BVC issue #7

Issue #7 Winter 2023

VOGUE CHIREC

Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed Dwight D. Eisenhower

PAGE 2: Conflict Catalyst - Explosive Arms Sales Surge Amid Israel-Palestine Turmoil PAGE 7: Fueling Global Uncertainty - Can the Israel-Palestine Conflict Shift the World's Energy Landscape?

CONFLICT

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EXPLOSIVE ARMS SALES SURGE BY: DHRUVA

he great American industrialist Henry Ford once said “Show me who makes a profit from war, and I’ll show you how to stop the war” in regards to war profiteering. The relevance of this quote has increased every day as the world slowly moves into a period of increased instability, violence, and conflict.

The rising tensions in the Middle East have brought great levels of distress to families in and out of the war zone. As major industrial sectors of the global economy see a downturn in production due to inflation in prices of crude oil and other commodities, one sector has flourished like never before - Defence.

The most talked about conflict in the Middle East recently, has been the IsraelPalestine conflict dating back to the 1940s.

It is currently being fought between two sides - the State of Israel and Hamas based out of the Gaza Strip. Both sides are wellarmed, hence the longevity of the conflict over several decades. The State of Israel has been working towards cementing its place as one of the world's leading arms providers since its Independence in 1948.

On the other hand, the Gaza Strip is a small rectangular plot of land with limited infrastructure and hence does not possess the capabilities to develop and manufacture weaponry of its own. It is widely accepted that Hamas, the organization currently in control of the Gaza Strip, gets its supply of weapons from Iran which are then smuggled into the strip through a complex system of underground tunnels.

Although Israel is technologically capable of brawling in war, it still rely on the United States for an estimated 80% of its weapons. These weapons are produced by private contractors to the US government that are indeed for-profit companies. These include well-known names such as Lockheed Martin, RTX, Northrop Grumman, Aviation Industry Corporation, and Boeing. All investors in these companies directly benefit from wars between countries where one or both countries require American assistance.

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CATALYST

AMID ISRAEL-PALESTINE TURMOIL VENGA From the start of the conflict between Israel and Palestine in 2014, major world powers have been ramping up their stocks of arms, which means more revenue for defence providers. The American defence sector has grown 61% since 2014, from a total estimated net worth of $800 billion to over $1.3 trillion in 2023. This growth in large part is due to the rising tensions in the Middle East but can also be tied to but not limited to the Russian invasion of Crimea in 2014. We can’t be sure about where Iran gets its arms from but many believe China and Russia have been exporting arms to Iran since the UN sanctions in 1979.

The embargo did expire in 2020, and so it's very possible Iran has been importing foreign military equipment thereafter. The defence sector of Russia is controlled by two major corporations, namely the United Aircraft Corporation and Rostec. The owners of these companies are Russian oligarchs who are loyal to the president and profits are most likely split between both parties. On the contrary in China, arms are produced by the China South Industries Group Corporation which is state-owned and hence the profits are likely to end up in the hands of top CCP officials and the national government expenditure. The defence sectors in Russia and China have grown 57% and 60% respectively since 2014. The global defense sector is controlled by a set of rich and powerful men who profit greatly from conflicts like the one happening right now in the Middle East. The growth of the sector and profits alike are fueled by pushing for a rise in tension worldwide, forcing nations to spend on growing their inventories and fighting amongst themselves, while the people at the top of the chain mint money and benefit extraordinarily. The future of this very conflict is clouded in mystery and we will never really know if this war has been forced to grow out of proportion for monetary benefit but what we do know is that someone is benefiting greatly.

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ISRAEL'S ECONOMIC BATTLEFIELD NAVIGATING THE STORM OF REGIONAL INSTABILITY BY: ANIKA MEGHA K

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he Israel-Palestine conflict is a long-standing and violent

struggle between two rival factions that control different parts of neighboring land. The conflict is fueled by historical, religious, and political factors, as well as the Israeli occupation of the West Bank and Gaza Strip. The latest escalation of the conflict started in October 2023, when Hamas launched a surprise attack on Israel from Gaza, killing and kidnapping hundreds of people. This prompted Israel’s retaliation with air strikes and a ground invasion, aiming to destroy the infrastructure and leadership of the Hamas group.

