Navigating the Vortex

We are now well beyond the 24 hours that Donald Trump had promised it would take him to secure an end to the Russian war of aggression against Ukraine. But Trump’s first week since his inauguration on January 20, 2025, has nonetheless been a busy one regarding Ukraine. In his inauguration address, Trump only made a passing and indirect reference to Ukraine, criticising his predecessor Joe Biden of running “a government that has given unlimited funding to the defence of foreign borders but refuses to defend American borders”. Trump’s first more substantive statement on Ukraine was a post on his TruthSocial network, threatening Moscow with taxes, tariffs and sanctions if his Russian counterpart, Vladimir Putin, didn’t agree to a deal soon. Trump reiterated this point on January 23 in comments at the World Economic Forum in Davos, adding that he “really would like to be able to meet with President Putin”. Trump’s approach of putting pressure on Putin if necessary to bring him to the negotiation table has been well-established for some time and echoed by key members of his administration. His special envoy for Ukraine, Keith Kellogg — a retired lieutenant general of the US army and former chief of staff on Trump’s national security council — published a detailed peace plan in May 2024. And Trump’s now-confirmed nominee for treasury secretary, Scott Bessent, specifically emphasised increasing sanctions on Russian oil companies “to levels that would bring the Russian Federation to the table” during his Senate confirmation hearing on January 16. On January 24, Putin responded by saying that he and Trump should indeed meet to discuss Ukraine and oil prices. But this was far from a firm commitment to enter into negotiations, and particularly not with Ukraine. Putin alluded to an October 2022 decree by Ukraine’s president, Volodymyr Zelensky, banning any negotiations with the Kremlin after Russia formally annexed four regions of Ukraine. Zelensky has since clarified that the decree applies to everyone but him, thus signalling that he would not stand in the way of opening direct talks with Russia.Yet, Putin is likely to continue playing for time. The most probable first step in a Trump-brokered deal will be a ceasefire freezing the line of contact at the time of agreement. With his forces still advancing on the ground in Ukraine, every day of fighting brings Putin additional territorial gains. Nor are there any signs of waning support from Russian allies. Few and far between as they may be, China, Iran and North Korea have been critical in sustaining the Kremlin’s war effort. Moscow now has added a treaty on a comprehensive strategic partnership with Iran to the one it had sealed with North Korea in June 2024. Meanwhile, the Russia-China no-limits partnership of 2022, further deepened in 2023, shows no signs of weakening. And with Belarusian president Alexander Lukashenko winning a seventh consecutive term on January 26, 2025, Putin will retain additional leverage both on Ukraine and Belarus’s EU neighbours.Putin is unlikely to be too worried about additional US sanctions. Pressure on oil prices would be more detrimental for the Russian war economy, but it is unlikely that OPEC will quickly accede to Trump’s demands for increased outputs that would drive global prices down. And while the EU has just renewed its sanctions against Russia for another six months, Hungary and Slovakia, two of Putin’s allies inside the EU, could derail future decisions for a roll-over of existing sanctions — required every six months — or the approval of new sanctions.Zelensky, like Putin, may play for time. Trump’s threat of sanctions against Russia is likely an indication of some level of frustration on the part of the US president that Putin seems less amenable to cutting a deal. This will make it less likely that Trump’s ire will be directed at Zelensky for standing in the way of a deal and makes the continuation of at least some US military support for Kyiv more likely. Russia may continue to make territorial gains in eastern Ukraine, but it has not achieved any strategic breakthrough. The significant increase in US military assistance to Ukraine since September 2024, as well as commitments from European allies, including the UK, have also likely put Kyiv into a position that it can sustain its current defensive efforts through 2025. Ukraine may not be able to launch a major new offensive but could continue to keep costs for Russia high. On the battlefield, these costs are estimated at 102 casualties per square kilometre of Ukrainian territory captured. Beyond the frontlines, Ukraine has also continued its drone campaign against targets inside Russia, especially the country’s oil infrastructure. This is not to say that intransigence in Moscow and Kyiv will lead to Trump failing in his efforts to end the fighting in Ukraine. But there is a big difference between a ceasefire and a sustainable peace agreement. And while a ceasefire, at some point, may be in both Russia’s and Ukraine’s interest, sustainable peace is much more difficult to achieve. Putin’s vision of total victory is as much an obstacle here as western reluctance to provide credible security guarantees for Ukraine, be it in the form of Nato membership or a western-led peacekeeping force that could act as a credible deterrent. It is certainly inconceivable that Europe could muster the 200,000 troops that Zelensky envisaged as a deployment in Ukraine to guarantee any deal with Putin. But a smaller force, led by the UK and France, might be possible and act as a tripwire force — similar to Nato troops in West Berlin during the Cold War or US troops on the Korean peninsula.Kyiv and Moscow continue to be locked in a war of attrition and neither Putin nor Zelensky have blinked so far. It is not clear yet whether, and in which direction, Trump will tilt the balance and how this will affect either side’s willingness to submit to his deal-making efforts. So far, Trump’s moves are not a gamechanger. However, this is the first serious attempt in nearly three years of war to forge a path towards an end of the fighting. It remains to be seen whether Trump, and everyone else, has the imagination and stamina to ensure that this path will ultimately lead to a just and secure peace for Ukraine.An earlier version of this analysis was published by The Conversation on January 27, 2025.We hope you'll share Navigating the Vortex with anyone you think might find it of interest. 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Even before taking office for his second term in the White House, Donald Trump gave some very clear indications of a renewed focus of American foreign policy on the western hemisphere. This included plans to buy Greenland, annex Canada and to resume control of the Panama Canal. Of these three Panama, for now, appears to be the one highest on the US president’s agenda.In his inauguration speech on November 20, 2025, Trump complained that the United States “have been treated very badly from this foolish gift that should have never been made, and Panama’s promise to us has been broken.” As evidence for his claim, he cited that American commercial and navy vessels are “severely overcharged” and that “China is operating the Panama Canal”.Is Trump right regarding these claims? There is no question that charges for vessels using the Panama Canal have increased over the years and were raised again on January 1, 2025. The reason for this is primarily a severe draught in 2023 which has reduced the water available to enable ships’ transit through the canal (a problem known for over a decade). As a result, the Panama Canal Authority requires pre-booked transit slots, for which it charges a fee. Slots are also offered through an auction process, with congestion sending bids skyrocketing. One company paid a record US$4 million to jump to the front of the queue in November 2023. Booking fees and transit fees apply to all vessels regardless of their origin, destination, or ownership—but with the US accounting for almost three-quarters of all traffic through the canal, the cost of increasing fees is particularly felt by US companies.Similarly, Trump is not correct in claiming that “China is operating the Panama Canal”, as he did during his inauguration address. The Panama Canal Authority is the autonomous legal entity that administers the canal. It is based on the Panamanian constitution and an organic law of 1997.However, China has considerable influence over the operation of the canal. Two of the five ports at the Atlantic and Pacific entry ports of the canal are operated by a subsidiary of Hutchison Whampoa, a Hong Kong-based conglomerate with stakes in 52 ports across 26 countries. This has given rise to concerns that a foreign power now has the “ability to turn the canal into a choke point in a moment of conflict”, as Trump’s secretary of state, Marco Rubio, noted during his confirmation hearing. Rubio, whose first official trip abroad will include a stop-over in Panama, acknowledged that “technically” China does not control the canal but made the point that Beining wields significant influence through commercial actors that are ultimately “not independent”.Back in 2017, Panama was the first Latin American country to switch its diplomatic recognition from Taiwan to the PRC. Four other countries—the Dominican Republic, El Salvador, Nicaragua, and Honduras followed. One year later, Panama signed up to Beijing’s Belt and Road Initiative, again the first country in the region to do so. By December 2024, another 21 Latin American countries had joined the initiative.Among China’s signature infrastructure projects in the region is a deep-sea port in Peru, operated by COSCO Shipping Ports, another Chinese logistics giant with stakes in 38 ports globally. But China has not only increased its economic footprint in Latin America but also expanded into even more sensitive areas such as law enforcement and 5G technology.The claims regarding the Panama Canal may be dubious, and Trump would certainly be on shaky legal grounds if he were to attempt “take back” the Panama Canal. After all, the hand-over to Panama is based on a bilateral agreement, the 1977 Torrijos-Carter Treaty, and further backed up by an accompanying neutrality arrangement. But as a shorthand for a more assertive Latin America policy, the way in which Trump talks about Panama is an indication of how US foreign policy towards the region is likely to evolve.Trump’s America first doctrine will feature a return to an earlier version of the so-called Monroe Doctrine and its Roosevelt Corollary – named, respectively, after the fifth and twenty-sixth US presidents – which established the Americas as a sphere of influence for the United States and justified American intervention to prevent other powers from gaining a foothold in the western hemisphere.Although the policy of intervention was replaced in the early 1930s by the “Good Neighbour” policy, it was never completely abandoned and resurfaced in the US interventions in Grenada in 1983 and Panama in 1989. Unsurprisingly, countries in the region have reacted with alarm to Trump’s posturing. Panama has taken the issue to the UN Security Council where it currently serves a two-year term as a non-permanent member, ironically together with Denmark which was elected at the same time.The problem, therefore, is not that the new US administration has misdiagnosed a problem. Growing Chinese influence in the western hemisphere is hard to dispute. But the approach taken by Trump is likely to be counter-productive, or at least unlikely to be as effective as a more cooperative policy. Panama’s current president, José Raúl Mulino, for example, is widely considered a much better ally to Washington than to Beijing. Threatening him in the way Trump has is hardly a recipe for lasting success.Trump’s vision of America first is beginning to take shape as a foreign policy of insulation and isolation. It is about restoring a secure and undisputed sphere of influence in the Americas and a reduction in Washington’s commitments to Europe and the Middle East. All of this is meant to allow the US to prevail in its rivalry with China. Trump has so far refrained from imposing his threatened tariffs on China and is seemingly softening his anti-China rhetoric keeping the door open to a new deal with his counterpart Xi Jinping.But both sides are hedging their bets: as the foreign ministers of the Quad countries – Australia, India, Japan, and the US – met in Washington, Xi was on a 90-minute video call with Russia’s president, Vladimir Putin. As far as the Quad is concerned, this indicates that the US, including Trump’s now-confirmed Secretary of State, Marco Rubio, see a certain value in alliances.Adopting this approach towards Latin America would be a way to restore US leadership in the western hemisphere and to limit Chinese influence. It would also ensure cooperation from countries in the region on other US priorities, like curbing migration and drug trafficking. Being a good neighbour may not get Trump the Panama Canal, but it may gradually secure him the sustainable sphere of influence that Washington will need to outcompete China in the long run. Bullying his neighbours may lead to some short-term successes, but it will not bring the “Golden Age” that Trump envisaged in his inauguration address.This is an updated and expanded version of a commentary published by Channel News Asia on January 25, 2025.We hope you'll share Navigating the Vortex with anyone you think might find it of interest. Also, you can listen to our podcast editions via the website and on all major podcast platforms, including:Apple PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Donald Trump’s return to the White House on January 20, 2025, is widely seen as ushering in a period of significant upheaval for US foreign policy, and a change in the way diplomacy is done.Trump’s favoured style of bluster and threats against foreign leaders already seems to have paid off in helping to craft a peace deal, however shaky, in Gaza. The deal was negotiated by Biden and his team, in co-ordination with Trump’s incoming administration. But analysts suggest Trump’s fierce comments on January 7 that “all