Author: Adeeb Sheikh

The impact of Covid-19 is more geopolitical than medical

With Covid-19 unfolding as a human tragedy all over the world, it has been harder to focus on the wider impacts. But even if we are still living in a strange world of quarantines, Zoom calls and social distancing, the major impact of Covid-19 is proving to be geopolitical rather than medical.

Fundamental change in relations with China

Relations with China have changed fundamentally. Britain is reviewing its decision to include the Chinese firm Huawei in its 5G network and considering granting right of settlement to nearly 3 million Hong Kongers, two policies that would have seemed an impossibility in February.

President Trump’s hardline approach to China had previously looked like excessive provocation; now countries all over the world are seeking to reduce their dependence both on Chinese manufacturing and on its inward investment. Even with a President Biden in place, there is never going to be a return to ‘business as usual’ with China.

Russia after Putin?

In Russia, President Putin, who in mid-March was effectively declared president for life by Russia’s highest court, now finds himself with the lowest popularity rating he has seen in 15 years. Beset by a collapsing oil price and a population unimpressed with this response to the virus, the possibility of a Russia after Vladimir Putin seems thinkable, if not immediately plausible.

The oil price, in long-term decline since 2014, collapsed amid an ill-timed price war between Saudi Arabia and Russia. The virus has had a huge impact on demand; whilst prices have made a recovery from the lows seen in early April, the movement of people, goods and commodities around the world may never return to the highs seen before Covid-19. Entire industries, from commercial property to hospitality, appear to have lost a significant part of their reason for existence.

Competence over charisma

Politically, it is painfully obvious where governments have failed their populations. The US, UK and Brazil have all seen significant falls in their leaders’ approval ratings, reflecting the three countries with the highest death tolls. Populations can be expected to prioritise competence over charisma in future elections.

The first major electoral test of this new world comes at the end of June with the Polish Presidential election, where the government has struggled to keep a lid on the virus infection rate. Whilst the incumbent, right-wing populist Andrzej Duda, looks likely to prevail in a second round, his polling lead has fallen in spite of a structure that gives the incumbent numerous advantages.

President Trump, facing a polling slide and nationwide protests over police brutality, will play to his base, doubling down on American isolationism. His early-June decision to withdraw troops from Germany is his way of emphasising the ‘America First’ message at the same time as telling Europe that it’s time they dealt with their own defence. But this, and Trump’s attempt to invite Putin to the G7 summit, sends a powerful signal to Vladimir Putin that Trump’s America is not going to make life difficult for Russia.

Strategies to mitigate geopolitical uncertainty

What does all this mean for the business community? More than ever, geopolitical uncertainty impacts every aspect of business. To mitigate these risks, specific strategies, tailored to the realities of particular countries, industries and operating assumptions will need to be built to ensure success in a chaotic world.

We are supposed to believe that the threat of COVID-19 in Moscow and the rest of Russia is over, yet President Putin seems to be exhibiting insecurities prior to the upcoming vote on constitutional changes designed to keep him in power for another 12 years.

Low ratings ahead of the constitutional vote

His ratings hit historical lows as Russia has been plagued by a severe outbreak and tried to cover it up. As his citizens have suffered economic hardships and a well-reported lack of medical supplies and resources, Putin has kept himself isolated for the last three months firmly outside of Moscow – the city worst hit by the virus.

Putin’s reputation, image, and ratings are low, perhaps too low to secure a fair (or perhaps more accurately, a believable) win in the constitutional vote on 1 July. Consequently, in what is widely thought to be a move to improve his ratings, Putin has confirmed the delayed May Day Victory Parades will take place on 24 June to commemorate the end of The Great Patriotic War (Russia’s name for World War II).

Parade to promote Russian strength and unity

Sold as a means of honouring fallen comrades, this is in truth, for lack of a better phrase, Putin’s Parade. He has spent the last two decades of his rule making it an event every year – giving it a festival atmosphere; parading Russia’s military units and hardware; projecting strength and promoting a sense of greater Russianness and unity.

It is less an opportunity to peacock to his enemies, and more for Putin to remind Russians what he has achieved in their name, or sought to achieve, whilst in power. Military might and prowess, and the presence of carefully shielded veterans – reportedly being housed in isolation in nearby sanatoriums to ensure healthy attendance – is meant to serve as a distraction from the economic hardships the country and most of its citizens are facing.

Brief distraction from future struggles

No matter the success on the day, and it will be a success despite Moscow’s mayor Sergei Sobyanin encouraging Muscovites not to attend and despite the lack of foreign dignitaries including French President Emmanuel Macron, it will only provide a brief distraction from the future struggle Putin and Russians face. It may be just enough to boost morale and Putin’s ego ahead of the vote, but it will not solve the greater problems the country is facing.

Oil’s jump up to $42 a barrel (the minimum for Russia to balance its budget) does not look likely to last in the long run. Unemployment is up by at least 30% and living standards are down. The long-term impact on public health is not yet understood, and likely won’t be for a long time given the lack of trust in the official statistics.

