Each week our scan collects weak – and less weak – signals…
”Shock: A violent collision, impact, tremor; a sudden, disturbing effect on the emotions, physical reaction; an acute state of prostration following a wound, pain; a disturbance in stability causing fluctuations in an organization.” The Concise Oxford dictionary, 8th edition.
Considering the amazing number of articles related to the 2016 U.S. Presidential election or more exactly to now President-elect Donald Trump’s victory, we decided to show most of them on the front page (however after other burning topics such as Turkey and the war against the Islamic State, which will interact with the changed political situation in the U.S. and the world, considering American power). Indeed, the sheer number of articles on the new American President’s victory and the content of these items is indicating first how much media, polls and pundits, which have been again proven wrong in their ‘predictions’, as well as those who listened to and sided with them, are shocked. The content of the articles, with so much negative tone, also shows how much the U.S. society has become polarized. Meanwhile it points out that crowdsourcing, from Twitter notably, tends to represent mainly only one type of actors, those who thought that Hillary Clinton would win.
The evolution of this polarization, which, everything being equal, does resemble what happened and still happens with the Brexit (see Lessons from and for the Brexit), must be closely watched out as tension may spread (outside the U.K. and the U.S.) and escalate.
This quite long first series of articles is followed by perspectives on international positioning following incoming President Trump’s victory, which are also extremely interesting, as they outline possible and, or likely international changes. Then a couple of news article will document the financial, commodity, and bonds markets’ reactions.
In general, in the Weekly, each section focuses on signals related to a specific theme: world (international politics and geopolitics); economy; science; analysis, strategy and futures; technology and weapons; energy and environment. However, in a complex world, categories are merely a convenient way to present information, when facts and events interact across boundaries.
The Weekly is the scan of The Red (Team) Analysis Society and it focuses on national and international security issues. It was started as an experiment with Paper.li as a way to collect ideas, notably through Twitter. Its success and usefulness led to its continuation.
The information collected (crowdsourced) does not mean endorsement but points to new, emerging, escalating or stabilizing problems and issues.
If you wish to consult the scan after the end of the week period, use the “archives” directly on The Weekly.
Featured image: “C-band Radar-dish Antenna”. Licensed under Public domain via Wikimedia Commons.
On 24 June 2016 morning, the U.K. announced the results of the referendum on the Brexit: 51.9% of the population voted to leave the EU against 48.1% wanting to remain, while the turnout reached 72,2% (BBC Referendum Results). This vote triggered among the media, financial and European political elite a “shock”, consternation, and a host of predictions of impending doom, while markets plunged worldwide (BBC News, “Brexit: What the world’s papers say“, 24 June 2016). It also set off a series of events and dynamics still unfolding nowadays with far-ranging consequences, globally, for the future.We shall use this real life case to further enhance our understanding of the way businesses and the corporate world relate to and especially anticipate or rather …
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In this article on the development of the energy, business and military nexus of the Arctic by Russia, the Red (Team) Analysis Society studies how the Russian Arctic is becoming a new crucial business and strategic “centre” in the world, through the creation of numerous energy and infrastructure projects and operations, which attract Chinese companies (Jean-Michel Valantin, “Russian Arctic Oil: a New Economic and Security Paradigm?”,The Red (Team) Analysis Society, October 12, 2016).
In effect, the Russian political, industrial and business authorities turn this immense extreme region into an international attractor, thanks to the combination of the consequences of climate change and of the natural resources, which become accessible because of the warming of the region and thus relative retreat of ice (see below in part 1, the 28 Oct 2016 NASA video visualising the retreat of the Arctic ice since 1984).
The Russian strategy is efficient with, among others, the Chinese and Norwegian business and strategic actors, as well as interests. The Russian Arctic attractor is deeply dominated by Russia’s understanding and strategic vision of a quickly and massively changing planet (Jean-Michel Valantin, “The Arctic, Russia and China’s Energy Transition“, The Red (Team) Analysis Society, 2 February, 2015) and “The Planetary Crisis Rules (Part 1)”, The Red (Team) Analysis Society, 27 January 2016).
China is sharing with Russia the understanding of the very practical consequences of the current planetary change upon politics and the economy. Consequently, the Chinese political and business authorities take action to turn these changes to their advantage (Valantin, “The Chinese Shaping of the North”, The Red (Team) Analysis Society, 9 June 2014). This goes with the development of commercial and strategic negotiations and partnerships with Russia, the dominant power of the Eurasian Arctic region.
This phenomenon is typical of the new convergence between the current economy, geopolitics, and the emergent “Anthropocene” geological era. (Jean-Michel Valantin, “The Anthropocene Era and economic (in)security”, The Red (Team) Analysis Society, 19 September 2016). The international geophysics community thus qualified this new era because humankind has become the main geological and biological force on the planet, and this immense force is driving a planetary change that affects the atmosphere, the lithosphere, the hydrosphere, the cryosphere and the biosphere (J. R. Mac Neill, Something New Under the Sun, 2000).
In this article, we shall more particularly focus upon the way the current energy, industrial and military development of the Russian changing Arctic is attracting public and private Chinese sectors, meanwhile becoming the new and long-term giant support of economic, business and security development for these two countries. We shall thus see the resulting interlocking of the Russian Arctic strategy with the Chinese “New Silk Road” initiative.
Creating a Russian Eurasian corridor on an extreme planet
Over the last few years, Russia has been accelerating and intensifying the energy, commercial and military development of its land and sea Arctic region. The Russian political, industrial and trade authorities are creating an energy, industry and maritime trade corridor, which connects Asia to Europe. By the same operation, they are turning their Arctic zone into a new oil and gas Eldorado (Charles Emerson, The Future History of the Arctic, 2010).
What makes this extreme endeavour possible is the fact that this immense region is profoundly affected by the warming wrought by anthropogenic climate change. In effect, during the last fifty years, the Arctic region has known the most rapidly warming on the planet, with a 3° to 4° degrees increase in average temperatures (Thomas Nilsen, “Arctic Russia Warms 2.5 Times Faster Than the Rest of the Globe”, The Independent Barents Observer, November 29, 2015).