hell would break lose” if the hostages weren’t soon released were actually a threat to Israel’s Benjamin Netanyahu to get something done quickly. And this forced the Israeli government to commit to a deal.Trump used this abrasive style before in his first term. And his recent threats to buy Greenland, annex Canada and to resume control of the Panama Canal suggest this will happen again. Not only that, but Elon Musk, one of Trump’s close confidants, is openly bragging about his attempts to change governments in the UK and Germany – in an attempt to shore up a global alliance of populist leaders. This does not bode well, especially for traditional allies of the US.Add to that a promised deal with Russia to end the war in Ukraine, a renewal of the maximum-pressure campaign against Iran and doubling down on confrontation with China – and you have all the ingredients of a fundamental remaking of US foreign policy.Three particular aspects stand out and give an early indication of what an actual Trump doctrine of foreign policy might look like.First is the focus on the western hemisphere. Trump’s focus here appears to be simultaneously asserting US dominance in the affairs of the Americas and eliminating any perceived strategic vulnerabilities. While Greenland, Canada and the Panama Canal have dominated the headlines, there are also implications for US relations with Cuba, Nicaragua and Venezuela, with Trump’s pick of Marco Rubio as secretary of state known for his hawkish approach.Trump may inaccurately hype up China’s role in the Panama Canal, but Beijing has unquestionably increased its (mostly economic) footprint in Latin America. A Chinese-funded deep-water port in Peru has raised US security concerns. Chinese investment in Mexico has created an important backdoor into the US market and contributed to the fact that Mexico is now the largest trade partner for the US. In 2024, US imports of goods from Mexico stood at just under US$467 billion (£383 billion), compared to China’s US$401 billion (£329 billion).Trump is likely to dial up the pressure in the western hemisphere using a mixture of threatening rhetoric, tariffs and political pressure. In an early demonstration of how serious the incoming administration takes the issue, his allies in Congress have already introduced a bill in the House of Representatives to “authorize the President to seek to enter into negotiations with the Kingdom of Denmark to secure the acquisition of Greenland by the United States”.The second feature of the emerging Trump foreign policy doctrine is the scaling back of US involvement in regions that the administration considers of secondary importance. The two main areas in this context are Europe and the Middle East.Trump’s promised deal with Russia to end the war in Ukraine is one key component of his strategy to free up US resources to focus on China and to “un-unite” Russia and China.A deal with Putin, however, is not a foregone conclusion. Russia has retained the momentum of its campaign on the battlefield and does not appear to be running out of steam anytime soon. In fact, new doubts over western aid and the sustainability of sanctions might sway Putin against any deal, should he have contemplated one.At the same time, a recent strategic partnership agreement between Moscow and Tehran is hardly likely to please Trump who has vowed to double down on renewing pressure on the Iranian regime. The deal between Russia and Iran, while stopping short of a mutual defence guarantee, however, is likely to provide Iran with something of a lifeline even if it just creates more links between two of the world’s most sanctioned countries.There are some signs that Trump and his team are aware of these complexities. His insistence that US allies in Nato step up their defence spending, for example, is an indication that the incoming administration continues to place value in transatlantic security. It just does not want to be the one mostly paying for it. And Trump has a point: Washington currently shoulders 68% of all Nato expenditure, compared to European members’ 28%.Trump’s approach to the Middle East is underpinned by the same calculation of US-brokered deal-making that protects US interests while facilitating a scaling down of commitments. With a ceasefire between Israel and Hamas now in place that will facilitate a release of Israeli hostages, a much clearer path to normalising relations between Israel and Saudi Arabia exists. This is still contingent upon an Israeli nod towards Palestinian statehood. But when it materialises, Israel’s relations with the rest of the Arab world will also improve. This will then shift the burden of containing Iran to a likely more effective and capable coalition of US allies in the region and allow Washington to resume its maximum-pressure campaign against Tehran.While Trump’s approach to the western hemisphere and to Washington’s future relations with Europe and the Middle East is reasonably clear, there is an abundance of questions over his China strategy. His national security team is generally considered as hawkish on Beijing – with the exception of Elon Musk who has significant business interests in China.Trump himself oscillates between aggressive and conciliatory rhetoric. Alleged Chinese control of the Panama Canal is one of his justifications for seeking to reassert US control of the strategic waterway. But he also name-checked Chinese president Xi Jinping as being able to help with a Ukraine deal and even invited him to his inauguration. Trump may be open to a deal with China, as he indicated after his first call with Xi since winning a second term in the White House. And China, in turn, has signalled interest in this as well. While Xi himself will not attend the inauguration, his vice president, Han Zheng, will.Trump and Xi also have a track record of deal-making, even though their 2020 agreement did little more than stop an escalating trade war. The deal took two years to negotiate and left many of the tariffs imposed by Trump early in his first term in place, albeit in some cases at a reduced rate. Something similar could happen again now with Trump fulfilling one of his campaign pledges for higher tariffs on Chinese goods and simultaneously starting negotiations on a new deal with Beijing.In all likelihood, this is Trump’s last term as president. For the next two years, at least, he controls both the Senate and the House of Representatives. He has every incentive to make good on his promises – and he faces few, if any, restraints. He sees himself as a disrupter, and his Maga base expects him to be just that.Trump’s deal-making philosophy has little, if any, place for win-win outcomes. For him, it is all about winning, being seen to be winning, and being able to brag about it. This will complicate much of the deal-making required for his foreign policy doctrine to work. Nor is it clear whether any deals would stick, and if Trump, or his successors, would be able to enforce them.What is not clear, therefore, is whether Trump’s vision of an ultimately more stable international order with clearly delimited spheres of influence for the great powers of the day – the US, China, and possibly Russia – will emerge, let alone whether such an outcome would be desirable.An earlier version of this analysis was published by The Conversation on January 17, 2025.We hope you'll share Navigating the Vortex with anyone you think might find it of interest. Also, you can listen to our podcast editions via the website and on all major podcast platforms, including:Apple PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

When Donald Trump first offered to buy Greenland in 2019, he was widely ridiculed and nothing much came of it, apart from a cancelled state visit to Denmark. Fast-forward six years and Trump’s renewed “bid” for the world’s largest island is back on the table.And with renewed vigour at that. In an interview on January 7, the incoming US president refused to rule out the use of force to take possession of Greenland and he dispatched his son, Don Jr, “and various representatives” there on January 8, 2025, to underline his seriousness. With Elon Musk on board as well, money should not be an obstacle to any deal that Trump envisages.Trump is not the first US politician to try to buy Greenland. The earliest documented attempt to acquire the island goes back to 1868. The last serious pre-Trump effort is that by President Harry S. Truman’s government in 1946. Trump’s renewed interest in Greenland, thus, stands in a long tradition of American efforts of territorial expansion.Even without this historical background, Trump’s latest bid is less irrational today than it may have seemed back in 2019. Greenland is exceptionally rich in so-called “critical minerals”. According to a 2024 report in the Economist, the island has known deposits of 43 of 50 of these minerals, which, according to the US Department of Energy, are essential for “technologies that produce, transmit, store, and conserve energy” and have “a high risk of supply chain disruption”.The latter certainly is a valid concern given that China – a key supplier of several critical minerals to global markets – has been increasing restrictions on its exports as part of an ongoing trade war with the US. Access to Greenland’s resources would give Washington more supply chain security and limit any leverage that China could to bring to bear.Greenland’s strategic location also makes it valuable to the US. An existing US base, Pituffik Space Base, is key to US missile early warning and defence and plays a critical role in space surveillance. Future expansion of the base could also enhance US capabilities to monitor Russian naval movements in the Arctic Ocean and the north Atlantic. US sovereignty over Greenland, if Trump’s deal comes to pass, would also effectively forestall any moves by rivals, especially China, to get a foothold on the island. This may be less of a concern if Greenland remains part of Nato member Denmark which has kept the island economically afloat with an annual grant of around US$500 million (£407 million).Greenland’s independence – support for which has been steadily growing – could open the door to more, and less regulated, foreign investment. In this case, China is seen as particularly keen to step in should the opportunity arise.Add to that growing security cooperation between Russia and China and the fact that Russia has generally become more militarily aggressive, and Trump’s case looks yet more credible. Nor is he the only one to have raised the alarm bells: Canada, Denmark and Norway have all recently pushed back against an increasing Russian and Chinese footprint in the Arctic.So, the problem with Trump’s proposal is not that it is based on a flawed diagnosis of the underlying issue it tries to address. Growing Russian and Chinese influence in the Arctic region in general is a security problem at a time of rising geopolitical rivalry. In this context, Greenland undeniably poses a particular and significant security vulnerability for the United States.The problem is Trump’s “America first” tunnel vision of looking for a solution. Insisting that he wants Greenland and that he will get it – even if that means exceptional tariffs on Danish exports (think Novo Nordisk’s weight loss drugs) or the use of force. Predictably, Greenland and Denmark rejected the new “offer”. And key allies, including France and Germany, rushed to their ally’s defence – figuratively for now.Rather than strengthening US security, Trump is effectively weakening it by, yet again, undermining the western alliance, and Nato – the North Atlantic Treaty Organisation – in particular. Not only does the irony of doing so in the north Atlantic appear to be lost on Trump. But it also seems that there is an even more fundamental problem at work here in that this kind of 19th century-style territorial expansionism reflects Trump’s isolationist impulses.“Incorporating” Greenland into the US would likely insulate Washington from the disruption of critical mineral supply chains and keep Russia and China at bay. And signalling that he will do it whatever the cost is an indication that, beyond the kind of bluster and bombast that is normally associated with Trump, his approach to foreign policy will quickly do away with any gloves.Rather than investing in strengthening security cooperation with Denmark and the rest of its Nato and European allies to face down Russia and China in the Arctic and beyond, Trump and his team may well think that the US can get away with this. Given that what is at stake here are relations with the US’s hitherto closest allies, this is an enormous, and unwarranted, gamble. No great power in history has been able to go it alone forever – and even taking possession of Greenland, by hook or by crook, is unlikely to change this.An earlier version of this analysis was published by The Conversation on January 9, 2025.We hope you'll share Navigating the Vortex with anyone you think might find it of interest. 