Economics

[Mher]

Re: Economics

And a bad credit from a Russian lending institute means what exactly? My opinion isn't an economical one, it's a political one.

Armenia could have cheap/secure gas from Iran: Russia prevents this.

Armenia could rid itself of corruption like ENA: Russia prevents this.

If I was your financial adviser, I'd suggest you not borrow money from people who are interested in making you indentured.

$200mln "loan" for weapons?

I'm not trying to start a long discussion here, because this isn't the thread for it, but try to become a little more informed before making broad uniformed statements. I'm not a big supporter of Russia, just a realist, and a lot of what you just said is nonsense.

Armenia pays $189 for gas at the border, and the consumer pays about $391 at home/business. Here's the consumer prices paid across Europe.



Note the prices are in Euro, not Dollar. As you can see, even the lowest prices at 562 Euros, or about $600, is well above what Armenians pay. So stop this nonsense about cheap gas from Iran. Gas doesn't get any cheaper anywhere in the world than what we pay for from Russia. The Azeris sell it for much more than this to the Turks. I can't imagine there is much of a profit margin for Russia. Because a market of 3 million isn't worth the profit margin. Yes in fact Russia forced Armenia into preventing the export of Iranian gas through Armenia, but that's a different story than forcing Armenia to pay more for gas. Russia isn't stupid to try to make enemies for profit in a tiny relatively poor country.

the ENA was sold to Samvel Karapetyan, the Russian Armenian billionaire, about six weeks ago. Not that this was the benevolence of Russia. This was the work of the ElectricYerevan movement. But Russia wasn't forcing the Armenian government to stand idly by while this company was run into the ground, being administrated by local Armenians.

and borrowing from people who are determined to make you indentured? lol that's pretty much the entire point of the existence of the IMF. the Armenian government has had to borrow from multiple institutions to keep the country afloat during the regional economic crisis. Fortunately, the debt is still within a reasonable and manageable limit.

I'm not a fan of Russia, its short sighted policies, its malfunctioning government, and its economy that is a dying carcass. But Armenia's military budget is one eighth of Azerbaijans and we have the same army as them thanks to the Russian military assistance. Regardless of the foolish shortsighted decision of multiple the Armenian administrations of having sold major infrastructure assets to Russian state owed companies, Armenia would have been dependent on Russia for its survival while the Azeri oil is flowing.

But meanwhile, Armenia has gotten its fair share of benefits from the alliance with Russia.


Also a side note, that I think i should discuss. About two weeks ago I was in Gyumri and I asked a friend who lives there about their opinion on the military base and the shooting that occurred there last year. He said well, first of all I think we tend to understand to not judge an entire people based on the action of one insane person. That one eighteen year old kid shouldn't determine our feelings towards an entire people. But he said, regardless of how we feel, the entire economy of this city is based on that base. He said even though its only a few thousand soldiers, they get paid a respectable Russian income, and they spend their money here, and they account for a big percentage of the economic activity of this city. He was like half these stores would close the day that base closed, so even if we hated them we would tolerate them. Not for national security, but for our economic well being.

That was a very interesting point that I had never considered. The economic impact of that military base.

[londontsi]

Re: Economics

And a bad credit from a Russian lending institute means what exactly?

Would you lend money to somebody who did not honour his previous loan with your adversary?

My opinion isn't an economical one, it's a political one.

Smart people when doing business do not look at politics.
They look if the spirit of "My word is my bond" motto exist ( ie. honesty)

If the spirit of this motto does not exist they will close the books and leave the meeting .... exception, if you can cheat them ....

.

[HyeSocialist]

Re: Economics

Your statement on the IMF is interesting, mostly because the countries that have been indentured to the IMF are Latin American and African. The loans provided to these countries went to despots and corrupt institutions. On the opposite side of this story are countries like Taiwan, Singapore, South Korea, the Baltic, and Ireland. Although not perfect, it's pretty much a failure of the administrations of a lot of countries on how they spent their IMF loans and to foolishly agree to use those loans to support the industries of former colonial powers (agriculture, mining, cheap labor).

