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EU, USA and Russian flags with chess pieces symbolizing the conflict and control of Ukraine

The end of the end of history

by Marc Saxer

With China’s rise and Russia’s war, the unipolar moment after the triumph of the West in the Cold War is over. Five scenarios for a new world order. With the invasion of Ukraine, Russia effectively destroyed the European peace order. Now, Europe needs to find ways to contain its aggressive neighbour, while its traditional protector, the United States, continues its shift of focus to the Indo-Pacific. This task, however, becomes impossible when China and Russia are driven into each other’s arms because, if anything, the key to end the war in Ukraine lies in Beijing. China hesitates to be dragged into this European war as bigger questions are at stake for the emerging superpower: Will the silk road be wrecked by a new iron curtain? Shall it stick to its ‘limitless alliance’ with Russia? And what about the territorial integrity of sovereign states? In short: for China, it is about the world order. The unipolar moment after the triumph of the West in the Cold War is over. The war in Ukraine clearly marks the end of the Pax Americana. Russia and China openly challenge American hegemony. Russia may have proven to be a giant with clay feet, and has inadvertently strengthened the unity of the West. But the shift of the global balance of power to East Asia is far from over. In China, the United States has encountered a worthy rival for global predominance. But Moscow, Delhi, and Brussels also aspire to become power hubs in the coming multipolar order. So, we are witnessing the end of the end of history. What comes next? To better understand how world orders emerge and erode, a quick look at history can be helpful.What is on the menu?Over the course of the long 19th century, a great power concert has provided stability in a multipolar world. Given the nascent state of international law and multilateral institutions, congresses were needed to carefully calibrate the balance between different spheres of interest. The relative peace within Europe, of course, was dearly bought by the aggressive outward expansion of its colonial powers. This order was shattered at the beginning of the World War I. What followed were three decades of disorder rocked by wars and revolutions. Not unlike today, the conflicting interests of great powers collided without any buffer, while the morbid domestic institutions could not mitigate the devastating social cost of the Great Transformation.    With the founding of the United Nations and the Universal Declaration of Human Rights, the foundations of a liberal order were laid after the end of World War II. However, with the onset of the Cold War, this experiment quickly ran into a quagmire. Pinched between two antagonistic blocs, the United Nations was in a deadlock for decades. From the Hungarian Revolution over the Prague Spring to the Cuban missile crisis, peace between the nuclear powers was maintained through the recognition of exclusive zones of influence. After the triumph of the West in the Cold War, American hyperpower quickly declared a new order for a now unipolar world. In this liberal world order, rule-breaking was sanctioned by the world’s policeman. Proponents of the liberal world order pointed to the rapid diffusion of democracy and human rights around the globe. Critics see imperial motifs at work behind the humanitarian interventions. But even progressives place great hopes in the expansion of international law and multilateral cooperation. Now that the West is mired in crises, global cooperation is again paralysed by systemic rivalry. From the war in Georgia over the annexation of Crimea to the crackdown in Hong Kong, the recognition of exclusive zones of influence is back in the toolbox of international politics. After a short heyday, the liberal elements of the world order are jammed again. China has begun to lay the foundations of an illiberal multilateral architecture.How will great power competition play out?In the coming decade, the rivalries between great powers are likely to continue with undiminished vigour. The ultimate prize of this great power competition is a new world order. Five different scenarios are conceivable.  First, the liberal world order could survive the end of the unipolar American moment. Second, a series of wars and revolutions can lead to the total collapse of order. Third, a great power concert could bring relative stability in a multipolar world but fail to tackle the great challenges facing humanity. Fourth, a new cold war may partly block the rule-based multilateral system, but still allow for limited cooperation in questions of common interest. And finally, an illiberal order with Chinese characteristics. Which scenario seems the most probable? Many believe that democracy and human rights need to be promoted more assertively. However, after the fall of Kabul, even liberal centrists like Joe Biden und Emmanuel Macron have declared the era of humanitarian interventions to be over. Should another isolationist nationalist like Trump or others of his ilk come to power in Washington, London, or Paris, the defence of the liberal world order would once and for all be off the agenda. Berlin is in danger of running out of allies for its new value-based foreign policy. In all Western capitals, there are broad majorities across the ideological spectrum that seek to up the ante in the systemic rivalry with China and Russia. The global reaction to the Russian invasion shows, however, that the rest of the world has very little appetite for a new bloc confrontation between democracies and autocracies. The support for Russia’s attack on the sovereignty and territorial integrity of Ukraine – values especially smaller countries unwaveringly adhere to – should not be read as sympathy for a Russian or Chinese-led order, but as deep frustration over the US empire. Seen from the Global South, the not-so-liberal world order was merely a pretext for military interventions, structural adjustment programmes, and moral grandstanding. Now, the West comes to realise that in order to prevail geopolitically, it needs the cooperation of undemocratic powers from Turkey to the Gulf monarchies, from Singapore to Vietnam. The high-minded rhetoric of the systemic rivalry between democracies against autocracies is prone to alienate these much-needed potential allies. But if even the West were to give up on universalism of democracy and human rights, what would be left of the liberal world order? Are the great power rivalries that play out in the background of the war in Ukraine, the coups in Western Africa and the protests in Hong Kong only the beginning of a new period of wars, coups, and revolutions?  