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On December 31, 2024, the last contract that the Russian energy giant Gazprom had for the over-land supply of natural gas to Europe came to an end. This was the result of Ukraine refusing to renew the transit contract that had been in place since 2019 and contributed around $5bn to Gazprom’s annual revenue. Given that Russia invaded Ukraine in 2022, this was not an unreasonable decision for the government in Kyiv to take. Nor was it unpredictable – already in the summer of 2023, Ukraine had indicated that it had no intention to extend the contract with Gazprom.By the time the contract came to an end, the dependency of the European Union on Russia for gas had been reduced from its peak above 40% just before the beginning of the Russian aggression against Ukraine to below 10%. And only around half of that came via Ukraine. The EU and its member states were well-prepared for the cut-off, having secured alternative suppliers and sitting on full gas storage tanks to see them through the winter.Moreover, the European energy infrastructure of pipelines and the electricity transmission grid have sufficient levels of in-built flexibility and redundancy and have proved resilient to cope with the sudden lack of supply of gas via Ukraine. This even included the capacity of additional provision of electricity to Moldova – a small country wedged between Romania and Ukraine, which had been highly dependent on gas supplies via Ukraine.The end of over-land gas supplies and the EU’s ability to cope with this were thus clearly foreseeable for everyone – except, apparently, Slovakia’s prime minister Robert Fico. He predicted a severely negative impact on the EU, including in terms of the costs and availability of heating and electricity. As his row with Ukraine’s president Volodymyr Zelenskyy escalated, Fico also threatened to cut off electricity supplies to Ukraine and warned of further unspecified retaliation measures.Perhaps most shockingly, Fico even went to Moscow on December 22, 2024, for direct talks with Vladimir Putin. This made him only the third EU leader to go to Russia since the start of the war almost three years ago. The other two that went to meet the Russian president were the outgoing Austrian chancellor, Karl Nehammer, and the Hungarian prime minister, Victor Orban.Fico and Orban in particular are well-known for their pro-Russian leanings. They have repeatedly used their leverage inside the EU and NATO to undercut support for Ukraine. Trying to play the energy card as they did over the end of the Gazprom deal, thus, has less to do with energy security. Rather, it is part of a political agenda of some of the populist European far right who are more than willing to act as a fifth column for Russia inside western institutions.For some time now, populist parties have played on voters’ fears of ever-increasing inflation, immigration and an escalation of the war in Ukraine that could ultimately drag NATO and the EU into a direct confrontation with Russia. Parties on the extreme left and right have done well at the polls last year, including in Austria, France, and Romania. They are also likely to be the main beneficiaries of parliamentary elections in Germany in February and potentially of presidential elections in Poland in May. Meanwhile, the resignation of Chancellor Nehammer in Vienna on January 3, 2025, following the collapse of coalition negotiations among three centrist parties, has also opened up a pathway to power for the far-right, pro-Russian Austrian Freedom Party.The general shift to the political extremes, however, should not be mistaken for a broader, Europe-wide tendency towards accommodating Russia. This is certainly part of the agenda of Orban and Fico, as well as of elements in the German and Austrian far right (and to an extent the German far left). But others in the European right, like Italy’s Giorgia Meloni and France’s Marine Le Pen, have clearly distanced themselves from Putin’s war. Meloni has gone beyond that and been a strong and outspoken supporter of Ukraine.Those European leaders closest to the Russian president’s agenda also share an anti-democratic and authoritarian streak with him. Whatever their reasons for doing so, they appear to be working towards the weakening western support for Ukraine and eroding western leadership in the current international order – much like Putin himself.They might all be hoping that the return of Donald Trump to the White House will benefit their own aspirations. And in the short term, this may well prove to be the case. Putin may get a good deal from Trump on Ukraine. Orban, Fico and others may get audiences with Trump (and financial support from Elon Musk).Yet, for Trump and most in his team, the big prize is defeating China. Both Putin and Orban are likely to fall out of the incoming American president’s good graces if they are unwilling to cut their ties with Beijing – something almost inconceivable for Russia to do.And Putin’s eastern European acolytes would also do well to remember that in Putin’s imperial mindset there is no place for truly independent neighbours. This is what prompted the invasion of Ukraine and there is no guarantee that Putin’s vision of Russia as a great power will be confined to the borders of the former Soviet Union. In fact, there is nothing to suggest that Putin’s re-imagined Russian empire would not be more like the former communist bloc that extended all the way to the Berlin Wall. In the future, European populists may thus come to regret the erosion of western institutions like NATO and the EU which they now appear so keen to achieve at Putin’s behest.This is an expanded and updated version of a commentary published by Channel News Asia on January 8, 2025.We hope you'll share Navigating the Vortex with anyone you think might find it of interest. Also, you can listen to our podcast editions via the website and on all major podcast platforms, including:Apple PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

This is the podcast version of our analysis of the likely consequences of the end of over-land deliveries of Russian gas to Europe. You can read the original post, which includes a number of hyperlinks, here.We hope you'll share Navigating the Vortex with anyone you think might find it of interest. Also, you can listen to this and other podcast editions via the website or on all major podcast platforms, including:Apple PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

This morning, the High-Level week of the 78th session of the United Nations General Assembly gets under way in New York. This is the annual gathering of the heads of state and government of most of the UN’s member states. Notably absent this year, however, are four of the five permanent members of the UN Security Council—Russia, China, and France are not sending their presidents, and neither is the UK prime minister attending.What will the main focus be for the General Assembly?Two items will likely dominate the 78th UN General Assembly High-Level Week—the war in Ukraine and progress on the Sustainable Development Goals, on which there is a special summit in New York that is expected to conclude with the adoption of a political declaration today.Will the war in Ukraine dominate?The war in Ukraine will probably not dominate, but it will be a key item on the agenda, given especially that Ukraine's president, Volodymyr Zelensky, is one of the speakers scheduled to address the General Assembly on the first day of the debate. The war in Ukraine will also be critical in more indirect ways. Many countries have been affected by the war, including in terms of their food security, in terms of the inflation of energy prices, and in relation to the increasingly tense and fractious relations between Russia and the West which has added to global instability and negatively affected the ability of the international community to tackle key issues, such as development and climate change, more effectively. These issues are likely to be raised by several speakers in the debates and in meetings, like the one between Britain’s Prince William and UN Secretary General Antonio Guterres yesterday.Who will the main players be given the leaders from the UK, France, Russia and China won’t be in attendance?Given that of the permanent five, veto-wielding powers of the Security Council only the US will be represented at the highest level, with President Biden addressing the General Assembly this morning in New York, we can expect key leaders from the Global South playing a more important role this year. President Lula of Brazil will be the first speaker after the report of the General Secretary. South Africa, another key actor for the Global South, will also be there with its president speaking this morning, while the new Nigerian president will speak in the afternoon. Apart from the US, key Western players sending their heads of state or government include Switzerland, Germany, and Japan. But in general, we would expect the so-called Middle Powers, including those from the Global South, which have for years pushed for a greater recognition of their role, to take at least part of the limelight. This will also include countries like Turkey, Argentina, and Qatar.Is it surprising to see that the leaders of these superpowers won’t attend?Yes and no. Yes, because the High-level Week at the General Assembly is one of the major universal platforms not only for addressing the assembled international community and raising key issues in front of a global audience but also for these heads of state and government to have bilateral and small multilateral meetings in the margins of the general assembly. This is where a lot of important business gets done--for example, President Biden will host the leaders of five Central Asian states today for the in the first-ever presidential summit in the so-called C5+1 summit. At the same time, it's also not surprising, for example, that Russia's president Vladimir Putin is not attending given that there is a warrant out for his arrest by the International Criminal Court. And the Chinese president, Xi Jinping has avoided any potential direct encounters with his US counterpart for quite some time. The absence of the heads of state and government of Russia, China, the UK and France, however, should also not be overstated -- regardless of their high-level presence or not, they remain the key players in the UN system because of their privileged position as veto powers on the Security Council, which, compared to the General Assembly, is the more powerful of the UN organs. And the US Secretary of State, Antony Blinken, met the Chinese Vice President, Han Zheng, yesterday in New York, so the superpowers still interact at the UN, even if not at the highest levels.We hope you've found this Navigating the Vortex PDQ rapid response helpful. To get this and all of our articles and podcasts directly to your mailbox as soon as we share them, register for free at Navigating the Vortex. You can also subscribe for subscriber-only access to comments and chats and other special subscriber-only benefits.We hope you'll share Navigating the Vortex with anyone you think might find it of interest, and please consider rating and reviewing us on Apple Podcasts or wherever you are listening. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

The 15th BRICS Summit, held in South Africa from the 22nd to the 24th of August was predictably underwhelming in its lack of concrete outcomes. The BRICS, even after the addition of six new members next year, will be anything but an alternative or rival to the G7. For all the talk about multipolarity, the BRICS, and their expansion, contribute further to the consolidation of a new bipolar order with just two rival blocs—led respectively by the US and China. It remains to be seen, however, whether dislike of a US-dominated order is enough to sustain the current lure of the BRICS. What it’s about: The 94-paragraph Johannesburg II Declaration issued at the summit of currently five members of the BRICS—Brazil, Russia, India, China, and South Africa—is a mostly aspirational and self-congratulatory document. The only truly notable outcome of the summit is contained in paragraph 91:We have decided to invite the Argentine Republic, the Arab Republic of Egypt, the Federal Democratic Republic of Ethiopia, the Islamic Republic of Iran, the Kingdom of Saudi Arabia and the United Arab Emirates to become full members of BRICS from 1 January 2024.This is preceded by the announcement that “BRICS countries reached consensus on the guiding principles, standards, criteria and procedures of the BRICS expansion process” but without any further elaboration of what these might be. And the announcement of expansion is followed by a commitment “to further develop the BRICS partner country model and a list of prospective partner countries”.Apart from that, the Declaration is hardly a revolutionary document. It repeats calls for reform rather than replacement of key international institutions, such as the UN, the World Trade Organisation, and the IMF. In addition, the BRICS “reaffirm the importance of the G20 to continue playing the role of the premier multilateral forum in the field of international economic and financial cooperation”.There are the usual expressions of concern about war and conflict, with Sudan, Niger, Libya, Western Sahara, Yemen, Syria, the Occupied Palestinian Territories, and Haiti all name-checked. On Ukraine, the language is predictably vague to accommodate the different stakes that the five members have:We recall our national positions concerning the conflict in and around Ukraine as expressed at the appropriate fora, including the UNSC and UNGA. We note with appreciation relevant proposals of mediation and good offices aimed at peaceful resolution of the conflict through dialogue and diplomacy, including the African Leaders Peace Mission and the proposed path for peace.On the other big issue in the run-up to the summit—de-dollarisation and the possible establishment of a BRICS currency—the Declaration stretches as far as “stress[ing] the importance of encouraging the use of local currencies in international trade and financial transactions between BRICS as well as their trading partners” and “encourag[ing] strengthening of correspondent banking networks between the BRICS countries and enabling settlements in the local currencies” with BRICS finance ministers and central bank governors to report back on these issues at the next summit.Why it matters: In their current five-member composition, the BRICS constitute just over 40% of the world’s population and account for one-quarter of global GDP ($26tn out of $104tn, according to World Bank data). The six new members will not significantly increase either of these figures: based on 2022 data, the enlarged BRICS’ share of global GDP will only increase by three percentage points. But with the addition of major Chinese oil and gas suppliers—notably Saudi Arabia and the UAE, less so, for now, Iran—what will, from 2024 onwards count as BRICS-internal trade is likely to increase. The same is probable to occur for BRICS-to-BRICS FDI. All five current members are part of the G20. With Argentina and Saudi Arabia joining the BRICS in 2024, seven G20 members will also be BRICS countries. If current, and future, members of the BRICS are serious about the G20 as “the premier multilateral forum in the field of international economic and