Even before the COVID-19 pandemic, it was clear that the world is undergoing a transition away from fossil fuels and carbon-intensive sectors, towards renewable energy and clean growth. The collapse of oil demand and prices have simply compounded the challenges that oil and gas producers already faced.

What happens next will have significant implications for Norway, as one of the world’s largest exporters of both energy and capital, and for the UK, as it plans its recovery and looks ahead to its hosting of the next major climate change summit in 2021 - COP26.

While the speed and scale of the transition has always been uncertain and contested, an accelerated transition with deep implications for future oil and gas demand looks plausible.

There has long been a debate over when global demand will peak, but what happens after demand has peaked is perhaps the more critical question. Now there is the additional uncertainty of how this post-peak demand might be affected by an oncoming global recession and potentially by the greening of recovery measures implemented in response to it. Will there be an extended plateau, a gentle decline or a sudden collapse?

The post-peak trend will impact oil producers and exporters to varying degrees, in terms of their vulnerability to reduced volumes and lower prices, and their ability to compete in a shrinking market. There is also growing scepticism over whether natural gas can act as a bridge between coal-fired power and renewables, as increasingly, renewables directly replace coal.  There is also significant uncertainty over extent to which hydrogen, either produced from fossil fuels or renewable energy, will play a significant role in a decarbonizing energy sector.

Even before the pandemic, there was growing public and political pressure in most EU member states for more ambitious action on climate change. More challenging climate targets now look certain as a growing number of governments and companies commit to becoming carbon-neutral by ever-earlier dates.

While market developments, such as the rate of change and the costs of technologies such as renewable energy and electric vehicles will heavily influence their deployment rates, policy interventions and large-scale investment in core infrastructure are still crucial to their scaling up. We are now seeing the EU refocus its Green Deal in support of post-COVID recovery, and scale its support for transition in coal-dependent and carbon-intensive regions with its €100bn Just Transition Mechanism.  

These developments have significant implications for fossil fuel producers and energy consumers both inside and outside the EU. It will particularly affect Norway, not only as a significant supplier of energy to the EU, but as a member of the European Economic Area, with likely pressure to adopt similarly binding domestic carbon reduction legislation. Similarly, as the UK forges new post-Brexit trading and regulatory relationships, it will need to align with European policies for efficiency.

As the host of the critical COP26 UN Climate Change Summit in Glasgow next year, the UK will also need to at least match the EU in terms of its ambition on national emissions reductions, and in placing decarbonization and sustainability at the heart of COVID-19 recovery measures. However, unfortunately, the early indications are that 'Project Speed' will focus on traditional infrastructure projects are less than promising.    

The UK and Norway face similar challenges, as oil and gas producers that recognize the importance of climate change, and will rightly face scrutiny where they reinvest in their oil and gas sectors. They are both outside, yet highly dependent on developments within the EU. However, they are also both, somewhat surprisingly, world leaders in different aspects of decarbonization, such as off-shore wind or electric vehicle deployment, in part due their offshore capabilities and advanced manufacturing capabilities. This presents an opportunity for both countries and their industries to place an accelerated energy transition at the heart of their economic recovery and their relationship with the EU.

There will of course be different opinions on how to do this. A new Chatham House paper – Expert Perspectives on Norway’s Energy Future – explores these issues in the Norwegian context, and draws upon the views of 15 international experts on energy transition and climate change, each interviewed in depth. While unsurprisingly there is little consensus, these views provide valuable background from which to consider the future of future of energy for Norway, and for its partners including the UK and the EU.

Trade policy is a blunt instrument for realizing human rights. Although many trade agreements now include commitments on human rights-related issues - particularly labour rights - not everyone agrees that linking trade to compliance with human rights norms is appropriate, let alone effective.

Sceptics point out that such provisions may become an excuse for interference or ‘disguised protectionism’ and admittedly anyone would be hard-pressed to identify many concrete improvements which can be directly attributed to social and human rights clauses in trade agreements.

This lack of discernible impact has a lot to do with weak monitoring and enforcement. A more fundamental problem is the tendency of trading partners to gloss over – both in the way that commitments are framed and in subsequent monitoring efforts – significant implementation gaps between the standards states sign up to, and the reality.

Working from ‘baseline’ international standards and treating each state’s human rights treaty ratification record as an indicator of compliance does offer objective verifiability. But it also means underlying economic, structural, cultural, social, and other problems, often go unidentified and unaddressed in the trading relationship.

Regulatory failings of trading partners

Those with sufficient leverage can use dispute resolution or enforcement proceedings to signal displeasure at the regulatory failings of their trading partners, as recently shown by the European Commission (EC) in relation to labour violations by trading partners – against South Korea under the 2011 EU-South Korea Free Trade Agreement (FTA) and Cambodia under the EU’s Generalised Scheme of Preferences (GSP) scheme.

These actions do show a more proactive and rigorous EU approach to monitoring and enforcement and have been largely welcomed – especially by trade unions – as a necessary political response to persistent failings by the states to address violations of fundamental labour rights. However, claiming any major victories on behalf of the workers who produce the goods being traded seems premature.

The ‘implementation gaps’ - between human rights commitments made in a state-to-state context and the reality of the human rights situation on the ground - mean there may be cases where enforcement action under a trading arrangement, such as the removal of trade preferences, may actually make things worse. Some local unions have expressed concern that the EU action against Cambodia may be detrimental to vulnerable migrant women factory workers, especially in the context of a worsening economic situation due to the pandemic.

Making stakeholder voices heard

There are routes through which people with first-hand knowledge of human rights-related problems arising from trading relationships – such as labour rights abuses in global supply chains – can make their voices heard. Unions have used consultative bodies set up under trade agreements to highlight labour abuses in trading partner countries - this helped to shift the Commission’s strategy towards South Korea.

But the rather vague and open-ended mandates of these consultative bodies, and their reliance on cash-strapped civil society organisations to do much of the heavy lifting, means they are not a solid basis for systematic follow-up of human rights problems.