Further, as the world has collectively suffered with the pandemic and reduced imports of fossil fuels and other natural resources, the core powerhouse of Russia’s economy has nosedived. In 2014, Russia faced economic hardship and although it worked somewhat to reduced reliance on fossil fuel exports, critics and economists widely noted back then it was not enough.

This has come back to bite Putin and the Kremlin. The question now, is how will they manage this and the potential political and economic fallout?

‘World War Three’ isn’t about to happen. But Iraq will become more violent again.

With ‘World War Three’ and ‘Franz Ferdinand’ trending on Twitter, social media appears to have made up its mind about the assassination of Iranian Revolutionary Guards Corps (IRGC) major general Qassim Soleimani via a US airstrike.

Soleimani personified Iran’s rising influence in Lebanon, Syria, Iraq, Yemen, the Gulf and further afield. As commander of the IRGC, Soleimani was able to control a series of proxy forces from the Mediterranean to Afghanistan. Soleimani was the man who rescued Bashar Al-Assad when Syria’s regime looked vulnerable to rebels. But he was also a senior military official of an important regional power, not a fugitive terrorist. His assassination, coupled with that of several senior Iraqi Shi’a militia commanders, will not go unavenged.

No interest in conventional conflict

However, Iran’s response will not signal the start of World War Three. Literally the only point of agreement between Iran and the US is that neither side wants a war with one another. Specifically, President Donald Trump has been crystal clear that his policy is to minimise US military engagements overseas, pulling most of his troops out of the Middle East and questioning the value of military alliances. Trump has no interest in invading a country, changing its leadership or administering territory.

Luckily for Trump, Iran has no interest in a conventional war either: thanks in part to Obama’s nuclear deal (the one that Trump has done everything to kill off) Iran has no nuclear weapons and is in no position to confront the US in a conventional conflict. Just as Trump is happy ordering airstrikes and special forces raids, Iran’s greatest strength is in its ability to act asymmetrically, drawing on the very proxies and militias that Soleimani helped establish. In a strange way, this conflict suits both sides.

Iran’s response to airstrike

Except of course it doesn’t: Iran has been goading the United States for months, with its rocket attacks on US bases, the assault on the US Embassy in Baghdad, the attacks on Saudi Arabia’s oil installation. But it’s safe to assume that losing Soleimani in an airstrike was never part of the plan.

We don’t yet know what Iran’s response will be. They have in the past used a wide range of options from rocket attacks by militias to mass casualty suicide terrorism. Iranian proxies have bombed a Jewish centre in Buenos Aires and an expat housing complex in Saudi Arabia. They have attempted assassinations in European capitals and maintain an advanced cyber capability. For Iran, all of its global capabilities will be on the table and we should avoid thinking that one single event or operation will encapsulate their retaliation.

A new cycle in Iraq

For the US, things also might not be going entirely to plan, assuming that Trump has a plan. Yes, he has ‘decapitated’ the overseas operations arm of the IRGC and taken out the leadership of one of Iraq’s most dangerous Shi’a militias. But it is likely that US troops will be forced to leave Iraq by a vote in Iraq’s parliament that is convening for an emergency session on 5 January. As much as Trump disdains having his forces deployed overseas, US troops have been undertaking important counter terrorism roles in Iraq supporting the ongoing fight against Islamic State. The death of Soleimani is good news for the Islamic State.

With the US out of the picture in Iraq, a new cycle will begin there: Iraq’s government will emphasise its connections with Iran and empower the Shi’a militias to employ violence against ordinary Iraqis protesting against the corruption and incompetence of its government.

Already, Moqtada Al-Sadr, an Iraqi Shi’a nationalist politician ordinarily seen as opposed both to Iranian and US interference, has announced the reactivation of his ‘Mahdi Army’ as part of the ‘patriotic Iraqi resistance’. Between 2011 and 2014, most foreign troops left Iraq and its government entered an increasingly sectarian, violent and corrupt trend, resulting in the rise of the Islamic State which seized Mosul in June 2014.

Iraq’s future

History may not repeat itself. A new feature of Iraq is mass protests against its current political leadership. These protesters are also protesting against Iranian influence and that of the Shi’a militias. The Iraqi government’s response has been shockingly violent: since October, over 500 protesters have been shot dead by security forces, including by snipers from Shi’a militias. This has echoes of the early days of Syria’s civil war: disorganised protests met with excessive force, leading to a spiral of violence, repression and chaos.

Is this Iraq’s future? We have no way of knowing. But it seems likely that Trump is not very interesting in knowing the answer. Soleimani’s killing does not appear to be part of a considered US strategy, nor does Trump’s decision to allow Turkey to attack Syria’s Kurds, or his claim that US troops were seizing Syria’s oilfields. A strategy, and a plan, are things that Iraq and the wider region sorely needs.