Active US drilling rigs number 501 nationwide and output for 2024 is expected to drop just slightly to 13.12 million barrels a day. Active rigs are down significantly (610 in 2022), however, making output even more impressive considering the erratic US regulatory environment. The current administration is only planning for three oil and gas leases over the coming five years – if this holds it will be the fewest leases offered ever.

 Yet, despite record output the world at large is still highly dependent on Saudi Arabia and a handful of other OPEC nation producers. For example, should Iran be drawn into the Israel-Hamas war the country’s 3 million barrels a day would be at risk. A massive explosion at a Gaza City Hospital alone sent prices skyrocketing northward.

 Before the Israel-Hamas war, the Saudis were negotiating with Israel to increase their oil production to lower prices globally. Most analysts believe the Saudis would prefer oil in the $80 to $100 per barrel range and will continue pursuing this strategy. One-third of seaborne oil passes through the Strait of Hormuz and greater entanglement with neighboring countries would likely affect vital traffic flows.

The Exxon Mobil purchase of Pioneer Natural Resources in early October was a boost to US domestic energy production. While the merger will naturally result in increased production, the two companies would still only represent 13% of Permian Basin production. The Permian is a shale basin and features high production decline rates. This means that maintaining the status quo production rate takes significant effort and resources.     

 In late September oil prices reached $93.68 a barrel on the New York Mercantile Exchange. Meanwhile, the Brent crude BRNOO hit $96.55 a barrel, the highest since November. The Exxon move clearly communicates that the demand for fossil fuels is not abating. However, it is still unclear how Russia and Saudi Arabia would react to a potential market share grab by Exxon and Pioneer.     

The post The Middle-East Conflict is Driving US Oil Production to Record Highs appeared first on Global Trade Magazine.

The US Treasury Department, in a statement, outlined that these sanctions focused on nine individuals and one entity spread across Gaza, Sudan, Turkey, Algeria, and Qatar. These actions came in the wake of Hamas’ destructive attack on October 7, which claimed the lives of 1,400 people in Israel. In retaliation, Gaza health authorities report that more than 3,000 Palestinians have lost their lives in bombings.

Treasury Secretary Janet Yellen emphasized the urgency of these measures, stating, “The United States is taking swift and decisive action to target Hamas’s financiers and facilitators following its brutal and unconscionable massacre of Israeli civilians, including children. We will continue to take all steps necessary to deny Hamas terrorists the ability to raise and use funds to carry out atrocities and terrorize the people of Israel.”

These sanctions specifically address six individuals associated with Hamas’ covert investment portfolio, building upon earlier sanctions imposed in 2022 on officials and companies linked to this international portfolio. Notably, one of the key targets is a Gaza-based cryptocurrency business known as “Buy Cash Money and Money Transfer Company.” This firm provides services related to money transfer and virtual currency exchange, including the use of the cryptocurrency Bitcoin. According to the Treasury, this company has also been utilized by other terrorist groups for fund transfers.

Blockchain research firm Elliptic revealed that crypto wallets controlled by “Buy Cash Money and Money Transfer Company” have received more than $25 million in cryptocurrencies since 2015.

In response to these sanctions, Buy Cash stated that it is a “licensed international company” without specifying which authority granted its license. The company also disputed the claim of receiving $25 million in its wallet, attributing the discrepancy to fluctuations in Bitcoin’s value.

It’s worth noting that one of Buy Cash’s crypto wallets was among several seized by Israel’s National Bureau for Counter-Terrorist Financing in June 2021, as indicated in the Treasury’s statement.

Additionally, a group of 105 US lawmakers sent a letter to the US Treasury Department and the White House expressing their “grave concern” about Hamas and its affiliated group, Palestinian Islamic Jihad, using digital assets to fund their operations and evade US sanctions.

The post US Imposes Sanctions to Disrupt Hamas’ Funding Sources Following Deadly Attack in Israel appeared first on Global Trade Magazine.

In this changing landscape, staying informed is not just an option; it’s a necessity. To make smart decisions about your container logistics business, one must keep a close watch on events such as these and its impact on their business. 

In a world where the old rules no longer apply, knowledge truly is power.

Global Overview

Overall, we witness minimal volatility across trade routes in the month of October so far which keeps container prices stable. This also indicates that the container demand remains unchanged mostly across the key trade routes.  