And yet, every country is likely to have a number of agencies with interests and expertise in these issues. Beyond labour inspectorates, this could include environmental regulators, licensing bodies, ombudsmen, national healthcare bodies, special-purpose commissions, ‘responsible business’ oversight and certification bodies, local government authorities and national human rights institutions.

At present these groups are barely mentioned in trade agreements with monitoring frameworks for human rights. And if they do feature, there tends to be little in the agreement terms to guarantee their participation.

To seriously address implementation gaps, there needs to be much greater and more systematic use of these domestic regulatory bodies in human rights monitoring and enforcement activities. These bodies are potentially vital sources of information and analysis about the many different social, economic, environmental and human rights consequences of trade, and can also contribute to designing and delivering ‘flanking measures’ needed to assist with the mitigation of human rights-related risks or adverse impacts which have been detected.

Looking further ahead, monitoring practitioners may find - as those involved in the EU GSP+ scheme have already noticed - that close and visible engagement with domestic regulatory bodies helps strengthen a regulator in getting clearer political support and better resources. It can also help with greater ‘buy-in’ to human rights reform agendas, creating conditions for a positive legacy in the form of more confident, committed, and capable domestic regulatory bodies.

Paying more attention to synergies that exist between the work of domestic regulatory bodies and the principles and objectives which cause states to seek human rights commitments from their trading partners is a vital contribution to the concept of ‘building back better’ from the present crisis.

The goal should be to move from the present system – which veers between largely ineffective consultative arrangements and adversarial, often high stakes, dispute resolution – to more cooperative and collaborative systems which draw more proactively from the knowledge and expertise of domestic regulatory bodies, not only in the identification and monitoring of risks, but also in the delivery of jointly agreed strategies to address them.

This article is part of the Chatham House Global Trade Policy Forum, promoting research and policy recommendations on the future of global trade.

Many people are aware that the scourge of malnutrition affects a vast number of individuals and communities around the world. However, most tend to view it as a problem to be addressed by governments, charities or donors, rather than the corporate sector.

Certainly, when considered at a societal scale, malnutrition makes the complexities of delivering inclusive growth all the harder. It ratchets up the public health burden while restricting the potential for at-risk populations to take part in productive employment.  Economies are hindered, lives are blighted and the potential for people to reach their full potential can be severely limited.

A number of upcoming summits represent a window of opportunity to address nutrition in the context of resilience, particularly in the wake of COVID-19 and the much-referenced ambition for governments to ‘build back better’. The opportunity is there to foster a true partnership between governments, third sector organizations and businesses of all sizes, sectors and geographies to work for the betterment of society and deliver benefits to all participants in such a partnership. 

So what is the role of business in relation to nutrition - where does it sit on their list of priorities and why should it matter to them? A new Chatham House report represents an important contribution to the discussion about the role of business in addressing malnutrition. Through thorough research and direct engagement with businesses, it seeks to find out if malnutrition is on the corporate radar and the extent to which it is considered a material issue.

Surprisingly, whilst many large corporates recognize malnutrition as a matter for concern, this is typically defined only in the context of CSR programmes or related ambitions. These types of commitments have their limitations though; most notably the fact that the communities more severely affected by malnutrition typically sit outside of the sphere of influence of the multi-national companies with the greatest ability to mobilize resources and make an impact. Where populations are marginalized, operating within the informal economy and living in settings that are too fragile for large-scale business investment, corporate CSR programmes are unlikely to have a meaningful impact.

The report also asked businesses whether they considered malnutrition to have a material impact on their ability to create value, protect value and manage risk. In the majority of instances the answer was no. This may be surprising, particularly given the evidence provided by new modelling – done for this report using a purpose-built model by Vivid Economics – that illustrates the costs posed to business by malnutrition within a population. On an immediate and direct level, the impacts can be considerable due to lost or reduced productivity from the employee base. However, if even that immediate impact is addressed, the externalities associated with malnutrition can come back and have a negative effect on businesses and investors alike.

When reflecting on externalities and the landscape of risk within which business operates, it is worth considering climate change by way of comparison. Climate change is well embedded in the risk profiling of most progressive and well-managed corporates – although in some instances meaningful action may be well overdue. That said, it is recognized that the direct and indirect impacts have the potential to conspire and permanently reduce shareholder, stakeholder and societal value. 

Similarly, if left unchecked, the externalities associated with malnutrition will undoubtedly contribute to an increased level of risk in terms of both operating and investment environments. This is both an issue of social equity and enlightened self-interest given that good nutrition is key to the success of many of the Sustainable Development Goals (SDGs), and is essential to driving sustainable economic growth. One of the lessons of the COVID-19 pandemic is the manner in which widespread malnutrition can significantly reduce the resilience of populations to external risks, including the outbreaks of infectious disease. We need only to look at the impact of climate stress and related events to understand how closely linked malnutrition is – or may become – to the incidence of social unrest and armed conflict in low-income countries.

Progressive companies and investors have already identified the ability to drive inclusive and sustainable growth as a compelling imperative for investment. In this context, the potential for improved nutrition – both in the workforce and amongst the communities upon which the firms depend – should be a true priority. As fund managers seek increasingly meaningful insight into the way that companies within their portfolio(s) create value, protect value and manage risk, the scope of environmental and social governance is expanding. Many recognize the link between delivering on the SDG agenda and protecting or enhancing shareholder value into the longer term. This is a powerful lever for change, particularly when considering that good nutrition is integral to the success of the ambitions laid out by the various SDGs. Successfully delivering against nutrition-focused targets could unlock growth in developing markets and create an enabling environment for achieving the broader SDG agenda. This may in turn help companies to deliver enduring shareholder value in a way that does not undermine their corporate sustainability commitments.

So, given the insights provided by this report, what can businesses do that have the potential to make a practical and effective impact? There are three main action points around which the private sector can galvanize its efforts and work in partnership to deliver a meaningful impact. 

