Thursday, July 11, 2024

Geopolitical scrambling: China, Belarus, Turkey, India, Russia, Taiwan, Poland and more…

“This must be Thursday,' said Arthur to himself, sinking low over his beer. 'I never could get the hang of Thursdays. '” – Douglas Adams  ||   

Hi all! Today I step back from markets and focus on the geopolitical noise of the past few days – there’s a strong signal emerging.

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IN THIS NEWSLETTER:

Geopolitical scrambling:

• China, Belarus and Turkey

• India and Russia

• Taiwan, Poland and Saudi Arabia

• And more

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WHAT I’M WATCHING:

Geopolitical scrambling

There have been some deep moves on the geopolitical landscape over the past week. At face value, they seem like part of the firehose of chaos that is politics these days. But taken together, they are starting to suggest that the shift I’ve been talking about in this newsletter, with fragmenting military and economic alliances necessitating a rewiring of global finance, is starting to accelerate.

I’ll share just a few examples that jumped out:

China, Belarus and Turkey

Earlier this week, China and Belarus started joint military exercises just a few kilometres from the Polish border, just as the NATO summit kicks off in Washington DC. These are the first joint military exercises between the two powers in six years, and the first physically close to a NATO member.

This is being seen as a message to the west, which could be interpreted as China saying “we have friends”, and “careful with NATO expansion”. The relevance of this message is enhanced by the publication earlier today of a NATO communiqué calling China a “decisive enabler” of the war in Ukraine, and accusing China of posing “systemic challenges” to European interests and security. Those are astonishingly stern words from an organization that usually sticks to safe and careful language.

On the other hand, there is a remote possibility the timing of the exercises is coincidental, as the drills could be to showcase the accession of Belarus last week to the Shanghai Cooperation Organization (SCO), a Eurasia-led alternative to NATO. Then again, as an ambassador friend once told me, there are no coincidences in diplomacy.

(photo by DON JACKSON-WYATT via Unsplash)

For those not familiar, the SCO is a security alliance between member states China, Russia, India, Pakistan, Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Iran and now Belarus, covering almost 45% of the world’s population. For comparison, NATO covers roughly 12%.

Now, how’s this for a twist: Turkey wants to join the SCO, according to a statement from President Erdogan last week. But Turkey is a member of NATO. Can it be a member of both? Wouldn’t it have to come to the defence of one in the event of conflict with the other?

And which would Turkey choose if it had to do so?

Here’s an excerpt from President’s Erdogan statement:

“As Türkiye, we constantly draw attention to the shortcomings of the current international order.”

If it ends up choosing the SCO, does that mean we’d see joint military drills with China or with Russia on the Mediterranean? Unlikely, sure, but if things get tenser, it would be a strong lever to pull. 

What’s more, this is occurring at a time of discord within NATO itself, with Donald Trump’s repeated threats to leave the organization now becoming more relevant, and Hungary (a member) flat out refusing to participate in the bloc’s plans to help Ukraine. Earlier this week, Hungary’s leader Viktor Orban paid a surprise visit to China and met with President Xi Jinping, just days after meeting with President Putin in Russia. That also sends a message.

There’s another twist: last week, the SCO held its annual summit, astonishingly under-covered by western media. Present were the leaders of not only Turkey, but also Qatar and one of the UAE emirates.

A hint at the overall tone of the event can be seen in remarks by the host, Kazakhstan President Tokayev:

“Today, the world is facing serious challenges due to unprecedented geopolitical contradictions and growing conflict potential. The architecture of international security is under threat, which could lead to dire consequences for all of humankind.”

This may be sabre-rattling. Or, it could be a new phase of positioning. The heavy emphasis on “international order” in recent statements from all sides, coupled with threatening language, rings loud.

India and Russia

Indian Prime Minister Narendra Modi visited President Putin this week, despite concerted efforts from several of India’s key allies to isolate the Russian leader. India has staunchly maintained its neutrality, refusing to participate in US-led sanctions and abstaining in UN votes on the Ukraine conflict. But the image of the two leaders hugging was obviously a staged moment.