The disappearance of the Arctic sea ice is most strikingly shown in this 28 October 2016 animation gathering latest research by NASA below, where “Dr. Walt Meier of NASA Goddard Space Flight Center also describes how the sea ice has undergone fundamental changes during the era of satellite measurements.” (NASA, “See How Arctic Sea Ice Is Losing Its Bulwark Against Warming Summers “, 28 Oct 216).
This mammoth change is profoundly altering the geophysics of the region, and goes with a decrease of the time, extent and thickness of the sea ice and of the land glacial conditions. In thirty years, between the half and two-thirds of the summer Arctic sea ice have disappeared, setting up the conditions for a thermal feed back loop that keeps the ice increasingly melting, while the Arctic ocean absorbs more and more solar radiation, and heats up. This feed back loop is now qualified as “the Arctic death spiral”(Joe Romm, “Arctic Death Spiral Update: What Happens in the Arctic Affects Every Where Else”, Think Progress, May 3, 2016; see also video above).
The Russians translate into geoeconomic and geopolitical opportunities those geophysical changes. Consequently, this extreme region becomes accessible for industrial development, and, as we have seen in “Russian Arctic Oil: a New Economic and Security Paradigm?” (The Red (Team) Analysis Society, October 12, 2016), the Russian oil and gas companies have started to implement onshore and offshore operations for extracting oil in the extreme conditions resulting from the meeting of cold and extreme weather, sea ice and the warming effects of climate change.
Among many examples, a subsidiary the National oil company Rosneft, has started drilling in the Okhotsk Sea, while Rosneft keeps on exploring the area (Atle Staalesen, “No Pause in Arctic Exploration – Igor Sechin”, The Independent Barents Observer, July 18, 2016). Meanwhile, Rosneft continues to buy exploitation licenses. The last to date, but not the least, is the Lisiansky one, which should be operated through a partnership with the Norwegian Statoil, while the drilling itself is done by the Chinese rig “Nanhai 9” (Staalesen, ibid).
If the warming of the Arctic makes the latter more accessible, the summer disaggregation of the ice cap gives birth to numerous icebergs, which are a vital danger to the oil rigs operating in the Russian economic exclusive zone. In order to prevent this risk, Rosneft is investing in systems of protection, while developing systems to “move away” the icebergs from the oil rigs. During the summer 2016, an expedition led to create a scientific basis in the Laptev Sea allowed experimenting with 18 different ways to tug icebergs ( Atle Staalesen, “Rosneft Builds Base on Laptev Sea Coast”, The Independent Barents Observer, August 10, 2016). A one million tons iceberg was moved at one occasion (Atle Staalesen, “Rosneft Moves 1 Million Ton Big Iceberg”, The Independent Barents Observer, October 11, 2016). This operational approach aims at guaranteeing the technical sustainability of the Russian Arctic strategy.
The current relative retreat of the sea ice also incites Russian shipping companies to build a whole new generation of diesel and nuclear giant icebreakers. Those are devoted to the constant opening of the Northern Sea Route (RT, “Russia Floats Out Arktika Icebreaker, set to be world’s largest”, 16 June, 2016).
Latest map (5/8/2015) of Russian claims in the Arctic, as maintained by IBRU: Centre for Borders Research of Durham University.Click here (pdf) to access large map with details and here to access IBRU Center.
However, the Arctic remains an extreme region, with a fragile environment, necessitating the capability to coordinate shipping convoys, harbours and infrastructure security in the context of extreme weather. In order to achieve maximum security and coordination in this extreme environment, the Kremlin decided to put the Russian ministry of Defence in charge of the whole Arctic shipping operations in the Russian Arctic economic exclusive zone. This decision is fully involving the military in the development of the region. To implement this decision, the Ministry of Defence notably created the Oboronlogitika Company in 2011. The company is owned by the Russian ministry of Defence and is in charge of all the civilian and military shipping operations in the area (Atle Staalesen, “Ministry of Defence Takes Charge of Arctic Shipping”, The Independent Barents Observer, July 07, 2016).
The Arctic space is also developed by the Russian military through the creation of new bases on the Wrangel Island, North of the Bering Strait at the extreme east of the Northern Sea Route as well as on the archipelago of the Franz Joseph Land – north of the Barents Sea – on the north-west coast of Siberia and thus of the Northern sea route (Atle Staalesen, “Arctic Brigade Advances on Franz Joseph Land”, The Independent Barents Observer, October 03, 2016 and (Mathew Bodner, Alexey “Russia Starts Building Military Bases in the Arctic”, The Moscow Times, 8 Sept 2014). Meanwhile, the Russian political and economic authorities are using the military in order to push for the creation of new land and sea infrastructures along the Siberian coast, on the islands and on the coasts of the Siberian Archipelago in the Barents Sea, the Kara Sea, the Laptev Sea, the terribly cold and dangerous Chukchi Sea, the Eastern Siberian Sea and the Strait of Bering (Atle Staalesen, “Rosneft Prepares Seismic Mapping of eastern Arctic Waters”, The Independent Barents Observer, April 15, 2016).
The infrastructures, especially harbours, coast guards, and environmental survey, among others, which are needed on the Siberian coast in order to develop the Northern Sea route, also necessitate to bring much more power to the cities, harbours and industries on these northern zones, which were so far quite isolated.
For example, the harbour city of Pevek, on the East Siberia Sea, the northernmost Russian city, is preparing the infrastructures that are going to host the first floating nuclear reactor (Atle Staalesen, “Russia’s Northernmost Town Prepares for Nuclear Future”, The Independent Barents Observer, October 04, 2016). This reactor is being built at the Baltic Yards in St. Petersburg, by Rosernergoatom, a subsidiary of the mammoth national company Rosatom (Nick Cunningham, “Russia to Power Arctic Drilling with Floating Nuclear reactors”, OilPrice.com, April 27, 2015). After a whole year of test, the nuclear reactor, the “Akademik Lomonossov” will be transported to Pevek, where it is expected to power the city (Staalesen, ibid).
