Geopolitics trumps geo-economics

The world is witnessing unprecedented geopolitical turbulence – a high-intensity Hamas-Israel war with thousands of casualties and potential for escalation, 600-day long conflict which reshaped the security and energy architecture of Europe and seems to have no end in sight, deepening hostility between global powers, and trade protectionism undermining the global trading system. Geo-political risks have serious implications for businesses.

Over the last few decades, Asian leaders wooed Western MNCs; now CEOs worry about getting caught in geopolitical crossfires and look up to specialists for advice. In an article titled, “Inside the secretive business of geopolitical advice,” The Economist says: “As multinationals grapple with a fragmenting world, specialist consultants are cashing in.”

Lt Gen Sudhir Sharma, Chairman of MitKat Advisory explains, “Today the stock markets react and are highly sensitive to what a foreign secretary is saying, or not saying, rather than the comments of finance minister. One politically loaded statement by a middle power can send food/oil prices soaring. Geopolitics shapes and drives the world economy. Macroeconomic fundamentals and plans carefully crafted in economic capitals and corporate boardrooms can go totally awry in a few hours of a diplomatic spat. 

Sudhir Sharma adds, “Geopolitical analysts with an ear-to-the-ground and experience can identify fault lines well before they become unbridgeable chasms. While democracy is the desirable form of governance, public opinion shapes geopolitical responses – often limiting options – resulting in undesirable consequences. The Canada-India spat is a clear example of political expediency forcing the hand of Mr Trudeau in making a questionable geopolitical decision. The #geopolitics of the Ukraine war is ruining the economy of many European countries. The China-India border stand-off limits the potential of their economic relationship. Global tech majors having offices in Israel could move their business operations to India or other locations if the Israel-Hamas conflict escalates.

Sudhir Sharma explains, “To understand the cross-currents of #geopolitics, one has to have a keen sense of history & know the reasons for the deeply rooted national psyche. China-Japan relationship can only be viewed through the prism of centuries of mistrust & animosity. Similar is the case with the Korean peninsula and Indo-Pacific. An astute geopolitical analyst would delve deep into history before commenting on the geopolitical headwinds of a region.”

Countries are queuing up to join BRICS because of its geopolitical clout. BRICS Bank is stronger, not because it has more money, but because its money is backed by trade deals & market access. China has the second-largest economy but is still struggling for dominance due to a geopolitical quagmire of its own making.  

Geopolitics not only trumps geoeconomics, but drives, shapes and gives direction to the world economy and #globalization trends. The coupling and decoupling of economies and technology protocols is shaped in the political conference rooms and its repercussions are then felt in corporate boardrooms. 

MNCs are increasingly seeking expert advice on how to navigate the choppy waters of geopolitics so as to better ring-fence and ensure their geoeconomic ambitions. AI-assisted operational risk intelligence platforms assist geopolitical analysts in collating, synthesizing & customising data & helping understand trends & patterns.

MitKat Advisory helps organizations thrive by pre-empting and managing operational risks and enabling sustainable resilience. Kindly reach us at contact@mitkatadvisory.com or www.datasurfr.ai

The article has reference to open sources including The Economist, ET, official publications, and expert opinions.

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