Guns and Roses

It looks like I will have to burn all the Biggles books I collected as a child and jettison any antique copies of ‘Eagle’ comic books, because there are reports that Britain and Germany are about to sign a defence co-operation agreement, ending a long stretch of history where they have been on opposing sides. Indeed, the entire literature of what George Orwell described in his essay ‘Boys’ Weeklies’ could now be caught offside.

For instance, the work of John Buchan, once Governor General of Canada, and well known as the author of the ‘Thirty Nine Steps’, may be especially dislodged by an agreement that casts Germany and Britain as best geopolitical friends, as many of his books, like those of Captain W.E. John, depend on the role of the indispensable British hero seeing off his German nemesis. An innovation on the part of Buchan, was the glamorous female mastermind, Hilda von Einem, who vies with the handsome Irish intriguer Dominic Medina (please do read ‘Greenmantle’ and the ‘Three Hostages’) as the foil to Richard Hannay.

One of the significant moments of history when Britain and Germany (Prussia then) found themselves on the same side was the Battle of Waterloo, one of the great contests, where during a pounding from French guns Wellington’s officers asked for orders he replied, ‘there are no orders, except to stand firm to the last man’.

One of the survivors was Henry Percy, aide de camp to Wellington, who after the Battle had to row halfway across the Channel with the news of the Duke’s victory, as an absence of wind had halted his sloop. On arriving in England he found that many (in the City) already knew of the victory owing, allegedly, to a network of agents assembled by Nathaniel Rothschild who is said to have made a fortune on the event and thereby spawned the phrase ‘buy on the sound of cannons’. It is a useful illustration of the roles of communications (social media today) and finance in war.

Indeed, part of the reason that Germany and Britain are moving closer together on defence (France is even closer to each one militarily) is finance. Gone are the days when London and Berlin could afford to spend 9% of GDP building great battleships in the lead-up to the First World War (Margaret MacMillan’s ‘The War That Ended Peace’ is worth a read), and now they must do with more meagre ambitions and newfound collaborations.

In this context, the recent NATO Summit was a watershed as it signalled a headline commitment to 5% defence spending across NATO countries (as a % of GDP), something that would have been unthinkable four years ago.

In Europe, there is a sense that some of the defence spending pledges amount to a ‘fudge’, and it is very clear that defence spending as a % of GDP does not translate into defence readiness. Of the European members of NATO, the UK, Greece, France, Poland, the Nordics and Baltics are the most defence ready, and some of them are already spending ambitiously. For example, Poland is set to reach a level of defence spending of 4% of GDP and has already struck a strategic military procurement partnership with South Korea.

On the other hand, countries like Italy and especially Spain have been castigated for their reluctance to spend. Italy has talked of including investment in a bridge from the mainland to Sicily as defence infrastructure and in the case of Spain, it has apparently tried to ‘kitchen sink’ other tangential forms of spending into the defence segment.

Still, the broad 5% target is a gamechanger, and is comprised of two parts – close to 3.5% on defence spending and then 1.5% on areas like cyber security and AI driven defence capabilities. Momentum will be boosted by the EU’s Eur 150 bn lending facility for defence procurement, up to Eur 3bn in loans from the EIB (European Investment Bank), and the German government’s significant augmentation of its defence budget. Still, this fiscal support leaves an enormous shortfall that will likely require capital from the private sector.

In this respect, we are at the cross-over of geopolitical forces. NATO as an operating construct has been thrown into doubt by Donald Trump and the actions of his defence policymakers (the latest act being to deprive Ukraine of defensive missiles). As such, Article 5 no longer seems as watertight as it did in the early 2000’s (it has only been invoked once, in September 2011, by Nick Burns, then US Ambassador to NATO). The impression many in Brussels have is that Europe will be left to defend itself from Russian aggression – there is now a parlour game amongst the various European intelligence agencies to estimate when a Russian incursion might occur.

As a result, the EU will become a much bigger player in defence procurement (see the recent White Paper here), Europe’s defence centric innovation economy will grow rapidly, and ‘war bonds’ will become a new asset for investors. Europe’s main threat is most obviously Russia, in addition to cyberwar from further afield. The danger in the long-term is that it finds itself as the last bastion of democracy, amidst a range of large, autocratic countries.

To return to Germany and Britain, anyone who reads the MacMillan books can’t escape the recognition that the arms race between Germany and Britain over one hundred years ago, is now being repeated by the US and China. Ultimately Europe may count itself lucky to stay out of this context.