This floating nuclear reactor, the first of a series, is meant to have the capability to power a 200.000 people city, when Pevek hosts less than 5000 inhabitants. This discrepancy shows the strategic importance given to this city close to the Bering Strait. In effect, Pevek is destined to grow with the increasing number of the international shipping convoys, which will be using the Route (Atle Staalesen, “Aiming for Year Round Sailing on Northern Sea Route”, The Independent Barents Observer, December 14, 2015). Other floating nuclear reactors are meant to be built and used in order to power the numerous onshore and offshore new Russian infrastructures, which are rapidly structuring the Russian Arctic space (Staalesen, ibid).
In other terms, with the development of the Arctic, Russia installs itself into a long game of business and strategy (Emerson, ibid). This goes with the rapidly developing Russo-Chinese cooperation in the Arctic.
The Russo-Chinese energy, industrial and business partnerships in the Arctic
In effect, over the last few years, China has started becoming an important Arctic actor, through its membership as permanent observer at the Arctic Council as a “near-Arctic nation”. China is signing bilateral agreements with all the members of the Arctic council and is particularly interested by the energy and trade potential of the Russian Arctic (Valantin, “Arctic China (2) – The Chinese shaping of the North“, 9 June 2014”, The Red (Team) Analysis Society, 9 June 2014). China is projecting its gigantic influence in the Arctic, through scientific expedition, cargo convoys, trade and science partnerships, as well as financial investments, and has built its first own nuclear icebreaker, the Snow Dragon.
An illustration of this strong dynamic is the fact that, during the summer 2016, the Chinese streamer seismic vessel Hysy 720 has completed an undersea seismic mapping operation, after having been chosen for this task by the Russian giant oil company Rosneft. This operation maps in 3-D images the underground formations through the use of sound waves, in order to identify their geological content, and thus their oil and gas potential. The marine underground is divided into blocks, which are then bought by the energy companies that wish to explore and exploit them. The Chinese ship Hysy 720 is the first grand deepwater seismic vessel not only built in China, but also owned by Chinese oilfield Services Ltd. Rosneft decided to hire this company in April 2016 in order to accomplish the mapping operation of two blocks during the summer 2016, before the return of the winter night and cold. (Atle Staalesen, “Russians Choose Chinese Explorers for Arctic Oil”, The Independent Observer, April 27, 2016). In order to prepare its campaign, the Chinese ship docked in Kirkenes, i.e. the northernmost Norwegian harbour city, and signed a docking agreement with the local Henriksen shipping company.
We should note that the mapping of the second block was done in partnership and close cooperation with the Norwegian Statoil Company for the Norwegian side of the Barents Sea (Atle Staalesen, “First Arctic Summer for Chinese Oil men“, The Independent Observer, September 05, 2016). This shows, as other binational partnerships, the good Arctic relations between Norway, Russia and their companies, regarding the combination of energy development with changes in the Arctic environment.
The Arctic Russian-Chinese partnership of the summer 2016 is just one among many others energy partnerships between Russia and China, as, shows the example of the Yamal LNG plant where the Chinese invested a massive 12 billion dollars along Russian banks which input another 12 billion dollars (Valantin, “Russian Arctic Oil”, ibid). These partnerships reveal how the energy, shipping, industrial, business and strategic interests of Russia and China are converging in the Arctic.
These operations are only one example of the way Russia, in the current Anthropocene Era, is developing its Arctic region, changed by anthropogenic global warming, while developing partnerships with China as well as Norway and many other countries. As we observed previously, China’s business operators are gearing towards the Arctic, (See “Jean-Michel Valantin, “Arctic China (1)- The Dragon and the Vikings and Arctic China (2) ibid ”), while Russia is becoming a critical actor in a time when climate change is deeply altering the trade, energy and strategic status balance of the whole Arctic region (Marc Lanteigne, “Policy Brief-One of the Three Roads: The Role of the Northern Sea Road in the Evolving Sino-Russian Strategic Relations”, Norwegian Institute of International Affairs, 2/ 2015).
The Chinese New Silk Road meets the Russian Arctic Long Game
The partnerships between Chinese and Russian businesses are encouraged at the highest level by Russian political authorities, as shown by Russian Deputy Prime minister Dmitri Rogozin 7 December 2015 statement, given in Beijing, when he invited Chinese involvement in the Northern Sea Route (“Moscow invites Beijing to take part in Arctic sea route project”, RT, 7 December, 2015). This invitation is rooted in the nexus of Russo-Chinese political, logistical and business partnerships, heightened by the Chinese “New Silk Road” strategy (Lanteigne, ibid).
The “New Silk Road” is an immense process for the development of land and maritime transportation, as well as energy, mineral and cyber infrastructures, officially launched by Chinese President Xi Jinping in 2013. It is accompanied by legions of commercial contracts and political deals between the Chinese public and private sectors and their counterparts in the different countries and continents belted by the “One Belt, One Road” initiative (Shannon Tiezzi, “China’s New Silk Road” vision revealed – a new series in Xinhua offers the clearest vision yet of China’s ambitious “New Silk Road””, The Diplomat, May 09, 2014). The New Silk Road is conceived as being a gigantic “loop” spanning from the centre of the “Middle Kingdom” to Rotterdam and from the port of Quanzhou in Fujian to Kenya, Egypt and Europe (Tiezzi, ibid). It goes with massive investments made by the Chinese-led Asian Investment and Infrastructures Bank (AIIB).
An example of the involvement of the actors of the maritime New Silk Road in the Russian Arctic is the way the China Shipping Ocean Company (COSCO) has sent more than five of its ships on several voyages along the Northern Sea Route in 2016. Mr Ding Nong, CEO of COSCO, one of the biggest shipping company in the world, announced in October 2016, at the Arctic Circle conference in Reykjavik, capital city of Iceland, that
“As the climate becomes warmer and polar ice melts faster, the Northeast Passage has appeared as a new trunk route connecting Asia and Europe” … “COSCO Shipping is optimistic about the future of the NSR and Arctic shipping” (Atle Staalesen, “COSCO Sends 5 Vessels Through Northern Sea Route”, The Independent Barents Observer, October 10, 2016, and Jean-Michel Valantin, “Arctic China (1)- The Dragon and the Vikings”, The Red (Team) Analysis Society, 24 May, 2014).
It is interesting to note that, for such an important business actor, climate change is fully recognized and turned into an opportunity, and that climate disruption is in fact turned into a massive commercial advantage.
