Global climate change opens up new opportunities for international transport networks, particularly with the trend towards glacier retreat around the North Pole.
If the trend continued, Arctic routes could be used more reliably, at least during the summer months and for longer periods of time.
The North Sea route to the Arctic coast of Russia is likely to be ice-free and would reduce sea travel between Europe and East Asia from 24,000 kilometres, using the Suez Canal, to 13,600 km, thus reducing transit time by 10-15 days.
Furthermore, the Northwest Passage through the Canadian Arctic Ocean could become usable on a regular basis within the next few years, thus reducing shipping distances significantly.
Instead, the sea voyage between East Asia and Western Europe requires to travel 24,000 kilometres, also through the Panama Canal.
The Northeast Passage is the shortest sea route from Europe to Asia. Its only disadvantage is that it is located in an icy area for a period of about six months a year and cannot be crossed. This, however, seems to be changing. Global warming is changing the rules of the game, opening up new and – in some cases – unexpected opportunities for freight transport.
The increasing use of this hitherto neglected route provides many opportunities for commercial shipping. The Arctic and subarctic sea route is also considered to be the shortest sea passage between the Pacific Ocean and the Atlantic Ocean.
Arctic routes can save much time and fuel, as well as reduce fuel waste emissions, which is particularly important in an era of fierce competition between shipping companies and of ever increasing attention paid to environmental issues and ecology.
A further advantage is that this route allows ships to circumvent areas where piracy is rampant (such as the Straits of Malacca and the Red Sea region).
There are certainly many advantages, but also a major disadvantage. The route is only used by a relatively small number of ships. There are more ships passing through the Suez Canal every day than those sailing along the route between the Barents Sea and the Bering Strait.
The reason is simple: due to frost, ships can only navigate between early July and late November. Even in this short period of time the route is complicated; Russia charges taxes for crossing the territorial waters and you need to use icebreakers to clear the way in difficult weather conditions.
This entails additional costs. Moreover, fast climate change, sudden ice formations and irregular icebergs can also cause severe problems.
Since the infrastructure in Russia’s Northern ports has been in poor condition since the collapse of the Soviet Union, emergency situations could endanger ships.
Owing to global warming, this relatively short time window for traffic would become longer in the coming decades. In the past decades, the size and thickness of the Arctic ice cap have shrunk significantly. On August 29, 2008, the Northeast and Northwest Passages were even free of ice for the first time. Since then, the ice cap has further shrunk and thinned.
For example, an Asian icebreaker conducted a research expedition from the Pacific to the North Atlantic in August 2012. It encountered less ice than expected and the return journey took less time than the outward journey.
In the future the Northeast Passage could be completely ice-free in summer. From a historical viewpoint, this region has always been considered a harsh environment and its development is an important pioneering achievement.
As early as the 12th century, the Russians set off for Eastern Siberia by navigating in sight of the coastline. In the 16th and 17th centuries, the Netherlands, Great Britain, Sweden and Denmark often tried to find another way to Asia, but they never succeeded.
It was only in 1878-79 that the Swedish explorer, Adolf Erik Nordenskiöld (1832-1901), made an expedition with the sailing ship Vega, leaving from Göteborg to the Bering Strait, sailing along the Northern coasts of the whole Eurasia and solving once and for all the problem of the Northeast Passage. Previously, in 1875 and in 1876, he had only managed to reach the mouth of the Yenisey river and was forced to come back because of ice.
Strictly speaking, however, it is not really correct to call it a success – at least from a theoretically commercial viewpoint–as the ship Vega was blocked by ice and trapped in the Bering Strait for ten months.
It was only in 1932 that the Soviet icebreaker Aleksandr Sibirjakov made his first successful passage in a single season. In the summer of 1967, that route was finally opened to the international shipping industry.
Later, before the collapse of the USSR caused a sharp drop in the volume of shipments in the Northeast Passage, nuclear-powered icebreakers cleared the route and enabled ships to transit (at the latest since 1987, 331 times).
In 2009, the Bremen transport and shipping company was the first to use that route again with two cargo ships, thus causing a sensation. According to the shipping company, the two icebreakers leaving Vladivostok at the end of summer 2009 were both class E3 – therefore suitable for sailing through the North Pole.
In September 2018, the Danish container ship Venta Maersk crossed the Northeast Passage in 37 days: It was the first container ship to do so. As it is a large container ship, its class is 1A (it can cross up to one-metre thick ice). It is specially designed with a reinforced hull for being used in cold water (minimum -25°C).
