Returning to Washington recently after consecutive keynote presentations at several major investor events, before hundreds of highly-educated and well-informed finance executives, I was struck by their focus on the turbulent shifts in geopolitical relations on a global scale of recent decades.
In 1988, the U.S. and the Soviet Union were still locked in the Cold War, with most nations siding with liberty or totalitarianism. The 1990s were marked by America’s unipolar moment, with Russia rendered relatively meaningless in world affairs and China just beginning to rise from Mao’s domestic ruins. The first decade of the 21st century literally exploded into being, unleashing American military power in Afghanistan, Iraq, and globally against a vast radical Islamist terror network.
The last 10 years have witnessed the resurgence of a resurgent quasi-monarchy in Moscow undermining Western cohesion and American influence in Europe and the Middle East, joined by a revisionist authoritarian regime in Beijing determined to manage Asia’s commerce and overturn the international liberal economic order sustained by U.S.-led alliances for 70 years.
In 2018, the world is witnessing a tripartite landscape, marked by nuclear powers of varying influence within a framework unlike any of the past century. The question for political, corporate and finance leaders centers on how to engage these new power arrangements, sure to be in flux for the foreseeable future.
The perilous fusing of twin threats from nascent nuclear power North Korea and aspiring nuclear power Iran portend the broader destabilization of the Pacific Rim and Middle Eastern regions. Neighboring countries warn of plans to acquire independent nuclear arsenals or deploy American systems on their territories as desperate means of deterrence against aggression from Pyongyang and Tehran — a proliferation system that would gravely undermine stability.
Many of these flashpoints have emerged immediately adjacent to the world’s most important waterways, carrying the bulk of total global commerce and much of the world’s oil and natural gas supplies. Sovereignty disputes between China and almost every Pacific neighbor, from Japan to Indonesia, play out regularly in the South and East China Seas, through which a combined 35 percent of the world’s commerce traverses.
The Straits of Malacca, between Indonesia, Malaysia and Singapore, is the entry point for China’s ambitious naval security strategy deep into the Indian Ocean, where it has established a “string of pearls” comprised of ports and harbors in Myanmar, Bangladesh, Sri Lanka, the Maldives, Pakistan, and in several countries along Africa’s eastern coastline. China established its first foreign military base, in the African nation of Djibouti, across the Bab el Mandeb chokepoint guarded by the U.S. and NATO allies against pirate and terror organisations exploiting the civil war in Yemen and long-standing anarchy in Somalia.
India is emerging from the self-imposed isolation of decades of non-aligned socialism, seeking to build a modern economic powerhouse and assert its sovereign national interests across the south Asian continent and throughout the Indian Ocean, bordered by two dozen countries from South Africa in the southwest to Australia in the southeast. India’s strategic priority is to constrain China’s maritime, commercial and military ambitions from the Straits of Malacca to the Gulf of Aden, and to conduct military operations and project power expansively into the open ocean — ideally in a strategic partnership with the U.S., Japan and Australia.
In the Middle East, transformed by the 1979 Iranian revolution that provoked the radical Shia-Sunni sectarian divide with Saudi Arabia, Washington is conceding Moscow’s growing influence.
This began under the Obama administration in 2013, when the U.S. welcomed Russian assistance in purportedly removing chemical and biological weapons from Syria. In the summer of 2015, Iranian mullahs and military leaders persuaded Vladimir Putin to escalate the aerial bombing of anti-Assad forces close to toppling the Syrian regime. Moscow’s pitilessly decisive bombing campaign, joined to ground operations by Iranian militias and Hezbollah proxies, are the reason Bashar Assad prevails in Damascus.
The Trump administration’s National Security Strategy recognizes Moscow’s newfound regional power status, buttressed by 49-year leases to maintain and expand Russian naval and air bases on Syria’s Mediterranean coast. Moscow is now positioned to project greater military power and diplomatic influence throughout southeastern Europe and the Middle East than at any time since it was expelled from Egypt in the early 1970s.
Russia’s pronounced eastern Mediterranean presence will reassure China, which has designated southeastern Europe as its entry point into central European markets, and will challenge the U.S. and Egypt guarding the Suez Canal, through which 40 percent of global oil shipments and over 10 percent of world trade pass annually.
These are just some of the paramount geopolitical risks concentrating the minds of today’s political and financial leaders. Their concerns are growing, clear answers are few, and the potential for significant disruption is kaleidoscopic. What is needed is far-sighted, innovative and realistic leadership as the foundation for essential American predominance in a stable and surer world order, limiting the reach of those countries that would undermine the relative security and prosperity of recent decades.
The alternative is a world economic order dominated by a mercantilist Chinese Communist Party, weighed down by the constant menace of Russian revisionist ambition, and the undermining of political stability, regional economies and energy resources by North Korea and Iran.
With 90 percent of total world commerce — including that of the West’s most determined adversaries — borne on ships, the United States and its partners have no recourse but to maintain free and open shipping across and throughout all international waters. Such are the daunting challenges of our constant turmoil, seeking to mitigate geopolitical risk in a world as dangerous as ever, where history and geography remain the bedrock of political choices and decisions — today, tomorrow and always.
John Sitilides, geopolitical strategist at Trilogy Advisors LLC, specialises in global risk analysis and regulatory affairs.