The first action point is a basic requirement to be proactive and make supportive interventions with existing and future workforces, ensuring that staff are well fed and have appropriate facilities for breastfeeding and childcare. Beyond that foundational commitment, the second action point is to work to build impactful and well-governed partnerships to work within local communities and deliver outcomes at an appropriate scale. The third and final action point sets out the importance of reporting. Businesses should thoroughly assess the impacts of their operations, investments and influence. They should be transparent about those impacts and report both on the current situation and the commitments made to deliver on measurable targets.

Malnutrition is a scourge; it negatively impacts individuals, families, societies and economies. Now is the time to align corporate, government and third sector efforts to consign it to the past. We just need leaders to be bold enough to seize the opportunity.

When the resolution was passed by World Health Organization (WHO) member states at the World Health Assembly (WHA) in May requesting an evaluation ‘at the earliest appropriate moment’ of lessons learned from the WHO-coordinated international health response to COVID-19, it was generally thought the appropriate moment would be when the pandemic was on the wane.

Yet the Independent Panel for Pandemic Preparedness and Response has actually been established at a time when - as noted by WHO director-general Dr Tedros Adhanom Ghebreyesus in his announcement of the panel - the pandemic is still accelerating.

In most of the world the virus is not under control, and cases have actually doubled in the last six weeks. So why now?

Emphasis on global solidarity

Throughout the pandemic so far, Dr Tedros has emphasised two main points – the need for urgent action by countries, and the imperative need for global solidarity. In announcing the panel, he said this is the ‘defining crisis of our age’ and that ‘we cannot defeat this pandemic as a divided world … the COVID-19 pandemic is a test of global solidarity and global leadership’.

He may well see establishing the panel now - when the pandemic still has a long way to run - as an opportunity to reinforce messages which have hitherto seemed to fall on deaf ears, notably saying ‘we are in the midst of the battle of our lives, and we have to do better’. And he has also said that we should learn lessons now that will be useful in the continuing fight against the pandemic.

Establishing both the membership of the panel and its terms of reference has been left largely in the hands of the co-chairs – distinguished ex-politicians Helen Clark of New Zealand and Ellen Johnson Sirleaf of Liberia. But they will have to construct the panel in close consultation with member states on the basis of their proposals for membership – a process that will likely be fraught by the divisive politics which have already so upset Dr Tedros.

In addition, embedded in the mandate from the WHA resolution is the phrase ‘WHO-coordinated international health response’ – negotiated language which is intentionally ambiguous and reveals an unresolved tension.

Does it mean the panel should principally focus on WHO’s performance, which is what several countries – including the US – want to see? Or should it give at least equal weight to the way countries have responded individually and collectively, as Dr Tedros and the WHO may want to see?

These different interpretations mean both the construction of the panel and its terms of reference could be highly contentious. Most countries, including China and the US but also others, will not want their responses to be subjected to independent investigation. Nor will they want to include panel members likely to be critical of their responses. This suggests the possibility that there will be political pressure to focus the enquiry principally on the performance of WHO rather than that of countries – an outcome Dr Tedros would not welcome.

It remains to be seen how the co-chairs will manage these highly political issues, and avoid the panel becoming an extension of ‘pandemic politics’ by other means. Can it come to definitive conclusions in the midst of a pandemic and, if so, how likely are they to be heeded?

It is also highly likely that several other reviews will be launched, wholly independently of oversight by WHO and its member states, as happened following the 2014 Ebola outbreak. This provides opportunities for a variety of perspectives on both the performance of WHO, and of individual countries.

Already, The Lancet has announced its own Commission on COVID-19 with a broad mandate covering both the health and economic responses to the pandemic. Both this and the Independent Panel for Pandemic Preparedness and Response are likely to be only the first of many COVID-19 reviews.

Flaring is a significant source of economic and environmental waste. Except when safety-related, flared gas can often be captured and monetised using low-cost proven solutions.

In doing so, governments can improve health and safety, reduce emissions (of carbon dioxide, methane, and particulates) and add value by driving up revenue, increasing reserves and production, creating jobs and improving the industry’s ‘social license to operate’.

Flare capture also helps countries to deliver on the Paris Agreement and the UN’s Sustainable Development Goal #13 while, for example, providing affordable alternatives for heating and cooking.

The Middle East and North Africa (MENA) region accounts for 40% of the world’s flaring. In the region, flaring has increased year-on-year - apart from 2018 - to almost six billion cubic feet of gas per day, generating up to 300-500 million tonnes of CO2-equivalent emissions per year.

These emissions result not only from the combustion of gas, but also from the venting, from inefficient flares, of un-combusted methane, a more potent greenhouse gas. Yet much of this is avoidable.

There are many commercially attractive options to reduce flaring in MENA. The key is to use the right proven technology and to be agile in commercial structuring. And the prize could be a boost to MENA’s annual revenues by up to $200 per second (up to $6.4 billion per year) by delivering wasted gas to market by pipeline, as power or in liquid form.

The chart highlights the abundance of flaring across the MENA region, and in many cases, their proximity to population centres. While Iran, Iraq, and Algeria generate 75% of MENA’s flaring, Saudi Arabia, Kuwait, UAE and Qatar are notable for their relatively low ‘flaring intensity’ i.e. flaring normalized to oil production.

In today’s world of lower energy prices, it makes sense to monetise every molecule. Even more so for national oil companies, which are responsible for most of the flaring, since they are not only the custodians of their countries’ natural resources, but they also generate a dominant source of government revenue.

Most oil producers in MENA have already made commitments to the World Bank’s flaring-reduction initiatives (e.g. ‘Zero Routine Flaring by 2030’), but to date, delivery is mostly lacking. Three main issues have hindered progress.

Firstly, operators, regulators, and governments highlight that flaring is often not ‘sufficiently on the radar’. Flaring is often underreported if not ignored or denied - although satellite detection gives unavoidable transparency. In MENA alone, more than 1,700 flare clusters are visible every day from space.

Secondly, flare capture is sometimes not perceived to be economically viable due to costs, taxes, or inappropriate technology. Thirdly, there are often issues around resources, especially concerning management bandwidth, delivery capabilities or financing.