The ancient Greek philosopher Thucydides already knew that the competition between rising and declining great powers can beget great wars. So, are we entering a new period of disorder? Not only in Moscow and Beijing, but also in Washington, there are thinkers that seek to mitigate these destructive dynamics of the multipolar world through a new concert of great powers. The coordination of great power interests in fora from the G7 to the G20 could be the starting point for this new form of club governance. The recognition of exclusive zones of influence can help to mitigate conflict. However, there is reason for concern that democracy and human rights will be the first victims of such high-powered horse-trading. This form of minimal cooperation may also be inadequate to tackle the many challenges humankind is facing from climate change over pandemics to mass migration. The European Union, an entity based on the rule of law and the permanent harmonisation of interests, may have a particularly hard time to thrive in such a dog-eat-dog world. Not only in Moscow, some fantasise about a revival of imperialism that negates the right to self-determination of smaller nations. This dystopian mix of technologically supercharged surveillance state on the inside and never ending proxy wars on the outside is eerily reminiscent of George Orwell’s 1984. One can only hope that this illiberal neo-imperialism is shattered in the war in Ukraine. The Russian recognition of separatist provinces of a sovereign state have rung the alarm bells in Beijing. After all, what if Taiwan follows this model and declares its independence? At least rhetorically, Beijing has returned to its traditional line of supporting national sovereignty and condemning colonialist meddling in internal affairs. There are debates in Beijing whether China should really side with a weakened pariah state and retreat behind a new iron curtain, or would benefit more from an open and rules-based global order. So, what is this ‘Chinese Multilateralism’ promoted by the latter school of thought? On the one hand, a commitment to international law and cooperation to tackle the great challenges facing humankind, from climate change over securing trade routes to peacekeeping. However, China is only willing to accept any framework for cooperation if it is on equal footing with the United States. This is why Beijing takes the United Nations Security Council seriously, but tries to replace the World Bank and the International Monetary Fund with its own institutions such as the Asian Infrastructure Investment Bank. If Chinese calls for equal footing are rejected, Beijing can still form its own geopolitical bloc with allies across Eurasia, Africa, and Latin America. In such an illiberal order, there would still be rule-based cooperation, but no longer any institutional incentives for democracy and human rights.Hard choices: what should we strive for?Alas, with a view of containing an aggressive Russia, a rapprochement with China may have its merits. For many in the West, this would require an about-face. After all, the recently fired German admiral Schönbach was not the only one who wanted to enlist Russia as an ally for a new cold war with China. Even if Americans and Chinese would bury the hatchet, a post-liberal world order would pose a predicament for Western societies. Is the price for peace really the right to self-determination of peoples? Is cooperation to tackle the great challenges facing humankind contingent on the rebuttal of the universality of human rights? Or is there still a responsibility to protect, even when the atrocities are committed in the exclusive zone of influence of a great power rival? These questions go right to the West’s normative foundation. Which order will prevail in the end will be determined by fierce great power competition. However, who is willing to rally around the banner of each different model differs significantly. Only a narrow coalition of Western states and a handful of Indo-Pacific value partners will come to the defence of democracy and human rights. If this Western-led alliance of democracies loses the power struggle against the so-called axis of autocracies, the outcome could well be an illiberal world order with Chinese characteristics. At the same time, the defence of international law, especially the inviolability of borders and the right to self-defence, are generally in the interest of democratic and authoritarian powers alike. An alliance for multilateral cooperation with the United Nations at its core finds supports across the ideological spectrum. Finally, there could be issue-based cooperation between different centres. If ideological differences are set aside, hybrid partners could cooperate, for instance, in the fight against climate change or piracy, but be fierce competitors in the race for high-tech or energy. Thus, it would not be surprising if the United States were to replace their ‘alliance of democracies’ with a more inclusive coalition platform. Politically, Germany can only survive within the framework of a united Europe. Economically, it can only prosper in open world markets. For both, a rules-based, multilateral order is indispensable. Given the intensity of today’s systemic rivalry, some may doubt its feasibility. However, it is worth remembering that even at the heyday of the Cold War, within the framework of a constrained multilateralism, cooperation based on common interests did occur. From arms control over the ban of the ozone-killer CFC to the Helsinki Accords, the balance sheet of this limited multilateralism was not too bad. In view to the challenges facing humankind, from climate change over pandemics to famines, this limited multilateralism may just be the best among bad options. For what is at stake is the securing of the very foundations of peace, freedom, unity, and prosperity in Europe. 

