Eurasia Group Warns A “Major Geopolitical Crisis” May Be Coming In 2018

Eurasia Group Warns A “Major Geopolitical Crisis” May Be Coming In 2018

Eurasia Group’s Ian Bremmer says that 2018 is “by far the greatest geopolitical risk environment that we’ve ever seen” and that this could be the year where the international community witnesses the geopolitical equivalent to the financial crisis.

With the Dow Jones Industrial Average nearing 25,000 and the pace of economic growth in the US climbing back above 3%, the economy has seldom been in better shape since the crisis – a fact that President Trump never misses an opportunity to highlight. However, lingering geopolitical tensions that have been simmering for years finally came to a head in 2017. The result? The US is now mired in what Bremmer calls “a geopolitical recession.”

China

Put simply, this means the decline of US influence in the world will accelerate in 2018, as the US’s mix of soft power and economic and political liberalism faces a crisis of credibility.

Meanwhile, some of the US’s largest geopolitical rivals will seek to claim some of the authority ceded by the “America First” Trump administration, which is opposed to trade deals, supports slashing funding for the United Nations and is virulently anti-immigration.

Which brings us to Eurasia Group’s  top risks for 2018…which begins with…

…China.

No. 1: China Loves a Vacuum:

Bremmer believes Xi Jinping’s speech at November’s Nineteenth Party Congress will be remembered as one of the most important geopolitical events since the fall of the Soviet Union.

The reason? As the US retreats under Trump, China is setting international standards in more ways than ever before.

This is true in three ways:

Trade and investment. No country today has developed as effective a global trade and investment strategy as Beijing. China is writing checks and creating a global architecture while others are thinking locally or bilaterally. This model generates both interest and imitators, with governments across Asia, Africa, the Middle East, and even Latin America tacking more toward Beijing’s policy preferences because the direct transactional consequences have become much more impactful.

 

China

Technology. China and the US are leading the charge on investment in new technology—in artificial intelligence (AI), in particular. For the US, leadership comes from the private sector. In China, it comes from the state, which aligns with the country’s most powerful companies and institutions, and works to ensure the population is more in tune with what the state wants. That’s a powerful stabilizing force for the authoritarian and state capitalist Chinese government. Other governments will find the model compelling, especially those most worried about potential social unrest within their borders. And China’s economic clout will align tech sectors within smaller nations with Chinese standards and firms.

Values. The only political value that China exports is the principle of non-interference in other countries’ affairs. That’s attractive for governments that are used to Western demands for political and economic reform in exchange for financial help. With the advent of Trump’s “America First” foreign policy and the many distractions for Europe’s leaders, there is no counter to China’s non-values-driven approach to commerce and diplomacy.

But importantly, China is still a regional power when it comes to national security. China has not been a player in the war against terrorism. And US defense spending is far greater than China’s.

But in time, this may begin to change as China’s military becomes increasingly active in the Pacific.

No. 2: Accidents

While the world isn’t on the brink of WWIII, tensions between the US, China, Russia and North Korea remain elevated. The likelihood of geopolitical accidents has risen significantly, a trend that will continue. At some point, there could be a mistake that leads to a confrontation. A few worth thinking about for 2018:

Cyberattacks. The risk of a major cyberattack has risen at a time when international mistrust and the erosion of common norms, standards, and architecture has made it more difficult to coordinate responses to attacks when they occur. That makes the risk of overreaction high, even when reaction is warranted. The threat comes both from states (Russia, China, North Korea) and non-state actors (such as Anonymous); the capacity to wreak havoc is rapidly growing, especially given security vulnerabilities and high-level leaks from within the US National Security Agency. The prospect today of an economy-shaking cyberattack is real— be it via the destruction of a critical piece of infrastructure or through forced transparency that cripples the credibility of a leading corporation, bank, or marketplace; or even a takedown of the internet itself (several states have reportedly probed the resilience of the internet’s backbone infrastructure). If an actor goes after these targets, we’re in uncharted territory. Of all the unexpected geopolitical “accidents” listed here, cyber deserves to be at the top of the list.

North Korea. The world’s most obvious risk of geopolitical accident. An unsatisfactory (and eroding) status quo remains the most likely outcome in 2018. Everyone knows that the US has only unpalatable military options. The North Koreans aren’t suicidal; further North Korean missile tests are likely, but a direct strike on an adversary is nearly inconceivable. Yet, rocket tests over Japanese territory are intrinsically dangerous and could provoke an escalatory response. So too the expanded military exercises and overflight by the North Koreans, Americans, and allies within easy shooting range of one another. Elevated tensions combined with less trust/coordination among all actors means that mistakes, when they occur, are more likely to ignite a conflagration. The possibility of war, which would risk severe damage to a key US ally and impact global supply chains, remains unlikely. But it’s much more thinkable today than it has ever been.

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