Corona and the economy of the Arab oil countries ... What about the future of Chinese trade and projects?

Abdul Hafiz Al-Sawy

While Chen Yulou, deputy governor of the People's Bank of China, announced that the impact of the corona would be short-lived and limited, the media reported the spread of the virus in new places outside China such as South Korea, Israel, Iran and Italy, and limited cases in some Arab countries.

This prompted the director of the International Monetary Fund, Kristalina Georgieva, to say that countries should be cautious in their assessment of the impact of corona on economic growth rates in China and the world.

Georgieva stated that the estimates of central bankers and finance ministers of the Group of Twenty go to the decline in growth due to corona by about 0.4% in China, and by about 0.1% in the world economy.

Georgieva added that the fund is looking at more severe scenarios if the virus continues to spread for a long time, and spread on a global scale, which supports Georgieva's warning that stock exchanges in America and Europe continue to decline due to Corona's concerns.

The oil market was not in isolation from the performance of global exchanges, if prices fell on Monday, February 24, 2020 to 57.08 dollars a barrel of Brent crude, and $ 52.1 a barrel of US crude.

In light of the continuing fears in the economic circles because of Corona, the economic effects on the Arab oil states will undoubtedly be largely negative.

Oil prices in the international market at the beginning of January 2020 were about 66.2 dollars per barrel of Brent crude and 61.1 dollars a barrel of American crude, meaning that the rate of decline in oil prices due to corona amounted to 13.8% for Brent crude and 14.7% for American crude.

The current prices are not economic in light of the budget estimates of the Arab oil states, which includes the Gulf states in addition to Iraq, Libya and Algeria, although there are other countries that export oil and gas, even in small quantities such as Egypt, but these prices mean the continuation of the financing crisis in these countries, and their approval On loans to finance the budget deficit.

What helped the effects of the Corona crisis be limited with regard to the Arab oil budgets, that most of them in preparing the 2020 budget went to weak estimates of oil prices, for example, Saudi Arabia prepared its budget estimates at the price of $ 55 a barrel of oil, and Algeria at $ 45 a barrel, due to anticipation of the bad scenarios of the crisis Trade war between China and America.

However, this hypothesis is considered in light of the oil prices remaining at the level announced on February 24, but if the conditions of confrontation of Corona deteriorate in China and the rest of the world, then there will be another darker reading on the economies of the Arab oil countries, which will have a faster effect on setting public budgets. .

Trade is declining
According to the data of the Gulf Cooperation Council, the trade exchange of the GCC countries with China in 2018 amounted to 173 billion dollars, of which about 97 billion are Gulf commodity exports to China - and oil exports constitute 81% of the total merchandise exports to the world in the same year - while the merchandise imports of the Gulf countries China has about 75 billion dollars.

As for Iraq, the value of its trade exchange with China in 2018 reached about 30 billion dollars, and Algeria had increased the value of its trade exchange with China to about 10 billion dollars, and oil naturally dominates the exports of both Algeria and Iraq to China.

But with the restrictions imposed now on aviation movement to and from China, as well as the reserves that are taken towards trade in general, that will limit the value of trade between China and the Arab oil states, especially in light of the expected decline in China's demand for oil from the international market, Which will affect oil exports to Arab oil countries.

There are expected trends for the foreign trade movement of the Arab oil states to change from their destination to countries other than China, but the recessionary atmosphere resulting from the spread of Corona Virus will be a major determinant in this direction, especially as countries that can be considered as an alternative to China have taken measures that limit the movement of production by them, and these The countries are specifically South Korea and Italy.

And if the political situation between Turkey and the Gulf states is normal, Turkey can achieve commercial advantages from converting Gulf trade to Turkey as an alternative to China, but by virtue of the fact that Saudi Arabia and the Emirates represent the largest economies among the Gulf states, and they have a major political dispute with Turkey, they will undoubtedly work to waste these The opportunity for Turkey.

However, the rest of the Arab oil states, such as Iraq, Algeria, and Libya, do not suffer from problems shifting trade towards Turkey.

The future of investments
China has many relationships with companies and investments in oil and natural gas, as well as providing aid and loans to Arab countries, and the implications of the mysterious future around the elimination of the Corona Virus will put the future of these relations to the test.

There are many major projects that China has recently been associated with the Arab oil states, on top of which are Vision 2030 projects in Saudi Arabia, in addition to that the Silk Road projects were aimed at being in all the Gulf countries through joint investment projects.

The cumulative investment of China in Iraq recently is estimated at 20 billion dollars, and it is generally concentrated in the oil and natural gas sector.

In Algeria, China acquires major projects from roads, the largest mosque, industrial areas, and the expansion of Algeria's airport, as well as the Hamdania Port project and its associated roads and railways, and the project is estimated to cost about $ 3.3 billion.

China has announced its plan to invest abroad by about 130 billion dollars over the next five years, within the framework of its Silk Road project. Undoubtedly, the Arab oil countries have had a share of these investments, given their strong economic ties to China.

But the unknown future of economic conditions globally, and in China in particular, makes us go to say that the existing projects that are implemented by a Chinese company, may be delayed in implementation, especially if they depend on financing through loans from Chinese banks.

Also, the foreign investment plan linked to the Silk Road project became open to many possibilities, after it was controlled by a spirit of certainty.

The absence of the plan
Like many crises in the Arab region, including the oil states, there is no vision of the Arab oil countries to deal with the Corona crisis, and its negative economic repercussions. There may be country scenarios, but they are absent at the regional and institutional levels.

We have not heard an example, for example, of the Organization of Petroleum Exporting Countries (OPEC) as an Arab organization, to talk about the future of Arab oil and its economies in light of the open scenarios of the Corona crisis.

The case of the fragmentation that afflicted the Gulf Cooperation Council after the crisis of the blockade of Qatar is not absent from the observer of the Gulf affairs, as it has become a mere paper entity, despite the fact that the crisis imposes itself, and its negative repercussions may be one of the factors that help end the Gulf differences and think about its economic future, especially in Estimates of the International Monetary Fund have remained likely to run out of Gulf financial reserves.