GEOPOLITICS

Intro: If Britain is nimble and responsive to this global crisis it can be a winner in an era beset by conflict. Confident governments that circumvent risk will benefit handsomely

Amid the geopolitical storms and instability emanating from Ukraine to the Strait of Hormuz, flickers of light are piercing the gloom. To paraphrase Charles Darwin, it is not the strongest that survive, but those most responsive to change. So too, with nation states. Mid-ranking powers are navigating independent paths to mitigate risks and grasping opportunities lacing the chaos. There are lessons here for Britain.

In Ukraine, necessity has proved the mother of invention. Since Russia’s invasion, Ukraine has revolutionised its industrial-defence base, changing the face of global warfare. In 2024, Ukraine conducted the first fully autonomous drone strikes on Russian targets. The scale of innovation is equally dramatic. Ukraine has reduced its reliance on foreign-supplied military hardware, from 54 per cent to 18 per cent, in three years. Now, Gulf states are queuing up to buy its drones to defend themselves against Iran.

Such rugged self-reliance and determination persuaded the United Arab Emirates (UAE) to leave OPEC, the 12-country cartel that fixes oil prices and supply. “Opexit” will enable the UAE to increase its oil production by around 40 per cent, and help to ease global shortages. In doing so, the UAE has derided regional rivals, deepened ties with the US and Israel, and signed a defence pact with Ukraine. These moves are highly controversial for a mid-sized power under lethal fire – responding with vision and self-confidence.

The trend is not limited to those facing military pressure. When China responded to Australian criticism over Covid in 2020 by imposing tariffs, the government in Canberra reduced its dependency on China. It expanded trade with South-East Asia, and signed Aukus, the defence co-operation pact with Britain and the US.

In the wake of US tariffs, Canada signed a dozen new free trade deals, and launched a sovereign wealth fund to boost critical mineral supply chains with allies. It has ramped up defence spending, and is partnering with innovators in defence tech. 

The emerging trend undermines lazy assumptions that mid-sized nations must choose between or bow to larger powers. Confident governments that manoeuvre nimbly can circumvent risk. By co-operating in clusters with like-minded partners, they can seize the opportunities accompanying geopolitical ructions.

There are clear lessons for Britain. Since 2019, UK trade has increased – measured by volume or as a proportion of GDP. The latest United Nations statistics show that, since its departure from the EU, Britain rose from seventh to fourth place in the global trade rankings, spurred on by trade deals with Australia, India, and the 11 countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. As a services-oriented economy, the UK should strike further deals from the Gulf to South America.

UK trade objectives, however, must play to our comparative advantages. London remains the second-largest financial centre in the world, contributing 20 per cent more to the UK economy than it did in 2016. We can build on this by securing greater market access abroad. Reform at home would help, too. With public finances strained, state support should focus on sectors where the UK offers global leadership from life sciences to AI, for example, to make it easier for large funds to invest in data centres and defence procurement.

As the conflict in Iran shows, the global economy is still acutely reliant on traditional maritime supply chains. Britain has a long history as a leading maritime nation, and UK firms – like GB Global – are looking to high-tech logistics and modular methods of shipbuilding to mitigate these risks. The Government can do more to support this strategic sector, in ways that would boost tax revenue.

If Britain aims to lead in innovation, we need a reliable supply of critical minerals. Similarly, Europe-wide efforts to rebuild defence capabilities will fail without a stable supply of heavy rare earths.

While the West lags behind China by around 20 years in the race to mine and refine these commodities, Europeans have been slower to respond than the US, Canada, Japan, and Australia. The UK has some natural resource and refining capacity, but is yet to translate strategic objectives into operational delivery. One option is to help finance projects abroad in return for the off-take needed to service industry.

Likewise, in defence tech there is a UK hub emerging in Swindon, but it needs a technical college to provide the skills, faster procurement decision-making, and a revamp of the electricity grid to attract businesses.

The splintering of the post-1945 international order has sent waves of uncertainty around the world. Yet mid-sized countries can navigate turbulent geopolitical waters, but only if they face the new realities and play to their strengths.