Silk Road Headlines_12th March, 2020

The coronavirus is impacting world regions and their economies in more ways than one. The virus has so far resulted in supply chain discontinuities and mass production shutdowns due to counter-Corona measures by manufacturers or port closures ordained by governments and port authorities. Various regions are getting affected. Middle Eastern energy exporters, such as Gulf countries, are dealing with suppressed demand for oil and gas. The non-oil sectors in this region are also suffering badly, especially after the Coronavirus in Iran went rampant. Such exporters now desperately need higher oil prices to compensate for the lackluster non-oil sectors. But the exact opposite is happening; oil prices are going dramatically down these days in the aftermath of Russian-Saudi oil price competition. Iranian society and economy is experiencing what is already one of its most punishing collective experiences in modern history, an experience that is exponentially exacerbated by American sanctions and maximum pressure policy. Iran’s main (if not only viable) trade partner, China, is busy grappling with its own epidemic situation, which means BRI projects in Iran are not going anywhere for now. Nor are, for that matter, Indian infrastructure projects in the country.

For Africa and its resource-rich countries a similar situation is arising; demand for African resources is decreasing due to port closures and decreased business and trade. Non-resource sectors are not doing well. The virus is gaining a foothold in Africa. South Africa, Nigeria, DR Congo, Egypt, and Tunisia (among others) have confirmed Corona cases. But the economic impact has already been felt in different sectors of African economies that are discussed in the Baker McKenzie report The Impact of COVID-19 on Key African Sectors, sectors such as energy and mining, manufacturing, tech, trade, infrastructure, mergers and acquisitions, insurance, and local markers. Health care systems and infrastructure in much of the continent are far from ideal and resilient. Before Corona, Africa was projected to have steady and positive economic improvements in different sectors. But now, uncertainty is back. The economic fallout of the virus for China, the report argues, can mean that Chinese attention will be diverted away from the BRI projects in Africa for a while, not too dissimilar to the Middle Eastern problem. Middle Eastern and African countries and economies are deeply interlinked with China, that is to say, any systemic health and/or economic risk for China means a similar or identical risk for those regions.

By Clingendael