What's Next on the Geopolitical Horizon

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Experts offer their insights into future geopolitical trends as the CERAWeek Conference wraps in Houston.

Both the United States and Europe are united in seeing the need for international monitors in the Crimea and maintaining a dialogue with Russia following the country's invasion of Ukraine, but Europe’s close economic ties with Russia and dependence on Russian gas will make European leaders more reluctant to impose sanctions.

Angela Stent, professor at Georgetown University and author of The Limits of Partnership: U.S.-Russian Relations in the Twenty-First Century, told IHS CERAWeek attendees that it’s unlikely Crimea will be a part of a territorially intact Ukraine if residents in Crimea vote for independence in the March 16 referendum. Stent and other international policy experts discussed geopolitical trends and the role of oil and gas in those trends – and the implications that geopolitics might have on oil and gas -- as the conference wrapped up on March 7.

“The recent Ukrainian crisis feels like a cold war if you listen to the rhetoric of both sides, but it’s not the cold war,” said Stent. “We’re not ideological antagonists trying to carve up world between socialism and capitalism, our nuclear weapons are not pointedly targeted at each other anymore – and they could be.”

In the Cold War era, Communist Russia wasn’t integrated into the global economy, so a Russian invasion of a country didn’t have much economic impact. But Russia’s recent move into the Ukraine is impacting Russia by depressing its stock market and value of the ruble. “This global integration works both ways,” said Stent. “While it can work against Russia, it also constrains European countries from the extent they can impose sanctions.”

Differences have always existed within Ukraine, whose current borders were established following World War II. People from Western Ukraine, formerly part of Poland, speak Ukrainian and identify with Eastern Europe and don’t like the Russians, while those who live in eastern Ukraine speak Russian and identify with the former Soviet Union.

In 1991, Ukraine voted to separate from Russia to become a sovereign country, and it was assumed that Ukraine would continue to exist as a nation with internal differences. However, existing weakness in Ukraine’s existing government structures in the past two decades, the government’s inability to create a functioning state and to create a national identity on which everyone agreed, gave Russian President Vladimir Putin an opportunity to invade Crimea, said Stent. Disgust over Ukraine’s previous government also has had some groups seeing an alignment with Russia as a better solution.

Putin, who told former U.S. President George W. Bush in 2008 that he didn’t see Ukraine as a country, has invaded Crimea to prevent a territorially intact Ukraine from moving closer to the European Union’s orbit.

Stent could not say what Putin’s endgame is for the Ukraine, noting that Putin may not know himself. “There are groups in eastern Ukraine outside Crimea who want to join Russia too,” Stent commented. “You could have some provocation that could spark conflict.” This conflict could give Russia an excuse to move into the country and take the eastern Ukraine.

To diffuse the situation, Russian, Ukrainian, U.S. and European officials need to talk, but if Russia won’t recognize the interim Kiev government, this will be difficult. Stent noted that Germany, whose rhetoric has been calmer than the United States and other allies, will play a key role in possible discussions.

Many countries are not likely to recognize a vote by Crimeans to join Russia or disassociate with the Ukraine. “The United States and its allies are caught in a bind,” said Stent. President Obama and the Europeans have said a referendum would be unconstitutional, but Russia has said that not recognizing a vote of 75 percent or more of Crimeans to join Russia would goes against the U.S. and its allies’ democratic roots.

Despite Aggression, Russian Power Position to Fade

Despite Putin’s move to establish that Russia is a strong country at the table, its demographics indicate that Russia’s power position will fade. “The wealth of modern societies is not what’s in the ground, it’s in human beings,” said Nicholas Eberstadt, Henry Wendt Chair in Political Economy with the American Enterprise Institute. With a life expectancy for a 15-year old man in Russia three years lower than a 15-year old in Haiti, two percent of the world’s population, six percent of the world’s college graduates, and one-tenth of one percent of global patent applications, Russia will likely account for less and less of global economic output in years to come.

“Russia’s trade weight is the same as Belgium,” said Eberstadt. “Think of a big scary Belgium with nuclear weapons. Right now, Russia is kind of a horror show.” The demographic trends in Russia suggest that playing power politics with the Kremlin will be an increasingly risky game.

Ukraine sanctions will eventually have an impact on the Middle East, although the breaking point for the European Union, Russia and China will be lower versus the United States. Gaining Russia’s cooperation on sanctions for Iran may seem difficult under the current circumstances, but Russia is closer in proximity to the Middle East than the United States, and has more direct, immediate interests in the Ukraine and Middle East in the spillover of Syria violence, the Caucasus, and the spread of Islamist extremism. Protests against Russia also have taken place in Iran, said Raad Alkadiri, management director of Energy insight, IHS.

Alkadiri believes the current U.S. negotiations with Iran will succeed, but will take time. The fact that the current Iranian regime came to power through popular vote means it has the political depth, support and power to maintain concessions. The U.S. sees virtue in engaging with Iran and bringing it out of isolation to manage Middle Eastern turmoil, rather than deploying U.S. troops on the ground.

Proposals put out in 2004 have served as the basis for current negotiations, and both sides have been willing to take part in negotiations. The fact that Iran’s current supreme leader backs the process and that Iranian leaders will have to deliver results for the domestic constituency or face criticism at home, said Alkadiri. “We can see a point where the European Union, Russia and China see the barebones of the deal reached and want to invest in Iran and see Iranian crude flowing.”

