Author: Claudia Chia Yi En, NUS
The signing of a provisional deal between Russia and the Taliban in September 2022 marks the Taliban’s first known major international economic deal. But beyond the announcement that Russia will supply gas, oil and wheat to Afghanistan, the payment and pricing details have not been released to the public. How the two countries will navigate international sanctions and their exclusion from the global banking system remains unclear.
This deal comes against the backdrop of active trade talks between the Taliban and its regional neighbours and Russia’s discussions with several non-Western countries on long-term oil contracts. The economic value of Afghanistan–Russia trade relations might be dismal, but more bilateral engagements and partnerships are a positive diplomatic asset for Russia and the Taliban. They show the international community that neither country is isolated.
The Taliban has been striving to diversify its trading partners and enhance relations with its regional neighbours. International sanctions, followed by the freezing of assets by the United States, have affected Afghan businesses. Since August 2021, the economy has shrunk by 20 to 30 per cent.
The ongoing humanitarian crisis, along with an increase in violent attacks by other militant parties, has worsened living conditions. The incoming winter pressures the Taliban to hastily secure oil and gas imports. Negotiations with Iran, Kazakhstan and Turkmenistan are ongoing. In July 2022, the Afghan Ministry of Commerce and Industry signed a contract with a Turkmenistan oil company to supply fuel at a discount and inked an agreement with Iran to purchase oil.
The Taliban initially had high expectations for Chinese investment, but this has not materialised. Beijing remains reluctant to invest and harbours suspicions about the Taliban’s commitment to cut ties with the Turkistan Islamic Party, formerly known as the East Turkestan Islamic Movement. Khan Jan Alokozay, the vice president of Afghanistan’s Chamber of Commerce and Investment, publicly stated that ‘there has not even been a penny of investment by China’.
Russia is a natural choice for the Taliban because it is an existing trade partner with significant energy resources. The Taliban has remained neutral regarding the Ukraine–Russia conflict, officially calling for restraint on both sides.
Despite being bogged down in the Ukraine crisis and facing ongoing European disentanglement from its oil and gas, the Russian economy seems to be resilient against these shocks. In September 2022, the International Monetary Fund forecasted that Russia’s GDP will decline by 3.4 per cent, an adjustment from its earlier forecast of an 8.5 per cent fall.
Russian oil companies have been enticing non-Western buyers with discounts, insurance coverage and alternative payment schemes. Countries like Sri Lanka, India, Turkey and China have continued to purchase oil from Russia amid international sanctions. Cheaper prices are attractive for countries facing rising inflation, supply chain disruptions and economic setbacks due to the COVID-19 pandemic. The October 2022 clash between Saudi Arabia and Washington over plans by the OPEC+ to cut oil production also drew speculations within the US that Riyadh is siding with Moscow.
Despite their provisional trade deal, it does not appear that the Kremlin will officially recognise the Taliban. The clearest indication yet is the exclusion of the Taliban from the September 2022 Shanghai Cooperation Organisation (SCO)’s summit in Samarkand, Uzbekistan. Whether Afghanistan will retain its observer status at the SCO is unknown, given that the international community has not recognised the Taliban as the legitimate government of Afghanistan.
Aside from issuing statements on helping the Afghan economy, the summit discussions highlighted that the region is more concerned with how best to protect themselves against any potential spillover of violence from Afghanistan.
Russian President Vladimir Putin has repeatedly expressed his wariness of militants camouflaging as refugees from Afghanistan crossing into neighbouring states and plotting acts of terror. The so-called Islamic State (IS) has reportedly increased its anti-Russia propaganda. They have lambasted Russia as a ‘crusader government’ and ‘enemy of Islam’, actively encouraging their supporters to inflict harm on the country.
The 5 September suicide bombing of the Russian embassy in Kabul exemplified Russian concerns about the Islamic State of Khorasan Province…
Getting Vietnam’s economic growth back on track
Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.
Vietnam’s Economic Roller Coaster
After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.
Trade Performance and Monetary Policy
Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.
Challenges and Prospects
Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.
Thailand’s post-pandemic economic recovery still trailing behind
Thailand’s economy is struggling to recover from the impact of the COVID-19 pandemic, with slow growth in GDP and GDP per capita. The government has implemented short and long-term policies to address economic challenges.
## Thailand’s Economic Slowdown
Thailand’s real GDP and GDP per capita have yet to outpace pre-pandemic figures, unlike other ASEAN countries. The Thai economy was severely affected by the pandemic, causing a slow economic recovery. The country’s large informal economy and dependence on tourism made it particularly susceptible to the impacts of the pandemic. While economic growth in 2023 was driven by activities in the travel sector, the manufacturing sector continued to contract, and merchandise exports continued to decline.
## Government’s Economic Policies
The new government’s short-term economic policies include providing a one-time digital cash payment to approximately 50 million residents, debt relief measures, and efforts to cut energy and electric train costs. Long-term economic measures consist of new free trade agreements, green industry projects, and a land bridge project. However, these measures have faced criticism from Thai economists due to significant fiscal implications and rising public debt-to-GDP ratio.
## Challenges in International Trade and Industrial Policies
Thailand’s new government is looking to boost international trade through free trade agreements. However, concerns are raised regarding the effectiveness of FTAs in driving global value chains and boosting trade. Additionally, industrial policies that emphasize domestic value added are being reconsidered in light of evidence that it runs counter to development from engaging in global value chains. The success of Thailand’s economic growth goals will depend on how supply-side constraints are addressed and resolved.
The United States and China’s complex cooperation and rivalry continue
The US-China relationship in 2023 had complex economic and technological dynamics. While trade remained substantial, there’s also intensified technological competition, as both countries seek to enhance communication and cooperation in 2024.
Economic and Technological Dynamics
The world has witnessed a complex tapestry of economic and technological dynamics between the United States and China, with 2023 marking a period of continued economic interdependence and technostrategic rivalry. Despite a nominal dip in US imports from China, bilateral trade volumes remained substantial. US exports to China totalled US$135.8 billion and imports stood at US$393.1 billion for January–November 2023.
Economic Relations and Tensions
Policymakers, cognisant of the perils inherent in economic decoupling, have started to eschew such a course. High-level meetings and initiatives offered a positive glimpse of potential bilateral relations. In contrast, the high-tech landscape in 2023 was tense. The United States reinforced its global stance against China’s ascendancy, supported by US political parties.
Moving into 2024, the US–China economic and technological relations are poised to undergo a shift, characterised by enhanced communication, selective cooperation, and balanced management of both interdependence and competition. There is a mutual understanding among senior officials of the potentially devastating repercussions associated with misunderstandings and miscalculations in the US–China relationship. 2024 is expected to witness increased economic dialogues between Beijing and Washington.
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