Currencies of US, China, Russia

Can Russia and China unseat the Dollar from its throne?

by Sauradeep Bag

​Although the dollar continues to be the dominant global currency, Russia and China could dent this dominance. In the aftermath of global financial exclusion, Russia has had to make some strategic adaptations. The West’s sanctions had crippling consequences, and the Kremlin scrambled to find alternatives. In light of these developments, China became an important ally, and the Yuan—its currency—has taken on a more prominent role. It is telling that in Russia, the yuan has surpassed the United States Dollar (USD) in trading volume, a feat achieved a year after the Ukraine conflict, which triggered a series of sanctions against Moscow. As Russia and China band together, one wonders what other shifts will take place and how they will shape the future. Change is afoot, and the Russian market bears witness. The month of February saw a watershed moment as the yuan surged past the dollar in monthly trading volume for the first time. The momentum continued into March as the gap between the two currencies widened, showcasing the growing sway of the yuan. It’s an impressive feat, considering that the yuan’s trading volume on the Russian market was once quite insignificant. The winds of change blew through Russia’s financial system as the year progressed. Additional sanctions had taken their toll on the few remaining banks that still held power to make cross-border transactions in the currencies of countries that had been deemed “unfriendly” by the Kremlin. One such bank was Raiffeisen Bank International AG, whose Russian branch played a significant role in facilitating international payments within the country. However, the lender found itself under the watchful eye of both European and US authorities, which only added to the pressure. These events spurred the Kremlin and Russian companies to shift their foreign-trade transactions to currencies of countries that had not imposed sanctions.Converging coalitionsThe bond between Russia and China is growing stronger, with both nations seeking to bolster their positions on the global stage. Their alliance has spread across various spheres: military, economic, and political. With relations between Russia and the West crumbling, China has emerged as a key partner for Russia, providing it with the necessary support to counter economic and political pressure. On the other hand, China is keen on expanding its global reach, especially in the Eurasian region, and sees Russia as an important ally in this regard. President Xi Jinping’s recent visit to Moscow and his pledge to expand cooperation are likely to take this partnership to greater heights. Trade and investment ties are set to grow stronger, with both nations seeking to reduce their dependence on Western economies. Russia’s focus on infrastructure development and mega projects is also likely to benefit from China’s expertise in these areas. Energy is another significant area of collaboration, with Russia being a leading exporter of oil and gas and China being the world’s largest importer of these resources. Technology is also an essential domain, with both countries investing heavily in research and development to remain competitive in the global economy. While the alliance between Russia and China will likely have far-reaching geopolitical consequences, it is a complicated relationship with both nations pursuing their interests, even as they work towards common goals. As a result of Western sanctions, Russia has shifted its foreign trade transactions away from the dollar and euro to currencies of non-restricted countries. By doing so, the Kremlin and Russian companies hope to decrease their dependence on the Western financial system and explore new avenues for conducting their trade and economic activities. This shift in strategy reflects Russia’s determination to maintain its economic stability despite restrictions on its access to the global financial system. It also underlines the growing importance of alternative currencies in global trade as countries strive to minimise the impact of sanctions and safeguard their economic interests.Structural overhaulsThe Russian Finance Ministry was not immune to the winds of change either. Earlier this year, it made the switch from the dollar to the yuan for its market operations. It even went a step further by devising a new structure for the national wealth fund, earmarking 60 percent of its assets for the yuan. The Bank of Russia joined the chorus, urging its people and businesses to consider moving their assets to the rouble or other currencies considered “friendly.” This would help mitigate the risk of having their funds blocked or frozen. As the world undergoes a seismic geopolitical shift, it seems Russia is moving in tandem, searching for ways to secure its economic future. However, the dollar still reigns supreme in the Russian market. Even with all the changes taking place, it remains the most widely used currency, ceding its throne only occasionally to the yuan. This underscores the enduring dominance of the dollar, which has played a significant role in Russia’s financial landscape for years. However, as the world continues to evolve, one wonders how long it can hold on to its crown.

