Russia’s Economy Is Starting to Come Undone

Upcoming Webinar: Assessing China’s Growing Influence in the Middle East

The Jamestown Foundation is pleased to host a forthcoming webinar on “Assessing China’s Growing Influence in the Middle East” on Tuesday, April 4 at 9:30 AM ET.

On March 10, Iran and Saudi Arabia agreed to restore normal diplomatic relations in a deal brokered by China. Although Iraq and Oman also played key roles in facilitating negotiations, Tehran and Riyadh ultimately turned to Beijing to finalize the agreement. This diplomatic breakthrough follows Iranian President Ebrahim Raisi’s state visit to China in February and General Secretary Xi Jinping’s visit to Saudi Arabia last December, where he attended the inaugural China-Arab States and China-GCC Summits. Despite China’s expanding role in Middle Eastern geopolitics, the extent of its influence in the region is debated. One potential brake on China-Saudi cooperation is that although relations between Washington and Riyadh have been fraught of late, neither side appears willing to abandon the long-standing U.S.-Saudi security partnership entirely.

In order to assess the drivers and limits of China’s growing influence in the Middle East, the Jamestown Foundation has invited three leading analysts, Andrea Ghiselli, Sine Ozkarasahin and Alex Vatanka. The panel will be moderated by Jamestown China Program Manager John S. Van Oudenaren.

Register Here

Participant Biographies 

Andrea Ghiselli is an Assistant Professor at the School of International Relations and Public Affairs of Fudan University. He is also the Head of Research of the TOChina Hub’s ChinaMed Project. His book Protecting China’s Interests Overseas: Securitization and Foreign Policy was published by Oxford University Press in 2021.

Sine Ozkarasahin is an analyst in the security and defense program at the Istanbul-based think tank, the Centre for Economics and Foreign Policy Studies (EDAM). Sine holds an undergraduate degree from Leiden University and an MSc from Sciences Po Paris. Her research mainly focuses on smart defense, emerging defense technologies (with a specific focus on UCAVs) and their geopolitical implications.

Alex Vatanka is the founding Director of the Iran Program at the Middle East Institute. He specializes in Middle Eastern regional security affairs with a particular focus on Iran. He was formerly a Senior Analyst at Jane’s Information Group in London. Alex is also a Senior Fellow in Middle East Studies at the US Air Force Special Operations School (USAFSOS) at Hurlburt Field and teaches as an Adjunct Professor at DISAS at Wright-Patterson Air Force Base.

Register Here

Upcoming Webinar: Assessing China’s Growing Influence in the Middle East - Jamestown

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How London Plans to Fix Its Economy

The government is banking on its status as a world power.

By Ekaterina Zolotova - March 27, 2023

The British economy has seen better days. What started with its departure from the European Union was compounded by the COVID-19 pandemic, then made worse still by the economic ramifications of the Ukraine war. Over the past few years, the British economy has thus been marked by a mix of fears of recession, a record fall in the sterling against the dollar, and an exodus of investors from British assets, large-scale strikes, declining living standards, a migration crisis, a massive energy shock and a shortage of labor.

No surprise, then, that London’s real gross domestic product showed no growth in the fourth quarter of 2022. Forecasts for 2023 aren’t any more encouraging. This year, the U.K. is expected to face one of the worst recessions and the weakest recovery of all G-7 countries. Inflation is expected to persist, so the Bank of England will have to maintain high interest rates, and the government will continue to pursue a tight fiscal policy. The situation is so harried that, according to data released by The Independent, 65 percent of the country’s inhabitants support a referendum on a return to the European Union – up roughly 10 percent from last year – while some 61 said the British economy was made worse by leaving the EU.

And yet, London is acting from a position of optimism, crafting a strategy for recovery that promises long-term returns while allowing it to maintain its financial support for Ukraine, which despite the problems at home is still in London’s interests. British Prime Minister Rishi Sunak has decided to drastically cut public spending, including funding for schools, police, municipalities and transport, and divert the money to the most vulnerable segments of society to find ways to deal with the rising cost of living, in particular energy bills – even as it assured Kyiv that it would maintain or increase military assistance in 2023. Clearly, London means to use this opportunity to increase its influence over Europe, and it seems to have decided that that will come at the expense of economic growth.

To be sure, it’s a delicate balancing act, but then London understands that its geopolitical needs have always been somewhat delicate. The U.K.’s physical separation from the rest of Europe gives it a fundamentally different approach to security and international relations from the rest of the Continent. Its security and economic interests, for example, are more aligned with the U.S. than with Europe, and the Five Eyes intelligence network figures prominently in its defense strategy. Consequently, London has much to gain from a strong Eastern Europe, provided Russia isn’t the prevailing interest there, and provided the region counterbalances its historical competitors in France and Germany. In that sense, supporting Kyiv not only honors its security commitments to the U.S. but also helps it shape mainland Europe to its own specifications. And it explains why London has been one of the biggest supporters of Ukraine and why it can justify massive spending on a war in another country in the face of simmering economic tensions at home.

