As former allies shift allegiances, flows of commerce dissolve and inflation continues, an overview of geopolitics can offer some perspective. A post-Cold War era of globalization and prosperity is being replaced by fragmentation and more fluid alliances.  

The US, Europe, China, Russia, India and the Middle East represent the commanding heights of the new multipolar world. The U.S. remains the leading economic and military power while its relative power has waned in a more divided world.    

The US and Europe are more closely aligned politically and militarily since Russia’s second invasion of Ukraine in 2022. During this same time Russia and China have developed a more cohesive relationship. In 2023 the U.S. continued to add protection for U.S. industries from China and restrictions on high-tech exports to China. In early 2023 Europe looked to forge deeper economic relations with China, yet by September it wanted to restrict imports of electronic vehicles from the county.

The Subcontinent

India considers itself a member the Global South. This conforms with its plans to continue increasing its carbon emissions while asking other countries to finance environmental remediation.   India aspires to be the leader of the developing world. Among non-industrialized countries only Saudi Arabia comes close to spending as much on defense. Much of this budget is devoted to buying Russian platforms and hardware. Like much of the developing world India has not condemned the Russian invasion of Ukraine.  

India has become more comfortable with the U.S. since it has moved away from Pakistan. India has joined the Quadrilateral Security Dialogue (Quad) with the U.S., Japan and Australia. However, it would likely sit out a Chinese invasion of Taiwan.  

India is also a member of the BRICS nations, which have been trying to move the global economy away from the US dollar and the Western financial system. While China and Russia seek to undermine the US’s geopolitical standing, other countries remain cautious. The reticent countries value their ability to play both sides of the Russia/China-U.S./EU divide.   

The most aggressive country playing both sides is Saudi Arabia. Over the last decade Saudi Arabia has worked with Russia to thwart the interests of the West economically through OPEC+. Saudi Arabia and the Middle East, as a whole, is emerging as an independent power center. The Crown Prince of Saudi Arabia, Mohammed bin Salman (MBS) envisions the Middle East as the new Europe and eventually at the “forefront of the world.” 

The Gulf

Since WWII the countries of the Gulf Cooperation Council (GCC) have allied with the U.S. and the West. Their political independence has increased since the 1970s. This pace was accelerated after Saudi citizens took part in the 9/11 hijackings.  

In the last two decades, as U.S. oil production has grown, Saudi Arabia has redirected its exports to Asia in general and China more specifically. Economically and politically their allegiance is shifting from the West to Asia. It’s a natural fit as Saudi Arabia imports so much from China and the country has more in common with authoritarian counties and dictatorships. 

As the U.S. has regained its status as an energy superpower GCC countries have moved closer to Iran and Turkey as well. The UAE and Saudi Arabia have been invited to become a member of the BRICS. 

Saudi Arabia may be on the verge of an inflection point in its relations with the West. As an invited member of the BRICS it may sign on with their priority to decrease the importance of the U.S. dollar in international trade. This could be initiated by selling oil to the Chinese and accepting the yuan as payment. In November 2023 the two countries announced a $7 billion currency swap.  

Normally, selling oil in yuan would make little sense as it is not a freely convertible currency. However, it can use yuan to purchase Chinese made goods and compensate contractors building Belt and Road projects.

If the change occurs the global economic shift to Asia would be significant. While the complete transition is hypothetical, it’s possible MBS sees himself as a modern-day Mustafa Kemal Ataturk. He plans to modernize the country economically and politically while centralizing power in his hands.     

If Saudi Arabia abandons the petrodollar it would likely end U.S. military protection. However, MBS may plan to smooth the transition through increased military and security assistance from Russia and China. 

 

The Global South

 

In the post-Cold War era most drama took place in the boardroom as companies sought to capture new consumer markets. In the global realignment military leaders and defense companies will gain relative importance as technological development focuses more on military platforms.

In this new era, the battle to win the hearts, minds and pocketbooks in the Global South is similar to the Cold War. The battle is focused on Latin America, Africa and Central Asia.  This time China is a far bigger player and often works counter to U.S. interests. Russia is a smaller player economically but a more direct adversary of the U.S.

Beware of the Dog

Although he did not originate the phrase, the late Henry Kissinger once summed up realpolitik by saying, “America has no permanent friends or enemies, only interests.” It is an approach former U.S. allies have taken to heart.