Armenia's electrical networks could have had the same success story as the Armenian water supply systems. It went with Russia and they continued their crony business practices. This constant association of Armenia's economy with Russia's is shortsighted and really limits the country.

Armenia threw away its Association Agreement with the EU, a much larger market with better technology and business practices, for the EEU. Now, the second and third largest members of the EEU are trying to get out. I don't think Armenia should leave the Russian camp politically, but Economically it really needs to break a lot of those chains. Like you mentioned, its a small market, Russia trying to dominate it is nonsensical and it hinders Armenia completely. Having access to Iran, the EEU, the SCO, and EU is a smarter choice for Armenia. They should push for Free Trade with the Georgians and Iranians too.

[Artashes]

Re: Economics

Post#61 by Mher
--- economics of Russian base in ---
As the USA military tries to consolidate bases throughout the country by shutting down some bases and consolidate into others, the cry from the communities that house these bases is 100% against base closer in "their" community.
5,000 troops in Gyumri base spend $10 each = $50,000 , a hundred $ spend = $500,000 , etc.
Military bases anywhere are a huge capital input for the communities they are located in.

[Haykakan]

Re: Economics

"Armenia should leave the Russian camp politically, but Economically it really needs to break a lot of those chains"
These two things are not independent of one another. You cannot have your security being guaranteed by one power and flip them the finger and do business with its adversary instead of it. You seem to overlook some basic facts in your calculations which really bring about questions regarding either your ability to be analytical or your motives.

[Artashes]

Re: Economics

--- Armenia threw away much larger markets , technology & business practice of eu ...
IMO , that is a "bait & switch" act of the west at large.
Along with all the promised roses is higher inflation , absurd prices that don't reflect reality , and the ever constraint need to make more and more outrageous sums just to be at the poverty level.
European conduct is not what Hayastan should strive for. European market is a smoke screen for the manipulative money mongers.
Don't drink that cool aid. Understand it , but don't drink.
We need to search for reality. Keeping inflation low and having prices that reflect reality is better than the fraudulent and conniving promise of the "west's gold".
Once you get the west's cancer , the only way out is major surgery or your dead.
The eu is not looking to strengthen the less fortunate of this world , but to enslave them .
The colonialists haven't changed their entent , only the style has changed.
Eu + west have stolen more and are stealing more than Russia ever did.
Who got more crooks and shame business practices ? Russia ? Or London/wall street ?

[Haykakan]

Re: Economics

The Saudis are proposing production cuts and Russia and Iran are saying fu. I think the Saudis have shot themselves in the foot by messing with the oil supply and prices. The financial squeeze is making it hard for the Saudis to wage their war on Yemen.

[Haykakan]

Re: Economics

05.12.2015 Author: F. William Engdahl



Russia’s Dollar Exit Takes Major New Step


Column: Economics

Region: USA in the World





8675444For some time both China and the Russian Federation have understood, as do other nations, that the role of the US dollar as the world’s major reserve currency is their economic Achilles Heel. So long as Washington and Wall Street control the dollar, and so long as the bulk of world trade requires dollars for settlement, central banks like those of Russia and China are forced to stockpile dollars in thge form of “safe” US Treasury debt, as currency reserves to protect their economies from the kind of currency war Russia experienced in late 2014 when the aptly-named US Treasury Office of Terrorism and Financial Intelligence and Wall Street dumped rubles amid a US-Saudi deal to collapse world oil prices. Now Russia and China are quietly heading for the dollar exit door.

Russia’s state budget strongly depends on oil export dollar profits. Ironically, because of the role of the dollar, the central banks of China, Russia, Brazil and other countries diametrically opposed to US foreign policy, are forced to buy US Treasury debt in dollars, de facto financing the wars of Washington that aim to damage them.

That’s quietly changing. In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today.

Renminbi in Russian Reserves

On November 27, Russia’s Central Bank announced that it was including the Chinese Renminbi into the central bank’s official reserves for the first time. As of December 31, 2014, official Central Bank of Russia reserves consisted of 44% US dollars, and 42% Euros with the British Pound slightly more than 9%. The decision to include Renminbi or Yuan into Russia’s official reserves will increase the use of the yuan in Russian financial markets, to the detriment of the dollar.

