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Emerging Global Market: The Arctic on Sale

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The Arctic Region has been on a journey of geographical transformation induced by Climate Change. There has been an unprecedented percentage of what can be called as ‘Arctic metamorphosis’, witnessed as deterioration of climate twice as rapidly as in any other parts of the globe. There has been a decline in permafrost, sea ice, icesheets on ocean and glaciers in Canada, Alaska and Greenland.  There has been a notable decrease in the snow cover that earlier occupied the land. These alarming changes in the physiography were first recorded in the 1980s, and have been on a surge ever since. Around 1 million sq. miles of sea ice has shrunk over the past 50 years, halving the size of Arctic icecap. The transition has been so dramatic that it actually cut the turf to Asia, revealing the fabled North West Passage that European voyagers sought for shipping, for over centuries. As of now, it is not a matter of ‘if’ but ‘when’ will the Arctic Passageway open for regular marine transportation and when would the exploration of lucrative natural energy-resources deposits be possible.

The regressing ecosystem has been the least of the concerns of our capitalist, market-oriented, energy-hungry world economy. The melting ice caps and glaciers are paving way to access the 13% of globe’s undiscovered oil and 30% of globe’s undiscovered natural gas lying at the Arctic Ocean seabed, a home for world’s largest unexplored hydrocarbon resources. These percentages translate to 1,669 trillion cubic ft. of natural gas and 90 billion barrels of oil. The economic potential for these energy resources exceeds $2.7 trillion for Russian and American Arctic claims alone. Moreover, there are massive reserve potential for rare mineral resources also referred to as “strategic minerals” including palladium, nickel and iron-ore which might prove to be a greater economic driver than the energy resources. Apart from these, Arctic has tremendous new opportunities for high sea fisheries. The Ocean has vast stocks of marine resources including shrimp, pollock, crab, pacific salmon, squid, scallop and halibut. It would prove to be a new arena of industrial-scale commercial fisheries.

Whether the sought resources are hydrocarbon or mineral, they must procure their route via pipelines or shipping routes to the receptive markets. Along with the transitory passageways, there would be need for improved icebreakers, satellite and communication and navigation, deep water ports, double-hulled shipping vessels, operational search and aviation infrastructure development.

An even better incentive would be the inception of new sea-lanes initiated by the great Arctic melt. The shipping shortcuts of Northwest Passage and Northern Sea Route would reduce the nautical transit times by days, saving the shipping corporations thousands of miles. The sailing distance between Yokohama and Rotterdam on the Northern Route would be reduced from over 11,200 nautical miles to 6,500 nautical miles, in comparison with the current Suez Canal Route which would amount to the savings of up to 40 percent of shipping expenses. Likewise, the voyage from Rotterdam to Seattle would be trimmed by the North West Passage by over 2000 nautical miles, reducing the distance up to 25 percent in comparison with the current Panama route.

Taking into consideration the fuel costs, canal fees and various other miscellaneous charges that amount to lofty freight rates, these alternative passages will cutback the charges of a single voyage down to at least 20%, saving around $17.5 million, saving billions of dollars per annum for the shipping industry. These savings would be far greater for the megaships that have to sail all the way down to Cape Horn and Cape of Good Hope.

The world’s shipyard’s have already started building ice-capable ships, beginning with the groundwork for the navigation through these sea-lanes and for the transport of Arctic’s natural gas and oil. Billions of dollars are being invested by the private sector for the fleet of Arctic tankers. As of now, around 496 ice-class ships have been built worldwide. The gas and oil markets are investing in development of the avant-garde technology and assemblage of advanced ships, possessing double-acting tankers, that have the dual technology of steam bowing through open waters and proceed stern to smash through deep ice. These ships are capable of sailing unobstructed to Arctic’s burgeoning gas and oil fields independent of ice-breakers. These breakthroughs will turn previously unviable commercial projects into booming businesses.

Of all the Arctic States, the largest stakeholder with greatest intrinsic interests in the region is Russia. A significant 20% of Russia’s GDP comes of Russian North, and accounts for 22% of all exports. The resources of Arctic are of strategic importance for Russia; therefore, it has been so far the largest investor in the region. It has invested in the fleet of nuclear-icebreakers, the only of their kind in the world. Further, Russia is planning on increasing this fleet of 4 to 13 with a cost of over $1.5 billion. Moreover, Russia has endeavored to aim for 92.6 million ton of cargo by 2030. These hefty investments indicate the importance of Arctic as a market. Russia aims at charging for providing the sea-routes since it has the largest geographical proximity to the ocean as well as providing shipping and infrastructure in the region. The claims of oil and gas reserves are only an addition to the gains Russia has planned to make.