The maiden voyage of the Venta Maersk revealed a serious flaw, so it is unlikely that a large 40,000-ton container ship will sail along this route in the near future. The problem was that some parts of the route have a draught of only 11 metres, which is too low for a large container ship.
The cargo carrying capacity of the Venta Maersk is usually less than 3,600 TEU, but the shallow water means that it can only hold 600 refrigerated containers.
The construction of large container ships does not meet ice breaking standards, and is also constrained by more unfavourable factors such as length. Hence the Northeast Passage will never be comparable to the Suez Canal in terms of transport volume.
Great progress is currently being made in the construction of flexible cargo ships capable of crossing ice and cope with difficult environments without icebreakers clearing the way to them. This type of vessel can be used for certain types of goods that cannot take longer traditional routes.
Although it will take time, the global economy is expected to reap many potential benefits from shorter supply routes to production sites and sales markets in Europe and Asia.
Crossing the Arctic Ocean risks becoming a decisive factor in the fierce price war between major shipping companies.
However, environmentalists have warned against the damage caused by increased traffic. They fear that this will have a lasting negative impact on the extremely sensitive Arctic ecosystem.
Moreover, the more ships on the route, the greater the risk of severe accidents in this region rich in natural resources.
However, the world’s joint efforts to tackle global warming will put an end to such plans before then. A case in point is the expedition of the German research icebreaker Polarstern, which started on September 20, 2019 and came to an end this autumn.
The MOSAiC research (Multidisciplinary Drift Observatory for Arctic Climate Research) was conducted by the Alfred-Wegener-Institut Helmholtz-Zentrum fuer Polar und Meeresforschung.
The results of MOSAiC will contribute to a better understanding of the regional and global consequences of Arctic climate change and sea ice loss and will improve weather and climate forecasting, as well as the opportunities of exploiting this potential economic and trade route in the future.
The Economic Conundrum of Pakistan
The State Bank of Pakistan (SBP) is due to convene on 20th September 2021. The Monetary policy Committee (MPC) will be announcing its policy rate after retaining it since March 2020. As the world deals with the uncertainty of the delta variant along with the dilemma between inflation and growth, it is a plenary to watch as Pakistani policymakers would join heads to decide the stance on the economic situation. However, the decision would be a tough one. Primarily because the mixed signals could either lead to burgeoning inflation and subsequent financial deterioration or they should guide the central bank to strangulate the growth prematurely. Either way, the policymakers would have to be cautious about the degree of inclination they lean to each side of the argument – economic contraction or growth with inflation.
A poll conducted by Topline Research shows that about 65% of the financial market participants expect status quo; the MPC to maintain the policy rate at 7% to further accommodate economic growth. Pakistan has barely mustered a 4% growth rate after the contraction of 0.4% last year. In this regard, Mr. Mustafa Mustansir, head of Research at Taurus Securities, stated: Visible signs of demand-side pressure are still quite weak. In another survey conducted by Policy Research Unit (PRU): a policy advisory board of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), 84% of the market participants believe there will be no change in the policy rate. The sentiment implies that the researchers and the business community don’t expect a rate hike in this week’s policy meeting.
However, the macroeconomic indicators paint a bleak picture for Pakistan’s economy: warranting a tougher policy response. The external trade figures released by the Pakistan Bureau of Statistics (PBS) project a debilitating situation for the national exchequer. According to the data, Pakistan’s trade deficit has increased to $7.5 billion in the first two months (July-August) of the fiscal year 2021-22. The deficit stands at $4.1 billion: 120% higher than the same period last year. Due to the accommodative policies implemented by the government of Pakistan, the trade deficit has already climbed 26% up to the annual target of $28.4 billion, set in the fiscal budget 2021-22. Despite excessive subsidies, the bi-monthly exports have only grown by 28% to stand at $4.6 billion. And while it is an increase of nearly a billion dollars compared to the same months in the preceding year, the imports have more than perforated the balance of payments.
During the July-August period, the imports have grown by a whopping 73% to stand at $12.1 billion: 22% of the annualized target. What’s more worrisome is the fact that despite a free-float currency mechanism, the exports have failed to turn competitive in the global market. According to the data released by PBS, Pakistan’s exports have dropped from their previous levels for three consecutive months. And despite a 39% net currency depreciation in the past three years, the exports continue to drift sluggish around the $2 billion/month mark. Yet, the imports are accelerating beyond expectation: clocking a 95% increase last month alone. Clearly, something is not working.
