Geo-Economics of COVID-19

In 2020, as practically the whole world went into lock-down, it became obvious that many countries, and distressingly the world’s superpower, were unprepared to deal with pandemics.

The United States and many European countries suddenly realized that they needed to import huge amounts of personal protective equipment (PPE) from China, which held a near monopoly in these supply chains. The realization, in the midst of a pandemic, that the so-called ‘global supply chains’ were, in essence, ‘China’s supply chains,’ caused anguish in many developed states.  The competition for the limited supplies of made-in-China PPE laid bare the fact that depending on foreign suppliers can backfire during emergencies.

The United States that was desperate for PPE resorted to wild west practices. It paid top dollars to divert medical supplies destined for other countries to itself.  Governments, hospitals, businesses, and their middlemen, descended on China to secure ventilators, masks and other protective equipment.  It was the Chinese factories that dictated the terms of such deals.[1] 

About 90 governments blocked the export of medical goods to preserve supplies for their citizens while 29 did the same for food.[2] India banned the exports of medicines because of the huge disruption on its own supply chain. India imports 68% of active pharmaceutical ingredients (APIs) used in its generic pharmaceutical industry from China. It encountered several problems, therefore, when many Chinese drug factories closed due to the pandemic.[3] 

Some European countries, that import large amounts of drugs and APIs from China and India, faced shortages of critical medications, such as anesthetics, antibiotics and muscle relaxants, which were necessary for treating the ailments caused by the coronavirus.  China and India supplied about 90% of the APIs used to make EU generic medicines.  The EU’s overwhelming reliance on China and India for critical intensive care medicines led it to reevaluate its dependency on these states and its overall industrial policy. Japan, who is China’s biggest trading partner, set aside $2.2 billion of its pandemic response package to help Japanese companies deal with chokepoints in their supply chains.  Such chokepoints were presumed to exist when a product could only be sourced from China.[4]

The calls for de-globalization, self-efficiency and national resilience, that kept echoing all through the world, during the pandemic, were not entirely new.[5]  The pandemic was wreaking havoc in a world that was still reeling from the aftershocks of the 2019 US-China trade war.[6] In 2019, the United States was already treating China as an adversary. The US government was in the process of decoupling the US economy from the Chinese economy. The trade war between the two states was, at its roots, a conflict over technological supremacy. The United States, for example, prohibited its private companies from providing software and semiconductors to Huawei, a Chinese private company and a leader in 5G technology.[7] The goal of the prohibition was to blunt China’s emerging advantage in new technologies.[8] 

China used its battle against COVID-19 to bolster its image as the new superpower. It took advantage of the pandemic to inaugurate the ‘Health Silk Road,’ promoting itself as a responsible leader in global health. China’s private sector, including companies such as Alibaba and Huawei, two big technology firms, sent planeloads of PPE and ventilators to 54 African states.[9] The United State, on the contrary, cancelled shipments of medical supplies abroad because they were badly needed domestically.[10] US governors, hospitals, and even the federal state,  tried to outbid each other in China’s PPE marketplace reinforcing the view that the United States was a muddled superpower.[11]

China projected itself as the state successful at containing the deadly virus outbreak.  This success, according to the Chinese government, demonstrated the advantages of state capitalism.  China’s system was presented as superior when compared with the US spasmodic efforts to battle the pandemic. The United States used every opportunity to portray China as a secretive state that suppressed information about the initial virus outbreak, including imprisoning the doctor that notified the Chinese government about COVID-19.

As the pandemic was spreading and people were sheltering in place, the demand for energy collapsed. On April 20, 2020, the US benchmark[12] (the price per barrel of oil) fell to minus $37.63, for the first time in history, meaning that sellers were paying buyers to take oil barrels off their hands.  

This happened despite the fact that the US President had taken the unprecedented step of brokering a deal between Russia and Saudi Arabia (that were engaging in a price  war) to reduce oil supply by cutting down production.[13] Companies operating within the OPEC, and other oil producing states, had to reduce their production as refineries, storage facilities, pipelines and even ocean tankers, were filled to capacity.[14] The two-million-barrel ships known as VLCCs (Very Large Crude Carriers) were in high demand because they could double as storage facilities.