financial cooperation” and if they are able to align and coordinate their approaches to global political and economic issues, dynamics at the G20 may change under the Brazilian presidency in 2024. But this is a very big ‘if’.Our take: The BRICS do not constitute an alternative world order in either a geopolitical or geoeconomic sense. The BRICS are not an international organisation in the traditional sense with a legal personality and a permanent secretariat, often established by a formal treaty, and united by a common purpose. Their ‘creation’ was almost accidental, based on an assessment in 2001 that GDP growth in the emerging markets of Brazil, Russia, India, and China would accelerate significantly and consequently have an impact on the global economic and financial system. Their first formal summit was held in 2009 in Russia’s Yekaterinburg. South Africa was invited to join in 2010, turning the BRICs into the current BRICS.The BRICS’ share of global GDP—25% at present, 28% after their enlargement next year—sounds impressive. However, almost 70% of that is due to the size of the Chinese economy. China similarly dominates in trade terms. Our calculations based on the UN Comtrade Database indicate that Chinese trade in goods with BRICS partners in 2022 came to just over $550 billion, which, however, constitutes less than 10% of China’s total global trade. Expansion will add another $273bn to this figure, based on 2022 data, making BRICS trade worth approximately 15% of China’s total trade. The single most important trade partner among the current BRICS for China is Russia with just over $190bn, but this was just over 3% of China’s total global trade in 2022. By comparison, trade with the US in 2022 was slightly more than $761bn, making the US China’s single most important trade partner overall, accounting for 12%. China’s most important trade relationships are with other blocs. First among them is the Regional Comprehensive Economic Partnership, a free trade area including China, all ASEAN member states, and Australia, Japan, New Zealand, and South Korea. Trade with this bloc amounted to $1.9tn in 2022, equivalent of just under 31% China’s global trade. China’s trade with the EU was worth close to $900bn (14% of global Chinese trade in 2022). Trade with all the individual members of the G7, which do not constitute a free trade area, was worth just over $1.7tn, or 27% of all Chinese trade in 2022.While China’s trade with the BRICS as a whole and its individual members may be less important for Beijing than other trading relationships, the reverse is not true. For Brazil, trade with China constitutes just over 27% of its total trade. Corresponding figures for Russia (based on 2021 trade volume) are 24%, for India 11.5%, and for South Africa 24%. For new members, the data differ slightly. Oil and gas exporters Saudi Arabia and United Arab Emirates depend on China for 26% and 13%, respectively (both 2021 data). For Argentina (2022), Egypt (2022), and Ethiopia (2021), the corresponding figures are 13%, 14%, and 15%.From a geoeconomic perspective, China, thus, clearly dominates the current BRICS and will continue to do so after enlargement. But its trade relationships overall will still be highly diversified and the BRICS, even after enlargement, are unlikely to become a major trading bloc or a key driver of geoeconomic fragmentation. For that to happen, membership would need to grow significantly more, members would need to agree on a free trade arrangement, and they would need, collectively, to decouple more from the G7. None of this is impossible, but it is highly unlikely to occur anytime in the near future.Geopolitically, the picture is only slightly different. Since 2010, the BRICS have developed a stronger sense of common purpose, which can loosely be described as gaining more influence in the international system—be that in the UN, in international financial institutions, or when it comes to tackling global challenges like climate change. The BRICS often present themselves as defending the interests of the global south within in an unfair and unjust international order that is dominated by, and primarily serves the interests of, the US and its allies.This is an attractive proposition to the current five BRICS countries, the six new members, and the reportedly dozens of other countries that have expressed an interest in joining. But for each of them, this means something different and their interests are often not aligned in a meaningful way. The current five members can all subscribe to supporting “the legitimate aspirations of emerging and developing countries from Africa, Asia and Latin America, including Brazil, India and South Africa, to play a greater role in international affairs, in particular in the United Nations, including its Security Council.” However, while Brazil, India, and South Africa may see this as a pathway to permanent membership in the Security Council, neither Russia nor China have been overly enthusiastic about this prospect.Similarly, the Johannesburg II Declaration is full of recognition of the challenges posed by climate change and the need to tackle it. Yet, it was India and China at COP26 in Glasgow who were responsible for opposing a firm commitment to “phasing out” coal.In addition, there are also significant bilateral issues between the current five members, including a long-standing border dispute between India and China. Notwithstanding the China-mediated resumption of diplomatic relations between Iran and Saudi Arabia earlier this year, inviting these two traditional Middle Eastern rivals into the BRICS is unlikely to increase BRICS coherence. And decades-old tensions between two other incoming members—Ethiopia and Egypt—over the Grand Ethiopian Renaissance Dam on the Nile are not a recipe for harmony either.Crucially, though, the BRICS have increasingly turned into yet another mechanism for China to rally support, especially in the global south, in its ongoing rivalry with the United States. The weakening of Russia, especially since the start of the Kremlin’s war of aggression against Ukraine in February 2022, has made China the default leader in the BRICS, as well as other gatherings, like the Shanghai Cooperation Organisation. While China commits rhetorically to lofty notions of “inclusive multilateralism”, of “an environment of peace and development”, and of partnerships for “mutually accelerated growth” and “sustainable development”, these are ultimately serving the singular purpose of strengthening China’s position vis-à-vis the US. The Johannesburg II Declaration reaffirms the BRICS’ commitment “to ensuring the promotion and protection of democracy, human rights and fundamental freedoms for all with the aim to build a brighter shared future for the international community based on mutually beneficial cooperation.” While the irony of such a commitment seems entirely lost on the signatories, this ‘vision’ will work for BRICS members now and in the future—under certain conditions. One of these conditions is that none of the leaders who signed up to BRICS membership will ever be held accountable for delivering on this vision. Given that the 2024 enlargement will do little to increase the number of genuine democracies among the BRICS, this is perhaps a lesser concern for current and future leaders. Another condition may be more important: that a China-led dictators’ club continues to remain attractive, especially for other middle powers whose support China will need if it seriously wants to take on the US. It is unlikely that the mere dislike of a US-dominated international system will be enough of a long-term attraction to keep rising middle powers like Saudi Arabia committed to the BRICS or to attract others like Indonesia or Turkey. Herein lies a real challenge and opportunity for the US and its allies: to offer a genuine alternative to a China-led bloc in the emerging new bipolar order. At the end of the day, the first step in that direction is not to dismiss the BRICS as yet another failed Chinese project to take over the world but to see it for what it is: another BRIC in a new Chinese wall that seeks to carve up an ever-growing sphere of influence.A big thanks to all of our readers, listeners, followers and subscribers. We launched Navigating the Vortex in April, and now more than 125k of you get our newsletter and podcast delivered straight to you all over the world. If you haven't signed up to the newsletter, it is the best way to make sure you don't miss out on anything.If you're like us, when something catches your fancy you like to dive deeper and read the primary sources and the like. If you are listening to this, you can go to Navigating the Vortex and read the full written version of all of our pieces which include all of the background links to the reports and information we cite.You can register for free at Navigating the Vortex. You can also subscribe for subscriber-only access to comments and chats and other special subscriber-only benefits.We hope you'll share Navigating the Vortex with anyone you think might find it of interest, and if you like the show, please consider rating and reviewing us on Apple Podcasts or wherever you are listening. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

In this emergency episode of the "Navigating the Vortex," podcast Lucy P. Marcus and Stefan Wolffprovide a detailed analysis of Prigozhin’s fast march to Moscow, the role of key players, and the potential consequences, and opportunities, for the region and the world. Lucy and Stefan delve into the many facets of the aftermath: the implications for the war in Ukraine, the changing power dynamics inside and outside Russia, and the kaleidoscope of players, from the African nations to multinational boardrooms, and from Washington DC and New Delhi to Beijing. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Two reports out this week — the World Bank’s Global Economic Prospects and the OECD’s Global Economic Outlook — paint a picture of slow growth and incremental recovery threatened by persisting economic, political, and environmental risks. Both reports emphasise the importance of sound macro-economic policy, including addressing inflation, responsible debt management, and structural policy reforms that enhance productivity and can sustain longer-term growth.What it’s about: The prospects of global economic growth remain bleak. Both the World Bank and the OECD project very moderate growth across all regions for 2023 and 2024. The projections are not identical in the last detail of every percentage point, but the underlying message is clear: growth is at best fragile and risks remain significant. Above all, whatever economic growth might be possible is unlikely to be sufficient to create the fiscal space for governments to address a vast number of socio-economic, political, and environmental challenges by simply throwing money at these problems. Instead, the World Bank and the OECD both point out the need to return to the fundamentals of macro-economic policy making; that is, to move away from a permanent crisis mode that responds to whatever appears as the most pressing issue of the day and ensure that foundations are (re-) built that will enable sustainable long-term growth. The growth required to deal with the challenges that lie ahead is substantial. Populations are growing globally, but unequally; climate change requires a transition to net-zero and much greener economies than we have today; workforces need to become more diverse and inclusive and will need a whole range of new skills.Why it matters: This is not the first time that key economic and financial institutions have pointed out that the underlying drivers of economic growth are weak and that the prospects for achieving levels of sustainable growth that would be sufficient to deal with challenges as diverse as climate change, sovereign debt crises, and demographic change are mixed at best.“Is global growth doomed?” was a question that we discussed some two months ago (On Our Radar, 5 April 2023), the problems are deep-seated, the consequences of not addressing them will be negative and long-lasting, and the solutions, while in many ways obvious, difficult to achieve at a time of geoeconomic and geopolitical fragmentation.In this sense, the World Bank’s Global Economic Prospects and the OECD’s Global Economic Outlook don’t tell us anything new per se. They identify similar underlying trends — inflationary pressures, the risks to global trade from ‘de-coupling’ and ‘de-risking’, etc. Both note the lasting impact of the COVID-19 pandemic in terms of the unsustainable loosening of fiscal policies. Both point to Russia’s aggression against Ukraine as an exacerbating factor.Counter to the perennial call for everyone to “think outside the box” to find the solutions, what is important, is the emphasis on “getting back in the box”. That a permanent crisis mode of economic policy making can all too easily become a self-fulfilling prophecy by making the crisis itself permanent. For that reason alone, both reports are important, and their advice needs to be heeded by policy makers around the world. Our take: Resilience is at the top, front, and centre of a seemingly never-ending series of global summits, as we covered in our On Our Radar pieces on 22 May and 5 June — “Moving on from Ukraine? China-West relations between Xi'an and Hiroshima” and “Summitry continued: the EU and Central Asia, BRICS and Friends, and the European Political Community”.And if any further proof of the focus on resilience was needed, the OECD’s 2023 Ministerial Council Meeting, which endorsed the Global Economic Outlook report, was imaginatively titled “Securing a Resilient Future: Shared Values and Global Partnerships”. Its Key Issues paper identified Ukraine, trade, energy, and innovative technologies as key factors in “a world [that] faces economic, social, environmental, political and development challenges on a scale not witnessed for decades” and in which “geopolitical uncertainty grows”.Yet, many of the prescriptions on how to achieve resilience are driven primarily by geopolitical imperatives around national security concerns. These may be narrow in their intended economic impact as evident, for