This week we begin with an examination of this year’s geo-economic risks borne by both Europe and the Americas. We then move to a discussion of how US disengagement from the Middle East requires changes in American foreign policy. Next, we take a look at trends in the global energy market and shifts in the world’s energy resources. We end this week’s newsletter by reviewing the trends shaping Asia in the shadow of China’s rise.

Global Risk Forecast 2023

Crisis24

The era of lower geopolitical volatility has ended, and governments, businesses, and individuals must have a clear-eyed view of the global risks that the world faces. Europe, in particular, has faced increased risk throughout the year, mainly due to the war in Ukraine. The conflict may continue through the rest of the year with neither side able to claim a clear victory, which would further destabilize Eastern Europe. Western Europe is feeling the economic pressure of the war, which has sparked both an energy crisis and civil unrest. Russia, for its part, may shift its war efforts into maintaining a low-intensity frozen conflict to wear down the patience of Kyiv’s Western allies.

Across the Atlantic in the Americas, the New World faces a painful combination of rising costs of living and an economic slowdown. While the United States and Canada are expected to weather the storm, the governments of Latin America will likely see far more trouble. Cost-of-living pressures on the urban poor throughout large cities in Latin America may spark unrest, while the high prices of fuel and fertilizer may give farmers reason to protest. Migration from poor countries to richer ones will likely continue or even increase, bringing with it increased societal tension and fueling nativist politicians. Popular unrest, leaders with weak mandates, and fragile economies may again destabilize a region that has endured far too much violence and chaos in the past.

The New-Old Middle East

Aaron David Miller, Project Syndicate

While the United States has disengaged with the Middle East after distancing itself from Iraq and Afghanistan, the region is fraught with complexities and systemic risks that America cannot ignore. The balance of power, once contested between Egypt, Syria, and Iraq, has dramatically shifted towards non-Arab states like Turkey, Israel, and Iran. How the US interacts with the new reality has global implications, from energy supply lines to counterterrorism efforts. Saudi Arabia, vital to the world’s energy, has grown in stability and influence as the US detaches itself from the region. China’s influence in the region, which has been limited but notable, includes facilitating the reestablishment of diplomatic relations between long-time rivals Iran and Saudi Arabia. Iran, for its part, draws ever closer (if it has not already) to becoming a nuclear-threshold power, a development which would raise oil prices, derail financial markets, and risk a destructive war that could spread far outside the region. These intricate problems show that the US cannot completely remove itself from the region. Rather than the failed transformative approach that entangled the US in unending wars in Iraq and Afghanistan, the US must take a ‘risk management’ approach, focusing only on its truly vital interests – oil, counterterrorism, and Iran’s nuclear program. 

The State of World Energy Explained in 4 Charts

Nathaniel Bullard, Bloomberg

UK-based Energy Institute has released its 2023 report on the energy market, showing 4 trends ongoing in 2023. First, energy demand is growing in non-OECD countries, while demand in OECD countries has declined by 3.4% in absolute terms since 2007. Second, oil, coal, and gas continue to grow as fossil fuel demand hits an all-time high, with gas showing the strongest growth in consumption since 2011. Third, shipping has surpassed pipelines as the dominant means of transporting gas since 2020 with the US leading the shipped LNG charge. Finally, non-hydropower renewables have increased their overall market share among renewables, with hydro making just 100 terawatt hours more than non-hydro in 2022. Both hydro and non-hydro have generated more electricity than nuclear since 2020. 

Looking Past China’s Rise for the Trends Shaping Asia

The Editors, World Politics Review

Trends across Asia point towards turbulence as Chinese power expands, democracy contracts, and problems abound. To start, Chinese president Xi Jinping has begun to more aggressively challenge America’s economic and political power in Asia, positioning itself as a power broker on everything from trade routes to territorial disputes. Meanwhile, illiberalism has spread across multiple Asian democracies, from Modi’s Hindu Nationalist India, to the Philippines’ undermining of democratic institutions and rule of law under former president Rodrigo Duterte, and the elimination of democracy in Myanmar after the military took control in 2020. Further, while liberal democracy remains strong in Japan and South Korea, both countries are experiencing economic troubles at a time of great power tension between the US and China. Finally, regional flash points are growing, starting with the Chinese-Indian border dispute that turned violent in June 2020; instability in Afghanistan after the US withdrawal and ultimate Taliban takeover of the country; North Korea’s continued belligerence; and the possibility of Chinese use of force against Taiwan.