The world is going through many successive events that cause rapid and clear changes at the global economic level, starting with the Covid-19 epidemic, which has clearly negatively affected economic growth rates since 2020 and created a state of stagnation from which countries hardly recovered until the supply chain crisis began, and then The Russian-Ukrainian war of 2022 came to affect the global economy significantly in the form of high energy and food prices, thus increasing the cost of imports for energy-importing countries and obstructing their production process, and the impact of countries dependent on food imports to meet their local requirements, especially North Africa and the Middle East.
Tension escalated during the last period in relations between China and Taiwan, followed by tension in relations between China, America and the European Union due to Beijing’s position towards Moscow by not criminalizing the Russian-Ukrainian war, and how the two countries began to create a state of convergence and unification of interests and orientation to target the Middle East and North Africa in investments and promotion Products, obtaining energy sources, and reducing their need for Europe and America, as well as trying to convince many countries to exchange trade in local currencies to reduce their need for dollars.
The question that now arises is what is the American position on this rapprochement, which threatens Washington’s control over global issues and its hegemony in the Middle East and North Africa, and how this convergence will affect global food and energy prices, and the extent to which developing and Arab countries and Egypt will be affected by this rapprochement, which will support Russia’s position. to continue its war with Ukraine.
This will be explained in that report through the following points:
First: the global economic situation
Second: the economy of China and Russia, and targeting the countries of the Middle East and North Africa
Third: Sino-Russian rapprochement and the American position on it
Fourth: China-Russia rapprochement and its impact on developing countries and Egypt
First: global economic situation
The global economy witnessed a number of crises during the year 2022, beginning with the Russian-Ukrainian conflict, the strained relations between China and America, and between China and Taiwan, as these global tensions between the major countries caused global economic activity to experience a wide and noticeable slowdown in global growth during the year 2022 and high levels of inflation.
the recent forecasts of the International Monetary Fund indicate a slowdown in global growth expectations from 6% in 2021 to 3.2% in 2022 and then 2.7% in 2023, and according to forecasts, global inflation will rise from 4.7% in 2021 to 8.8% In 2022, to decline later to 6.5% in 2023, according to the Global Economic Outlook report issued by the International Monetary Fund in October 2022.
Table (1): Real GDP 2021 (annual change %) for countries of the world and forecasts for 2022-2023
Source: IMF Global Economic Outlook Report, October 2022
Fuel and food prices have skyrocketed as a result of those tensions Global growth is rapidly increasing, with the greatest impact on vulnerable populations in low-income countries and countries that depend on imports to meet their energy and food needs. However, according to the World Bank’s report on the outlook for commodity prices in October 2022, the prices of most primary commodities in dollar terms have witnessed a decline from their peak levels due to fears of an imminent global recession. Since the Russian-Ukrainian conflict in February 2022 until the end of September 2022, the price of Brent crude oil, estimated in US dollars, witnessed a decrease of about 6%. However, due to the depreciation of the currencies of many developing countries, nearly 60% of emerging market and developing oil-importing economies have seen oil prices rise in local currency terms during this period. About 90 percent of these economies also experienced a larger increase in wheat prices in local currencies than in US dollars.
Figure (1): Changes in the price of Brent crude futures contracts from January 10, 2022 to January 6, 2023 (dollars per barrel)
The figure expresses the daily fluctuation of the price of Brent crude futures contracts from January 10, 2022 to January 6, 2023, from $80 per barrel to $78 per barrel.
Figure (2): Changes in the price of crude oil futures contracts from January 10, 2022 to January 6, 2023 (dollars per barrel)
The figure expresses the daily fluctuation of the crude oil futures price from January 10, 2022 to January 6, 2023, from $77 per barrel to $73.5 per barrel.
Figure (3): Natural gas futures prices from January 10, 2022 to January 6, 2023 ($ per million units)
In this race, the previous format reflects the fluctuating price of natural gas futures per day since 10 January 2022, until 6 January 2023, moving from $4.1 per million units to $3.7 per million units.
According to the Food and Agriculture Organization, in December 2022, the average of the organization’s food price index reached 132.4 points, declining by 2.6 points (1.9%) from its level recorded in November 2022, to witness the ninth consecutive monthly decline, as it recorded 1.3 points (1%) less than its value. registered a year ago.
The decline in the index value in December 2022 is due to falling global prices of vegetable oils, along with some declines in the prices of grains and meat. However, the moderate increase in the prices of sugar and dairy products has partially offset the increase in oils. As for 2022, the average FAO food price index reached 143.7 points, which reflects an increase of 18 points (14.3%) compared to 2021.