As we compare the different leasing rates in October across stretches, Russia to China has the most expensive per diem charges, followed by Port Kelang in Malaysia to Moscow. The volatility in Russia is indicated in the chart (below) owing to uncertainty and risk involved in  container movement in and out of Russia.

Most Transacted Stretches 

Here we have identified five significant trade routes, based on the volume of containers exchanged along these routes in 2023. 

The chart above shows the demand hotspots for containers this October namely, China and Vietnam. The demand is coming mostly from the US. Alongside US, Moscow stands second for demand of containers. To read more about the China to Russia trade situation, here is our recently published analytical piece that narrates the current state of container excess in Russia.  

Since the demand for containers on the China to Russia stretch is strong, the leasing spot rates are the highest on our platform as compared to the other stretches.  

Shenzhen to Warsaw consistently maintains lower rates, showcasing its cost-effectiveness for shippers. Meanwhile, the Shanghai to Moscow route experiences relatively high and stable rates throughout, indicating a robust and consistent trade relationship between these two cities as well as stronger demand for containers on this route compared to others.

Intriguingly, Ho Chi Minh City to Atlanta, GA exhibits a substantial increase in rates from week 38 (18-24 September 2023) onwards. 

Vietnam’s growing importance as a supply chain destination is underscored by its strong trade ties with the US, which is now its second-largest trading partner after China, with bilateral trade reaching $79 billion in first eight months of 2023. This surge in interest from US investors in Vietnam’s green energy and semiconductor manufacturing sectors points to the substantial increase in leasing spot rates from Vietnam to the US.

In contrast, Vietnam’s emergence as a favored destination for US investors is contributing to decreasing the gap in leasing spot rates between Vietnam and China to the US, firmly positioning Vietnam as an attractive hub for investment and trade diversification. Despite being a major player in the global supply chain, China’s leasing spot rates to the US have remained relatively stable.

“In this ever-shifting trade landscape, one thing is clear: every trade route is a tale of opportunities and challenges. Black swan events like the pandemic, war in Ukraine and now the Israel- Hamas conflict remind container logistics players to rethink their container logistics strategy. Volatility has led to tangible shifts in shipping trade lanes.  While the intra-Asia trade remained stable by far, the Israel Hamas conflict gives reasons to stay cautious. China trade resurgence is going to again bring some hopes back for carriers.” Commented Christian Roeloffs, cofounder and CEO of Container xChange. 

On the Asia-Europe stretch, the inclusion of Türkiye in the India-EU trade route offers promise amidst political complexities, while Central Asia and the South Caucasus create a bridge connecting the EU and China. The flexibility of the Asia-Europe trade route, as demonstrated by MSC, showcases the necessity for adaptability in a shifting market

Christian Roeloffs added – “However, the recent Israel-Palestinian conflict serves as a stark reminder of the challenges and complexities in establishing new trade corridors. Similarly, the relationship between Pakistan and Afghanistan underscores the potential for economic cooperation in neighboring states, promising substantial rewards despite historical and political complexities.”

Asia-North America

While the turmoil in Israel has the potential to cause multifold impact, here is all about the situation in our most recent analytical piece on the israel situation  

Challenges affecting the Malacca Strait

The Malacca Strait, a crucial passage uniting the Indian and Pacific Oceans, faces growing stress due to the US-China trade rivalry. This leads to a noticeable reduction in trade volume and marks the strait as a pivotal security and economic chokepoint for Southeast Asian nations.

In an evolving Indo-Pacific landscape, China’s rise as a global player challenges the once-unipolar world. The US, a premier player, faces questions about its past engagement, notably evaluating the implications of Henry Kissinger’s influential outreach to China.

A staggering 90,000 ships annually congest the Malacca Strait, causing navigational challenges. To ensure trade reliability, calls for alternative routes and enhanced connectivity become imperative.

US trade initiatives in a global context:

The US actively seeks permanent normal trade relations with Central Asian nations through the C5+1 partnership, encompassing Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. This initiative fosters stronger ties and opens doors for new trade connections.

In a quest for bolstered economic development, energy security, and enhanced connectivity, the US scales up infrastructure investments. This effort particularly targets the Trans-Caspian trade route, known as the “Middle Corridor.”

As global commerce faces complex waters, the need for adaptation and strategic thinking becomes paramount. In the midst of geopolitical shifts and economic rivalries, nations and businesses must create opportunities amidst challenges.