In recent weeks, global attention has pivoted towards these significant developments in the Middle East. Within a brief period, a conflict has not only reshaped critical geopolitical alliances but also raised concerns about its potential expansion throughout the region, leading to rapidly unfolding repercussions.

Israel, which is no stranger to conflicts with an extensive historical narrative of geopolitical issues, chronically finds itself in crisis. Its current situation is marked by volatility and unpredictability, making it challenging to predict or anticipate subsequent events.

At the surface of these challenges lay Israel and its businesses. In early 2023, the IMF estimated Israel's GDP at US$564 billion, a figure comparable to other highly developed and developing countries. However, following the declaration of war between Hamas and Israel in October 2023, Israel has incurred significant losses, surpassing $7.3 billion to support the Shekel (Israeli Currency). This caused it to hit an eight-year low. However, despite the ongoing crises and difficulties posed by the continuing security threats, Israeli businesses display perseverance in the unpredictable. Despite this, Israel’s challenges persist.

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Israel is home to major tech companies globally, including Intel, one of the largest CPU manufacturers.

The high-tech industry which has been the fastest growing sector in Israel for the past few decades, plays a crucial role in its economic growth, accounting for around 15% of employment and almost onefifth of the Israeli GDP. Considering how the Israeli tech sector relies heavily on foreign investments to function, the infiltration of the organisation Hamas has caused Israeli foreign investment to decline by almost 60% from its regular average. As a result of the declining currency and dwindling investment rate in the country, Israeli tech startups have fled to the US, uncertain about flourishing in their homeland.

Without one of its most valued sectors, the Israeli economy faces daily losses amid the heavy requirement for defence on multiple fronts, from safeguarding security systems to ensuring the Shekel's stability in global markets. Bids are reaching up to US$30 billion of foreign currency to defend the Shekel. Amidst this, Israel expresses a clear commitment to recovering promptly - evidenced in the economic aid plan presented by the finance minister, which includes US$1 billion in grants to help businesses affected by the war.

This is an example of Israel's resilience and capacity to turn challenges into opportunities, underlining the importance of fostering innovation in the face of economic uncertainties. A reiteration of its 2008 economic downturn, and its tech industry’s following recovery and strengthening.

The last crisis reinstates a reminder that urges Israel to rethink strategies and foster a determination to emerge stronger than ever from its current one. As employees perform military duties, Israeli tech companies such as ActiveFence plan to persist in serving customers. ActiveFence, specialising in online threats and based in New York and Tel Aviv, continues to maintain customer service; even with its CEO, Noam Schwartz, returning to Israel for military service. Schwartz reassured Reuters, saying, "We have sufficient global personnel to ensure everything is under control.". Companies demonstrate a willingness to go to great lengths to serve their country, from aiding disrupted families to attentively addressing employees' concerns.

All of this unveils the potential wonders that exist when communities and innovation come together.

The journey to recovery remains uncertain, but Israel's history of overcoming challenges provides a ray of hope. The resilience ingrained in Israeli businesses, coupled with thoughtful measures, is poised to shape the nation's direction during and after the conflict. As the world watches, Israel is able to accustom to obstacles, while standing resolute and ready to rebuild and chart a course towards prosperity.

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NAVIGATING ECONOMIC GROWTH IN THE WEST BANK AND GAZA INVESTMENT INSIGHTS BY : SRIVIDYA REDDY

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aza and the West Bank, despite their numerous political and economic instabilities, offer a compelling landscape for those seeking to navigate the complexities of this region. This territory consists of layers of historical background along with dormant geopolitics that make it a promising yet incredibly risky investment.

The recent events of the Israel-Palestine dispute have taken a toll on the investment market for Gaza and the West Bank. From political instability to a grave humanitarian crisis, the war has already set both of the regions back by more than a decade economically. It is estimated that the war caused 1.5 billion USD in direct and indirect losses, increasing the poverty rates to 40% in Gaza and 14% in the West Bank. Due to the small scope of the local market, trade access to overseas markets is essential for the expansion of the private sector there. Israeli-imposed restrictions on access and movement of labor and goods severely hinder trade outcomes and productive capacity in the regions; in fact, 90 percent of Palestinian exports are sold to Israel.

