Strange to say, but the Libyan economy which, as is well-known – depends much, if not almost exclusively, on oil extraction and sale, performed very well in 2017 even at a time of falling prices – currently made more complex by the Covid-19 pandemic which has led to crisis in consumer countries.
It should be recalled that the 2017 good performance of the Libyan economy came six years after the silly elimination of Colonel Gaddafi, with a +67% extraction peak compared to 2016.
In 2018 it went much worse, with a 17.9% increase, but in 2019 GDP grew by 9.9% and currently, at the end of 2020, a 58.7% vertical drop in GDP is expected.
Obviously there is an inextricable combination of severe internal political and military instability, pandemic-related crisis in consumer countries, as well as a different configuration of the struggle for world oil power, especially with the arrival of the U.S. shale oil.
Basically, oil extraction and refining in Libya have almost stopped, except in the last few weeks, when some oil wells (such as El Sharara or El Feel, among the largest ones Libya) are supposed to reopen “as soon as possible”, as the Minister said.
The two oil wells, however, are still controlled, by Khalifa Haftar’s LNA forces. Here is the clear link between political-military destabilization and the Libyan economic crisis.
Oil production fell by 0.1 million barrels per day as from April 2019, i.e. at the beginning of the clash between the GNA and the LNA, with a public deficit that reached 28.9% of GDP in 2019, but with inflation rate falling by 4.6% in 2019 alone, although expected to reach 22.3% by the end of 2020.
The oil barrel global cost is supposed to keep on falling also in 2021, but production in Libya continued to grow, at least until March 2020, which was the expiry date of the moratorium granted to Libya by OPEC.
Nevertheless, the specifically political level of negotiations between Libya and OPEC – which is what matters – will be mediated mainly by Saudi Arabia, notoriously pro-Haftar, and the United States, often uncritical supporter of the Tripoli regime. A complex mediation.
However, both General Haftar’s LNA and, in many ways, the various katibe linked to Tripoli’s regime – often rather loosely – are business groups – mostly illegal – and, as always happens in these cases, constitute illegal monopolies guaranteed by the monocratic exercise of power and force.
Therefore the “mafiazation” of the economy is the obvious result of a central State which is absent, substantially unlawful or perceived as such.
General Haftar has imposed his monopoly mainly on the export of scrap metal and the sale of refined oil products.
Many monopolies, ranging from food to the sale of technological materials, have been guaranteed more or less legally to Haftar’s LNA by the Tobruk House of Representatives.
The activities for controlling and managing the routes of transit and sending of sub-Saharan migrants to Italy are mostly connected to the parallel networks of Haftar’s LNA, but also to Tripoli’s networks of Zawiya and the “Al Nasr Martyrs” group, always operating in that city. But there are entire sectors of the Defence Ministry, the Libyan Coast Guard, the Police and the Interior Ministry cooperating and contributing, directly or indirectly, to the big bipolar system of illegal migrant trafficking and smuggling.
This is the second source of illegal income, after the smuggling of oil products. This is what happens when you destabilize an African coastal State, without any other project than the chatter of some French pseudo-intellectual on “human rights”.
It is the classic anti-Machiavellian paradox of modern politics. The heterogenesis of ends, as Giovanni Gentile put it.
But Haftar’s LNA, in particular, also funds itself directly with banks: Libya’s Central Bank in the East has, in fact, backed the wages and material of Haftar’s troops for three years, with the local equivalent of at least 6.7 billion U.S. dollars.
Furthermore, with a view to funding the State and its armies, both Tripoli and Benghazi used the credits granted by merchant banks – often manu militari or through corruption or political-military connections.
In 2018 alone, the government of Cyrenaica raised 7.9 billion U.S. dollars in loans, while the Tripoli area reached a budget of over 8.1 billion U.S. dollars only with loans from credit banks.
As mentioned above, this share includes the role of corruption, which is huge and even affects the officials of the anti-corruption structure in Tripoli – to the tune of millions of dollars. Obviously this applies also to the East.