In other terms, Chinese interests and needs meet the Russian Arctic strategy, and are turning this warming region into a continental-wide hub of commerce, energy and natural resources development, while reinforcing each other: the Russian Arctic becomes the basis for a long game energy, business and military strategy, while the Eurasian corridor it creates becomes a new and essential segment of the New Silk Road.
The strategic convergence of these two Eurasiatic giants is based on the new alliance of the oil, gas, nuclear and finance sectors, and on the will to turn the potentially catastrophic consequences of climate change into a large spectrum support. This shows that potential threats, if understood and anticipated early enough, can be transformed into strategic opportunities (Helene Lavoix, “Business and Geopolitics: Caught Up in the Whirlwinds?”, The Red (Team) Analysis Society, 19 October, 2016).
This convergence has deeply transformative consequences, because it is starting to attract other actors, for example in East Asia, such as Viet Nam, South Korea and Japan to the Arctic, besides historical Arctic actors such as European Norway. Furthermore, railroads are built, through investments and development, to link Russian Arctic harbours to Central Asia (Atle Staalesen, “Chinese money for Archangelsk rail and port”, The Independent Barents Observer, December 10, 2015 and “This Arctic Shipping makes it into the history books: From South Korea to Kazakhstan through the Northern Sea Route”, The Independent Barents Observer, July 25, 2016).
Is the warming Arctic becoming the “centre” of an emerging Eurasian market with related security shift, while the Arctic keeps on warming?
It is the issue the Red (Team) Analysis Society will study in the next part of this series, by continuing to underline how geopolitical and environmental changes are of importance to the business and security communities.
To be (soon) continued.
About the author: Jean-Michel Valantin(PhD Paris) is the Director of Environment and Security Analysis at The Red (Team) Analysis Society. He is specialised in strategic studies and defence sociology with a focus on environmental geostrategy.
Featured image: 50 Years of Victory at North Pole by Christopher Michel 50 Years of Victory North Pole Icebreakers, 12 July 2015, CC BY 2.0 (http://creativecommons.org/licenses/by/2.0), via Wikimedia Commons and Flickr.
In our previous article we detailed three sub-scenarios of combined partition and spill over where Libya disappears as such through the creation of three new states, while consequent weaknesses is the cause of spill over to neighboring nations. We thus concluded the series of scenarios 2, which depicted a continuing civil war but with different terms, i.e. change of terrain or actors (see Mitchell, “Scenarios for the Future of Libya Within the Next Three to Five Years,” June 1, 2015; and Lavoix, “How to Analyze Future Security Threats (4): Scenarios and War,” December 30, 2013). This article focuses on the first of the two possible scenarios detailing a total victory in Libya, either by the Islamists or the nationalists. Scenario …
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What if, by May 2017, “non-liberal” movements and parties were in power in the U.S. with Donald Trump, France with Marine Le Pen and Austria with Norbert Hofer? The overall geopolitical configuration would most probably greatly change, in areas such as the tensions between “the West” and Russia, the upheavals between the U.S. and Eastern Asia, the European Union’s definition, policies and survival, or the TTIP and more largely the neo-liberal economic approach, without forgetting relations with the Middle-East. Would this impact most businesses? Yes, most probably.
What if the defeated parties, candidates and their supporters, in these three coming presidential elections – whichever they would be – refuse to accept the results? Considering the way some proponents of the “Remain” in the U.K. refused – and still refuse – to accept the democratic vote of the “Brexit”, such reactions, unthinkable a few years ago, have become a very real possibility (e.g. Brendan O’Neill, “The howl against democracy“, 26 June 2016; “Democracy is hanging by a thread in this country“, 6 September 2016, The Spectator; Uri Friedman, “Should the Brexit Vote Have Happened at All?” The Atlantic, 27 June 2016; BBC News, “Brexit case ‘of fundamental constitutional importance’“, 13 Oct 2016), even if likelihood still must be discussed. Would we head towards institutional deadlock, extreme polarisation, or instability, if not civil wars in the U.S., France and Austria? Is the trend towards less democracy to continue? Would this impact most businesses? Yes, most probably.
Should businesses envision such scenarios (even if their likelihood widely varies) coldly, without considering any personal and individual preferences? Should businesses, actually, envision all possible scenarios, not only those outlined above? Yes, they definitely should, because it is only by properly identifying scenarios for the future that correct answers may be designed, and profitability – to say nothing of survival – be ensured. In turn, all staff should also be keen to see their employer properly designing answers, because, at the end of the day, their job is at stake, with overwhelming consequences in all areas of their lives should their company downsize or close down.
The question is: will businesses consider these political and geopolitical risks and uncertainties and how?
Our aim with this series of articles is to understand better the relationship between businesses or the corporate sector and geopolitical and political risks and uncertainties, as well as those actors who are specialised in their study, and to suggest elements of answers and solutions that should help businesses to properly address these “risks”.
We shall first look, with this article, at general trends regarding the way businesses’ executives perceive and deal with geopolitical and political risks and uncertainties, using mainly the results of a survey published by McKinsey in May 2016*. This part will allow us identifying a first series of questions and features.
The next articles will consider three main cases where geopolitics and politics impacted businesses: the Brexit, the crisis in Ukraine and impact on some sectors, and the Islamic State’s terrorist attacks. We shall use these examples to point out key elements related to geopolitical and domestic instabilities’ risks and uncertainties and what they mean (or should mean) for businesses. We shall use these cases to recommend practical ways forward.
Geopolitical risks, what increasingly keeps executives up at night
Back in May 2016, McKinsey Global Survey on globalisation pointed out that “in two years’ time, the share of respondents [executives across regions, industries and companies’ sizes] identifying geopolitical instability as a very important factor affecting their businesses has doubled” (Drew Erdmann; Ezra Greenberg; and Ryan Harper, “Geostrategic risks on the rise“, McKinsey & Company, 2016). Thus, 84% of executives now consider that these risks will have an impact on their business, and 49% a very important one, besides domestic instability, which is mentioned by approximately 66% of respondents (Ibid.).