Asia Europe

Türkiye’s key role in the IMEC trade route:

Türkiye’s strategic significance as a bridge between Europe and Asia takes the spotlight in the evolving India-EU trade route. Its NATO membership enhances regional security, while the country’s robust infrastructure capabilities promise to contribute significantly to the corridor’s growth. 

Challenges like political complexities and geopolitical tensions are acknowledged but outweighed by the promise of enhanced trade and geopolitical influence.

Forging a new trade connection Central Asia and South Caucasus

Amid Russia’s waning influence in the region, Central Asia and the South Caucasus draw closer, forming a potential bridge between the EU and China. Recent developments, including a roadmap for the Middle Corridor’s development, highlight the region’s commitment to facilitating trade between the two areas. Rising transshipment levels underscore their growing interdependence, shaping evolving trade dynamics between Asia and Europe.

MSC’s Adaptive Moves in Asia-North Europe Trade:

Market dynamics and shifting demands prompt changes in the Asia-North Europe trade route. The Mediterranean Shipping Company (MSC) takes proactive steps to adjust its capacity, including omitting certain sailings to align with current demand. 

This strategic move, seen as a potential industry precedent, reflects the ever-evolving nature of global trade, emphasizing the need for flexibility and efficiency in the Asia-Europe trade route.

Intra-Asia

Challenges in new trade corridors:

The Israel-Palestine conflict casts doubt on the India-Middle East-Europe Economic Corridor (IMEC), a Western rival to China’s Belt and Road initiative. IMEC relies on a stable Saudi Arabia-Israel connection through Haifa port, owned by India’s Adani group. This highlights the challenges in building long-term trade routes amid regional political complexities.

Pakistan-Afghanistan: Toward Economic Cooperation:

Pakistan and Afghanistan face geopolitical hurdles but can pivot to economic cooperation. Their trade balance has fluctuated, but both countries stand to gain from increased trade. A TDAP study identifies untapped potential in Afghanistan, exceeding $20 billion in trade value, making a compelling case for enhanced economic cooperation.

The post Trade Route Market Update appeared first on Global Trade Magazine.

“In light of recent developments in the Middle East, including the outbreak of war in Israel and its vulnerability to missile attacks and the incursion of opposing militias, the security of transporting goods through the port of Haifa has become uncertain. The transit of containers, especially hazardous materials, and the arrival of commercial vessels greatly emphasize the importance of security on this route. Such insecurity or potential terrorist attacks could lead to a shift in the transportation of goods,” said Hossein Norouz Fashkhami, a senior marketing expert from Middle East.

Shipping industry’s resilience amidst Israel-Palestine conflicts

Maersk, a major player in the industry, reassured stakeholders by announcing that its port operations across Israel’s key terminals are functioning without disruption. MSC echoed this sentiment, asserting that Israel’s major terminals are operational, enabling them to facilitate cargo delivery.

However, the maritime industry is aware of the security situation, and companies such as MSC remain vigilant, pledging to monitor the situation closely and heed government guidance. This underscores the industry’s adaptability and resilience in the face of geopolitical tensions.

The specific impact on individual ports tells a compelling story:

• Port of Ashdod: This port, situated a mere 50 kilometers from the Gaza border, operates in an ’emergency mode’ only, subject to potential missile attacks. Furthermore, restrictions on vessels carrying Hazardous Materials (“HAZMAT”) remain in effect.
• Port of Haifa: In contrast, the port of Haifa, encompassing the Haifa Bay port and Israel shipyard, continues with business as usual, undeterred by the conflict.
• Port of Ashkelon: Located just 15 kilometers from the Gaza border, the Port of Ashkelon is severely impacted, rendering it incapable of normal operations due to missile threats. Vessels can only discharge cargo while moored at sea buoys, highlighting the risk and necessity for adaptive measures.
• Port of Hadera: The port of Hadera, in comparison, carries on without disruption, maintaining its regular functions.
• Port of Eilat: The port of Eilat similarly remains operational, showcasing the industry’s commitment to ensuring the flow of maritime trade.

Beyond the ports, several global companies with a presence in Israel have been forced to adjust their operations. Chevron, the second-largest U.S. oil and gas producer, was directed by Israel’s energy ministry to shut down the Tamar natural gas field off the country’s northern coast. Adani Ports, operator of the Haifa Port, assured stakeholders of operational readiness while closely monitoring the situation and having a business continuity plan in place.