It’s a gamble, of course, and it’s unclear whether London will be able to pull it off. But the U.K. does have some things going in its favor. It’s still a major, highly developed economy replete with social security and a fairly solvent population. It’s well positioned in the production of high-tech products, it sports healthy trade with the U.S., the EU and China, and it is still a singular force in financial services and international exchange.

More, the U.K. is on the prowl for new markets, especially with traditional trading partners in Africa and India. In Africa, London has become much more active and, even before the start of the Ukraine conflict, said it intends to offer regional states more free trade than the EU and more honest business transactions than China and Russia. This has resulted mostly in bilateral deals, such as the one announced in 2022 by the U.K. Export Finance agency, which will provide up to 4 billion pounds ($4.9 billion) to overseas buyers of goods and services from the U.K. to strengthen trade relations with Morocco. London also held its first-ever Economic Partnership Agreement Council to secure jobs and expand trade with Kenya, and it announced that next year it will host an African investment summit.

In India, London is trying to jump-start relations by pushing for a free trade agreement. It is also coordinating with New Delhi in key industries such as defense, and high-level officials recently discussed broader bilateral security cooperation efforts.

Elsewhere, British Foreign Secretary James Cleverly said London intends to develop long-term strategies for developing relations with certain countries in Asia, Africa and Latin America to prevent Russia from wielding too much influence there. Russia, of course, is merely a pretext; Britain wants to regain some of the international influence it has lost while entering otherwise unsaturated markets for British products.

London thus believes that the key to its recovery lies primarily in ensuring its status as a world power, as evidenced by the U.K.’s comprehensive strategy and development plan for 2021-2030 in the fields of defense and foreign and domestic policy. That’s why it sees the war in Eastern Europe as an opportunity. In the medium term, it can simultaneously weaken Europe while it shores up relations with more distant regions, which it believes will provide more sound economic footing than quick fixes to current problems.--

About Ekaterina Zolotova

https://geopoliticalfutures.com/author/ezolotova/

Ekaterina Zolotova is an analyst for Geopolitical Futures. Prior to Geopolitical Futures, Ms. Zolotova participated in several research projects devoted to problems and prospects of Russia’s integration into the world economy. Ms. Zolotova has a specialist degree in international economic relations from Plekhanov Russian University of Economics. In addition, Ms. Zolotova studied international trade and international integration processes. Her thesis was on features of economic development of Venezuela. She speaks native Russian and is fluent in English.

How London Plans to Fix Its Economy - Geopolitical Futures

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A force for good: Global Britain in a competitive age

• English
• Русский язык

Foreign Secretary Dominic Raab gave a speech at the Aspen Security Conference, setting out out how Global Britain will act as a force for good in today’s world.

From:

Foreign, Commonwealth & Development Office and The Rt Hon Dominic Raab MP

Published - 17 March 2021

Yesterday the British Prime Minister Boris Johnson published the Integrated Foreign Policy Review, Global Britain in a Competitive Age.

For us it sets out the UK’s international strategy for this decade and beyond. It follows a clear-eyed analysis of our capabilities, and the opportunities and the threats that we face in the world today and tomorrow.

Our conclusion – and my argument today – is this. The UK has a central role to play on the world stage as an independent sovereign state, a leading member of the western alliance, and an energetic and dependable partner in the growing prosperity of the Indo-Pacific region.

These features of our foreign policy – our independence, our partnerships, our commitment to the East, are all part of the common mission that is Global Britain in the 2020s. That mission is to be a force for good in the world.

Force – because let’s not be na?ve about it, without power, economic, military, diplomatic, cultural clout, we can’t do anything.

But a force for good – because the purpose of this power is to increase people’s security and living standards, at home in the UK, but also across the world.

It is the right thing for a leading power to do. And it is squarely within the interests of the British people.

As we look out into the world today, there are three dangerous and dominating trends.

The first is the fraying of the world order that grew up after World War 2, that seemed stronger than ever just a generation ago.

Democracy is in retreat. This decade, the combined GDP of autocratic regimes is expected to exceed the combined GDP of the world’s democracies. Just take a second to think about what that means.

Tyranny is richer than freedom. And that matters to us here at home because we know stable, freedom-respecting, democracies are much less likely to go to war, to house terrorists or to trigger large scale flows of immigration. Democracies are generally, not always, but generally easier to trade with and easier to cooperate with to solve our shared problems. That’s the first problem.

The second trend is the rise of new threats. We have all become used to talking about asymmetric warfare since 9/11 but technology, twisted to perverse causes, is creating dangerous new weapons which falls short of armed conflict.

