- Zimbabwe shifted from neutrality regarding the war in Ukraine
- Since the War, Zimbabwe maintained a neutrality stance
- Economic cost unveiled
Harare- After an extended period of approximately 15 months, Zimbabwe has unveiled its stance regarding Russia's perceived imperialistic war which has shammed global supply chains, commodity prices and accelerated hunger in North and East Africa.
Amidst the backdrop of the Russia-Africa Summit two weeks ago, a momentous utterance emerged from President Mnangagwa, unveiling a profound bond of solidarity with the Kremlin's military endeavour in Kiev, elegantly draped in a veil of softened rhetoric special military operation. This intriguing shift in stance reveals a captivating departure from his antecedent paradigm governing global affairs.
“Zimbabwe is in solidarity with the Russian Federation in your country’s special military operation in Ukraine,” declared the President.
Ascending to power in 2017 subsequent to the ousting of his longstanding predecessor, Robert Mugabe, President Mnangagwa ardently emphasised the imperative of rekindling ties with Western powers, orchestrating a thawing process to ameliorate relations that had languished in an icy state for over a decade during Mugabe's reign. The president's visionary aspiration, encapsulated by the resounding proclamation that "Zimbabwe is open for business," sought to galvanize economic horizons. Yet, the recent pronouncement of solidarity with Russia's military endeavours bespeaks a discernible metamorphosis in President Mnangagwa's trajectory of foreign policy.
Embedded within the United Nations Charter, the right of states to embrace independence in the realm of global affairs finds its genesis primarily within the nuanced contours of Article 2. This reverberates with resolute echoes of sovereign equality, the profound tenet of non-interference in domestic affairs, and an unwavering respect for the sacrosanct realms of territorial integrity and political autonomy that enshrine the essence of each nation's identity.
Nevertheless, the principle of absolute power in domestic affairs intertwines with national interests, both economic and political in nature. In this context, the actions undertaken by the government can be perceived as an independent approach that seemingly diverges from the national interests of economic bailout. Such a departure can be regarded as a diplomatic failure, as it deviates from the path taken by countries with economies magnitudes larger than Zimbabwe's, which, despite not being aligned with the West, have opted for a publicly proclaimed stance of neutrality to safeguard their own economic interests.
President Mnangagwa's public support for Russia's invasion of Ukraine may have significant implications for Zimbabwe's reengagement efforts, removal of sanctions, debt restructuring, admission into the Commonwealth, and the country's economy as a whole.
The significance of reengagement with the West, debt restructuring, Commonwealth membership, and sanctions removal cannot be understated in relation to Zimbabwe's economic growth. By revitalizing diplomatic and economic ties with Western nations, Zimbabwe can attract foreign investment, bolster trade opportunities, and facilitate the transfer of advanced technologies. Moreover, addressing the burden of debt through restructuring initiatives can unleash resources for investment purposes and instil renewed trust among lenders. Joining the Commonwealth can foster international collaboration, granting access to invaluable technical support and platforms for economic discourse. Furthermore, the removal of sanctions has the potential to re-establish investor confidence, unlock foreign capital inflows, and expand trade relationships. Collectively, these measures hold the promise of forging a conducive environment for sustainable development, financial stability, and prosperity within Zimbabwe
The trajectory of Russian investments in Zimbabwe has been marked by outcomes that have fallen short of anticipated expectations, thus far. The intricate interplay of external factors, such as the imposition of Western sanctions on Russia and the ongoing Ukraine conflict, has cast a shadow over the viability and progress of these investments, leading to a notable withdrawal of Russian investors from a highly promising platinum mine project in Zimbabwe. The reverberations of geopolitical tensions have reverently influenced the course of these investments, culminating in unfulfilled aspirations and unmet objectives.
Moreover, the ambitions of Alrosa, an esteemed global titan in the realm of rough diamond production, have encountered considerable delays that have surpassed the company's envisioned timeline. These protracted delays have posed significant challenges, denting the overall efficacy and desired outcomes of Russian investments in Zimbabwe. These instances serve as poignant exemplars of the formidable obstacles and setbacks that have become intrinsic to the Russian investment landscape within the country, underscoring the arduous nature of navigating the complex intricacies involved.
Russia’s investments in Zimbabwe: How worthy to risk foreign policy?
Russia and Zimbabwe’s lithium
In 2022, Huayou Cobalt, a Chinese company, successfully acquired Prospect Lithium's Arcadia Mine for a sum of $422 million, surpassing potential Russian interest. Prospect Resources had previously entered into a memorandum of understanding with Russia's Uranium One, but ultimately opted for Huayou Cobalt's more favorable offer. Despite this, Uranium One remains actively engaged in exploring other lithium opportunities in Zimbabwe.