Moreover, while the forex reserves with the State Bank stand at a record high of around $20 billion, the rapid depreciation in the rupee is gradually damaging the financial viability of Pakistan. According to Mettis Global, a web-based financial data and analytics portal, the rupee recently slipped to its all-time low of 168.95 against the greenback. While the currency reserves are at their peak, the rupee continues its losing streak as the State bank has refrained from intervening in the forex market to artificially buoy the currency. Primarily because the IMF program stands contingent on letting the rupee float and find equilibrium. As a result, the rupee is touted to breach the 170 rupees against the US dollar mark by next month. The bankers around Pakistan have urged the State Bank for an intervention to put an end to “abnormal volatility in spite of increased reserves.” However, an intervention seems highly unlikely as the SBP Governor, Dr. Reza Baqir, already warned regarding currency devaluation in the last policy meeting: citing supply constraints, debt repayments, and increased imports as primary reasons for the temporal slump.
Nonetheless, almost 10% of the market participants, according to the survey, expect a rate hike of 50 basis points in the policy rate to hedge against inflation. Furthermore, analysts at Topline Securities expect a hike of 25 basis points to counter “vulnerabilities in the current account and control inflationary pressures.” Regardless of the prudent beliefs in the market, however, a few players actually believe that a rate cut of 50-100 basis points is plausible in the meeting. They argue that while the Consumer Price Index (CPI) – a national inflation measure – refuses to let down, the core inflation of Pakistan has dropped perpetually down to 6.3% in August. A stratum of the business community, therefore, also believes that the policy rate should be gradually brought down to 5% to match the regional dynamics.
I somehow find this notion ironic, as the government has already doled billions of dollars in subsidies, provided lucrative loans, and slashed taxes periodically. Yet, the exports have stayed relatively redundant. While it may not be the most effective time to hike the policy rate and tighten the monetary policy, in my opinion, a cut in the policy rate would be detrimental – catastrophic for the current account and incendiary for prevailing inflation.
Global Revolution in the Crypto World: Road to Legalization
The raging popularity of virtual currencies is hardly unheard of in today’s day and age. If not by the damning crackdown in China, price swings in cryptocurrencies – especially bitcoin – are definitely deemed perpetual and inherent: unlikely to go away. And while the volatility does bring along a unique thrill to retail investors, the experienced pundits of the financial world are expectedly skeptical. Regardless of the apparent discomfort and resistance to tap into the pool of virtual currencies, policymakers across the world are aware that the future is digital. Therefore, while digital fiat seems to be the direction of most developed economies to counter the decentralized giants, the economic gurus are preparing to harness the mania on another front as well – before the craze overtakes the globe.
The first – and most popular – cryptocurrency is undoubtedly bitcoin. In the aftermath of China’s crackdown on mining activities, bitcoin lost more than half of its valuation. However, acceptance around the world in the past few weeks has helped the currency to buoy past the slump. Bitcoin currently stands at a market cap of $863.8 billion: flirting with the $46,000 mark. Naturally, the rest of the crypto world flows in tandem as fanatics have placed bets for the currency to breach the $50,000 psychological mark again in the following months. However, the rally is largely attributed to the blooming acceptance by governments around the world; something the officials were wary of to avoid risks and uncertainty. However, I still don’t understand the change of perception given the market is more volatile than ever.
Last week’s headlines were all about El Salvador and its adoption of bitcoin as a legal tender. The fiasco that followed was hardly a surprise. Though the incident bolstered the crypto critics, the event projected nothing that was a mystery before the launch. A glitch in the virtual wallet, called “Chivo Wallet,” was one of the countless impediments that had already been warranted as risky by economists around the globe. While the problem was resolved in a matter of hours, the price of bitcoin nosedived by 19% from the 4-month high of $53,000. President Nayib Bukele boasted about “buying at a dip” yet overlooked a crucial aspect from a broader perspective. He failed to realize that a minor glitch in his small nation was significant enough to send the currency spiraling; that in mere hours, billions of dollars were wiped from the global market. All because the app couldn’t appear on the designated platforms for a few hours.
What happened in El Salvador is a vital example to analyze. The resulting confusion is exactly why a passage of regulation is being placed. If the domestic and international markets are to rely upon cryptocurrencies in the near future, then the need for a detailed framework becomes even more amplified.
Recently, Ukraine became the fifth country in weeks to legalize bitcoin. However, while the Ukrainian parliament adopted a bill to legalize the cryptocurrency, regulations are put into place to handle its precarious and volatile nature. Unlike the loose move by El Salvador, Ukraine did not facilitate a rollout of bitcoin as a form of payment. Moreover, the parliament has refrained from placing bitcoin on an equal footing with Hryvnia – Ukraine’s national currency. Primarily because adding another currency prone to unprecedented and wild swings in value could prove complex in policymaking matters including drafting fiscal budgets and taxation planning. And while Kyiv is pushing to lean further into bitcoin to gain more access to global investment, the authorities are prudent. Therefore, unlike the brazen entry by El Salvador, the Ukrainian authorities are underscoring a strategy to learn about the crypto world before bitcoin is etched into Ukrainian law forever.