We know this for ourselves. Three years ago this month, we saw a nerve agent attack on the streets of Salisbury. An attack without a shot being fired. At the same time states, terrorist groups and criminal gangs are exploiting technology to prey on our homes, our businesses and our infrastructure.

The third trend of our times is perhaps the most dangerous. That is the rise in what we can only consider as potentially existential threats. Threats to our civilisation, threats to large swathes of the world’s population, or even threats to our planet itself.

We see nuclear weapons technology proliferating, a very real risk that it could fall into the hands of people who can’t be reasoned with.

We face the possibility of catastrophic climate change, catastrophic pandemics. We can all see how COVID has shown just how interconnected we all are in the modern world.

And yet at the same time, for all these threats, now is not a moment to wallow in the counsel of despair. Because there are also equally powerful reasons to feel optimistic about the future for us. For us in the UK but also for the world at large.

Our fraying international order can be repaired and reinforced. We can counter these new threats and these new challenges, as we have shown during this pandemic, through the collaboration of scientists to innovate new vaccines.

Most of all, I believe we should be optimistic because we see that the flame of human freedom still burns brightly, even at the bleakest moments.

You can see that on the streets of Russia, on the streets of Belarus, Myanmar and Hong Kong. Young people risking their lives to stake their claim to the future, demanding democracy, freedom, a better quality of life. Telling the old guard in their palatial offices that a different time is coming.

I saw it for myself when I was out in Khartoum in January when I visited the focal point of the 2019 revolution that forced a transition from power, although not before the security forces killed many young protestors.

I met some of those protesters, including a young woman called Rifqa Abdelrahman. She became known as the teargas hunter because every time the security forces hurled teargas at the protesters, she raced to pick up the canister and threw it right back at them.

She is remarkably brave and I draw courage from hers. She took some time to talk to me about the hopes she and her friends had and their dreams for the future. For all the challenges that a country like Sudan faces, it’s the hope and the courage of those young people give that country a fighting chance, if it gets the international support it sorely needs. And there are many other countries like that today.

So, whilst we’ve got to recognise that history doesn’t march in a straight line, that technology can have a dark side, we must also take heart when the future bends towards freedom.

I don’t think there’s any inevitability to this, there’s no End of History. But, if we summon the will, and if we galvanise those countries that share our core conviction, together we can and we must wrest control of history once again, and shape a better path ahead. And I believe Britain has a central, driving, role to play in all of this.

So, how well equipped are we in Britain to navigate this dangerous but hopeful world? History offers us at least some clues.

First, the UK can lead the world in innovation and technology. We were the cradle of the first industrial revolution, that happy combination of intellectual innovation, private capital and public infrastructure.

Today, instead of Watt’s steam engine and the Spinning Jenny we have a proliferation of disruptive technologies, AI, quantum computing, biotechnology, the next great economic step forward.

The second lesson is that our strongest asset is our people, that includes the way we create communities that come together.

After the Great Plague of 1665 it was Daniel Defoe who wrote about how, with work suspended for many, people got through by showing great charity towards one another. I feel that same spirit has marked our country through this pandemic.

Our national commitment to the NHS and to carers, a broader spirit of neighbourliness. That has proved a vital source of strength for us, and I think we need to cherish it.

But it also marks out our approach to international collaboration, a sense of international civic spirit if you like, and we need that now more than ever.

The third lesson from history is the strength of our institutions. Whether it’s the Church of England, Parliament or our armed forces, we have a knack for creating enduring systems that can serve the public.

Perhaps our greatest contribution is the rule of law, and the sacred principle, the foundation of order at home and abroad, that’s a particularly British tradition with a global appeal.

Don’t just take my word for it. We saw last month the international community elect Karim Khan to be the first British Chief Prosecutor at the International Criminal Court, as well as Judge Joanna Korner, a testament to their credentials, but also to the British brand. So institutions matter at home and abroad.

The fourth and final lesson I draw from our history is the overarching need for global engagement.

In the UK, particularly as we have come through Brexit, I’m not shy about saying we are a proud, independent nation, but we’re not inward-looking. Sovereignty has never meant isolation.

Let’s look at our commitment to free trade. It reflects a deeply-held belief in human exchange as a force for good, and our historic ties with all corners of the world give us a uniquely international perspective.

Britain is truly global, and that gives us an edge. These defining characteristics – a scientific, community-minded, law-abiding, outward-looking people - stand us in really good stead for the challenges of our time.

But of course history doesn’t just hand you a blueprint to follow, and many of the threats we face today are new.

So, what is Britain’s comparative advantage today? Put simply, we’ve got clout. Britain has economic, military, diplomatic, cultural clout.

We are the 5th largest economy in the world. The UK is in the top 10 countries in the world for ease of setting up a business. We have produced the largest number of tech Unicorns in Europe. Innovation runs through our DNA.