Interestingly, what businesses have in mind when they think about “geopolitical instability” and domestic ones, always according to the same study, is mainly “uncertain or restrictive regulatory environment” (from 40% to 54% according to sectors), followed by “political or social instability” (from 27% to 43%) – and “disruption to supply chain” (27%) for the manufacturing sector – “protectionist and trade related policies” (from 17% to 32%), and only far behind “volatile prices of commodities” (from 9% to 33%) or High levels of public debt (from 5% to 24%)(Ibid., exhibit 3).
The answers, logically, differ according to sectors. The manufacturing sector is more concerned about what can disrupt its production and its transportation, compared with financial services, which are obviously not so worried about these risks, indeed quite irrelevant for them, at least directly. The differences in answers thus first point out, as stressed by McKinsey, the need to consider corporate sectors according to type of activities rather than an undifferentiated “businesses”, if we want to deliver useful actionable anticipation.
Finally, businesses, assuming that McKinsey’s survey is representative, understand “geopolitical risks” differently from those who are meant to help them understanding these risks. First, the broad label of geopolitical risk has hardly anything to do with geopolitics, “a method of foreign policy analysis which seeks to understand … international political behaviour in terms of geographical variables…” (Evans and Newnham, The Dictionary of World Politics, 1992). Then, specialists would tend actually to have in mind what is part of their field, mainly international relations – or international politics – and the study of escalation to war or out of war (in a nutshell, the discipline started by Alfred Zimmern right after World War I in Aberystwyth). To accommodate with historical developments, scholars then, in terms of issues, would look at what could impact security, understood as the security of human societies organised as polities. If we use Buzan’s pioneering work, we thus have five main sectors: military, political, economic, societal and environmental, “all woven together in a strong web of linkages” (Buzan, People, States and Fear, 1991: 20).
We thus have quite a strong disconnect between the perception of businesses and the communication of understanding and accumulated knowledge generated by “geopolitical experts”.** When the latter talk about war, be it civil war or interstate ones, at best they directly address, from a business perspective, only “supply chain disruption” (one of the risks deemed as least important, save for the manufacturing industry) and part of “political and social disruption”.
Yet, political and geopolitical scholars could also explain and contribute to monitor, for example, that high levels of public debts (a geopolitical risk which is not deemed as very important for businesses , see above) could have, at second and third order effect a much higher impact on businesses’ operations than thought. Indeed, the capability of a state to maintain a secure enough environment to allow businesses to operate depends also on the level of public debt or more exactly on the resources available to the state (see Seeking Security; Budget Deficit and Liquidity; Public Resources and Lenders in The Chronicles of Everstate, RTAS January/Feb 2012): without resources the state cannot ensure its fundamental missions, and thus essential functions such as police cannot be fulfilled successfully. Infrastructures – if they have not been liberalised (note that their privatisation also faces its own challenges, e.g. water, “Learning from water privatization” in The Chronicles of Everstate, RTAS July 2012) – cannot be maintained. Also public debt and state budgets may imply institutional deadlocks – as has been the case in the U.S. (e.g. Clinton T. Brass, “Shutdown of the Federal Government: Causes, Processes, and Effects“, Congressional Research Service, 2011 ) – with also impacts on businesses’ main concern, regulations. It is thus crucial that political and geopolitical experts make the effort to help executives deciphering their geopolitical environment.
The gap between the two perspectives is not a fatality and only needs to be bridged, while a common vocabulary is developed. Yet, the bridge must be built if hundred of years of efforts are not to be wasted when it could be used by businesses, and if businesses are to improve their odds when facing and dealing with “geopolitical and domestic instabilities”.
A need to change perspective to go beyond negative impacts
Then, businesses estimate the impact of the geopolitical and domestic instabilities to be largely negative: 57% (for geopolitical instabilities) and 58% (for domestic instabilities) (McKinsey, Ibid., exhibit 2).
Yet, and this time placing ourselves from the point of view of strategic foresight and warning, risk management (in its 2009 approach) or more broadly, anticipation, we know that what has a negative impact is not so much “instabilities” but the inability to foresee them properly and thus to answer in a timely way these coming changes. To use the wealth of military and intelligence understanding existing on the topic (see J. Ransom Clark, The Literature of Intelligence: A Bibliography…, “Strategic Warning: Surprise, Intelligence Failures, and Indications and Warning Intelligence“), what must be prevented is surprise.
This was well expressed by Guenter Taus, the head of the European Chamber of Commerce in the Philippines, faced with the rapidly changing situation in the Philippines under the impulse of President Duterte (e.g. Reuters, “China confirms Duterte visit amid strained U.S.-Philippine ties“, 12 October 2016):
“We can all deal with risks. We can put measures in place to provide for risks… But uncertainty is a factor that we do not like in business, and that is exactly what we’re experiencing right now because we don’t know where we are heading.” (Guenter Taus in Associated Press, “Uncertainty over Philippine president alarms investors“, Asahi Shimbun, Oct 3 2016)
By focusing mainly on instabilities, or risks (i.e. most of the time pre-identified probability x impact, which is still how most people understand a risk, despite the new ISO 2009 definition – see H Lavoix, “When Risk Management Meets Strategic Foresight and Warning“, RTAS, 5 May 2014, updated June 2016 ), the corporate sector deprives itself from the capability to, potentially, turn instability into an opportunity, as well as to answer an often inescapable instability better than its competitors, which would then provide a specific company with a definitive advantage.
Moving out of fatality?
Finally, McKinsey’s study stresses that, even though, executives have developed a new awareness of “geopolitical and political risks”, even though they point out the potential negative impact to their businesses, they have not started addressing properly these risks: only 13% have taken steps to address both risks of geopolitical and domestic instabilities (exhibit 4).
Furthermore, and strangely enough, although 58% deemed that “comprehensive scenario methodologies, integrated into a strategic planning process” – of the type we are promoting and doing here at The Red (Team) Analysis Society – are the most efficient way to address these risks, only 18% of executives and their companies use “scenarios”. Meanwhile, the large majority tend to use internal analyses (ad hoc or not) and external think tank resources, such as specialised reports, ad hoc analyses, consultancy and dialogue with external experts, yet executives consider these ways to face geopolitical and domestic risks as less efficient (exhibit 5).