Meanwhile, the United States is proving rather stringent against the rise of bitcoin – and the crypto world – as nightmares of another financial crisis are caging a progressive adoption. The lawmakers are already vigilant to put braces on the market before it blooms beyond control. The Infrastructure Bill recently passed by the senate provides a hint of direction being adopted by the US legislators. The tax provision, estimated to collect $28 billion over a decade, has been placed as a regulation of the crypto market that stands at a valuation of $2 trillion. The Treasury directives are driven to mobilize the Internal Revenue Service (IRS) to tax crypto brokers while monitoring mandated reporting requirements. The goal is obvious: gradually tighten the screws before regulating the uncharted territory as any other capital market. However, the bill is purposefully vague regarding market actors deemed as brokers under the new law. Naturally, the frenzy follows as miners are left scrambling to define the meaning of a broker in an extremely complex and unorthodox market mechanism. It is clear that prominent lawmakers, like Senator Elizabeth Warren, are the main driving forces to put a leash on the emerging market.
Furthermore, the US Security and Exchange Commission (SEC) has been vocal about Treasury’s long-awaited intervention in the crypto market. Allegedly the virtual currencies have come across as a key tool for tax evasion in the United States. Therefore, much of the lobbying to amend the tax provision in the infrastructure bill is to limit the strictness of application rather than simplifying the vague terminologies. Moreover, the Treasury Department has also been active in discussing the financial stability of Stablecoin – crypto assets pegged to the US dollar and other fiat currencies. While extreme volatility is not a risk in this scenario, the Federal agencies – particularly the Financial Stability Oversight Council (FSOC) – have been keen to set tougher regulations over the market with more than $120 billion in circulation. The move has been swift since the tax provision made its way into the Senate debate. The main intent to regulate stablecoin – particularly Tether – is to harness the market, primarily because the sector acts as an unregulated money market mutual fund holding massive amounts of corporate debt. A plunge in price is enough of a spark to send ripples through the fixed income markets: posing a financial threat to the entire market. Thus, the FSOC is touted to be mobilized soon to probe and regulate the market as it continues to grow.
The crypto world has been cited by global lenders such as IMF as a haven for money laundering and tax frauds. Such tags could lead to negative credit ratings and ineligibility to gain investment and aid packages, especially when debt-ridden countries like El Salvador dabble along without any fixed legal framework. However, with broader regulation, like the steps taken by the US and Ukraine, the risk could be minimized. Another area is to initiate with experienced investors before gradually easing market restrictions for retail investors. A prime example is Germany which recently allowed institutional investors to invest as much as 20% of their holdings in bitcoin and other crypto-assets. While the portion still congregates to billions of dollars, such deft institutional investors are trained enough to manage and monitor trillions of dollars in a vast array of capital markets. Moreover, such large-scale institutional investment firms already have strict regulatory requirements and thus, by default, are bound to consciously maintain conservative holdings.
In my opinion, the crypto market is the financial future of the technological utopia we aspire to build. The smart choice, therefore, is to learn the system down to its spine. Correct the loopholes and irregularities while monitoring experienced professionals participating in an open market. Sketch and amend the legalities and a financial framework along the way. And gradually let the market settle as second nature.
CPEC: Challenges & Future Prospects
Global economy paradigm is shifting from the West to the East while China is torch bearer in this context with it’s master stroke OBOR project. The beauty of this unique project is that it provides a new trade corridor and a new route to at least 60 countries. If we make an educated guess, then about 80% of the world population would get benefit from this project. This project can be divided into “Silk Road economic belt” and Maritime silk road”. For disbursement of funds, five financial institutions are opened so that the complete burden should not fall on China. Now it has been a proven fact that the US, few Western countries and India are lobbying and conspiring against the OBOR project.
The most important project of this initiative is CPEC as it gives China access to the most important geo-strategic location of Gwadar that had always been dream of Russia and NATO for their strategic, military and economic interests in the region. The only project which gives landlocked countries access to the sea. CPEC certainly can be game changer due to its potential of creating mass industrial productivity, exports, and job creation not only for Pakistan but for entire South Asian region.
