As the war in Iran drags on and control of the Strait of Hormuz, a key oil transport route, is prolonged, an energy "the rich get richer and the poor get poorer" phenomenon is worsening among developing countries. Some countries are using diplomacy to secure detours for crude oil and gas shipments or entering direct talks to keep their energy lifelines afloat, even if only in a limited way. In contrast, countries with weaker negotiating power in the international community are being pushed first into extreme power-saving measures, even if they are close to the Middle East.
In particular, poor countries in Africa and Asia that lack financial resources are facing a crisis that goes beyond simply higher fuel prices to the paralysis of their entire national economies. In the harsh reality where energy security is directly tied to national security, governments are staking everything on do-or-die brinkmanship diplomacy to break through shuttered energy supply lines.
On the 29th (local time), the Egyptian government announced special measures to cap all shops, restaurants and cafes at 9 p.m. for one month starting on Apr. 4 to counter soaring energy prices. It ordered the dimming of streetlights and roadside billboards and instructed as many workers as possible to work from home at least once a week throughout April. With oil and gas supplies via the Strait of Hormuz effectively halted, this is a desperate stopgap after being unable to withstand the surge in global oil prices.
Egypt has been an oil-producing country since 1970. However, its capacity to procure the fuel needed to refine extracted crude is limited, constraining output. Nor does it have the fiscal room to expand extraction sites or modernize facilities. Even with domestically produced crude, it cannot meet domestic demand, and recently gas output has fallen, further increasing import dependence.
Egypt is geographically part of North Africa. But because it is close to conflict zones in the Middle East, it is taking a far bigger hit than other developing countries. Egypt's economy relies heavily on tourism and retail. Nighttime business restrictions after 9 p.m. are highly likely to cause massive economic losses, as during the pandemic. Even so, experts said the government imposed tough measures out of the urgent concern that if it cannot immediately secure fuel to run power plants, the entire national power grid could be paralyzed.
The situation is similar in developing countries in Asia. Weak states without diplomatic leverage are being thoroughly isolated. The Philippines set a goal to cut national power consumption by 20% and abruptly introduced a four-day workweek in the public sector. The governments of Thailand and Vietnam also ordered public officials to work from home as they tightened their belts on energy. With factories unable to halt operations, the public sector is trying to curb power demand by taking the lead in making sacrifices.
In South Asia and the poorest countries in Africa, which are highly dependent on energy imports, a food crisis has already become a reality. The Financial Times (FT) reported that countries unable to secure even the minimum electricity needed to maintain national backbone networks are facing a perilous situation in which the entire social infrastructure is shaking, with rolling blackouts and outages becoming routine. In some countries, farm machinery cannot operate due to power shortages, and fertilizer plants have halted production. The Kiel Institute for the World Economy in Germany noted, "The blockade of the Strait of Hormuz is triggering a chain reaction beyond simple energy price increases to spikes in fertilizer and food prices."
Meanwhile, some countries have opened every dormant diplomatic channel to find a breakthrough. Sharing a border with Iran, Pakistan has, since the outbreak of the war, held direct talks with Iran's leadership and secured an exceptional clause guaranteeing its ships safe passage through the Strait of Hormuz.
China absorbed the shock by importing Russian oil and gas on a large scale after the Trump administration lifted sanctions on those supplies for a month. Chinese President Xi Jinping and Russian President Vladimir Putin agreed at a summit in Beijing last September to build the Power of Siberia 2 gas pipeline to bring in large volumes of Russian natural gas to China, which has been under Western sanctions since the outbreak of the war in Ukraine. This is a clear example of a nation's independent diplomatic line serving as a shield that determines the amount of energy it can secure.
Experts said this kind of structural energy inequality will be hard to resolve in the short term. Fatih Birol, executive director of the International Energy Agency (IEA), warned, "The war in the Middle East is triggering a major energy crisis for the world economy, including the largest supply disruption in the history of the global oil market," adding, "If the situation is not resolved quickly, the impact on the energy market and the world economy will become increasingly severe."