In 2022, Huayou Cobalt, a Chinese company, acquired Prospect Lithium's Arcadia Mine for $422 million, outbidding potential Russian interest. Prospect Resources had previously signed a memorandum of understanding with Russia's Uranium One, but ultimately chose Huayou Cobalt's more favorable offer. Uranium One, however, continues to explore other lithium opportunities in Zimbabwe.
Russia and Zimbabwe’s platinum
Great Dyke Investments (GDI), led by Vi Holdings, had envisioned constructing Zimbabwe's largest platinum mine at the Darwendale site. With abundant ore deposits of approximately 181.3 million tonnes, the project held the promise of sustaining mining operations for two decades and achieving an annual production capacity of 860,000 ounces of platinum, surpassing Zimplats.
Vi Holdings, through its subsidiary Afromet JSC, invested $100 million in pre-development and exploration. In 2019, Landela, associated with entrepreneur Kuda Tagwirei, acquired a 50% stake, ushering in a new phase of collaboration.
However, the project faced challenges due to the COVID-19 pandemic and Western sanctions on Russian investments. GDI struggled to secure the necessary $665 million for the project's initial phase, hampering progress. Attempts to sell the project to Implats faltered due to concerns about Landela's ownership. Consequently, GDI withdrew from the project in June 2022, citing the impact of Western sanctions.
Kuvimba Mining House assumed responsibility for the project, but with revised plans compared to the original vision.
Russia and Zimbabwe’s diamond
Alrosa, the world's largest producer of rough diamonds, initially expressed interest in Zimbabwe in 2014 but faced frustrations with the government and subsequently left. However, the company returned in 2018 when its then-CEO, Sergey Ivanov, visited Harare to meet with President Mnangagwa and local business executives. Alrosa benefited from a diamond policy announced that year, which allowed only four companies, including Alrosa, to mine diamonds in Zimbabwe. They signed a Memorandum of Understanding (MoU) with the state-owned Zimbabwe Consolidated Diamond Company (ZCDC), with Alrosa receiving 70% of new projects and ZCDC receiving 30%, as a concession to the company. Alrosa committed $12 million for exploration and pledged $9 million annually for new projects. The aim was for ZCDC to increase its diamond output to 10 million carats by 2023, making Zimbabwe one of the world's top five producers. However, bureaucratic challenges in Zimbabwe and Western sanctions on Alrosa and Russian diamonds have caused delays. Despite these setbacks, Alrosa remains committed to Zimbabwe, and a company delegation is expected to visit soon. ZCDC chairman Munashe Shava stated that the joint venture aims to complete exploration by the end of the year, followed by a feasibility study and subsequent mining operations.
Uralchem
In 2018, Russian billionaire Dmitry Mazepin expressed interest in acquiring Chemplex, the state-owned chemicals and fertilizer company that controlled Zimbabwe's sole phosphate mine. The Zimbabwean government had initiated a privatization drive and put Chemplex and other state assets up for sale. Mazepin's Uralchem, the world's second-largest ammonium nitrate manufacturer, sought to expand its presence in the global fertilizer market. Mazepin, with connections to prominent Russian lenders such as Sberbank, VTB, and Renaissance Capital, had ambitions to control Chemplex. However, some members of the Zimbabwean government declined his offer in favor of local bidders. Despite being unable to acquire Chemplex, Uralchem established a presence in Zimbabwe by launching the United Fertiliser Company in 2021, importing fertilizers into Zimbabwe and the region. During the Russia-Africa summit, Zimbabwean President Mnangagwa held discussions with Uralchem, and the company's director, Dmitry Konyaev, expressed the possibility of constructing a manufacturing plant in Zimbabwe.
Unpacking the subtext
Re-engagement Efforts
President Mnangagwa's public support for Russia's actions in Ukraine is poised to strain Zimbabwe's delicate reengagement efforts with Western nations, particularly the United States which is making it difficult for the country to find economic bailouts from international lenders like IMF and World Bank. The cautious Western stance has been fuelled by concerns over human rights abuses and the absence of democratic reforms within Zimbabwe's borders. By openly aligning with Russia, President Mnangagwa risks facing heightened scepticism and resistance from Western powers, thus creating a formidable hurdle in the quest to foster trust and fortify diplomatic ties. Russia is killing Ukrainians, interfering in a state’s internal affairs and this is forbidden by the United Nations Charter and African Charter on People’s Human Rights where Zimbabwe is a signatory. In the view of the West, what Zimbabwe did is reinforcing bad behaviour making things soar between Washington, Brussels and itself.