The yuan first began to be traded as a currency, even though it is not yet fully convertible into other currencies, in the Moscow Exchange in 2010. Since then the volume of yuan-ruble trades has grown enormously. In August, 2015 Russian currency traders and companies bought a record 18 billion yuan, about $3 billion, representing a 400% increase from a year earlier.

The Golden Ruble is coming

But the actions of Russia and China to replace the dollar as mediating currency in their mutual trade, a trade whose volume has grown significantly since US and EU sanctions in March 2014, are not the end of it.

Gold is about to make a dramatic return to the world monetary stage for the first time since Washington unilaterally ripped up the Bretton Woods Treaty in August, 1971. At that point, advised by David Rockefeller’s personal emissary in the Treasury, Paul Volcker, Niixon announced Waahinton was refusing to honor its treaty obligations to redeem the dollars held abroad for US central bank gold.

Since that time, rumors have persisted that, in fact, the gold chambers of Fort Knox are bare, a fact that, were it to be verified, would spell curtains for the dollar as reserve currency.

Washington adamantly holds to the story line that the Federal Reserve sits on 8133 tons of gold reserves. If true, that would far exceed the second-largest, Germany, whose official gold holdings are listed by the IMF at 3381 tons.

In 2014 a bizarre event transpired which fed the doubts about US official gold statistics. In 2012 the German Government asked the Federal Reserve to return German central bank gold “held in custody” for the Bundesbank by the Fed. Shocking the world, the US central bank refused to give Germany her gold back, using the flimsy excuse that the Federal Reserve “could not differentiate German gold bars from US ones…” Perhaps we are to believe the auditors of US Federal Reserve gold were laid off in the US budget cuts?

In the ensuing scandal, in 2013 the US repatriated a measly 5 tons of German gold to Frankfurt and announced it would need until 2020 to complete the requested 300 tons repatriation. Other European central banks began demanding their gold from the Fed, as distrust of the US central bank grew.

Into this dynamic the central bank of Russia has been adding to its official gold reserves in dramatic fashion in recent years. Since the growing hostility with Washington the pace has become far more rapid. From January 2013, Russia’s official gold has expanded by 129% to 1352 tons as of September 30, 2015. In 2000 at the end of the decade of US-backed plunder of the Russian Federation during the dark Yeltsin years of the 1990s Russia’s gold reserves stood at 343 tons.

The vaults of the Russian Central Bank, which at the time of the fall of the Soviet Union in 1991 held some 2,000 tons of official gold, had been stripped during the controversial tenure of Gosbank head, Viktor Gerashchenko, who told a startled Duma that he could not account for the whereabouts of the Russian gold.

Today is a different era to be sure. Russia has far and away replaced South Africa as the world’s third largest gold mining country in terms of annual tons mined. China has become number one.

Western media has made much of the fact that since US-led financial sanctions, Russian central bank reserves of dollars have fallen significantly. What they do not report is that at the same time the central bank in Russia has been buying gold, lots of gold. Russia’s total reserves in US dollars have fallen recently under sanctions by some $140 billion since 2014 parallel with the 50% collapse in dollar oil prices, but holdings of gold are up by 30% since 2014 as noted. Russia now holds as many ounces of gold as the gold exchange-traded funds (ETFs) do. In June alone, it added the equivalent of 12% of global annual gold mine production according to seekingalpha.com.

Were the Russian government to adopt the very sensible proposal of Russian economist and Putin adviser, Sergei Glazyev, namely that the Central Bank of Russia buy every single ounce of Russian mined gold at a guaranteed attractive ruble price to increase state gold holdings, that would even more avoid the Central Bank having to buy the gold on international markets for dollars.