Considering the economic and strategic importance of Arctic and its potential to add to the world’s oil, gas, minerals, fisheries and shipping reserves makes it an alluring marketplace. The region itself has been divided among the ‘Arctic States’ that include Russia, Denmark, Iceland, Finland, Sweden, Norway, Iceland, and United States. Instead of making efforts to preserve the deteriorating environmental conditions and the physiographic challenges, these states are only in a race of dividing the resources among themselves and reaping as much assets as they can. All domains of Arctic are on sale; including the sea, land, sea-life, mineral resources, and fossil fuels. The world has turned a blind eye towards the environmental consequences for the region of the planet which will surely cost more than the gains. Putting nature’s commodities on sale have never worked in anyone’s favor.

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The first Africa-Caribbean Trade and Investment Forum Comes On 1-3 September at Barbados

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With the new dawn gradually unfolding, African financial institutions such as the African Export-Import Bank (Afreximbank) are making tremendous efforts and offering support for African leaders in consolidating Africa’s economy within the framework of the African Union Agenda 2063. They have consistently been pushing to transform agriculture as the safest approach to reduce imports and insure food security, improve industrialization and the raise the efficiency of human resource capital in Africa.

The Government of the Republic of Barbados will be hosting the first ever edition of the AfriCaribbean Trade and Investment Forum (ACTIF) which is being convened by African Export-Import Bank (Afreximbank) and Government of Barbados in collaboration with African Union Commission (AUC), African Continental Free Trade Area (AfCFTA) Secretariat, Africa Business Council, the Caribbean Community Secretariat, and Caribbean Export Development Agency. 

The African and Caribbean ties are deep rooted and based on shared history, culture, and sense of a common identity and destiny that was forged by the slave trade creating large centres of African Diaspora in the Caribbean and elsewhere. While Africa and the Caribbean have renewed their engagement, with a Heads of State and Government Summit of the Caribbean Community and Africa, held on 7 September 2021, the relationship needs to be institutionalized through deepening of trade and investment ties between the two regions.

The holding of the inaugural Africa-Caribbean Trade and Investment Forum is, therefore, a key strategic deliverable towards the institutionalisation of the reborn relationship between Africa and the Caribbean. This Forum will further consolidate the political agreement reached by Heads of State and Government of the Caribbean Community and which aims to strengthen collaboration, unity and to foster increased trade, investment and people-to-people engagement between the two regions.

It is in this context that the inaugural Africa Caribbean Trade and Investment Forum (ACTIF), has been organized to hold during 1-3 September at Bridgetown, Barbados. The Forum dubbed: AfriCaribbean Trade and Investment Forum 2022, will hold under the theme “One People, One Destiny. Uniting and Reimagining Our Future” vividly reflecting the common cultural aspirations. 

The main goal of the AfriCaribbean Trade and Investment Forum is to provide a platform for the development of strategic partnerships between the business communities in Africa and the CARICOM Region with the objective of fostering bilateral cooperation and engagement in trade, investment, technology transfer, innovation, tourism, culture and other services. The Forum will also be used as a vehicle to actively promote trade and investment opportunities among people of Africa and the Caribbean, as well as the wider diaspora which will contribute to the implementation of the African Continental Free Trade Agreement (AfCFTA) and to the Caribbean trade development agenda.

Africa leaders and its people highly appreciate the readiness of external countries, who in practical terms, engage in infrastructure development, agriculture and industry especially at the dawn of the rapid geopolitical changes possibly leading to creating a new global economic order. Noting the significance, a number of countries are simultaneously trying to understand barriers in the region and are steadily exploring ways to leverage unto the newly created AfCFTA which provides a unique and valuable platform for businesses to access an integrated African market of over 1.3 billion people in Africa.

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China’s economy showing resilience and potentials amid headwinds

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Since the beginning of this year, the increasingly complicated international environment and weakened global economic recovery, as well as sporadic but multiple local outbreak of COVID-19 pandemic caused harsh impacts on China’s economic development.

