Author : Rachel Poole
Date : February 18, 2021
The articles we selected this week explore shifting power balances through several lenses. First, renewable energy is a relatively new piece on the geopolitical chessboard, but it has quickly garnered attention as what is likely to be a pivotal trend in the 21st century. On a shorter time horizon, the unique situation created by low interest rates and consistent growth has cheapened debt for emerging economies, but unwary policymakers may find themselves hitting a debt ceiling sooner than they expect. Our fourth article looks at proxy struggles between the West and China and Russia in fragile states, as multilateral institutions struggle to survive amid increasing great-power rivalries. Finally, in our third article we examine a case in which 16 prisoners in India may have had incriminating evidence planted on their computers, which human rights groups consider a possible attempt by the Indian government to suppress dissent.
Leslie Hook and Henry Sanderson, Financial Times
The advent of renewable energy is already having a profound impact on global power structures – both in physical infrastructure and political positioning. The old levers of power, of oil and gas exporters holding the strings of progress, are rapidly disappearing in favor of the new order, one in which cheap electrification levels the playing field. Still, power abhors a vacuum, and some countries will come out ahead of the clean energy wave. China is poised to capitalize on the transition, being a major supplier of basic materials (such as cobalt, lithium, and copper) and a manufacturing powerhouse. It has also been developing a power infrastructure through its Global Energy Interconnection initiative. While this kind of supply chain dominance is certainly a concern for the US, the economics of renewable energy do not play to the traditional conceptions of oil and gas oligopolies. Once the infrastructure is in place, it is much more difficult to exert control over the electricity supply – the energy extraction is more dependent on the underlying technology than the quality of any particular natural resource. While old energy is unlikely to fade without a fight, renewables’ momentum seems unlikely to waver in the long term. The tectonics of world energy are shifting.
The Economist
As interest rates followed a downward path on a global scale, debt has ballooned, leading some economists to re-evaluate the frameworks of emerging economy debt loads. In many countries, the growth rate has outpaced interest rates, pushing effective interest rates negative and minimizing the cost of borrowing. The calculus of sovereign debt loads balances growth in budget deficits against growth in GDP. While these fiscal mathematics tend to work for developed economies borrowing against their own currency (for which “magic money” is always a back-pocket solution), the game is much more dangerous for emerging economies who often borrow in foreign “hard currencies,” like USD or the Euro. If the exchange rate between their home issue and their debt currency weakens, emerging economies will find themselves hard-pressed to repay their obligations, leading to a self-amplifying wave of defaults and drastically increasing the cost of debt as investors flee their sovereign assets. In addition, high levels of government debt have more costs than their interest payments: capacity concerns, inflation, and crowding out private investments constitute several of these considerations. While low interest rates and consistent growth may have raised the debt ceiling, there is a limit to what emerging economies can borrow.
Niha Masih and Joanna Slater, Washington Post
In a case that began on January 1st, 2018 when Hindu nationalist groups and Dalits clashed in a western Indian village named Bhima Koregaon, 16 activists were charged under a stringent anti-terrorism law by the Indian government which has accused them of plotting to overthrow the government. Many of them remain in prison to this day even as key evidence emerges to support their innocence. According to a report from Arsenal Consulting, a Massachusetts-based digital forensics firm, an attacker used malware to infiltrate one of the activist’s laptops prior to his arrest, planting at least 10 incriminating letters on the computer. While the report does not identify a person or institution behind the attack, it does find that the same attacker targeted some of the other activists over the last four years. Arsenal has expressed concern over the cyberattack, calling it “very organized”, “extremely dark”, and “unique and deeply disturbing.” Ironically, the prosecution’s case relies heavily on these incriminating letters. Human rights groups and legal experts consider the case an attempt by the government to suppress dissent. The United Nations high commissioner for human rights recently called on Indian authorities to release the detained activists, all of whom have been denied bail.
Alexandre Marc and Bruce Jones, Brookings
The West has historically dominated interventions and investments in fragile states. Since the Cold War period ended, institutions like the International Monetary Fund (IMF) and the World Bank have seen large increases in their support to war-torn countries. However, Western governments and multilateral institutions have had a difficult time creating sustained progress towards stable development or a coherent approach to fragile states. Now, fragile states have become an arena for geopolitical competition, particularly between the West and China and Russia. The authors warn that this competition creates several risks for fragile states:
Western nations need to develop a coherent policy towards China and Russia and some sub-regional powers who are also entering the playing field. Right now, the instincts of the US and Europe are divided, with the former viewing fragile states as another area of competition with China and the latter engaging in practices that intentionally or unintentionally may accommodate Chinese goals. However, if the West remains divided, China and Russia will be able to gain even more influence in fragile states and in the multilateral institutions through which the global response is organized.