Monthly Risk Spotlight: November 2023


Severe Drought Severs Global Trade as Panama Canal Reduces Capacity
This past October marks the driest on record for the Panama Canal, an interoceanic waterway that is reliant on fresh water to operate. The severe lack of water for the Panama Canal has caused a major traffic jam to occur on both the Atlantic and Pacific sides of the Isthmus as major container ships, large natural gas-carrying ships, ships laden with brand-new cars, and tourist-filled cruise ships must either wait for an ever-decreasing number of transit slots or make the tough and expensive decision to sail around the continent. A minor slowdown in the Panama Canal could very well have long-lasting effects on global trade while also making consumer items across the globe more expensive.

The main issue at hand is that using the Panama Canal requires a massive amount of water to use the locks that elevate and descend the vessels used to cross the country and reach the ocean on the other side. The water source for the Panama Canal is the large Gatun Lake, which is primarily fed by the Chagres River. However, due to the unprecedented drought conditions in the country, the river and lake are at risk of losing so much water that the draft, or the height of water a ship needs to stay in the water, will not be sufficient for ships to travel through. In September of this year, the Panama Canal Authority (ACP) limited the number of vessels that may transit through the Canal to 32, a significant decrease from the normal 40 transits that took place before the drought. This month, as the situation has not improved, the ACP has further limited the number of daily transit slots to just 25 vessels. Worryingly, if the water situation does not improve by February of 2024, the ACP is warning it may limit transits to just 18 vessels a day, an over 50% reduction in capacity for the Panama Canal.

Even with fewer ships passing through the Canal, the ships that are able to pass through will have to do so with significantly reduced cargo in order to decrease the draft of the ship. This means that ships that do pass will need to carry less cargo or will be forced to unload cargo on the Pacific or Atlantic side of Panama and then rail or truck the goods across the country and reload the cargo at the other terminus.

Although the situation may be dire for Panama, the ultimate consequence for the world could very likely be higher shipping costs for goods coming to and from Asia. In August, the typical cost of shipping freight from Asia to the East Coast of the United States was $2,400; however, the cost is expected to rise to $3,200 this month, with a major spike in cost in February if the drought situation is not resolved. This will directly affect the prices of goods, from the food in stores to the cost of new vehicles and televisions. This is just another reminder that the environmental effects can have a drastic impact on peoples’ finances, even if these environmental concerns are happening far from home.


Who is Hezbollah?
Hezbollah, a Shiite Muslim political party and militant group established in Lebanon, is often referred to as “a state within a state” due to its expansive security, political, and social services network within the country. Presenting itself as a Shiite resistance movement, its ideology was cemented in a 1985 manifesto that highlights the eviction of Western powers from Lebanon’s borders, the obliteration of the Israeli state, and allegiance to Iran’s supreme leader.

The root of Hezbollah traces back to the beginning of the Lebanese Civil War (1975-1990) when there was an armed Palestinian presence in Lebanon. In their discontent, various Lebanese religious communities began vicious attacks against Palestinian factions, Israeli interventions, and other religious communities. Amidst the chaos, a group of Shiites inspired by Iran’s theocratic governance led a resistance against Israeli forces invading southern Lebanon. Iran, seizing an opportunity to broaden its influence, funneled resources, and training to this emerging militia, which came to be known as Hezbollah, or “The Party of God.”

Through the coming years, Hezbollah would make many notable military engagements, with their motives remaining virtually the same since the civil war. That being resentment towards Israel and resistance to Western sway in the Middle East. This has manifested through various alleged global terrorist attacks targeting Israeli and Jewish entities and supporting anti-western agendas. The most recent of these was their 2013 public declaration of involvement in the Syrian Civil War, where they dispatched over seven thousand militants to bolster Iranian and Russian forces in support of Syria.

Hezbollah is led by Hassan Nasrallah, who, since 1992, has facilitated Hezbollah’s extensive social services encompassing infrastructure, healthcare, education, and youth programs. This network has significantly bolstered the organization’s support base in Lebanon amongst all the religious communities. The funding for these services primarily flows from their greatest ally, Iran, which has channeled hundreds of millions of dollars annually to the organization. They also receive lesser support from the Bashar al-Assad regime in Syria and other enterprises. It is due to this funding that has led to where Hezbollah is today. With up to 20,000 active fighters, 20,000 reservists, and an artillery arsenal that is larger than most nations, it’s no surprise why they have been called the most formidable non-state military actor in the Middle East.

