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Italy’s current economic crisis

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The day of reckoning has now come for the Italian economic crisis, worsened by the Covid-19 pandemic and the related lockdown.

As the Italian Statistical Institute (ISTAT) showed, 34% of Italian production has been negatively affected. The activity and operations of 2.2 million companies, accounting for 49% of the total, have also been suspended, but 65% of the entire export business has been closed.

This means that Italy’s economic system is changing.

All this has stopped – hopefully temporarily – the work of 7.4 million employees (44.3% of the total number of private employees not directly working in offices) and, along with the fear of coronavirus, it has obviously had a snowball effect, which has soon greatly reduced the confidence rate of consumers and businesses.

Production has been stopped for 34.2% of companies and the same holds true for 27.1% of value added.

 Therefore, considering the general lockdown envisaged, the fall in jobs currently affects 385,000 workers, 46,000 of whom are irregular, to the tune of 9 billion euros of wages.

The most affected sectors have been catering and accommodation (-11.3%), logistics, transport and trade (-2.7%).

 With sectoral closures envisaged until June, the overall reduction in value added amounts to 4.5%.

 The employees affected by definitive closures will be 900,000 approximately, 103,000 of whom are irregular, for a total amount of 20.8 billion euros of lost wages.

That is where the complex and long-standing E.U. issue comes in.

If we consider all the possible and already proposed E.U. funds, we are talking about 100 billion euro of resources, while it is very likely that Italy may have a “firepower” to generate credits and funds up to 300 billion euros. It would need them all and probably they will not be enough.

We should also consider the future 172 billion euros from the Recovery Fund.

The Conte II government has so far mobilized – albeit with badly drafted, superficial and even naïve rules and regulations – about 75 billion euros of resources, all based on budget deficit.

The so-called Cura Italia decree of last March “mobilized” 25 billion euros and 55 billion euros were mobilized with the recovery Decree of last May.

Certainly not everyone has yet reached this money – sometimes not even many of them. The funding to companies -shambolic and all foolishly used through the banking system, which is structurally inefficient – reminds us of what a great Lombard entrepreneur used to say years ago: “What do we industrialists ask of the State? That it gets out of the way”.

 The European Funds from SURE, the European Investment Bank and the European Stability Mechanism will mobilize about 270 billion euros throughout the European Union, with a share for Italy equal to 96 billion euros.

They are certainly not enough to rebuild the production system and compensate for damage.

 SURE is currently worth around 20 billion euros for Italy alone, but only to finance the Redundancy Fund, while 40 billion euros will be the Italian share of the 200 billion funds provided by the EIB only for SMEs.

 Therefore, Italy will go into debt – albeit on favourable terms -but not to get what it really needs.

 The rest will certainly have to be borrowed on the financial markets and with our own public debt securities which, however, at maturity will be secondary to the ESM or EIB loans.

Another key problem is that if and when – but it will happen anyway- the standard rules of the Stability Pact are back in place, we will be left with a very high debt, but still liable to all the reprimands of both the “markets” and the E.U. which, at that juncture, may also revise the terms and conditions of the loans already in place.

 For Italy, the Recovery Fund could make available the above stated 172 billion euros, of which 90 billion of loans and 81 billion of grants.

At the end of 2020, however, the Italian public debt will rise by as many as 15 points of GDP.

Why? Firstly, because the denominator will obviously be lower: the economic downturn resulting from the coronavirus crisis will be much wider than the one occurred in 2008, with a very severe 5.3% decrease compared to the GDP recorded in 2008.

Currently Confindustria, the General Confederation of Italian Industry, estimates a 6% drop in Gross Domestic Product, while Goldman Sachs estimates a 11.6% fall.

 Obviously there is also the inevitable increase in public spending, which is another public debt problem, hoping that speculation will stay calm – which is unlikely. There will also be a sharp drop in tax revenue.

 For example, it is estimated that 20% of the professionals registered with professionals Rolls and Associations risks being forced out of the market. It is no small matter. Other associations in the sector provide similar data.

Hence, if we assume a 6% GDP reduction, the debt-to-GDP ratio would rise from the 135% of late 2019 to at least over 153% at the end of 2020.

 With an11% GDP fall, the debt-to-GDP ratio in late 2020 would be equal to 163%.

Obviously, in such a context, even pending the suspension of the Stability Pact, Italy’s debt would be very hard to support.