Yet these issues can be solved if the right proven technologies are combined with the right commercial structures. To accelerate flare capture projects, stakeholders in the MENA hydrocarbons sector must consider several complementary, action-oriented initiatives.

In particular, they should:

• Promote transparency and disclosure to drive greater awareness of flaring. Governments, regulators and operators must understand the real scale of their gas flaring opportunity and be capable of acting, as a recent report for the EBRD on Egypt highlighted. Compliance with clear standards for measuring, monitoring and verification is critical.
• Advance policies and incentives which encourage action. Better commercial terms will incentivise and accelerate flare investments. Stronger penalties will help, but independent and capable regulators must actually enforce these penalties. Through the use of such clear anti-flaring policies, Norway’s flaring intensity is almost 20 times lower than the MENA region.
• Improve the investment climate, beyond economics and open access to a broader range of players. Local market failures can be avoided by reducing the complexity and cost of in-country operations and by removing excessive, rigid, or redundant regulations. By enabling greater ‘third-party’ access to gas and power projects and infrastructure, new players can accelerate change by deploying new technologies and new operating models. Better third-party access will also unlock ideas, capital, skills and project-specific financing options. Algeria is making steps towards such liberalisation through its new 2019 Hydrocarbon Law.
• Reduce subsidies and improve energy efficiency and reduce demand, increase gas exports and boost national revenues. Countries with large subsidies on transport fuels and power, such as Algeria and Iraq, stand to gain the most.
• Encourage collaboration between stakeholders in industry and government by creating working groups to radiate best practices, build capacity, deploy technology and local content, such as the flare minimization programme in Saudi Arabia or Iraq’s major flare-to-power project operated by the Basrah Gas Company.

The industry needs to prepare for a greener world after COVID-19 and investors and consumers are demanding cleaner fuels. Since gas is widely viewed as a transition fuel, MENA governments and stakeholders must work to eliminate its wastage and seize the revenue, production and environmental opportunities that flare capture projects offer.

There is much new leadership in the region in government and critical institutions with new mandates for change. The time to act is now.

For a leader who had not travelled abroad since his inauguration – skipping G20 and APEC summits and the UN General Assembly – and who is probably one of the most intellectually incurious and disinterested Mexican presidents of the modern era when it comes to global issues, President Andres Manuel Lopez Obrador could have certainly waited until after the US elections in November to travel to Washington and personally engage with President Donald Trump .

Instead, Lopez Obrador – who has sought at all cost to avoid conflict with his US counterpart, having decided that bending the knee was a better option than standing his ground with Trump – waded straight into electoral politics in the US, despite his repeated assurances to the contrary.

The decision to travel now to Washington was fraught with political and diplomatic challenges, not least the fact that President Trump will use President Lopez Obrador as an electoral prop.

To American audiences, at a time when the US is riven by social and political convulsion unseen in 50 years since the Vietnam War and the civil rights movement, meeting with Trump in Washington just before the general campaign starts was seen by many as a pat on the back for a polarizing and unpopular president.

In Mexico, most discussion has been about the merits and timing of the visit, with one El Financiero newspaper poll conducted a week before showing public support (59%) for the trip, while a post-visit Reforma newspaper survey showed that a substantial majority of those polled (69%) believe a Biden victory in November is a better outcome for Mexico.

While it’s true that Lopez Obrador returned to Mexico unscathed, his visit – and his baffling Rose Garden remarks stating that Trump (the most anti-Mexican US president in modern history) has shown respect to Mexico and Mexicans – is certainly a slap in the face to migrants in the US, 11 million of whom are Mexicans, to American NGOs and activists that defend the rights of migrants and enlightened immigration and asylum policies, and a boon to Trump’s dog-whistle xenophobia and chauvinism.

Lopez Obrador’s words added insult to injury by asserting the US president has never imposed anything on Mexico, blithely ignoring Trump’s March 2019 threat to impose punitive tariffs on Mexico unless the country deterred and stopped Central American transmigration flows through Mexico on their way to the US.

Certainly if the purpose of the visit was to celebrate the July 1 entry into force of the USMCA – a spin made even more hollow by the fact that Canadian Prime minister Justin Trudeau decided to skip the event – then Lopez Obrador should have been reaching out to the Speaker Nancy Pelosi and the Democratic leadership to meet and thank them too, given the important role they played in supporting the revamping of NAFTA and the ratification of the USMCA.

The best-case scenario is that the meeting between the presidents will be leveraged by both governments to address looming hurdles with the entry into force of the USMCA.

But Trump still seems intent on wielding punitive tariffs and mercantilist measures to extract concessions from either Canada or Mexico. And across the border, the Lopez Obrador government – and his party in Congress – continue enacting abrupt policy shifts and changes to the rules across different sectors of the economy that bode ill for the level playing field required under the USMCA.

What could have easily been achieved via a virtual event has now morphed into a second successive Mexican government jumping on the Trump electoral bandwagon, after Enrique Peña Nieto’s ill-advised invitation to then-candidate Trump to travel to Mexico, and a new opportunity for the US president to ‘pimp’ Mexico for his campaign purposes. Perceptions have certainly deepened among Democrats that Lopez Obrador prefers to see Trump re-elected.

Although Lopez Obrador’s aim was to buy Mexico time between now and January of next year by hoping this visit will contain Trump’s anti-Mexican tirades on the campaign trail, whether or not Trump stops using Mexico as a political-electoral piñata is yet to be seen. I would not hold my breath.

Moreover, for a leader whose default position is ‘the best foreign policy is domestic policy’, the trip lays bare a paradox in Lopez Obrador’s mantra. It is precisely Mexico’s domestic weaknesses and failings that create foreign policy vulnerabilities, particularly vis-à-vis the Trump administration. And it is likely these will be used in the coming weeks and months to once again to pressure Mexico in what has become Trump’s ‘Sinatra Policy’ towards his southern neighbour: 'My Way'.

