The article explores the geopolitical landscape of the 2020s, highlighting challenges reshaping global dynamics. It delves into the vulnerabilities of the existing world order, including the threats faced by the Dollar and the US military supremacy. The rise of multi-polarity, de-dollarization, and conflicts in the Middle East and Europe are discussed, with a focus on Russia, Iran, and North Korea forming a new axis. The strained US alliances and potential conflicts in East Asia, especially around Taiwan, are emphasized, raising concerns about a new global power struggle. The article concludes with a call for India to prepare for potential great power conflicts.

In an era marked by unprecedented connectivity, the question of political stability on a global scale has become pertinent. The world is witnessing a myriad of challenges that are reshaping the geopolitical landscape. From a war between members of the UN security council to consistent shocks to the global supply chain, conflicts are leading to persistent economic turmoil. How safe are we from these ongoing events, spilling over into a global war?

Let’s take a look at the checks and balances and how resilient are they in 2024.

The world order as we know it today was put in place post WW2, by the victorious allies, who sought to impose a Rules-based order to pre-empt wars between great power nations. This order was built around

• A Dollar trade economy, the Petrodollar;
• The supremacy of the United States Armed Forces to enforce the will of its government anywhere on the planet.

Today, as it stands in 2024, both face serious threats unseen since the mid-1960’s, the peak of the Cold War. The Dollar has been the global reserve currency since the end of the Second World War.  This was the result of visionary policy decisions by the leadership of the United States at the time.

The Bretton Woods Agreement

This was a historic international monetary conference held in Bretton Woods, New Hampshire, USA, in July 1944. Representatives from 44 Allied nations attended the conference with the primary goal of establishing a stable and cooperative international economic order after the devastation of World War II. The establishment of the IMF and World Bank was brought about through this agreement.

The decision with the most far reaching consequences was the decision to peg international currencies to the Dollar, which was itself tied to the value of gold.  This was the first step to the establishment of the Dollar as the reserve currency of the world.  With the Dollar as the global reserve currency, any country in the world could deposit its gold reserves in the United States and they would be in return issued with US Dollars with which to trade, thus, streamlining the sale and purchase of goods on a very large scale. This in turn turbocharged global growth, and has led to a period of economic prosperity never seen before.

However, over the latter half of the 20th century, the US has leveraged this control over global trade to impose sanctions on any country it sees as in breach of the ‘Rules based order’. Iran, Venezuela, and till recently, even we in India were subject to sanctions, as a result of ‘Operation Shakti’- the Nuclear tests conducted in 1998.

To be sanctioned by the US generally led to countries stagnating in terms of economic and technological growth.  Generally, these measures are taken against autocracies, which tend to isolate them from global development. Till the 2020s, such autocracies tended to remain time capsules, cut off from the global marketplace, and with little incentive for innovation in their civilian markets as it had little to offer. However, this was all set to change very soon.

Rising Iranian influence in the Middle East

In the early morning hours of Jan 3, 2020, a U.S. drone struck Baghdad International Airport eliminating Iranian Major General Qasem Soleimani, commander of the IRGC Quds force. This assassination brought to the world’s attention the influence a heavily sanctioned Iranian regime now wields in the Middle East. Maj Gen Soleimani was tasked with increasing Iranian control of its neighborhood by cultivating its proxies throughout the Middle East, as the Hezbollah in Lebanon, Hamas in Gaza, the Houthis in Yemen, and several Shia militias in Iraq. The combat ability and effectiveness of these militias is on display to the world, and Maj Gen Soleimani certainly did his job well. If you were to put pull out a map of the Middle east, and mark out the area under the control of Iranian Proxies, you would be surprised to see how far from its own borders, Tehran exerts its influence.

This outcome is exactly one that NATO was looking to avoid, with its wars in Iraq and Afghanistan.  Occupying the two countries to the east and west of Iran, the U.S. has tried, and failed to contain the Iranian influence, from spreading throughout the Middle East. It would be natural to conclude thus, that the American wars in Iraq and Afghanistan were won in the initial battle stage, but the lack of a coherent (tactical) policy made them lose the wars. A nation cannot lay claim to being a super power if it cannot convincingly finish its wars.

Thus, as we enter 2020 questions were being raised about the effectiveness of American foreign policy in the face of insurgencies and the haphazard response to them.

The Move towards De-Dollarisation

The Russian invasion of Ukraine threw the entire western hemisphere into disarray and called into question the ability of the U.S. to influence a war in the favour of its allies.  Economic sanctions had hitherto not been used on a UN Security Council permanent member. The punitive sanctions imposed on Russia in the wake of their invasion, saw them turn into the most heavily sanctioned nation almost overnight. Most devastating though, was the seizure of the Russian foreign reserves to the tune of $300 Billion. As of now, there is talk of diverting those funds to Ukraine. The enormity of such an act has shaken the trust the world had in the Dollar as the reserve currency. Most countries around the world, India included, found ourselves asking – were we to fall afoul of the United States, would we be next in line to lose access to our funds stored abroad?

Imagine if your bank seized your savings account, and refused to allow access to it! This would trigger a bank run, as all the investors would rush to pull out their money, lest they be the next to be denied their earnings. Surely this would collapse the bank, as has happened in the past. However, the systems that nations have built to deal with each other are slower to affect change, and the lack of an alternative to the Dollar has slowed the impact of such a move. Countries have started trading with each other’s currencies, and there is an effort by some to move away from the Dollar as their primary trading currency. The US has tried to bolster confidence in their currency, as was shown in the recent release of $6 Billion in Iran funds which were frozen in lieu of the release of American hostages.

