Trade
Russia and Afghanistan’s partnership of convenience
Author: Claudia Chia Yi En, NUS
The signing of a provisional deal between Russia and the Taliban in September 2022 marks the Taliban’s first known major international economic deal. But beyond the announcement that Russia will supply gas, oil and wheat to Afghanistan, the payment and pricing details have not been released to the public. How the two countries will navigate international sanctions and their exclusion from the global banking system remains unclear.
This deal comes against the backdrop of active trade talks between the Taliban and its regional neighbours and Russia’s discussions with several non-Western countries on long-term oil contracts. The economic value of Afghanistan–Russia trade relations might be dismal, but more bilateral engagements and partnerships are a positive diplomatic asset for Russia and the Taliban. They show the international community that neither country is isolated.
The Taliban has been striving to diversify its trading partners and enhance relations with its regional neighbours. International sanctions, followed by the freezing of assets by the United States, have affected Afghan businesses. Since August 2021, the economy has shrunk by 20 to 30 per cent.
The ongoing humanitarian crisis, along with an increase in violent attacks by other militant parties, has worsened living conditions. The incoming winter pressures the Taliban to hastily secure oil and gas imports. Negotiations with Iran, Kazakhstan and Turkmenistan are ongoing. In July 2022, the Afghan Ministry of Commerce and Industry signed a contract with a Turkmenistan oil company to supply fuel at a discount and inked an agreement with Iran to purchase oil.
The Taliban initially had high expectations for Chinese investment, but this has not materialised. Beijing remains reluctant to invest and harbours suspicions about the Taliban’s commitment to cut ties with the Turkistan Islamic Party, formerly known as the East Turkestan Islamic Movement. Khan Jan Alokozay, the vice president of Afghanistan’s Chamber of Commerce and Investment, publicly stated that ‘there has not even been a penny of investment by China’.
Russia is a natural choice for the Taliban because it is an existing trade partner with significant energy resources. The Taliban has remained neutral regarding the Ukraine–Russia conflict, officially calling for restraint on both sides.
Despite being bogged down in the Ukraine crisis and facing ongoing European disentanglement from its oil and gas, the Russian economy seems to be resilient against these shocks. In September 2022, the International Monetary Fund forecasted that Russia’s GDP will decline by 3.4 per cent, an adjustment from its earlier forecast of an 8.5 per cent fall.
Russian oil companies have been enticing non-Western buyers with discounts, insurance coverage and alternative payment schemes. Countries like Sri Lanka, India, Turkey and China have continued to purchase oil from Russia amid international sanctions. Cheaper prices are attractive for countries facing rising inflation, supply chain disruptions and economic setbacks due to the COVID-19 pandemic. The October 2022 clash between Saudi Arabia and Washington over plans by the OPEC+ to cut oil production also drew speculations within the US that Riyadh is siding with Moscow.
Despite their provisional trade deal, it does not appear that the Kremlin will officially recognise the Taliban. The clearest indication yet is the exclusion of the Taliban from the September 2022 Shanghai Cooperation Organisation (SCO)’s summit in Samarkand, Uzbekistan. Whether Afghanistan will retain its observer status at the SCO is unknown, given that the international community has not recognised the Taliban as the legitimate government of Afghanistan.
Aside from issuing statements on helping the Afghan economy, the summit discussions highlighted that the region is more concerned with how best to protect themselves against any potential spillover of violence from Afghanistan.
Russian President Vladimir Putin has repeatedly expressed his wariness of militants camouflaging as refugees from Afghanistan crossing into neighbouring states and plotting acts of terror. The so-called Islamic State (IS) has reportedly increased its anti-Russia propaganda. They have lambasted Russia as a ‘crusader government’ and ‘enemy of Islam’, actively encouraging their supporters to inflict harm on the country.
The 5 September suicide bombing of the Russian embassy in Kabul exemplified Russian concerns about the Islamic State of Khorasan Province…
Trade
Self-Reliance and Openness: Core Principles of China’s Third Plenary Session
The Third Plenum communique from the CCP indicates a prioritization of stability and compromise in response to China’s economic challenges. It highlights the concept of Chinese-style modernization and establishes political guidelines for balancing regulation and market forces.
The CCP’s Third Plenum communique signals a focus on stability and compromise in the face of China’s economic challenges. It emphasises Chinese-style modernisation and sets political directions for balancing regulation and market forces. While not as groundbreaking as previous plenums, it acknowledges the importance of market mechanisms and technological self-reliance, aiming to address issues like high youth unemployment and private sector uncertainty. The communique seeks to navigate the complexities of global competition and domestic innovation, potentially reshaping global supply chains and trade dynamics. Overall, it presents a pragmatic blueprint for China’s economic future.
Source : Self-reliance and openness central pillars of China’s Third Plenum | East Asia Forum
Trade
Trade Prevails Over Political Persuasions in China-Germany Relations
China and Germany maintain a strong bilateral relationship, rooted in economic cooperation despite ideological differences. Recent visits and agreements focus on expanding trade and addressing mutual concerns, navigating challenges while nurturing ties.
Evolving Bilateral Ties
China and Germany share a strong bilateral relationship, rooted in history since 1972. This connection has seen moments of cooperation intertwined with periods of tension. German Chancellor Olaf Scholz’s April 2024 visit underscores Germany’s commitment to fostering this partnership, reflecting a mutual interest in maintaining economic ties despite ideological differences.
Economic Pragmatism
As the second and third largest global economies, China and Germany’s economic interdependence is crucial. Germany emerged as China’s primary trading partner in 2023, with trade values reaching €254.4 billion (US$280 billion). In response to global scrutiny, Germany has taken a balanced approach, emphasizing economic stability over political discord. This was evident during Scholz’s prior visit in November 2022, where his diplomatic tone contrasted with broader EU sentiments.
Facing Challenges Together
Despite increasing public skepticism in Germany regarding China’s global influence and human rights issues, both nations continue to seek common ground. Their October 2023 Joint Statement highlights intentions to pursue cooperation in areas like carbon neutrality and open markets. To navigate these complex terrains, Germany can utilize its institutional frameworks to enhance dialogue, while also considering supply chain diversification to reduce dependency on China. The intertwining nature of their economies suggests that, despite challenges, both countries will continue to prioritize their substantial trade relations.
Source : Trade trumps political persuasions in China–Germany relations
Trade
Fixing fragmentation in the settlement of international trade disputes
Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.
Fragmentation in Global Trade
Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.
Challenges with WTO Dispute Settlement
The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.
The Path Forward for Global Trade
Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.
Source : Fixing fragmentation in the settlement of international trade disputes
- China’s Golden Rooster Film Festival Kicks Off in Xiamen – Thailand Business News
- Italy and China New DTA Set to Take Effect in 2025: Important Changes and Implications
- China’s New Home Prices Stabilize After 17-Month Decline Following Support Measures
- U.S. national debt is its Achilles’ heel, but China sees it as an opportunity
- Business Update: Southern Sun Reports Earnings Growth; China Stimulates Property Market – News24
- Vietnam’s Approach to China: A Balance of Cooperation and Struggle