The reason for the lack of efficiency of internal analysis, on the one hand, and of the use of external think tanks and consultants – probably specialised in international relations, on the other hand, lies in what we uncovered in the first part: the difference and discrepancy between languages, center of interests and education, somehow between supply and demand. If two sets of actors do not understand each other, and live on different planets – not to say in different universes – then it is most likely that unsatisfactory relationships will follow.
The more frequent use, nonetheless, of these two “inefficient approaches” most probably comes from the fact that these approaches are what is mainly available.
Furthermore, the absence of training of most international relations specialists in anticipation methodologies, and of “business-related anticipation experts” in international relations, most probably also participate in the generalised use of an expertise considered as inadequate.
Finally, developing scenarios, assuming the right expertise is available, if it is well done is also a relatively long, resource-intensive and thus more expensive and demanding process than buying a generalist subscription to one think-tank or another. This supplementary cost, fundamentally allows for more profit and less losses, but may also be perceived as just a new supplementary cost by companies. As a result, this perception might also be an element in the current lack of use of the methodology deemed most efficient.
Meanwhile, a timeframe issue may also emerge. If a business needs scenarios in the next hours – actually for yesterday because the crisis is now evident, when one month or a couple of months, according to the scope of the issue and level of details, would necessary to obtain proper actionable scenarios, then it may just give up and think it is too late to use scenarios. There are ways to overcome this challenge, including because it is never too late to make scenarios, accepting and taking hold of unfolding crises, within the bounds of possibility and quality.
If businesses are unsure of the way to address geopolitical and political uncertainties, and tend to believe that what is mainly on offer is inefficient for their needs and purpose, then it is not that surprising that they fail to take practical steps forward, and remain caught up in the geopolitical whirlwinds.
This is not, however, a fatality. Using the McKinsey study, we have identified a few crucial yet still general elements that shape the way businesses address – or not – geopolitical and political uncertainties and started thus envisioning ways forward. With the forthcoming articles, using specific cases, we shall look at the way geopolitical and political uncertainties (and crises) impact businesses, so as to refine our understanding of what could be done better.
——–
*Initially, we planned to also use the part of the Global Risk Report 2016 (GRR), published yearly by the World Economic Forum, which is dedicated to businesses and global risks (part 4 for the GRR 2016, pp. 69-78). However, the differences between the McKinsey study and the WEF approaches are so important that comparison and even complementarity, for our specific purpose, are impossible.
The McKinsey’s study concerns risks that will impact “global business and your own business” in the coming years, and more specifically (see exhibit 3) “risks that will most affect organizations in countries where they operate over the next 5 years”. Meanwhile the GRR questions are about “the five global risks that they [business executives] were most concerned about for doing business in their country within the next 10 years” (p.69, see also appendix C, p.90). The way the question is asked (at least as portrayed in the report) tends to rule out foreign operations as well as international trade – surprisingly considering the World Economic Forum outlook.
The GRR survey is thus less relevant to our purpose and will not bring us further insight into the relationship between businesses and “geopolitics”.
Furthermore, the period when the survey were conducted is different too. The McKinsey survey was done between 3 and 13 November 2015, while the GRR was conducted between February and June 2015. Considering the evolution of the war against the Islamic State and its impact notably in Europe, to have a better understanding of the GRR results, we would need to wait for the forthcoming results, corresponding to a survey conducted around Spring 2016.
**Note that the discrepancy most probably comes from the fact that, initially, international relations – and foreign policy – belonged mainly to the state and that it was meant to serve the state and governments by training diplomats, analysts and policy-makers. The discipline thus covers and deals with issues and categories that are relatively congruent with the organisation of the modern state. With the withering away of the state (at least in the liberal world), businesses must face, in a novel way new tasks for which they are not prepared, while “geopolitical specialists” must work with new types of decision-makers, with very different concerns… and education.
About the author: Dr Helene Lavoix, PhD Lond (International Relations), is the Director of The Red (Team) Analysis Society. She is specialised in strategic foresight and warning for national and international security issues.
Featured image by Solomon_Barroa, CC0 Public Domain, via Pixabay.
Barry Buzan, People, States and Fear – 2nd edition: An agenda for international security studies in the post-Cold War era, (New York: Harvester Wheatsheaf, 1st edition 1983, 2nd edition 1991)
The summer and early autumn have been particularly interesting times for the Red (Team) Analysis Society. We notably participated in crucial “behind-the-scenes” meetings and activities, which shape how the field of risk management, strategic foresight and warning, crisis prevention or more broadly strategic anticipation evolves, from practice, processes, and methodologies, to major issues, specific risks and uncertainties.
About global risks, threats and uncertainties, process and methodology
At The World Economic Forum for The Global Risk Report 2017 and the 4th Industrial Revolution
Helene Lavoix was part of the October 2016 preparatory workshop for the forthcoming Global Risks Report 2017 of The World Economic Forum (WEF), held at the WEF beautiful headquarters in Geneva, Cologny.
This article is the second of our series on the Anthropocene and security. Previously, we presented the larger dimensions and general elements framing the new (in)security. Here, we shall focus on latest developments regarding Russian Arctic oil. Between April and July 2016, the current Russian energy conquest of the Arctic led to the shipment of more than 230.000 barrels of oil from the Russian Arctic. They came from two recent on-shore fields, and from the Gazprom Prirazlomonoye off-shore oil rig (Irina Slav, “Russia Ramps Up Arctic Oil Production”, OilPrice.Com, July 21, 2016). The latter is the first of the glacial Barents Sea. The 2016 flow from the Russian Arctic almost doubled compared with 2015. In the meantime, the Russian ministry of …
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Featured image: United Nations Photo, [CC BY-NC-ND 2.0], via FlickrIn our previous article, we detailed a partition scenario where Libya splits into independent states along tribal and provincial lines, as well as a north-south axis, and in the one before, we focused on various possible spill over. This article focuses on a combination of the two cases, partition and spill over scenarios. In the first scenario, the Amazigh, Tuareg, and Toubou tribes outright declare independence and break away from the Libyan state, which leads to significant spill over in Algeria, Niger, and Chad. In the second scenario, Libya is partitioned along provincial lines, which leads to spill over in all directions. In the last scenario, Libya splits apart along a …
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The summer of 2016 has been a major pivot in the history of mankind. In effect, on 30 August, the definition of the current geological epoch as the “Anthropocene Era” has been officially validated, during the 35th International Geological Congress, in Cape Town, South Africa (Noel Castree, “An Official Welcome to the Anthropocene Epoch”, RD Mag, O8/31/2016).