While there are many threats associated with investing in Gaza, there is also some unexplored potential for the development of the private sector in that region. The Palestinian labor force is well-educated, boasting a 91.1% literacy rate (and a youth literacy rate of 98%). These demographics offer quite a large consumer market and a skilled workforce. Additionally, the West Bank and Gaza have high potential in the growth market, especially in the technology sector. There are also other promising opportunities to explore such as stone and marble, real estate development, light manufacturing, agriculture, and agroindustry.

Assessing these factors should be an important consideration for the investors who choose to navigate the inherent risks with the hope of reward due to the territory's intricate situation.

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FUELING GLOBAL UNCERTAINTY CAN THE ISRAEL-PALESTINE CONFLICT SHIFT THE WORLD'S ENERGY LANDSCAPE? BY: KATHYA YARATAPALLI

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he Israel-Palestine dispute, one of the most significant conflicts between two countries this year, is affecting the world in various ways. A major arena that will suffer due to this conflict is the energy market. The dispute is certain to bring about changes in the energy market, impacting not only Israel and Palestine but the entire world. It has the potential to create a demand shock in the oil sector due to the requirements of war, encompassing the increased need for energy in transportation and weaponry.

Venturing into the realm of energy markets, the pressing question surfaces– what, exactly, defines the oh-socomplex energy market? An energy market is the trading of all materials that produce energy and energy itself. It can be broadly divided into two categories: fossil fuel-based energy and renewable-based energy. The latter is what is used by most companies today. It includes crude oil and its derivatives, such as petrol, diesel, marine oil, aviation fuel, coal, and methane. On the contrary, renewable energy, while being less harmful to the environment, is significantly less popular in the market due to its high cost. This includes sources from solar energy to hydropower.

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The energy market is globalized because all countries need energy in some form. Any country that buys or sells in the energy market is a participant in the energy market. In all, market supply and demand are of utmost importance and are significantly influenced by fluctuations in supply and demand. Supply and demand chains are constantly changing due to several factors such as the relations between traders, minor disputes, and conflicts between countries. For instance, when the supply of oil or coal is diminutive in a given year, and the demand for these resources remains steady or even rises that the price of the resource experiences a sharp increase.

To understand the geopolitical implications of the conflict between Israel and Palestine on the energy market, it is crucial to grasp the map of producers and consumers in the energy market. Had the Israel-Palestine conflict stayed local, it wouldn’t have heavily affected the market, as neither of the two countries are major producers or consumers countries are indirectly involved in the conflict. of energy. However, this is not the case, as several Public sentiment in Saudi Arabia (ranked as the world's second-largest oil exporter), Qatar (the sixthlargest natural gas producer globally), and most other Middle Eastern states support their Arab cousins in Palestine, while governments are yet to make concrete decisions. Iran, the world's third-largest crude oil producer, openly backs Palestine and supplies weapons to Hamas (the Palestinian organization). On the contrary, the USA and Germany, both major producers and consumers of fossil fuels, have sided with Israel.

One of the main reasons geopolitical relations change is because of conflict. It is almost certain that, due to the conflict between Israel and Palestine, relations around the world will be changed. For example, consider the case of Russia and Ukraine, both engaged in a conflict. Russia, which used to sell substantial amounts of oil to Europe, experienced a decline in sales as the conflict with Ukraine escalated. This shows how trade relations between two countries can change due to a conflict. This can happen in the case of Israel and Palestine, especially because the conflict is taking place in the Middle East, and most Middle Eastern states produce a remarkable amount of oil.

The Israel-Palestine conflict has a short-term effect on the energy market. Firstly, there could be a decrease in the supply of oil if more countries get involved. Increased direct involvement of countries in the conflict increases the risk of bombings on oil fields, refineries, and pipelines, disrupting the oil supply. If this happens, it will cause a significant decrease in the supply of oil, but the demand for the oil may stay the same or even increase due to the war.

