Events which were simultaneously predictable and unexpected continue to drive global change. This week we begin by examining the bizarre mutiny by the Wagner mercenary group and its effects on Russian power. We then move to look at natural gas, which may stay with us longer than we thought. Moving on to geopolitics, we discuss how China’s bet on the undoing of global institutions may give it an upper hand in the days to come. Finally, we end by examining the frightful state of commercial property in the world’s most prominent cities.

Wagner Mutiny Exposes Cracks in Putin’s Power

Putin avoids bloodshed, but at the cost of weakening his authority

Benoît Vitkine, Le Monde

Putin’s Armor Has Been Pierced

Jeffrey A. Sonnenfeld, Jon M. Huntsman Jr., & William F. Browder, Foreign Policy

On June 24, the Wagner mercenary group, infamous for its role in Russia’s invasion of Ukraine, seized the city of Rostov-on-Don and planned to advance on Moscow, citing the failings of the Ministry of Defense to execute the war in Ukraine effectively along with other grievances. The mercenary leader, Yevgeny Prigozhin, led fighters within 200-300km of Moscow without encountering significant resistance before suddenly and unexpectedly backing down. Belarusian leader Alexander Lukashenko brokered a deal in which Prigozhin would be welcomed in Belarus in exchange for standing down. Additionally, the criminal charges against Prigozhin have been dropped, seemingly ending the mutiny as quickly as it started. However, this crisis shatters Putin’s carefully crafted image of complete control and revealed his inability to reign in his own underlings. The repercussions of this incident on the front lines in Ukraine remain uncertain, but the recent turmoil surrounding the Wagner group signals the potential for further disruptive consequences that may jeopardize Putin’s rule in the future.

Gas Is Here to Stay for Decades, Say Fossil Fuel Heavyweights

Stephen Stapczynski, Bloomberg

Fossil fuel companies are making it clear that a green energy transition will not take place without natural gas as investment rises significantly in tandem with global demand. Companies ranging from Shell PLC to Chevron Corp. are leading the investment charge, even as China signs a 27 year agreement with Qatar and Germany signs an LNG supply contract through 2046 with the US. While natural gas was initially viewed as a transition hydrocarbon that would bridge the world to green energy, it may prove a stickier energy source than initially thought. With gas becoming a major driver for the earnings of energy companies, it is likely that more LNG is on the horizon, reducing the likelihood of reaching net zero emissions by 2050. 

China Is Ready for a World of Disorder

Mark Leonard, Foreign Affairs

While Western policymakers scramble to preserve the “international rules-based order,” China is preparing for global disorder characterized by pluralism and disparate power centers. Unlike the US, which seeks to restructure the post-World War II order and its institutions for a new era, China seeks to position itself to succeed in a world where those institutions become increasingly irrelevant. To do so, the country has developed a “dual circulation” economic strategic, which creates an internal circulation for the domestic Chinese market and an external circulation that pulls other countries into China’s economic system and locks them in. Whereas the US and allies are focusing on deepening and expanding alliance systems and reconstituting a Cold War-style bloc structure, China avoids overt politics, opting to build ties through investment and infrastructure. While such ties afford China the opportunity to flex power politically, the country nonetheless avoids the sort of strong-arm tactics employed by the US and its allies, resulting in wide appeal among countries in the Global South and especially among countries that are non-aligned. Ultimately, given the broader appeal, the future is likely one of multi-alignment and self-determination rather than bloc politics, positioning China well for the future to come.

The World’s Empty Office Buildings Have Become a Debt Time Bomb

Natalie Wong, John Gittelsohn, Jack Sidders, & Shawna Kwan, Bloomberg

The global commercial property market is in a precarious position. Property owners went on a buying binge during the days of near-zero interest rates, when debt was cheap. Now, they struggle to adjust to post-pandemic working conditions and rising interest rates that make it more expensive to buy or refinance their properties. In the U.S., $1.4 trillion of commercial real estate loans are coming due this year and the next, but the crisis extends around the world. London, Stockholm, and Hong Kong properties are all facing issues caused by the pandemic’s disruption and worldwide higher interest rates. These challenges help add to the landscape of geoeconomic uncertainty that abounds in the post-pandemic, high-interest world.