After another year of populists assuming power, 2019 has the makings of a year of turmoil. However, what will be next year’s surprises to renew optimism? We look at three issues brewing underneath the surface regarding the global backlash against Chinese influence, the Arctic Ocean, and reformists in Asia.
- Last year was characterized by an intensifying global backlash against Chinese influence. The ‘Five Eyes’ (U.S., U.K., Canada, Australia, New Zealand) united to block Chinese tech ambitions. Australia adopted legislation to curb the influence of China in Australia. EU leaders grew more concerned over Chinese influence in Europe. Malaysia heavily criticized the BRI, as did Pakistan. Brazil portrayed China as a predator. The treatment of Uyghur Muslims in Xinjiang, western China has entered the limelight as the U.S. is asking the world to take notice.
- The Arctic Ocean is becoming a hotspot for geopolitical competition. This August, the global shipping giant Maersk completed its first voyage through the Arctic Ocean unassisted by ice-breakers (it is the fastest trade route between Europe and Asia). As we have noted before, China is encouraging its ships to take the Northwest Passage through the Arctic Ocean, Russia has been building up military strength in the Arctic, and countries like China, Finland, South Korea, the Netherlands and Chile are building ships, submarines and infrastructure for the Arctic.
- In Asia, incumbent reformists in India and Indonesia are on track to get re-elected with a new mandate. India and Indonesia are key countries in Asia and their leaders Modi and Widodo were both lauded for their reform plans when they were elected in 2014. In India, Modi reduced energy subsidies and allowed the central bank to control inflation, a break from the past. In Indonesia, after falling commodity prices slowed the economy, Widodo cut energy subsidies and increased tax revenue to boost desperately needed infrastructure spending. Widodo, like Modi, also turned Indonesia more outwards and open to trade deals.
Connecting the dots
The year 2018 was marked by political turmoil as the Sino-American trade war intensified and populists assumed power from Mexico and Brazil to Italy and Pakistan. As such, 2019 is set to be a year of higher uncertainty. Still, we should also look out for events that could renew optimism in different parts of the world. We are not talking about low probability events; by definition these cannot be anticipated. Indeed, we will focus on events that are already brewing under our radar. Here are three examples from our list:
1). Global backlash against China fades. The global backlash against Chinese influence has cast a shadow over the rise of China and its ambitions with the BRI. However, 2019 could increasingly show that this backlash will confine itself to the U.S. Most importantly, (non-western) countries like Brazil, Malaysia and Pakistan do not seek to block Chinese influence, but rather, they seek triangulation (extracting maximum benefit from both China and the U.S.). As such, while the U.S. seeks to block Chinese influence (and its hegemonic rise), other countries are mainly trying to get a ‘better deal’ from Chinese investments. To a lesser extent, this also applies to Europe, which stands to benefit immensely from a rising China and its BRI. The European backlash against Chinese influence could therefore limit itself to strategic sectors like high tech and state-led political activities. Indeed, the Chinese vision of progress will continue to gain ground, especially since many Asian, African and even European countries have no other partners willing to invest as much in the infrastructure they desperately need. As a result, the global character of the backlash against Chinese influence could fade during 2019.
2). Arctic activity makes global headlines. As an increasing amount of ships will sail across the Arctic, northern countries will seek to establish their presence in the region to benefit from this activity. As such, the Arctic will increasingly become a
fundamental geography that will shape the 21st century world order. Indeed, as the Arctic offers strategic (i.e. military infrastructure) and commercial (i.e. trade, resources) opportunities, conflict between countries is also likely, which means that uncertainty will rise. Still, new alliances and unity among countries are also likely to emerge there (for example, through institutional dialogues like the Arctic Council), which means, for instance, that Russia could grow closer to the U.S. Moreover, Greenland will also increasingly enter the global limelight. As the icecaps melt, Greenland will become a hub for trade, tourism and resources. After obtaining a self-rule arrangement in 2009, Greenland is now exploring pathways to full independence (all political parties in Greenland support independence). All in all, in 2019, Arctic activities are likely to make global headlines.
3). Reformist optimism in Asia. The leaders of India and Indonesia (the natural leaders of South Asia and Southeast Asia) are on track for re-election in 2019. Although both Modi and Widodo have partly backtracked on their reforms amid worries over re-election (Modi has pressured the central bank to spur lending and Widodo has partly restored energy subsidies), their re-elections will allow them to implement more reforms and above all boost the stability of two key countries in Asia. Furthermore, in both cases, re-election is likely to boost foreign policy initiatives (e.g. AAGC, SIJORI, ASEAN, trade deals) as both Modi and Widodo have shed the traditionally inward-looking mentality of their countries. Moreover, both countries will seek to establish networks of alliances that compete with Chinese influence, i.e. India in the Indian Ocean with other maritime powers (U.S., Japan, Australia) and Indonesia in Southeast Asia with ASEAN neighbors like Malaysia and Singapore.
- As the global nature of the backlash against China fades, American policy aimed at curbing China’s rise will drive other countries closer together. As we have noted before, the Eurasian continent is already growing closer together in energy and trade. Even more detrimental to U.S. interests is that the VIRTUs (Venezuela, Iran, Russia, Turkey) are growing closer together and to China.
- Greenland will emerge as a strategic hub in the future. Besides its location for Arctic trade, Greenland has 1/10th of the world’s known sources of rare earth metals, including two of the world’s largest mines. China is already active in Greenland and will also be interested in the country for military infrastructure, which the U.S. will strongly oppose. Both superpowers will battle for influence in Greenland (and the Arctic), while its people regard themselves as the bridge between North America and Europe.
- Stability of India and Indonesia will increase opportunities for countries in their respective regions. Both India and Indonesia will increasingly turn outwards and position themselves as regional powers. While Southeast Asia is returning to the region’s maritime tradition at the crossroads of civilizations, South Asia (e.g. Sri Lanka, Bangladesh) is at the center of the strategic Indian Ocean into which countries like China, Japan and India are pouring billions.