Tag Archives: Geopolitics

Britain, Economic, Government, International trade, Politics, Society, Technology

Wresting opportunity from this geopolitical crisis

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.

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China, Economic, Foreign Affairs, History, Politics, Russia, Society, United Nations, United States

The new and emerging Russia-China pact bodes ill for the United States…

GEOPOLITICAL STRATEGIC TRIANGLE

It was in 1972, at the height of the Cold War, when President Nixon made his impromptu (but famous) visit to China in an attempt to normalise relations with Beijing. His aim was for the United States to gain an advantage over its superpower rival, the Soviet Union. In recent days, Russia’s Vladimir Putin made his journey to China. The countries in this geopolitical strategic triangle may be the same, but their roles are far different from what they once were.

Transformation in Russia, the successor state of the former Soviet Union, has been huge. Moscow is a diminished power now and not the threat it once posed. The US, the only remaining superpower, is also in decline, at least in relative terms. But this trend in turn reflects the emergence of China, almost dormant 40 years ago, but now accepted as being a mighty global force on the world stage. China’s economy is soon expected to surpass that of the US, and many economists suggest that China’s currency poses a serious challenge to the US dollar, the world’s main currency reserve.

In the 1970s, the odd man out in the triangle was Moscow. Now, though, Presidents Putin and Xi Jinping are trying to forge an alliance that will cut the US down to size.

Symbols of intent are apparent in this new and emerging joint partnership. The launch of the current joint naval exercises, for example, was attended by both leaders. And, far more importantly, is the massive 30-year deal signed this week for the sale of Russian gas to China. This will start in 2018, but the deal also contains contractual terms which allows for substantial Chinese investment in Russia’s infrastructure. The agreement will provide a new outlet for the energy exports on which the Russian economy largely depends. More broadly, Moscow’s orientation is being seen as part of a ‘pivot to Asia’, with a focus on deepening ties with the East (rather than the West).

The driving force and logic behind this new alignment has been accentuated when we consider the sharply deteriorating relations between America and its emerging eastern superpower rivals. In the case of Moscow, the annexation of territory in Ukraine has raised tensions with the West to levels not seen since the Reagan era. Ongoing difficulties have generated a fear of a looming second Cold War, which are by no means fanciful. Mr Putin’s unconcealed ambition to restore a de facto Russian empire continues to fuel such suspicions.

China and the United States, economic and increasingly geopolitical rivals, could well be described as being at loggerheads. Notwithstanding Beijing’s perceived expansionism in South-east Asia, which has brought it into direct conflict with several close American allies in the region, this week’s announcements of unprecedented criminal indictments in the US against Chinese military officials for cyber spying has raised the political stakes even further. Not surprisingly, Beijing has referred to a major setback in relations with Washington, while simultaneously proclaiming that relations with Moscow have never been better.

In some respects, however, this Sino-Russian rapprochement may make little difference. Economically, Russia needs China far more than the other way round: not just as an export energy market, but also as a source of vital capital.

When Russia’s economy is slowing and tensions over Ukraine threaten future financing and investment by the West, having Beijing as a strategic partner could unsettle relations with the West much further. China is already increasingly supportive of Russia’s position on Ukraine and, with both countries being permanent members of the United Nations Security Council, with the right to exercise the power of veto, the prospects of resolving the crises in Syria and elsewhere seems remoter than ever. Between them, too, they could also make it even harder to secure a satisfactory nuclear deal with Iran. Whichever way we turn, the loser in this changing eternal triangle of geopolitics is the United States.

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