With less than 1% of the world’s population, we are blessed with 6 of the 30 top universities, more Nobel Prize winners than any other country outside the US, and 14% of the most cited research.

So that’s economic power. And our hard power is pretty potent too. The UK spends more in cash terms than any other NATO member outside the United States.

We are one of only a small number of NATO allies who bring to bear nuclear, cyber, precision strike weapons, 5th generation aircraft, surface and underwater capability alongside an agile manoeuvre division.

Our investment in cutting-edge technology will position the UK as a global leader in cyber and space. And that capacity to project force rests on that key characteristic that I have already mentioned, our tradition of internationalism.

That’s where our diplomatic clout comes in. We have the 4th largest diplomatic network in the world, reinforced by the second most generous aid budget in the G7 as a percentage of our national income.

We have an unparalleled range of expertise to help resolve conflicts and disputes, from Cyprus to Yemen. We are a problem-solving nation and that gives us influence and it gives us reach.

And we also have disproportionate cultural influence. I’m not just talking about the English language, it’s what our people do, our artists, our designers, our writers, our sportspeople.

The other day, I found my 8-year old son, Peter, watching YouTube and he loves Minecraft. I didn’t really get what it was all about but he was listening to the British gamer Dan Middleton commentating on it. I checked him out. This guy has almost 25 million subscribers around the world.

He’s not a one-off. The Great British Bake-Off is watched in 196 countries. The Premier League is the most watched football league in the world. That’s soccer, not American football.

And it’s not just about viewing figures, it’s our message, our appeal that really matters. When boxing’s undisputed heavyweight championship of the world is settled, it’s going to be between two Brits, Tyson Fury and Anthony Joshua.

When David Attenborough’s latest series goes around the world, it helps shape the global debate on climate, biodiversity and plastic pollution.

And it’s those qualities, a global reach, a compelling brand, anchored in a vision of a better world, that help explain why, according to international polling by Ipsos-Mori, the UK is the most attractive country for young people in the world.

So we have got some strengths. What use should we put them to?

I believe if Global Britain means anything, it means our force is meant for good. Yes we’re a world leader in innovation and tech, but we want that innovation to be a force for good.

So we lead in debates on setting down rules and ethical frameworks on human genomics. We can and we should do it again for AI, data and for e-commerce.

Last year here in the UK we introduced a UK Magnitsky sanctions law, to target individuals guilty of the most serious human rights abuses abroad. This year, we’re going to go one step further and extend the Magnitsky model to corruption, that scourge of the poorest nations.

We took the bold step to issue an invitation to this country to the people of Hong Kong, oppressed by Beijing. We set an example to the world with our contribution to COVAX, the global vaccine programme for the developing world.

We are one of the most generous contributors of foreign aid and we were of course the first industrialised nation to set a legally-binding national target to reach net zero carbon emissions by 2050.

There is a golden thread running through all of this. The UK is not afraid to act, but we prefer to act with others, to form alliances and partnerships that multiply the force, the impact, that we would otherwise be able to bring to bear if we acted on our own.

More than that, Global Britain – our concept – is a creative disruptor willing and able to challenge the status quo but in the cause of good order and future stability.

A mould-breaker but also a rule-maker, a disruptor for stability if you like. We have got a buccaneering spirit, but we also strive and yearn to build bridges.

The challenge is to make the most of our strengths. That is why we brought our aid budget and development policy together with our diplomatic network in the new Foreign, Commonwealth and Development Office, to drive a more integrated approach, to maximise our impact abroad.

In January, I saw what this really means and what this can achieve up close in East Africa. From the UK military support training Kenyan peacekeepers under AMISOM to defeat Al Shabaab, right the way to the school I visited in Addis which we support as part of our campaign to guarantee 12 years of quality education for every girl.

It is that unique combination of our hard power and our soft power that is so often a game-changer in those countries that we strive to support in a spirit of partnership.

With all of this in mind, the Integrated Review sets out our 4, global, strategic priorities.

First, our starting point, forged in the crucible of this pandemic, is to nurture our capacity for scientific and technological innovation. We must harness our comparative advantage in tech and science to create the better paid jobs of the future at home and to boost exports fueled by liberal free trade.

That’s key to reinvigorating UK productivity and enhancing the capacity of our start-ups to scale-up. You can already see this being infused and reflected in the Chancellor’s latest budget, from his review of R&D tax credits, to the Super Deduction from business tax bills for capital investment.

Our ambition in tech and science will also shape Global Britain’s Indo-Pacific tilt, towards the growth opportunities of the future, and the partnerships that we are going to need to grasp them.

So it’s that USP, in tech and science, that will be a defining feature of our second, strategic priority, a pioneering approach to free trade.

That’s why the British Trade Secretary Liz Truss has agreed trade deals with 66 countries as well as the EU, and that’s why we’ve launched the UK’s negotiations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

To place a new anchor in a part of the world that will provide the most fertile ground for the expansion of UK manufacturing and UK services, including in areas like digital and data.

