Geopolitical Dynamics Analysis

Iran’s attack on Israel confirms BCA Geopolitical Strategy’s view since Oct 12, 2023 that the conflict in Israel would expand. Specifically we argued that Israel would pivot to Hezbollah/Iran as it achieved its aims in Gaza against Hamas. Our decision tree (pasted below), last updated on Dec 18 here, shows that events are trending toward the third scenario, conflict between Israel and Iran. However, we need to see if Iran’s attack is successful, what is the targeting and the hit rate, and whether the attack kills Israeli citizens or damages critical infrastructure. Going forward, Israel will retaliate to Iran’s retaliation. The effectiveness of Iran’s attack will determine whether Israel retaliates in a major way or not, and also whether the US gets involved. The US is striving to avoid involvement for fear of oil shock in election year. Israel will also continue to target Hezbollah and its lines of communication with Iran, as Israel will seek to push the buffer zone out of northern Israel and back into southern Lebanon. So if Iran’s attack is ineffective, then the episode may pass but the regional escalation of tensions will continue. For now, we would not upgrade the odds of an oil shock. Instead recent events vindicate our 30% odds of a major oil shock (recessionary) before the US election, and 46% of a minor oil shock (non-recessionary).

The AI race isn’t just about the U.S. and China - it’s about the new world order forming around them. If you’re not one of the two superpowers, you’re now a swing state. That’s the geopolitical reality of this moment. We’re seeing real-time alignment shifts, like Trump’s recent $3 trillion AI megadeals with the Gulf states - UAE, Saudi, Qatar - all focused on infrastructure and services, even powered by NVIDIA. That’s not just business. That’s power being brokered through AI. Europe? Should be a contender. Has the talent, has the capital. But the EU’s structure is its Achilles heel. Twenty-seven countries, no unified industrial policy, no cohesive energy strategy - it’s fragmentation at a time that demands speed and scale. Meanwhile, China’s long game with the Belt and Road was built on the insight that infrastructure is both hard and soft power. But now the U.S. is countering with its own tech-fueled version - and pulling major players into its orbit. What we’re witnessing isn’t just a tech rivalry. It’s the reshaping of global alliances through the AI economy.

Geopolitical instability isn’t just a policy issue it’s a cyber risk multiplier. Here are three key impacts to help shape how you think about cyber risk internally. 1. Nation State Attacks Evolve Tactics Conflicts drive innovation. Nation state groups are shifting tools, infrastructure, and even targeting methods sometimes blurring the lines between espionage and disruption. Incident responders need to stay ahead of these new TTPs and pivot investigative playbooks accordingly. 2. Surge in Financially Motivated Attacks Geopolitical events create economic ripple effects. Sanctions, instability, and currency devaluation often lead to a spike in ransomware and extortion attempts by actors looking to fill financial gaps. Response plans must now account for more frequent and aggressive financially motivated attacks. 3. Hacktivism on the Rise We're seeing a resurgence of politically driven cyber activity. These groups may lack sophistication, but their speed, volume, and ability to generate headlines make them a significant disruption risk. Organizations need clear internal and external communication strategies when these groups strike. In times of geopolitical tension, response readiness isn’t just about technical capability it’s about agility, clarity in communication, and situational awareness. It’s not enough to detect and contain. You have to explain, defend, and respond fast. How are you adapting your response strategy in light of current global tensions?

Trade relationships are reconfiguring.  To check on the latest, and understand the role of geopolitics, my colleagues and I just published, "Geopolitics and the geometry of global trade-2024 update." Read it here: https://lnkd.in/gXuEMBzQ   Countries are trading more with geopolitically aligned partners. Trade’s “geopolitical distance” dropped by 7 percent between 2017 and 2024.  But the geographic distance of trade has grown slightly – so no global signature of nearshoring.   Patterns vary by country and also by sector. Overall, in the US, Germany, the UK and China, geopolitical distance of trade is dropping. The US has continued to shift trade away from China and toward other economies such as Mexico and Vietnam – sometimes when these economies form an intermediate step in flows between China and the US. European economies have drastically cut trade with Russia and increased with others, notably the US. Developing economies, rather than advanced ones, now account for the majority of China’s imports and exports.   On the other hand, developing economies such as ASEAN, Brazil, and India continue to strengthen trade ties across the geopolitical spectrum and across the globe.   More change may be in store.    To see strategic opportunity and mitigate downsides, firms should monitor changes in the geometry of trade – as well as future-looking factors like FDI and potential tariffs.   For every trade tie that weakens, another may grow stronger (just see the chart of shift in US import partners since 2017). Markets of greatest opportunity will shift, influencing manufacturing, supply chains, sales and marketing, and even product development. Scenario planning and structural segmentation of parts of the business across the world can help with resilience.  