Affected by both domestic and external unfavorable factors, China’s economic performance in the second quarter was less ideal than expected, which has resulted in some negative rhetoric against China’s economy on some media. In this case, I would like to share some views on China’s economy and its prospects:

First, China’s economy managed to grow in the second quarter despite downward pressure. In the second quarter of this year, the impacts from a new round of COVID flare-ups and other unexpected factors steeply increased the downward pressure on China’s economy, and major economic indicators tumbled in April.

However, the Chinese government responded with resolute and swift actions. We put stable growth higher on the agenda, held ground against a massive stimulus, worked to front-load the policies set, and introduced and implemented a policy package for stabilizing the economy. The effects emerged immediately. In May, the decline in major economic indicators slowed.

In June, the economy stabilized and rebounded. Major indicators picked up fairly fast and returned to the positive territory. As a result, the economy registered a positive growth in the second quarter. The gross domestic product (GDP) of China in the first half year was 56,264.2 billion yuan, up by 2.5% year on year at constant prices. In terms of specific economic indicators, industrial production was steadily recovered and the total value added of industrial enterprises above designated size grew by 3.9% year on year in June which is 3.2% higher than in May. The service industry production index also increased from -5.1% to 1.3%. The total retail sales of consumer goods bounced back from -6.7% to 3.1% in June demonstrating market sales improvement and fast growth in retail sales of goods for basic living.

Exports went up by 22% which is 6.7% higher than the previous month. By ensuring supply and price stability in the market, focusing on grain and energy production, and overcoming the impacts of imported inflation, the consumer price is also generally stable and the employment improved. 

Second, China’s economy is expected to recover gradually and maintain steady growth. The risk of stagflation in the global economy is on the rise these days, thus raising the concerns of instability and uncertainty in China’s economic growth. However, China’s economy has strong resilience and great potentials and the fundamentals sustaining China’s long-term economic growth remain unchanged. With the implementation of a series of policies and measures to stabilize growth, China’s economic performance is expected to gradually improve. First, a major economy like China always has enormous resilience.

We should be aware of the considerably large scale of China’s economy and its advantages for having a solid material foundation and a huge domestic market. Second, the potentials of demand recovery are significant. Chinese government is determined to stabilize investment, accelerate the issuance and use of special-purpose bonds, speed up major projects construction, and encourage infrastructure investment. We expect to see further consumption recovery as the offline consumer services are reviving and the government policies to boost consumption are coming into effect.

Moreover, China’s foreign trade sustained great resilience. In May, China’s total import and export volume increased by 9.5% year-on-year, 9.4% higher than the previous month; and 14.3% in June, 4.8% higher than that in May. Third, there is a concrete foundation for production to rebound. Following the steady recovery of production, the industrial and supply chains have been gradually smoothed, and the promoting effects of key industries such as automobiles and electronics will further strengthen. And the service industry turned from a decline to an increase in June as the pandemic situation improved.

In addition, the promising recovery of transportation industry will also be of great help for the further production boost. Fourth, innovation will provide new momentum for economic growth. Under the pandemic, traditional industries have accelerated their transition and expansion towards digitization and intelligentization, meanwhile new industries continue to develop steadily and rapidly. Fifth, China’s macroeconomic policies are consistent and precise. The positive effects of policies such as large-scale tax refunds, issuance and use of special-purpose bonds, and increased financial support for the production will emerge, which will contribute to the steady recovery and growth of the economy.

Third, China’s economy has been deeply integrated into the global economy, and opening-up is one of China’s fundamental national policies. China cannot develop in isolation from the world, and the world also needs China for its development. Affected by factors such as the COVID-19 pandemic and the Ukraine crisis, the global industrial chain, and supply chain are disturbed. As a result, many countries are stuck in multiple crises in terms of food and energy. Rising prices have forced major economies to tighten their economic policies, and pushed the world economy into a substantial risk of stagflation. China, as the largest developing country in the world, has profound developmental potentials and can certainly provide a strong impetus for the global economic recovery.

China will deepen high-level opening-up, stay committed to free trade and fair trade, and help keep the two wheels of multilateral and regional trade cooperation running in parallel. Continued efforts will be made to foster a market-oriented, world-class business environment governed by a sound legal framework, and ensure foreign enterprises’ equal access to unlimited sectors in accordance with law in order to realize mutual benefit amid fair competition. China is ready to strengthen international cooperation against COVID-19 and willing to make its COVID control measures more targeted and well-calibrated under the premise of ensuring safety against the pandemic. We will steadily optimize the visa issuance and COVID testing policies and keep resuming and increasing international passenger flights in an orderly manner, and prudently advance overseas commerce and cross-border travel for labor services, so as to better promote personnel exchanges and China’s cooperation with the world.