The collapse of the oil market triggered the depreciation of the Mexican peso and the Russian rubble. In the United States, about 70 highly-indebted oil producers were on the brink of bankruptcy.  The plummeting of oil demand threatened to dislodge the United States as the top oil-producer of the world.

The collapse of the oil prices hurt Saudi Arabia, the swing producer in the oil market,[15]  but not as much as other oil-producing states.  In a market of excess oil, controlling storage was power and Saudi Arabia had ample storage.  Oil stored within the country rose from 8 billion to 79 billion barrels in the 2½ weeks before March 26, 2020.[16]  Saudi Arabia secured additional storage capacity in Egypt.[17] 

The collapse of the oil market did not prevent Saudi Arabia’s SWF, the Public Investment Fund (PIF), from amassing stakes worth roughly $1 billion in four major European energy companies whose assets were undervalued in a market depressed by the pandemic.  The PIF bought a stake worth about $200 million in the majority-state-owned Norwegian oil company Equinor.  It bought also stakes in the Royal Dutch Shell, Total (France) and Eni (France).[18]  The PIF purchased sizable chunks of US companies including Facebook, Citigroup and Boeing.[19]  

In Europe, the frenzied acquisition of companies by the United States, China, and the oil-producing states alarmed European states. France and Germany, the two largest EU economies, were concerned that strategic companies, including pharmaceutical firms, could be snapped up by foreigners. The European Commission asked governments to carefully evaluate all takeover bids.[20]  The warming was the result of a huge shock.  The recognition that reliance on foreign imports undermined Europe’s resilience when dealing with crises.

All in all, in 2020, as the world was gripped by the pandemic, unshackled globalization started to appear like a quaint and a dangerous idea. Great power competition, articulated afresh in the US-China struggle, jettisoned a world in which the survival of the fittest was, unpretentiously, the norm.

[1] Liza Lin and Eva Xiao, China’s Medical-Goods Market is ‘Wild West’ Amid Surging Coronavirus Demand , WSJ, Apr. 23, 2020,

[2] Jacob M. Schlesinger, How the Coronavirus Will Reshape World Trade, WSJ, June 19, 2020,

[3] Jacky Wong, Drug Industry’s China Habit Will Take Time to Kick, WSJ, July 27, 2020,

[4] Rachel Pannett, China’s Clout Loses Punch as Trading Partners Push Back Over Coronavirus, WSJ,  May 14, 2020,

[5]Mark Carney on How the Economy Must Yield to Human Values, Economist, Apr. 16, 2020,

[6] Elli Louka, The Global Economic Order: The International Law and Politics of the Financial and Monetary System 132 (2020).

[7] Id.

[8] Id. See also Katy Stech Ferek, Commerce Department Tightens Rules on Exports to China, WSJ, Apr. 27, 2020,

[9] Id.

[10] Id.

[11] Id.

[12] The West Texas Intermediate (WTI).  The price of Brent Crude, the international benchmark also sank.

[13] OPEC, The 9th (Extraordinary) OPEC and non-OPEC Ministerial Meeting concludes, Press Release, Apr. 9, 2020,

[14] Ryan Dezember, U.S. Oil Costs Less Than Zero After a Sharp Monday Selloff, WSJ, Apr. 21, 2020,

[15] Louka, supra note 6, at 64.

[16] Benoit Faucon and David Hodari, Behind Oil-Market Gyrations: Few Places Left to Store Unwanted Crude, WSJ,  Apr. 24, 2020,

[17] Id.

[18] David Hodari et al., Saudis Take Big Stakes in European Oil Companies, WSJ, Apr. 8, 2020,

[19] Rory Jones and Summer Said, Saudi Sovereign-Wealth Fund Buys Stakes in Facebook, Boeing, Cisco Systems, May 17, 2020,

[20] See also Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, OJ L 79 I/1, 21.3.2019.