The leaders of four BRICS countries, Lula, Xi Jinping, Cyril Ramaphosa with Russian Foreign Minister Sergey Lavrov

BRICS and the West: Don’t Believe the Cold War Hype

by Cedric H. de Coning

While it is prudent to be cautious, it may also be wise to explore cooperation in those areas where there are shared interests rather than assume that the BRICS and the West are strategic rivals on all fronts.This analysis was first published in the Global Observatory, 30 August 2023.When Jim O’Neill coined the BRIC acronym in 2001, the point he was trying to convey was that the global economic system needed to incorporate the world’s largest emerging economies. His advice fell on deaf ears and in 2009, Brazil, China, India and Russia decided to take matters into their own hands and formed the BRIC grouping. South Africa joined the group in 2010 to form the BRICS. This July, the group held its 15th summit in South Africa, where they decided to add six new members: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates. More are likely to join in the future, including countries like Indonesia and Nigeria. What these countries have in common is a frustration, if not a grievance, about being side-lined to the periphery of the world economy. Together, the BRICS represent approximately 40% of the world’s population. The combined size of their economies are approaching approximately 30% of the world’s GDP, which puts them roughly on par with combined size of the economies of the G7 countries, depending on whether size is measured in GDP or PPP.  More importantly, in the next few decades, the combined size of the BRICS economies will surpass that of the G7. Despite this growing parity, all the members of the BRICS, with the exception of Russia, self-identifies as being part of the Global South, i.e., they feel excluded from a global system dominated by the Global North. Their stated aim is to work towards a future system of global governance where they will have equal political and economic say in global institutions, and where no one state will dominate others. In pursuit of this aim, BRICS countries have established their own development bank, set up their own contingency reserve arrangement, are developing their own payment system, and have started to trade with each other in their own currencies. The BRICS want to free their economies from the dollar-based international financial system. They feel exposed to United States interest rates that can have a negative effect on their economies, for no domestic reasons. The dollar-based financial system also provides the US with significant advantages in the global economy, which the BRICS see as unfair. They also feel a dollar-based financial system gives the US hegemonic influence in global affairs, through for example, exerting US jurisdiction on all dollar-based trade or investments that flow through US banks or financial institutions. While the BRICS countries have these clear shared macro-economic interests, many of the members also have competing interests in other domains. China and India are geopolitical rivals in South Asia. Egypt and Ethiopia are at loggerheads over the Nile. Brazil, India, South Africa and the newly-added Argentina are democracies, while other countries in the group are governed by a diverse set of autocratic regimes, which could set up an irreconcilable clash of values on some issues. Many of the members of the BRICS also have close ties to the United States and Europe, including Egypt, India, Saudi Arabia and South Africa. South African President Cyril Ramaphosa, in a televised statement to the nation on the eve of hosting the BRICS summit in South Africa, explained that South Africa remains non-aligned, and he announced that in 2023 the country will also host a major United States-Africa trade meeting and an EU-South Africa summit. South Africa will also host the G20 in 2025, the first in Africa. For many countries, membership of the BRICS does thus not necessarily imply aligning themselves with one global alliance versus another, but rather cooperation in a group around a series of shared interests. Where does this place the BRICS on the Russian war in Ukraine? The BRICS summit in Johannesburg steered clear of taking a position on the war, other than welcoming mediation aimed at resolving it through dialogue and diplomacy. Some BRICS members like Iran are clearly supporting Russia, while most others have stopped short of either supporting or condemning Russia. For many such as Egypt, the war has adversely affected their economy. Two of the BRICS members, Egypt and South Africa, are part of an African initiative to seek a mediated end to the conflict, which is perhaps the first African initiative to mediate an international conflict. Overall, however, the BRICS have their eyes on the medium- to long-term transformation of the global macro-economic and financial system, and countries like China are probably frustrated that the Russian war in Ukraine has drawn attention away from this larger objective. Are the BRICS and the West headed for a new cold war? The shift in the center of gravity of the global economy to the East is an unstoppable fact driven by demographics and economic factors like the cost of production. At the same time, Europe and the United States will remain major economic players. In tandem with these changes in the global economy, it is clear that the global political order will become more multipolar, with China, Europe, India, and the United States representing some of the major centers of influence. In an August 27 article, Jim O’Neil argues that the influence of the BRICS will be determined by their effectiveness, not their size. An expanding BRICS will most likely succeed in helping its members to break free from a dollar-based international financial system, but that will take several decades of incremental change before it reaches a tipping point. Whether that is a good or bad thing depends on the degree to which your economy is tied to the United States. Many of the BRICS countries, including China, Egypt, India, Saudi Arabia, and South Africa all have economies whose prosperity are closely tied to the Unites States. They will thus have an interest in a slow, stable freeing up of the international financial system, and this should give everyone that is prudent time to adapt. The same logic also applies to changes in global governance architecture. Apart from Russia, all the other BRICS countries have an interest in making sure that changes in the global order are managed at a slow steady pace that does not generate instability. All the BRICS countries, apart from Russia, are also strong supporters of multilateralism, with the United Nations at its center. Many Western countries and BRICS members may thus have more shared interests than the doomsday headlines suggest. While it is prudent to be cautious, it may also be wise to explore cooperation in those areas where there are shared interests rather than assume that the BRICS and the West are strategic rivals on all fronts.