Have a great week ahead,

Mike

Orientalism

It is likely that many of the people protesting for Palestine in US universities will have read Edward Said’s book ‘Orientalism’, or at least will have an idea who he was. It is also likely that they will have heard of Donald Trump, whose ire at these protesters has led to an unexpected fiscal crackdown on many prominent US universities including Columbia, where Said used to teach (see our recent note ‘University Challenge’).

In brief, the tack of Orientalism was to criticise the construction of a superior, Westernised view of the Middle East (the term was coined by navigators in the US Navy), that is then internalised by members of the Middle Eastern elite. At this broad level the theory was attractive, but runs into many practical difficulties such as Said’s downplaying the role of women, and the failure of many Middle Eastern countries to develop economically and to nurture the kinds of open society that Said liked to live in.

As with many facets of the debate around the Middle East, ‘Orientalism’ has become a badge of honour for many, and a contentious identifier for others, and there is a risk that many people who hold the ‘Orientalist’ view, have not updated their outlook for say the rise of Al Qaeda in the broad region and the effective domination in the last decade, of Palestinians by Hamas.

I doubt that Donald Trump has read ‘Orientalism’ (I think his speechwriter might have though) but in the light of the Western perspective of the Middle East, his visit to Saudi Arabia was striking in two respects.

First, like any clever politician, he confirmed the view that several countries in the region want to have of themselves

– ‘this great transformation has not come from Western interventionists … giving you lectures on how to live or how to govern your own affairs. No, the gleaming marvels of Riyadh and Abu Dhabi were not created by the so-called ‘nation-builders,’ ‘neo-cons,’ or ‘liberal non-profits,’ …instead, the birth of a modern Middle East has been brought about by the people of the region themselves’

To a degree, Trump’s view is not correct. The economies of the UAE and KSA were built on Western know-how (see David Mulford’s ‘Packing for India’ for example), and many of the financial institutions at least have mimicked those in the US and UK. Also, a large number of army officers from the region have been trained in imperialist bastions such as Sandhurst.

At the same time, the miraculous growth of these countries can be ascribed to local vision and leadership, on a scale only matched by Lee Kuan Yew in Singapore. And, consistent with the ‘Orientalism’ thesis, many people in the West do not acknowledge the rising institutional role that Abu Dhabi plays in the region, or the extent to which Mohammed bin Saman has become a hero for the youth in his country. In that regard, we might say that the model the Middle Eastern countries have followed is the ‘Sinatra Model’ (‘do it my own way’) with a slight American twist.

The President’s address struck a chord because in the Emirates and the KSA in particular, there is a growing pride and independence in what these countries have achieved economically, and on my last visit there a few months ago, I found that there was little patience on the part of government officials to for example, have EU regulatory standards imposed on joint investment projects. In a note I wrote at the time I flagged how locals had developed their own acronym of the West (W.E.N.A.), surely proof that the ideas in ‘Orientalism’ are dated.

Trump’s speech will be a big disappointment for those who believe in institutions and the idea of nation-building, and in that regard will turn on its head the efforts of so many in the State Department and other institutions. Neither does it augur well for current day American institutions.

The speech also brings into focus what Prof. Afshin Molavi refers to as the existence of ‘two Middle Easts’, namely a geopolitical one (sustained by American defence agreements) and an economic one. Chillingly in the context of the annihilation of Gaza, the Trump speech has tilted the momentum towards the economic version, and I feel that many people in Europe vastly underestimate the focus that governments in the region have on the economic prize, as opposed to the humanitarian catastrophe.

Various countries in the region from Qatar to Syria, may now find themselves the beneficiaries of Mr Trump’s lack of attachment to history and the democratic model, and it is very likely that the region known broadly as the Middle East will be one of the very few in the world to profit from his presidency, and will spearhead a move towards a model of materialistic, technocentric non-democracies, that some of Mr Trump’s supporters have in mind for the USA.

The emergence of the ‘Fourth Pole’, a prospective multipolar zone that will become the beneficiary of trade tensions between the ‘older’ multipolar zones (US, EU, Asia), is still very much on track, but as it develops it will increasingly need institutions, markets, rules and means of binding people to the region, none of which Mr Trump can help with.