example, in speeches given by European Commission President Ursula von der Leyen on 30 March 2023, US Treasury Secretary Janet Yellen on 20 April 2023, US National Security Advisor Jake Sullivan on 27 April 2023. However, their broader perception and consequences reinforce exactly the kind of geoeconomic and geopolitical fragmentation that has been repeatedly identified as one of the key risks to sustainable economic growth. Pointing out the risks of ‘de-risking’ is one thing, offering an alternative is quite another, especially when the risks of an over-reliance, for example on Russian oil and gas, were so obvious to see once they materialised in the context of Moscow’s aggression against its Ukrainian neighbour. The other lesson learned from this, especially in Europe, was that a straightforward decoupling from Russia, though slow and painful initially, was possible.The challenges of ‘de-risking’ in relation to China are a multiple of what they are in the context of Russia, and crucially they extend beyond trade. True resilience, therefore, needs to be conceptualised beyond supply chains, Chinese access to advanced technologies, and inward and outward investment. And this is where some of the policy recommendations from the World Bank’s Global Economic Prospects and the OECD’s Global Economic Outlook come in, because they help us refocus on some of the fundamentals of sound economic policy making that goes beyond this crisis or that and, in fact, makes our economies more resilient to future crises. Reigning in public spending and focusing it on both those most in need and on job creation will benefit economies because it will reduce inflationary pressures while protecting the most vulnerable in societies and open opportunities for increasing government revenue. Expanding the workforce both by investing in skills development and by making it more gender-inclusive will have additional growth-generating effects. Stimulating private investment, and supplementing it as needed with public investment, in the transition to a green economy is also likely not only to stimulate growth but also to mitigate the key challenge of climate change. It may not prevent this particular crisis in the future, but it will better equip us to manage it.These domestic policy measures will need to be flanked with a similar re-focus on the fundamentals of international (economic) relations. This would require strengthening the World Trade Organisation, a global re-commitment to the UN and its specialised agencies, such as the World Food Programme, the Food and Agricultural Organisation, and the World Health Organisation, among others. It will also mean making a success of COP 28, regardless of the misgivings one might have about its President-Designate or the potential participation of Syrian president Bashar al-Assad.At a time when it is all too easy (and justifiable) to get lost in the flurry of crises from the escalating war in Ukraine to the stand-off in Kosovo and to the civil wars in Afghanistan and Sudan and all too tempting to share in the outrage over Donald Trump and Boris Johnson, we must always look to the lesson that can be gleaned from these, and recognise that these are symptoms of failing institutions and a mix of self-serving and incompetent people within them. Going back to the fundamentals of what sound and responsible policy making used to look like will not fix all of these and other problems but it can restore, and lay, the foundations not just for sustainable future economic growth but for more security and stability in a world that might otherwise be doomed to long-term decline, and not just of the economic kind. Note: We will be discussing this topic of how we get from crisis to resilience in greater depth on the next episode of the podcast. If there is anything you'd like us to focus on in particular, please email us and let us know.A big thanks to all of our readers, listeners, followers and subscribers. We launched Navigating the Vortex two months ago, and now more than 100k of you get our newsletter and podcast delivered straight to you all over the world. We are very grateful for your enthusiasm, feedback, suggestions, and commitment! Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Last week saw another three summits in quick succession: the foreign ministers of the BRICS countries met in Cape Town, South Africa; the European Political Community met at Mimi Castle in Bulboaca, Moldova, and the Heads of State of Central Asia and the President of the European Council came together in Cholpon-Ata, Kyrgyzstan. None of the meetings produced much in terms of concrete outcomes, but even as mere talking shops they are indicative of geopolitical and geoeconomic flux and uncertainty.What it’s about: The foreign ministers of Brazil, Russia, India, China, and South Africa — collectively also known as the BRICS — met in Cape Town. Their Joint Statement emphasised a common commitment to challenge what is, in the BRICS’ view, a western-dominated international order, often couched in calls to both strengthen and reform existing multilateral institutions like the UN and to promote “a more agile, effective, efficient, representative and accountable international and multilateral system.” The three stated pillars of the BRICS — political and security, economic and financial, and cultural and people-to­ people cooperation — are not very different from discussions at the second meeting of the European Political Community. Held in Moldova in a not-so-subtle endorsement of that country’s EU ambitions, the forty-five gathered leaders discussed peace and security, energy resilience, and connectivity and mobility in Europe. Intended as an informal policy coordination forum, there was no official communiqué and only a brief pre-meeting statement by the Head of the European Council, Charles Michel, as well as an even shorter statement by him following a separate discussion he chaired between the leaders of Armenia, Azerbaijan, France, and Germany.The brevity of these two statements could be explained either with the secrecy (or vacuousness?) of the discussions in Moldova or with Michel’s busy schedule, as he headed straight to Cholpon-Ata to the second EU-Central Asia summit from there. While this meeting did produce a more fulsome joint press communiqué, it was perhaps the one most devoid of concrete results, reaffirming intentions that had already been reaffirmed in a similar communiqué after the first summit on 27 October last year. Why it matters: As we discussed in our earlier piece, Moving on from Ukraine? China-West relations between Xi'an and Hiroshima (On Our Radar, 22 May 2023), the war in Ukraine remains an important driver of the current flux and uncertainty in the international system, but not the only one, and it certainly gives rise to, and exacerbates, any number of other factors that add to the current conflagration of multiple crises. Last week’s three summits are no different. The BRICS statement did not mention Ukraine, but noted “concern about the use of unilateral coercive measures, which are incompatible with the principles of the Charter of the UN and produce negative effects notably in the developing world” before doubling down by recognising “the impact on the world economy from unilateral approaches in breach of international law and they also noted that the situation is complicated further by unilateral economic coercive measures, such as sanctions, boycotts, embargoes and blockades.” A charitable reading here might consider the reference to “unilateral approaches in breach of international law” as including Russia’s invasion of Ukraine, but the key point that permeates these and other passages of the statement is the concern about the economic impact of the war in Ukraine and the intensifying economic conflict between China and the US. An impact that is primarily borne by the global south — of which the BRICS consider themselves the leading voices and which they also seek to shape more, including through a potential expansion of the format. This desire to remould the BRICS from an alternative to the G7 into to an alternative to a US-led global West that combines elements of the old Cold War Soviet block and the erstwhile non-aligned movement was particularly obvious in the “Friends of BRICS” gathering on the sidelines of the summit in Cape Town. Not exactly or exclusively great company — Iran, Saudi Arabia, the United Arab Emirates, Cuba, the Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan were physically present with Egypt, Argentina, Bangladesh, Guinea-Bissau, and Indonesia joining online — it indicates the potential attractiveness of an enlarging BRICS to a wide range of countries. Our take: The BRICS are still quite a bit off from being able to mount an effective challenge to the current international order. But that order is clearly in trouble and will change. Yet neither the US nor China, and their respective allies, have a clear vision of what it might look like, and above all none that would be credible in the sense of accommodating whatever individual visions might exist and how they could ensure a return to some semblance of stability and predictability in international relations.This continuing uncertainty is neither cost- nor consequence-free. The costs are borne by many of the poorest countries around the world, and the Global South is right to point to this out. But we should equally not forget that a much higher and much more direct cost of Russia’s aggression is borne by Ukraine and Ukrainians. The widespread sentiment in the Global South that the war should end as soon as possible and regardless of the impact on Ukraine may be understandable from the perspective of a country like Indonesia — whose foreign minister proposed a new peace plan at the IISS Shangri-La Dialogue 2023 on 3 June — but it is insensitive to Ukraine’s rights and potentially endorses, and encourages, the flagrant violation of fundamental principles of international law. What is more, it is short-sighted. Never mind disputes in and near the South China Sea, including Indonesia’s own Natuna Islands, and not only because such a stance effectively accepts Russia’s territorial dismemberment of a sovereign neighbour. But also because it will likely have unintended and unwanted economic consequences. The G7 remain the world’s most prosperous and powerful economies by some margin. As we covered in last week’s podcast “The Debt Ceiling, Summitry, and Corporate Governance in Japan…or just follow the money”, they now put significant emphasis on economic resilience, including the security of supply chains and the associated re-shoring, near-shoring, and friend-shoring. The implication here is clearly that you don’t recommend yourself as a ‘shore’ going so obviously against the Western understanding of the principles that should guide a just and sustainable settlement of the war in Ukraine.Yet, continuing uncertainty also has consequences for the west and its allies. The EU, despite its focus on Ukraine, is also keen to consolidate its neighbourhood, now referred to as ‘wider Europe’. One of the few notable outcomes of the European Political Community summit in Moldova was a mini-lateral summit on the conflict between Armenia and Azerbaijan over Nagorno Karabakh which kept the momentum in the EU’s mediation efforts alive. Were the Union to succeed in brokering a normalisation between the conflict parties and even a peace treaty, this would have a significant and positive impact on supply chains along the Middle Corridor, including energy supplies from Kazakhstan. Speaking of Kazakhstan, here is an obvious example of the many countries that are still hedging their bets in the current turmoil. Courted by China, the country was present at the BRICS summit as a ‘friend’, while its President attended the EU-Central Asia summit, signing up to the joint commitments made there, including “to formalise and advance the implementation of the Joint Road Map for Deepening Ties between the EU and Central Asia.” This may be more limited than the plethora of agreements signed at the China-Central Asia summit in Xi’an two weeks earlier, but it does nonetheless indicate that nothing is quite set in stone yet when it comes to an emerging new geopolitical and geoeconomic order.Within this uncertainty, others are also hedging. China-US relations may not have bottomed out quite yet — although the trip by CIA director Bill Burns to Beijing in May for talks with his Chinese opposite number indicates that there are still high-level channels of communication, the refusal of the Chinese defence minister to meet his US counterpart at the Shangri-La Dialogue was a new low in the recent downward spiral. Meanwhile, Beijing appears to be keen to court US business elites as evident in the meetings that Elon Musk and Jamie Dimon, respectively the CEOs of Tesla and Twitter and JPMorgan Chase, were able to secure with senior Chinese government officials last week.Perhaps then, the direction of travel in the current upheaval is less clear beyond the seemingly confident statements uttered by leaders at the various summits that we covered over the past weeks. This creates opportunities for governments and private sector organisations alike. Even NGOs, like IISS with its Shangri-La Dialogue, have a role to play in this kind of summitry. Ultimately, however, summits are only as useful as their outcomes and any follow-through. And what these are depends on the visions, skills, and determination of the political, business, and civil society leaders that attend them. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Join hosts Lucy Marcus and Stefan Wolff for a deep dive into some of the most pressing issues of today and tomorrow.In this episode of Navigating the Vortex, Lucy and Stefan talk through the continuing impact of the potential US default; the regional and global summits that tell us about China's growing influence in Central Asia, Ukraine's diplomatic efforts, G7 concerns regarding China; and how money is the glue that ties the threat of default by the US government, the recent banking sector crisis, and Japanese corporate governance together.Too late to avoid the consequences of a potential default?Lucy and Stefan begin with an update on the potential US default and the ongoing negotiations to raise the debt ceiling. They talk about the geoeconomic consequences of a default and the credit rating agencies' concerns about political partisanship hindering a resolution.Summit-paloozaThen it is on to recent and upcoming regional and global summits. Stefan talks through China's Belt and Road Initiative and its economic and political influence in Central Asia, the runners and riders embracing China's investments, as well as where the war in Ukraine, President Zelensky's diplomatic efforts, and support from Western partners fit into all of it.Lucy and Stefan delve into the G7 summit particularly regarding its focus on China and concerns about economic resilience and security. They highlight the implications for the private sector, such as evaluating equipment, protecting advanced technologies, and considering foreign investment strategies.Coming up, there is more summitry to be had with the Nato foreign ministers meeting, the European Political Community gathering, and the 25th anniversary of the European Central Bank—Lucy and Stefan will brief you on key issues from these summits as and when they arise.The hum of instability, both economic and political, balanced by borderless money Lucy and Stefan outline some of the threads of the interconnectedness of geopolitics and geoeconomics, drawing together the threat of US default, the recent banking sector crises, and corporate governance issues - this time looking at Japan. Above all else, they emphasize the fragility of global economic stability and the importance of vigilance.Deeper DiveAs promised in the podcast episode, here are links to several items mentioned for those who’d like a deeper dive:Stefan and Lucy first discussed the potential impact of a US debt default on the global economy several weeks ago. Starting with an explanation of what the debt ceiling actually is, they talk through severe consequences for the US economy and that a US default would have significant global consequences due to the US's central role in the global economy and financial system. Here is that episode:Stefan mentioned a webinar that he co-organised with the Foreign Policy Centre in London, where he is a Senior Fellow. The video of the webinar “The impact of the war in Ukraine on connectivity in Eastern Europe and the South Caucasus” is below.Lucy mentioned a piece she wrote, The Better Corporation, about the forced transformation of corporate governance in Japan, prompted in no small part by international investors expecting Japanese companies to adhere to universal principles of good corporate governance. Also, this link takes you to a collection of all of the columns on corporate governance on Navigating the Vortex.We hope you'll continue to share Navigating the Vortex far and wide, with friends, family, colleagues, across social media, and people you meet at summer garden parties.Subscribe to the podcast via Substack or on all major podcast platforms, including:Apple PodcastsGoogle PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Four weeks ago, on 26 April 2023, Presidents Xi and Zelensky spoke on the phone for the first time since Russia’s invasion of Ukraine in February last year. This was an important first step in the direction of at least some cooperation between China and the West to work together on ending the war in Ukraine. But progress in this direction has been slow, and fighting in Ukraine has further intensified since. As China and the West have continued to shore up their respective alliances, Ukraine remains a major divisive issue but one that is becoming more and more a sideshow in the competition to shape a new geopolitical and geoeconomic order. What it’s about: When Xi and Zelensky spoke for almost an hour about their countries’ bilateral relations and the war in Ukraine, the Chinese president focused on the importance of dialogue and negotiation “to bring lasting peace and security to Europe” while his Ukrainian counterpart confirmed “a just and sustainable peace for Ukraine” was inextricably linked to restoring “the territorial integrity of Ukraine … within the 1991 borders.” This is the position that the G7 leaders’ communique supported as well, specifically calling on China “to support a comprehensive, just and lasting peace based on territorial integrity and the principles and purposes of the UN Charter, including through its direct dialogue with Ukraine.” The corresponding Xi'an Declaration of the China-Central Asia Summit was unsurprisingly less specific in this regard, but the six presidents nonetheless “reaffirmed their commitment to the purposes and principles of the Charter of the United Nations and stressed that the territorial integrity and sovereignty of States cannot be undermined.” Why it matters: The war in Ukraine so far has cost hundreds of thousands of lives on both sides, caused hundreds of billions of dollars’ worth of damage to Ukraine’s economy and infrastructure, and contributed to a global cost-of-living crisis by driving up the prices of energy and food. Western sanctions on Russia and the increasingly tough stance by the G7 on sanctions evasion and circumvention have accelerated a trend of geoeconomic fragmentation that reinforces the geopolitical reconfiguration of the international order into a US- and an emerging China-led block. China’s consolidation of its relations with Central Asia at the summit of the presidents of all five Central Asian states with Xi Jinping in Xi’an indicates Beijing’s expanding influence in a region traditionally dominated by Moscow. Meanwhile, G7 leaders in Hiroshima re-committed to “de-risking, not de-coupling” in their quest for a common approach among them to economic resilience and security. China and the West both try to maintain some momentum in shaping their respective alliances, and the war in Ukraine continues to matter in this context. But it is increasingly becoming a distraction from a range of other issues that China and the West, as well as the rest of the world, are grappling with. There can be no question that the war needs to be brought to an end but given the broader stakes in the China-West relationship, managing it by containment in the absence of a credible peace plan is becoming a more likely approach—and one that will intensify the political and economic rivalry between China and the West. Our take: Bringing the war in Ukraine to a just and sustainable end will not be quick or easy, but China’s overt commitment to attempting a process of mediation is now evident with the visit last week by China’s special envoy on the issue, Li Hui, to Kyiv. While any Chinese mediation will play out only slowly, even if it is reluctantly supported by the West, both sides will continue in their efforts to reshape the international order in which a settlement of the war in Ukraine will eventually happen. The two rival summits in Xi’an and Hiroshima clearly demonstrate that the contest over the shape of this new order has taken centre-stage, and the war in Ukraine, and its two main protagonists, are turning into instruments of China and the West in their intensifying rivalry.To understand why and how this happened, we need to look at the bigger picture. A flurry of European visits to China sought to convey one key message to Beijing, namely that another ‘forever-war’ is in nobody’s interest, especially not one like that in Ukraine near the centre of Europe with the enormously destabilising consequences for the global economy and international peace and security. Although he was much derided for various comments during and after his trip to China, it seems as if President Macron of France was able to impress this point on President Xi. This was not Macron’s doing alone, and it is important to bear in mind that other ‘messengers’ played an important role as well—EU Commission President Ursula von der Leyen travelled with Macron to China, and German Foreign Minister Annalena Baerbock followed them a week later. Similarly important for Beijing to hear, von der Leyen’s earlier speech about de-risking the EU’s relationship with China, rather than de-coupling from it, was echoed in a speech by US treasury secretary Janet Yellen just days before the Xi-Zelensky call. As we wrote in an earlier piece, Europe-China relations: still just muddling through? (On Our Radar, 9 April 2023), maintaining channels of dialogue between Europe and China “is by no means a bad thing at a time when communication is often the first victim of intensifying geopolitical and geoeconomic rivalry.” Yet, not only is this rivalry between China and the West far from over but it appears to be intensifying despite the war in Ukraine which is unlikely to come to a sustainable solution without cooperation between Beijing, Brussels, and Washington. At the time of the Xi-Zelensky call, China and the West were seemingly treating the war in Ukraine as an issue where they might demonstrate to each other that progress towards a settlement reflected their self-interest in restoring even a modicum of geopolitical and geoeconomic stability, including in their own relationship. This may still be the case, to some extent, but the two summits in Xi’an and Hiroshima also indicate that things have moved on. Through the Xi’an Declaration, China has firmly locked the five Central Asian states into its expanding sphere of influence. Economically, this has been a trend for the last decade since President Xi launched the Belt and Road Initiative in Kazakhstan in September 2013. Politically and in terms of security, China’s influence has gradually and substantially increased as well—partly because of the crisis in Afghanistan, partly because of the war in Ukraine. The statement in the Xi’an Declaration that “China firmly supports the development path chosen by the Central Asian countries and supports all countries in safeguarding their national independence, sovereignty and territorial integrity and in adopting independent domestic and foreign policies” leaves little doubt that the days of Russia’s dominance in the region are over while also sending a clear message to the West that China will not tolerate any rival influence there.The G7 Hiroshima Leaders’ Communiqué is similarly unequivocal about the rivalry between China and the West being the defining feature in the contest over the geopolitical and geoeconomic shape of the new international order. While there are some proverbial olive branches extended to China in relation to cooperation on climate change, biodiversity, debt sustainability, global health, and macroeconomic stability, there follows a long list of concerns regarding China’s conduct. These include practices of economic coercion, market distortion, industrial espionage, and so on, leading the G7 leaders to conclude that “economic resilience requires de-risking and diversifying.”As we wrote earlier in Black Swan Events & Business Resilience: Insights from Ukrainian Companies amid War (On Our Radar, 15 May 2023), many of the measures adopted by states to ensure their economies’ resilience to both external shocks, like the war in Ukraine, and the effects of increasing rivalry with China have a significant impact on businesses as well. That this will continue to be the case, and perhaps even more so, is also apparent from the separate and more detailed Statement on Economic Resilience and Economic Security. Here, the G7 Leaders acknowledge that they have yet to “provide clarity to the private sector” regarding the implementation of policies on economic resilience and economic security. Yet, the overall direction of travel is clear, including, among others, more export and investment controls when it comes to critical and emerging technologies, more protection of global value and supply chains against “illegitimate influence, espionage, illicit knowledge leakage, and sabotage”, more “coordinated responses, [to] deter and, where appropriate, counter economic coercion”, more due diligence regarding the “political, economic, and other risks of a non-technical nature posed by vendors and suppliers”, and more “resilient supply chains through partnerships around the world, especially for critical goods such as critical minerals, semiconductors and batteries.” There can be little doubt that if implemented this strategy will involve far more decoupling than political leaders are willing to admit, or perhaps imagine, at the moment. It will put significant burdens on the private sector to re-shore, near-shore, and friend-shore, while potentially leading to lost market and investment opportunities. It could also mean a higher burden on taxpayers if states were to decide that some of the likely costs borne by the private sector should be absorbed by the public purse. To be sure, this emphasis on economic resilience and economic security is politically driven and one of the key lessons from the war in Ukraine—to avoid economic dependencies (like Europe’s dependence on Russian energy in the run-up to February 2022) and to limit the transfer of defence-critical technologies to potential adversaries. Even if limited, the inevitable de-coupling of China and the West in some sectors of the global economic and financial systems will have ripple effects beyond these imagined narrower boundaries. It will be more difficult for countries in the Global South not to take sides and thereby contribute to the ongoing process of fragmentation. It will also limit the availability of resources and goodwill to cooperate on truly global problems like climate change, health, and poverty reduction. And it will turn issues like the war in Ukraine even more into one of the instruments of this new great-power rivalry. China’s focus on Central Asia and the West’s depressing long list of broad global security concerns, however, also make it abundantly clear that as the war in Ukraine is well into its second year, neither side has a workable plan of how to end it. And even if a carefully hatched plan between them did exist, it may not survive contact with a reality in which Kyiv and Moscow have very different ideas about how to end this war and when. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