Looking ahead to the Israel-Hamas war, it needs to be clarified what Hezbollah’s next move will be. Their political leader has made statements that “a real victory” for the resistance in Gaza and Palestine is their most significant goal for this conflict; however, whether that means they will intervene directly has remained unseen. With discontent brewing amongst their political circle since their 2022 elections, which saw a surge in independent and anti-establishment candidates, there have been hints at a possible erosion of its grip on Lebanon. Regardless, Hezbollah does have an array of options to put pressure on Israel, and starting a two-way war would do so.


China’s Position on Israel/Gaza War
Two major Chinese companies have removed Israel’s name from their maps. Internet users who looked at major map platforms Alibaba and Baidu were able to see the names of Israel’s neighboring countries, but the Jewish state’s name is missing. The maps still show border demarcation and names of major cities like Jerusalem.

China has pitched itself as taking a neutral position regarding the Israel/Hamas war, however, this move, it is said, represents an ambiguity that matches the country’s vague diplomacy in the region. The development comes amid reports of anti-Zionist sentiments being on the rise on Chinese social media platforms. With the amount of censoring the Chinese government partakes in, along with its attentiveness to maps, many accuse the government of antisemitism for allowing Israel’s name to be omitted from maps. Additionally, despite heavy monitoring, inflammatory speech criticizing Israel has increased greatly.

In late October, a state-run newspaper ran an editorial declaring the United States was on the wrong side of history by blindly backing Israel. Many Chinese influencers have also used their large platforms to sympathize with the Palestinian cause, accusing Israel of being a terrorist organization because their airstrikes in Gaza have caused mainly civilian casualties. A prominent professor of International Relations compared Israel’s attacks on Palestine to acts of aggression perpetrated by Nazis. Many believe that the anti-Israeli stance on the Chinese internet is all part of a coordinated campaign.

Despite China’s claims to neutrality, Beijing’s actions since the start of the conflict reflect its longstanding support for Palestine, this includes its refusal to condemn the recent attacks by Hamas. The United States and European Union have issued statements condemning Hamas’ actions and expressed support for Israel. Meanwhile, China’s foreign ministry reiterated its support for Palestinian statehood, while calling all parties to cease fire. Chinese foreign minister announced that Israel’s actions in Gaza ‘have gone beyond the scope of self-defense.’

With its position as a permanent member of the United Nation’s Security Council, China’s support for Palestine carries more weight than other supporters like Iran and Qatar. During a UN council meeting to develop a response to the war, China along with Russia vetoed and denounced a US-back proposal, claiming it was ‘evasive’ and ‘out of balance’. The proposal draft called for a temporary pause to enable aid to be delivered to Gaza. However, the proposal resulted in harsh criticism from Beijing due to its failure to call for an immediate ceasefire and its failure to advocate for an end to indiscriminate and asymmetrical use of force. By refusing to acknowledge the root of the crisis in Gaza, the proposal neglected the historical injustice that Palestinians have suffered.

China has historically remained a minor player in Middle East politics, but its newfound involvement and advocacy presents Beijing with an opportunity to brighten its reputation. By conforming to the majority of the world’s calls for a ceasefire, China is able to present itself as a better suitor for the world than the United States and promote its vision of a Chinese-led world.


AGOA Set to Expire in 2025
On November 2-4, a U.S. Government delegation joined African leaders and officials in Johannesburg South Africa to participate in the 20th African Growth and Opportunity Act (AGOA) Forum. AGOA is foundational in facilitating trade and integration of Sub-Saharan Africa into the global economy. A key component to AGOA is that it makes provision for eligible sub-Saharan African countries to have duty-free access to the U.S. market.

In order for countries to be considered eligible for AGOA benefits they must demonstrate or make continual progress toward establishing a market-based economy, the rule of law, political pluralism, human rights, and the right to due process. Eligible countries must also reciprocate the U.S. trade agreement by eliminating barriers to trade and investment by the U.S.

The strategic value and impact of AGOA has helped bolster economic growth in the region, as well as promote social and political reform. In the first 12 years of its existence, democracies in the region grew by 37.5%.  In 2022 the total U.S. AGOA imports generated $9.4 billion. The enablement of exports has encouraged investment in the region, increasing domestic and global commerce. Hundreds of thousands of jobs have been created across the continent, as well as 120,000 jobs in the U.S., as a direct benefit of the bilateral trade agreement. Over 30 African countries participated in this year’s forum, many of whom along with U.S. officials expressed their desire for an extension of AGOA, which is due to end in 2025.

On November 1, President Biden announced in a letter to Congress his intention to terminate the participation of four African countries from AGOA – Uganda, Gabon, Niger, and the Central African Republic (CAR). He stated his reason for doing so was their failure to “address the United States’ concerns about their non-compliance with the AGOA eligibility criteria.” President Biden described the failure to meet eligibility criteria as “gross violations of international human rights”.