With about 70,000 soldiers, Haftar’s LNA currently controls a larger territory than France, but the core of its financial operations is still the creation, on June 5, 2017, of the “Committee for Military Investment and Public Works”, led by Air Force Colonel al-Madani al-Fakhri, whose leaders immediately began to extort money from Cyrenaica’s businessmen. In the West, the various military katibe of “martyrs” shared control over all trade and productive activities, sector by sector.
Based on what can be inferred from “open” local sources, the GNA has extorted at least 5-6 billion dollars from businessmen and traders in 2020 alone.
Although Western propaganda always tends to see Haftar’s LNA as the den of all evils, the two forces are similar, as far as the illegal economy is concerned.
Furthermore, nobody knows how many counterfeit dinars were printed in Russia – possibly 4 billion, at least – with Gaddafi’s effigy, which passed through Malta, greasing many wheels.
In May 2017, during the Ramadan, the banknotes printed in Russia were distributed particularly to banks in the South and in the East.
The idea, after all, was not bad. Libyans do not trust banks, under any circumstances, even when they make withdrawals.
Hence, when it comes to paying wages and salaries, the rulers in both East and West hurry to print new money, which is easily exchanged with the banknotes probably printed in Russia.
So much so that if everyone accepts it at a lower value than the normal dinars, it becomes only a devalued currency, no longer counterfeit money.
This is fine, even better than the official dinar, for the “grey” and “black” economy.
Moreover, the financial-oil system does not directly support Haftar’s LNA, nor can it do so.
Only the state-owned National Oil Company (NOC) – which is largely answerable to the West – has the possibility to sell Libyan oil, and only the Central Bank of Tripoli can accept the related payments.
The fact is that all the military groups operating in Libya, in the East and in the West, are linked to the war economy and inextricably tied to the parallel para- or totally illegal economy.
The economic crisis, connected with the non-existence of a strong and credible central State, perpetuates the positive incentives for all those who take advantage of the State dysfunctions.
Dysfunctional and para-criminal economies are always based on three pillars: smuggling, extortion, theft of public resources and external patronage.
The latter can be of a Libyan potentate or, more often, of an “external player”: Turkey, Egypt, the Russian Federation, France, Saudi Arabia, Qatar. Obviously Italy has disappeared from the Libya, since currently its foreign policy is little less than a joke.
The operations of all these countries’ Intelligence Services are largely rewarded by the business that becomes possible for the companies linked to all external Services, if they operate in Libya. The operations of the various intelligence agencies fund themselves on their own in Libya.
I have been told that, regardless of the external player, the operations of the various Intelligence Services generate 20-25% gains, which are guaranteed by the extortion ability of the various local katibe to which the external States refer.
There is no return from a criminal economy which generates a failed state and, above all, eliminates any alternative legal option.
In Cyrenaica, there is now a monopoly of the illegal use of force by Haftar and his LNA. It shows signs of overstretching and some old allies are showing signs of disillusionment. But soldiers from Darfur, Chad and even Mauritania could soon strengthen Haftar and allow a new offensive towards Tripoli, also considering the presence of Syrian jihadists in the GNA, sent by the Turkish Intelligence Service.
In the West, there is Tripoli and hence Fajez al-Sarraj’s government, often comically praised and hailed by Westerners.
In this case, however, there is another factor of structural weakness other than the LNA: the factionalism of the various katibe and their often completely interested and always partial relationship with the government in Tripoli.
Therefore, the analytical pair with which to study the connections between Tripoli and Benghazi is Factionalism/Ovestretch. Here is the fundamental dialectic.
Again using the very useful terms of the Mafia jargon, Tripoli’s militias are a “cartel”, while in the East there is a monopoly of unlawful and illegitimate force which, however, struggles to make itself credible.
Moreover, factionalism is inherent in the Arab and, above all, Bedouin soul: “my brother and I against our cousin, my cousin, my brother and I against the stranger”.