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This will inconvenience large consumers of oil such as China and India, in turn damaging their economy.

Consequently, oil prices will rise, and oil-producing countries will make a lot of money until countries decide that they have enough oil. This will cause a massive drop in the energy market causing prices of oil and natural gas to fall by a great amount.

Conflicts in the energy market affect us all as individuals in one way or another and can cause substantial changes, leading to geopolitical tensions that affect trade. However, the energy market is a global arena with trade routes and partners constantly changing for various reasons. Conflicts or disputes between any two countries located anywhere in the world, participating in the energy market, only fasten this change and cause more of it to happen in a short span of time.

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BUILDING BRIDGES, CULTIVATING PEACE COLLABORATING VENTURES FOR ISRAEL-PALESTINIAN PROSPERITY BY: HASINI REDDY GONDI

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he only way to bring about peace is to create opportunities for people to collaborate and interact, fostering understanding and empathy between Israelis and Palestinians”, said Shimon Peres, the former president and prime minister of Israel. The Israeli-Palestinian conflict is a deep-rooted and established geopolitical conflict that has been going on for decades. It is defined by historical, religious and territorial challenges. This multilateral conflict has attracted international attention, generating intense dialogue and diplomatic efforts to find a lasting comprehensive solution for business stakeholders.

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Collaboration in the Israeli-Palestinian conflict can take many forms and involve a variety of stakeholders, whether it ranges from governmental and international organizations, to non-governmental organizations (NGOs) and joint business ventures. They collectively aim to promote understanding and encourage discussions towards a peaceful solution even if the conflict presents objections. Organizations such as the United States Institute for Peacekeeping (USIP) and the International Crisis Group (ICG) work on peacebuilding initiatives that facilitate communication between Israelis and Palestinians. The goal of this effort is to build trust, resolve grievances, and achieve peaceful coexistence. Economic collaborations can create shared interests and incentives for cooperation. Some joint business ventures involve Israelis and Palestinians working together to develop projects, fostering economic relationships, and building bridges between communities. The technical dialogue brought together Israeli and Palestinian entrepreneurs who seek to encourage collaboration in research and development. Additionally, the aim of integrated companies in the tourism industry is to promote the area as a tourist destination. Shared historical and cultural heritage can be used to create tourism opportunities that benefit both Israelis and Palestinians.

Joint ventures in renewable energy aim to solve common environmental concerns. Projects such as solar farms and wind energy projects can benefit both Israelis and Palestinians.

Textile and promoting tourism-related exports involves marketing products such as traditional crafts, souvenirs, and local artwork to international tourists visiting the region. Establishing manufacturing facilities in both Israeli and Palestinian territories may lead to the production of goods for export, contributing to economic interdependence. Both Israel and Palestine have growing technology sectors. collaborative efforts in technology exports involve the sale of software, hardware, and other technological products to global markets.

The war continues to have an immense impact on Israeli and Palestinian society. Issues such as borders, refugees, and the right of return of Palestinian refugees remain contentious. In any case, joint ventures and collaborations between Israel and Palestine can and will help them to create peace and development in both countries.

When it comes to the aspects of trade and export ventures in the Israel-Palestine conflict zone, they present both opportunities and challenges. While economic collaboration has the potential to contribute to stability and prosperity, the deeply rooted political and historical context of the conflict adds complexity to such ventures. Establishing forums to facilitate trade between Israeli and Palestinian businesses could help remove logistical and labor barriers. This includes joint ventures and trade associations. Joint ventures in agriculture involve the export of agricultural products from both Israeli and Palestinian territories. This may include the export of fruits, vegetables, and other agricultural goods to international markets which promote stable development and economic growth.

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Issue #7 | WINTER 2023

BUSINESS VOGUE CHIREC CHIREC’S FIRST BUSINESS MAGAZINE Executive Team: Ayra Chugani, Saanvi Mantha, Shreeka Prabhuram, Nittala Sidharth, Ananya Agarwal, Maria Emmanuel, Harihara Nalamolu, Shrithan Adipuram, Ria Tangri