The continued airstrikes by the US and Israel on Iran and Iranian counter attack have triggered an unprecedented war in the Middle East. Retaliatory ballistic missile attacks on US allies in the Gulf region, especially Saudi Arabia, Qatar, Bahrain, Oman, and the UAE, have rendered the region highly volatile, placing civilian lives and regional security at grave risk. Consequently, the peace and security of these countries are at stake. On the other hand, there has been a massive loss of innocent lives in Iran due to US bombing campaigns. The killing of Great Iranian Leader Ayatollah Ali Khamenei and his other key aides are really unprecedented and atrocious.
As hostilities persist, the conflict has caused incalculable damage to life, property, and living standards. The airstrikes continue, and many European countries are planning to join the war to support their alliances. This is dividing the world, as the USA, specifically under the Trump administration, is making the international sphere very turbulent. These attacks using ballistic ammunition are causing severe collateral damage to small and neighboring economies.
However, this situation severely impacts Bangladesh and other South Asian economies. Hereafter some critical observations regarding issues are highlighted that are dangerously hurting our economic operation.
This situation critically impacts South Asian economies, particularly Bangladesh. Since Bangladesh has multi-tiered ties to the Middle East, the nation is a severe victim of this US-Iran warfare. Due to the attacks, Iran has blocked navigation through the Hormuz Strait, making sea routes in this allied area extremely risky. LNG and other liquid fuel consignment cost has become alarmingly higher resulting into price shock in many countries.
Bangladesh relies heavily on fuel imports from the Middle East. Due to temporary blockades on the Strait of Hormuz, fuel prices have become alarmingly high in Europe and across the globe. Since Bangladesh depends on imported fuel, including leaded, unleaded, and refined products, and because fuel production in the Middle East has become expensive, the supply chain has been badly disrupted. Additionally, the largest fuel reserves held by Saudi Aramco have been under severe attack, rendering facilities in the Gulf region partly dysfunctional.
On the other hand, outbound international flights from the Middle East have been cancelled, severely affecting aviation connections. As soon as the war kicked off, Bangladesh cancelled nearly 200 flights. This has disrupted our air shipment and cargo movements, affecting both export and import activities.
Alongside this, the Middle East-bound workforce, skilled and unskilled migrant workers (NRBs) in Kuwait, Saudi Arabia, and Qatar, have been stranded. They are stuck in Bangladesh because flight schedules have been cancelled and airport operations in destination countries remain dysfunctional. If this continues, apart from trade, human movement and international business promotion between Bangladesh and the Middle East will be paralyzed. Alongside, the remittance outflow will be slim and slow if this state continues further affecting our much-needed foreign exchange reserve. Diplomatic efforts from Bangladesh with GCC countries are essential to safeguard the jobs of the Bangladeshi workers through extension of entry visa under the force majeure clause.
Since Bangladesh depends on imported energy, LNG and crude fuel supplies are being severely disrupted. It seems likely that local fuel prices and the uninterrupted energy supply will be hurt, affecting our local and export-bound industrial operations.
Given our global economic interdependence, this war causes infinite loss to all stakeholders. For the greater interest of humankind, the US government and the rest of the world should immediately end the war. They must rehabilitate peace through deeper dialogue involving the United Nations and ensure an immediate ceasefire. This is essential so that global supply chains can recover, allowing civilians to live peacefully and ensuring that least developed countries like Bangladesh are not adversely affected. The global trading network has been badly affected and requires to be resumed to contain undue poverty hike and economic hardships throughout the world.
The United Nations should come forward, bring more countries into a dialogue, and peacefully deal with this situation for the greater interest of humankind immediately by facilitating a swift, peaceful diplomatic resolution immediately. Our economy, which is struggling to turn around, may be challenged with higher food and non-food inflation if this war-led geopolitical crisis prolongs. While our economy was going through a revival plan amidst a challenging economic context featured due to local political transition, weak law and order state, energy crunch and investment downturn and LDC related competitiveness loss, this devastating war is going to further aggravate our resilience and readiness efforts towards economic revitalisation.
The writer is a macroeconomic & policy research analyst