Thinking about the Middle East with the typically Western and European idea of the Nation-State is a mistake that will lead us to far greater disasters than those caused by the Sykes-Picot agreement, narrated in an old book with the now famous title, A Peace to end all Peaces.
Distribution of local gangs and oil wells, updated to May 2020, source
Then there is the powerful “stone guest” of the Libyan economy that we must never neglect, namely China.
It should be recalled that China abstained in the UN Security Council voting authorising military intervention in Libya against Gaddafi and also criticized NATO’s decision to create a no-fly zone. It even underlined the illegality of air strikes on the legitimate forces of Gaddafi’s regime. China was right.
Even when Gaddafi was in power, China was very active in Libyan infrastructure, as Libya paid very well.
At the time of Gaddafi’s fall, China had as many as 75 companies operating in Libya, with a turnover of 18.8 billion U.S. dollars.
The workers concerned were mainly the 36,000 Chinese, but also the about 28,000 Libyan ones or even many immigrants (Egyptians, Tunisians and Algerians).
Until 2011 there were 50 Chinese projects in Libya and it should be noted that Libya alone produced 3% of all Chinese oil imports, equivalent to 150,000 barrels a day.
At the time of West’s maximum manipulation against Gaddafi, China always tried to maintain all its business connections, obviously rejecting the NATO military mission in its entirety.
Moreover, like the Russian Federation, China also rejected the theory – typically Western-style in its naivety and arrogance- of Responsibility to Protect, i.e. the universal rule – stuff for boy scouts or elegant socialites-whereby States can intervene directly and militarily in other States when the protection of “human rights” is needed.
However, who establishes and ascertains the violation of human rights? A French pseudo-philosopher, a former follower of Pol Pot, two articles in the New York Times or possibly the statements of an NGO invented at the moment (in this respect, the story of NGOs working for migrants from Libya to Syria would be very interesting) or the lamentation of some “intellectuals” who do not even know where Tripoli is on the map?
Obviously, with a view not to being relegated to play the role of the only protector of the vilain Gaddafi, China finally abstained in voting on the UN Security Council Resolution on Libya, but immediately recognized the National Transitional Council (NTC), as the only semblance of unitary Libyan government left.
ENI also recognized it, well before others, exactly two days after the start of the insurgency against the Colonel, staged only by the East and by French submarines.
As early as the beginning of June 2011, China held its first meeting with Mohammed Jibril, the Head of the NTC. A few days later, the Head of the Department for West-Asian and Middle East Affairs of the Chinese government, Chen Xiaodong, visited Benghazi very carefully.
Obviously China pursues a policy of careful neutrality between the two factions, namely the GNA and Haftar’s LNA.
Officially China supports the GNA, which – in a Memorandum of Understanding (MoU) signed in June 2018 -even accepted that Libya would be part of the Chinese Belt and Road Initiative, albeit with some obvious twists in the map.
China, however, has also excellent relations with Haftar and, above all, with the Tobruk House of Representatives.
As to the Covid-19 pandemic, which – for those who know how to use it-is an opportunity for hegemonic penetration into the so-called “third” countries, China has rapidly included Libya in its humanitarian and health aid programmes, which are currently envisaged for as many as 82 countries.
However, what is the profound logic of Libya’s political and hence economic system? Unfortunately, we always see and interpret the non-Western world through the eyes of our often idiotic, fashionable ideologies. It is the biggest mistake we can currently make.
As seen above, the fact is that Libyan institutions have always been sectarian and biased in Libya, but not less powerful for this reason.
The British Military Administration (1942-1951) built up a great deal of political-tribal mediations in Libya even equal, if not greater, than Gaddafi’s. They largely remained in place, even after the 1969 coup of the “Free Officers”, organised by the Italian intelligence services in a meeting at Abano Terme.
Then there is the Senussi monarchy, originating from an Islamic esoteric sect, not from a specific family lineage of the monarch.