Here the problem also lies in primary surplus. According to our data, even if we assume a limited 2.5% GDP rebound in 2021, with an unchanged cost of debt (2.6% in this case) there would be the absolute need for primary surpluses of at least 2.3% and 2.6%, respectively, in the case being studied of a 9% fall in GDP and also in case of an 11% collapse.

 In other words, the government should cut public spending always below 40 billion euros compared to taxation. This is impossible.

Therefore, we must necessarily monetise the extra-deficit with the ECB -monetise and not postpone payment until maturity – but for a very long period of time and for amounts that will probably be much higher than the current ones. It will also be necessary to issue common E.U. debt securities.

 Otherwise the markets, which have already laughed at a currency that has not even a common taxation and a single public budget rule, will pounce on the poor wretched Euro and destroy it.

 Then there is the ECB. On June 4, 2020 it announced the expansion of the Pandemic Emergency Purchase Program (PEPP) from 750 to 1,350 billion euros and also its extension until June 2021 and, in any case, until the end of the emergency situation.

However, there is additional data to analyse. Firstly, the current PEPP share mobilized for each E.U. Member State in the March-May 2020 quarter still corresponds, in essence, to the capital key.

The capital key is the mechanism whereby the ECB purchases sovereign debt in proportion to each country’s ECB share. The key is calculated according to the size of a Member State in relation to the European Union as a whole. The size is measured by population and gross domestic product in equal parts. In this way, each national Central Bank has a fair share in the ECB’s total capital.

 With two significant exceptions for the time being: France in a negative senseand Italy in a positive sense.

In other words, France is actually supporting Italy’s public debt. Obviously it cannot last long.

Even in the Italian debt case, however, the PEPP share does not seem to be as high as usually believed.

 The maximum absorption has long been recorded by the TLTRO purchase programme. Indeed, these are short-term operations and the markets know they will end soon.

What next? There is no alternative option.

Let us not even talk about the possibility that, based on the pressure from the so-called “thrifty countries”, well led by Germany, this mechanism may stop all of a sudden.

There is also another factor that should be better studied in Italy, namely the ruling of the German Constitutional Court based in Karlsruhe.

As made it very clear by the German Constitutional Court, it concerns the ECB programme known as Public Sector Purchase Programme (PSPP).

Created in 2015, it is still operational. It is not yet known for how much longer, to the delight of speculators.

On points of law, the German Constitutional Court challenged the 2018 judgment of the European Court of Justice, in which the Luxembourg judges considered the ECB’s intervention unlawful, but rather deemed that the E.U. Court should only confine itself to the actions and deeds manifestly exceeding the limits set by the Treaties and the ECB Statute.

 Therefore, the issue at stake in the current Karlsruhe ruling concerns the principle of proportionality (Article 5 TEU).

Based on the principle of proportionality, in fact, the E.U. can take action in “shared competence areas” (which are listed in Article 4 of the Treaty on the Functioning of the European Union) only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States, but can rather be better achieved at E.U. level.

Certainly the monetary policy strictly falls within the E.U. and ECB competence, but the ECB’s action has inevitable repercussions on economic policy, which is in any case a shared competence area.

Hence, as the Karlsruhe judges maintain, the issue lies in defining whether the ECB enjoys independence even in relation to the treaties establishing it or whether the ECB itself should in any case follow the principles of the E.U. system to which it belongs.

 In essence, it is a matter of keeping fiscal and monetary policy still separate, and this is scientifically difficult. The dream of every badly aged and old-fashioned monetarist.

In essence, however, the Karlsruhe ruling tells us that the Euro area is sub-optimal(as we already knew, since Robert Mundell’s model certainly does not apply to the E.U. and the Euro) and is in any case not representative.

We have already known it, too, and indeed for a long time.

 The Euro is now a handicap for most E.U. Member States except Germany.

 The system of fixed rates with the European currency enables Germany to be increasingly competitive on the export side, in the absence of mechanisms to readjust foreign trade balances.

 Moreover, there is not even a real and homogeneous tax policy in the E.U.Member States, not to mention the ban on funding the Member States’ debt, which was established as far as the Maastricht Treaty.

With a view to avoiding this ECB funding mechanism, which may be rational but is illegal under the E.U. Treaties, Germany basically asks us to sell the public debt securities purchased by the ECB before their maturity.

That is fine, but it only means that a Member State’s debt can never be cancelled by purchasing the securities through its Central Bank.

Hence the securities continue to exist and be painstakingly renewed or possibly continue to re-enter the market.

Facts are facts, however, and without Mario Draghi’s quantitative easing (QE), France, for example, could certainly not have 32% of its public debt been bought back by the Eurosystem.