Perception is indeed reality, and Lopez Obrador – and more importantly Mexico – can ill-afford to be perceived as Trump’s patsies at this juncture of American history. As many expected, it only took four hours after President Lopez Obrador’s White House remarks for Trump-supporting Hispanic-outreach social media accounts to start piggybacking on them. Campaign officials have also specifically said they will likely use his quotes in TV ads aimed at Hispanic voters later this year.

In addition, there is a potentially bumpy road ahead for Mexico’s relationship with the Democratic Party. The statements and tweets issued by former vice-president Joe Biden, Biden campaign surrogates and officials, prominent Hispanic Democrats in Congress, and the Democratic National Chair signal as such, as does a letter sent the same day of the visit by Democratic representatives regarding outstanding labour issues in Mexico related to USMCA compliance and enforcement.

This trip could have a long-standing impact for Mexico’s relationship with the US – and US society – and the voters that will determine the future of this country in the decades to come. Lopez Obrador’s meeting with Trump could well become a ‘travel now, pay later’ moment in Mexico-US relations.

Back in April, nervousness about external debts reached its peak when highly-respected economists Carmen Reinhart and Kenneth Rogoff suggested emerging economies with less than a AAA credit rating be offered a moratorium on all their external debt service payments.

Although such a proposal might make sense if emerging economies were actually facing any serious shortage of access to foreign exchange, it is a difficult case to make. What we should worry about is not the external debt of emerging economies, but rather the large increases in government debts denominated in their own currencies.

In the first six months of 2020, borrowers from emerging economies issued more than $400 billion of Eurobonds to international investors, up by one-fifth over the same period in 2019. Most of these bonds were sold by borrowers with relatively high credit ratings, but many of the poorest countries do not fear for their access to international capital markets - largely because the US Federal Reserve increased global supply of dollars to a point where their availability is beyond question.

Much of the panic about emerging economies’ external debt comes from ‘sticker shock’ - the bald fact that developing countries’ external debt rose by $4.1 trillion in the decade to 2018 generates much hand-wringing.

But the increase in gross external debt of developing countries looks a lot scarier than the net increase in debt, which sets off a country’s foreign assets - mostly foreign exchange reserves - against its liabilities. And it is net that counts.

At the end of 2018, foreign exchange reserves covered 70% of the external debt of low and middle income developing countries - much lower than a decade ago, when that coverage was above 100%. But in the 1980s and 1990s – two decades of financial instability largely because of excessive foreign debt – the coverage was 15%. By that measure, we are far from crisis territory.

Complacency about the external debt burden of developing countries is quite wrong. But, if complacency is misplaced, so is panic.

The debt growing most worryingly is the domestic debt of governments. There are large, systemically important emerging economies who will suffer eye-watering increases in public debt this year thanks to a combination of collapsing GDP and the fiscal effort needed to save lives.

In Brazil, public debt is rising from 75% GDP last year to a level that could top 100% in 2020. South African public debt is rising from just over 60% last year to something close to 80% GDP. These are truly unprecedented levels of debt.

So why worry about a government’s domestic debt? These are debts which are denominated in these countries’ own currency. So surely the central bank can just print the currency needed to repay their obligations if more conventional solutions – such as tax increases – will not work.

But it is one thing for the US Federal Reserve to increase supply of dollars on a massive scale, since the world is hungry for them - it is quite another thing if emerging economies do the same with their currencies which almost entirely lack the many attractions of the dollar. That remains the currency of the pre-eminent global superpower whose capital markets offer legal certainty and depth of liquidity. And other highly developed economies have a similar privilege.

And yet printing money – in effect, asking the central bank to finance budget deficits – does seem as though it could become a more attractive option for many emerging countries. Importantly, international fund managers have lost interest in buying bonds issued by emerging economy governments in their local currencies. Just a few years ago, foreign investors owned more than 40% of South Africa’s public debt. That has fallen sharply to 30% and is unlikely to rise.

Monetising budget deficits was once anathema, since it was routinely associated with uncontrolled rates of inflation - bad news not only for firms trying to decide whether to invest but also for the poor, who suffer disproportionately when inflation accelerates.

Right now there are emerging economies – such as Indonesia – whose central banks lend directly to the government, and the sky has not fallen in. The rupiah has been remarkably stable this year. However, there are other examples – Argentina, Turkey – where central bank financing of government deficits has been associated with uncomfortably high inflation rates.

This needs careful watching. The biggest risk is the accumulation of public debt threatening longer-term growth. If firms stop investing because they worry about the risks to the value of their currency as domestic public debt explodes, emerging economies will have a tough time growing their way out of these debts.

It could be this, rather than the external debt of emerging economies, that is the biggest risk to the post-coronavirus economic environment in the developing world.

Although the Armenian-Azerbaijani conflict is focused on the Line of Contact around Nagorny Karabakh, a new - and significant - outbreak of violence has happened some 300 kilometres away on high ground along the de jure Armenia-Azerbaijan border.

Although not a first, violence in this area has generally been contained by the proximity of major transport and infrastructure arteries, and of civilian populations on both sides of the border. Plus, unlike in Nagorny Karabakh, the extended deterrents conferred by Armenia’s membership of the Collective Security Treaty Organization (CSTO) and bilateral agreements with Russia are also – theoretically at least – in force.

Despite this, battlespaces opened rapidly, with bombardment of civilian homes, drone strikes and cyberattacks on government and other sites being widely reported by both sides. At the time of writing, combined reported casualties were already at least 16, the highest for a single incident since April 2016’s ‘four-day war’.

Most are known to be Azerbaijani combatants, including the highest-ranking Azerbaijani serviceman to be killed in action since the 1990s – the respected Major General Polad Hashimov. And, although rumoured to be removed soon anyway following a campaign of negative briefing, Azerbaijani foreign minister Elmar Mammadyarov was publicly blamed in the immediate aftermath for ‘meaningless’ diplomacy and dismissed. He was replaced by education minister Jeyhun Bayramov.

