soviet space. This has to do with the battle Russia is fighting with the West over the borderlands—i.e., the regions that adjoin Russia from the west and south.
Maintaining the 11 buffer states around Russia (excluding the Baltic states of Estonia, Latvia, and Lithuania) is a cornerstone of the Kremlin’s foreign policy against Western military and economic encroachment. The Russians knew that because of their country’s low economic attractiveness, the South Caucasus states would inevitably turn to Europe. The same was likely to occur with Moldova and Ukraine on Russia’s western frontier, as their geographical proximity to and historical interconnections with Europe render them particularly susceptible to the West’s economic and military potential.
To prevent Western economic and military penetration, the Kremlin has deliberately fomented various separatist conflicts. This policy has been successful so far, as the EU and NATO have refrained from extending membership to Ukraine, Georgia, and Moldova.
However, Russia now faces a different problem: its long-term vision for the separatist regions is becoming increasingly unrealistic. While in the first years following the collapse of the Soviet Union, Russia had to manage breakaway conflicts only in small and poor Georgia and Moldova, Moscow’s responsibilities had increased significantly by the late 2010s.
Following the Ukraine crisis, Donetsk and Luhansk became part of Russia’s “separatist empire.” One could also add Syria to the list. The latter’s inclusion might be surprising, but considering the level of Russian influence there and the stripping away of many of Damascus’s international contacts, the war-torn country is essentially now fully dependent on Russia.
With Syria and Donbas on the roster, the Kremlin now has to manage a range of territories that rely almost entirely, in both the military and the economic senses, on Russia—but that are also geographically dispersed, economically disadvantageous, and geopolitically vulnerable. Even the conflict around Nagorno Karabakh, in which Russia is not militarily involved, is under the geopolitical influence of the Kremlin.
This means that at a time when economic problems resulting from the pandemic, Western sanctions, and the lack of reforms are looming large on the Russian home front, Moscow has to pour yet more money into multiple separatist actors spread across the former Soviet space, as well as Syria. Moscow’s broader strategy of managing separatist conflicts is therefore under increasing stress.
It is more and more difficult for the Kremlin to maneuver across so many diverse conflicts simultaneously. At times, participants have tried to play their own game independently from Moscow. Kyiv and Chisinau, for example, have considered constraining the breakaway territory of Transnistria, and Moscow—which has no direct land or air route (Kyiv would likely block the latter)—can do little about it. In Georgia’s Abkhazia and South Ossetia, Russian forces stand by and watch as NATO exercises take place on Georgian soil—an indication that despite Russia’s military presence, the West is continuing to expand its military support for Georgia.
Geopolitical trends indicate that Russia’s long-term “separatist” strategy to stop Western expansion in the former Soviet space is losing its effectiveness. While it is true that Moscow stopped its neighbors from joining the EU and NATO, its gamble that those breakaway regions would undermine the pro-Western resolve of Moldova, Georgia, and Ukraine has largely failed. Although Russia remains militarily predominant, Western expansion via the powerful weapon of economic influence is proving to be more efficient.
Nor can the Russian leadership solve the problem of its failure to entice states around the world to recognize the independence of breakaway states. For instance, in the case of Abkhazia and South Ossetia, only Syria, Nicaragua, Venezuela, and Nauru have extended them recognition—not a prominent set of states from a geopolitical point of view. This trend is not likely to change anytime soon. Moscow simply does not have sufficient resources—and in any case, US laws withholding financial aid from states that recognize the independence of separatist territories throughout the former Soviet space remain a major disincentive.
Nor does Russia have any long-term economic vision for the breakaway states. Dire economic straits have inevitably caused populations to flee toward abundant medical, trade, and educational possibilities. Usually these are territories from which the separatists initially tried to break away. The Kremlin has failed to transform those entities into secure and economically stable lands. Crime levels have been on an upward trajectory, too, as high-level corruption and active black markets have undermined the effectiveness of Moscow’s spending.
Over the past several years, there have been hints in the media about rising discontent within the Russian political elite on how the breakaway territories (plus Syria) are being run. Questions have been raised about how Russian money is being spent and about the increasingly predatory nature of the separatist (plus Syrian) political elites, which are focused on extracting as much economic benefit as they can from Moscow.
