War on Iran threatens global economy, but worse, rattles 'just world' ethic in places such as Malawi

Malawi, east of Lilongwe, looking toward Lake Malawi
RJ Peltz-Steele CC BY-NC-SA 4.0

Americans are suffering an affordability crisis wrought in large part by the Middle East war. But the impact of the conflict is global. And the lasting message to the world's poorest places might be less about economic setback, and more about the unreliability of western capitalism.

Driven especially if not exclusively by the Iran war, record fuel prices in the United States make local and national news every day and are sending ripples through the economy, worsening the affordability crisis that the White House alternatively grapples with and declares "fake."

It's easy to be self-absorbed in this crisis. I've lately lamented the $65 tab to fill my gas tank. Traveling to join family for an upcoming weekend wedding will cost my wife, daughter, and me more than $3,000. 

We're blessed; for now, we can absorb these costs. But as we consider our retirement plan with airfare inflation topping 23%, I worry about an impending need to decide what family we want to be close to in the States, presumably a parent or child, and to move there, understanding that we will rarely see other family again. 

It's like going back in time to when Americans moved west knowing they might never see their loved ones again. Shouldn't that be a forgotten era with modern transportation technologies? Both political parties purport to support the American family, but neither takes responsibility for our geographic fragmentation in the national labor market. We have no long-distance, high-speed trains, and we treat air travel like a free-market luxury.

Many Americans are in that bind already, tethered to work, if they can find it, and isolated from family. As Americans talk on the news about increasingly having to choose between fuel and food, it can be hard to remember how much better off we are than people elsewhere in the world. 

In May this year, I visited Malawi, a small country in southern Africa. The Iran war was then only a couple months on, but it reverberated worldwide already. I traveled overland from the Zambian border to Lake Malawi and back with Colby Mughogho, an entrepreneur, developer, and tourism operator. 

Drivers await a fuel delivery at a station outside Lilongwe.
RJ Peltz-Steele CC BY-NC-SA 4.0

Open fuel stations were hard to find. A station might get one delivery per day, then dispense fuel until the tanks went dry. At any station, a glut of trucks and motorcycles waited for hours in anticipation of a delivery. Petrol usually was delivered a few times per week; some areas were deserts for diesel, which we needed.

Colby worked the phone to call ahead to friends, sometimes to nail down the delivery time for a fuel station, or if we were lucky, to enlist someone to set aside a couple of liters for us. Police patrolled the main streets and watched fuel stations closely, enforcing a purchase limit of 15 liters (3.96 gallons) per customer.

With that limit, a fill-up would not get us the whole way. A pickup on Malawi's rough roads might at best get 9.3 km/L (22 mpg), so 140 km (87 miles) on a legal-limit fill-up. The distance from Lilongwe to our destination, Chembe, on Lake Malawi, was 216 km (134 miles), each way.

Motorcyclists queue for petrol at a fuel station outside Lilongwe.
RJ Peltz-Steele CC BY-NC-SA 4.0

At a fuel station, petrol cost about MK7,000 (Malawian kwacha) per liter (US$4.04/L). That's US$15.29 per gallon. Before the war, the fixed price had been about MK5,000/L (US$2.89/L), or US$10.92 per gallon.

If we were unlucky, we could leave the main road in search of scant and risky supplies of black-market fuel, sold curbside by men looking over their shoulders while they juggled ragtag containers. Black-market sellers commanded MK12,000/L, or US$26.20 per gallon.

The government blames black-market sellers, fairly, for amplifying scarcity and driving up prices. The quality of fuel also is suspect, possibly diluted, and tainted fuel can damage engines, a further drain on a fragile economy.

At the same time, black-market sellers disperse supply so that small-capacity users such as motorcycle taxis can continue to operate without losing productive hours in lines. A great deal of downstream commerce that depends on transportation is thereby protected, as well as beneficial noncommercial needs, such as health care, family connections, and schooling.

A billboard in Lilongwe touts the "Malawi 2063 National Vision."
RJ Peltz-Steele CC BY-NC-SA 4.0

For me, our fuel search was a "#FirstWorldProblem," a matter of convenience. I could have hitched a ride to the airport if I'd needed to. I was more worried about Colby making his way back to his wife and kids.