 When all E.U.Member States’ securities reach maturity, other ones are always purchased, so that the exposure remains around 33% and Germany is happy with this strict compliance with the law.

This 33% limit is self-imposed by the ECB so as to avoid one of the Karlsruhe conditions, i.e. the national voting thresholds, within the ECB, for rescheduling the debt of an individual State.

 It should be noted, however, that the ECB funds the absorption of E.U. countries’ public debt with the creation of money ex nihilo, like all Central Banks in the world. Nevertheless,this is still explicitly prohibited by the Treaties, but is barely justified, at legal level, with the aim of curbing inflation.

 An economic ideology which is now very old-style, but still very fashionable within the European Central Bank.

The various ECB sovereign debt purchase programmes are already worth over 1,000 billion euros, accounting for 8% of the entire Euro area.

However, with a view to really operating in this area, the ECB must also get rid of the German Constitutional Court’s first ruling of 2017, namely the 33% limit and hence the obligation to put the purchased securities back into circulation immediately after the end of the pandemic.

Reselling, on the secondary market, the securities still maturing would cancel all the monetisation benefits, but a new PEPP will be needed in the future, without quantitative limits and for a long period of time.

 And the ruling of the German Constitutional Court and Germany itself, with or without “Nordic” or “thrifty” watchdogs, will certainly get in the way. Hence for Italy (and France) there will not be much room for manoeuvre.

 The Fourth Reich is advancing not with the overheated “Tiger” tanks or with the Pervitinephedrine drugs, but with the monetary game on a non-rational currency.

Germany, however, said a very clear “no” to this process of debt repurchase and absorption, precisely with the Karlsruhe ruling of May 5.

The current PEPP is already outlawed under German law. We need to remember it or Germany will make us remember it.

 Italy, however, will not survive within the Euro area without QE, PEPP or any other trickery may be devised by the European Central Bank. The same holds true for France, although it still does not say so clearly.

 When, at the end of the three months allowed by the ruling of the German Constitutional Court, the Bundesbank withdraws from the purchase operations, it will obviously start again to put several thousand Bunds purchased with the ECB back on the market.

The sales of these securities will make rates rise in Germany, an increase that will be counteracted by the flight of Italian and French capital to buy German debt.

 At that juncture, Germany itself will autonomously carry out controls on capital, which is tantamount to paving the way for its exit from the Euro.

 What about the United States? At the end of 2019, before the lockdown, the share of speculative debt at high default risk amounted to 5,200 billion U.S. dollars.

Over the last two months of Covid-19 crisis, 1,600 companies a day have gone bankrupt in the United States, while consumer debt – a sort of crazy magic wand for American spending – has decreased by at least 2 billion U.S. dollars per month.

It is a severe drop for those who foolishly live on debt, not to mention that in late 2019 consumption was worth 75% of the U.S. GDP.

Therefore, considering the close correlation existing between consumer credit and consumption – and hence GDP – in the United States, there will almost certainly be a further crisis in companies’ solvency there.

 Since 2008 FED’s interventions have been worth 7,000 billion U.S. dollars, and the financial assets on the U.S. market are worth approximately 120 trillion dollars, i.e. 5.5 times the North American GDP.

Hence, not even the United States will give us a chance to find a way out or an exit strategy.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Economy

Are we going into another economic recession? What history tells us

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An economic recession or depression is a period of economic decline, typically characterized by a decline in the gross domestic product (GDP), high unemployment, a decline in manufacturing and industrial production, a stock market crash, and a decrease in consumer spending.

The Great Depression

The Great Depression was a severe economic downturn that lasted from 1929 to 1939. It was the longest and most severe depression of the 20th century. The Great Depression began in the United States and quickly spread to countries around the world. Many factors contributed to the Great Depression, including economic policies and structural weaknesses in the global economy. During the Great Depression, unemployment rates reached as high as 25% and GDP fell by as much as 30%. Many businesses and banks failed, and people lost their savings and homes. The depression had a profound effect on society, leading to widespread poverty and social unrest. Governments around the world implemented various economic policies in an attempt to combat the depression, including increased government spending, protectionist trade policies, and monetary policies such as the devaluation of currencies. The Great Depression had a lasting impact on the global economy and political landscape, leading to the rise of fascist and communist regimes in some countries and shaping the economic policies of governments for decades to come.