The McKinsey report Survival through purpose: How Ukrainian businesses endured amid extreme uncertainty offers fascinating insights on how Ukrainian companies were affected by Russia’s invasion in February 2022 and how they responded to the extreme challenges that this created. While specific to Ukraine, some of the observations in the report led us to consider the broader implications of war, and similarly rare but extreme events, on public and private sector companies — and the importance of planning and thinking on your feet.What it’s about: More than a year into the war in Ukraine, McKinsey surveyed 122 Ukrainian companies about how the dramatic events since February 2022 had changed their business environment, what strategies they had adopted to mitigate these impacts, and which of them had worked to date (or not). The consequences of the Russian invasion have been enormous in terms of lives lost, infrastructure destroyed, and people displaced. This has affected businesses of all shapes and sizes and in all sectors — it disrupted their ability to operate normally and, for the most part, decreased demand for their goods and services. Yet, of the organisations McKinsey surveyed, only 2% ceased operations, despite the fact that 47% recorded a drop in sales of more than 30%. This remarkable resilience, the report outlines, comes down to four factors: providing employees with safety and purpose; quickly shifting to a “wartime operating model” of agile decision making; implementing existing contingency plans; and senior executives leading from the front and by example.Why it matters: One of the rationales behind McKinsey’s report is that events like the war in Ukraine generate lessons that “apply to any company hoping to create a tool kit to deal with true black swans.” War, like major natural disasters, large-scale terrorist attacks, and man-made catastrophes, is often considered a black swan event — an event that is extremely impactful, but also extremely rare. Taken as singularities, this is probably true. Looking at it from a more cumulative perspective, it is more doubtful that we are really dealing with events that only occur once in a blue moon. Over the past decades, hardly a year has passed without testing the resilience of states and societies in different parts of the world and around the globe, often to, and sometimes beyond, breaking point. The end of communism and the collapse of the Soviet Union, German unification, the wars in the former Yugoslavia, 9/11, Afghanistan, Iraq, the global financial crisis, the war in Georgia, the Arab spring, Fukushima, the annexation of Crimea, the COVID-19 pandemic, the return of the Taliban, and now the full-scale Russian invasion of Ukraine and the escalating civil war in Sudan are just some examples of such events, many of which had not just an immediate impact but lasting consequences. Add to this natural disasters like earthquakes, tsunamis, and climate-change related events like floods, droughts, and wildfires that occur more frequently and with greater regularity, and it becomes clear that many black swans are taking on a decidedly lighter shade of grey. Our take: War is a man-made disaster in both its immediate consequences and in how states and societies respond to it — not only those immediately affected by it but also further afield. This adds complexity to how businesses can cope, and, crucially, prepare for such an event. The war in Ukraine demonstrates this complexity in a number of ways. For companies in Ukraine, as the McKinsey report highlighted, the key impacts were on operations and demand. Businesses further afield are similarly affected, as we have seen in terms of inflationary pressures, which increase operational costs but can also depress demand because inflation hits consumers as well. Supply chain disruptions are another factor, as are the broader impacts of increasing geopolitical and geoeconomic fragmentation. This fragmentation — sometimes also referred to as decoupling or de-risking — is partly a choice made in response to war and in an effort to deal with its consequences, as we discussed in an earlier piece, Mitigating the risks of geopolitical fragmentation: regulation, oversight, and good corporate governance. One of the West’s responses to Russia’s invasion of Ukraine has been a significant up-scaling of sanctions since February 2022. This has not only had an effect on Russia’s war effort, as detailed, for example, by the World Economic Forum in a report last December, but it has also increased the regulatory burden on companies and the costs of non-compliance. Non-compliance is wide-spread, partly because of deliberate circumvention of sanctions, partly because of the complexity of the sanctions regime. With sanctions widely used by the US, the EU, and their G7 partners as geopolitical and geoeconomic tools of statecraft, ensuring compliance has become a major, and constantly evolving, task for business organisations. Non-compliance can have a serious effect on company profits. Even before the Russian invasion of Ukraine, Standard Chartered Bank was fined just over £20m by the UK Treasury in 2020 for breaching sanctions imposed by the European Union over Russia’s annexation of Crimea. Unrelated to the war in Ukraine, Royal Bank of Scotland and French bank Credit Agricole were fined $100m and $800m, respectively, in 2013 and 2015 by the US Treasury for violating various sanctions then in place against a number of countries, including Iran, Sudan, Myanmar, and Cuba. Given that sanctions violations remain high on the radar of western governments and international financial institutions, compliance should also become, or remain, a priority for companies in their corporate governance efforts.At the same time, war has always created opportunities for growth, investment, and innovation as well, and the war in Ukraine is no exception in this regard, as detailed in a recent report by the Financial Times. This, however, also indicates a shift in public and private financing priorities in times of war, which means that in sectors other than those relevant to the war effort, access to capital and skilled labour will be more difficult and potentially have long-term negative impacts. The longer wars last, the more entrenched shifts to war-time economies become, and the more time- and resource-intensive post-war transitions will be in economic terms.The bottom line — regardless of whether one looks at war or other black or not so black swan events — is that risk management and contingency planning are important aspects of any organisation’s resilience to major external shocks. But they are only part of the answer. What is equally, and perhaps more significant, is having well-qualified and well-motivated people working for the organisation from top to bottom who can think on their feet when any kind of event requires activating these contingency plans. This means realising that resilience is above all about people, and that investing in people is key to increasing resilience. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Join hosts Lucy Marcus and Stefan Wolff for a deep dive into some of the most pressing issues of today and tomorrow.In this episode of Navigating the Vortex, Lucy and Stefan discuss Italy, corporate governance, the energy sector, multinational companies, politics, the debt ceiling, the OSCE, NATO, Sudan, Ukraine, Russia, and, of course, Eurovision.Italy's Enel AGM and the Shakespearean drama of corporate governanceAGM season continues and Lucy and Stefan do a bit of a deep dive on one Italian company that brings together politics, energy, power, leadership, governance, money and more. By the end you'll wonder if it is a Shakespearean play or corporate governance, or both.Corporate governance rules for appointing directors to public companies in Italy are structured in a way which is supposed to emphasize transparency, accountability, and diversity in the boardroom, and to seek to ensure that all shareholders have a voice in the governance of the company. Enel, an Italian multinational energy company, is the largest-listed company in Italy and operates in the production, distribution, and sale of electricity and gas. They had their AGM on 11 May, and the vote was seen as a test of the influence that the Italian government has as a majority shareholder over Enel and other powerful state-backed companies. Because Enel operates in numerous countries around the world, across Europe, North America, South America, and Africa, the right-wing government's power to have a strong say over who is appointed to the board, means that they also have a great deal of influence over the company's operations in other countries, and by extension that expands their power on a global basis.The Global Impact of a US Debt Default: What You Need to KnowStefan and Lucy also discuss the potential impact of a US debt default on the global economy. Starting with an explanation of what the debt ceiling actually is, they talk through severe consequences for the US economy and that a US default would have significant global consequences due to the US's central role in the global economy and financial system.They note it could cause economic turmoil, trigger market instability, and lead to currency fluctuations, potentially causing political instability and reducing US influence in international affairs. The consequences of a US default could be severe and long-lasting, affecting not only the US but also other countries, particularly those that hold a significant amount of US debt, such as China and Japan.A US default could undermine the stability of the global financial system, and a downgrade of the US credit rating could increase borrowing costs for other borrowers as well. They also talk through the reverberations that will begin to be felt as the US gets closer to the chance of default: we may see increased volatility and uncertainty in financial markets around the world, making investors more risk-averse and leading to a sell-off of assets that are perceived to be risky.Eurovision and Geopolitics: Behind the Glitz and GlamourOf course, the episode would not be complete without a vital conversation about the Eurovision song contest, including the finer points of the geopolitical implications and influence on Eurovision voting, and the special significance of this year's event.Note: A big thank you to all of our subscribers, listeners, and readers! Since its launch, the Navigating the Vortex newsletter and podcast have been read and listened to by people from 43 countries. Thanks for continuing to read, listen and share.We love hearing from you so please be in touch with your questions and feedback via the comments. We read it all.We hope you'll continue to share Navigating the Vortex far and wide, with friends, family, colleagues, across social media, and even strangers on your commute.Subscribe to the podcast via Substack or on all major podcast platforms, including:Apple PodcastsGoogle PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Join hosts Lucy Marcus and Stefan Wolff for a deep dive into some of the most pressing issues of today and tomorrow. In this episode of "Navigating the Vortex," Lucy and Stefan discuss the ongoing crisis in Afghanistan, the impact of Brexit on Northern Ireland, the escalating conflict in Sudan, and the role that business and investment can play in promoting political stability. They also touch on the impending Ukrainian counteroffensive and the impact of the conflict on corporations, with knock-on economic and supply issues that are reaching beyond the region and into boardrooms around the world.Plus, they talk about corporate governance and the overarching theme of accountability that is emerging from Annual General Meeting (AGM) season this year, as investors hold companies to account for the promises they made in the past and the commitments they’ve made for the future. Note: A big thank you to all of our subscribers, listeners, and readers! Since its launch, the Navigating the Vortex newsletter and podcast have been read and listened to by people from 41 countries and 20 US States. Thanks for continuing to read, listen and share.We love hearing from you - this week we had some fascinating and thought-provoking feedback, including from readers in Pakistan about our piece on Afghanistan. Please be in touch with your questions and feedback via the comments. We read it all.We hope you'll continue to share Navigating the Vortex far and wide, with friends, family, colleagues, across social media, and even strangers on your commute…Subscribe via Substack or on all major podcast platforms, including:Apple PodcastsGoogle PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

