A multi-century economic and geopolitical cycle is giving way to a new one. This is a tectonic shift which has got accelerated by both withdrawal from old conflicts and and the emergence of new ones. A single major war, like the one in Ukraine, is like an earthquake that precipitates aftershocks and more conflicts. Some within the power structures of countries seeking to retain their edge will adapt to new realities while others will not.
As a result, internal interests often clash. Countries that remained on the margins or in the shadows of larger powers, will muscle flex. With many moving tectonic plates, the magma underneath – in the form of historical grievances and civilizational enmities – surfaces. Old conflicts are given new political hues.
Actions are backed by actors that want to control outcomes in a new global order and in some cases, retain their traditional methods of exercising influence. The arbitrage that major and regional powers enjoyed in conflict economies is under stress, leading to unpredictable outcomes. The attempt to establish new channels of diplomacy in this context receives pushback sometimes from within countries and other times from outside.
Empires often shrink from fringes they occupy. The US’ withdrew from Afghanistan in 2021 and the Taliban was reinstalled in Kabul. The US left behind some $80B dollars worth of weapons and military hardware in Afghanistan. Some of these arms are finding their way to conflicts in the subcontinent and in West Asia. The war theater eventually shifted to Ukraine.
Ukraine was armed with north of $100B worth of weapons. Many of these arms are making their way into the black market, from Latin America to the Middle East. While the US lacks the political appetite to put boots on the ground in any major size, it increasingly deploys advanced cyber and over-the-horizon kinetic capabilities.
Some of these capabilities are yet to be tested in a hot war. But wars still involve arms, and these are proliferating in areas where geopolitical interests of several countries and two competing power blocs, collide. This poses new risks given the US has reverted to its pre-9/11 stance of broadly dismissing Islamist terror as a non-issue for its own security.
The Ukraine war has debilitated the US’ main partner, Europe. On the energy front, piped gas supplies from Russia to Europe have dropped to a trickle. With Nordstream 2 sabotaged, Europe now depends on expensive LNG. This has triggered deindustrialization and an irreversible economic decline. Inflation has ravaged the Eurozone leading to public anger.
As a result, governments are changing and are leaning right despite political parties holding no real solutions in sight. Migration from the Middle East and North Africa to Europe has risen sharply over the last decade due to wars in Libya, Iraq, Syria. Concerns remain about the revival of Islamist terrorism in Europe given the proliferation of illicit arms. Meanwhile, social tensions are rising as illegal migration, aging local demographics, high social spending and dense spending requirements eat into a shrinking economic pie.
Qatar played a mediating role for the US since 2010. The Doha regime earns most of its revenue from the sale of LNG. Gas is an important bridge fuel in the global green energy transition. LNG has grown rapidly both in volume and price over the last decade. Gas sales have financed Qatar’s investments in groups like the Muslim Brotherhood and Hamas. Doha has also built a formidable media presence and a network of influence spanning the globe.
Penetration into the political landscape of several countries has been made possible by vasts amounts of money that a small country like Qatar has in excess. The Brookings saga and the close relationship some Democrats have with the Muslim Brotherhood reveal the extent to which Qatar has attempted to influence US foreign policy.
Today, many of the US’ military operations in Afghanistan and West Asia are conducted out of Qatar. Condemnation of Qatar’s role in financing Hamas is generally muted in the mainstream media. The focus is on the country which speaks the most on the Palestine issue, which is Iran.
The shift away from the oil economy has prompted countries like Saudi Arabia and the UAE to take advantage of the shifting geopolitical winds. Repositioning themselves is no easy task given their historical dependence on oil revenues and proximity to the US. China and the US are driving this change with their aggressive expansion into the electric vehicle space. EVs are not just for clean energy but for shaking up the geopolitical order. The EV revolution is forcing Middle Eastern states to break from their molds. It also aims to weaken Europe, a continent heavily reliant on the auto industry.
The US wants to preserve a unipolar system but as early as 2005, proposed a bipolar arrangement with China. There are some in the US that see a G2 world as the most favorable outcome of great power competition. A US-KSA defense pact + a KSA-Israel pact + IMEC and I2U2 would bring US reach very close to the Chinese sphere of influence. It would also push emerging Chinese influence out of the Middle East. Beijing stands to benefit from any breakdown in the formation of new bilateral and multilateral relationships in the Middle East which usher in connectivity from India to the West.
Most importantly from economic angle is the structural shift up in US borrowing costs after forty years of decline. Against the backdrop of rapidly rising debt levels and deglobalization, the risks to the global economy are probably the highest in decades. As the world gets cleaved into blocs and the Chinese labor arbitrage trade phases out, the debt fueled consumption and its allied fiat currency model gets questioned.
A monetary reset is expensive. “Benefits” of a war economy can offset some of the losses resulting from this reset. The incentive to expand conflicts is rising. Meanwhile, the nature of modern warfare is morphing into a hybrid form that world powers aren’t ready just yet to go all in on.
Away from the media glare are conflicts in Africa, a ground for proxy wars aimed at gaining strategic influence and access to natural resources. The world needs stable, clean baseload electricity generation which until now has been provided by coal and to some extent, gas. Nuclear is significantly better in this regard so access to uranium comes at a premium. Moreover, base, precious and critical metals are needed for the EV transition.
Control over these resources will determine which countries have geopolitical leverage in other parts of the world. African conflicts come with significant humanitarian consequences given the continent’s young and rapidly growing population.
Migration northwards to Europe will add pressure to an already struggling EU. Russia and China are aware of this. The US is trying to regain influence in Africa after ceding much ground both economically and geopolitically over the last two decades.
(This article has been compiled from the tweet thread posted by @suryakane on October 09, 2023, with minor edits to improve readability and conform to HinduPost style guide)
