Kurdish Policy Analysis

SULAIMANI, Kurdistan Region of Iraq —By Dr. Pshtiwan Faraj | Kurdish Policy Analysis

From disrupted supply chains to geopolitical rivalry, the world is discovering that decades of prosperity depended on a fragile security order that can no longer be taken for granted.

The era of cheap goods and predictable globalization is ending as geopolitical tensions, supply chain disruptions, and security reshape the global economy.

Why have the global rifts gotten bigger?

"Security is far more important than economic prosperity. Adam Smith

Globalization has taught us to forget where materials come from. If there is a shortage of gas in Europe, they bring it from Qatar. If there is a shortage of diesel in Germany, they steal it elsewhere This is how it looked on paper.

But none of this was automatic. Global abundance depended on a series of conditions rare in human history: open straits, secure merchant ships, cheap insurance, financial facilities, overcapacity refineries, strategic warehouses, and countries willing to continue trading even when they did not like each other The system worked as long as all the pieces worked together, but this complex puzzle is becoming more and more cracked, and “market forces” no longer decide.

The Strait of Hormuz is the gateway to the Arabian Gulf, Bab Mandab is the southern gateway to the Red Sea, the Suez Canal is the shortcut between Asia and Europe, the Bosphorus is the gateway to the Black Sea When Hormuz is under threat, the problem is not only that a barrel of oil becomes more expensive, but that an oil tanker must find an insurance company willing to take the risk Militarily open, but commercially closed, no need to sink ships, just make the voyage an unfunded route, several shipowners are willing to send their oil tankers to a danger that they may not be able to return after loading... and then there is the Red Sea. 

Saudi Arabia could divert part of Hormuz through pipelines to the port of Yanbu. But from there, the oil must also exit through Bab Mandab or head north to the Suez Canal, meaning that the road built to bypass one obstacle immediately falls into another. What a strange geography in the Middle East! There is really no way out. As for other ships outside the Arabian Gulf, if Bab Mandab is dangerous, ships will choose the long route around Africa, the journey will be longer, thus each ship will make fewer trips per year Drowning in the depths of the sea... and then the Black Sea comes into the equation.

The Black Sea has become one of the main economic fronts of the Russian-Ukrainian war, with Russia trying to attack the sea route through which Ukraine sends grain and agricultural products by attacking ports, warehouses and ships in the Odessa region Russian oil, aimed at reducing Moscow's energy revenues and hitting fuel supplies for the war effort, but the disruption doesn't stop in Russia and Ukraine Kazakhstan has been forced to cut production because it has no other fast way to get its oil to market. The war has made shipments dependent not only on resources but also on ports, ship availability and insurers' willingness to cover the risk.

Another front is Europe, Europe is not just connected by streets, railways and ports, in not. Its modern system hides a much older transportation route: the rivers that connect the Rhine, Rotterdam and Antwerp to the heart of German technology and industry, the Danube through central Europe to the Balkans and the Black Sea, French rivers cool their nuclear power plants Southeastern Europe produces hydroelectricity, for decades, Europeans treated living water as if it were a fixed factor, but a river is not a railway; When the water level drops, you can't just add another wagon and wagon. Here the sea boats continue to move, but they carry less load; What used to be shipped in one ship now requires two, three or more voyages. Fuel, coal, chemicals and coal may have reached the port, but transportation to factories will become more expensive and slower and forced industrial companies to curtail their activities.

In Europe, however, rivers are not the only means of transportation; Rather, they are part of the energy system. Nuclear plants need water for cooling, and hydropower plants need sewage. When the river runs low and warms, the plant is forced to cut production just as heat waves increase demand for electricity Europe will face the same problems in two directions: it will be harder to transport energy to the continent, and it will be harder to produce energy within the continent, ships will carry less cargo, nuclear power plants will produce less electricity. No river need be completely dry; Enough to lose a little bit of his stamina.

Economists and markets are used to measuring barrels, tons and cubic meters, paying attention to how much oil is produced, how much gas is stored in warehouses and how many shipments go to port, but the real economy does not rely solely on the amount of material available; Rather, it depends on the ability to continuously transport the material from the well to the refinery, from the refinery to the port, from the port to the river, and from the river to the factory or consumer.