Our new geological period is thus defined as being “anthropos” (meaning “human”) driven, because humankind has become the major geological and biological force on Earth. This happened through the combination of use of carbon energy, industry, agriculture, urbanisation, modern transportation, and nuclear development, which are all profoundly altering the geophysical and biological conditions of the Earth system (Waters, Zalasiewicz et al., “The Anthropocene is functionally and stratigraphically distinct from the Holocene”, Science, 08 January 2016).
The massive strategic problem linked to this new epoch is that the planetary present and future are now dominated by complex dynamics of global change. The rhythm of planetary evolution is now attuned to the chaotic coupling of the Earth system’s cycles with the current human technological, industrial and urban forms of development (Jean-Michel Valantin, “The Planetary Crisis Rules, Part. 1 and 2”, The Red (Team) Analysis Society, January 25, 2016 and February 15, 2016).
The current forms of economic development are now undergoing a fundamental risk of disruption.
We need to understand that our modern societies are far from being adapted to this new planetary reality, into which the atmosphere, climate, water, soils, and biology cycles are altered (James Howard Kunstler, The Long emergency, 2005). For example, the current anthropogenic climate change is an important signal of the Anthropocene.
It derives of this new geophysical reality that, in our period of globalised economy, the Anthropocene turning point bears a profound meaning: the current forms of economic development are now undergoing a fundamental risk of disruption.
In the first article of this series, we shall initially see, through some climate-related extreme events, how the economy is threatened. Then, we shall deepen our emerging understanding by further pointing out the economic disruption brought about by the climate dimension of the Anthropocene. Finally, we shall review the emerging need for economic adaptation to this new situation.
Climate change versus economy
The Anthropocene is rapidly becoming the new planetary reality. And this new reality is very dangerous for the current state of the world economy, because the latter has been developed within a given set of planetary conditions, which are quickly and deeply transformed (Thomas Homer Dixon, The Upside of down, catastrophe, creativity and the renewal of civilization, 2006).
This danger is expressed, among others, through the growing pressure exercised by the numerous impacts of climate change on the economic context. For example, the period between May and September 2016 has been a climate nightmare for the American and Canadian economies.
In July, the Insurance Bureau of Canada released a survey establishing that this disaster would cost almost 3,6 bn dollars to the insurance sector, and was the second worst natural disaster in Alberta since the catastrophic floods that happened … in 2013, in a region that was not defined as a flood-prone area.
To these costs must be added those of the interruptions of operations on the tar sands’ exploitation sites, and of the public stores following the intervention of fire-fighters, also resulting from the evacuation of Fort McMurray’s population (Jean-Michel Valantin, “Alberta Mega WildFires and the United Arab Emirates Security”, The Red (Team) Analysis Security, May 23, 2016).
It was only the beginning.
In August, a flood of biblical proportions, stemming from tremendously heavy rains, engulfed more than twenty parishes in Louisiana, impacting more than 60 000 homes, 80% being non-insured against risks of flood, and 6 000 businesses. The related costs could reach more than 2.2 billion dollars, and add to the 1.3 billion loss generated by another giant flood, which happened in March 2016 (Holly Yan, “Louisiana’s mammoth floods: by the numbers”, CNN, August 22, 2016).
Worse still, the total losses for the U.S. economy related to the August flood could reach between 10 to 15 billion dollars, considering direct damages, losses in property value and in tax revenues from businesses, as well as direct and indirect damages to agricultural activities (“USA-Louisiana Floods to Cost US Economy 10 to 15 Billion Dollars Says AON Benfield”, Flood List News in Insurance USA, 9 September 2016). Meanwhile, human impacts, such as loss of job, combination of health and financial insecurity and exhaustion should also be taken into account.
It is interesting to note that the Louisiana floods increasingly appear to be related to climate change. Given the fact that climate change keeps on intensifying, this raises important questions in terms of anticipation, warning and adaptation. (“Climate change increased chances of record rains in Louisiana by at least 40%”, National Oceanic and Atmospheric Agency, September 16, 2016).
In the meantime, on the West Coast, California burned. More than 27 wildfires occurred between May and the end of August, some of them being awfully powerful.
At a deeper level, the Californian conurbations are under a growing risk. In effect, huge swaths of Californian urban sprawls have been built on natural fire corridors. The probability that these densely urbanised areas may interact with wild fires due to climate change is now growing (Mike Davis, Ecology of Fear, 1998).
The chronic state of drought that affects California, and the combination of a powerful El Nino combined with climate change powered those wildfires (Justin Worland “Don’t call California wild fires “natural disasters”, Time Magazine, August 17, 2016). The costs of the wildfires result from soaring budgets to fight wildfires, destruction of property, interruption of businesses, disruption of transportation system, and related insurance and rehabilitation costs (Western Forestry Leadership Coalition, The True Costs of Wildfire in the Western U.S, 2010).
In the Californian case, those costs must be added to those associated with the already long series of costs due to growing damages wrought by wildfires, especially since 2000 (“Chart: 13 of California’s 20 largest wildfires burned since 2000”, Climate Signals).
This new climate versus economy insecurity also takes other forms. For example, the long drought of the summer 2012 impacted more than 80% of American agricultural land. If the effects were less severe than expected, they were nonetheless felt on livestock food prices during the last quarter of 2012 and through slight but widely distributed rises in prices for different kinds of agricultural products (cereals, dairy, poultry, fruits) on the U.S. and international markets (USDA: U.S Drought 2012, Farm and Food Impacts, July 26, 2013.
Climate change and economic disruption
In a very strange and disturbing way, the Anthropocene epoch would thus emerge as a new kind of economic disruptive force. Its impacts are quite analogous to a kind of permanent geoeconomic offensive, because the Anthropocene creates a state of permanent risk of loss, for private persons, owners, business, and finance actors, the insurance industry, among others (Eric Reguly, “No climate-change deniers to be found in the reinsurance business“, The Globe and Mail, November 28, 2013).