The Israel-Palestine conflict serves as a testament to the shipping and maritime industry’s ability to adapt, demonstrating that despite challenges and disruptions, trade and operations can persist, albeit with the necessary caution and vigilance.

Global trade relationships hang in the balance, with disruptions, diplomacy, and dollars at stake

Israel’s trade with China is characterized by a notable trade imbalance, with China being a major importer of Israeli goods. While Israel’s exports to China are substantial at $4.68 billion, the conflict may disrupt trade flows, particularly concerning Israel’s high-tech exports. The disruption could affect Israel’s exports and potentially hinder access to China’s vast market.

The United States is a critical trade partner for Israel, with a strong focus on exports. Israel exports goods worth $18.67 billion to the U.S., including high-tech products and defense-related items. The conflict may strain diplomatic relations between the two countries, potentially impacting Israeli exports to the U.S.

Germany is a key European trade partner for Israel. The conflict might impact Israel’s exports to Germany, valued at $1.88 billion. As Israel navigates regional instability, German imports from Israel could be affected.

India is another crucial trading partner for Israel, with $3.94 billion in Israeli exports. The conflict could have an impact on bilateral trade, potentially leading to disruptions in Israel’s exports to India.

Uncertainties surrounding ambitious trade initiatives

“The Israel-Palestinian conflict serves as a reminder of the uncertainties facing ambitious trade projects like the India-Middle East-Europe Economic Corridor (IMEC), positioned as a Western counterpart to China’s Belt and Road” said Christian Roeloffs, cofounder and CEO, Container xChange. 

IMEC, involving railways, ports, and green energy, aligns with the G7’s plans to mobilize $600 billion by 2027 for global infrastructure investments. India’s trade with Saudi Arabia has doubled in two years, reaching $53 billion in 2023, but the corridor’s true potential lies in strengthening Indian-European trade ties.

To fully realize IMEC, a reliable link between Saudi Arabia and Israel is essential. However, the ongoing regional complexities make it riskier for Saudi Crown Prince Mohammed bin Salman to normalize diplomatic relations with Israeli Prime Minister Benjamin Netanyahu.

In the near term, the Suez Canal remains the primary route for goods from India to Europe. This conflict underscores the enduring complexities of reshaping global trade and financial routes, highlighting the unpredictable nature of such endeavors.

Geopolitical conflicts and global health crises, unfortunate as they are, often lead to unintended consequences, boosting profits in specific sectors. Wars tend to inflate returns for defense contractors, while the pandemic brought substantial gains for select pharmaceutical companies. The maritime industry is not immune to these dynamics, with shipowners reaping unexpected benefits from both types of crises.

Christian Roeloffs added – “In the case of the conflict in Israel, any expansion of the hostilities beyond the country’s borders could introduce risks to two vital shipping choke points. The Suez Canal, a critical waterway for various commercial vessels, including container ships, may face disruptions. Similarly, the Strait of Hormuz, a backbone for oil and gas shipping, could be affected. However, the extent of these effects will largely depend on the conflict’s expansion and duration.”

It’s worth noting that Israel itself represents a relatively small market for container shipping, with its primary ports of Ashdod and Haifa accounting for just 0.4% of global throughput. Consequently, the threat of disruptions to container trade flow through the Mediterranean region remains limited.

Additional Information

India-Israel exports, costs, and risk management amid conflict

Key Indian exports to Israel include diesel, cut and unpolished diamonds, electronics, and telecom components like integrated circuits and photovoltaic cells. Conversely, India’s imports from Israel consist mainly of rough diamonds, fertilizers, and herbicides. This evolving trade relationship extends beyond traditional sectors, encompassing electronic machinery, high-tech products, communication systems, and medical equipment.

Higher costs for Indian exporters: The Israel-Hamas conflict has raised concerns about increased costs for Indian exporters, such as higher insurance premiums and elevated shipping expenses. These expenses stem from the heightened risk associated with shipping goods to regions experiencing geopolitical unrest.

Limited impact on trade volumes but financial strain on exporters: While the conflict may result in higher expenses for Indian exporters, the impact on trade volumes is expected to be limited unless the war escalates significantly. The primary concern is the financial burden on exporters, which may reduce their profit margins.

Risk Premiums from ECGC to Safeguard Indian Businesses: To protect Indian businesses from potential losses due to geopolitical uncertainties, India’s Export Credit Guarantee Corporation (ECGC) may introduce higher risk premiums for firms exporting to Israel. This is a standard risk management practice in regions facing increased instability.