Origins of the clashes

How the fighting began remains unclear. The escalation did not appear to result from a coordinated offensive operation of the kind that led to the four-day war, nor are there obvious strategic goals for either side in terms of the international border. There does appear to have been an element of surprise as an Azerbaijani vehicle unexpectedly encountered a new Armenian post, triggering deadly artillery exchanges.

Unclear boundaries in highland terrain may have played a role. Although referred to as the international border, the de jure boundary between Armenia and Azerbaijan - previously an inconsequential internal administrative boundary in the Soviet Union - is not clearly demarcated in many areas and does not coincide with lines of actual control.

Here, as in Nakhichevan - Azerbaijan’s exclave bordering Armenia and Iran - Armenian and Azerbaijani forces have been engaged in long-term, incremental competition for tactical advantage by claiming higher ground in ‘no man’s lands’. But in remote and cartographically ambiguous areas, the precise location of borders - and even place-names - are unclear, and rival forces can unexpectedly meet their adversaries.

Although clear strategic objectives appear absent, what might then have been a lesser incident escalated purposefully into a crisis – suggesting a political rationale.

A missed opportunity for a negotiations reset

Both Armenia and Azerbaijan began 2020 with unfinished consolidations of domestic power - whether bottom-up in the case of Armenia’s ‘Velvet Revolution’, or top-down in the case of Azerbaijan elite renewal. COVID-19 then added further challenges, with the government of Armenia facing significant domestic criticism for its handling of the pandemic, while numerous opposition activists in Azerbaijan were arrested, and the country’s economic vulnerability to external shocks was highlighted.

But throughout this, the frontlines did remain calm - as they generally have since the three-year period from 2014-2017 which witnessed regular skirmishes, use of heavy weaponry and four days of intensive combat in April 2016. In January 2019, the OSCE Minsk Group made the often-cited announcement that the foreign ministers of Armenia and Azerbaijan had agreed on the necessity of ‘preparing their populations for peace’.

Although the quietest year on the frontline since the 1990s then followed, neither side invested seriously in a peace strategy. After a reasonable start and moves towards humanitarian cooperation, relations between President Ilham Aliyev and Prime Minister Nikol Pashinyan eventually visibly soured.

Several moves, such as the go-ahead for new infrastructure in the occupied territories and Pashinyan’s attendance at de facto leader Arayik Harutyunyan’s inauguration in Nagorny Karabakh, were received in Azerbaijan as evidence of Armenian insincerity towards the peace process.

More inflammatory rhetoric then resumed, leading the OSCE Minsk Group to call for calm at the end of June. As recently as July 7, President Aliyev expressed public criticism of the peace process and emphasised the validity of Azerbaijan’s right to use force.

Each new round of Armenian-Azerbaijani fighting serves as an audit of the various restraining factors preventing a larger war. A Russian-Euro-Atlantic-Iranian consensus on proactively containing any new Armenian-Azerbaijani war appears to still hold, although senior-level attention from US secretary of state Mike Pompeo trailed that of his counterparts.

Russia acted quickly to offer mediation, reflecting the reality that any large-scale Armenia-Azerbaijan war would test Russia’s extended deterrence guarantees to Armenia. As in April 2016, Turkey has been vigorous in its support of Azerbaijan, raising concerns in Armenia and drawing oblique warnings from Russia. On the other hand, the CSTO - much to Armenian chagrin - dithered, initially calling then postponing a meeting citing the need for more time to study the situation.

Unprecedented spontaneous demonstrations in Baku called for war with Armenia, broke into the Azerbaijani parliament and, in some cases, articulated anti-government slogans. In the absence of reliable polling, such protests cannot be taken as evidence of a popular consensus in favour of war.

But they do underline the importance of the conflict as the one issue in Azerbaijan where open protest is accepted as legitimate and cannot easily be dispersed. As losses over the past week are counted, the dismissal of the foreign minister may not be sufficient to quell public anger.

Prospects are now real of a return to the dynamics in 2014-15: recursive low-level violence aimed at influencing the diplomatic calendar and public opinion while remaining below the deterrence threshold for triggering active external involvement.

The UK’s decision to ban its mobile providers from buying new Huawei 5G equipment after December 2020 and removing all the company’s 5G kit from their networks by 2027 is a blow to Huawei and China, but it is one battle in a long war that the West is currently losing.

5G’s significance for the next generation of technology is indisputable and so is its critical role in helping countries achieve digital transformation and economic success. Not only does it offer faster and better connection speeds and greater capacity, it also transforms the way people interact with online services. And it will allow industry to automate and optimize processes that are not possible today.

Due to its transformative importance, what is in essence a technological issue has turned into a contest over global technological leadership that extends beyond the US-China rivalry and has created tensions between the US and its long-time allies. Yet 5G is just one key technology in a more expansive landscape that will underpin the future of the world’s critical infrastructure, including in areas such as quantum computing, biotechnology, artificial intelligence, the internet of things and big data.

To achieve technological leadership in these domains requires governments to invest in a long-term, strategic and agile vision that is able to encompass the interdependencies between these areas and then leverage the resulting technological advances for economic progress. It also requires governments working with each other and with the private sector to support research and development and to create companies with leading-edge technologies that can compete globally.

China understands this and has a national and international vision to establish itself as a technological superpower. Re-balancing from a hub of labour-intensive manufacturing to a global innovation powerhouse is the absolute priority of the ruling Chinese Communist Party.

China’s state-led approach

In the earlier part of this journey, commercial espionage and IP theft of western R&D were at the heart of the Chinese way of competing. Now, Beijing is cultivating national champions that can drive China’s technological innovation, with the goal of using domestic suppliers to reduce reliance on foreign technology at home as well as extending its international outreach. 

In the 5G area, Beijing has introduced domestically the so-called ‘New Infrastructure Investments Fund’, which earmarks special loans to boost 5G technology applications in medical devices, electric vehicles and communication platforms. This Fund constitutes a major part of the stimulus package for China’s post-COVID economic recovery.

Apart from 5G, China's recent launch of a second state-funded semiconductor development fund valued at $29 billion, following an earlier $20 billion fund for the same purpose, shows the extent to which state financial resources are being utilized in China’s quest to become technologically self-sufficient.