🚨 Red Cell Friday: Iran's Use of Proxy Forces 🚨 🔥 This week’s Red Cell analysis highlights Iran’s strategic use of proxy forces as central to its foreign #policy and military strategy. These groups enable #Iran to project power and influence across the Middle East and beyond while maintaining plausible deniability. 💡 By funding, arming, and training these #proxygroups, #Iran extends its reach and creates instability in key regions: 🔫 #Military Influence – Leveraging groups like Hezbollah and militias in Iraq and Syria to exert influence and disrupt regional stability. 🌍 #Political Manipulation – Using proxies to destabilize governments, influence political outcomes, and further Iranian interests. 💥 #Asymmetric Warfare – Employing irregular tactics like guerrilla warfare, cyberattacks, and missile strikes via proxies to challenge stronger state actors. 💰 #Financial Networks – Funding proxy operations through illicit activities, smuggling, and connections to criminal networks. 🎯 #Terrorism – Supporting proxy groups with ties to terrorism to instill fear, target adversaries, and shift regional dynamics. 🔴 Iran's proxy #strategy allows it to act aggressively while avoiding direct confrontation with state actors. The web of proxy networks destabilizes regions and creates long-term threats to #US and allied interests. ✅ Understanding and countering this strategy requires coordinated #intelligence, #military, and #diplomatic efforts to disrupt Iran’s proxy #networks and limit their influence. 🔍 What are the most effective ways to counter proxy warfare strategies? Let’s discuss. #RedCellFridays #NationalSecurity #ProxyWarfare #Iran #StrategicCompetition #MiddleEast #AsymmetricWarfare #Geopolitics Image from the internet

Recent risk assessments have highlighted the escalating concerns surrounding macroeconomic and geopolitical risks, particularly in relation to shifts in policies and priorities impacting operations and market conditions. The sensitivity of businesses to geopolitical and security issues, such as tariffs, sanctions, embargoes, and trade restrictions, poses a real threat to operations. To address these risks effectively, proactive risk organizations are implementing integrated risk management practices. These practices involve continuously reassessing enterprise risks, updating exposure information, and aligning operations to develop informed contingency plans. Some of the key considerations and actions being taken include: - Supply Chain Diversification or Re-location: Exploring options to diversify supply chains or relocate operations to mitigate risks associated with geopolitical and macroeconomic uncertainties. - Negotiated Price Lock-ins, Cost-sharing, or Hedges: Engaging in negotiations to secure price lock-ins, cost-sharing agreements, or hedging strategies to manage financial exposure to fluctuating market conditions. - Inventory Buffers: Building up inventory buffers to cushion against supply chain disruptions or delays resulting from geopolitical tensions or policy changes. - Tariff Engineering, Product Reclassifications, or Exemption Filings: Strategizing tariff engineering tactics, reclassifying products, or filing for exemptions to navigate changing tariff landscapes effectively. - 'Wait and See' :): Monitoring developments closely and adopting a cautious 'wait and see' approach to assess the evolving geopolitical and macroeconomic landscape before making strategic decisions. By aligning risk management practices with operational strategies, organizations can enhance their resilience in the face of geopolitical and macroeconomic uncertainties, ensuring a more robust and adaptive business model.

I had the pleasure to speak at Georgetown University Walsh School of Foreign Service 美國喬治城大學 where Nishank Motwani, PhD and I discussed the changing geopolitical dynamics in the Indo-Pacific under #Trump administration. Here are some key takeaways: 1. Selective #decoupling: Especially in semiconductors, AI, critical minerals, defense technologies. 2. In #ASEAN reguon, we are seeing harder #deterrence posture, with greater hedging — no one wants to choose sides, but Vietnam, Philippines, Singapore are quietly deepening defense ties with U.S. and Japan. 
3.Trump’s policies are accelerating strategic #self-reliance among U.S. allies while deepening Indo-Pacific defense networking. But they also introduce a degree of strategic anxiety over U.S. reliability. How should MiddlePowers Like Australia and Taiwan navigate U.S.-China competition? 1.One big challenge is #Security-Economy #Dilemma. Security alignment with U.S. strengthens defense but invites Chinese economic retaliation (tariffs, boycotts, investment bans). On the other hand, there’s pressure from U.S. to align on sensitive issues versus pressure from China to stay neutral. Some potential pathways: A)Maintain deep security cooperation with the U.S. while keeping pragmatic economic channels open with China.Australia diversifying trade toward India, Southeast Asia, Europe post-China coercion. * Minilateralism and Issue-Based Coalitions: * Form flexible groupings (#Quad, AUKUS Pillar II, Indo-Pacific Maritime Domain Awareness) without being locked into binary blocs. *#Taiwan can engage more with regional democracies on cybersecurity, disaster relief, economic security without being seen as purely a military provocation. B) Build resilience against Chinese coercion by reducing overdependence. Australia's shift toward critical minerals exports, green energy partnerships. 3. Middle powers must emphasize #agency — that they are choosing partnerships based on sovereign interests, not merely aligning under U.S. pressure. Thanks Howard Cheng-Hao Shen for the kind invitation.