And I was more worried still about the impact of the shortage on people whose livelihoods depended on the fuel supply. No fuel meant no work for many, and no work meant nothing to eat. The food supply itself, for everyone, would be in jeopardy when fisherman and farmers could no longer fill the tanks of boats and tractors.

That was then. Now the war drags on and is expanding in Yemen and Saudi Arabia.

The New York Times reported last week that rising fuel prices have touched off furious protests around the world, "from Indonesia to Guatemala to Syria." The Times reported on work stoppages with insufficient fuel for boats, tractors, and factory machinery, and people responding angrily with marches, horns, and burning tires.

Malawi managed to cut fuel prices later in the summer. With fixed government pricing, petrol has held steady at US$3.24/L, or $12.26 per gallon, and diesel has closed in toward that number, about 12% higher. That's still an increase for petrol of 122% over the price a year ago. And I know that the official price says nothing about availability on the ground. Authorities say demand is being met, though in "good times" in 2024, an NGO reported Malawi fuel retailers operating at only 30% of capacity.

Boys play football beside their school in Chembe.
RJ Peltz-Steele CC BY-NC-SA 4.0

The Iran war is not the only reason that fuel shortages hit hard in Malawi, where fuel already was expensive and in short supply. Part of the problem is simply geology and geography. Malawi has no oil reserves and no domestic fossil fuel production. The landlocked country depends on imported oil products, though finds some relief by blending in domestic ethanol.

Other key factors in Malawi's fuel pain, predating the war, are economic: a foreign currency deficit and stubborn price fixing (e.g., BBC). People I talked to in Malawi were quick to blame their government, observing that surrounding countries were better managing the latest crisis. 

There's truth to that. In the long term, Malawian politicians have been unwilling to make unpopular choices to get a grip on the economy. But in fairness to Malawi, its economic woes are less a result of misfeasance than of the seemingly insurmountable poverty cycle that plagues developing countries in the contemporary global economy. 

With reinvested revenues, hard-won grants, and a great deal of grit and hard labor, Colby and his brilliant better half, Violet, have been developing tourism infrastructure in Malawi, especially in the north, around Mzuzu, the capital of the northern region and the country's third-largest city. Mzuzu is superbly located as a base for Malawi tourism, because it affords ready access to the small country's stunning range of landscapes, from iconic Lake Malawi to wildlife safariing, and to trekking through plains, forests, and mountain ranges. Colby and Violet have built camps and miles of trails and employed hundreds of Malawians in the process. 

Near Lilongwe: Some modes of transportation require no petrol.
RJ Peltz-Steele CC BY-NC-SA 4.0

The problem now is getting people there. Besides fuel prices, the Iran war is tanking tourism in Africa. Airline routes have been reduced, and demand for travel services has fallen off. The retreat of U.S. (and others') foreign aid from Africa is destabilizing governments, spilling red ink across the continent on the travel advisory map, spooking travelers. Malawi and its neighbor Mozambique are hanging on to their "level 2" status (travel with caution), though neighboring Tanzania, home to Kilimanjaro, has slipped to "level 3" ("reconsider travel"). (Neighboring Zambia boasts a remarkable "level 1" ("normal precautions"), though the rating system seems suspiciously aligned with a U.S. appetite for African resources; read more.)

I had not intended to come home from Malawi to write about fuel woes and war effects; rather, I wanted to write about the Mughoghos' investments in "community tourism" through homegrown enterprise, admirably independent of the foreign quid pro quo that haunts so much of the African economy. The latter is still an important story. Tourism is the bellwether of foreign investment that will be essential to bolster the Malawian economy and give the people a fighting chance at socioeconomic mobility and a healthy, middle-class standard of living.

Right now, though, it's hard to see the road to that prosperity. Like many countries and many peoples in the developing world, Malawians are captive to an emerging geopolitical catastrophe that they had no hand in making. What for Americans is a crisis of affordability means, for people elsewhere in the world, development paralysis, and worse: a betrayal of the western economic promise, that hard work pays off. The "just world hypothesis" holds that good people will reap rewards. It's sometimes called the "just world fallacy." But it is a motivating ideal that keeps the peace in much of the world, and it's an ideal worth striving to make real.

