Geopolitics & the Day After
Geopolitics & the Day After
-
Author : The BlackSummit Team
Date : January 25, 2024
This week, we are examining several global and regional developments that lend insight into the state of world affairs. First, we discuss the takeaways from Davos, the gathering of the World Economic Forum in Switzerland. Then we move to an analysis of the expanding risks that threaten the global system, from the rise of interstate conflict to the disruption of international trade. We then look at the role Iran plays in the Middle East, especially as it relates to Israel’s war in Gaza. We finish this week’s newsletter by looking into the challenges facing Germany and the European Union.
Davos Takeaways
Davos Sees Nothing Normal About the Global Economy for 2024
Craig Stirling, Bloomberg
Geopolitical risks overshadow economic optimism in Davos
Sam Fleming, Financial Times
United Nations Press Release
The global outlook was mixed at this year’s gathering of the World Economic Forum in Davos, with participants having to reconcile better-than-expected economic data with the myriad of risks that threaten serious harm to the global economy. The developed world has weathered high interest rates to combat inflation, and the forecasts for a deep recession this year have subsided. However, such expectations are darkened by wars in Europe and the Middle East, both with the possibility of escalation that would present severe economic disruptions. The possibility of an escalation of tensions in Asia, particularly around the Taiwan Strait and the South China Sea, also worried attendees due to its potential effects on international trade. At the same time, some of the most consequential countries in the world are set to host elections this year, with the US presidential election being particularly influential. The impacts of climate change – the severe drought affecting the Panama Canal, the threat of increasing instances of extreme weather – also factored in, as well as the uncontrolled expansion of artificial intelligence. Perhaps the most disquieting development has been the general breakdown of trust in the rules based order, without which many believe the world would slide into chaos, where geopolitical polarization prevents any multilateral cooperation to counter these emergent threats.
Global Risk Compounding
Brahma Chellaney, Project Syndicate
The Oil Market is Making Plans for Red Sea Chaos to Last Weeks
Alex Longley, Sherry Su, and Bill Lehane, Bloomberg
A geopolitical reconfiguration is underway, as evidenced by Israel’s devastating war in Gaza, Russia’s bloody invasion of Ukraine, and China’s aggressive posture. This year will be the biggest election year in history, the outcomes of which could illuminate or even accelerate the coming transition. Longstanding global norms like the prohibition of taking land by force, non-interference in other countries’ affair, and more have been increasingly disregarded. At the same time, international institutions appear to be unable to accommodate a changing world, and increasing numbers of countries are embracing economic protectionism. Such upheaval is being compounded by a significant reshuffling of trade, an example of which is currently playing out in the Middle East. Due to ongoing attacks by Houthi rebels in Yemen on ships passing through the Red Sea, many tankers transporting oil and fuel between the Persian Gulf and Europe are diverting around Africa to avoid the danger zone. The detours have spiked a surge in ship earnings and rates as demand increases for tankers to make the longer voyages. As a result, the oil market is bracing for a weeks-long disruption. The sense of chaos that pervades the area is a reflection of the modern geopolitical landscape; its progression will depend significantly on developments over the next year.
Iran, Israel, the United States, and the Geopolitical Order
Andrew England & Najmeh Bozorgmehr, Financial Times
America and Iran step closer to the brink of war
The Economist
The International Order Is Dying in Gaza
Mohamed Elbaradei, Project Syndicate
Ongoing tensions in the Middle East, inflamed by Israel’s war against Hamas, threaten to escalate the conflict and bring in regional powers like Iran. At the outset of Israel’s invasion of Gaza, prompted by the October 7th attacks by Hamas, there was worry about how Iran and its “axis of resistance,” the myriad of militant groups it funds and supports across the Middle East, would respond. While Iran has expressed a desire to avoid a regional conflict, it has allowed its allies in Syria, Lebanon, Iraq, and Yemen to launch attacks against Israeli and US forces, as well as global shipping vessels. Tehran’s support of these attacks is likely a strategy to show force while keeping out of the fray directly, but that may change if the regime feels it is backed into a corner. The Biden administration, on the other hand, will face increasing pressure to confront Iran directly if Tehran continues its campaign.
At the same time, the horrors of war in Gaza, coupled with the lack of broad Western condemnation, threaten the underpinnings of the global system itself. Trust has broken down between the Muslim world and the West as some sources estimate the Palestinian death toll has surpassed 25,000, with some even accusing Israel of conducting a campaign of ethnic cleansing. Those who sympathize with the Palestinian cause worldwide are seeing hypocrisy among Western leaders who claim to promote an equitable, rules-based international order as Israel seemingly violates those rules with impunity. This breakdown is particularly concerning against the backdrop of a more geopolitically fraught world. It is unclear how trust can be rebuilt, and the global community can only hope that violence today can somehow lead to a more just peace tomorrow, with fledgling hopes of a two-state solution being floated around once more.
Challenges Escalate for the EU
As Challenges Mount, Can Europe Correct its Course?
World Politics Review
Germany, Once a Powerhouse, Is at an Economic ‘Standstill’
Melissa Eddy, The New York Times
The European Union (EU) is facing an increasing number of challenges, both within and outside its borders. At the external level, the EU must maintain transatlantic ties that have been revitalized by solidarity against Putin’s invasion of Ukraine. However, resurfacing tensions with the United States over trade relations and burden-sharing on defense could harm this renewed relationship. The European Union also must navigate its relationship with China which is becoming more complex, as Brussels tries to balance cooperation with competition. The rise of populist movements and right-wing parties across Europe presents an internal challenge for the European Union.
Meanwhile, Germany, Europe’s main driver of economic growth is at an economic impasse. It was announced this week that the German economy contracted by 0.3% in 2023, making it not only the largest but also the slowest-growing economy among the 20 countries using the euro. Industrial production has fallen for five months in a row. A particularly important sector, automaking, must now compete with cheaper electric vehicles (EVs) from China, while the US presents competition in attracting interest from large tech firms. Many fear that Germany has not kept its industry up-to-date with technological progress. German analysts have called the situation an economic standstill, and they do not expect a rapid recovery in 2024. It will be seen this year if Germany and the greater EU can address these mounting challenges and make the necessary corrections to achieve a more stable geopolitical and economic order.
