Written by Rarely in the past six decades has global context counted for as much in strategic forecasting — trend analysis — as it does at the dawn of 2012. Reliance on stove-piped analysis of “strategic sectors” — such as economic and financial issues, security issues, politics, geopolitics, resources and energy, sociology and religion, and so on — will produce skewed and unreliable estimates, and will tend to favor linear extrapolations of recent experience. A study of broad contextual factors, including an expanded view of history, will show how cycles and confluences of trends potentially play a greater disruptive role than at any time since the end of World War II.
We have, in recent writings, stressed the longer-term trends and outlook, but it is important to see how the strategic environment is likely to play out during 2012. Equally, it is important that these trends (and others) are seen collectively, and not separately.
1. Global Economic and Financial Trends: Economic fragility is everywhere, even in fairly robust and growing economies. Some of the new engines of economic and financial growth — Brazil, India, and the People’s Republic of China (PRC) — face significant hurdles in 2012. Indeed, it is likely that we may see economic growth couple with instability, and with an inability of even substantial growth to meet social (and therefore political) expectations. Absent major surprises, watch for India to fall still further behind the PRC in terms of economic, and therefore strategic, competitiveness. But the delicacy of the global situation, as well as the PRC’s leadership transition in 2012, means that the PRC is unlikely, during this year, to see its yuan (renminbi) transform into a major global currency. Three of the major global economic lynchpins — the United States of America, the European Union, and Japan — remain in economic and financial difficulties, and this will constrain their strategic capabilities significantly. The rising debt-to-GDP ratio in both the US and the EU will hollow economic recovery efforts. This situation also means that the US dollar and the euro will retain their status as global trading currencies only by default, and will help reinforce a continuation of a fundamentally inflationary situation in the global marketplace. National statistics, which are biased politically, will continue to obscure real, underlying inflation, and this will continue to be pervasive and exported from the US and eurozone.
2. Global Energy Supply and Demand: 2012 will see the start of a transformation in fossil fuel supply and demand patterns, driven to an increasing extent by technological capabilities (such as the increasing possibility of delivering fuels derived from shale deposits in Europe, North America, and elsewhere). Changing strategic power reach (such as the decline in US influence in the Middle East, Central Asia, and, increasingly, Africa; and the rise in the PRC’s and India’s acquisitiveness) will also change control and logistical patterns for oil and gas distribution. The US has the ability to move much of its fossil fuel dependence away from the Middle East and Africa through transforming political approaches to the exploitation of domestic oil and gas fields and through cooperation with Canada in the exploitation of Alberta’s shale deposits, but is unlikely to make headway in this arena in the short term, due to political inertia. Based on present evidence, the US energy dependence pattern will remain slow to change in 2012, and significant change is only likely to occur with a change in US political leadership, which could occur at the beginning of 2013. As a result, the US will continue to face high costs, and high security vulnerability, because of its ongoing dependence on the maritime delivery of its oil and gas imports. This dependence comes at a time of declining US ability to project power to protect or — through strategic influence — ensure security of supply from, say, the Gulf of Guinea or the Middle East. Declining US strategic reach has already ensured the loss of control over, for example, Central Asian/Caspian oil and gas supplies.
Part of the changing fossil fuel logistical framework which will affect the strategic balance — apart from the exploitation of shale deposits in Europe, North America, and elsewhere — will be the clarity which will begin to emerge during 2012 in the future importance of oil and gas fields being developed in the Eastern Mediterranean. This will be a major driver in determining the economic creditworthiness (and therefore eurozone reliability) of the South-Eastern European countries such as Cyprus and Greece and, potentially, Italy. This will be a significant factor in the strategic behavior of Turkey, which is now seen as being outside the European Union bloc, and which is struggling to retain a major role in the energy marketplace. It lacks control over viable energy fields, and its influence over Central Asian/Caspian energy transportation to European markets (or even to the Mediterranean transshipment market) is, in relative terms, declining. Turkish economic fragility is, as a result, beginning to show, and this has generated an “equal and opposite” rise in Turkish strategic adventurism, designed to ensure a re-growth of neo-Ottoman influence over the Levant (particularly Syria and parts of the Palestinian Authority) and even Egypt. This adventurism seems likely to come to a head in 2012, even though the current Turkish Islamist political leadership is unsure how to effectively realize its adventurism given its concern over the reliability and loyalty of the Turkish Armed Forces to support an approach which goes so strongly against the secularist Kemalism of the Armed Forces.
The growing uncertainty of hydrocarbon supplies from the Persian Gulf, North Africa, and the Gulf of Guinea has sent the EU into an even greater reliance on Russia-origin and Russia-dominated for its energy supplies. What started as an economic driven default option will keep evolving in 2012 into a grand-strategic transformation. Brussels’ ambivalence about continued reliance on the NATO-based Euro-Atlanticism versus shift to the Mackinderian “Common Eurasian Home” doctrine advocated by Berlin and Moscow will be decided in favor of the latter, primarily on energy supply grounds and irrespective of the brewing political instability in Russia. Cognizant, the Kremlin will increasingly trade artificial lowering of energy price for Europe’s political-strategic pliability. This realignment will have major impact on the EU’s policy in key issues outside the immediate bilateral relations such as interventionism in third-party conflicts on the European periphery.
The strategic impact during 2012 of new energy-related technologies, apart from shale cracking, which will be worth watching are those related to energy transmission and storage. On the one hand, fixed, terrestrial electricity grids will become more efficient through interactive energy management computing, but at the same time they will become strategically more vulnerable, as noted repeatedly by this writer. On the other hand, 2012 will see a growth in the development to strategic scale (a significant change) of viable storage devices — batteries — which can act as stand-alone support for increasingly efficient local communications and computing networks, and be sustained by the newly-strategic-scale solar power technologies. It is the growth of these self-sustaining local networks which will serve as the guarantor of stability in the event of widespread interference with conventional terrestrial grids by natural disasters or human-sponsored disruptions.