Sign at a Lilongwe bus stop along a Chinese-financed highway
touts foreign aid.
RJ Peltz-Steele CC BY-NC-SA 4.0

If you are inclined go to Malawi, please do. It is safe and open for business. Flights are available; Ethiopian Airlines hedges against economic downturn with a diversified fuel supply. Please consider planning your time in Malawi with Adventures with Colby; Colby and Violet reinvest proceeds in communities. They'll store fuel if they know you're coming. (Nothing received for this endorsement.)

Western dollars and a little bit of faith are needed to help Malawi, "the warm heart of Africa," to weather this storm, and to get back on its feet.

Let's hope that the current strategy in U.S. foreign relations has not completely undermined the just-world hypothesis in places such as Malawi. Because if it has, there are other nations with less benevolent intentions waiting in the wings to export a very different worldview.

(This post was updated on Sept. 25 to restore the sentences about the "just world hypothesis," which disappeared inexplicably after the original posting, in the paragraph beginning "Right now ....")
 

Kuwait ponders a future after fossil fuels

Kuwait City skyline

Kuwait is an oil country, and Kuwait City glows with prosperity. Kuwaitis know, though, that they can't ride the oil train forever.

Earlier this month, I took part in a program of the Kuwait Bar Association (KBA) and International Association of Lawyers (UIA) in Kuwait on the mediation of energy disputes. (All photos RJ Peltz-Steele CC BY-NC-SA 4.0.)

Kuwait Bar Association (Society of Lawyers)

The program addressed both state and corporate actors, which often in the Middle East are functionally the same, as political royals are only formally differentiated from their investments. Iraq invaded Kuwait in 1990 largely in response to long-running disputes over access to oil reserves under the countries' desert border. So it's understandable that Kuwait, powered by a 70-year-old, $1tn sovereign wealth fund born almost entirely of oil revenue, is an eager evangelist for non-violent dispute resolution in extractive industries.

Kuwait Towers

I spent some additional time in Kuwait, besides the KBA-UIA program, to see the sights of Kuwait City. The first place I went was the iconic Kuwait Towers. Dating to 1979, the towers were designed to be monumental more than functional, architecturally distinct among Kuwait's historical water towers, a remaining few clusters of which dot the urban landscape. Repaired since they were trashed in the Iraq invasion, and refurbished in the 2010s, the Kuwait Towers are a patriotic reminder of a Kuwait that long imported fresh water for its survival, before oil wealth paid for expensive but effective desalinization. 

Dhow model at Marine Museum

On display at the Al Hashemi Marine Museum and the Maritime Museum are Kuwaiti dhows dating to the 19th century. Some were used for pearling, the dangerous prospect but potential big score of a once seafaring economy. Many of the dhows are specially fitted with large water tanks running along the keel.

Thus imported, water historically was famously expensive in Kuwait. There's still a popular maxim that water, the truly scarce resource of the desert, is more expensive than oil. Water still is expensive, or should be, because desalinization is expensive and largely fossil fueled. 

Other legacy water towers

Government subsidies, however, obscure the cost of water. A combined utility bill in Kuwait, including water, electricity, sewer, garbage, etc., might run US$40 or $50 a month, single family—a lot for some locals, especially ex-pat laborers. But even correcting to U.S. cost of living with a 250% multiplier, utilities including water are far cheaper than in the States. Environmentalists fret over the conceit that water is inexpensive. I thought that my hotels would caution about water consumption, as is common in desert countries, not to mention American desert states, but they did not.

In keeping with the maxim, petrol is cheap. I was worried when Europcar warned me that gas stations accept only cash—until I worked out the prices. I filled up my SUV rental's 13-gallon (about 50L) tank for less than US$10.

Evening recreation at Dasman Beach

There's much to see in Kuwait City, in terms of museums and historical sites. What struck me, though, is the prevalence of western influence and a near indifference to foreign tourism. Attractions are aimed at locals. Kuwait excels at affording its people diversions of all kinds, including the educational and recreational: museums, beaches, playing fields. But the focus is decidedly domestic, bringing the world to Kuwaitis, not the other way around.