Of course there will be other growth markets too. We look to Africa, in particular the Horn of Africa, we’ll look to the Gulf and South America with renewed ambition and energy.

In Africa, our offer will be grounded in the need to provide a more compelling alternative to some of the less scrupulous governments who exact a punitive long-term price for short term investments in things like infrastructure.

Put very simply, our offer to Africa will be more liberal on free trade than the EU, do business with greater integrity than the Chinese or Russians, and we’re committed to serve as a force for good in the communities in which we invest.

We will do this by combining our trade, our aid, and our values to patiently nurture long term win-win partnerships.

Beyond those bilateral trade deals, we have taken up our seat at the WTO under the fresh leadership of the first African, first female Director General.

We’re committed to unblocking the vested interests in protectionism, and unleash the power of global free trade to help the world bounce back stronger, and bounce back greener.

We recognise in the UK we have got to change the way we do business too. One of the things the pandemic showed up very clearly is the weaknesses of our supply chain model, as every country around the world queued up for PPE and other vital goods from China and a small number of other mass-producing countries.

Of course, we embrace the power of the market and we value our trade with China. But we will also develop new partnerships with existing allies, and other High Trust Vendors.

We will work with the likes of Estonia and Norway, India and Israel, Singapore and South Korea, and many others, to diversify our supply chains from manufacturing to tech, to shore up our economic resilience.

Our science base and our economic resilience are vital elements of the third strategic priority, which is our security. We can do even better in deploying and adapting our lead in science, tech and research to bolster the defences of our business, citizens and our government.

Through GCHQ, the National Cyber Security Centre, and our partnerships with business, we are a world-leader in cyber-security. We’ve got the UK’s new National Cyber Force, we are investing to stay ahead of the unholy alliance of hostile states and criminal gangs that prey on our PCs, tablets and our iPhones, whether it is to steal, spy or to spread lies.

And the Integrated Review highlights the Janus-facing nature of our investment in tech and science, driving economic productivity and bolstering our security, reinforcing our domestic resilience and demanding more innovative relations with longstanding allies and new partners.

That’s why we are increasing our defence spending by ￡24 billion over the next 4 years. We will restore Britain’s position as the foremost naval power in Europe, and modernise our armed forces.

We will be spending nearly ￡7 billion over next 4 years in R&D, in new areas like space, cyber, AI, quantum tech, and directed energy weapons.

That far exceeds our NATO pledge. By the way, for all the talk about the Indo-Pacific, our commitment to NATO is absolute, supporting its adaptation to threats both above and below the threshold of conventional warfare.

In the same spirit, we will maintain our nuclear deterrent to counter the most extreme threats to our national security and our way of life.

We will continue to adapt to meet the frankly predatory opportunism of states such as Russia, Iran, North Korea and some others.

And we will adapt our defence posture to the new shift in the balance of world power towards the Indo-Pacific region. You’ll begin to see that this year, with HMS Queen Elizabeth leading a British and allied task group to the region.

The fourth and final strategic priority is the defining feature of Global Britain.

The IR provides a road-map, guided by our moral compass, our history, and our present day mission as a force for good in the world.

From our inventors to our entrepreneurs, from our diplomats and aid experts to our brave armed forces, all the people involved in delivering Global Britain, share a unifying sense that we are part of a shared planet.

We believe that we can and should help alleviate the worst suffering in the world, that we have a moral responsibility and an indivisible stake in our planet, our global economy, our global eco-system and the broader conditions of peace and stability that underpin them.

And, whether or not you feel that internationalist impulse, we can surely all of us by now see the cold, hard, evidence, compelling us to take a greater interest and responsibility beyond our shores. Whether it’s Daesh to the plastic polluting our oceans, from COVID to the threat of climate change, it has never been plainer that the UK’s raw national interest, is inextricably bound up in tackling the international challenges that touch us all.

The challenges that will define the security, the livelihoods and the happiness of our children, and their children after them. And that is the key to Global Britain.

We do it because it is the right thing to do but also because bitter experience shows us that strengthening fragile countries and their people is essential to reduce the terrorist threat and to reduce the migratory flows that arrive in the UK.

We feel a moral reflex to exploit our scientific base, not just to vaccinate our own people from COVID, but also to take a lead internationally to make sure an equitable access to vaccines for the most vulnerable countries.

It chimes with our sense of justice. But, we also know that this global pandemic requires a global solution, that we won’t be safe until we’re all safe. That will be a major theme of our G7 Presidency this year.

This year’s a big year for us, we’ll also be leading on climate change as we bring the world together in Glasgow in November for the COP26 United Nations conference.

And I have to say that with the US re-joining the Paris Agreement, and many other countries stepping up to the plate, Japan and South Korea stretching their emissions reduction targets, we sense an opportunity to shift the dial on climate change, phasing out coal and boosting climate finance. Let’s be honest that none of that will be possible without at least some constructive cooperation with China.