While the Israel-Hamas conflict has the potential to increase shipping costs and insurance premiums for Indian exporters, it is essential to emphasize that the impact on trade volumes remains relatively limited at this stage. The bilateral trade relationship between India and Israel has diversified in recent years, encompassing various sectors beyond diamonds and petroleum products.

The post Israel-Palestine Conflict Set to Create Challenges in Maritime Industry while Trade Continues with Caution appeared first on Global Trade Magazine.

Influenced by the Russo-Ukraine conflict, the world of armored vehicle spending is witnessing a resurgence. Beyond the attention-grabbing main battle tanks and tracked Infantry Fighting Vehicle (IFV) programs, there is a growing focus on 8×8 wheeled armored vehicles over the next six years.

A recent report sheds light on several key findings regarding the future of the 8×8 armored vehicle market. This includes the growing importance of Rapid Strategic Mobility, the demand for armored Command and Control (C2) vehicles, and the potential for 8×8 wheeled platforms to replace medium/light tanks in African and South American markets.

According to Defense Insight’s market report, spending on 8×8 vehicle programs is projected to reach $25.6 billion between 2022 and 2035. Notably, the figures for tracked armored vehicles and main battle tanks are considerably higher, with planned investments of $62.2 billion and $84 billion, respectively.

The report identifies specific market opportunities, including a $1.8 billion forecast for Qatar in 2024/25, a $2.8 billion forecast for Greece in 2026, and a longer-term forecast for France to replace its Jaguar EBRC 6×6 and Griffon VBMR 6×6 with 8×8 wheeled vehicles by the mid-2030s.

In North America, there are targeted investments in various programs. The US Army is prioritizing the procurement of tracked vehicles while Canada is progressing with its LAV 6.0 upgrades and orders, replacing legacy M113 tracked Armored Personnel Carriers (APCs).

The report also highlights the enduring debate between tracks and wheels, particularly in the context of the Ukraine-Russia conflict. As mobility and armor become increasingly critical in land-based operations due to the emergence of loitering munitions, future large armored vehicle programs are expected to be contested between 8×8 and tracked alternatives.

Modularity is emerging as a crucial factor, offering maintenance and cost advantages. By leveraging the advantages of lower overhead costs, reduced maintenance burdens, and improved strategic mobility, the 8×8 market has the potential to compete globally with tracked IFVs and medium/light tanks.

Paramount’s Mbombe armored vehicle family is strategically positioned to meet these evolving requirements. At the forefront of armored vehicle technology, the Mbombe family offers unmatched protection levels to ensure the safety of military personnel.

According to Paramount’s spokesperson, “Paramount is not just a manufacturer; we’re evolving into a technology-driven global OEM. With our focus on IP licensing and global partnerships, we’re shaping solutions that the world is seeking today. Through our portable production concept, we’re targeting partnerships in Europe and the UK, strengthening our position as a global leader.”

Paramount’s portable production concept involves locating manufacturing activities within customer countries to produce and sustain armored vehicle fleets, promote indigenous innovation, and provide long-term support. Collaborating with industrial partners enables nations to access modular and proven options for upgrading their armored vehicle capacity.

In conclusion, the global armored vehicle market is experiencing a significant shift towards 8×8 wheeled vehicles, driven by geopolitical tensions and the need for rapid mobility and strategic agility. Paramount’s Mbombe family, along with other key players, is well-positioned to meet the evolving demands of this dynamic market.

The post Global Armored Vehicle Market Sees $25.6 Billion Surge in 8×8 Wheeled Vehicles Amidst Rising Tensions appeared first on Global Trade Magazine.

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Disappointing US harvest figures coupled with the war in Ukraine is straining the global food supply situation. Recently senior executives from Bunge, Archer Daniels Midland, Bayer, and Corteva released a collective warning that the worldwide crop supply will be tight for some time. Roughly two years of bumper crops in North and South America would be needed to ameliorate the situation.    

On September 12th the US Agriculture Department modulated its corn-production estimate by 3% from August (13.9 billion bushels). This figure sits nearly 8% below the 2021 total. In Nebraska, the Professional Farmers of America Inc., an agriculture advisory firm, slashed its corn yield outlook by 13%. North Dakota fared even worse with a 22% cut compared to 2021. The Chicago Board of Trade took notice reporting futures prices for corn soaring to 28% with wheat and soybeans following at 17% and 14% respectively. 

