Scholz can save China embarrassment and seize a mega opportunity

When two fight, a third grows. This is how you could describe the geopolitical situation in 2023 in one sentence.

Because the fact is: The West is biting its teeth into the rising world power China – and nobody is going along with it. Rather, in the shadow of this rivalry, a new, literally third world is emerging.

Or as The Economist Editor-in-Chief, Zanny Minton Beddoes, put it over the weekend: “It is uncomfortable for the West and for China that more than half of humanity, spread over more than 100 countries, has no position in this geopolitical dispute would like to take a side.” Literally: “They do not want to pick sides.”

Olaf Scholz, whose Federal Chancellery did not want to accept the new geopolitical isolation of the West, experienced exactly that during the state visit to India and Brazil: he was treated well on a personal level, politically he was given the cold shoulder. His advocacy for Brazilian participation in the war and an anti-China policy in India met with vehement rejection.

Many experts – including those who are at home on the boardrooms of business – were aware of this repulsive reaction beforehand. Apparently not him. The refusal of conflict by these more than 100 states is not just a hare’s foot, but their strategy.

Scholz could have avoided the embarrassment

Why is this important?

Because the chancellor could have avoided this embarrassment. And – even more important – because this renaissance of the non-aligned movement – ​​which already existed at the height of the East-West confrontation – offers great opportunities for the German economy.

So here we take a look at the key players in this new non-aligned movement, which is basically linked by only one trait – their equidistance to enemy world powers #1 and #2:

If

On Friday, India overtook China to become the most populous country in the world with more than 1.4 billion people. It is and remains the largest democracy in the world and generates a gross domestic product (GDP) of 3.2 trillion US dollars, which, however, already corresponds to a GDP of over 10 trillion dollars when adjusted for purchasing power. The country, which stretches from the Himalayas in the north to the Indian Pacific in the south, doesn’t want to participate in anti-China sentiment, but it does want to benefit from it.

The integration into the world economy (India has so far only had a three percent share in world trade) is to be deepened. In the course of de-risking or even de-coupling – which China and the West are doing at the same time – it is hoped that the sum of direct investments (fifth place and thus second place behind China) will increase significantly. People are happy to take cheap Russian oil with them: before the war, less than one percent of imported oil came from Russia, now it’s around 30 percent. India wants to be the laughing third party.

Brazil

The largest economy in South America is the seventh largest country in the world with over 214 million inhabitants. For the German economy, Brazil is the most important trading partner on the continent – Volkswagen has four of its own plants on site, the group sells more cars in Brazil than in France, Spain or Italy.

Despite the economic interdependence, Brazil’s President Lula da Silva shows no euphoria about Western goals in the Ukraine conflict.

One reason: Brazil gets around a fifth of the fertilizers it uses in its agriculture from Russia. During Scholz’s state visit, he unanimously rejected the supply of ammunition to Ukraine: “It’s not worth provoking Russia.” Instead, he introduced himself as a mediator: “Brazil is a country of peace. “

Saudi Arabian

With a GDP of over US$830 billion, Saudi Arabia is one of the major economies in the world. The most important export good is oil with a share of 70 percent of exports, the most important trading partners are China, Europe and the USA.

Saudi Arabia benefits from Western sanctions against Russia and its own equidistance on the world stage. Saudi Arabia abstained in the UN vote condemning Russia’s war of aggression.

The kingdom doubled its crude oil imports from Russia last year because, thanks to international sanctions, the cheaper oil from Russia could be used to generate electricity. Crude oil from Saudi Arabian production is meanwhile destined for the world market, where higher prices have been paid since the Russian war of aggression. The state-owned oil company Saudi Aramco made a record net profit of $161 billion in 2022.

South Africa

With a GDP of around 419 billion US dollars, South Africa is the third largest economy in Africa and is well above the continent’s average. The country is deeply rooted in Europe. There has been a trade agreement between South Africa and the EU since 1999, and the EU is still the largest trading partner.

However, China is catching up. Chinese investors have invested more than $13 billion in South Africa since 2005. China has been providing large loans for infrastructure projects for years. They are well received: the Chinese are faster in decision-making and implementation processes, interfere less in internal affairs and also have fewer scruples about corruption, according to a study by the Friedrich Naumann Foundation.

In mid-February, South Africa held military maneuvers off its own coast together with Russia and China. The country does not condemn the Russian war.

Conclusion: A new formation of states is emerging here that would like to be economically rewarded by the great powers for its political abstinence. Because these 100 non-aligned countries do not politicize their trade relations and rely on the old principle of “change through trade”, they become hope for the market economy. Zanny Minton Beddoes, editor-in-chief of The Economist, is downright euphoric: “These states are the new defenders of globalization.”