Due to various factors, there are always chances that mistrust may prevail among Pakistan and China, which can have a direct impact on Pakistan’s economy. The economy plays a fundamental role in the development and strengthening of any country, but unfortunately, Pakistan was unable to stabilize this sector for decades. As soon as the situation becomes better, another incident of unrest happens. Attacks like the Dasu hydropower plant in Khyber Pakhtunkhwa or like Serena Hotel Quetta are preplanned efforts of our enemies like India to destabilize the project. Although, it has been accepted by Chinese think tanks on various occasions that the security situation has improved in Pakistan during the recent few years.
Luckily, due to the US withdrawal from Afghanistan, Indian investment is also dying. There is no doubt that the economic stability that Pakistan will achieve after the completion of CPEC cannot be digested by an eternal enemy like India. India is intensifying its covert operations against CPEC, as its discomfort is growing day by day with the cozying Pak-China relations. Modi’s government believes that once operational, CPEC will reduce its sphere of influence in Central Asia, IIOJ&K, and Afghanistan. The terrorist network formulated in Afghanistan to create unrest in Pakistan under the garb of diplomatic activities has also been jeopardized. As CPEC passes through Gilgit-Baltistan which India claims as a disputed territory but their claim was rejected out rightly by Pakistan and China. Now India may try to reinstate its sleeper cells inside Pakistan to disrupt CPEC.
CPEC in particular offers a win-win situation for participating nations and it has a strong component of social development, poverty alleviation, and demographic uplift, unlike similar programs offered by other international donors. CPEC would not impact its balance of payments of Pakistan at any stage. The payment schedule is very relaxed. It’s about geo-economics and the establishment of a non-exploitable economic system. Another point is that CPEC is a transparent project with all its details present on its websites. The projects of CPEC are not only confined to specific areas but its network is present in the whole of Pakistan.
Although, it’s correct that Pakistan has a risky security environment, but Pakistan has taken various positive steps in this regard like raising two “Security Divisions” in Pakistan Army, incorporating special paramilitary forces, increasing intelligence apparatus, and improving local police networks.
There are eight main core areas linked with CPEC which are ‘integrated transportation system’, ‘information network infrastructure’, cooperation in ‘energy related’ fields, ‘trade and industrial parks’, ‘agricultural development and poverty alleviation, ‘tourism’, ‘social development and non-government exchanges’ and lastly ‘financial cooperation’. CPEC is now attracting other countries around the world who are also expressing their desire to join it.
In present circumstances, the CPEC projects must be completed as soon as possible so that Pakistan’s geographical location can be truly exploited. Our narrative building part is weaker in International media as India and other lobbies are floating a huge bulk of anti-CPEC stories with fake facts and figures, we have to give proper rebuttal and our side of the story must be backed with verified facts and figures. Another point to be focused on is that a prosperous Balochistan would strengthen CPEC’s foundation. This is a real game-changer and we have to engage maximum countries of the world in this project to get moral, social, and financial support.
The new AUKUS partnership comes at the cost of sidelining France, a key Indo-Pacific player
Here is my quick take on the new AUKUS security partnership announced on Wednesday (September 15), by the leaders of...
Germany and its Neo-imperial quest
In January 2021, eight months ago, when rumours about the possibility of appointment of Christian Schmidt as the High Representative...
Moderna vs. Pfizer: Two Recent Studies Show Moderna to Be The More Effective One
The first study was published by medRxiv “The Preprint Server for Health Sciences” on August 9th, and compared (on 25,589...
After 10 years of war in Syria, siege tactics still threaten civilians
The future for Syria’s people is “increasingly bleak”, UN-appointed rights experts said on Tuesday, highlighting escalating conflict in several areas...
Misjudgements in India’s Afghan policy
India’s Afghan policy has always been obsessed with the desire to deny Pakistan the “strategic depth” that Pakistan, according to...
Republic of Korea offers support for smallholder farmers in Mozambique
The Korea International Cooperation Agency (KOICA) donated US$5.7 million through the World Food Programme (WFP) for a project to support...
Global Plastic Action Partnership Making an Impact in Fighting Plastic Pollution
The Global Plastic Action Partnership (GPAP) released its second annual impact report, which highlights strides made over the last two...
Economy4 days ago
CPEC: Challenges & Future Prospects
Defense4 days ago
To include or not include? China-led SCO weighs Iranian membership
Intelligence3 days ago
Russia, Turkey and UAE: The intelligence services organize and investigate
Defense3 days ago
HTS enters Turkey’s plot against the Kurds
South Asia3 days ago
The Taliban Dilemma and Thucydides Trap
South Asia4 days ago
Qatar foreign minister, the first foreign dignitary, to visit Afghanistan
Energy News3 days ago
Indonesia’s First Pumped Storage Hydropower Plant to Support Energy Transition
Europe4 days ago
Should there be an age limit to be President?