A Bankrupt Hegemon

At the close of the 1980’s as they viewed a major US banking crisis coupled with the clear decline in the postwar role of the United States as the world’s industrial leading nation, as US multinationals out-sourced to low-wage countries like Mexico and later China, Europeans began to conceive of a new currency to replace the dollar as reserve and creation of a United States of Europe to rival US hegemony. The European response was creation of the Maastricht Treaty at the moment of the reunification of Germany in the beginning of the 1990’s. The European Central Bank and later the Euro, a severely flawed top-down construction, was the result. A suspiciously successful bet in billions by New York hedge fund speculator George Soros in 1992 against the Bank of England and the parity of the Pound, managed to knock the UK and the City of London out of the emerging EU alternative to the dollar. It was easy pickings for some of the same hedge funds to tear the Euro at the seams in 2010 by attacking its Achilles Heel, Greece, followed by Portugal, Ireland, Italy, Spain. Since then the EU, which is bound to Washington as well via the chains of NATO, has posed little threat to American hegemony.

However, increasingly since 2010, as Washington attempted to impose the Pentagon’s Full Spectrum Dominance on the world in the form of the so-called Arab Spring manipulated regime changes from Tunisia to Egypt to Libya and now, with poor results, in Syria, China and Russia have both been pushed into each others’ arms. A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed renminbi or yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America’s ability to use the reserve dollar role to finance her wars with other peoples’ money. That could just give the interests in favor of a world at peace a huge advantage over that warring lost hegemon, the United States.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.


First appeared: http://journal-neo.org/2015/12/05/ru...ajor-new-step/

[Haykakan]

Re: Economics

print

WORLD | BUSINESS

Abduction of Europa

Dmitriy SEDOV | 08.01.2016 | 00:00




The sponsors of the Transatlantic Trade and Investment Partnership agreement have been hard at work over the past year to prepare the public for the signing of TTIP next fall. This agreement promises to change the status quo of the global economy, and its consequences will be felt throughout the system of international relations.

TTIP is being drafted by the Office of the US Trade Representative and the EU’s European Commission amidst an atmosphere of secrecy that resembles more a backroom deal than a discussion of the principles of free trade. The general public must still make do with either brief and not very illuminating statements from «authorized agencies» or else leaks published in the media. Only in February 2015 were a few crumbs of information about the planned agreement posted on the European Commission’s website.

There is possibly no other topic in Europe today that has been the subject of such an intense publicity battle or so completely shrouded in disinformation.





More than three years have passed since work began on the TTIP project, and during that time many secrets have been revealed. The following picture emerges. Forty-six percent of the world’s GDP would pass through this transatlantic free-trade zone. Allegedly the future agreement aims at «removing customs duties on goods and restrictions on services, gaining better access to public markets, and making it easier to invest».

For the EU, the future agreement will open up the US market for state purchases, while maintaining both the ban on imports of genetically modified organisms (GMOs) and hormone-treated beef, as well as the recognition of geographical indications on foodstuffs.

For the United States, TTIP will offer freer access to Europe for American agricultural products, the tariff-free export of motor vehicles, and the preservation of the ban on hiring foreign contractors in many industries, such as shipping.

However, this cursory description of the contents of TTIP was upended by a leak from Brussels in March 2014, when Germany’s Die Zeit published seven chapters of the agreement that had been obtained secretly, and which indicate, for example, that Article 14 of the future document contains rules that prohibit governments from engaging in «nationalization or expropriation... except: (a) for a public purpose; (b) under due process of law; (c) in a non-discriminatory manner; and (d) against payment of prompt, adequate and effective compensation». That is an explicit restriction of the economic sovereignty of a nation state.

And if the leader of a state still decides to pursue nationalization, Article 14 (2) requires that compensation be paid for «the fair market value... plus interest at a commercial rate». It’s safe to say you don’t want to nationalize.

But that’s not all. What are known as «Investor-State dispute settlement provisions» have been drawn up and are intended to further restrict a state’s sphere of competence in the economy. In December 2013, more than 200 environmentalists, trade unionists, and public consumer-protection organizations on both sides of the Atlantic sent a letter to the USTR – Office of the US Trade Representative – and to the European Commission with a demand to eliminate this provision from the trade talks, as it is a «a one-way street by which corporations can challenge government policies, but neither governments nor individuals are granted any comparable rights to hold corporations accountable».