Rise of a Multi-polar world- Cold War Round 2

The Russia- Ukraine standoff and the resulting invasion in February 2022 saw Europe try to impose financial costs on Russia by severing its energy ties with them. A belligerent Russia in turn pivoted East towards China and India to look for alternative markets for its energy exports (which account for 50% of its income). The result of this upheaval has been a recession for Germany, as it copes with high energy prices and the threat of de-industrialization. Besides energy, the pace of the war in Ukraine showed a shortfall in ammunition supplies as both parties rapidly burned through their stockpiles. Just as an example, Russia fired between 12-14 million shells in the first year of the war, whereas its domestic production is 4-5 million shells a year, even on a war footing. They have accounted for the shortfall by approaching other heavily sanctioned countries, North Korea and Iran.

Iran and North Korea, a new Axis

Iran and North Korea have had a few hard decades being cut off from the global markets. They have not seen a growth in domestic innovation which has transformed so many countries, ours included. With little to offer to the civilian markets abroad, they lost leverage on the world stage and were reduced to saber rattling and the occasional threat of military escalation to remain relevant. Almost stuck in a time capsule, these countries focused on developing asymmetrical warfare capabilities. Drones, proxy militias, and conventional low-tech, mass-produced weapons such as artillery shells and small arms ammunition. It is to these countries that Russia has turned to as it transitions into a war economy.

North Korea, currently operates over 2000 T-62 tanks and still has an open production line which is supplying the Russian army parts for its mothballed T-62 and helps prepare them for deployment. They also produce 120mm, 132mm and 152mm caliber ammunition on which most soviet artillery is based. The Russians have already received one million rounds of artillery ammunition and large quantities of rifle rounds from North Korea.

Iran has also been pulled into the European war as pre-war Russia avoided direct transactions with Iran for fear of sanctions. In 2022, trade between Russia and Iran was valued at $4.5 Billion which rose to $6 Billion in 2023. This does not include the military equipment exports, especially the Shahed 136 and the follow-on jet powered Shahed 238, which can fly higher and faster than the previous Iranian drones. Lack of capital for investment in Iran implies the Iranians cannot produce sufficient number of these drones by themselves, hence the Russians are expanding the Alabuga plant in the Republic of Tatarstan, and as per Ukrainian intelligence and plan to produce upto 6000 drones by 2025. The Iranians in turn would look to modernize their Air force, which largely consists of soviet legacy aircraft, and obsolete F-4 and F-14 fighters, from the era of the Shah.

American support to Ukraine has tapered off, in the aftermath of the failed counter offensive, as a belligerent Russia looks to rearm and transition fully to a war economy.

All this military activity in Asia and an increasingly bogged down NATO in the face of ever-increasing conflicts has led to a sense (realization) of the US not being a reliable ally. The restrained response to the Houthi disruption of the most critical shipping route – the Red sea, has caused supply shocks due to a shortage of shipping containers as ships take longer via the Cape of Good Hope around South Africa to avoid the Red sea. It seems the US finds itself increasingly alone in its role as the global policeman, and defender of the order it imposed post WW2 as its allies are reluctant to take on their share of the defence expenditure.

Trouble in East Asia, site of the next conflict?

The readers would find it interesting to note that South Korea supplied Ukraine with more artillery ammunition in 2023 than all of European nations combined. The strange fact of the two Koreas fighting a proxy war across the globe in Europe is irony at its best. But this is a sign of the rising influence of South East, and East Asia on the world economy and a competition among world powers to maintain their influence in the area.

With the NATO alliance bogged down in multiple conflicts, the world is looking tenuously at the Taiwan straits, where the Chinese communist party (CCP) has made it clear that they will unite Taiwan with mainland China by force, if necessary. This is unacceptable to the US as the loss of Taiwan would mean a loss of political and economical influence in the world’s most economically productive area – South East Asia, the loss of which would cost them dearly in terms of lost trade and business opportunities, and would be the death knell of western influence in East Asia.

In January this year, Taiwan’s ruling Democratic Progressive Party (DPP) pulled off a historic third consecutive presidential victory, as the Vice president Lai Ching declared victory. The result shows voters backing the DPP’s view that Taiwan is a de facto sovereign nation that should bolster defences against China’s threats and deepen relations with fellow democratic countries even if that means economic punishment or military intimidation by Beijing. This result will be seen as a setback to the plans of a peaceful reunification by the CCP, and further tilts the scales in favour of military action by the Chinese.

The situation as it stands is greatly in favour of the Chinese communist party leadership, as they have found themselves neutral in all but name. As the factory of the world, they have pushed for the de- dollarization move in favour of trade in the Yuan. Hence they can trade with sanctioned countries freely which has been apparent in the increasing trade with Russia and Iran. China already enjoys a good relationship with the Kim dynasty ruling over North Korea. In light of their expansionist policies, it certainly helps them to be on good terms with the 2 largest war economies in Asia.

In Conclusion

To quote the ancient Athenian General, Thucydides, “It was the rise of Athens and the fear that this inspired in Sparta that made war inevitable.”  Thucydides trap was the name given to this tendency for when one great power threatens to displace another, war is almost always the result. The American involvement in conflicts in the Middle East, and Europe, certainly ties them down and gives China the incentive for a military adventure in the East.

The global policeman certainly is going through a rough time internally, with deep internal political divisions, and a Presidential election this year; with Donald Trump threatening a return to power. Their attention is divided, and any bad state actor would see this as an opportune moment to make quick territorial gains. A knee jerk reaction to such a provocation could see the world plunged into a new World War.

Should the US- China fall into the Thucydides trap and enter into conflict, we in India need to be prepared for such a contingency on the economic and military front, with a doctrine in place to prepare for a great power conflict. As the upcoming third-largest economy, India cannot merely observe as the world descends into a Great Power conflict. We owe it to future generations for our leadership to act with a clear vision and the strength necessary to navigate our nation through these turbulent times.