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The words geopolitical, strategic, and geostrategic are used to convey the following meanings: geopolitical reflects the combination of geographic and political factors determining the condition of a state or region, and emphasizing the impact of geography on politics; strategic refers to the comprehensive and planned application of measures to achieve a central goal or to vital assets of military significance, and geostrategic merges strategic consideration with geopolitical ones.
Geopolitics started as the analysis of the geographic influences on power relationships in international relations. In contemporary discourse, geopolitics has been widely employed as a loose synonym for international politics. Geopolitics has continued to influence international politics, serving as the basis for the United States’ Cold War strategy of containment, which was developed by George Kennan as a geopolitical strategy to limit the expansion of the Soviet Union.
Geopolitical risks emerge when the interests of countries in defined policy areas collide, or when the international system at large is undergoing transformation. Country-level risks emerge when the national political environment, the stability of the government and institutions, or legislation has measurable economic consequences for companies acting in that market. Regulatory risks emerge when governments — at the international, national or local level — change the rules or implementation of environmental, health and safety, financial market, and other regulations. Societal risks emerge when groups, from trade unions to consumer bodies, launch public activism such as boycotts or protests that have consequences for markets and companies operating globally.
As the novel coronavirus spreads globally, governments’ responses are evolving even as public health officials race to learn more about how the virus works and how to treat it. These government policy responses — from school closures and shelter-in-place directives to expanding unemployment insurance and injecting financial markets with liquidity — create political risks for companies, because these policies are largely unpredictable due to the fast-moving nature of the pandemic and its incredibly high impact on business; in some cases, the survival of entire industries is at stake.
Geopolitical risks for Industry
Political risk — a political event that alters the expected value of a business investment or economic outcome — can emerge from international, country-level or civil society actors. The overall incidence of political risk has increased dramatically in recent years — hitting a post-World War II high in the 2016–2018 period, according to research we conducted in collaboration with the Wharton School’s Professor Witold Henisz. Political risks manifest across four levels: geopolitical, countrylevel, regulatory and societal .
Geopolitical tensions are also mounting as countries close their borders to people and goods from abroad. Executives need to monitor these risks, identify how they will affect business activities, and proactively manage them as part of a structured and comprehensive approach to crisis management and business resilience.
Geostrategy is the incorporation of political risk assessment into risk management, strategy and governance. Geostrategy is the geographic direction of a state’s foreign policy. More precisely, geostrategy describes where a state concentrates its efforts by projecting military power and directing diplomatic activity. The underlying assumption is that states have limited resources and they must focus politically and militarily on specific areas of the world. As with all strategies, geostrategy is concerned with matching means to ends—in this case, a country’s resources (whether they are limited or extensive) with its geopolitical objectives (which can be local, regional, or global). Geostrategists, as distinct from geopoliticians, approach geopolitics from a nationalist point of view.
Geostrategy is about securing access to certain trade routes, strategic bottlenecks, rivers, islands and seas. It requires an extensive military presence, normally coterminous with the opening of overseas military stations and the building of warships capable of deep oceanic power projection. It also requires a network of alliances with other great powers who share one’s aims or with smaller “lynchpin states” that are located in the regions one deems important.
Political geographers also began to expand geopolitics to include economic as well as military factors. Geopolitics has also influenced Industry and technology.
Emerging geopolitical trends
The US-Chinese Cold War: Relations between the world’s two superpowers have fallen to their lowest level in decades. Flashpoints such as Taiwan, Hong Kong and the South China Sea will threaten to lead to clashes between the two sides, while the two countries vie for global economic and technological leadership. Given the vast influence of both countries, any worsening in this relationship will have global repercussions.
China is now the world leader in technology: it invests more in R&D than any other country, 2.4% of its gross domestic product, in 522 laboratories and 350 engineering research centers. It could soon become the world leader in machine learning, the technology with the most significant disruptive potential. It has pioneered the automation of its production centers and the retraining of its workers: its companies have more robots in operation than any other country in the world, which allows them to produce not only more, but also better, with a much lower percentage of errors.
In addition, it is the world power with the best technological protection and the greatest internal stability thanks to a Great Electronic Wall it has been building for years. It also has the best and most advanced distribution in the world, while its pioneering electronic currency gives its monetary policy additional degrees of freedom.
China and India: Last year’s clashes between the world’s two most-populous countries in the Himalayas were a reminder of the range of issues that divide the two countries. With both sides keen to portray themselves as leading powers in the 21st century, neither is likely to back down on their territorial claims along their shared border, raising the likelihood of more clashes in the coming year. This could harden both sides’ position on these issues and could push India into the arms of an emerging alliance in the Asia-Pacific region aimed at offsetting China’s rising power.
Vaccine Politics: As an increasing number of effective vaccines for Covid-19 are rolled out, the focus will shift from the development of such vaccines to their distribution, and here political tensions could arise. While countries such as the United States and the United Kingdom are likely to have most of their populations vaccinated by mid-2021, other countries, especially poorer ones, might have to wait until the following year to undergo mass vaccinations. This could further widen the North-South split and add to risk levels in countries where vaccinations are delayed.
Iran’s Nuclear Program: A new administration in the United States has raised hopes that tensions surrounding Iran’s nuclear program and its ambitions in the Middle East can ease. However, Iran is facing a presidential election in 2021 and hardliners are determined to scupper any potential concessions to the United States over Iran’s nuclear program. At the same time, an alliance of Middle Eastern countries, including Israel and Saudi Arabia, has coalesced around the notion that Iran’s efforts to gain influence in the Middle East need to be countered.
Cyber Terrorism: While the threat of cyber terrorism continued to grow over the past year, there are serious concerns that the world has only experienced a very small level of the true threat posed by potential cyberattacks. With both state and non-state actors becoming more adept at carrying out attacks in the cyber realm, the threat to global security and the economy will continue to grow. This raises the possibility of one of more debilitating cyberattacks in 2021, something that could trigger an actual conflict outside of the cyber sphere.
Geopolitics of Technology
Geopolitical competition is driving technological innovation and, in turn, the race to innovate is catalyzing competition between the emerging power blocs.
Technology’s crucial role in the global economy, national competitiveness, geopolitical competition and national security is amplified by the COVID-19 pandemic. With so many employees working from home around the world, never before has remote server bandwidth and stable internet connections in homes been more important. Robotics and artificial intelligence (AI) are also increasingly important in keeping factories and warehouses operating efficiently. And of course, biotechnologies and life sciences will be crucial in developing vaccines and treatments for COVID-19.
Artificial intelligence (AI), 5G, cybersecurity, robotics, semiconductors, space… Technology, especially in the digital domain, is now deeply affecting all human activities and, by extension, international relations. The value of frontier technologies is high. 5G alone is projected to generate $13 trillion in global economic value and 22 million jobs by 2035. And artificial intelligence is projected to add over $15 trillion to the global economy by 2030.
The resulting political, strategic, economic and social issues manifest themselves at multiple political scales involving states, international organizations and private companies. The dynamics of international competition and cooperation are transformed.
Power: redistributions of power caused by new technologies, in particular digital; military and dual innovations; transformations of international competition;
Sovereignty: definition of critical infrastructures and technologies; industrial and innovation policies in strategic sectors; opportunities and risks associated with international value chains;
Governance: ethical and legal issues; interactions between companies, states, international organizations and users; public-private partnerships and GovTech;
Society: political and social impacts of technological innovations; risks and opportunities for the future of work, health, the fight against climate change; connectivity and economic development.