Each of the four countries has drawn condemnation from the U.S. this year leading to their eviction from the AGOA trade agreement. Niger and Gabon both underwent changes in government this year by military coups, in direct violation of their constitutions, by overthrowing a democratically elected leader. The Central African Republic has failed to establish “protection of political pluralism under the law” when it violated its own constitution by eliminating term limits for the presidency. Uganda signed into law its Anti-Homosexuality Act earlier this year, including a potential death penalty for those convicted of “aggravated homosexuality” if the victim has a disability, is a minor or elderly and is forced to have non-consensual same-sex intercourse.

For some in Africa, aid from the U.S. is perceived as little more than interference. Uganda’s President Yoweri Museveni accused foreign critics of the new law of daring to coerce his country “into abandoning our faith, culture, principles and sovereignty, using money.” He responded by saying that the United States’ reaction was hypocritical since homosexuality is a criminal offense in 31 countries in Africa, many of which the U.S. supplies aid to. The law was passed democratically with the support of 341 out of 389 members of parliament. Museveni stated that “Uganda will develop with or without loans.”

Their elimination as beneficiaries from the AGOA trade agreement could hurt small, medium, and large businesses alike, primarily in the food and textile industries. Ugandan exports to the U.S. were worth $174m last year, while Gabon, Niger and the CAR recorded US exports of $220m, $73m, and $881,000 respectively. However, the trade between China and sub-Saharan Africa may be more than enough to make up for the losses.

China, the United States’ chief strategic competitor, has grown exponentially in economic and commercial gains in the region. In 2022, trade between China and Africa surged to a record $282 billion. In comparison, the U.S. goods trade with Sub-Saharan Africa totaled $44.9 billion. The region’s economic rise is as complex as it is volatile, but China attributes a portion of its success to its respect for national sovereignty and reluctance to involve itself with foreign affairs of the state. While the U.S. looks to build lasting frameworks on political and social levels, China is focused on infrastructure and the simplicity of transporting goods and services with little or no regard for a country’s human rights record.

In the wake of Sub-Saharan countries expressing their desire for the extension of the AGOA trade agreement, coupled with China’s increasing influence in the region, this is an open door that the U.S. will benefit from by not closing.  However, the region continues to be threatened by instability due to a variety of reasons, including democratic backsliding, power grabs, traditional and cultural values on an international stage, and violent extremism, to name a few. It is a difficult environment to maintain the standard of eligibility that encourages African countries to invest in domestic development and preserve the rule of law. Therefore, the U.S. should remain flexible as it explores alternative incentives for growth in keeping compliance with international standards of human rights and security.


A Bedbug’s Trial
 At the end of September, concern grew in Paris as videos of what appeared to be bedbugs on the metro system spread on social media and even on plush theater seats as cinemagoers in Paris reported being bitten. Due to such a quick rise in concern, the French Transportation Minister, Clement Beaune, opened investigations into dozens of cases on the Paris Metro and 30 other cases throughout France’s national railway company but no bedbugs were found. Several weeks after the initial videos surfaced in Paris, the same thing occurred in the London Tube system. At this time, cases concerning the invasive bugs in both Paris and London were being picked up by media outlets and circulated via social media, when prior they would have been dealt with and not a cause for any concern.

There is no doubt that social media amplified public concern in this situation, however, it is up to the individual to determine their reaction and if they would like to mitigate the risk of bedbugs in their travels. Regardless of the reaction, there is not a high risk of bedbug contamination in Paris or London at this time. Notably, Johanna Fite, an expert with the government’s health agency, stressed that bedbugs are not a sign of bad hygiene and though an ordeal that can induce severe anxiety, they do not transmit diseases.

If concerned about bed bugs, there are several easy ways to mitigate the risk, such as when arriving at a new accommodation, placing all luggage in the bathroom/area with no fabric to then proceeding to check the bed and furniture of the accommodation. Bedbugs most often cling to fabric, so isolating all belongings to the bathroom/area with no fabric allows additional time and protection for a thorough search of the accommodations. To check a bed for bedbugs, all layers of the bedding should be lifted and all around the mattress should be checked for both bugs and eggs.

As stated earlier in this piece, at this time there is not a high risk of bed bug contamination in Paris or London, as no official statement or mass hysteria has occurred in relation to bedbugs existing in two large global cities. However, this may take a toll on both cities in the short term as travelers cancel or re-route plans. Notably, the Summer Olympics are expected to draw millions of spectators to Paris in Summer 2024 and if bedbugs become an official concern in the city or hysteria drives people away, there could be a major risk to the city’s economy and any other city that is condemned to this bedbug’s trial.


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