This situation is similar to the state of affairs in the late 1980s, just prior to the Soviet collapse. At that time, members of the Soviet elite started to realize that Moscow had become little more than a supplier to Soviet republics that had grown more and more predatory as corruption skyrocketed and production levels sank. The result was the Soviet dissolution.
The Soviet level of endowment to the republics was far higher than it is now, but a similar pattern is emerging. Moscow has to cope with domestic economic troubles, “disobedience” from separatist leaders, and problematic relations with the West. These challenges make it increasingly difficult for Moscow to pull the strings in multiple separatist regions at once. Even in Syria, the Kremlin’s spending is occasionally questioned by Russian analysts and politicians. The Russian elite has grown less willing to provide direct economic benefit to the separatists, as the return is too marginal to warrant the expense.
Author’s note: First published in BESA Center
Russia marks 15 years of its membership in OIC
On June 30, 2020, the Russian Federation marked the 15th anniversary of its joining the Organization of the Islamic Conference (presently the Organization of Islamic Cooperation), as an observer.
Russian and foreign politicians, as well as the leadership of the OIC, took part in a videoconference organized on the occasion by the Permanent Mission of the Russian Federation to the Organization of Islamic Cooperation.
The participants discussed a range of important issues, including the development of political dialogue and across-the-board cooperation between Russia and the countries of the Islamic world. They also underscored the significance of Russia’s joining the OIC in 2005 as an observer.
However, the extensive preparatory work, carried out over several years ensuring the success of the Russian bid to join the organization as an observer has been largely ignored.
One aspect of that preparatory work was the need to ease tensions and explain the real meaning of the events in the North Caucasus, where the Russian Federation had to deal with a large-scale conspiracy by international terrorist organizations and a maze of anti-Russian forces supporting those organizations.
The February 2004 visit to Saudi Arabia by the first president of the Chechen Republic, Akhmat Kadyrov, who led a delegation of public and religious figures representing Russia’s North Caucasus republics, was a significant part of that preparatory work.
The prospect of such a visit was discussed by President Vladimir Putin and the Crown Prince of the Kingdom of Saudi Arabia Abdullah on September 3, 2003.
However, the whole idea faced serious hurdles due, among other things, to the presence in Saudi Arabia of opponents of our rapprochement, who were influenced by anti-Russian forces and criticized Moscow’s policies in the North Caucasus.
The Saudi Foreign Minister, Faisal Al-Saud, told me, as Russia’s Ambassador to the Kingdom, that “the fate of the visit is in the hands of Crown Prince Abdullah,” who was then the de facto leader of the country (King Fahd was seriously ill and was virtually incapacitated).
After a tense, over two-hour-long discussion of the issue with the Crown Prince, he gave the visit the go-ahead, adding that all members of the delegation and accompanying persons would, without exception, be treated as “personal guests of the King of Saudi Arabia” and placed in the official government residence.
Upon his arrival in Saudi Arabia, Akhmat Kadyrov met with top members of the Saudi government, including the foreign minister and ministers of the economic bloc, the leadership of the OIC, the President of the Islamic Development Bank, Ahmed Mohamed Ali, and local public and religious leaders.
Akhmat Kadyrov’s excellent knowledge of the Arabic language and the intricacies of Islamic culture and his frankness eventually broke the ice of mistrust and contributed to the success of negotiations on Russia’s accession to the OIC.
Morocco’s ex-Foreign Minister Abdul Waheed Belkaziz, who served as the OIC Secretary General between 2000 and 2005, and Saudi Foreign Minister Faisal Al-Saud, who organized a meeting in Jeddah of representatives of OIC member countries to present weighty arguments in favor of the importance of Russia’s joining the alliance, played a major role in establishing a new climate of friendship between Russia and the Organization of Islamic Cooperation. During the meeting we agreed to amend the IOC Charter so that it would allow Russia to join the organization as an observer.
Today, our cooperation is many-sided and productive. It is really imperative for us to bear in mind our previous experience of friendly interaction and to give credit to our partners, including the Saudis, who played such an important role in opening up new opportunities for cooperation between Russia and the Arab, Islamic world.
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