The last King Idriss was ousted by the coup of the Nasserian and Third- World Socialist “Free Officers”, led at the time by Gaddafi, who had been selected for that purpose by the Italian intelligence Services, during a comfortable meeting – I still remember – at an excellent hotel in Abano Terme.
The Senussi monarchy originated from a strange esoteric organization that started from a wide Islamic heterodoxy and finally shifted to a sort of quasi-Wahabi Koranic normativism, which is not at all contradictory, as it would appear in the poor minds of Westerners, who see only the servile adaptation to Western pluralism or simple “fanaticism”, old theme of the worst and naivest18thcentury Enlightenment.
As we all know, Gaddafi’s regime began in 1969, amidst counter-coup, attacks and adverse operations by the British intelligence services, which only thanks to Italy were wrecked. Revolutionary governments, however, choose only the faithful tribes, which are such because they are paid to be so.
In the case of the Senussi, the Cyrenaica Defence Forces operated – and King Idriss boasted he had never been to Tripoli – made up of agents and employees of the British Intelligence Services. Also the People’s Social Committee of Executives had military roles. Gaddafi had no mercy, of course.
The Warfalla tribe made several unsuccessful attempts on Colonel’s life. Therefore, after the attempted coup against the Colonel in 1991 it accepted a negotiation with Gaddafi.
Nevertheless, it was precisely because of the Gaddafian Jamahiriya (1973-1979) that the Libyan economic networks became ever more informal and sometimes tribal, but paradoxically ever less controlled by the Colonel’s regime.
Exactly those networks killed him and hence ousted him from power, although the poor informal military economic networks believed in the Western promises of an economy integrated in the world market and in an opening of Libya to foreign investment.
They wanted globalisation, without too many disasters, but the West gave them a useless failed state, even for Italy.
Hence within the Great Socialist Jamahiriya of the Libyan Arab People there still were popular committees that dealt with economy and business, often very seriously – but without any coordination and control by Gaddafi’s leadership, except for the NOC.
There were GECOL (General Electricity Company of Libya), a separate committee, as well as LISCO (Libyan Iron and Steel Company), ESDEF (Economic and Social Development Fund) and ODAC (Office of Development of Administrative Complexes).
A great role was played by the free zone of the port of Misrata, and by an endless number of autonomous committees, even in the Security Services, which, however, were linked to the abstract and even scarcely “informative” structure of Jamahiriya.
Generally speaking, the network of “people’s” Committees that managed the economy reported to the General People’s Congress, but everything was obviously in the hands of Gaddafi and his most trusted aides and collaborators – who, however, did not succeed in getting the news in time or let some operations slip away, given the level of informality of the Libyan economy, already pathological at the time.
The only two organizations with some degree of autonomy were the Central Bank of Libya, established in 1956, well before Gaddafi’s coup – which, however, originated from a UN-established institution, namely the Libyan Currency Committee – and obviously the National Oil Corporation (NOC), created in 1970, immediately after Gaddafi’s coup.
There is also the Libyan Investment Fund (LIA), the Libyan Sovereign Fund that supports 15 other apparently autonomous funds or financial initiatives.
It was established in 2006. At the beginning, in the good years of oil revenues, LIA had an endowment of as many as 60 billion U.S. dollars.
Gaddafi’s son, Saif-al Islam, was actually its leader. But, after the anti-Gaddafi “revolution”, between 2005 and 2010, also the experts who seemed capable of privatizing anything arrived. Called by France, the United States, the Libyan elite itself, but not by Italy, of course.
At that juncture, given the solidity of the old informal Gaddafian economies and of those following the destruction of the Libyan State, the new Agencies of Libyan liberals arrived. Hence the Economic Development Board and the Privatization and Investment Board were established, in addition to the Public Projects Authority.
You privatize when there is capital available, otherwise to whom do you sell in a failed state where those who have money are already out of Libya?
As early as the phase in which the war between Eastern and Western Libya was starting to emerge, the local governments had to “enlist” technicians, experts, economists and business jurists to understand the intricacies of post-Gaddafi economic structures which, in any case, had developed – in their baroque and elaborate complexity – since the last years of Gaddafi’s life.