Nick Dearden, the director of Global Justice Now, spoke out against the agreement, backed by extensive analytical material. He pointed out that «[a]ll of these agreements are being negotiated secretly, with hundreds of corporate lobbyists given special access to the process. All of them will erode democracy... and enforce corporate power through parallel legal systems that make states accountable to corporations rather than vice versa».

Martti Koskenniemi, a professor of international law at the University of Helsinki, has also noted that the plans to include a strategy to protect foreign capital in the agreement jeopardize the sovereignty of states that have signed this agreement and placed their trust in a small circle of lawyers who are sitting in foreign arbitration courts, and it also grants unprecedented power to interpret and revoke the legislative acts of the signatories.

No less discriminatory are the regulations governing the nation states’ financial activities. For example, TTIP will limit the right of governments to adopt regulatory laws or to oversee insurance and banking.

Dean Baker, the co-director of the Center for Economic and Policy Research (CEPR), claims that «The most important fact to know about the Transatlantic Trade and Investment Partnership (TTIP) is that promoting trade is not really the purpose of the deal... [T]rade barriers... between the United States and European Union (EU) are already low... The deal is about imposing a regulatory structure... that likely would not be approved through the normal political processes in each country. The rules that will be put in place as a result of the deal are likely to be more friendly to corporations and less friendly to the environment and consumers than current rules».

The primary beneficiary of the impending transatlantic agreement will be US corporations, which – due to lower costs of production – will be able to launch a massive attack on the newly unprotected EU market and fully subjugate it. In early 2015, Deutsche Wirtschafts Nachrichten published some calculations by the American economist Jeronim Capaldo regarding the consequences of TTIP for the EU. According to his estimates, the agreement will lead to declines in European net exports in the first decade. This will result in a decrease in earned income. France will be the biggest loser, where there will be a drop of 5,500 euros per year per employee, while Northern Europe will suffer a loss of 4,800 euros, the UK – 4,200 euros, and Germany – 3,400 euros. Overall, the EU will forfeit 600,000 jobs and a large number of small farms, while also seeing an increase in its state budget deficits.

TTIP’s negative impact on Europe will affect more than just the economy. The influential German journalist Jens Jensen identifies potential casualties in the cultural sector.

«Let’s take for example an American filmmaker who enters the European market of subsidized German or French cinema. Under the provisions of TTIP, he could demand the same subsidies that German or French film companies get. Or he could demand that all subsidies be eliminated. That would decimate the very concept of providing sponsorship to the European film industry, which is able to survive and compete with Hollywood only thanks to state assistance. It would be the death of German cinema... The parliaments in every European state have made a decision to promote the development of their national film industry, and these rulings that were made democratically would be scrapped if TTIP is signed».

Jensen claims that the same fate would await the theater, symphony orchestras, public television studios and radio stations, and the publishing industry.

Even higher education would be threatened with extinction, because TTIP stipulates that public universities may no longer receive money from state coffers. They must become as expensive as private schools.

The preparation of the draft agreement has been completed, but the European public is not being allowed to examine it. And the European public is not sitting by silently, but is protesting. The website of the STOP TTIP movement has posted the text of a petition opposing the transatlantic pact, which has already collected more than three million signatures. Last year, tens of thousands of people across Europe took to the streets to protest TTIP. Marina Albiol, an MEP from Spain and a member of the United Left party, claims that TTIP is a «hurricane that would sweep away citizens’ rights».





The ranks of the protesters are swelling, and EU officials are doing all they can to try to neutralize them. For example, last July the European Commission refused to register STOP TAFTA (another name for TTIP), a European Citizens’ Initiative.

In March 2015 the Bundestag concluded a special investigation that determined that councils of German cities and communities have no right to examine the content of TTIP, and if they do so they are breaking the law. But in the meantime, by March 2015, the procedure for drafting TTIP and the content of that agreement had been discussed in 113 urban and local councils in Germany, and everywhere negative resolutions were being published in regard to this issue.

In this context, the leaders of Germany’s biggest political parties are acting as though they have been hypnotized. Even the German Social Democrats, who in better days developed the successful «Ostpolitik», are pretending that there is nothing inherently dangerous about TTIP. As the chairman of the SPD, Sigmar Gabriel, stated at the recent national party congress, «the SPD accepts TTIP with some reservations».