So we take this challenge on out of a sense of social responsibility in the world, but I think we also see now more than ever, but also due to the tangible impact climate change is having.

In all of these different areas, Global Britain is imbued with a sense of responsibility and a desire to help. But we also see the direct gains that we can yield if we can reduce tensions between allies, resolve global problems and bring stability to regions whose prosperity will contribute to our own.

I think that’s important – foreign policy in the UK has to stay grounded in the real-life concerns and interests citizens have, whether it is securing the decision by the latest job-creating business to headquarter in Britain, or defending ourselves against the threat from terrorists radicalising the vulnerable online.

But it just so happens that many British people also count amongst those very tangible interests the values they hold dear, they expect their government to stand up for freedom, democracy and the rule of law.

Because it’s in our DNA, because it’s our compact with the world. And it’s not just about the content of one or other set of international rules, but the very concept to which we feel compelled.

We see our maritime interests, from fishing to navigation, reflected in the United Nations Convention on the Law of the Sea. We identify with those countries lining the South China Sea whose legitimate claims have come under recent threat from China.

This is not just a regional issue, it’s not even just a maritime one. If the terms of a law-making international treaty, bearing the signature of 168 parties can just be junked on a whim, it’s not just an attack on one or other Article or Treaty, it’s a wholesale assault on the system.

Now I don’t know, perhaps it was inevitable, after the Cold War, with the economic rise of many developing countries, a good thing, that we would see a re-balancing of global power, that this would translate into pressure to change the international rules.

Yet, those governments seeking to ransack the international system remain a minority, albeit a dangerous one.

Now I think that is why the Biden Administration’s return to the Paris Agreement and the US’ return to the WHO sends such a powerful message. Because none of us can afford a vacuum in the multilateral institutions where international law is shaped, negotiated and ultimately decided.

Nor can we in the West afford disunity, whether it’s holding Iran to its nuclear commitments, holding Russia to account for the use of Novichok, or holding China to its freely assumed international human rights obligations. So, we must re-double our efforts to reinforce transatlantic solidarity. But I think the really urgent imperative we face today is to broaden that consensus in favour of an international system that respects open economies, open societies and promotes public goods.

If we are going to rise to the global challenges of COVID and climate change, if we are going to safeguard the international order that reflects a set of progressive liberal values that serve so many of our goals and our interests, we are going to need a concerted effort to bridge the old dividing lines, between the West and the G77, the Global North and the Global South.

So let me be clear about it. The UK will remain anchored in NATO, in Five Eyes, a close US ally, a friend of the Gulf, a dependable European neighbour and partner, a passionate member of the Commonwealth.

But, Global Britain will also be able and willing to forge and follow agile clusters with like-minded countries, where our values and our interests demand it.

That’s why you can see under our Presidency of the G7 that we’ve invited India, South Korea and Australia to join this year’s summit, because we in the West, we have got to broaden our reach and appeal, if we are going to tackle global challenges and manage the threats we face today.

And that’s just a start, an organic one if you like, building on a traditional G7 format.

But it must be part of, a conscious broadening of the caucus of nations who feel committed to reforming but also safeguarding an order grounded in rules and a conception of the common good.

These are just the core tenets that will guide Global Britain for the coming decade, but they are crucial.

A focus on science and tech yes to make Britain richer, but also to help the world develop good ethics around AI, genomics, the internet.

A commitment to free trade to create British jobs, but also to offer the developing world a more compelling model of economic growth than debt servitude.

A clear and unequivocal commitment to security to defend the British people, but also to build up better governance in countries abroad.

And an absolute commitment to be a force for good in the world, to help the global south, but also to expand British interests.

Now let me finish with a pledge. US Secretary of State Dean Acheson described foreign policy in the post-war era as like being ‘present at the creation’ of a new world. Well I believe we bear an equally humbling responsibility today.

So today the British government undertakes to work with our allies, to do whatever it takes to make that new world a better one for all of our people, and for the planet itself.

Because if these islands, if this rainy archipelago off the European coast, has a particular destiny, it’s surely to act as a beacon of hope at home and abroad, to fight for peace and prosperity, to defeat the enemies of mankind, and to act as a force for good.

That is our mission. That’s our promise. Thank you very much.

A force for good: Global Britain in a competitive age - GOV.UK (www.gov.uk)

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Russia’s Economy Is Starting to Come Undone

Investment is down, labor is scarce, budget is squeezed. Oligarch: ‘There will be no money next year’

MOSCOW—The opening months of Russia’s invasion of Ukraine last year drove an increase in oil and natural-gas prices that brought a windfall for Moscow. Those days are over.

As the war continues into its second year and Western sanctions bite harder, Russia’s government revenue is being squeezed and its economy has shifted to a lower-growth trajectory, likely for the long term.

