The year 2018 was full of sparks, but it only laid the groundwork. I have not yet discussed the tariff war between primarily China and the U.S., which hogged the headlines the world over. Let’s have a short overview of what one needs to be on the lookout for and what to expect:
MAINLAND EUROPE: The European Union is in a collapsing mode, the writing is on the wall, but that won’t reveal itself just now. It will take a few years. That has nothing to do with Brexit, rather with the changing power dynamics of the world. Europe is important, but not so much these days; it is an also-ran now. Within Europe itself, the power landscape is changing somehow. Eastern Europe, as it carves out Europe from Eurasia, or rather the first entry into Europe after the Central Asian steppes and mountains, is coming out from under Germany/EU’s shadow. There are, however, many stumbling stones: immature leaders being the main ones. But economies in Eastern Europe are doing well, people are becoming prosperous, and for the first time in a century or more, there is some kind of stability in the region. Bad wolf Russia awaits, but Russia’s interests are in its buffer zones, not necessarily right now over anything beyond: it is too diminished in power to effect anything. On the Western side, it’s all crumbling. France’s “gilets jaunes” is symptomatic of people’s disenchantment here: the root cause is an inability of many to keep prospering in post-2008 world, while keeping having the Social Security benefits. Germany, being a heavily lopsided economy (on the side of exports and manufacturing), faces a tough time: as trade relations get redefined globally, and new players emerge (e.g., in automobiles, a key German area), traditionally held fiefdoms stand challenged. Also, countries like Germany, France and the UK need a lot of investment, much of it urgent, in their infrastructure: many of their rails, bridges, etc., were built in the 1960s to 1980s period, and now they are creaking. The Italian bridge collapse some time back was a sign of things to come if some of the investment is not done urgently. Germany’s DeutscheBahn is becoming worse and worse in punctuality. The problem is that the economies aren’t doing so well now, China is the giant to take on, social security seems difficult to withdraw from people nourished on a diet of values of dependence, and no leader having intelligence, charisma and empathy exists. It’s difficult, given all this, to put money into infrastructure such as rails (I don’t mean trains), where foreign investment usually is not welcome. Then, there are also tensions created by Brexit. Countries such as Portugal have close relations with the UK but are part of the EU. Also, if any companies, notably banks, thought they could relocate their operations to Paris from London, the “gilets jaunes” must have spooked them: France is simply not the UK.
UK/NORDICS: It is hard to say anything about the UK, as the British themselves are confused what to do. The best would probably be a “no-deal” exit, that is, under the WTO rules, but that is also hard to say. It would be interesting to see if that has any effect on Britain’s trading partners such as Norway. The geopolitical role of the UK has by now become quite obsolete. Under May, the UK has not proceeded with great pace, not being able to be ready, it seems, to stitch up good deals with major economies outside the EU. One country that is doing very well, aided by a smart, experimental leadership and companies, is Finland. Its smaller, poorer cousin Estonia also is doing well. For them, the main threat remains Russia, and Finland has been preparing well for any future attacks of any kind. It is also training its people in artificial intelligence and experimenting with education models. Scandinavia itself is doing neither great, nor badly. Sweden is facing trouble with integration, while Norway has no clue over what to do with all the money it has.
INDIA: Let’s move on to another obsolete player on the geopolitical stage, India. The country is big, its market is what everyone is eyeing, yet India has never played a very significant role on the geopolitical stage. That is not necessarily a bad thing: being non-aligned always, even now, has helped India to weather the Cold War, the 2008 financial crisis and now the U.S.-China trade war. The problem with India is though its legacy: corruption sustained by red-tape bureaucracy, a spirit of divisiveness, and an inability to look to the present and the future. Much of this legacy was born in the British times, but an inability to modernise seems to have characterised many kings and emperors post Akbar. India is blessed though with a quite good geography: vast ocean extending to its south, and the Himalayas, where warfare is difficult to sustain, on its north and northeast. Its weak point remains the Indo-Pak border: if India had not got divided, Baluchistani territory would have afforded some buffer. The Modi government meanwhile proved itself to be one of the worst-performing in Indian republic’s short history when it came to issues touching foreign relations: it has made the Kashmiris more antagonistic, has bullied Nepal so much without projecting the necessary power to sustain the bullying that Nepal is in China’s camp, has made the blunder of letting go of a strategic port in Sri Lanka, almost lost the Maldives, and has lukewarm relations with Bhutan and Myanmar. The only success has been continuing good relations with Bangladesh, though much of it is down to the Sheikh Hasina government in B’desh. This much for the region; internationally, India hasn’t been an important actor at all, and the Modi government’s inability to sway the Trump administration in the U.S. as regards visas means that many engineers from the U.S. start returning to India. Relations with Japan are on an upswing, but that has more to do with Japan’s hedging of bets given the Koreas’ relative rapprochement and the constant China threat. With already a dearth of jobs in the country, a booming population, increasing automation, and rising living costs, India seems to be sitting on an atomic stockpile of ‘too many to feed, too few able to work’. But many Indians are enjoying a newfound prosperity and have not realised the danger, so they are still busy with the divisive cards played by their politicians: caste, language, religion.