When supply tightens, food or otherwise, poorer countries and consumers are hit the hardest. The USDA estimates that the number of food-insecure people is up 10% from last year. This puts the overall figure just north of 1 billion people. The invasion of Ukraine has only exacerbated the situation but crop prices have abated some thanks to a grain export Russia/Ukraine agreement in July. This has enabled one million-plus tons of grain to be freed from Ukrainian silos and exported through the Black Sea. Earlier this year it was estimated Ukraine was exporting only 40% of the grain it would typically ship, but thanks to the summer deal that number has risen to 60%. Barring any reversals, by the end of the year, Ukraine could be exporting up to 85% of what it normally would. 

Much of this is dependent on Mr. Putin. Just weeks ago the Kremlin signaled they have been unhappy with the terms of the deal accusing the West of taking advantage of the exports as opposed to more wheat flowing to developing world markets. The threat alone boosted wheat prices after a period of decline. The deal will expire in late November. Global food security hinges on its extension as well as the freeing up of the storage necessary for the next cycle’s crop. 

The post Global Food Supply Outlook – Remains Tight with US Drought and Ukraine  appeared first on Global Trade Magazine.

The US is home to immense natural gas reserves and the fracking boom intensified the supply. Construction of export terminals followed to eventually chill the gas into a liquified state and set it to export. Before the Ukraine invasion, Europe had received approximately 40% of its gas from Russia. The US has already gone on record indicating they cannot replace those volumes. In the LNG world, long-term contracts are the norm. US LNG exporters already have their buyers and spare LNG is scant. Some buyers, specifically in Asia, had been willing to sell their LNG imports to Europe for a nice profit, but now that winter is approaching even in the face of an economic windfall, they are also beginning to cut supply. 

For the first half of 2022, US LNG exports averaged 11.2 billion cubic feet a day. This is 17% more than the first half of 2021. Australia and US were on track to export the most LNG in 2022 but a massive fire at a Texas LNG terminal slowed exports considerably. Yet, with the war in Ukraine showing few signs of letting up, analysts expect 2022 to be a banner year for US and Australian LNG. 

S&P Global Commodity Insights is a provider of commodities and energy information. According to a recent study, demand for LNG at a global level is expected to reach 78 billion cubic feet per day by 2030. This would be a 60% increase from 2021. The global research and consultancy group, Wood Mackenzie, revealed a similar jump in future demand. Since March, six US firms have signed on to process 39.5 million tons of LNG per annum to be shipped out of future terminals. This is a consequential 74% increase from 2021 volumes.

LNG spot prices are understandably hitting new heights. Yet, long-term supply depends on infrastructure. The promises of a transition to renewable energy that most developed countries have pledged to mean a reduction in LNG. Stateside, LNG executives point to interstate pipelines in Appalachia. A region stretching from the southern tier of New York all the way south to northern Alabama and Georgia, Appalachia is home to the country’s most prolific natural gas field. The development of pipelines is critical in ramping up LNG exports, yet many LNG exporters are in a difficult position. To secure funding investors want to see pipelines (or permits for new ones) established with the corresponding permits. Federal officials, however, are reticent to grant permits unless LNG exporters can show they have already secured funding. 

This “chicken and egg” scenario is not welcome news to Europe. On the environmental side, we’re now seeing developing nations like India and Pakistan switch back to burning coal because LNG is simply too expensive. These are problematic times for everyone.     

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Over the last decade, 40 percent of annual world trade (USD 7.6 trillion), was made up of nature dependent exports – 36 percent of which derived from non-democratic regimes, as defined by the Economist Intelligence Unit’s Democracy Index. The risks
associated with an over-dependency on non-democratic regimes, for this sector of global trade in particular, have been instantiated by the conflict in Ukraine – forcing leaders to re-assess the vulnerabilities of their current supply chains.

It is crucial that the nations that rely on non-democratic political systems for certain commodities, reconsider where they source these products from, in order to avoid similar disruptions in the future.

The commodities in danger

Natural capital, defined as the world’s stocks of natural assets, which include geology, soil, air, water and all living things, provide a wide range of services that make human life possible. For instance, nature provides both renewable (e.g. crops) and non- renewable goods (e.g. fossil fuels), which can be traded.

Annually, the global cotton trade is valued at approximately USD 269 billion. But it is not just the most valuable agricultural commodity – it is also the one most dependent on non-democratic states, with China alone accounting for 30 percent of its global trade.

