The most important driver of geostrategic realignments since 1900 is energy, while for many centuries it was generally commercial in nature. The struggle for control of the components of the energy mix today has dynamic ramifications for global geopolitical and, by extension, military redistributions of the planet.
The geopolitical developments of 2023 have led to a rise in inflation, increasing the cost of capital, energy, raw materials and services. The economic environment of 2022 continues to impact supply chains and consequently costs. Particularly in the field of technology, guarantees of economic viability are sought as well as criteria of environmental and social sensitivity. These are the “intangible” assets that represent a percentage of the future value of an organization, a company or a state.
The new balances
In 2023 the planet has already entered the phase of building the balances of the model of the new economic transition. The economic transition is taking place globally and has implications for the energy mix, the food regime and geopolitical/military reallocations. Since 2000, and especially between 2011 and 2022, the economic transition has followed a search path culminating in the period 2019-2022 where the pandemic, war, and sanctions on both sides defined the perimeter of the major economic blocs.
The initial perimeter has already brought to the surface the resentment of developing countries, the expanding presence of Middle Eastern oil producers, China, India and the enlargement of the BRICS. We are heading towards increasing tensions of major states trying to expand or defend their spheres of influence by shifting global economic and energy relations along their geopolitical goals.
Russia’s invasion of Ukraine is the largest and most dangerous military mobilization in Europe since World War II, and the conflict is developing into a widespread war of attrition affecting the financial market. The war in Ukraine has had significant implications for Europe and the internal stability of neighboring Russia, with the result that the US and Europe are stepping up efforts to reduce their economies’ dependence on Russia and China. Russia and China are deepening economic ties to become less dependent on the West while food and energy inflation raise the risk of social instability in emerging markets.
North Korea’s nuclear program, the West’s relations with Iran, the South China Sea puzzle and the international terrorist threat remain poles of tension that will continue to affect energy and food supply chains. The economic transition to a new bipolar world is pushing smaller economies to join a geopolitical bloc, while medium-sized powers such as India, Brazil, Saudi Arabia and Turkey choose to diversify and increase their bargaining power.
Energy security
The crisis in Ukraine has brought energy security and the impasse in climate policy to the fore. For the energy mix, the Western world will need more non-Russian fossil fuels in the short term, without this meaning that it will accelerate the much-discussed transition to Net 0. Europe, in a burst of optimism, believes that the energy shock it has suffered will push it to get rid of coal and will make it independent of oil and natural gas imports. What is certain is that Europe’s governments have come together to impose sanctions on Russia and support Ukraine’s military with risks of division as the war drags on and the economic costs rise.
As a consequence, technology emerges as a central field of geopolitical confrontation and the components of the energy mix are targets of dominance. Misinformation about the efficiency of sources and forms of energy, unintentional in many cases, plays a large role and affects the making of critical decisions to maintain peace while the risks of shrinking the economy of many developed countries lurk. Knowing these risks, countries with high industrial activity, in Europe, America, and especially Asia, compete and continue to invest in the combustion of hydrocarbons and coal while aiming at innovative solutions of available energy and the control of the components of the energy mix.
The paper tower
Solar and wind power have been seen for 20 years, especially in the EU, to produce cheap electricity. The economic developments of the last twenty years have turned it into a utopia. Oil and natural gas remain the food of machines because without machines the GDP of any country will be hundreds of times smaller. The European model of course relied on cheap natural gas from Russia and the massive importation of wind turbines and photovoltaics across the EU. Logically, EU leaders knew that existing transport systems, food systems, building heating systems, resource extraction systems, and derivative processes still depend on oil, gas and coal.
In this climate of persistence that lasted until 2019, the EU fell ill and with the pandemic and the war it was brought to its knees, while the economic competition between the USA and Saudi Arabia peaked, with the race for oil production. In this uncertain regime and aiming not only to boost US exports but also US domestic energy security, ExxonMobil and Chevron and others are pushing ahead with increases in spending budgets for 2024 and acquiring smaller hydrocarbon producers.
With these clouds above the European sky the EU recently published a communication on a European strategy for economic security. The announcement focuses on minimizing the risks arising from certain economic flows in the context of increased geopolitical tensions and accelerating technological changes, aiming to maintain high levels of economic extroversion and dynamism. Among the priorities is the retention and use of carbon dioxide which, in the final analysis, will also be an additional commercial service of the oil producers to other industrial sectors.