When some of these currents are hit at the same time, the system begins to lose its efficiency altogether. Hormuz threatens Gulf energy extraction, Bab Mandab and Suez threaten the shortcut between Asia and Europe They limit the continent, few refineries reduce the ability to convert crude oil into diesel, jet fuel and gasoline, hot and low-water rivers force operators of nuclear and French plants to cut production, the Panama Canal depends on rainfall Very long journeys.

None of these obstacles need to be completely closed to cause serious damage, just enough for each to lose a small part of its capacity, a ship to carry less cargo due to water shortages, an oil tanker to wait a week longer to get insurance Each of these events may seem limited if viewed separately, but when they all occur together, they combine to become a structural change in the entire global economy.

Globalization was not born spontaneously, not a natural result of technology, containers and the Internet, but a political agreement. After World War II, the United States offered the world a simple covenant: It worked in an American system, the dollar became the main currency, US banks financed trade, US ships protected the oceans, insurance companies insured cargo, and participating countries had access to markets, capital, technology, and raw materials.

The Europeans could reduce their fleet, the Japanese could import almost all their energy, the Chinese could build an export-based economy, the Gulf countries could send oil to the depths of the world, even small countries could enter global trade without controlling their sea lanes undertook, but this agreement was always more one-sided than it appeared.

The United States not only protected world trade, but allowed its competitors to grow within a system that financed itself. Europe created a welfare state under the umbrella of US security He accepted, not because the system was fair, but because it served a larger goal: to stop the Soviet Union and create a world front under the leadership of the United States.

From the US perspective, globalization gradually changed from a strategic tool to a strategic burden. The United States continued to protect the sea, defend its energy supply and keep its market open. Why should US ships defend Chinese oil tankers? Why should the American taxpayer pay the cost of European energy security? Why should American companies compete with countries that benefit from market access, subsidized energy, and a security umbrella that they themselves don’t pay the cost for? When this question is asked, the whole structure begins to change, because globalization cannot survive through trade alone; It needs someone to secure the trade, a credible currency, an insurance system, naval vessels and a country willing to bear the costs when something goes wrong.

China has large ships but not a global network of bases, alliances and currency to run the entire system. Europe has capital but no unified military force or foreign policy. Russia can destroy routes but cannot protect them We will not cross from the American order to a new one; Every route, every strait, every port and every pipeline becomes a tool of pressure again. Insurance becomes a political issue, credibility becomes a strategy, shipping becomes a national issue. It is slower, less efficient, but the point is exactly that, globalization was built on the assumption that security is free, and now the world finds that security was provided with financial support.

For thirty years, the world treated sea lanes as if they were part of nature, like winds and tides, oil tankers leaving the Arabian Gulf, container ships passing the Red Sea, grain passing the Black Sea, cargo passing through the Panama Canal, Suez, Malacca and Gibraltar win, the computer would find another way, if one port stopped, the supply chain would be diverted to the next port, everything would look smooth, everything would arrive on time… But sea lanes are not a natural system; They are a political system. A ship doesn't sail just because there is water under it. It needs insurance, credibility, staff, a ready port, fuel, repairs, a backup system and a government that believes the journey will end without seizure or missile launch.

Globalization was built on the assumption that these flows would be fast, reliable, and cheap, relying on ships that arrived on time, rivers that remained navigable, insurance companies that agreed to take the risk, cheap financial disclosure, and countries that continued to trade It would protect major sea lanes, but the New World no longer gives absolute priority to “efficiency”; Instead, it prioritizes “survival and security”.

Countries are expanding their warehouses, companies are looking for closer and safer suppliers, governments are financing ports, merchant ships, refineries, factories and power grids, a cheap individual route is being replaced by more expensive routes, just-in-time supply is being replaced by storage This is more expensive, but the high price is not a detriment to the new system; rather, it is a direct result of itself.

The low prices of the era of globalization did not come from the fact that the world was stable, simple or risk-free; Rather, they came from the fact that much of the risk was not counted in the price, the US bore the cost of maintaining sea lanes, companies reduced inventories and excess capacity to strengthen their financial balances, Someone else paid for security, alternatives and risk. Now these costs are returned to the market. Insurance becomes more expensive, warehouses get bigger, routes get longer, domestic production is subsidized and companies are asked to pay for resistance. It was always there, what has changed is that it can no longer be hidden in the price, so this is not just a temporary period of shipping delay; Rather, it is a transition from a world where the sea connected distant economies and made distance meaningless, to a world where geography again begins to determine who can produce, who can trade and who goes without supply.

Thank you for reading!

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