Deciphering the geopolitical puzzle: Insights into the big risks on the geopolitical stage

We’re living through an era that is more disorderly and complex than any other in our lifetime, General Sir Nick Carter, former Chief of the UK’s Defence Staff, said in conversation with Kevin Lings, Chief Economist at STANLIB Asset Management.

It is a much more multi-polar world, with more competition as countries like Russia and China increasingly want a stake in the future and a say in how the world is organised and governed. The rapid pace of technology and the pervasiveness of information is changing the nature of politics and warfare.

From a conflict perspective, the geopolitical landscape in 2024 looks similar to that of the 1930s, as conflicts in Ukraine, the Middle East and the Indo-Pacific region have the potential to escalate. 

Key discussion points from the discussion are summarised below.

War in the Ukraine

Carter said the Ukraine war is not all going Putin’s way and various developments threaten to undermine his domestic support base. There have been recent terrorist attacks in Moscow and Dagestan and unrest in Georgia. The number of Russian soldiers killed in the Ukraine war over the past two and a half years is estimated at about 100 000 to 150 000, with three to four times as many wounded. Caring for these wounded puts additional strain on the Russian economy.

Ukraine is benefiting from the recent approval by the US of a $61 billion appropriation bill, which is delivering fresh ammunition and systems. Ukraine has scored some strategic victories in Crimea, it is still exporting grain and it has begun EU accession talks. However, Ukraine is also suffering from the exodus of young men to avoid conscription and the shortage of artillery ammunition and air defence interception. There are questions about sustained US support in the event of a Trump presidential win and election outcomes in various countries that may undermine Western support for the Ukraine war.

Carter said the war in Ukraine is likely to end in conversation and compromise. After the war, Western defence spending is likely to rise, which will affect the investment landscape.

War in the Middle East

Carter raised the question whether the war in the Middle East can be contained or whether Iran will become involved and spark a regional conflagration. He said he doubted whether regional conflict would explode. So far, there has been an exchange of fire between Israel and Iran, but Iran probably had little appetite for war with Israel. Its political landscape is fragile, with popular discontent and the possibility of more moderate leadership as the Ayatollah Khomeini is not expected to outlive the year.

A Trump administration would take a harder line on Middle East war than the Democratic administration, Carter said. It was also relevant that the Arab world was seeking diversification from the export of fossil fuels and this would require regional economic stability.

Israel faces war on three fronts: against Hamas in Gaza, against Hezbollah in Northern Israel, and against the Palestinians in the West Bank. Israel has discovered that war against the people of Gaza is more challenging than against a conventional enemy and it risks turning Gaza into a black hole of potential Arab extremism. In Northern Israel, there has been exchange of rocket fire for several months and there is a possibility that it could lead to an invasion of Southern Lebanon by Israel. On the West Bank, Palestinians are becoming increasingly stressed economically.

War in the Indo-Pacific region

China is ringed by unfriendly neighbours, with limited sea access, Carter said. It has to import most of its food and energy. Its goal is to control the South and East China Seas to protect its import routes. It is using “lawfare” (global and domestic laws), coercion and quarantine as weapons. This includes harassing Philippines shipping, cyber attacks, cutting internet cables and other forms of bullying. China probably has no intention of a military invasion of Taiwan, as it cannot afford to incur significant Chinese casualties. It is more likely to pursue a strategy of quarantining Taiwan, Carter said.

Although China has been increasing its military and naval capability, it is not a disruptor. It wants to lead the world and understands it needs trade with the West. It is facing several economic challenges, including a declining working-age population, property sector collapse and dwindling foreign investment as a result of its unpredictable rules. In the next few years India will probably overtake China as the fastest growing economy in the world.

A multi-polar world

Carter said the post-World War II global liberal order has vanished. There are now four distinct global groups: pro- and anti-Western groups, multi-aligned countries (e.g. India, Saudi Arabia, Mexico and SA) and the developing world, who still have votes in the UN. The character of warfare and politics is changing and social media is underlining divisions in society. Geopolitical strategy now requires a multi-dimensional, long-term approach.