Economic Echoes Gaza's Reality Unveiled

On October 7th, 2023, a brutal militant assault in the southern sections of the Gaza Strip and the Sinai Peninsula ignited retaliatory war, escalating tensions in the Middle Eastern Levant. While numerous factors contribute to conflicts, economic considerations often take centre stage, with nations either battling resource scarcity or safeguarding their existing assets.

A Glimpse into Hell  

A besieged state finds itself in a state of excess, and a country the size of a city has one of the world’s most capable martial assets. These capabilities don’t however materialize overnight but evolve over time. So how does a country under siege find weapons? The answer is gunrunning or the illicit arms trade. You may now be curious about its relevance to economics, and the answer lies in its pervasive impact on every facet.

Transitioning from the murky world of conflict, let’s delve into the broader landscape of the global arms trade. The global illicit arms trade, a shadowy enterprise, rakes in a mind-boggling $250 million annually, making up around 10-20% of the total arms market. It’s not just about weapons; it concerns the uneasy interaction between geopolitics and the underground scene.

Picture this: small arms, RPGs, and man-portable air defences changing hands in the aftermath of collapsed nations and toppled regimes. Libya, once a powerhouse fresh out of the Toyota Wars, has now found its ammo depots like Jufra and Sukna raided, flooding the arms black market after Gaddafi’s fall. Now, let’s zoom in on Gaza, a hotspot where the demand for weapons never seems to fade. In these conflict zones, the illicit arms trade becomes a lifeline when legal routes fail. The suppliers, capitalising on the instability of resource-rich but beleaguered regions, not only feed the flames of violence but also leave a lasting scar on economies. Somalia, Botswana, and Venezuela – bear witness to this ruthless cycle of conflict and economic instability. So, what’s the story we unveil as we dig into this underworld of clandestine arms? It’s a disconcerting mix of conflict, economics, and the exploitation of vulnerable nations. In this realm where weapons become commodities and violence turns into profit, the numbers tell a tale echoing through the streets of Gaza and beyond – a tale of both despair and profit in a world caught between shadows and stark realities.

Red Gold?

Moving away from the illicit side of things in the realm of global arms trade, the figures speak volumes. The market is valued at a staggering $112 billion as of 2022, with the top 5 exporters claiming a lion’s share at $95 billion. The United States, currently witnessing an all-time high in military aid, stands as a dominating force in this lucrative arena.

The aftermath of the Russo-Ukrainian conflict triggered a seismic shift in demand dynamics. Russian equipment faltered, propelling Western weaponry into the spotlight, especially after the Gaza Strip conflict, where multi-purpose fighter-bombers showcased their effectiveness. The world now sees weapons not just as tools of war but as the new “red gold”, with the West holding the key to this metaphorical gold mine.

Before the conflicts of 2022-23, Russia was a major contender in arms exports, with India being its largest buyer. Notable exports included the S-400 and S-300 anti-air defence systems, priced at $600 million for export versions with a $200 million manufacturing cost per unit. These systems boast intricate radar detection and the capability to intercept hypersonic ICBMs. However, Russian equipment faced setbacks, evident in the interception of Su-35s by S-300s and the S-400’s struggle against modern drones. Buyers, including India, pivoted towards the West, stimulating the growth of indigenous arms industries. Enter Iran, playing a more illicit and politically inclined role in the defence industry. Western efficiency, exemplified by Javelin and N-law ATGMs (anti-tank guided missile systems), and Stinger MANPADS(man-portable air defences), performance on various fronts, especially the Russo-Ukrainian front, has been underscored globally. Poland and Switzerland contribute to Lockheed Martin’s ascendancy as the largest arms manufacturer in the US, acquiring Patriot systems as part of their rearmament programs. The F-35, a multi-role fighter developed by Lockheed Martin in collaboration with eight countries, has become a cornerstone in this narrative. Sales to the US military alone net a colossal $30 billion, with Israel set to purchase 50 f-35s by 2035.

In the crucible of conflict, the Gaza Strip has become a proving ground for Israel’s defence industry prowess. Precision-guided mortar shells like the Iron Sting and the Iron Dome missile systems, products of Israel’s homegrown industry, have become global phenomena. As the world watches, prospective buyers queue up for these battle-tested technologies, illustrating a unique blend of war and business internationally.

War Profiteering

War, often dubbed a profitable venture, is a complex interplay of economic and strategic interests. In 2023, global conflicts like the Russian-Ukrainian war, the Niger coup, and the West African conflict have unfolded, each rooted in the economic dynamics of resource scarcity or abundance.

The Gaza Strip conflict, seemingly ideological, reveals an economic war for strategic control. Iran, eyeing an uninterrupted trade corridor to the Mediterranean, seeks to bypass embargoes and boost trade in Europe. The U.S., backing Israel, benefits from a reliable ally in the region, facilitating Western companies. Notably, mining and petrochemical expertise in the Middle East comes largely from Western firms like Schlumberger, a French company commanding 40% of the market share in the oil drilling and mining equipment supply in the Middle East valued at $58.8 billion. In the intricate dance of conflict, economic interests often overshadow ideologies, showcasing the dual nature of warfare in the contemporary world.

Where do the Fumes Fly?

The ongoing Gaza conflict, now spanning 17 days, has become a focal point globally, capturing headlines and prompting reflections on the interplay between war, profit, and media narratives. Israel, despite its destruction and loss, stands as one of the foremost developed economies in the Middle East, leveraging its strategic location as a secure port of access.

In stark contrast, Gaza, controlled by Hamas, grapples with economic challenges. Though the region has received over $4.5 billion in aid, mismanagement has led to dire consequences. With 45% of Gaza’s population unemployed, regular power cuts, and food shortages, much of the aid seems to end up in the deep pockets of Hamas leaders and the de facto government in the region.

The economic impact extends beyond the conflict zone. Oil companies like Shell witnessed profits surge as concerns over regional fallout drove up oil prices. Shell’s stock price has risen by 1.5% to 2763p a share, reaching a record high. Brent crude has surged by over 7% since the conflict’s onset, surpassing $90 a barrel. This economic dynamic, however, is not new to Shell, as the company had previously assisted the Nigerian government in quelling protests to maintain steady profits in the region.

Yin or Yang? 

In a paradoxical dance, war and commerce have shaped human evolution. Wars have been catalysts for commerce and technological leaps, fostering innovations from steamboats to ironclads. Conflict spurred the need for efficient resource management, driving monetary standardization and the emergence of banks

Simultaneously, commerce has been both a driver and casualty of wars, with nations engaging to secure and expand trade. The 21st century continues this dance, with nations competing for hegemony to control trade routes and resource-rich territories. This modern era prioritizes efficiency in warfare over historical notions of bravery, marking a shift into resource wars where the finite nature of resources is a central concern. As we navigate this landscape, the intricate relationship between war and commerce persists, shaping the trajectory of both conflict and business in the contemporary world.

References

• www.wionnews.com

• www.theguardian.com

• www.statista.com

• www.lockheedmartin.com

• https://UNCTAD.org