Following on from the shock of Russia's full-scale invasion of Ukraine last February, I have been doing some more thinking about what geo-political shocks might arise in 2023.
In descending order of importance, potential shocks are:
1. China v Taiwan - I think it highly unlikely that China will try to invade Taiwan itself. This would require an amphibious assault on a par with, if not bigger than, D-Day by an army that hasn't fought a war in over 40 years, let alone staged such a complex operation. However, China could try invade the islands of Matsu and Quemoy near its coast, or worse impose a blockade on Taiwan. The latter would probably draw in the US in a high stakes game of brinkmanship, and have profound impacts on the global economy which is reliant on Taiwan's sophisticated microchips, and financial markets such as US corporate bonds where Taiwanese institutions are key investors.
2. Israel v Iran - this has been bubbling away for some time, but could come to a head. US-led sanctions against Iran's nuclear program have crippled the Iranian economy, contributing to recent unrest. In retaliation, Iran has kept enriching uranium and may only need a need a few weeks to enrich enough for a bomb (though it may take longer to build this [1]). Meanwhile Iran is receiving ever increased weaponry from Russia in return for its drones. Israel might decide to act sooner rather than later, before Iran builds a bomb or its air defences become too strong. The fall out would be immense - Iran's proxies Hezbollah would subject Israel to intense bombardment, while Iran is likely to block the Straits of Hormuz and/or attack Saudi oil production facilities in retaliation against the west, causing oil prices and inflation to rocket upwards.
Of course, if Israel did not act, and Iran were to build and test a bomb, then we would likely see the kind of nuclear stand-off witnessed during the Cold War, but with states like Saudi Arabia then feeling compelled to develop nuclear arsenals of their own.
3. Turkey v Greece - Turkey has long railed at Greece's possession of Aegean islands off its coast, which has been aggravated by discoveries of gas in the Easter Mediterranean. President Erdogan has recently rattled his sabre about these, claiming that Turkey could "come suddenly one night" to conquer these [2]. While it may seem outlandish, the two countries fought a war in 1974 over Turkey's invasion of North Cyprus, and Erdogan may be tempted to start another war to boost his waning popularity with elections coming up this year. This would rock NATO at a time when it is trying to support Ukraine, and could draw in other European countries, such as France which in 2020 sent warships to support Greece in confrontations with Turkey over offshore drilling.
4. Morocco and Algeria – these countries fought the brief Sand War of 1963 over a disputed border region, and relationships haven’t improved with Algeria supporting the Polisario Front in its struggle against Morocco’s annexation of Spanish Western Sahara. Algeria recently suspended gas exports to Spain via Morocco, and has threatened to cut Spain off if it re-exports gas back to Morocco [3]. There is a fear that Algeria’s leaders may seek a conflict with Morocco to deflect popular discontent with high unemployment and rising food prices, and that this could lead to a disruption to gas supplies to Europe at a time it is struggling to replace Russian gas, as well as lead to a large wave of refugees.
5. Egyptian meltdown - the conflict in Ukraine has led to a sharp rise in food prices in the Middle East. Such rises helped spark the Arab Spring back in 2011. A fear would be a repeat of this turmoil engulfing Egypt, which has recently needed an IMF bailout to deal with government debt of over 90% GDP. In a worst-case scenario, Egypt could become another Syria but with 5 times the population, leading to an unprecedented refugee crisis, and disrupting the Suez Canal crucial to world trade.
6. Pakistan meltdown - Pakistan has widely been tipped follow Sri Lanka into sovereign default, and matters have not been helped by catastrophic flooding and political turmoil following the ousting of Imran Khan. Economic and political collapse coupled with Islamic extremism is not a comforting recipe for a nuclear power with a long-standing rivalry with India.
7. India v China - following deadly clashes in May 2020, Indian and Chinese soldiers have regularly skirmished along their contested borders, though with clubs and knives as opposed to guns. There is always a risk these clashes could escalate into a shooting war. This happened before in 1962 with a decisive Chinese victory prompting the US to fly in supplies to India. Since then both China and India have developed nuclear weapons, but even a limited conflict could have implications for supply chains in Asia which rely on goods flowing between the two countries.
Lesser conflicts which may break out:
8. Kyrgyzstan v Tajikistan - in some ways this conflict has already broken out, with deadly clashes as recently as September. While this may seem remote from Europe, these countries lie on the "Silk Road" between Europe and China and wider conflict could disrupt supply chains reliant on this route, possibly leading to China and/or Russia to intervene.
9. Renewed conflict in the Balkans - 2022 started with fears over renewal of hostilities between Serbia and Bosnia-Herzeogovina [4] while tensions have also been rising between Serbs and Kosovo [5], though Serbia may be chastened by the setbacks its historical protector Russia has suffered in the Ukraine.
10. Turkey, Azerbaijan and Armenia - Russian troops formerly acting as peacekeepers and protectors of Armenia have been pulled out to fight in Ukraine, leaving a power vacuum which Turkey and Azerbaijan may seek to exploit in another war to wrest Nagorno-Karabakh from Armenia and link up Turkey and Azerbaijan, allowing the latter to project power and influence into Central Asia.
11. Ethiopia v Egypt and Sudan - Ethiopia's plans to dam the Nile have caused alarm in Egypt and Sudan which rely heavily on the Nile's waters. It has been suggested that they have been conspiring with the Tigrayan Popular Liberation Front to attack Ethiopia's Grand Renaissance Dam [6], and going forward they may seek to directly attack this dam, sparking wider war.
Of course, the lesson of history is that seemingly inconsequential events in faraway places - such as the assassination of Archduke Ferdinand inn Sarajevo in 1914 - can spiral out of control and have profound impacts.
[1] "Explainer: How close is Iran to being able to build a nuclear bomb?" by Francois Murphy, Reuters, 22nd February 2022 available at Explainer: How close is Iran to being able to build a nuclear bomb? | Reuters
[2] "Erdogan repeats threat against Greece during G20" by Tristan Fiedler, Politico EU, 16th November 2022 available at: Erdoğan repeats threat against Greece during G20 – POLITICO
[3] “Gas fires in the Sahara”, Economist, 14th May 2022.
[4] "Why there's fear that the Bosnian War could reignite" by Haley Ott, CBS News, 12th January 2022 and available at: Why there's fear that the Bosnian War could reignite - CBS News
[5] "What’s behind the renewed tensions between Serbia and Kosovo?" by Thomas O Falk, Al Jazeera, 4th August 2022 and available at: What’s behind the renewed tensions between Serbia and Kosovo? | Explainer News | Al Jazeera
[6] "Egyptian, Sudanese Generals Plotting with TPLF to Launch Another Catastrophic War", 2nd June 2022 available at: Egyptian, Sudanese Generals Plotting with TPLF to Launch Another Catastrophic War | Ethiopian News Agency (ena.et)
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