Texas Roadhouse Beneid Al Gar, one of three Kuwait City locations

Limited opening hours and a ramshackle bus system make many attractions difficult to access for visitors. Ride-share app Careem works well, though drivers speak little English. Some places' websites are in Arabic only. Besides foods, souvenirs are sorely limited: the norm is an assortment of refrigerator magnets and ball caps with cheap, afterthought patches. Walking south from Kuwait Towers on the city's corniche, the extent of Kuwait's Americanization in particular is on full display. Behind the beaches, the chain restaurants line up: TGI Friday's, the Cheesecake Factory, Texas Roadhouse.

One tentacle of sprawling Souq Al-Mubarakiya

Besides the beach, a favorite evening destination for locals is one of the city's many shopping malls, from the central 1,250-square-foot Assima Mall, with its gourmet Monoprix grocery, to the sprawling 334-acre (1.35m-square-meter) Avenues, with more than 1,100 retailers. Notwithstanding the scale and upscale nature of these operations, they are loaded with the sort of western retailers found on main street anywhere. There's plenty to buy, eat, and drink—besides alcohol; Kuwait is a dry country—but very little that is specially Arabian. A more touristically gratifying destination is the city's Mubarakiya Souq, though its modernized storefronts also cater mostly to local needs. The people-watching is better than the shopping.

Camels, highwayside

To see more than just the city, and also to get a closer look at both rural life and Kuwaiti infrastructure, I drove out both to the Iraq border in the north and to the Saudi border in the south. The highway network is impressive, if a work in progress, strong on asphalt, weak on road marking. Polished bridges here and there are designed for the exclusive use of crossing camels.

In both the north and the south, the desert is dotted with green patches of farms, fed, remarkably, by well water. Visiting these farms for markets of fresh produce, petting zoos, and other children's amusements is a seasonal family pastime.

Starbucks Wafra

Near the Saudi border, the town of Wafra is the center of an equine economy. Riding centers, breeding operations, and a market for export speak to the enduring importance of horses in Arabia. On Wafra's dusty outskirts, I was surprised to find a cluster of modern buildings, including a multistory veterinary center and, no kidding, the farthest flung Starbucks I've ever seen. A sign at Starbucks cautioned that horses are not permitted in the drive-thru.

Electric towers in the desert

Strung across the desert landscape is a mind-boggling network of electric towers, stretching lines into the distance from any vantage point. Kuwait imports electricity from Gulf partners such as Qatar and Oman, and even then struggles to meet demand in sweltering summers (e.g., N.Y. Times). Meeting electrical needs is simultaneously an incentive and an obstacle to Kuwait energy transition away from fossil-fuel dependence.

Change through energy transition and emission reduction was a recurring theme at the mediation program, besides the benefits and skills of mediation itself. I did not expect to hear, and am not accustomed to hearing, harsh criticism of fossil-fuel dependence in the Middle East. Yet in a session titled "The Climate Crisis and the Transition Imperative," speakers were adamant opponents of the status quo.

Panelists: Yousef Al-Abdullah; Elena Athwal, Qatar,
founder and CEO of consulting firm Icelis Global; and Sara Akbar

Moderator Sara Akbar, a chemical petroleum engineer, current CEO of Oilserv Kuwait, and a renowned figure in the modern history of Kuwaiti oil development, condemned the "New World Disorder" of Trumpian climate-change denial and on-again-off-again Paris participation. She argued passionately that the global costs of unchecked climate change, including devastated coastal cities and lost lives, will vastly outpace the costs of energy transition to renewables. According to Akbar, even the Kuwait oil industry understands that the era of fossil-fuel dominance in the Kuwait economy must end.

Akbar cited an interesting and alarming local statistic: Kuwait has long monitored the maximum temperature of the Persian Gulf at the sea floor, which reliably marked 95 or 96 degrees Fahrenheit. Now, she said, it routinely exceeds 100 degrees, evidencing the evaporation that is fueling catastrophic rainstorms from Dubai to Bangladesh.

Yousef Al-Abdullah, research scientist at the Kuwait Institute for Scientific Research, discussed the energy transition and emission reduction commitments of Gulf states. In contrast with the U.S. re-withdrawal from the Paris Agreement and Trump Administration promise to double-down on drilling, Gulf states have articulated ambitious aims.

