Josef Kefas Sheehama
The prevailing geopolitical landscape has triggered a series of interconnected challenges with far-reaching economic repercussions. The ongoing Russia-Ukraine conflict and the Israel-Hamas conflict have cast a shadow of uncertainty over the global economy, impeding the world’s ability to recover from the COVID-19 pandemic. These crises have introduced new geopolitical tensions, exposing vulnerabilities in the international relations system and threatening the stability of the global economy. While these conflicts persist, an underlying geopolitical crisis has emerged, with potential consequences for international trade. Notably, China’s observation of the world’s response to Russia’s actions in Ukraine may serve as a blueprint for its actions regarding Taiwan. Unfortunately, the international community appears ill-prepared to handle such an eventuality, presenting a significant challenge for smaller nations to navigate their geopolitical and geoeconomic objectives effectively.
Implications for Namibia’s Economy:
The conflict between Israel and Hamas may disrupt Namibia’s trade relations with Israel, affecting global economic sentiment and potentially leading to reduced foreign direct investment and the depreciation of the Namibian Dollar. Data from the United Nations COMTRADE database highlights that in 2022, Namibia exported goods worth US$59.82 million to Israel, while imports from Israel totalled US$3.8 million. Exports to Palestine were US$334 during the same period, with imports at US$17.35. It’s important to note that in 2004, several Israeli companies made substantial investments in Namibia’s diamond industry. For instance, LLD Diamonds received 36 concessions worth US$180 million from the Namibian government to invest in the diamond sector. As of 2005, LLD Diamonds operated Africa’s largest diamond-cutting centre, contributing to Namibia’s goal of attracting foreign direct investment. The impact of war should not be underestimated, considering the loss of life, infrastructure destruction, economic consequences, violence escalation, psychological and social effects, environmental damage, and threats to global stability and security.
The Ramifications of the Russia-Ukraine and Israel-Hamas Conflicts for the Global Economy:
The conflicts have the potential to intensify sanctions against Iran, disrupt possible reconciliation between Israel and Saudi Arabia, and expand conflicts throughout the Middle East, which could significantly impact fuel prices. The ongoing unrest threatens economic recovery, particularly regarding global petroleum supplies, which have already been disrupted by Russia’s actions in Ukraine and resulting Western sanctions on Moscow’s oil exports. Many experts anticipate a spike in the short to medium term. As the Middle East accounts for approximately 33% of global crude oil production, any protracted conflict in the region may result in volatile global oil prices, even if Israel and the Palestinian territories themselves are not major oil producers. Reports suggest that crude oil prices rose by 4% on October 8, 2023, with indications pointing to further increases.
Moreover, exchange rates play a pivotal role in a country’s economic dynamics, influencing export desirability and import costs. A nation’s foreign exchange reserves are closely linked to the strength of its currency. A decline in these reserves can lead to the depreciation of the local currency, such as the Namibian Dollar, against major currencies like the US Dollar. Geopolitical uncertainties can sway investor sentiment, potentially causing reduced capital inflow into Namibia. This reduced capital inflow may exert pressure on the currency, leading to potential depreciation. Companies reliant on trade links between Russia-Ukraine and Israel-Hamas may experience disruptions, added expenses, or reduced business. Prolonged or escalated conflicts can impact global economic sentiment, investor confidence, and risk perceptions, particularly affecting businesses dependent on international trade partnerships. Therefore, countries highly reliant on export trade must prioritize political stability to encourage foreign capital infusion or develop suitable policies that assure security for transnational investors.
Maintaining world peace and social stability and fostering harmonious international relations are the most effective strategies to mitigate the negative impact of geopolitical risks on economic activities. A stable political and economic environment is pivotal for attracting foreign investment, promoting foreign trade development, and enhancing domestic economic growth. Mitigating geopolitical risks requires proactive diplomatic strategies, the creation of bilateral investment agreements, and the improvement of relevant laws and regulations to foster a conducive economic and political environment. It is essential to acknowledge that no single country is equipped to address the complex social, economic, and environmental risks confronting the world.
In this geopolitical context, major global powers must take a leadership role in enhancing global resilience through innovative cooperation. Reducing the likelihood of political and economic instability and violent conflicts is crucial for the well-being of citizens. International relations play a critical role in achieving this, provided that the international community collectively fosters peace, regardless of individual country affiliations with Russia, Ukraine, Israel, or Palestine. Robust diplomatic efforts are needed to confront these challenges. To silence the guns, the voices advocating for peace must grow louder.
In conclusion, every effort must be made to secure peace and unity. Escalating geopolitical tensions could lead to substantial deglobalization of trade and disruption of the global economic system. Therefore, it is imperative for the international community, especially powerful nations, to explore avenues for resolving geopolitical conflicts through international cooperation. Regional economic and trade organizations can play a pivotal role in addressing geopolitical risks. The impact of regional organizations can help reduce potential economic and political instability and violent conflicts, ultimately contributing to the well-being of citizens. In an increasingly interconnected world, fostering cooperation is key to achieving a more stable and prosperous future.