Apparently, the long path traveled by the German Social Democrats, who have had their ups and downs, has now led the party to a position in which they find themselves in the same camp as those who are dismantling the German welfare state. But an increasingly confident voice of protest is being raised in Germany by the «second-tier» parties (the Left and the Greens), trade unions, and public organizations that are not dependent upon multi-national corporations. And they do not see this as a hopeless case. Even if the TTIP agreement is approved in late 2016 by the governments of the EU member states, the next step will be to get it ratified in the parliaments. Presumably that is where the struggle will come to a head, and the results of that will make it clear whether the American bull will succeed in abducting Europa.

[Haykakan]

Re: Economics

Zimbabwe: China’s ‘All-Weather’ Friend in Africa


While many worry about China’s economy, Zimbabwe adopts the yuan as its international currency.



By Samuel Ramani

January 11, 2016




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China’s currency has certainly been in the news so far this year, but one milestone of sorts at the end of 2015 attracted relatively little attention. On December 22, Zimbabwe became the first foreign country to adopt the Chinese yuan as its primary international currency. Zimbabwe’s Finance Ministry announced this decision after the Chinese government agreed to cancel $40 million in Zimbabwean debt. While critics of Beijing have described this move as neocolonial, Zimbabwean officials have insisted that the adoption of the yuan did not come from Chinese pressure but was instead the natural progression of Robert Mugabe’s “Look East” foreign policy strategy.

Zimbabwe’s isolation from Western markets due to its extreme economic volatility and Robert Mugabe’s authoritarian system has caused China to become its primary international ally in recent years. Chinese president Xi Jinping’s December 1 state visit to Harare reaffirmed China’s commitment to investing in Zimbabwe by announcing multi-billion dollar energy and infrastructure deals.

China’s close ties with Zimbabwe can be explained by historical legacies, normative convergences, and practical economic benefits. Zimbabwe was arguably China’s strongest African ally in the last years of the Cold War, an alliance that has consistently strengthened since 1991. China is also Mugabe’s leading international supporter against Western condemnations of his authoritarian policies. Beijing has also spearheaded economic recovery efforts in Zimbabwe to strengthen its leverage over the country and set a precedent for other alliance-building efforts in Sub-Saharan Africa.

Historical Allies and Normative Partners

China’s partnership with Mugabe began with its support for the Zimbabwe African People’s Union (ZAPU) during the 1979 Rhodesian Bush War. Mugabe’s political future was in jeopardy after the Soviet Union backed Joseph Nkomo’s rival faction in that conflict, so Chinese support played an integral role in ZAPU’s eventual consolidation of power. China greatly expanded its economic investments in Zimbabwe during the 1980s, building a national sports stadium, the country’s largest shopping mall, hospitals and power stations. When Mugabe began to repress Nkomo’s supporters in Matabeland in 1984, China was his largest arms supplier. From 1980-1999, Zimbabwe imported 35 percent of its arms from China.

China’s relationship with Zimbabwe deepened during the early 2000s, as the European Union and United States vociferously condemned political violence in Zimbabwe and Mugabe’s flagrant human rights violations. The Council of Europe imposed targeted sanctions on Zimbabwe in February 2002 after concluding that upcoming elections would not be free and fair. In response to increased economic isolation from Western powers, Mugabe announced his Look East policy in 2003. This policy pivoted Zimbabwe economically towards the Asia-Pacific region, with an emphasis on closer trade relations with China.

China’s opposition to Western condemnations of election fraud in Zimbabwe has strengthened the normative partnership between the two countries. During the 2008 UN resolution calling for an arms embargo on Zimbabwe and travel restrictions on Mugabe and 13 of his closest allies, China opposed humanitarian sanctions against Zimbabwe on the grounds that Western powers were meddling inappropriately into the country’s internal affairs. China’s stance received support from Russia, which is also an important arms supplier to Zimbabwe, and South Africa, whose president Thabo Mbeki supported the Chinese stance on the grounds that Zimbabwe did not pose a security threat to its neighbors in Southern Africa.