Iraq ‘Could Go Way of Syria’

While negotiations with Iran are progressing, Iraq could go the way of Syria. Iraq is as a weak and fragile country since the removal of former Iraqi leader Saddam Hussein in 2003, with spillover of Syrian violence impacting perceptions of domestic players in Iraq relative to each other and those who see no long-term value in a relationship with the government in Baghdad. Kurds are currently waiting on a decision on oil exports, which could allow for the region’s fiscal and political independence from Iraq. Sunnis in Iraq are deeply divided by aggrieved.

Some have argued that Iraq should be split into three regions. However, no institutional structure exists to maintain order in the three regions and prevent infighting among groups. Iraq’s Sunnis – who are deeply divided but aggrieved – are targeted as much as Shiite Muslim Iraqis on a day to day basis.

Oil and oil money to manage patronage have helped keep Iraq together over the past 11 years. The U.S. military – which protected the Iraqi people from the worst instincts of its leaders – and the patience of the Iraqi people also helped keep Iraq intact. However, the Iraqi people’s patience is starting to fray, which will force leaders to make extreme decisions. This continued erosion could cause Iraq to deteriorate.

“As long as you don’t have a formal or informal regional security framework, this violence will continue,” said Alkadiri, with Israel, Saudi Arabia, Iran and Turkey funding different groups to play the same game that took place in Lebanon between 1975 and 1990. A regional security framework is needed in Syria.

The negotiations with Iran have forced regional powers to come to terms with the fact that Iran may not be isolated. These negotiations have already prompted changes in Israel, Saudi Arabia and Turkey’s foreign policies. The times of peace that have occurred is when countries realize that a security framework is needed to ensure a fragile peace. “If we don’t get there, there will be continued funding of nasty groups who are tearing Syria apart and could tear other countries apart.”

Bright spots in terms of geopolitical stability include North Africa and, ironically, the Gulf states, with countries such as Saudi Arabia looking more stable and institutionalized and financially strong. So far, these countries have managed to keep Syria’s chaos at bay; this cannot continue if the chaos gets worse, however. “The anachronistic Gulf monarchies that were thought to be on their last legs are still standing,” said Alkadiri.

The headline story for the last generation has been rapid population growth in Arabic-speaking world and large number of youths unemployed. However, a quiet revolution of declining birthrates, women delaying or swearing off marriage, and greater number of women in higher education in Arabic-speaking countries also has occurred during this time, said Eberstadt.

The birth rate for Saudi Arabia now matches or is lower than the U.S. States of Texas, and Bahrain and Qatar’s birth rates are now lower than the United States. These demographic shifts represent a ‘huge change in mentality’ in the Gulf, and speaks to the death of the deeply religious, patriarchal mentality. These demographic shifts will play out over the next 10 to 15 years, as prolong sub-replacement birth rates will result in labor force declines and massive graying societies, said Eberstadt.

Chinese Assertiveness to Continue

The 100th anniversary of the start of World War I has prompted some to compare World War I with the ongoing conflict in the East and South China Sea. The discussions stem from books published prior to the Great War that discussed globalization, interdependence and economic involvement with hostile countries, which predicted that hostilities could not occur, said James Clad, senior advisor for Asian affairs with CNA Corp.

However, the situation in the East and South China Sea and the start of World War I are different. The East and South China Sea conflict is a very moderated, aggressive thing that has been underway since the 1970s and 1980s and stems from complicated Laws of the Sea, said Clad.

While China has accused the United States of trying to turn neighboring countries into an anti-Chinese alliance, Clad said that the Chinese have seemed receptive when he tells them that their assertiveness since 2006 have prompted these countries to ask the United States to take a more active role in prepositioning and other things.

“We should be happy that things are going on in the maritime domain, which makes management of public perception easier,” Clad said. Clad, who previously served as former Deputy Assistant Secretary of Defense for Asia Pacific Affairs, said he and former Secretary of Defense Robert Gates left office with two disappointments: the failure of Europe to fashion a post-Cold War NATO defense posture, and the inability to initiate with the Chinese talks similar to what the United States conducted with Russia in the early 1980s.

Unlike the Chinese, the United States does seem more understanding of the need to play a smart multi-lateral game with countries such as India that has overlapping interests with the United States. Glad said the way in which the prior and current U.S. administration is handling the situation in the East and South China Sea is correct. Recently, Secretary of State Daniel A. Russell said in testimony some of the most assertive, unambiguous comments on the unacceptability of Chinese behavior that the United States has ever made.

Glad does not believe the United States is on a path to war with China, but believes the United States needs to be more clear on Chinese activities such as China sailing through the straits of Taiwan. “We don’t want to deny China its place in the sun, but there is a new degree of assertiveness by China that’s supported by their new president, and it’s something we can’t run away from.”

China’s economy – which has grown faster for longer than any country in recorded history – now faces enormous headwinds due to demographic changes, said Eberstadt. With a shrinking workforce, graying population and shattered family structure, China faces significant non-trivial factors that will impact its economy.

The nation faces fairly significant social questions today that haven’t been recognized by the international business and intelligence communities. For years, the Chinese government has shipped peasants from the countryside to the cities to work. However, these workers are considered illegal residents in Chinese cities, with no access to health care, education, and who are often exploited in the local labor market. Today, almost twice as many illegal as legal residents live in Chinese cities, which has the making of a tinderbox situation in China, Eberstadt said. Chinese leaders also face issues in addressing family planning and establishing a nationwide pension system.

Eberstadt also fears that North Korea’s methodical progression towards amassing a nuclear arsenal will result in North Korea conducting for a limited nuclear war with the United States on the Korean peninsula. “North Korea’s international behavior is consistent; we just call it unpredictable because we don’t like it.” This war could result in a breakdown of the United States’ alliances with South Korea and Japan.



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