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5 Geopolitical Trends to watch in 2019

In today’s globalised world, many geopolitical events take place every year, and they have a long-lasting effects in time. So, considering what happened on the international scene in the year that has just ended, what are the top five global trends to watch in 2019?

1 – “America first”, America alone?

President Trump’s “America First” policy was put into practice various times in 2018. He introduced new tariffs to protect the US economy; he abandoned those agreements that he deemed contrary to America’s national interest; he criticised allies for free-riding on the US in security issues.

This is a trend that will continue as long as Trump remains in the White House, and that will have an important impact on the global order. For decades, the international system was centred on the US and its commitment to sustain its rules and provide security; albeit with limitations and largely for its self-advantage. But now, Washington prefers pursuing a narrow definition of its own national interest. This has already raised concerns with traditional partners; most notably with the European members of NATO to whom he demanded to spend more on defence. This divergence between the two sides of the Atlantic has cast doubts over the tenure of the Alliance. All this happens in a moment of renewed tensions with Russia, who in turn is taking benefit from the situation because in case of a confrontation, it will have to face a more divided and therefore weaker NATO. This uncertainty over the future of the Alliance damages European but also American interests: alienating its traditional allies risks to isolate the US and to reduce its international influence.

All this happens in a delicate moment for the US economy. While its GDP grew of almost 3% in 2018, its monetary policy is object of political debate as Trump accuses the Federal Reserve of being the “only problem” of America’s economy. If the Fed keeps on raising the interest rates to contain inflation, the US growth will slow down. This will also combine with the effects of tariffs plus the considerable public and private debt. Moreover, American stock markets have lost much value in the past year: the price of shares according to the Dow Jones index dropped of around 9.5% in 2018. And if the US economy slows, the rest of the world will follow.

2 – China’s economic slowdown

The world’s second-largest economy is also facing troubles. While it is predicted to grow of about 6.6% this year, which is still extraordinary given its size, the rate is no longer a double-digit figure as in the past. The Chinese economy is also slowing down, and this will inevitable have repercussions on the global scale. As economic prosperity is considered fundamental for social stability and for the rule of the Communist Party, the government is taking measures to maintain a steady growth. This explains various initiatives like “Made in China 2025” aimed at upgrading its industry, the huge investments in high-tech, or the far-reaching “One Belt, One Road” project.

Apart from purely economic issues, this will also have geopolitical consequences. Beijing has been increasing its worldwide presence in the past decade, notably through economic means; but if its growth slows down, its ability to sustain its greater plans in the Asia-Pacific and beyond will suffer. In this sense, the very plans it is implementing to boost its economy may result counterproductive: they are certainly ambitious projects with a great potential, but they are also very challenging. The enormous investments they require will result in a waste of resources if they do not translate into economic growth, and this will hamper China’s economy. As such, observing Beijing’s economic policies and its performance through 2019 will be an indicator of its future global role.

3 – The European (dis)Union

The EU will cross troubled waters in 2019. Anti-EU movements have risen everywhere, its economic recovery remains sluggish and each of its four most important members is not in the position to lead a reform of the common institutions. The United Kingdom will finally leave, but the exact terms are still undefined and a “No Deal” Brexit seems probable. This is the worst scenario, because it means uncertainty for economic and political actors alike. Italy is now ruled by a Eurosceptic coalition that has already clashed with the EU over immigration and economic policy. Germany continues opposing more economic integration in the form of a common fiscal policy, and Angela Merkel’s leadership has been weakened. In France, President Macron is calling for a reform of the EU and promotes further integration, but his popularity is at a record low and the country has first to deal with domestic issues.

Other members are also unable or unwilling to move the integration project ahead. The emerging countries of Central-Eastern Europe, notably Poland and Hungary, want to preserve their sovereignty and therefore oppose devolving more powers to the EU. Moreover, the Union has even initiated the infraction procedure for violation of core values against these two countries, thus leading to an open diatribe. Spain is focused on problems at home; while Greece is heading towards elections in 2019, and any change in its government could make the markets nervous and result in a renewed standoff with the EU.

As such, no state is in the condition to take the lead and move forward the much-needed reform of the Union. However, what is more worrisome is that the divergences do not simply concern the policies to implement, but the basic values of the EU and its very legitimacy are questioned and openly criticised. Considering also its complex institutional procedures, it is unlikely that the stalemate will be solved in 2019. On the contrary, it is likely that the EU will be even more divided at the end of the year.

4 – Sanctions on Iranian oil

Following President Trump’s decision to scrap the nuclear deal, a boycott on Iranian oil will be reintroduced in 2019. Given that it is largely dependent on oil revenues, the Islamic Republic will certainly suffer. The effects will not be only economic, but they will extend to the social sphere as well. Signs of discontent already appeared in late 2017 – early 2018, when mass protests erupted all over the country. As pressure increases on Iran’s economy, similar episodes may repeat in 2019 with destabilising effects on the region. Moreover, this means that Iran will have much less resources to sustain its goals abroad; notably in Iraq and Syria. As a result, it will have to reduce its international commitment and focus on domestic issues.

But this will also affect other countries who used to buy oil from Iran. China and India were its main customers, followed by Japan, South Korea and European countries. As sanctions come back into effect in 2019, such states will comply and change their import sources to avoid angering the US. This will impact the global oil market by putting an upward pressure on its price; even though many effects such as a less than expected demand may nullify this effect at least in part. Finally, while the intended effect of the boycott is to put pressure on the country and force it to negotiate another deal deemed more compatible with America’s interest, it is possible that the result will be the opposite. If Iran feels threatened enough by the US, it may decide to resume its nuclear programme after concluding that is the only way to ensure its national security. This is not likely, because Teheran would be even more isolated, but if this happens the whole region will be further destabilized.

5 – Tension with Russia

Relations between Russia and the US have not improved through 2018. Many important issues continue dividing them, like the war in Syria or Ukraine’s issue. The situation remains volatile in both cases, and the recent Kerch Strait incident has revived tensions between Moscow and Kiev. Additionally, there is another country to watch: Georgia. The new President Salome Zurabishvili has pro-EU Western views and openly calls for Georgia to join the EU and NATO. Russia will hardly accept such a scenario and may launch a military operation to prevent it, thus sparking another crisis in the post-Soviet space.

Moreover, a pillar of the longstanding strategic equilibrium between Russia and NATO has fallen: the Intermediate-Range Nuclear Forces Treaty, or INF. This agreement, dating back to the Cold War, prohibited the deployment of intermediate-range ballistic missiles in Europe, as they risked compromising the nuclear balance in the region: due to their limited range, such weapons enabled the Soviets to strike NATO in Europe without threatening the US territory, thus casting doubts among Europeans that in such an eventuality the Americans would have exposed themselves to retaliation by launching nuclear weapons on the USSR just to protect Europe.

Now that the Treaty is gone, a new arms race is likely to take place, and in fact this is already happening. Russia has tested several nuclear-capable ballistic missiles in 2018, and is rapidly working to deploy new hypersonic missiles capable of travelling at five times the speed of sound or more. The US is doing the same, and both powers are developing new weapon systems and doctrines to prevail on the other. But to pursue these objectives, Russia needs economic resources. Since oil is one of its main sources of revenues, Moscow will seek to coordinate with other producers to keep its price high enough to sustain its economy. This will largely determine the evolution of Russia’s role in 2019, but one thing is sure: Moscow will do its best to pursue its interests abroad, and as the Russian-American rivalry continues, the international scene will remain tense.

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