In the first half of this year, the bilateral trade between China and Iran increased dramatically, consolidating China’s position as the top trading partner of Iran. We are sure that the steady recovery and growth of China’s economy will provide more opportunities for countries around the world including Iran. In the second half of this year, China will hold a number of exhibitions like the 7th China-Eurasia Expo, the 22nd China International Fair of Investment and Trade, the 132nd Canton Fair, and the 5th China International Import Expo which are great chances for Iranian merchants to learn more about China’s market and conduct cooperation with China. China will actively implement the Global Development Initiative and all countries around the world, including Iran, are welcome to benefit from China’s economic development, promote high-quality Belt and Road cooperation through greater openness and cooperation in trade, investment and other fields. In this way, we will be able to collectively build a community with a shared future for mankind.

From our partner Tehran Times

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Seventh Package of Sanctions against Russia Presents Unaccounted-for Risks

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The seventh package of the European Union sanctions against Russia in connection with the events in Ukraine will be remembered for its ban on the import of Russian gold, the expansion of export controls, as well as its list of blocked individuals and organisations. However, an important new feature hasn’t been thoroughly discussed. In Art. 9 Council Regulation EU No. 269/2014, a rule was introduced that sanctioned individuals are required to report to the competent authorities of an EU country about their assets in the jurisdiction of the European Union. The deadlines are stringent. Reports must be submitted before September 1 of this year. Those who are slapped with sanctions in the future must report within six weeks. In addition, blocked persons are obliged to cooperate with the competent authority in the verification of this information.

Let’s recall that the essence of blocking sanctions is that the assets of individuals and organisations that fall under them in the EU are frozen. In other words, they formally remain the property of such persons, but their use is forbidden. These assets may include bank accounts, real estate, capital goods, vehicles, etc. In addition, blocked persons are prohibited from providing “economic resources”. This essentially means a ban on most economic relations with them.

What is the meaning of this new feature? Most likely, the EU authorities want to facilitate the search for the assets of blocked persons. They specify that the sanctioned individuals themselves should do this “legwork.” If they refuse to comply by reporting their assets, then according to Art. 9 of the said Regulations, their actions will be regarded as circumvention of the sanctions regime. In turn, violation of the Regulations may lead to criminal liability and the confiscation of property obtained as a result of the circumvention of the sanctions. Article 15 of the Regulation obliges Member States to develop criminal prosecution measures for violation of the EU sanctions regime, as well as to take all necessary measures to confiscate the proceeds of such a violation. In other words, by failing to report their assets in the EU, blocked persons risk being sued, facing criminal charges, or losing their property.

The West has actively discussed the confiscation of the assets of blocked Russians since February 2022. Work on legal mechanisms is underway in the United States. In Canada, the forfeiture framework has been approved by the Senate.

Now that the seventh package of sanctions has been adopted, a similar mechanism is now being seen in the EU, albeit in the context of circumventing sanctions due to failure to provide information.

It is not yet clear how these rules will be applied. However, the existing legal mechanism may well be interpreted by the member countries in a way that is detrimental to the sanctioned individuals. To date, 110 legal entities and 1,229 individuals have been targeted by EU blocking sanctions over the Ukrainian issue. While not everyone has property in the EU, for others, the value of the assets may be huge, and attempts to confiscate or prosecute will inevitably cause new political tensions. For example, within the framework of the seventh package, Rossotrudnichestvo, which has a network of Russian centres of science and culture in the EU countries, was blocked. The same applies to the Russkiy Mir Foundation and its Russian Centres in the EU countries. It can be assumed that Sberbank and a number of other blocked Russian banks, enterprises and individual entrepreneurs have assets in the EU. Access to their property should be blocked by EU authorities anyway. The new rules of the seventh package also add the risks of confiscation in the event of a lack of reporting within the specified timeframe or a refusal to cooperate with the competent authorities.

The experience of the crisis concerning transit to the Kaliningrad region has shown that the authorities of individual member states can interpret EU sanctions very broadly. It cannot be ruled out that the new features of the seventh package will receive similarly broad interpretations. It is necessary to be ready for a scenario where the property of individuals and structures in the EU is confiscated, as well as their criminal prosecution in certain EU countries for violating sanctions legislation.

From our partner RIAC

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