We could define Libya between Gaddafi and the two current governments as an overlap between the oil rentier States, the Socialist autocracies typical of the Third International and the chaotic and incoherent liberalization attempts that the Americans made in the old Socialist economies of the East after 1989.
This adds to the unpreparedness and factionalism of the new economic and political ruling classes that came to power after Gaddafis’ elimination.
The Colonel’s technocracy was often better than the current ones.
No economic unifying criteria were visible among the various factions that fought and then managed the 2011 insurgency, but all this remained even in the years 2013-2015, when the high oil barrel prices gave hope that fresh capital would right the wrongs of an authoritarian planning that added to the factionalism of the economy and the Stock Exchange short-sighted naivety of post-Soviet liberalisations.
Meanwhile, the mass of wages and salaries, in addition to subsidies, increases every year regardless of the amount of oil revenues.
There are therefore no quick fixes or effective solutions for a mechanism that is now so structured.
The World Bank predicts that oil rents will be 47% of GDP by the end of 2021, but wages and salaries will increase by up to 49%.
Public subsidies for oil or food will be equally high, to the tune of 10.6% of GDP, but then how will debt be refinanced?
In Tripoli – but the situation in Benghazi seems similar – the solution will be the cash advance from the Central Bank of Libya, in addition to the sale of Treasury Bonds, especially in Cyrenaica.
Future of Mid Size Business Economies & Bureaucracies of the World
The Agrarian age morphed into an industrial age over a millennia, sometime later industrial age advanced to computer age in another century, but now from cyber-age to advance into a new paper-less, cash-less, office-less and work-less age seems like an arrival in the coming days.
As if, like a revenge of The Julian Calendar, time like a tsunami drowning us in our own depths of performance, challenging our lifelong learning and exposing our critical thinking but only forcing us to fathom the pace of change, swim or drown.
Flat earth finally accepted as a sphere after a million years, but nowin the future, possibly, more like a digital cube of six parallel dimensions, a new perception of world-economic-order appears.Awaits a new horizon, where in simultaneous synchronization the digital platform economies, where borderless skills expanding boundary less commerce and productivity standards worthy of globally competitive edges. This is when transnational global public opinion selects the future of national economies driving global-age triangulating of latest new upskilling crushing old thinking and old models.
Visible primarily to the entrepreneurial mindsets, therefore such thinking always searches for collaborative assemblies of all of the various talents and skills required to mobilize national programs to advance such transformations for common good. National mobilization of entrepreneurialism expands the commonality and clarity of vision across the nation for a unified goal. Digitization creates platforms and ease of operations.
Some 200 nations are struggling for answers to the post pandemic recovery; only miniscule percentages have the critical meritocracies levels fit enough to uplift front line economic development agencies and navigate their midsize economies. The majority of nations are simply drowning in fermented bureaucracies, outdated-mindsets, fearful of change and deeply silent to face new narratives but still methodically slowing local midsize economies and strangling global growth.
The global economic damage now openly visible primarily caused by lack of digitization, absence of understanding national mobilization of entrepreneurialism on platform economies and lack of global-age skills are all creating economic havoc, therefore, with all solutions, almost free digitization and blueprints available only meritocracy will save face.
Bureaucracies leave no room to fight the climate change issues; national treasuries badly need thriving midsize business economies to fund the climate change fights. Now the growth of small medium businesses, blocked by bureaucracies across the world, with no room to fight climate change urgently needs meritocracy across governments of the world, creating global-age speed of progress to save the future. Investments on such digitalization, mobilization and transformation gaps are not necessarily impossible amounts of new funding from treasury but rather a call for political leadership with skillful execution and mastery of mobilization. What is stopping and where are the solutions?
The world economies are visibly suffering while political leaderships shy to dig deep on the root cause. The election cycles only repeated. Change postponed. Missing now are the post pandemic bold new narratives not for finger-pointing but collaborative amalgamation of talents and resources to fit the new world. No nation can do it alone.