The Suez Crisis of 1956

The Suez Crisis of 1956 was a political and military conflict that arose after the Egyptian government nationalized the Suez Canal, a strategic waterway that connected the Mediterranean Sea to the Red Sea. The nationalization of the Suez Canal led to the withdrawal of foreign investments and a decline in international trade, which hurt the economies of Egypt, France, and the United Kingdom, the three main countries involved in the crisis. The crisis also led to a rise in oil prices, as the closure of the Suez Canal disrupted the flow of oil from the Middle East to Europe. This had an impact on the economies of oil-importing countries and also led to inflation in many developed economies.

The Sue Crisis also led to a decline in stock markets around the world and a fall in the value of the British pound and US dollar, as investors sought safe-haven assets in the wake of the crisis. The Suez Crisis also had a long-term impact on the global economy, as it led to a shift in the balance of power in the Middle East and contributed to a decline in the influence of the Western powers in the region. It also had a lasting impact on international relations, as well as on oil prices and the global economy. The crisis also contributed to the formation of the OPEC and the oil embargo in 1973 which had a significant effect on the world economy.

The International Debt Crisis of 1982

The International Debt Crisis of 1982 was a financial crisis that arose from the inability of several developing countries to repay their debt to international creditors. The crisis began in the early 1980s, when several Latin American countries, as well as some countries in Africa and Asia, found themselves unable to service their debt and were forced to seek assistance from the International Monetary Fund (IMF) and other international organizations. The crisis was caused by several factors, including a rise in interest rates, a fall in commodity prices, and a decline in economic growth in many developing countries. The crisis was also exacerbated by the fact that many developing countries had borrowed heavily in the 1970s, during a period of high commodity prices and strong economic growth, and were now facing a difficult economic environment.

The International Debt Crisis had a significant impact on the global economy. Developing countries affected by the crisis saw a decline in economic growth and an increase in poverty and unemployment. The crisis also led to a decline in foreign investment in many developing countries. The International Monetary Fund (IMF) and the World Bank responded to the crisis by providing financial assistance to affected countries, in exchange for economic reforms such as austerity measures, structural adjustments, and trade liberalization. These measures had a significant social and economic impact on the affected countries and were criticized for their negative effects on the poor and vulnerable populations.

The International Debt Crisis also had an impact on the global financial system, as many banks and other financial institutions that had lent money to developing countries were at risk of default. The crisis led to a decline in the value of the US dollar and a rise in the value of other currencies, as investors sought safe-haven assets in the wake of the crisis. The International Debt Crisis of 1982 was a major event in the history of the global economy, and its effects were felt for many years afterward. It also led to important changes in the way the international financial system operates and the role of the IMF in providing financial assistance to developing countries.

The East Asian Economic Crisis 1997-2001

The East Asian Economic Crisis, also known as the Asian Financial Crisis, was a period of financial and economic turmoil that affected several countries in East Asia, including Thailand, Indonesia, South Korea, and Malaysia, between 1997 and 2001. The crisis was characterized by a sharp devaluation of currencies, a decline in stock markets, and a rise in interest rates, and had a significant impact on the economies and people of the affected countries. The crisis was triggered by several factors, including a rapid increase in debt, a property market bubble, and a lack of transparency in the financial systems of the affected countries. Many of these countries had experienced rapid economic growth in the preceding years and had attracted large amounts of foreign investment, but their economies were not well-equipped to handle the sudden influx of capital.

The crisis led to a sharp devaluation of currencies in the affected countries, which made it difficult for businesses and individuals to repay their debt. This, in turn, led to a wave of bank failures and a decline in economic activity. The crisis also led to a decline in the value of stock markets and a sharp increase in interest rates, making it more difficult for businesses to access credit.

The International Monetary Fund (IMF) intervened to provide financial assistance to the affected countries, in exchange for economic reforms such as austerity measures, structural adjustments, and trade liberalization. These measures had a significant social and economic impact on the affected countries and were criticized for their negative effects on the poor and vulnerable populations. The East Asian Economic Crisis had a significant impact on the global economy, as the crisis led to a decline in economic growth and a fall in stock markets around the world. It also led to a decline in foreign investment in many developing countries, as investors became more cautious about investing in countries facing economic problems.

The East Asian Economic Crisis of 1997-2001 was a major event in the history of the global economy, and its effects were felt for many years afterward. It also led to important changes in the way the international financial system operates and the role of the IMF in providing financial assistance to developing countries.