A leader in goal-setting is the United Arab Emirates (UAE). The UAE aims for 47% reduction in greenhouse gas (GHG) emissions by 2030. In energy transition, the UAE aims for 15% renewables in its energy mix; has adopted a net-zero target, green hydrogen strategy, independent energy regulator, and national climate law; plans a massive expansion of solar capacity; and is investing more than $14 billion in transition this fiscal year.

Persian Gulf coastline from Kuwait Towers

Kuwait looks weak on the same benchmarks. But that's not the whole story, Al-Abdullah said. Kuwait believes that some neighbors have announced goals they can't realistically meet, such as the Saudi aim to cut 278m tons of annual GHG emissions by 2030, and Kuwait wants to be realistic. Notwithstanding articulated commitments on the international stage, Kuwait has announced targets domestically, Al-Abdullah said, such as net-zero in the oil sector by 2050, and in other sectors by 2060.

Oil production is down over 10 years, Al-Abdullah said, and that's problematic for environmental strategy. The economy remains dependent on fossil fuels, to the tune of 90% of revenues, and a strong economy is needed to transition away from fossil fuels. Production is down for many reasons, including OPEC restrictions; increased competition from other sources, such as Uruguay, Paraguay, Guyana, Mauritania, and Uganda; and rising production costs.

Here my observation on Kuwait's underdeveloped tourism economy is salient, at least in small part. Because Al-Abdullah said that key to Kuwait's future is diversification of the economy, reducing the dominant position of fossil fuels, especially relative to a newly developed service sector. 

In domestic policy, a national plan called "Kuwait Vision 2035" contemplates an economy centered on logistics, leveraging Kuwait's world-crossroads location by, for example, expanding airport and seaport capacity. Vision 2035 imagines a Kuwait that is more livable for residents and hospitable to visitors, expanding highways and building a rail and metro system.

Besides infrastructure, transformation of Kuwait's workforce is required, too. Kuwait suffers an affliction known to other oil-rich states, which is a comfortable, but under-skilled national workforce. Kuwait's education system must rise to meet the challenge of preparing Kuwaitis to participate in the new economy, while the social and economic fabric must expand the job market and incentivize people to enter it.

Like other Middle Eastern states, Kuwait has a worrisome dependence on foreign workers. Ex-pats, whom I mentioned above, constitute some 70% of the resident population and have no pathway to citizenship. Blue-collar workers hale especially from the Asian subcontinent and Pacific rim. Qatar's plight in this regard was highlighted and made controversial by the location of the 2022 FIFA World Cup there; whether reforms were meaningful or sufficient is debatable.

The existing service economy, including legal, financial, and engineering services, depends heavily on ex-pat white-collar workers, too, who make up a fair chunk of that 70%. At the KBA-UIA program, I met lawyers from other Arabic-speaking countries who have worked for years, even decades, in Kuwait. They are generously permitted to practice, more than an out-of-jurisdiction lawyer may in the States, on matters related to their home jurisdictions. But there's no pathway to bar admission, such as might expose the domestic market to competition.

Legal and regulatory reforms will have to complement the development of a service sector and trade center, Al-Abdullah said. I don't think Kuwaitis alone will be able to make that change. Rather, Kuwait will have to open itself up with a more robust immigration framework, affording ex-pats the likes of property and other rights, if not naturalization, to foster a justified sense of ownership in the new economy.

KOC Oil and Gas Exhibition Hall

Apropos of energy transition, one of the most interesting tourist attractions in Kuwait is the Kuwait Oil Company (KOC) Oil and Gas Exhibition. The exhibition—reservations required for guided tours only—offers an artfully constructed tour of the history of Kuwait, from its desert and seafaring cultural history, to British protectorate and the discovery of oil, rise to global energy power, and Iraq invasion, destruction, and recovery.

Exhibit dramatizing Kuwait oil extraction: every second, every day

The exhibition is decidedly a paean to oil. But it is not wholly environmentally tone-deaf. One dramatic exhibit shows, with a massive gush of black liquid, the astonishing amount of oil that Kuwait pumps from the earth every second of every day, averaged out. The exhibits don't say it plainly, but there is an undeniable implication that this business model is not indefinitely sustainable.

The next chapter of Kuwait energy policy is ready to be written.

Tchotchkes for sale at the KOC Oil and Gas Exhibition gift shop

Kuwait sign on the corniche