What takes seconds in digital age processing is taking weeks and months in paper-based, floor-by-floor, rubber-stamping-approval-culture, creating chasms of digital-divides already struggling with mental divides. The magnitudes of losses of opportunity at certain geographical points are 1000 times greater than replacement costs of a brand new economic development agency.
However, de we let the trees fall in the forest, no matter how critical the tactical needs of advancements or how urgently the answers needed, each aspect calling for multilayered global scale virtual events to table solutions, here are three bold suggestions;
ONE: Forest fires always put out by creating more selected fires; study deeply, government and bureaucracy with visible skill gaps need undisturbed bureaucracy and to remain parked, while creating a far superior brand new meritocracy centric digital firefighting unit to act at the top and bring required results. The motivated and transformational talent will percolate towards the top.
TWO: Fear of exposure of talent is the number one fear of digitization. When procedures linger for decades on paper-based processing the management skills slowly end up only as a single rubber-stamp. Digitization eliminates that instantly, hence the resistance. No redundancy policy will save the day; all departments ensured staying provided upskilling and reskilling meticulously observed to create the digitization transformation.
THREE: Incentivizing all frontline management of all midsize business economic development and foreign investment attraction and export promotion bodies is a requirement of time. The world is spinning too fast and opportunity losses are extremely large, here creative entrepreneurial mindset required. Observe the power of entrepreneurial mindset in the driver seat, deploy national mobilization of midsize economies, accept upskilling as a national mandate, and digitization as national pride.
Conclusion: No need to panic, as the swing of the global pendulum on real value creation productivity, performance and profitability is the true driver of grassroots prosperity, capable enough of solving global climate change challenges and keeping the global economic order. Needed are the new bold and open narratives by the global institutions, like, UN, IFC, WTO, OECD, UNIDO, ICCWBO, Worldbank, chambers and trade groups, and major global Banks and to apply an entrepreneurial mindset criterion in dialogue to figure out applicable options. Economic development leadership across the world also has some new thinkers and visionary rising to claim their roles in this future.
The challenge is to find the right mindsets, as scratch-n-sniff policies out of old dysfunctional case studies and insecurity based academic feasibilities will only take another decade to the next pandemic. Time for action is right now, like today.
The rest is easy.
Afghan crisis: Changing geo-economics of the neighbourhood
The Taliban takeover of Afghanistan has caused a rapid reshuffle in the geo-economics of South, Central and West Asia. While the impact on the Afghan economy has been profound, triggering inflation and cash shortage, it’s bearing on Afghanistan’s near neighbourhood has wider far-reaching consequences. The US spent almost $24 billion on the economic development of Afghanistan over the course of 20 years. This together with other international aid has helped the country to more than double its per capita GDP from $900 in 2002 to $2,100 in 2020. As a major regional player, India had invested around $3 billion in numerous developmental projects spanning across all the 34 provinces of Afghanistan. Indian presence was respected and valued by the ousted Afghan dispensation. With the US, India and many other countries deciding to close their embassies in Afghanistan and the US deciding to freeze Afghanistan’s foreign reserves amounting to $9.5 billion, the economy of the country has hit a grinding halt. IMF too has declared that Kabul won’t be able to access the $370 million funding which was agreed on earlier. The emerging circumstances are ripe for China and Pakistan to cut inroads into the war-torn country as the rest of the world watches mutely.
Beijing’s major gain would be the availability of Afghanistan as a regional connector in its ambitious Belt and Road Initiative (BRI) linking the economies of Central Asia, Iran and Pakistan. Afghanistan is already a member of the BRI with the first Memorandum of Understanding signed in 2016. Only limited projects were conducted in Afghanistan under the initiative till now due to security concerns, geographic conditions and the government’s affinity towards India. Chinese officials have repeatedly expressed interest in Afghanistan joining the CPEC (China Pakistan Economic Corridor), a signature undertaking of the BRI. CPEC is a $62 billion project which would link Gwadar port in Pakistan’s Baluchistan province to China’s western Xinjiang region. The plan includes power plants, an oil pipeline, roads and railways that improves trade and connectivity in the region.
