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In a wide-ranging speech on geopolitics at the 68th CFA Institute Annual Conference, Ian Bremmer, founder and president at Eurasia Group, a global political risk research and consulting firm, discussed his current outlook.
Three Geopolitical Eras
According to Bremmer, the past 70 years have been defined by three geopolitical eras. First, dynamic tension between the United States and the Soviet Union dominated the post-World War II landscape until 1989. This period was a very dangerous one but was nonetheless stable and, consequently, fairly predictable. But then the Soviet Union disintegrated, giving rise to a geopolitical era that was relatively unstable but not particularly dangerous. That period came to an end with the 11 September 2001 attacks by al-Qaeda on the United States. Bremmer characterizes the new era that is beginning to take shape as both unstable and dangerous.
Key to understanding Bremmer’s entire presentation is grasping the four driving geopolitical forces at work today:
- The United States
- US allies
- The rise of China
- The decline of Russia
The United States
Currently, growing energy independence and war weariness is leading the United States to change its geopolitical impetus. Most outsiders interpret this as growing isolationism. But Bremmer sees US foreign policy as very interventionist and very unilateral. In short, the United States does not want to be the global police officer any longer. Rather than intense efforts to create international stability, the United States wants to focus on its national priorities on the geopolitical stage.
This attitude is especially apparent in the Middle East, where the United States is trying to create a regional balance of power very different from what was in place prior to the invasion of Iraq in 2003 — a balance largely created by the British and French in the first half of the 20th century. Specifically, by brokering a nuclear peace treaty with Iran, the United States is disengaging from Israel and Saudi Arabia, its previous Middle East geopolitical anchors, and realigning the entire structure of the region. The sought-after balance is Turkey to the north, Iran in the middle, and Saudi Arabia to the south — each competing with one another but never really gaining a permanent advantage.
When Iranian oil comes back online and its economy rises after the sanctions are withdrawn, it may mean the end of OPEC, according to Bremmer. Consequently, the United States can disengage from the Middle East gradually and focus on other regions, especially Asia.
It was the post-World War II transatlantic relationship that allowed the US economic order to become the world order. But that relationship is weaker now than it has been at any point in the past 30 years. This is because of the rise of national interests that trump international ones in much of Europe.
For example, there is a marked rollback of British foreign policy. Meanwhile, France is not engaging with Germany, breaking a nearly 50-year partnership that saw the two countries almost always acting in concert with one another. Additionally, Germany does not see the world in geostrategic terms but instead views it through the prism of economics.
All of this means that the United States cannot coordinate with Europe the way it used to do at the geopolitical level. When the United States wants to engage with China, it knows who to call. But who does the United States call when it wants to engage with Europe? Put another way, the lack of European coherence is accelerating US unilateralism and isolationism.
The rise of China
The only constant over the past 35 years geopolitically has been the increase in China’s influence. China has decided that it does not want to challenge the United States militarily in the near future (10–20 years), according to Bremmer. Yet China has decided to challenge the US global economic order.
Bremmer believes that China is the only global economy with scale that has a strategic global economic policy, and he compared it with the well-known Marshall Plan of the United States after World War II. Specifically, China’s challenge to the United States is coming in the form of the China Development Bank; the Asian Infrastructure Investment Bank; the BRICS New Development Bank; and its maritime and overland Silk Road initiatives. Bremmer believes these efforts are worth about $1 trillion, and they are designed to build China’s commercial relations, which it considers strategically important for the long run.
However, unlike the largesse of the United States over the past 70 years that sought to instill democratic and capitalist values, China, according to Bremmer, has no such interest. Consequently, China’s efforts are likely to have a destabilizing effect on global geopolitics. Given the rise of China, as well as its strategic focus and the US retreat, other nations are likely to begin hedging their bets on the international stage, says Bremmer.
The decline of Russia
According to Bremmer, the international community underestimates Russia in the short term, especially its willingness to disrupt the rest of the world. Policies put in place by the global community have not been meant to punish the Russian people — just President Vladimir Putin individually. But Bremmer is convinced that Putin has no intention of changing his behavior. That is because when the West’s policies target Putin’s friends, he perceives it as an effort at regime change. Consequently, Bremmer expects increased Russia-orchestrated cyber-attacks and more military incursions into Russia’s near periphery, including more destabilization in Ukraine. In short, Bremmer says that Russia is a bigger black swan than financial markets appreciate.
Although Bremmer made many predictions during the course of his speech, these are the major ones he shared with the audience:
- We are just now entering a period of geopolitical creative destruction.
- There will be more geopolitical intrusions into market dynamics, including in the more strategic sectors; more government interventions; and more inefficiencies wrought by politics.
- The Middle East is doing poorly and may get worse. This includes the realignment of the regional balance of power; the intensity of the failed regional states of Syria, Iraq, Yemen, and Libya; and the possible collapse of OPEC. The United Arab Emirates is one bright spot.
- China and Japan are much less interested in confronting each other because of stability at the national level in both countries.
- Prime Minister Narendra Modi’s victory in India marks a sea change for the nation and should cause the Indian economy to flourish and India to emerge as a regional power, if not an international one.
- A Grexit is not likely.
- Given the rise of populism in Europe and anti-EU sentiment, Bremmer fears that mainstream politicians may begin navigating toward separatism.
- There seems to be no energy to build future European institutions, and there is “systemic malaise.”
- The anti-corruption drive in Brazil is likely to work and to help Brazil’s economy improve meaningfully.
- Mexico will become the next developed state in the world.
- In 10 years, the United States will be closer with Iran than with Saudi Arabia.
All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Photo credit: W. Scott Mitchell