A kind of rising permanent geoeconomic offensive, … a state of permanent risk of loss …
According to Ceres in 2014, the annual cumulated costs of all natural disasters in the United States during the 1980s reached approximately 3 billion dollars a year. During the first decade of the twenty-first century, this yearly total amounted to 20 billion dollars a year (with spikes, for example in 2005, due to the devastation of New Orleans by hurricane Katrina).
In 2011 and 2012, these costs borne by businesses, real estate owners, large and small, territories, industries, and agricultural actors, exploded, due to the very intense and early tornado season, and the devastation it brought to the Midwest. The situation appeared dire enough to lead Frank Nutter, the President of the Reassurance Association of America (RAA), to testify in front of the U.S. Senate Committee on Environment and Public works on 18 July 2013 (Franklyn Nutter, Climate change: it’s happening now, July 18, 2013).
This testimony was an opportunity to explain how the number of extreme weather and climate related events, such as tornadoes, hurricanes, floods, wildfires, and storms, is growing rapidly, while hammering densely populated spaces, like coastal shoreline regions, where more than 123 million people live (i.e. 39% of the U.S. population). What Frank Nutter makes very clear is the way people, home, communities, and infrastructures are increasingly exposed to the multiplication of weather-related shocks, while the federal means of action are at risk to be wanting in the face of this socio-climatic trends.
As another example, in 2012, hurricane Sandy inflicted more than 50 billion dollars damages to homes and infrastructures in New York City and New Jersey, while 116 people were killed (Chris Isidore, “Sandy’s cost to economy: up to 50 Billion dollars”, CNN Money, November 2, 2012).
And we are most likely to experiment much worse, as it must also be remembered that, due to global warming, sea levels are rising faster than thought a few years ago (The Independent, Sea levels rising more quickly than predicted, war scientists, 28 November 2012; Jean-Michel Valantin, “The Antarctic versus Dubai – The Planetary Crisis Rules, part 5”, The Red (Team) Analysis Society, May 2, 2016).
Furthermore, climate change impacts U.S. economic activity, through semi-continental weather events, which can also slow or disrupt the way people work or go to work, as has been seen during the different “polar vortex” episodes during the 2013-2014, 2015 and 2016 winters (Atmospheric and Environmental Research, “Arctic Oscillation Analysis and Forecasts”).
In other words, the very fabric of society and economy are put at risk by the actualisation of the new environmental conditions.
The Anthropocene disruption and the necessary adaptation
We have entered a period defined by the installation in the daily social and economic life of series of disruptive extreme environmental events. Their number is quickly growing in kind, number and intensity, especially over the last twenty years. This generates a state of profound and permanent disruption.
As often showed by The Red (Team) Analysis Society (see portal to Environment and Security), and as recalled above, this constant disruption is profoundly dangerous for the economy, through the multiplication of different forms of destructions and unexpected costs that must be absorbed by the economic system.
Moreover, contrary to the “creative destruction” theorised by Joseph Schumpeter as being an important engine of the modern economy, the Anthropocene “environmentally-man-made” and constant disruption is signaled by the spread of what we could call “destructive destruction”.
This “destructive destruction” is at work in the combination of continually cumulating costs of direct and indirect damages over the last years, as we saw with the Alberta, Louisiana and California 2016 extreme events, caused by the violent, repetitive and intensifying nature of these events, that interact with the multiple vulnerabilities of modern societies and economies (Thomas Homer-Dixon, The Upside of Down, 2007).
These series of destructive extreme large-scale events are also symptoms of the rapid global disruption accompanying the emergence of the Anthropocene. From an economic point of view, this implies a necessary rapid and profound adaptation, in order to survive the coming “multi-storm”.
In order to find the principles of economic adaptation to an ever-changing state of disruption, the Red (Team) Analysis Society will focus, with the next article of this series on ways to combine the globalised economy with the principles of war economy and its built-in resilience.
About the author: Jean-Michel Valantin (PhD Paris) is the Director of Environment and Security Analysis at The Red (Team) Analysis Society. He is specialised in strategic studies and defence sociology with a focus on environmental geostrategy.
Image: Council of Representatives Government posted on the Council of Representatives Facebook Page, 1 September 2016In our previous article, we detailed a spillover scenario where conflict spills over in all directions, including Europe, Algeria, Niger, and Egypt. This article is focusing on possible scenarios depicting Libya’s partition that could stem from the Libyan war. In the first scenario, the Amazigh, Tuareg, and Toubou tribes move from ideas of autonomy to outright declaring independence and breaking away from the Libyan state as a result of marginalization and lack of security. In the second scenario, Libyans begin declaring independence and breaking away from the rest of Libya along provincial lines. In the last scenario, Libya splits apart along a north-south axis located …
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region into an international attractor, thanks to the combination of the consequences of climate change and of the natural resources, which become accessible because of the warming of the region and thus relative retreat of ice (see below in part 1, the 28 Oct 2016 NASA video visualising the retreat of the Arctic ice since 1984).
Rosneft keeps on exploring the area (Atle Staalesen, “
As we observed previously, China’s business operators are gearing towards the Arctic, (See “Jean-Michel Valantin, “
![July 5, 2011 A Super Sand Storm, reported by some Phoenix media channels as "The largest Sand Storm in the history of Arizona” by Roxy Lopez (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons](https://redanalysis.org/wp-content/uploads/2016/09/Duststorm.jpg)
McMurray (Bryan Alary, “
more than twenty parishes in Louisiana, impacting more than 60 000 homes, 80% being non-insured against risks of flood, and 6 000 businesses. The related costs could reach more than 2.2 billion dollars, and add to the 1.3 billion loss generated by another giant flood, which happened in March 2016 (Holly Yan, “
At a deeper level, the Californian conurbations are under a growing risk. In effect, huge swaths of Californian urban sprawls have been built on natural fire corridors. The probability that these densely urbanised areas may interact with wild fires due to climate change is now growing (Mike Davis, 
and related insurance and rehabilitation costs (Western Forestry Leadership Coalition, 
The situation appeared dire enough to lead Frank Nutter, the President of the 
This new situation is immersing the different actors of the economy in a permanently dangerous situation (Lord Nicholas Stern chair, 