The country’s biggest exports, gas and oil, have lost major customers. Government finances are strained. The ruble is down over 20% since November against the dollar. The labor force has shrunk as young people are sent to the front or flee the country over fears of being drafted. Uncertainty has curbed business investment.

“Russia’s economy is entering a long-term regression,” predicted Alexandra Prokopenko, a former Russian Central Bank official who left the country shortly after the invasion.

There is no sign the economic difficulties are bad enough to pose a short-term threat to Russia’s ability to wage war. But state revenue shortfalls suggest an intensifying dilemma over how to reconcile ballooning military expenditures with the subsidies and social spending that have helped President Vladimir Putin shield civilians from hardship.

Russian billionaire Oleg Deripaska warned this month that Russia is running out of cash. “There will be no money next year, we need foreign investors,” the raw-materials magnate said at an economic conference.

Having largely lost its European market next door, and with other Western investors pulling out, Moscow is becoming ever more reliant on China, threatening to realize long-simmering fears in Moscow of becoming an economic colony of its dominant southern neighbor.

“Despite Russia’s resilience in the short term, the long-term picture is bleak: Moscow will be much more inward-looking and overly dependent on China,” said Maria Shagina, a senior fellow at the International Institute for Strategic Studies think tank in London.

A big part of the dimming outlook stems from a bad bet by Mr. Putin last year that he could use Russian energy supplies to limit Western Europe’s support for Ukraine.

European governments, instead of tempering their support for Kyiv, moved rapidly to find new sources of natural gas and oil. Most Russian gas flows to Europe stopped, and after an initial jump, global gas prices fell sharply. Moscow now says it will cut its oil production by 5% until June from its previous level. It is selling its oil at a discount to global prices.

As a result, the government’s energy revenue fell by nearly half in the first two months of this year compared with last year, while the budget deficit deepened. The fiscal gap hit $34 billion in those first two months, the equivalent of more than 1.5% of the country’s total economic output. That is forcing Moscow to dip deeper into its sovereign-wealth fund, one of its main anti-crisis buffers.

The government can still borrow domestically, and the sovereign-wealth fund still has $147 billion, even after shrinking by $28 billion since before the invasion. Russia has found ways to sell its oil to China and India. China has stepped in to provide many parts Russia used to get from the West.

Russian officials have acknowledged the difficulties but say the economy has been quick to adapt. Mr. Putin has said his government has been effective in countering the threats to the economy.

“You know, there is a maxim, guns versus butter,” Mr. Putin said in a state-of-the-nation address last month. “Of course, national defense is the top priority, but in resolving strategic tasks in this area, we should not repeat the mistakes of the past and should not destroy our own economy.”

For much of Mr. Putin’s more than 20 years in charge, high oil and gas revenue underpinned a social contract that saw most Russians largely staying out of opposition politics and protests in exchange for rising living standards.

The International Monetary Fund has estimated that Russia’s potential growth rate—the rate at which it could grow without courting inflation—was around 3.5% before 2014, the year it seized Crimea from Ukraine. That has now fallen to around 1%, some economists say, as productivity declines and the economy becomes technologically backward and more isolated.

“For an economy like Russia, 1% is nothing; it’s not even a maintenance level,” said Ms. Prokopenko, the former central bank official.

The fall in exports, tight labor market and increased government spending are worsening inflation risks, the central bank said this month. Russia’s inflation was running at around 11% in February compared with that month last year. That rate will temporarily fall below 4% in the coming months, the central bank said, though that is because of the high comparison base of the post-invasion surge in prices last year. A number of other economic indicators will also temporarily improve in the coming months due to such base effects, economists say.

The country’s industry is in its worst labor crunch since records began in 1993, the Moscow-based Gaidar Institute for Economic Policy has said. The post-invasion brain drain and last fall’s 300,000-man military mobilization have resulted in around half of businesses facing worker shortages, according to the central bank. Locksmiths, welders and machine operators are in high demand.

On a recent visit to an aircraft factory, Mr. Putin said the labor shortage is hampering military production. He said the government has prepared a list of priority professions for deferment from service.

Before the war, Oleg Mansurov dreamed of competing with Elon Musk’s SpaceX. After the invasion, investors in Mr. Mansurov’s Moscow-based SR Space pulled their funds.

By April 2022, the private company, which he launched in 2020 with venture-capital funding, was facing bankruptcy. To save it, he turned it into an IT business, providing services from web design to analyzing satellite imagery.

Western satellite-imaging-service companies had left the Russian market over the war, and Mr. Mansurov secured interest from large state-controlled enterprises that previously rejected his approaches, such as Gazprom PJSC and the nuclear-engineering company Rosatom.

“We became more focused not on the development of a long-term product that would make some kind of qualitative leap but on simply becoming a classic business and generating revenue,” Mr. Mansurov said. “We understood we just had to survive.”