The Russian Economic Crisis 1992-97

The Russian Economic Crisis of 1992-1997 was a period of economic turmoil and financial instability that affected the Russian Federation following the collapse of the Soviet Union. The crisis was characterized by hyperinflation, a sharp decline in industrial production, and a sharp fall in the value of the Russian ruble.

The crisis was caused by several factors, including the massive structural and political changes that occurred following the collapse of the Soviet Union, the rapid privatization of state-owned enterprises, and the lack of a clear economic plan or strategy. Additionally, the crisis was exacerbated by the failure of the government to implement necessary economic reforms, and the ongoing conflicts in the region. The Russian economic crisis had a significant impact on the lives of the Russian people, as living standards declined sharply and poverty and unemployment increased dramatically. The crisis also led to a decline in foreign investment and a fall in the value of the Russian ruble.

The government responded to the crisis by implementing several economic reforms, such as the introduction of a new currency, the Russian ruble, and the implementation of a tight monetary policy to combat hyperinflation. The government also implemented several structural reforms, including the privatization of state-owned enterprises, the liberalization of prices, and the opening up of the economy to foreign trade and investment. The Russian Economic Crisis of 1992-1997 had a significant impact on the global economy, as the crisis led to a decline in economic growth and a fall in stock markets around the world. The crisis also led to a decline in foreign investment in Russia and other countries of the former Soviet Union, as investors became more cautious about investing in countries facing economic problems.

The Russian Economic Crisis of 1992-1997 was a major event in the history of the Russian economy and had a lasting impact on the country’s economic and political landscape. It also had important lessons for other countries undergoing the transition from a planned to a market economy.

Latin American Debt Crisis in Mexico, Brazil, and Argentina 1994-2002

The Latin American Debt Crisis of 1994-2002 was a period of economic turmoil that affected several countries in Latin America, including Mexico, Brazil, and Argentina. The crisis was characterized by a sharp devaluation of currencies, a decline in economic growth, and a rise in interest rates. The crisis had a significant impact on the economies and people of the affected countries. The crisis was triggered by several factors, including a rapid increase in debt, a lack of transparency in the financial systems of the affected countries, and the failure of governments to implement necessary economic reforms. Many of these countries had experienced rapid economic growth in the preceding years and had attracted large amounts of foreign investment, but their economies were not well-equipped to handle the sudden influx of capital.

The crisis led to a sharp devaluation of currencies in the affected countries, which made it difficult for businesses and individuals to repay their debt. This, in turn, led to a wave of bank failures and a decline in economic activity. The crisis also led to a decline in the value of stock markets and a sharp increase in interest rates, making it more difficult for businesses to access credit. The International Monetary Fund (IMF) intervened to provide financial assistance to the affected countries, in exchange for economic reforms such as austerity measures, structural adjustments, and trade liberalization. These measures had a significant social and economic impact on the affected countries and were criticized for their negative effects on the poor and vulnerable populations.

The Latin American Debt Crisis of 1994-2002 had a significant impact on the global economy, as the crisis led to a decline in economic growth and a fall in stock markets around the world. It also led to a decline in foreign investment in many developing countries, as investors became more cautious about investing in countries facing economic problems. The Latin American Debt Crisis of 1994-2002 was a major event in the history of the global economy and its effects were felt for many years afterward. It also led to important changes in the way the international financial system operates and the role of the IMF in providing financial assistance to developing countries.

The Great Recession

The Great Recession was a period of economic decline that lasted from December 2007 to June 2009. It was considered the most severe recession since the Great Depression of the 1930s. The Great Recession began in the United States and quickly spread to other countries around the world. The primary cause of the Great Recession was the collapse of the housing market in the United States, triggered by the widespread use of risky subprime mortgages and lax lending standards. The housing market crash led to a decline in housing prices and a wave of foreclosures, which in turn led to a decline in consumer spending and a decrease in economic activity.

As the recession deepened, several large financial institutions, such as Lehman Brothers, failed, leading to a financial crisis and a credit crunch. This made it difficult for businesses and consumers to access credit, further exacerbating the economic decline.

Governments around the world implemented various policies to try to combat the recession, including monetary policy measures such as interest rate cuts, fiscal policy measures such as stimulus spending, and bank bailouts. Despite these efforts, the recession caused high levels of unemployment, a decline in GDP, and a fall in stock markets around the world. The Great Recession had a profound impact on the global economy, leading to widespread job losses, a decline in economic activity, and a loss of wealth for many people. It also led to significant changes in economic policy and regulations, particularly in the financial sector, to try to prevent a similar crisis from happening again in the future.

