2018 COULD BE the year of a major geopolitical crisis equivalent to the 2008 financial recession, according to a US think-tank. In its annual report, the Eurasia Group, a New York-based political risk consultancy, warned of 10 major risks facing the world and said that any one of them could cause major problems in 2018.
Ian Bremmer, president of the Eurasia Group, a New York-based political risk consultancy, says that many countries feel they don’t need to fix the the current state of ‘geopolitical recession’, as he calls it. This is the case ‘certainly from the United States, the one country that could be making a difference to pull us out.’ He said the former world power ‘doesn’t feel like it’s their problem.’
This leads to a influence vacuum that China is stepping in to fill, at least economically for the moment. Along with US-Iran tensions, the erosion of institutions around the developed world and a new wave of protectionism, here are the group’s ten biggest risks for 2018:
1. China takes its place as USA backs away as global leader
China’s political model, despite domestic issues, is now perceived as stronger than ever at a time when the US’s political model is weak. In regards to trade and investment, China seems to learn towards wanting to be in economic control of a global network of countries, and sees the countries they have influence over leaning towards Beijing’s policy preferences, according to the think-tank. This means China is setting international standards with less resistance than ever before as Donald Trump’s America renounces a Washington-led multilateralism.
2. Accidents that could lead to conflict
While we aren’t on the brink of World War III, the Eurasia Group says the absence of a global security presence like the US and its allies, along with the increase of sub-national and non-state actors capable of regional destabilisation, has increased the likelihood of accidents. These can come in the form of cyberattacks, the tensions in North Korea, the Iran-Russia-US presence in the Syrian war, and terrorism. At some point it is likely that a mistake in these any of these areas could lead to a conflict.
3. The growth of the Global Tech Cold War
Competition between the US and China over technology, especially mastery of AI and next-generation technologies, could lead to the winner holding dominance economically and geopolitically, according to the think-tank. Market dominance in third-party countries like India and Brazil as well as some African countries will see them having to decide which major power to entrust with their technology infrastructure and, most importantly, security.
This could lead to strong political ties between the countries which are being provided with the technology and the country which is providing it (ie the US or China). This can also lead to the fragmentation of different technology as countries like Russia and China tighten information access and try to put up barriers to stop data flow between borders as they move away from dependence on Western hardware and software. This can impact the financial market and hamper security efforts due to the lack of international partnerships.
4. Mexico’s NAFTA renegotiation and presidential election
If the US under Donald Trump withdraws from the NAFTA negotiations, Mexico’s economy would suffer severely (as would the balances of those who invest in it). Though Canada and the US would also be impacted, Mexico’s reliance on trade with its northern neighbour would make it disproportionately disadvantaged if talks failed.
The Mexican presidential campaign begins in March and will make it difficult for Mexico to deal effectively at the talks. The Eurasia Group warns that the public anger at recent corruption cases, deterioration of security, and sluggish economic growth could lead to a major political change that could greatly impact the region and its relationships with its neighbors.
5. Trump and Iran
Donald Trump has it in for Iran and doesn’t want the country to possess nuclear weapons – which means he’ll likely support Saudi Arabia in the region and continue to put sanctions on Iran for ‘missile tests, perceived support for terrorism and human rights violations.’
“Iran will push back, including by harassing US naval vessels, a gambit that can lead to deadly and escalatory action,” the Eurasia Group says. “Saudi Arabia and its risk-acceptant crown prince could perceive US support as a green light to go after Iran, creating the danger of overreach.” If the nuclear deal collapses, Iran could ramp up its own programme and testing, and the “threat of US and/or Israeli strikes would again hang over the region and boost oil prices.”
6. Populism leads to erosion of institutions
Trust in technocratic and bureaucratic institutions has declined in recent years, sometimes due to political interference in what they do. The think-tank cites the mistrust in the mainstream media, the growth of belief in conspiracy theories, lower voter turnout and apathy towards older government structures as evidence. This sees the rise of populism and new political anti-establishment movements that may see the legitimacy of political institutions in established democracies slowly crumble. This can affect the stability of many countries in our current global system which will led to more conflict and see decision-making degraded and internal chaos commonplace.
7. Protectionism 2.0
The rise of anti-establishment movements in developed economic markets has influenced policymakers to shift towards a mercantilist approach to “look as if they’re doing something about lost jobs,” the Eurasia Group says. This means a defensive stance from many countries around their old economies, like agriculture and machinery, compared to the new economies of digital technology and the preserving of intellectual property related to technology. The US leadership’s retreat in global affairs shows China picking up the pace of buying up foreign assets and intellectual property at a speed and scale that suggests a political response from other countries. But with no rule book and willing leader to apply order, these transformations will continue at an alarming rate.
8. Chaos in the UK
Brexit will continue to cause headaches, especially over the Northern Ireland border. The money that the UK will have to pay the EU for leaving will likely cause disruptions with trade agreements and undo talks if both sides can’t agree. Theresa May is likely to lose her position at some stageand depending on who replaces her (either a hard-line Tory or Labour party leader Jeremy Corbyn) can also impact negotiations and domestic economic policy.
9. Southern Asian identity politics
Following the trend in Europe, we’ll see similar issues arise in Southeast Asia and the Indian sub-continent, the Eurasia group says. Islamism will influence forms of populism in Indonesia and Malaysia. The former feels that the country’s majority Muslim population are economic victims of political injustice which Islamist groups working against the current President Joko Widodo. ‘There is also growing anti-Chinese and anti-minority sentiment across the region.
10. Security in Africa
The dangers posed by terrorist and militant groups in West Africa will intensify, especially as ISIS is pushed from operational bases in the Middle East. With weakened political governments, many Africa countries are vulnerable and external partners are less likely to back them up with support. According to the Eurasia Group:
Kenya’s government will focus on economic recovery after a prolonged election cycle. Nigeria enters an election season with uncertainty over its current leader’s health. South Africa faces internal political strife. Angola is busy with a fresh leadership transition. Mozambique is still struggling with a years-long debt scandal.
Preoccupied Western countries are reducing their support and funding for military in the region to combat terrorist and militant groups (though Saudi Arabia and the UAE are stepping in). An increase in conflict or attacks could impact overseas investments and the ongoing management of refugee flows into Europe will continue creating difficulty for policymakers on both sides.