THE SECOND SCRAMBLE
Xi’s coronation was another reminder that we still live in an age of empires: while China, Russia, the EU, Japan, India and Turkey all inherit older imperial mantles, the US is today’s hegemon.
But, as America’s imperium wanes, so does its ability to secure the open and stable world order it built.
Last year underscored what can happen to countries which lack their own resources (especially energy) when markets freeze: plunging currencies, weak growth, strategic vulnerability, political crisis. Today’s Great Powers are therefore engaged in a new Great Game: a scramble for spheres of influence encompassing reliable resources and friends.
The holy grail is the ability to buy commodities in your own currency, a privilege presently reserved for Uncle Sam. But that’s changing.
“Most countries don’t want to take sides on a new Cold War, and many prefer China’s ‘no questions asked’ offer.”
Xi’s recent visit to Saudi Arabia for the China-Arab States Summit included commitments to expanded use of the yuan for oil payment. If China, the world’s largest oil importer, can pay for its oil and gas in yuan, which are recycled to buy weapons and tech from China, it will shift the pattern of global liquidity flows – with implications for the value of assets and market liquidity. Meanwhile, Russia’s botched invasion has confirmed its status as junior partner to Beijing and compelled it to sell discounted commodities to China, India and others.
China’s Belt and Road Initiative is a physical attempt to cement a secure trading sphere. Beijing continues to establish an alternative global payments infrastructure and China-centred institutions, such as the Asian Infrastructure Investment Bank and the Shanghai Cooperation Organisation. Rapid rollout of the digital yuan could bind them all together.
America’s full-scale weaponisation of the dollar and technology since Russia’s invasion has reinforced China’s desire to establish an independent hemisphere of influence. Follow the money: increasing exports of technology and weapons to the Middle East are a further sign of things to come.
Chastened, the US and its G7 allies launched the Partnership for Global Infrastructure and Investment, which aims to provide up to $600 billion over five years for developing world infrastructure.9
But the West is late to the party. Most countries don’t want to take sides in a new Cold War, and many prefer China’s ‘no questions asked’ offer.
Latin America, Africa, Central Asia, South-East Asia, the Arctic, outer space – all the great ‘in-between’ regions are battlegrounds in this scramble for resources, markets and friends. And Europe is only lukewarm on the new Cold War.
The ocean depths are increasingly contested as advances in robotic technology open up deposits of submarine minerals. Above them, remote Indo-Pacific island nations astride important trade routes or military chokeholds are the subject of fresh struggles between China, the US, Australia and others. In the Arctic, major powers are jostling for control of hydrocarbons, metals and rare earths as melting ice improves access.
The gloves are already off. As economist Pippa Malmgren has noted, in January 2022 an undersea internet cable connecting the archipelago of Svalbard – home to a vital satellite receiving station – with the Norwegian mainland was severed. Several kilometres of cable were removed. In a Bond-worthy plot, an oligarch’s yacht was apparently parked over the relevant cable to disguise Russian submarine activity.10
Over 95% of global data is carried on undersea cables11 and, whilst attention has been focused on risks to gas pipelines after the Nord Stream bombings, Svalbard’s experience offers another warning: our digital jugulars are vulnerable.
And that Svalbard base station is busier than ever. Ukraine’s experience – from the role of US satellite precision targeting capabilities to Starlink internet access – underscores the importance of holding the highest ground.
Or, at least, denying it to others.
But the commodity most vital to dominance of global economic, political and military order is also the most complex to acquire.
9 White House briefing (26 Jun 2022)
10 Malmgren (25 Nov 2022), MoneyWeek summit
11 CSIS