Current Scenario

The current economic crisis is a downturn in the global economy that is caused by the COVID-19 pandemic, the Ukrainian war, devaluing currency, Economic sanctions on Russia and Iran, New Strategic alignment, and US-China competition. It has resulted in widespread economic disruptions around the world, leading to a decline in consumer spending, an increase in unemployment, and a fall in economic activity.

Similarities between the current economic crisis and previous economic recessions include a decline in the gross domestic product (GDP) and an increase in unemployment which stands at 6.4% from 5.4% in 2021. Businesses, particularly small and medium-sized enterprises (SMEs) are facing severe economic challenges, with many closing down or filing for bankruptcy. Consumer spending also took a hit as people become more cautious about spending money and saving for uncertain futures. The current crisis also has some similarities to the 2008 financial crisis, as it has led to a decline in stock markets and a fall in the value of many currencies. The crisis has also led to a decline in foreign investment and a rise in uncertainty in the global economy, populist leadership.

Governments around the world are taking measures to mitigate the economic impact of the crisis, including fiscal policies such as stimulus spending and monetary policies such as interest rate cuts. Central banks are also taking action to provide liquidity to the financial system and to support the economy. The current economic crisis is a reminder of the interconnectedness of the global economy and the importance of swift and coordinated action to mitigate the economic impact of such crises. The crisis has also highlighted the importance of economic diversification, and the need for countries to build resilient economies that can withstand future shocks.

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China and the Middle East: More Than Oil

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Image source: China MFA

Within the next 20 years, the need for oil will account for just 20% of global consumption, but by the year 2040, that percentage will have increased to 75%. More than half of the oil that is necessary for the functioning of the industries and the upkeep of development is imported by China.

Oil is only one of many things that China has an interest in when it comes to the Middle East; their interests go much beyond that. China was responsible for some of the building work in Saudi Arabia and Iran. China has big plans to expand its reach into the Middle East. To demonstrate its presence and proclaim itself a global force within the context of the regional pattern. It is a fact that China’s rapidly expanding economy has a significant need for more oil.

China is likewise seeking an alternate supply, but as time has passed, its reliance on the middle east has grown from 19% in 1990 to 70% in 2020. Nearly twenty percent of China’s oil comes from Saudi Arabia, while ten percent comes from Iran. The fact that China has inked many petroleum agreements with Saudi Arabia and Kuwait demonstrates the country’s interest in the areas that are rich in oil and other commodities.

The oil industry is just one component of China’s interest in the Middle East. This interest provides a hyperlink to China’s growing influence on the world stage. The value of China’s trade with the Middle East surpassed that of the United States to become the region’s most important trading partner, having climbed from 100 to 222 dollars. Middle eastern nations that rely heavily on low-wage workers can afford the low-priced consumer products and commodities of everyday use that China ships there from its factories. In addition to this, China made investments in the transportation sector, technology sector, agricultural sector, real estate sector, and energy sector.

China is also making investments in the process of reconstructing Iran’s infrastructure. Even though China is the biggest exporter of oil from Iran, accounting for fifty percent of total exports, China makes every effort to smooth the road during discussions and diplomatic efforts. China is making significant efforts to protect the access it has to the energy resources that are situated in the nations of the middle east.

China is steadily climbing the ranks of world powers, and its growing influence in the Middle East is a clear indication that it has been successful in consolidating its authority over the nations of that region. Middle Eastern nations want to avoid getting into any kind of dispute with China since China is their most important trading partner; they want to make sure that their commercial operations aren’t interrupted. The United States’ stranglehold on the market is being challenged by China’s rapid expansion there. In 2010, China’s trade volume with middle eastern nations surpassed that of the United States’ trade volume with those countries.

China’s interest in the nations of the Middle East stems from the proposal known as the “New silk route,” in which the countries of the Middle East serve as a connection between the continents of Europe and Africa. These regions provide half of China’s crude oil imports which makes Arabs countries natural partners of the belt and road initiative.

China is participating in commercial operations while maintaining a neutral stance about the disputes that are taking place in the region at the same time. China is playing the role of the middle. Regarding the Iran nuclear agreement, the crisis in Syria, and the conflict between Israel and Palestine, China takes the position that these issues should be addressed diplomatically and politically. China took positive action to improve its position in the eyes of all parties involved in the dispute and to maximize the amount of profit it could make from the situation while minimizing the impact on trade.