Zimbabwe’s opposition leaders have predictably derided China’s cordial relations with the Mugabe regime. During the 2013 presidential election campaign, Mugabe’s primary challenger, Movement for Democratic Change Zimbabwe (MDCZ) leader Morgan Tsvangirai pledged to crack down on Chinese businesses violating Zimbabwean law and reject Chinese mining investments that do not stimulate economic development. Anti-Chinese sentiments amongst Zimbabwe’s opposition leaders caused China to escalate its support for the aging dictator, with Xi Jinping describing Mugabe as an “all-weather friend” during his December 1 trip to Harare.

China’s African Strategy

China’s extensive investments in Zimbabwe’s crisis-ridden economy and rhetorical support for Mugabe’s isolated regime are crucial to its broader strategy for expanded influence in Africa. If China can engineer a marked improvement in political and economic conditions in Zimbabwe, it will be able profit economically from a country that Western powers have very limited leverage over and set a precedent for other Sub-Saharan African countries to pivot towards China.

China has therefore taken a leading role in modernizing Zimbabwe’s dominant agricultural and mining sectors in a manner amenable to its broader interests. In 2003, Robert Mugabe agreed to a landmark Chinese agricultural investment deal to bolster Zimbabwe’s corn production, after his radical land redistribution policies left an estimated 7 million Zimbabweans at risk of famine. The long-term goal of the project was to restore Zimbabwe to agricultural self-sufficiency and to its former status as the “breadbasket of Africa.” Even though this effort failed, China became the dominant importer of a vital Zimbabwean cash crop, tobacco. By 2015, China was the destination of 54% of Zimbabwe’s tobacco exports.

China’s attempt to rehabilitate the Zimbabwean mining sector has followed a similar trajectory. China’s mining interests in Zimbabwe are wide-ranging with its first major foray in 2003 being a $300 million investment in Zimbabwe’s iron, steel, chrome and platinum resources. The commercialization of diamonds as a Zimbabwean export product rapidly increased Chinese investments in the mining sector and forced Mugabe to make major economic concessions to China.

As public opposition to illicit revenues accrued from diamond exports soared, Mugabe implemented a nationalization law in 2008, which would give local owners majority control over companies possessing assets of more than $500,000. However, Mugabe’s dependence on Chinese investments had risen to the point that he had to exempt China’s deals from the nationalization law. This exception consolidated China’s hegemonic position over the mining sector.

China also appointed pro-Beijing Zimbabwean military officials to senior leadership positions in its mining companies. As military loyalty is vital for Mugabe’s continued stranglehold on power in Zimbabwe, China’s leverage over the regime has increased substantially with these appointments. China’s vital role in propping up the Mugabe regime prevents him from enacting anti-Chinese policies to appease public discontent over corruption, environmental degradation, and human rights abuses perpetrated against Zimbabweans working for Chinese companies.

Zimbabwe’s extensive integration with the Chinese economy is potentially transferrable to other African countries. China has been careful to frame its investments in Zimbabwe as creating a balanced, cooperative relationship to distance itself from accusations of neo-imperialism. China’s recently expanded trade links with authoritarian African regimes that have strained relations with the West, like Uganda, provide an opportunity for Beijing to replicate its Zimbabwe strategy. China’s present economic concerns notwithstanding, other African countries could emulate Zimbabwe’s adoption of the yuan as a primary currency. Since 2014, Ghana and Nigeria have begun to shift their currency reserves away from the U.S. dollar and towards the yuan.

China’s heightened ties with Zimbabwe and Zimbabwe’s adoption of the yuan is the culmination of more than three decades of consistent cooperation between the two countries. Should these linkages inspire an improbable recovery of the Zimbabwean economy, they could be a harbinger for profoundly expanded Chinese influence in Sub-Saharan Africa.

Samuel Ramani is an MPhil student in Russian and East European Studies at St. Antony’s College, University of Oxford. He is also a journalist, whose work has also been featured in the Huffington Post, Washington Post, Kyiv Post and the Carnegie Endowment for International Peace.