The outbreak of war between Israel and Hamas adds another layer of complexity to the macroeconomic complications in which South Africa finds itself.
Iran, a major oil producer and one of the recent newcomers to Brics, is under suspicion as a possible collaborator in Hamas’s attack on Israel. That puts it in contention for further US sanctions, which could be extended to any country that engages with Tehran.
This increases the geopolitical risks to the global economy — and South Africa’s — with negative implications for inflation, monetary policy and growth.
South Africa, as a member of Brics, is in a tricky position because it will be taking part in meetings of the group at which Iran will be in attendance.
Before the war that erupted a week ago, there was so much complexity already. The US is in a technological war with China; the two countries take turns to impose taxes on each other. We had trade taxes under Donald Trump’s presidency, and we now have restrictions on technology access under Joe Biden.
China and India may be partners in Brics, but they also have an adversarial relationship. Delhi has aligned with the US and Europe in the proposed India-Europe-Middle East economic corridor, which is being established, in part, to counter China’s belt and road initiative. India appears to be promoting both its Global South membership and close ties with the West, giving economic motives priority over ideology.
Nations in the Gulf and Middle East seem to be positioning themselves in the middle. The UAE and Saudi Arabia are now also part of the expanded Brics — and are involved in the proposed economic corridor with Europe and India. This makes the latest outbreak of fighting in Israel and Gaza consequential for the global economy.