Companies are adapting to the West’s import bans. While Moscow has boosted imports of technologies critical to its war in Ukraine from other countries, including semiconductors and microchips from China, in many civilian sectors, parts are difficult to replace.

The central bank has said risks are rising in the airline sector, where a deficit of new aircraft and parts could lead to problems with maintenance. IT and finance firms are struggling without access to Western technologies such as software, database-management systems and analytics tools and equipment, the bank said.

Russia tried import substitution—replacing foreign goods with homemade ones—for years before the current sanctions, with limited success. A large chunk of its telecommunications equipment and advanced oil drilling software is imported.

“This is a little bit like going back to Soviet times, doing everything ourselves,” said Vasily Astrov, an economist at the Vienna Institute for International Economic Studies. “It will be nearly impossible to properly replace what’s missing.” Analysts at the central bank have called the postwar reality “reverse industrialization,” suggesting a reliance on less-sophisticated technology.

Ilya Korovenkov, director of Chili. Lab, a boutique IT company in Nizhny Novgorod developing web services and e-marketplaces, said that before the war, clients would often order new capabilities and functions. Now, the work is focused on fixing and improving existing systems.

“It’s logical,” he said. “We don’t know what will happen in a month. We need to wait it out.”

With all these changes, the Russian economy is becoming more dependent on the state.

Much industrial-production growth now comes from factories turning out missiles, artillery shells and military clothing, replacing the vast quantities used in the war. Some factories are working multiple shifts to cope with demand, Mr. Putin has said.

While official statistics don’t break out military production, the output of “finished metal goods”—a line that analysts say includes weapons and ammunition—rose by 7% last year. Production of computers, electronic and optical products, another line said to include military output, rose by 2% for the year and 41% in December compared with November. By contrast, auto output fell about 45% year-over-year.

Military production masks the problems. “This isn’t real, productive growth. This doesn’t develop the economy,” Ms. Prokopenko said.

Russia managed to avoid the worst last year, aided initially by high global energy prices. Gross domestic product fell 2.1%, according to official data, far less than some early forecasts of a 10% to 15% drop.

Gas exports to Europe didn’t start tailing off until last summer. The EU’s ban on Russian seaborne oil and a Group of Seven price cap began to take effect only in December. Sanctions on oil products such as diesel took effect last month. These delays kept energy revenue up and helped the government unleash a huge fiscal stimulus of around 4% of GDP in 2022, according to the IMF.

In January and February of this year, however, oil and gas tax revenue, which accounts for nearly half of total budget revenue, fell by 46% year-over-year, while state spending jumped more than 50%.

Analysts estimate that Russia’s fiscal break-even oil price—what it would need to balance its books—has swelled to over $100 a barrel as war spending weighs on the budget.

The country’s flagship Urals crude fetched an average of $49.56 a barrel in February, according to the Ministry of Finance, a deep discount to the benchmark Brent, which traded around $80 a barrel that month, although some analysts argue the difference is smaller. The government last month changed its oil-taxation formula in an effort to squeeze more from producers.

“Russia now has a lower bargaining power in the world oil market because they have much less choice where to ship the oil,” said Mr. Astrov, the Vienna Institute economist.

Consumers are ailing, too. Retail sales fell 6.7% in 2022, the worst showing since 2015, according to official data. New-car sales fell by 62% in February year-on-year, according to the Moscow-based Association of European Businesses.

Nearly a decade ago, Artem Temirov and his brother launched a coffee shop in central Moscow they called Kooperativ Chernyy, or the Black Cooperative. Just before the war, they opened a roaster and planned to begin selling their coffee beans in supermarkets.

The invasion halted those plans. Russia’s postwar exodus has included many who could afford to spend at a high-end shop like Kooperativ Chernyy, and sales fell. Despite a pick-up in the summer—which Mr. Temirov attributed to Russians wanting to ignore their new reality—sales cratered again after Mr. Putin’s September troop mobilization.

For this year, most analysts expect another fall in GDP, although some, including the IMF, forecast modest growth.

But the fund said that by 2027, economic output is projected to be around 7% lower than pre-war forecasts had indicated. “The loss in human capital, isolation from global financial markets, and impaired access to advanced technology will hamper the Russian economy,” the IMF said.

Rystad Energy, a consulting firm, expects investment in Russian oil and gas exploration and production to fall to $33 billion this year from a predicted $57 billion before the invasion. That would mean less output down the line. Analysts at BP PLC estimate that Russia’s total oil production, which was around 12 million barrels a day in 2019, will be down to between 7 million and 9 million a day by 2035.

“We’re not talking about a one-year or a two-year crisis,” said Mr. Astrov. “The Russian economy will be on a different trajectory.”

Russia’s Economy Is Starting to Come Undone - WSJ

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