China also eyes at an estimated $1 trillion mineral deposits in Afghanistan, which includes huge reserves of lithium, a key component for electric vehicles. This mineral wealth is largely untapped due lack of proper networks and unstable security conditions long-prevalent in the country. Chinese State Councillor and Foreign Minister Wang Yi hosted Taliban representatives in late June in Tianjin to discuss reconciliation and reconstruction process in Afghanistan. Taliban reciprocated by inviting China to “play a bigger role in future reconstruction and economic development” of the country. After the fall of Kabul, China has kept its embassy open and declared it was ready for friendly relations with the Taliban. It had also announced that it would send $31 million worth of food and health supplies to Afghanistan to tide over the ongoing humanitarian crisis. Pakistan, a close ally of China, has on its part has sent supplies such as cooking oil and medicines to the Afghan authorities. Pakistan having strong historical ties with the Taliban will possibly play a crucial role in furthering Chinese ambitions..
The immediate economic fallout of the crisis for Iran is its reduced access to hard currency from Afghanistan. After the imposition of US sanctions, Afghanistan had been an important source of dollars for Iran. Reports suggest that hard currency worth $5million was being transferred to Iran daily before the Taliban takeover. Now the US has put a freeze on nearly $9.5 billion in assets belonging to Afghan Central Bank and stopped shipment of cash to the country. The shortage of hard currency is likely to affect the exchange rates in Iran subsequently building up inflationary pressure. Over the years, Afghanistan had emerged as a major destination for Iran’s non-oil exports amounting to $2billion a year. A prolonged crisis would curb demand in Afghanistan including that of Iranian goods with a likely reduction in the trade volume between the two countries. In effect, Iran would find itself increasingly isolated from foreign governments and international financial flows.
India had been the wariest regional spectator watching its $3 billion investment in Afghanistan go up in smoke. Long-standing hostility with Pakistan has prevented land-based Indian trade with Afghanistan and the Central Asian Republic’s (CAR’s). Push by India and other stakeholders for setting a common agenda for alternate connectivity appears susceptible at the moment. India has been working with Iran to develop Chabahar port in the Arabian sea and transport goods shipped from India to Afghanistan and Central Asia through the proposed Chabahar-Zahedan-Mashhad railway line. India is also working with Russia on the International North-South Transport Corridor (INSTC), a 7,200 km long multi-mode network of ship, rail and road routes for freight movement, whereby Indian goods are received at Iranian ports of Bandar Abbas and Chabahar, moves northward via rail and road through Iran and Azerbaijan and meets the Trans-Siberian rail network that will allow access to the European markets. According to the latest reports, the Taliban declined to join talks with India, Iran and Uzbekistan on Chabahar port and North-South Transport Corridor, which has cast shadow on the Indian interests in the region. India’s trade with Afghanistan had steadily increased to reach the US $1.5 billion in 2019–2020. An unfriendly administration and demand constraints may slow down the trade between the two countries.
With the US withdrawal, the CARs would find their strategic and economic autonomy curtailed and more drawn into the regional power struggle between China and Russia. While China has many infrastructure projects in Central Asia to its credit, Russia is trying to woo Central Asian countries into the Russia-led Eurasian Economic Union (EEU), though so far it was able to rope in only Kazakhstan and Kyrgyzstan. CARs would need better connectivity through Afghanistan and Iran to diversify their trade relations with Indo-Pacific nations and to have better leverage to bargain with Russia and China. Uzbekistan, the most fervent of the CARs to demand increased connectivity with South Asia, expressed its interest in joining the Chabahar project in 2020, which was duly welcomed by India. The new developments in Afghanistan would force these countries to remodel their strategies to suit the changed geopolitical realities.