Vladimir Putin, Hassan Rouhani, Recep Tayyip Erdoğan

Iran’s role in the world: from isolation to alliances?

by Revista IDEES

한국어로 읽기Leer en españolIn Deutsch lesen Gap اقرأ بالعربيةLire en françaisЧитать на русском Rising tensions in the Middle East, with the risk of escalation in the confrontation between Israel and Iran against the backdrop of the Gaza conflict, represent a major change in the unwritten rules of this underground war between the two countries. From Iran’s perspective, the change in Israeli strategy violates the tacitly agreed rules of engagement. In particular, it removes the ambiguity that prevented attributing direct responsibility for attacks to either side, allowing the attacked party to limit the damage to its image and dissuading it from retaliatory actions that carry the risk of dangerous escalation. Iran’s response has also revealed a shift in its own strategy. For years, its position towards Israel and the US revolved around what was termed ‘strategic patience’, a long-term approach that involved strengthening the influence of its proxies in the region. In this sense, Hezbollah is its main export product, its most successful destabilisation model in that it is much more than a militia in Lebanon, even more than a state within the state: it is a state above the state, as it has the capacity to impose its own strategic objectives on the Lebanese state. This strategy of patience was based on the conviction that the networks Iran had been building allowed it to project its power without risking direct confrontation and its associated costs. However, the current dominance of conservative political figures in Tehran who see this strategic patience as a sign of weakness has led to the prevalence of more intense retaliation than usual, albeit below the critical threshold of outright conflict. This strategic shift has been evident in recent months. Thus, in January, Iran attacked targets in northern Iraq and Syria, claiming they were linked to Israel or the Islamic State, and a few days later launched strikes on Pakistani soil, demonstrating that the era of strategic patience is over. Broadening the focus, this episode reveals the dangers that prolonged tension between the two countries poses to an international security system suffering from prolonged US and EU inaction on the Palestinian issue and poisoning regional relations, as an open conflict between Iran and Israel would set the entire Middle East on fire and could degenerate into a nuclear crisis. With regard to Europe, this would pose a serious danger to its security and economy, as it could provoke large waves of migration to the EU, jeopardise the trade routes on which its economy depends and threaten energy supplies. The EU should therefore adopt a common policy to contain the risks associated with these dynamics. This means devoting more effort to resolving the Palestinian question and reactivating its conflict management capacity, keeping channels of communication open with all parties involved. Ultimately, it is urgent for the EU to intervene decisively and support inclusive dialogue in the Middle East to minimise the risk of full-scale war, before it is too late. These strategic shifts are taking place against a backdrop of growing internal contestation in Iran, where the Women, Life, Freedom movement has put an end to the idea that the regime was reformable and created a situation where both sides are at an impasse: on the one hand, a regime that disowns the majority of society and, on the other, a popular majority that disowns the regime. On the other hand, these tensions explain in large part why the regime continues to avoid a full-scale war, as it perceives that it is in a weak position with a population that has been in open revolt for almost two years. In addition, the destabilising role of ethnic minorities (Azeri, Kurds, Arabs, Turkmen, and Baluchi) who represent more than half of the population, with their long history of grievances, such as systematic repression, poverty, poor access to public services, environmental degradation and the eradication of their languages and cultures has also increased. Iran’s multi-ethnic