Not only is China achieving its goals for its interests, but on the other side, Saudi Arabia is also making progress toward its goals for 2030. The construction of new infrastructure received significant funding in Iran. Oil from Kuwait, the United Arab Emirates, and Saudi Arabia is sold to China, bringing in billions of dollars. On the other hand, China provided advantages to these nations while simultaneously expanding its soft power to advance the “New Silk Route.” This was done for the greater good of the initiative. Chinese studies were first included in the university curricula of Iran, Saudi Arabia, and the United Arab Emirates. Millions of Chinese visitors travel to these nations, and some of them decided to make a permanent move there.

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The importance of Sisi’s visit to India to build economic blocs for Egypt with the BRICS group

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Egyptian President Abdel Fattah El-Sisi during ceremonial reception at Rashtrapati Bhavan (Pic. Courtesy Twitter/@rashtrapatibhvn)

Asian countries represented successful experiences at the level of economic blocs, hence Cairo’s quest to be part of global blocs of an economic nature, as this represents confidence in the ability of the Egyptian state to advance its economic sector. Recently, the Egyptian desire to be part of  From the BRICS group, which is an economic alliance that includes Brazil, Russia, India and China, and was established in 2006, and South Africa joined it later in 2010.

  The BRICS Forum is an independent international organization that works to encourage trade, political and cultural cooperation among its member countries, taking into account that Brazil, Russia, India, China and South Africa represent nearly a quarter of the global economy, and contributed to more than half of the global growth in the past years.  About 30% of what the world needs in terms of goods and products, while its citizens represent 40% of the world’s population.  The BRICS countries have adopted many initiatives to support cooperation among themselves in various fields, including the establishment of a development bank with a capital of $100 billion to finance development projects in the member states.

   President Abdel Fattah El-Sisi’s visit to India is a national strategic visit in the first place to facilitate Egypt’s entry and accession to the BRICS international economic grouping with the help of China and India. The countries of China and India, and Egypt is trying through these relations to enter the giant BRICS gathering, which contributes to strengthening Egyptian cooperation with the countries of the ASEAN group and its geographical and regional scope, through many axes and ways to develop cooperation with Egypt and those countries in various fields, especially economic, investment and development in light of  The distinguished development experiences of India, China and those countries in achieving comprehensive development, as well as their progress in small, medium and micro industries, in addition to the convergence of all of them compared to the vision of Washington and the West towards a number of issues of common concern, primarily the Middle East issue, the Palestinian issue and efforts to combat terrorism.

 On the occasion of President El-Sisi’s visit to India, this was not his first visit to India, as he had already visited India in 2016 as part of an Asian tour, during which he met his counterpart, Indian President Bernab Mukherjee, Prime Minister Narendra Modi and senior officials in New Delhi.

 We find that President El-Sisi’s current visit to India confirms that President El-Sisi possesses great political and economic experience, through which he can open more investment and economic fields for Egypt, looking forward during his visit to benefit from the economic renaissance of the state of India, and the rapid growth rates achieved by India.  And growing, and Egypt here can benefit from this accelerating Indian experience, which will have positive effects on Egypt in several areas, such as: increasing exports, raising production rates, opening investment fields, and advancing the Egyptian trade and economy forward, given that India is one of the best countries in the world in terms of application.  Democracy has achieved economic development in recent years, effectively penetrated the field of technology, and the Indian product occupies a strong global position with high quality, despite its population exceeding one billion and 200 million people, but it has been able to achieve self-sufficiency after its massive agricultural revolution.

 Egypt and India have distinguished political relations, in addition to the trade and economic relations that have witnessed remarkable growth over the past years, despite the slow growth of the global economy.

 It is expected that President El-Sisi’s visit to India will witness a list of new joint projects that India can implement in the new administrative capital, including a project to establish a medical city on an area of ​​350 acres, which includes the establishment of a number of hospitals and nursing schools, as well as the establishment of an Indian university specializing in medicine, according to what has been done as an agreement with the Indian side.

 In my opinion, President El-Sisi’s visit to India is an important political and economic achievement that affirms Egypt’s presence as a pillar of stability and development in the region.  For Egypt to present its economic program to facilitate its entry into the giant BRICS economic group with the help of China and India in the first place, in a way that facilitates the process of attracting foreign investments to Egypt and promotes economic advancement and improves the living conditions of the Egyptian people.

 Here, it is worth noting the importance of President El-Sisi’s visit to India, in advancing Indian tourism to Egypt and increasing the number of Indian tourists coming to Egypt.  and experiencing rapid economic growth. The Indian market also has many opportunities for the growth of our exports, especially in the sectors of chemicals, plastics, fertilizers, fruits and agricultural crops such as cotton, handicrafts such as textiles, leather, marble, granite, dairy products, metal industries, iron and steel, crude oil, and others.

