This article provides an understanding of the interplay between geopolitics and economics, and of the impact of that dynamic global political economy.
The tests ahead are interconnected and have vast potential as economic disruptors. The trajectory of the Russia-Ukraine conflict and the Israeli war with Hamas heightens concerns about the global economy. These shocks have created uncertainty in the global political economy, weakening the world's ability to recover from COVID 19. This has generated new geopolitical tensions, exposed the fragility of the international multilateral system, and pushed the world economy closer to breakdown with major implications for the future of the international world trade.
If, for instance, China is monitoring the world's response to the Ukraine invasion, it may incentivise their own designs on Taiwan, something for which the international community is not prepared.
Therefore, the challenge for all these increasingly nervous lesser powers is not just whether they can retain a degree of policy independence, but whether they can reconcile potentially incompatible geopolitical and geo-economic goals.
What global tension means for Namibia's economy
The war between Israel and Hamas might disrupt Namibia's trade relations with Israel and affect global economic sentiment, resulting in reduced foreign direct investment and possible depreciation of the Namibia Dollar. According to the United Nations COMTRADE database on international trade, Namibian exports to Israel was US$59.82 million during 2022 while imports from Israel amounted to US$3.8 million. Namibian exports to Palestine was US$334 during 2022 while imports from Palestine was US$17.35.
It should be noted that in 2004 we had companies from Israel which have invested heavily in Namibia's diamond industry. LLD Diamonds, was given 36 concessions worth US$180 million by the Namibian government to entice them to invest in Namibia's diamond industry. As of 2005, LLD Diamonds operated in Windhoek the largest diamond polishing facility in Africa.
What Russia-Ukraine and Israel-Hamas war means for the global economy
According to various reports this violence could bring tightened sanctions against Iran, derail a possible Israel-Saudi thaw, and expand conflict across the Middle East which could send fuel prices soaring. We should understand that this unrest will further derail the global economic recovery on top of the damage done already by the conflict in eastern Europe.
The Middle East is a major hub for oil production and trade, contributing around 33% of global crude oil production. Any prolonged conflict in the region can lead to volatility in global oil prices due to concerns over supply disruptions, even if Israel and the Palestinian territories are not major oil producers themselves.
Furthermore, the exchange rate is a very important economic price mechanism that affects the desirability of our exports and the cost of imports. One must not forget that a country's foreign exchange reserves are directly linked to its currency's strength. A depletion of these reserves can result in the rapid depreciation of the local currency.
Moreover, from the scale of global relations, maintaining world peace and social stability and building good national relations are the most effective ways to defuse the negative impact of geopolitical risks on economic activities. Hence, a stable political and economic environment is essential to attract foreign investment, encourage the development of foreign trade and thus promote local economic growth.
We should strengthen political and economic cooperation, deepen friendly exchanges, jointly build a community of a shared future for humankind, and promote the common development of the global economy. We should effectively defuse geopolitical risks through proactive diplomatic strategies, promote the signing of bilateral investment agreements, improve relevant laws and regulations, and provide a sound economic and political environment.
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Hence, no single country can be fully equipped to deal with the growing social, economic, and environmental risks facing the world.
In this geopolitical context, major powers need to take a leadership role to enhance global resilience through innovative cooperation. Thus, reducing the possibility of political and economic instability and violent conflicts is essential for the wellbeing of all people. Therefore, International relations play an important part in this, provided that the international community fosters peace, given each country's support for either the Russia, Ukraine, Israeli or Palestinian side. We need vigorous diplomatic efforts to meet these challenges. To silence the guns, we must raise the voices for peace.
In conclusion, we need to do everything possible to promote peace and unity. An intensification of geopolitical tensions could potentially trigger a significant deglobalization of trade and the international economic system. The international community, particularly the powerful countries should find a way to eliminate geopolitical frictions through international cooperation, and the impact of geopolitical risks.