The fact that Iran is getting closer to China by signing a 25-Year Comprehensive Strategic Partnership cooperation agreement in 2020 adds yet another dimension to the whole picture. India’s hesitancy to recognize or engage with the Taliban makes it unpredictable what the future holds for India-Afghan relations.
The hasty US exit has caused rapid reorientation in the geopolitical and geo-economic status-quo of the region. Most countries were unprepared to handle the swiftness of the Taliban takeover and were scrambling for options to deal with the chaos. The lone exception was China which held talks with the Taliban as early as July, 28 weeks before the fall of Kabul, to discuss the reconstruction of the war-torn country. Chinese Foreign Minister Wang Yi also took a high-profile tour to Central Asia in mid-July which extensively discussed the emerging situation in Afghanistan with Central Asian leaders. Since the West has passed the buck, it’s up to the regional players to restore the economic stability in Afghanistan and ensure safe transit routes through the country. Any instability in Afghanistan is likely to have harrowing repercussions in the neighbourhood, as well.
Turkish Economy as the Reset Button of Turkish Politics
Democracy has a robust relationship with economic growth. Barrington Moore can be seen as one of the leading scholars focusing on the relationship between political development and economic structure with his book titled “Social Origins of Dictatorship and Democracy” first published in 1966. According to Moore, there are three routes from agrarianism to the modern industrial world. In the capitalist democratic route, exemplified by England, France, and the United States, the peasantry was politically impotent or had been eradicated all together, and a strong bourgeoisie was present, and the aristocracy allied itself with the bourgeoisie or failed to oppose democratizing steps. In Moore’s book, you can find out why some countries have developed as democracies and others as dictatorships.
It can be argued that economic development facilitates democratization. Following this argument, this article is an attempt to address the Turkish case with the most recent discussions going on in the country. One of the most powerful instruments used by the political opposition today is the rhetoric of “economic crisis” that has also been supported by public opinion polls and data. For instance, the leader of İYİ Party Meral Akşener has organized lots of visits to different regions of Turkey and has been posting videos on her social media account showing the complaints mostly centering around unemployment and high inflation. According to Akşener, “Turkey’s economic woes – with inflation above 15%, high unemployment and a gaping current account deficit – left no alternative to high rates.”
Another political opposition leader, Ahmet Davutoğlu raised voice of criticism via his social media account, saying “As if monthly prices hikes on natural gas were not enough, they have introduced 15% increase on electricity costs. It is as if the government vowed to do what it can to take whatever the citizens have.”
A recent poll reveals that about 65 percent think the economic crisis and unemployment problem are Turkey’s most urgent problems. Literature on the relationship between democracy and economic well-being shows that a democratic regime becomes more fragile in countries where per capita income stagnates or declines. It is known that democracies are more powerful among the economically developed countries.
The International Center for Peace and Development summarizes the social origins of democracy in global scale as the following:
“Over the past two centuries, the rise of constitutional forms of government has been closely associated with peace, social stability and rapid socio-economic development. Democratic countries have been more successful in living peacefully with their neighbors, educating their citizens, liberating human energy and initiative for constructive purposes in society, economic growth and wealth generation.”
Turkey’s economic problems have been on the agenda for a long time. Unlike what has been claimed by the Minister of Interior Affairs Süleyman Soylu a few months ago, Turkish economy has not reached to the level which would make United States and Germany to become jealous of Turkey. Soylu had said, “You will see, as of July, our economy will take such a leap and growth in July that Germany, France, England, Italy and especially the USA, which meddles in everything, will crack and explode.”
To make a long story short, it can be said that the coronavirus pandemic has exerted a major pressure on the already fragile economy of Turkey and this leads to further frustration among the Turkish electorate. The next elections will not only determine who will shape the economic structure but will also show to what level Turkish citizens have become unhappy about the ongoing “democratic politics.” In other words, it can be said that, Turkish economy can be seen as the reset button of Turkish politics for the upcoming elections.
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