One of the stories that we have followed for some time is the circumstances in Afghanistan. The situation of the UN mission, UNAMA, has become ever more precarious and its ability to improve the humanitarian and economic situation of ordinary Afghans has been seriously impeded. Within that context, it was intriguing to see China’s foreign ministry release a position paper on Afghanistan.What’s it about: On 12 April, the Chinese foreign ministry issued a position paper  on Afghanistan. Four of its eleven points deal with the threat of terrorism and narcotics that Afghanistan poses, indicating the serious concerns that China has in this respect. Unsurprisingly, the paper also condemns past and current US actions in relation to Afghanistan and juxtaposes them to China’s respect for the country’s independence, sovereignty and territorial integrity and Beijing’s commitment to never interfere in Afghanistan’s internal affairs, never seek selfish interests in Afghanistan, and never pursue a sphere of influence. That, however, does not stop the Chinese foreign ministry from demanding moderate and prudent governance from the Taliban, including the protection of the basic rights and interests of all Afghan people, including women, children and all ethnic groups. Moreover, China commits itself to supporting peace and reconstruction in Afghanistan, including through facilitating a solution to Afghanistan’s humanitarian and refugee issues and through strengthening international and regional coordination on the Afghan issue.Why it matters: Afghanistan has not been in a good place for as long as many people’s living memory. Foreign occupation and civil war have been a near-constant feature of life in Afghanistan for several decades. The Taliban takeover of power in August 2021 has done little to improve this. On the contrary, the economic situation in the country is dire. Women and girls are more and more excluded from education and the labour market. Levels of violence may have decreased, partly because of the harsh rule imposed by the Taliban, but the threat posed by Islamic State and other terrorist groups to Afghanistan and the region remains. Addressing this complex set of challenges requires a coordinated and thought-through approach by Afghanistan’s neighbours and the broader international community—an approach that recognises the urgent needs of Afghans and at the same time takes an ethically principled stance on the Taliban regime that causes much of their suffering.Our take: While Afghanistan remains one of the most deprived countries in the world with no hope of imminent improvement, the UN simultaneously contemplates pulling out its mission and taking steps towards recognising the Taliban regime. The dilemma that the UN is facing is that its operations have become more and more constrained with the Taliban now prohibiting women from working for the UN mission in the country. If any final confirmation was needed that attempts to engage with the Taliban since August 2021 have not led to any positive change, this should be it. The approach of give and take, of humanitarian relief, of economic engagement, of exploring trade and transport links has been futile.It seems intuitively right to argue that the world cannot turn its back on Afghanistan and abandon its people. But this argument ignores the fact that whatever engagement has been possible to date has not improved the situation of ordinary Afghans at all and in fact it has worsened that of women and girls. Moreover, calls for more engagement with the Taliban, especially when it appears to be unconditional—as expressed by China in its position paper and pursued by many of the Central Asian states for the past twenty months—also mask the underlying economic interests of such an approach.Afghanistan has vast mineral deposits, including critical rare earth minerals, that are of significant interest to China, as are the country’s oil reserves. China is known to have invested in Afghanistan’s lithium sector and China and the Taliban also agreed a deal in January this year enabling a Chinese company to drill for oil in the Amu Darya basin. For Afghanistan’s northern neighbours in Central Asia, engagement with the Taliban is meant to lead to infrastructural, trade, and energy cooperation that would supposedly create opportunities for economic development across Central and South Asia and connect Central Asia better to the global economy at a time when many of its traditional connections to and through Russia have been disrupted by the war in Ukraine.Economic engagement with, let alone diplomatic recognition of the Taliban regime, is not a promising approach to either achieving the regional security and stability that China and other neighbours of Afghanistan crave or to relieve the suffering of ordinary Afghans. While it is important to engage with China on Afghanistan, engaging with the Taliban regime can only lead to desirable outcomes if it remains steadfast in the commitment to key principles like the protection of the basic rights and interests of all Afghan people, including women, children and all ethnic groups which China’s position paper also calls for.Even if an unconditional engagement with the Taliban regime now would result in short-term economic and perhaps even security gains, the Taliban’s track record in power—between 1996 and 2001 and since August 2021—suggests that this is neither a sustainable business proposition nor one that would be politically prudent. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

In this first episode of the Navigating the Vortex podcast, hosts Lucy Marcus and Stefan Wolff introduce themselves and the premise of their podcast, which is to have insightful and thought-provoking conversations with guests about current events and big ideas. They discuss their backgrounds and expertise and how discussions around their kitchen table led them to create this podcast. The hosts also review their recent columns, which focused on geopolitical risks and their impact on economic growth, global trade flows, foreign direct investment, and technological advancement. They examine why geopolitical risks are so important and how they impact economic development. They emphasize the role of the private sector, which is as much affected by global events as the public sector, and examine how public-private partnerships are essential for the international community's ability to tackle global challenges like climate change and future pandemics.Subscribe via Substack or on all major podcast platforms, including:Apple PodcastsGoogle PodcastsSpotifyAmazon/Audible Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

Two reports released by the International Monetary Fund — on global financial stability and the world economic outlook — echo findings from an earlier report from the World Bank about the weak prospects for sustainable economic growth. Like the World Bank report (which we covered here, asking “Is Global Growth Doomed?”), the IMF points to geopolitical risks as a major driver of suppressed growth potential. While the IMF is sceptical about reversing the trend of geopolitical fragmentation anytime soon, it emphasises the importance of risk monitoring and strengthening oversight to improve the resilience of banks.What it’s about: The IMF’s April 2023 Global Financial Stability Report and World Economic Outlook paint a picture of a global economy strained by high inflation, fiscal tightening, a looming sovereign debt crisis, and uneven post-pandemic recovery. Added to that, and exacerbating these downside risks, is a persistent trend of geopolitical fragmentation — a deliberate reversal of global economic and financial integration, driven by strategic considerations, especially of major powers. Why it matters: Geopolitical fragmentation, according to the IMF, has a negative impact on global trade flows, foreign direct investment, labour mobility, and technological advancement. It affects developing economies more, and more negatively, than advanced economies but also limits the ability of the international community as a whole to tackle global challenges like climate change and future pandemic threats. In a context in which many people are already severely exposed to the consequences of the energy and food crises, reduced capacity to support the most vulnerable populations is likely to contribute to more, and spreading, social unrest. This, in turn, has increased the risk, and cost, of doing business for many companies, according to a recent study by Allianz. Our take: Geopolitical fragmentation is not a new trend, but it has accelerated since the beginning of Russia’s invasion of Ukraine. It is likely to continue as competition between the US and China increases. In fact, US-style decoupling is a prime example of geopolitical fragmentation. It also indicates that fragmentation will become more pervasive as countries will have few options but to choose between a US-led western bloc and a China-led bloc. That choice will be shaped by ideology as much as geography, evident in terms like ‘friend-shoring’ and ‘near-shoring’ that have been added to the vocabulary of geoeconomic strategies and that complement the trend of ‘re-shoring’ which became popular as a result of the COVID-19 pandemic. While the most obvious countermeasure to geopolitical fragmentation would be strengthened multilateral cooperation, this is, for the time being, also the most unlikely path to be chosen by the world’s major powers. Consequently, other mitigation measures are required. These might not treat the root causes of fragmentation, but they can increase the capacity of national and international financial actors to deal with some of the symptoms. Both policy makers and the private sector need to rise to this challenge. As the IMF points out, risks need to be more systematically monitored. This can improve early warning, which is important, and needs to be followed with early, and decisive action. Decisive action, in turn, requires that resources be available, and are made available, for targeted interventions. This can be aided by strengthening oversight of the banking and non-bank financial sector to ensure that financial regulations are not only in place but adhered to when it comes, for example, to capital and liquidity requirements. It is important to note, that oversight is not merely a question for financial regulators but also goes to the heart of the short- and long-term health and governance of all organisations. Nor does it only impact traditional multinational companies. Any organisation buying or selling abroad or operating in sectors that could be impacted by local, regional, and global upheaval — from sovereign debt crises and expanding sanctions regimes, to cyber threats, currency fluctuations, and protectionist trade policies — must have a system of risk assessment and monitoring in place. Public or private, profit or not-for-profit, no-one is immune, and as a matter of corporate governance, boards must keep a finger on the pulse of how the shifting winds of policy in myriad areas impact their organisations. At a time when multilateralism is unable to provide more than at best minimal guardrails against a prolonged global economic downturn, the public and private sectors need to work more closely together nationally and across politically like-minded economies to put in place mitigations against the negative impacts of geopolitical fragmentation. This requires a sense of common purpose in which regulation and oversight go together with good corporate governance. The more resilient national economies emerging from this will be better able to weather continuing fragmentation and be better placed to re-engage globally when the time comes. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe

One of the stories we have been following in the past couple of days is the trip by French president, Emmanuel Macron, and European Commission president, Ursula von der Leyen, to Beijing. Not much seems to have changed in the relationship or in either side’s attitude, but this is by no means a bad thing at a time when communication is often the first victim of intensifying geopolitical and geoeconomic rivalry.What it’s about: The not-so-joint visit by Macron and von der Leyen to China just before Easter produced no concrete political outcomes and few economic ones. Rolling out the red carpet for Macron and pretty much cold-shouldering von der Leyen confirmed that China prefers bilateralising its relationship with EU members, especially ones that reflect well on the image of its own leader, rather than dealing with the bloc as a whole. Why it matters: The EU and China are among each other’s largest trading partners—China is the primary source of imports for the EU and its third-largest destination for exports. European companies, too, have a stake in this. For the German automotive industry, for example, China is the most important export market, with every third German car sold there. Germany and France together account for almost a quarter of all EU exports to China. The EU and China, thus, have a keen interest in global economic and political stability, but they don’t see eye-to-eye on many issues. From democracy and human rights, to Taiwan and the war in Ukraine, and to the lack of a level playing field for European companies in China, there are many issues where both sides do not simply agree to disagree but have profound differences that shape their foreign, security, and economic policies. Our take: In a speech just before her departure, von der Leyen outlined a policy of ‘de-risking’ in the EU’s approach to China. Short of US-style ‘de-coupling’, the approach is meant to be more assertive and protective of EU economic interests and balance them carefully with the bloc’s political interests. This is insufficient from a US perspective, and US pressure on the EU and key member states like France and Germany will continue to align more with Washington’s policy of containing China.President Xi’s efforts to drive a wedge between Europe and the US are evident in his differential treatment of Macron and von der Leyen, as are his intentions to exploit divisions within Europe among member states who back the Commission’s approach and those that think it either goes too far or not far enough. There is no indication that Xi has been particularly successful in achieving this.The persistent lack of a level playing field for European companies in China has meant that the landmark 2020 Comprehensive Agreement on Investment has effectively been abandoned and was not even discussed at the recent meetings in Beijing. This does not imply an end to the trade relationship between the EU and China, but it also means that there will not be the kind of step-change in deeper integration that the 2020 deal could have offered. Like German chancellor Olaf Scholz before him, Macron has demonstrated that individual deals—such as for Airbus or French energy giant EDF—will remain possible. Like other European leaders before them, von der Leyen and Macron both emphasised the importance of the war in Ukraine as a determining factor in the relations between Europe and China, but they got little from China in return, apart from a re-statement of its “Position on the Political Settlement of the Ukraine Crisis”. Ultimately, there was nothing groundbreaking in the joint declaration by Macron and Xi, and there was not even one between Xi and van der Leyen. But not breaking things in one of the most important global political and economic relationships is perhaps as good an outcome as one could and should have expected. Above all, it means that dialogue between the EU and its member states and China will continue in areas where they agree and disagree alike. Get full access to Navigating the Vortex at www.navigatingthevortex.com/subscribe