Removal of Sanctions
Furthermore, Zimbabwe finds itself ensnared in the web of various sanctions imposed by Western countries, notably the United States and the European Union. These punitive measures serve as instruments to exert pressure on the government, urging it to address human rights issues and implement democratic transformations. When President Mnangagwa came to power, he promised to fight sanctions through sanitising the domestic affairs. He even set 25 October as the national Anti-Sanctions Day and lobbied the AFDB president Adesina to lead the campaign against sanctions. However, President Mnangagwa's endorsement of Russia's activities in Ukraine could potentially reinforce reservations about his administration's dedication to democratic principles, thereby potentially prolonging or intensifying the existing sanctions regime. The repercussions may impede efforts to garner support for the removal or easing of these restrictive measures. We anticipate strained relations between the two sides going further.
Bid to Join Commonwealth
Zimbabwe's expressed desire to rejoin the Commonwealth, a multilateral organisation encompassing numerous former British colonies—now dances on a tightrope. The Commonwealth places great emphasis on democratic values, human rights, and the rule of law which Kremlin’s destructive war on Kiev doesn’t cater for. President Mnangagwa's alignment with Russia's Ukrainian incursion risks casting shadows of doubt upon Zimbabwe's steadfast commitment to these fundamental principles. Consequently, this may impede the nation's aspirations of reclaiming its position within the organisation. The readmission to the Commonwealth will signify a restoration of Zimbabwe's international reputation and recognition as enshrined in the NDS 1 economic blueprint through image building. It would demonstrate the country's commitment to democratic principles, human rights, good governance, and the rule of law. Being part of the Commonwealth would provide Zimbabwe with a platform to engage in diplomatic dialogue, access technical assistance, and foster partnerships with other member states.
Debt Restructuring
Moreover, the burden of Zimbabwe's substantial external debt weighs heavily upon its shoulders, necessitating comprehensive debt restructuring to alleviate the crippling financial strain. Yet, successful debt restructuring hinges upon international cooperation and support. President Mnangagwa's alignment with Russia's actions may cast doubts upon Zimbabwe's credibility and reliability as a debtor nation. International financial institutions and creditors may perceive this alignment as a manifestation of geopolitical unpredictability, consequently engendering hesitancy in engaging in constructive debt restructuring negotiations. Zimbabwe is in debt crisis, and last year started a campaign, led by the African Development Bank (AfDB), to push for a debt restructuring deal with its major creditors.
Source: Treasury
As of December 2022, Zimbabwe's total public and publicly guaranteed debt amounted to US$18 billion. This debt can be broken down into two categories: foreign debt, which stood at US$12.8 billion, and domestic debt, which amounted to US$5.2 billion. Within the foreign debt category, Zimbabwe owed US$5.89 billion in bilateral debt, representing the funds borrowed from other countries. Additionally, the country had accumulated US$2.7 billion in multilateral debt, which includes loans obtained from institutions like the African Development Bank (AfDB) and the World Bank.
It is worth noting that a significant portion of Zimbabwe's debt owed to multilateral lenders, specifically US$2.47 billion, comprised arrears and penalties resulting from non-payment. These arrears and penalties have contributed to the overall debt burden. At the end of 2021, Zimbabwe's external debt reached US$14.4 billion, encompassing both foreign and multilateral debts.
Zimbabwe's trade relations with the European Union (EU), one of its largest trading partners after South Africa, are under strain due to President Mnangagwa's alignment with Russia. This alignment could potentially impact Zimbabwe's access to crucial markets, leading to the imposition of trade barriers, tariffs, or other restrictions by Western countries. Such actions may undermine export opportunities and hinder the growth of vital sectors like agriculture, manufacturing, and mining, which heavily rely on international trade.
The alignment with Russia has created apprehension, casting a shadow over Zimbabwe's prospects for foreign investment. Investors from Western nations, who may have reservations regarding political stability, policy coherence, and adherence to democratic principles, are particularly affected. Consequently, the inflow of foreign direct investment, which is vital for economic growth, job creation, and development, could experience a notable decline.
Final Thoughts
Zimbabwe's shift in neutrality to support Russia in the invasion of Ukraine raises concerns and has potential ramifications for the country. The strained trade relations with the European Union and other Western countries could undermine Zimbabwe's access to crucial markets, impacting sectors like agriculture, manufacturing, and mining that heavily rely on international trade. Additionally, the apprehension among Western investors regarding political stability and adherence to democratic principles may lead to a decline in foreign direct investment, hindering economic growth and job creation.
It is important to note that geopolitical decisions can have far-reaching consequences for a nation's economy and diplomatic relations. As Zimbabwe aligns itself with Russia, it is crucial for the country to carefully consider the potential impact on its trade partnerships, foreign investment inflows, and overall economic stability. Balancing alliances and maintaining productive relationships with various global stakeholders is essential for Zimbabwe's long-term economic growth and development.
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