CHINA: The biggest geopolitical player of today’s world is not the U.S., but it’s China. The country continues to develop impressively, especially in new technologies, whether it be artificial intelligence, aircraft manufacturing or space tech. It is already the leader in fintech, one can say, given that most Chinese youngsters now don’t carry cash or card to buy even a mocha tea. The issue before China is though its head of the state: is Xi Jinping ruining what would have been good times for the country by being personally too ambitious? It would have been ideal for China to buy some more companies in strategic domains in Europe and the U.S. and to continue lifting its huge population out of poverty: but because of Xi’s BRI (or OBOR) hubris, not only are countries like Germany and the U.S. warned, but also Chinese researchers are not anymore welcome so often in Western universities. China could of course focus even more on Africa and the rest of Asia, including big markets such as India, but it will need high technology to match the West. The game is now who will win the technological battle: China or the U.S.? (Or a third player?) The trade war will not hurt China that much; what is going to be more important for China is its ongoing domestic issues: the housing price inflation, increasing crackdown on religions, reportedly on even the Huis and Christians, and air pollution. China has to ensure that no domestic rebellion catches the people’s fancy: an equivalent of “gilets jaunes” in China, hard though it is to imagine right now, will throw everything in the spanner. In such a case, the millions unwisefully dumped in the BRI just to get political influence over other countries will return to bite the country. What is also important for China is how well it is able to protect its important companies, such as Huawei.
RUSSIA: Oil prices are again low, and with that the geopolitical importance of the country. It continues to have its sphere of influence in the various -stans, but China is making a dent into it. It continues to worry Eastern Europe, but the U.S. will also continue to sit tightly there. The U.S. role is to keep Russia and Germany on edge for each other. If anything happens to Putin, the power struggle will be intense, and chaos may ensue.
SAUDI ARABIA: The kingdom’s influence has certainly went down after the outcry over what seemed a directly ordered assassination by the Crown Prince (MbS) in the country’s consulate in a third country. However, as long as it has oil as well as stakes in various companies, the country will continue to be immune to criticism or sanctions. What is more of interest is how MbS will go now in his own country: will he slow down the secularisation and modernisation of the country? He shouldn’t, for his own good: any quarter given to the Islamist mullahs will bring his own downfall. Meanwhile, the burgeoning friendship between the country, the UAE and Israel so as to isolate Iran eventually promises only great instability in the region.
TURKEY/IRAN: While Iran seems hemmed in by sanctions, it would be foolish to understimate Iran. The country derives its strength from exceptionalism: the people know they are almost the only Shias in the world. In this respect, though many Iranians hate the Islamist regime itself, there is a kind of solidity within. Of more interest is Turkey: where several ethnicities live and don’t get along well with everyone, but also where many young are liberals or not that much interested in radical versions of Islam, going along more with the vision of Kemal Ataturk, but this modernity is not shared by all. The society is fractured, and while Turkey is safe from outsiders for now, it carries deep fissures within, including an ambition to once again become a power in the region. The sooner that ambition dies, the better it would be for the Turkish themselves.
SOUTH AMERICA: Except for some countries such as Colombia or Argentina to some extent, the year 2018 was worse than what went before, and it seems that there is not going to be any respite. Venezuela is a key issue, but also the Chinese control over several assets in many countries, especially oil and gas fields. It will be interesting to see how legalisation of certain narcotics in North American countries affects the region as a whole, especially countries such as Colombia: will it make the criminal drug cartels grow or reduce? The verdict is difficult to pronounce in foresight.
AFRICA: At issue again is Chinese control over various assets, especially in countries such as oil-rich Angola. Nigeria also hasn’t done anything to modernise its oilfield infrastructure, and seems ready to fall to foreign powers and internal instability. The Saudis may want to invest here, but MbS will be wary of going more into oil and of a rampant Islamism here. What Nigeria does need is a good new crude refinery. In Northern Africa, “gilets jaunes” kind of movements may surface.