It is too early to know if the Chinese government’s industrial policies will eventually achieve the technological self-sufficiency Beijing has long desired. But its growing national capabilities have stoked serious concerns across the West and led to the current US administration’s determined effort to dismantle Chinese high-tech companies.

China’s approach to macroeconomic management diverges significantly from that of the US and other market economies, particularly in its policy towards driving innovation.  Due to the legacy of a state-planned economy, China is certain that simply relying on market forces is insufficient.

While Beijing financially supports government-controlled technological enterprises, Washington takes  a laissez-faire, light-touch approach by the state to the business sector. The US believes that a politicized process of distributing public money is inherently susceptible to rent-seeking and corruption, and gets in the way of competitive innovation. In line with most liberal economists, many Western governments believe the government should refrain from market intervention. For its part, Beijing stresses a state-dominated economy as a necessary precondition both to the future growth of the Chinese economy and to the legitimization of one-party rule. 

If the pro-market economists’ view is correct, the US should have little to fear from Chinese industrial innovation policy in the long-term. Let Beijing waste money and distort resource allocation, while Washington follows its private sector-led principles, confident that this approach will produce a more competitive economy in the long run.

Using the leverage of technical standards

But one area that should concern the US and that illustrates the Chinese vision for global technological dominance is technical standard setting. Technical standards determine how technologies work with each other, enabling their interoperability around the world, meaning they can function irrespective of where they are being used.

The Chinese leadership has long understood the relationship between technical standards and economic power. Standards help to monetize technological innovation and research and can help shape new technologies. China has therefore been playing an increasingly active role in international standards organizations to legitimize Chinese technologies, whereas the US, which historically has been highly influential in this area, has not been participating as much or as effectively.

China has also been using its Belt and Road Initiative (BRI) as an opportunity to internationalize the distribution of its standards to countries signed up to the BRI. The so-called Digital Silk Road, which has been described as China’s most important global governance initiative, acts as a route to accelerate this process. Later this year, China is expected to launch its new ‘China Standards 2035’ plan, which aims to shape how the next generation of technologies will work together.

China’s preferred model and its recent actions have given Western leaders much to worry about.  But standing up to China’s growing global influence in high technology and re-establishing the West’s desired technological edge will take much more than achieving a common front on excluding China from their 5G networks. It requires a long-term vision built on the power of competitive markets, backed by solid investment in the next generation of technology. This will require, in turn, much greater cooperation between Western governments and between them and their private sectors.

And, whilst recent protective steps taken in Washington and other Western capitals may slow down China’s trailblazing in the technology sphere, it will only hasten China's determination to become tech self-sufficient in the long term. This will increase the probability of a splintered internet, which will have negative repercussions for all.

The UK has been redeploying diplomatic, defence and development capabilities towards the Sahel since 2018 – a strategic pivot intended to deliver development impact, address long term security threats to UK interests and support alliances with international partners.

The Sahel is one of Africa’s poorest and most fragile regions and has witnessed an escalation in jihadist activity, illegal migration and trafficking since a security crisis erupted in Mali in 2012.

The crisis spread to Niger and Burkina Faso and may now spill over into Côte d’Ivoire, Ghana and Senegal. With Nigeria also facing insurgency in the Lake Chad basin, all major regional security and economic anchors in the region are under threat including key UK partners. 

Reviewing the Sahel pivot

This pivot has already resulted in the expanding of UK embassies in Senegal, Mauritania and Mali and public commitments to opening new ones in Chad and Niger.

Back in London, there has also been a large uplift of staff including the setting up of a cross-Whitehall Joint Sahel Department in late 2018 and plans for more UK civil servants to have placements with the French government on the Sahel.

Yet in light of looming economic shocks from Brexit and Covid-19, there has been a lively debate in Whitehall on whether this is stretching UK resources too thin in an area of Africa that does not have close ties with the UK.

UK ministers are this week reviewing the Sahel pivot and will decide if it continues or grinds to a standstill including whether full embassies are opened in Niger and Chad.

This debate is not new. The UK has opened and closed its diplomatic missions in the Sahel in fits and starts since the early 1960s. More recently, MI6 pushed the re-opening of the embassy in Bamako in 2010 foreseeing Mali’s fragility before the current crisis started.

Partnering with the French

But though the Sahel is likely to dominate the Africa peace and security agenda for decades to come, the UK’s serious engagement in the region is not just about strategic foresight.

It also fulfils two other objectives: of partnership with two key bilateral allies, particularly France, and authority and leverage in multilateral fora such as the United Nations, African Union and the EU.

Partnering with the French in the Sahel has become even more important due to Brexit and the need to reinforce relationships with key European partners.

In 2012, David Cameron concluded that the rapid French response to stop a jihadist advance on the Malian capital Bamako was 'in our interests' and authorized the deployment of 330 UK military personnel, two cargo aircraft and a surveillance plane.

In July 2018, the UK announced further support to French led Opération Barkhane sending three Royal Air Force Chinook helicopters – supported by almost 100 personnel – which remain in theatre to this day.

UN commitment

Demonstrating the UK’s commitment to UN peacekeeping has also resulted in the deployment of 250 troops to join a UN peacekeeping mission to Mali later this year.

Based in Gao, these troops will form a long-range reconnaissance capability providing threat awareness, contributing to the protection of civilians and helping to prevent conflict from spilling over to neighbouring states.

This represents one of the biggest British peacekeeping deployments since Bosnia and it will be the most dangerous mission for British forces since Afghanistan.

The UK is also one of the largest humanitarian donors to the region and has contributed over £500 million in bilateral development and humanitarian assistance since 2015.

With COVID-19 now an additional challenge in the Sahel, a significant part of the UK’s £764 million contribution to the global COVID-19 effort will be channelled to the region.

New embassies are 'global Britain' strategy pillars

Keeping an eye on the impact of these initiatives requires a meaningful UK diplomatic network on the ground.