nature is thus also an important part of Iranian politics and a source of tensions that has usually been omitted from Western readings. Western pundits tend to look at Iran through the eyes of its Persian elite, just as they used to look at Russia from Moscow’s point of view, ignoring these different realities and their disruptive potential. However, the Iranian regime is well aware that if the majority of Persians who dominate the opposition hate the regime, they hate the prospect of losing control over the provinces even more, and Tehran is appealing to Persian nationalist sentiment to try to divide the opposition, claiming that only the current government can maintain control over the minority areas of the country. We will have to pay attention to the political, social and generational implications these movements have in a context where years of sanctions by Western powers have impoverished the main agents of change, namely the highly educated, open-minded and pro-Western middle class. These sanctions have been the main factor in strengthening economic ties between Russia and Iran, which share strategic objectives such as facilitating bilateral trade, accelerating the completion of the International North-South Transport Corridor (INSTC) and strengthening the banking systems of both countries to facilitate financial transactions. In addition, what will be the impact of Iran’s entry into the BRICS+, along with its great regional rival, Saudi Arabia. In this regard, Iran has demonstrated its diplomatic flexibility by initiating since 2021 a process of normalisation of relations with the great powers of the Middle East, most of which had broken off diplomatic relations with Tehran, sometimes since the very founding of the Islamic Republic. Faced with the threat that the consolidation of the Abraham Accords and the normalisation of relations between Israel and the Arab world could pose, Iran embarked on a new diplomatic strategy, where Egypt has become one of the main targets, after Saudi Arabia and the Gulf monarchies. In this sense, a normalisation of relations between the two countries would constitute a second major diplomatic victory for Iran after its successful rapprochement with Saudi Arabia. Also relevant is that Iranian President Ebrahim Raisi has recently visited Pakistan and Sri Lanka, two countries that have faced one of the worst economic crises in the region in recent years, and which hope to benefit from cooperation with Iran. Raisi’s trip demonstrates to the world that Iran remains diplomatically active despite instability in the Middle East, while reflecting a notable geopolitical trend: Iran is increasing its ties with South Asia with the intention of pushing an anti-Western and anti-Israel agenda through strengthening bilateral relations with certain countries in the region, most notably India and China, In parallel, Iran also seeks to diversify alliances in Latin America through a soft power strategy that allows it to position itself as a victim of Western harassment and to gain sympathy, political and strategic support in a region where, despite cultural and political differences, regimes such as Cuba, Nicaragua and Venezuela share the goal of establishing a new world order. In short, the Tehran regime is emerging from the isolation in which it has been immersed since the triumph of the Islamic Revolution in 1979, on the one hand by establishing alliances of circumstance such as the one it has been forging for some years now with Russia in the military and economic spheres and, on the other, by taking advantage of the loss of influence of the United States and the West in the region to normalise its relations with its great regional rival, Saudi Arabia, and other relevant actors such as Egypt and the Gulf monarchies, taking advantage of the loss of influence of the United States and the West in the region to normalise its relations with its great regional rival, Saudi Arabia, and other relevant actors such as Egypt and the Gulf monarchies, and betting on expanding its international influence through its membership of the BRICS+, thus taking the long road from isolation to strategic alliances.