It is common for the end of the year to warrant reflection and today we ask, is global cooperation a success or not?
In the latest round of UN Security Council voting for a ceasefire in Gaza, the motion received an overwhelming majority. However, the US vetoed the resolution. Amidst continuing fighting in Gaza, the Israeli government has also issued an ultimatum to Lebanon. The demand is for Hezbollah militants to clear the border with Israel to push them deeper into Lebanon. This comes after fighting intensified on the Lebanon-Israel border.
Another stage for global cooperation in the past week was COP28. The global narrative around the UAE event made it sound like the be all and end all of climate conferences. As COP28 comes to an end, it appears that the phaseout of fossil fuels has been left out of the draft agreement and that fossil fuel pledges will not be able to limit global warming to 1.5C after all.
So, was the conference a success or not? Perhaps time will tell how collaboration on the climate front looks. For now, fossil fuels are likely to continue to be an important part of the energy consumption market. So it is no surprise that big oil mergers continue. Occidental Petroleum has this week come to acquire CrownRock, a private company whose oil production increased significantly since 2019.
Events like this suggest that while global cooperation may be considered ideal, domestic economic and political concerns may come to trump international needs. For example, as election season approaches in India, controls on agricultural exports have tightened to control domestic supplies and prices. Global prices are expected to shoot up for essentials like onion and sugar, causing disruptions in global trade. The last time India took to controlling exports, the price of rice shot up by up to 15% globally.
Another obstacle to global trade and supply chains comes in the form of the Panama and Suez Canal crises. Panama is facing a drought, and so grain shipments are expected to be delayed until 2024. The Suez Canal is facing attacks on its cargo ships. It seems like a surprisingly tough time for consumption at the end of the year when festivities would normally have created a jump up in spending and movement of goods.
Decline in consumption also appears to be a rampant problem in China. Consumer prices fell by 0.5% in November. Experts have posited that investment in healthcare and education could be the way out of economic slump for China. However, the property sector liquidity crunch could be worth keeping an eye on for how the economy crawls out of deflation and back towards growth in 2024.
At Confluence Consultants, we routinely organize geo-political sensitization sessions to enable C-suite to understand the business impact (opportunities and risks) of global power rivalries, regional conflicts and emerging ‘Global South’ economies and partnerships. Get in touch with us on shraddha@confluenceservices.com for more information.