 Egypt will seek to activate the agreement between the Egyptian and Indian governments to increase the volume of trade exchange to $8 billion, knowing that Indian investments in Egypt are estimated at about $10 billion.

  In this context, we find that Egypt and India have six trade cooperation agreements with India, namely: an agreement to develop intra-trade, an agreement to establish a joint committee, an agreement to encourage and protect mutual investments between India and Egypt, an agreement to avoid double taxation, and two memorandums of understanding in the field of trade and technical cooperation.  And in the areas of small, medium and micro projects, and an agreement for a joint work plan to develop trade and joint investments between the two parties.

 There is momentum in our relations with the Indian side, and a common desire through President El-Sisi’s visit to India to develop them to a higher level, given the existence of intense political cooperation between the two countries, and continuous interaction at the level of leadership and ministerial level, where Indian Prime Minister Narendra Modi met with President El-Sisi on the sidelines of meetings  The United Nations General Assembly in New York in September 2015. The Indian and Egyptian sides are interested in strengthening their relations with regard to issues of combating terrorism, strengthening economic partnership and common regional issues between them.  India’s relationship with Africa through the Egyptian side.

 There are 50 Indian companies operating in Egypt, with a total investment of about $3 billion.  About half of these companies are joint ventures or wholly owned subsidiary companies of Indian investors, while the rest of the companies operate through their representative offices and implement projects for government agencies.

 Among the largest Indian companies investing in Egypt is TCI Sanmar (whose investments amount to about one and a half billion dollars), and the company announced the opening of a new production line with investments amounting to $200 million, in addition to other giant Indian companies with branches in Egypt, such as companies  Alexandria Carbon Black, Dabur India, Egyptian-Indian Polyester Company and Skip Paints.

 Indian companies are also implementing several projects in the fields of railway signals, pollution reduction, water treatment, irrigation, shock prevention devices, and others.  And the Indian company Hetero, a major company working in the field of medicine, launched a joint venture in May 2015 to produce a drug to treat hepatitis C, which was highly appreciated by the Egyptian government.

 Among the projects that were carried out through the Indian grants to Egypt were distance education and distance medicine projects in the African continent, based in Alexandria University, a solar lighting project in the village of Agwain, and a vocational training center for textile technology in Shubra, Cairo, which are projects that have already been completed, in addition to  To another project under implementation to establish an information technology center at Al-Azhar University.

 Here we find that cooperation in the technical field remains an important part of our bilateral relations with the Indian side.  Since 2000, more than 600 Egyptians have benefited from Indian technical and economic cooperation programmes. Many Egyptians have been trained under various programs such as India Technical and Economic Cooperation Programme, India-Africa Forum Summit and CV Raman Foundation Fellowship.  Many Egyptian diplomats joined the foreign diplomats course at the Indian Foreign Service Institute, and many Egyptian scholars and scholars benefited from the grants of the Indian C.V. Raman International Foundation for African researchers.

 At the level of cultural cooperation relations between India and Egypt, the Maulana Azad Indian Cultural Center was established in Cairo in 1992, with the aim of enhancing cultural cooperation between the two countries through the implementation of the cultural exchange program, in addition to its interest in spreading Indian culture through Indian and Urdu language courses, yoga and dance courses.  And seminars, film shows and exhibitions organized by the Indian Cultural Center, the Center also organizes many cultural festivals.

 One of the results of the Egyptian-Indian joint cooperation in the field of education is the allocation of 110 grants by the Indian Ministry of Foreign Affairs to Egypt within the framework of the Indian technical and economic cooperation programme.

 In the field of scientific cooperation between India and Egypt, we find that both the Indian Council for Agricultural Research and the Egyptian Agricultural Research Council work together in the field of joint agricultural research according to joint cooperation agreements between them. There are also programs for cooperation in the field of science and technology that take place every two years between the two parties.

 What can be concluded here, from the Egyptian moves on the level of foreign policy, is that Cairo avoids defining its relations and partnerships at the political, economic and military levels, which reflects prudence in decision-making and prompts Cairo to enter into partnerships and international economic blocs such as BRICS and others, which transforms Egypt economically and rapid development to broader horizons, with the aim of making Egypt an important figure in all regional and international equations on the basis of standing at the same distance from everyone, and moving in accordance with the requirements of the national interest and international law.

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