In the latest World Trade Report issued by the United Nations Conference on Trade and Development (UNCTAD), total trade in services was expected to reach nearly $7 trillion, an increase of 15% from 2021, due to the strong growth achieved in The first half of 2022, and in this context, the second half of the same year witnessed a slowdown in trade growth as a result of deteriorating economic conditions and increased uncertainties, and trade in goods witnessed a decline of about 1% during the third quarter of 2022, compared to the second quarter of 2022.
The report predicted that global trade would reach nearly $32 trillion for the year 2022, but its growth turned negative during the second half of 2022. Geopolitical frictions, continuous inflation, and low global demand are expected to negatively affect global trade during 2023.
Second: Economic situation of China and Russia
China has recently been facing a number of internal and external challenges, which led to a decrease in expectations related to the growth of the Chinese economy, according to the International Monetary Fund’s Global Economic Outlook report, from 8.1% in 2021 to 3.2% in 2022, and China had targeted achieving a growth rate of 5.5% in the same year, but it It recently announced that the gross domestic product increased by 3.9% in the third quarter of 2022, compared to a contraction of 2.6% in the second quarter of the same year.
The challenges that the Chinese economy still faces are the zero Covid strategy, which leads to restricting Chinese economic activity, especially in light of the campaigns launched by the Chinese government on the technology sector, which have had a negative impact on investments in the field of Chinese technology, as the two companies (Alibaba) and (Tencent) lost. Until December 2022. $1 trillion of their market capitalization since October 2021. This is in addition to the United States preventing the sale of advanced electronic chips to China, so it is expected that Beijing will witness a state of continuous clash with the Western world in the coming years in economic terms, for reasons including the West’s attempt to divert the path of supply chains from China to other Asian countries that are more compatible with other countries. The West, especially in light of the political positions taken by China that are not compatible with Western opinion and America, the latest of which was the failure to denounce the Russian-Ukrainian war, in addition to the ongoing issue of Taiwan sovereignty, as well as China’s policy towards Hong Kong.
the crises of the real estate sector, where a state of resentment prevails over the Chinese middle class because of the real estate and debt crisis that befell the Chinese real estate sector, as it constitutes about 30% of the Chinese economy, in addition to the external factors related to the crisis of the conflict between Russia and Ukraine, which caused a scientific economic slowdown due to The rise in interest rates to curb the rampant inflation around the world, and the continued loss of the Chinese yuan against the US dollar.
The Chinese Customs Administration announced a decline in Chinese exports in dollars by 8.7% in November 2022, from November 2021 to $296 billion, which is the lowest level that Chinese exports have reached since April 2020 in light of the Corona epidemic crisis, and the data also showed an increase in the decline in imports also to 10.6%. , bringing China’s trade surplus to $69.8 billion in November 2022, compared to $85.15 billion in October 2022.
Figure (4): China’s exports from January 2022 to November 2022 (in billions of dollars)
Figure (5): China’s imports from January 2022 to November 2022 (in billions of dollars)
In view of all these challenges, especially the tensions with America and Western countries, China began to go to the Middle East and North Africa region, where the presence of the Arab Gulf states, and they are among the The largest oil exporters in the world, as well as Egypt being one of the largest owners of natural gas. The region is also considered attractive to investments in the recent period, in addition to being a large market for promoting Chinese products.
On the other hand, the countries of the Middle East and North Africa benefit from China in establishing investments, grants and aid to achieve economic and social development in the region, benefit from advanced Chinese expertise in the fields of industry, agriculture, technology and educational development, and import the necessary products to meet local demand due to the weak production in most countries in the region.
During the last decade, China has invested more than 150 billion dollars in the Middle East and North Africa, and the volume of trade exchange between China and the Middle East during the past ten years has exceeded 230 billion dollars, and its consumption of oil from Arab countries has increased from 0.8 million barrels in 2003 to 5.1 million barrels in 2020, and China’s oil imports from Arab countries amounted to 264 million tons in 2021, according to data from the Chinese Customs Administration.
As for the Russian economy, it faced many challenges as a result of the repercussions of the war in Ukraine and severe Western sanctions, as it depends mainly on oil and gas revenues, and directs the bulk of Russian energy exports to the European Union. The dispute between Russia and the European Union has intensified with Russia’s intransigence in supplying the European Union with the necessary energy sources.