The fish trade is in a similarly precarious position. It matches the meat trade in value at roughly USD 160 billion worth of annual exports, yet it is three times more dependent on non-democratic states.

As the third most dependent commodity, cereal appears at first glance to be well insulated from non-democratic governments, given that 76 percent of the trade is dependent on democratic states. However, the conflict between Russia and Ukraine has brought to light the very fragile nature of trade flows. The disruption of supply chains by just one or two states can have a huge ripple effect globally, in this case making scarce commodities that are already at record prices even more costly, with poorer countries suffering disproportionately as a result.

A system on the blink

One of the primary challenges with exporting commodities lies in the friction between short-term economic goals and longer-term environmental policies. Many of the production methods taking place in these supply chains exacerbate environmental concerns,  including land and water use, the degradation of vital ecosystems and reduced biodiversity.

The global demand for natural capital is already putting pressure on limited resources, ecosystems and biodiversity, and this is rising at an unprecedented rate. But despite this, the problems associated with natural capital and those associated with the climate, continue to be separated by governments and institutions. This division is
demonstrated by the separation of two different Conferences of the Parties (COPs): one for climate change and another for biodiversity. However, climate and nature are closely interlinked. Climate change is having an effect on crop yields but also seafood catches.

Reducing emissions by growing biofuels, rather than edible crops, raises the question of whether climate should take priority over feeding the global population. The particularly alarming issue is that the countries that are the least climate resilient are also among
the biggest exporters of nature-dependent trade.

What the future holds

The global landscape is changing, and nature-dependent trade, both imports and exports, must be re-evaluated to account for this. There must also be a greater understanding of the consequences of a reliance on non-democratic actors for certain commodities.

There are many political considerations associated with food security, and as such, policies must be formed with a longer-term view in mind and acknowledge that climate change will have an effect on future sources of natural capital. Many states have been
forced to reassess trading relationships for both renewable and non-renewable goods as a result of the conflict. In doing so, this has reinforced the interwoven relationship between natural capital, biodiversity and the climate.

This is why it is essential for governments to build trading relationships with actors who share their policies, and commit to protect, not just the profits that the land provides, but to protect the land itself.

The post War and the Collateral Damage of Nature Dependent Trade appeared first on Global Trade Magazine.

The world’s response to the Russian invasion of Ukraine was swift. Major governments and companies sought to cut ties, ending trade and commercial ties with the hopes of imperiling Mr. Putin’s advances. To some extent this worked, although recent developments have shown just how resilient and dogged Russian forces are. At this time last year, China was a major buyer of US natural gas. Fast-forward to today, and that has shifted dramatically. Post-invasion, Europe cut Russian gas imports which provided US gas providers a new clientele base. Simultaneously, China’s energy demands declined due to a slowing economy, but it also found a cheaper gas provider in Russia due to the deep discounts the Kremlin had to offer based on decreasing European demand for Russian gas. 

Digging into the numbers it’s been an astonishing turn of events. Between February and April of this year, China’s natural gas imports from the US plummeted by 95% (compared to the same period in 2021). To make up for this, imports of Russian gas grew by roughly 50%. Chinese-Russian relations have a complex history. The two powerhouses share a 2,700-mile land border and have been involved in countless skirmishes both locally but also through proxy wars abroad. Yet, most analysts agree that Russia and China are currently enjoying their best relations since the 1950s. 

In 2014 a pipeline was approved linking China with eastern Russian gas fields. Approximately 38 billion cubic meters of gas were slated to be sold annually. It’s a large number, but nothing compared to the 155 billion cubic meters that the European Union purchased from Russia just last year. China will likely learn from Europe’s stumbles not to place all their gas imports in one basket. Major European countries such as Germany were overly reliant on one supplier country (Russia), and that has not turned out well.  

The war in Ukraine has undoubtedly moved Russia and China closer. Think tanks around the globe are hashing out whether this is a good thing for global stability. If anything, having Russia supply a larger portfolio of natural gas imports than before while simultaneously receiving US imports from small suppliers is certainly advantageous for China. Producers such as Dallas-based Energy Transfer LP have just inked two Chinese buyers for 3.4 million metric tons per year. This represents 60% of the total natural gas output from Energy Transfer’s Lake Charles, Louisiana project. 

If this war has taught us anything it’s that the things all our economies require to function will continue to hold the greatest leverage.    

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