New embassies in the Sahel cost a fraction of maintaining three Chinook helicopters in the region providing the government real time insight in the post-Brexit absence of a regular supply of country analysis from the European External Action Service and support for the UK’s international relationships.

It also underlines the UK’s commitment to UN peacekeeping and standing as a permanent member of the UN Security Council in light of regular discussions of the Sahel.

The tripartite ministerial review of the Sahel pivot by the secretaries of state for foreign affairs, international development and defence that is underway should not penny pinch by reversing the opening of small embassies in Niger and Chad nor threaten the overall strategic focus on the Sahel – most recently welcomed by the House of Lord’s Select Committee on International Relations and Defence in its July report on UK Africa policy.

Instead, UK ministers should focus on better defining what the UK’s specific objectives are in the Sahel and particularly what the UK plans to do about Burkina Faso whose rapidly deteriorating security threatens to over-spill into key UK partner Ghana.

This article was first published in the Daily Telegraph.

Days before the publication of last week’s report into Russian activity in the UK, and the subsequent call from several UK parliamentarians for a swift response to the ‘Russian threat’, Russia tested a new anti-satellite weapon capability releasing a small projectile from its Kosmos-2543 sub-satellite.

Kosmos-2543, a small satellite contained inside a larger satellite, Kosmos-2542, and 'birthed’ into orbit in late 2019, recently came under scrutiny in January 2020 when it was reportedly caught ‘buzzing’ US spy satellites in Low Earth Orbit.

By releasing a small projectile from the Kosmos-2543 sub-satellite, the US claims that Russia has launched a new projectile into orbit with relatively high speed – estimated at around 500 km per hour – leading to concerns about the potential of Russia to develop this technology as a weapon to target foreign satellites.

It is not the first time Moscow has relied on a Russian doll – or matryoshka – approach to launching satellites into outer space. In October 2017, a sub-satellite, Kosmos-2521, was ejected from its main satellite, Kosmos-2519, into a high-speed object in low orbit.

The Russian Ministry of Defence has declared that its latest activity is just for ‘routine’ inspections and surveillance of Russia’s other space assets, with the government’s official statement avoiding recognizing the existence of the new object while, at the same time, Kremlin spokesperson, Dmitry Peskov, recalling Russia’s commitment for the ‘complete demilitarization’ of space.

While it is possible that Russia’s matryoshka satellites have indeed been developed to carry out routine repairs of Russia’s space fleet, they also have the potential to interfere with, and destroy, other satellites with such action needing to be considered a threat until Russia demonstrates otherwise.

Russia’s use of outer space

Russia is not the only state investigating anti-satellite weaponry capabilities. There is a wider trend (e.g. China, India, US) to demonstrate advanced space capabilities with nefarious, if not directly offensive, intent. But, for the past few years, Russia in particular, has been provocative in testing its space weapon capabilities. 

For example, in April 2020, Russia launched and tested into low orbit the PL-19 Nudol direct-ascent anti-satellite (DA-ASAT) interceptor missile system from the Plesetsk Cosmodrome demonstrating its space assets with potential offensive capabilities, in particular, Russia’s capacity to destroy satellites in Low Earth Orbit.

In addition, the satellites, Kosmos-2535 and Kosmos-2536, launched in July 2019, are also suspected to be operating beyond their official mission of studying Russian orbital assets. It is reported that these satellites conducted a close proximity activity, coming within one kilometre from each other, which led to the creation of orbital debris.

Russia’s space strategy

By exploiting asymmetric advantages in space, Russia seeks to leverage its capabilities against competitors in space and in other domains, falling in line with its wider military strategy as well as its current Federal Space Programme for 2016 to 2025.

Russian space activities also have a cyber and electronic warfare angle. With the help of remote-sensing capabilities, Russian spy satellites potentially seek to disrupt military and civilian satellite communications and navigation systems. Indeed, in 2018, French authorities publicly accused Russia of seeking to intercept communication satellites for French and Italian armed forces putting data transmission through Western civilian and military satellites at risk of interception.

Furthermore, earlier this year, both Kosmos-2542 and 2543 came within 160 kilometres of a US spy satellite, US KH-11, similarly to Russia ‘buzzing’ around the British Isles or submarine surveillance that Norway and Sweden have been subjected to recently.

Shadowing and tailing in space is regarded as spying and this recent anti-satellite weapon test is part of a trend which demonstrates Russia’s persistent space strategy for close-proximity operations with foreign countries.

Orbital hypocrisy

Despite Russia’s calls for a treaty to prevent the placement of weapons in outer space, there remains little international trust in Russia’s behaviour in space so far with a US-Russia Space Security Exchange meeting scheduled to take place in Vienna on 27 July to discuss outer space stability and security.

This is amid a backdrop of bilateral nuclear arms control talks on the extension of the extant nuclear weapons reduction treaty, New START, which is scheduled to expire in February 2021. There is no guarantee, however, that the talks will achieve anything especially since the future of outer space requires a wider multilateral dialogue with all parties involved – including China.

Anti-satellite tests (ASATs) are a particularly dangerous form of weapon. Not only do they create major vulnerabilities in a domain where so much of humanity depends on for navigation, communications and environmental monitoring, they are also primarily a target for destabilization and undermining global positioning information in times of crisis.

And, perhaps most significantly, they possess the highly destructive potential to create even more space debris in Earth’s orbits that endanger the peaceful use of satellites and could do serious damage to large parts of the economies of developed and developing countries.

Avoiding space warfare

Space is for all but there is a risk that it is being hijacked by a few. It is time to re-assert and reinforce the rules, principles and norms of responsible state behaviour in outer space enshrined in the 1967 Outer Space Treaty and its associated international agreements.

And, because the treaty specifically prohibits stationing nuclear weapons and other weapons of mass destruction in orbit or on celestial bodies, it is necessary to build on it to ban other types of weapons in space.

Space has been militarized since 1957 with the launch of Soviet satellite Sputnik. But the increasing weaponization of space adds more uncertainty, and unveils more vulnerabilities, that states need to address before space warfare becomes a reality.