Exploring the Unseen Effects: How the Ukraine War Shaped Energy Markets? Since the invasion of Ukraine happened, the world's energy markets have really felt the impact in big ways. While we can see some of these effects right away, there are many more complex results hidden beneath the surface. These have changed how the whole world deals with energy. 📈 One often overlooked aspect is the shift in investment patterns within the energy sector. Uncertainty stemming from geopolitical tensions has led to a reevaluation of risk profiles, prompting investors to reconsider traditional energy sources in favor of more stable and sustainable alternatives. This transition not only reflects a growing awareness of the need for energy security but also underscores the pivotal role of geopolitical events in shaping investment decisions. Moreover, the Ukraine war has underscored the interconnected nature of energy markets, highlighting the vulnerabilities that arise from reliance on specific regions for energy supply. This realization has spurred efforts to diversify energy sources and enhance resilience against potential disruptions, driving innovation and collaboration across the industry. Beyond the immediate economic implications, the conflict in Ukraine has sparked conversations around the ethical dimensions of energy production and consumption. The spotlight on fossil fuel dependence has intensified calls for a transition towards cleaner, more sustainable energy sources, prompting governments and businesses to reevaluate their long-term strategies in alignment with climate goals. In the realm of energy security, the Ukraine war has served as a wake-up call, prompting stakeholders to reassess their approaches to risk management and contingency planning. The need for robust strategies to mitigate geopolitical risks and ensure uninterrupted energy supply has become increasingly apparent, paving the way for new frameworks and partnerships aimed at enhancing resilience in the face of uncertainty. Looking ahead, the lessons learned from the Ukraine war are poised to shape the future of energy markets in profound ways. Follow Ravi Choudhary for more such insights on #renewableenergy #sustainablenergy #solarenergy #renewableenergynews #sustainability

“Southeast Asian states are not without agency amid heightened major power competition, but the key question is whether and how they choose to exercise it. Anwar’s vision of shaping a more diverse but interconnected world order, where nations like Malaysia determine that security lies in and with the region rather than from the region, represents a good balance between national interests and regional and global responsibilities. At the same time, as with any vision of this kind, the challenge for any leader is to bring along their own people at home and build coalitions with enough like-minded partners abroad.” “It is not uncommon to hear from Southeast Asia’s officials that while countries are no strangers to competition, zero-sum competition if narrowly framed by major powers can also limit the maneuverability for smaller powers, consume the attention of policymakers at the expense of wider security challenges like climate change, and avoid addressing longstanding issues around the lack of diversity with the international order. Yet as Anwar points out, Southeast Asian countries can manage this if they “cast off inertia” and not only reinforce ASEAN mechanisms, but also engage with other subregions like the South Pacific to further elevate the voices of the so-called Global South.”  “While these creative, globally-minded approaches have their merit, the reality is that heightened major power competition is also partly contingent on getting its region itself in order. That list alone is quite long, and Anwar's speech touched on some of these, including rebuilding what he called ASEAN’s “increasingly fractured unity;” contending with China’s gray zone coercion and acting on Myanmar, where inaction would constitute “a dereliction of collective responsibility.” Malaysia will have an important role to play in this, including in its 2025 ASEAN chairmanship year as the grouping navigates through to its post-2025 vision." Read more: https://lnkd.in/ehm4p2QU #southeastasia #asean #malaysia #anwar #myanmar #southchinasea #china #geopolitics

Fascinating insights into 𝗦𝗮𝘂𝗱𝗶 𝗔𝗿𝗮𝗯𝗶𝗮'𝘀 𝗿𝗲𝗻𝗲𝘄𝗮𝗯𝗹𝗲 𝗲𝗻𝗲𝗿𝗴𝘆 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗮𝗻𝗱 𝗶𝘁𝘀 𝗴𝗲𝗼𝗽𝗼𝗹𝗶𝘁𝗶𝗰𝗮𝗹 𝗶𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀 in this piece from the Center on Global Energy Policy at Columbia University. 𝗦𝗼𝗺𝗲 𝗶𝗻𝘁𝗲𝗿𝗲𝘀𝘁𝗶𝗻𝗴 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀: • Saudi Arabia is pushing the envelope with its target to expand its share of renewable power to at least 50% by 2030.  • This aggressive pursuit of renewables isn't just about domestic diversification; it's a calculated move to maintain its global energy leadership as the world transitions away from fossil fuels.  • The kingdom is forming significant partnerships, particularly with China, to drive its renewable energy vision. These partnerships not only bring in investments in advanced technology and localized manufacturing, but also have the potential to reconfigure geopolitical alliances, challenging existing dynamics and promoting a multipolar energy market. 𝗔 𝘀𝗽𝗲𝗰𝗶𝗮𝗹 𝘀𝗵𝗼𝘂𝘁-𝗼𝘂𝘁 𝘁𝗼 𝗺𝘆 𝗶𝗻𝗰𝗿𝗲𝗱𝗶𝗯𝗹𝘆 𝘁𝗮𝗹𝗲𝗻𝘁𝗲𝗱 𝘄𝗶𝗳𝗲, Rawan Alfehaid, who co-authored this thought-provoking piece. Proud of you!