The growth rate, according to the Global Economic Outlook report, was expected for the Russian economy to decline from 4.7% in 2021 to reach negative rates in 2022 and 2023, as it lost about $80 billion since the outbreak of the war, equivalent to a deficit in gross domestic product of 4.5% for the year 2022.
However, despite previous expectations of a decline in the growth and contraction of the Russian economy, it was nevertheless able to withstand as a result of Russia’s insistence that payments for energy, especially natural gas, be for those who buy in rubles, which contributed to the rapid collapse of the ruble.
All these challenges have made Russia increase its orientation recently towards the Middle East and North Africa region, where it began the process of targeting the establishment of interests
And expanded partnerships and investments there. Syria is Russia’s most important strategic ally in the region for more than sixty years, through which it manages an important part of its foreign and economic policy in the Middle East, as Syria represents an important base for Russian economic and military interests.
Third: Sino-Russian rapprochement and the American position
Sino-Russian relations witnessed growing development on the economic level to an increasing degree, and to a lesser extent political and military, as it began to converge in light of the increasing tension between them on the one hand and the West and America on the other.
On the economic front, a number of strategic partnership agreements and digital cooperation were signed, internal and joint infrastructure projects were launched, joint financial projects and natural gas were promoted, in addition to land and sea corridor projects such as the North Sea Corridor project.
Relations began to consolidate between the two countries in light of the energy crisis, as Russia is one of the largest exporters of natural gas and China is one of the largest importers of energy, and Beijing did not take a position of condemnation towards Russia because of its war with Ukraine, as did the West and America. The Siberian line of force project that was signed in 2014 is Between the two countries, with a total value of 400 billion dollars, one of the most important projects for exporting Russian gas to China, as it aims to supply 38 billion tons annually of Russian gas to China for a period of 30 years, according to a time frame agreed upon between the two countries.
China also imports weapons and military equipment from Russia, and recently, military deals have been signed that provide China with the latest Russian military technology systems in order to strengthen its control over the South China Sea. Here it can be said that the secret of the Sino-Russian rapprochement is the Chinese need for energy, weapons, roads and markets, and the Russian need for Chinese goods, manpower and technology. There are also other factors related to the security and stability of the common vital field that make the development of relations between them always available.
America believes that the partnership of Russia and China will affect its ability to address many international issues such as the security of East Asia and Europe, democratic flexibility, and the defense of the global financial system. The United States will face increasing challenges in all these areas in light of the worsening crisis of the Russian invasion of Ukraine, and the tensions between China, Taiwan and Hong Kong, as well as the agreement between China and Russia and the conviction of a number of countries to deal in local currencies in trade exchange، Which may threaten the value of the dollar by reducing demand for it globally in the event that countries expand on this decision, and China tends to strengthen its relations in the Middle East, the Arab countries that export oil and Russia that exports natural gas.
Fourth: China-Russia rapprochement and its impact on developing countries and Egypt
The Sino-Russian rapprochement opens the door for Russia to continue its war with Ukraine. The Middle East and the Arab countries will be among the regions of the world most affected by the continuation of the Russian-Ukrainian war due to the high food prices, especially in light of the small size of its stocks.
Also, the prolonged crisis will lead to a continued rise in energy prices, given that Russia is one of the largest energy exporters, especially in light of the gradual decrease in stocks in importing countries and thus the continued impact on production and global growth rates, as most products need energy in their production, and thus Increasing countries’ bills of energy imports, and increasing burdens on individuals.
As for the situation in Egypt, with the prolonged Russian-Ukrainian war, it will continue to be affected, like other countries, from the rise in food and energy prices, as Egypt is one of the largest importers of wheat in the world and the largest buyer of wheat, whether Russian or Ukrainian. Egypt may have been able to hold out a little at the beginning of the crisis due to the presence of a strategic stockpile, but with the continuation of the war and the tendency of the stockpile to run out, the situation will start to worsen, especially in light of the policy of liberalizing the full exchange rate and the pound continuing to lose its value against the dollar, as it recently reached 30 pounds, and thus inflation reached high rates.
The high rate of inflation will affect the purchasing power of individuals despite the fact that the Egyptian market is the most consuming and importing market, as the crisis also comes in the continuation of the decline in cash reserves and the exacerbation of the crisis of need for dollars, which affected the import process, and perhaps the only alternative to get out of that crisis is to turn to Increasing industrial and agricultural domestic production and trying to attract new and old investors to establish factories inside the country and benefit from Egypt’s production of natural gas and its oil that allows the steadfastness of the production process.