Full Mettle Jacket

A week ago I started reading Admiral Jim Stavridis and Elliott Akerman’s second book, ‘2054’, which like the first (‘2034’) is a work of fiction designed to tell us about how our own world is evolving and the risks that will confront us. Without spoiling the plot, ‘2054’ demonstrates how new technologies can be deployed in nefarious ways, with the goal of turning the tide of geopolitics. However, as much as I enjoy the work of the Stavridis/Akerman team, my reaction to ‘2054’ was much the same as ‘2034’ (‘2034 – are we already there?’), which is that it has been rendered out of date by bizarre events in the real, political world

The detonation of over seventy years of American diplomacy and soft power by the various speeches and deeds of the Trump administration is a fin de siècle moment, that has drawn comment across the diplomatic world (the most pertinent was that of the Singaporean defence minister who described how he saw the USA moving from a force for ‘moral legitimacy’ to a landlord seeking rent’).

The worry now is that the US will treat its allies like enemies and its foes like friends. There was much consternation in Europe, but as this note has argued so many times, very few European countries have faced up to the challenges of the post-globalized world (Mario Draghi’s speech to the EU parliament last week put it very well…’do something!’).

There is now a furore over Eur 500 bn defence bonds, joint nuclear shields and defence equipment shopping lists. But, a more urgent task than buying fighter jets is the need for Europe to have a coherent security strategy. In a weekend where many are anticipating the results of the German election, a neglected development was the collapse of government formation talks between Austria’s centre-right OVP and the far-right FPO.

Some weeks ago, the parties had agreed on an economic programme, but could not settle on a common foreign policy, a critical stumbling point was oversight of the intelligence services (the OVP wanted to be in charge). This is a sensitive topic given that the FPO has a soft spot for the Kremlin, and specifically the fact that in 2018 the Herbert Kickl (FPO leader), when he was Austria’s interior minister, ordered an investigation into the country’s security services. Today, few of its EU peers share intelligence with Austria.

Reflecting that, the immediate challenge from Russia is infiltration, sabotage and manipulation across Europe (the Gerasimov doctrine and David Kilcullen’s work on Russian/Chinese tactics are both worth a read here ‘From Great War to Total War’). The EU has done relatively little to push back on this interference, and now has an urgent security (as well as defence) challenge.

This could take various forms.

The first is to penalise EU states that systematically go against the grain of the policies, values and interests of the Union. Hungary is the main offender here and whilst some EU funds have been withheld from Viktor Orban, the EU has in general failed to confront him. In the recent past there has been talk in the European parliament of excluding Hungary from the EU, which is technically difficult, but is a necessary part of a more ideologically consistent Europe, and one where bad actors face a penalty for their actions.

A second strand is to have much greater oversight over the movement of Russians in Europe, and of their capital. Vienna, Milan and the south of France, not to mention parts of Switzerland, are popular destinations for wealthy Russians and some European capitals are saturated with Russian money (Mark Hollingsworth’s book ‘Londongrad’ is instructive here as is Oliver Bullough’s ‘Butler to the World’). To emphasise the point, Russian interference in UK and lately Irish politics has not been aggressively countered, and my fear is that this is much worse in other countries like Germany.

Instead of clamouring to buy rocket launchers, Europe’s political classes have a lot to do domestically to shut the door on Russian interference in European affairs.

Then, on a more structural level, there is scope for much greater intelligence sharing across governments and joint task-forces on organised crime (gangs are a favourite extension of the Russian state). From the point of hardware, there is a need for increased joint use of satellites and electronic warfare collaboration.

The distinction between security and defence is an important and urgent one and a reminder of how complacent European governments have been. Whilst defence capabilities will take time to build up, the measures to be enacted in the security domain are less challenging to operationalise, but constitute a real test of European governments’ mettle.

Have a great week ahead,

Mike

The Diplomacy Crash

US stock market valuations have only been as high as in 2001 and 2020, market concentration is more extreme than in the late 1920’s (the top ten companies now make up 38% of the market capitalization of the S&P 500 index), and money manager surveys show US households to be the most bullish on future returns from equities since the survey began in the early 1980’s.

So, given this precarious euphoria, when is the crash?

My response is that crashes come in unexpected places and times and one idea that has not had much coverage but that might become current is the idea of a ‘diplomatic crash’. By this I mean that a host of countries have invested diplomatically, or in terms of soft power, in institutions, partnerships and causes. The acceleration of a multipolar world by the second Trump presidency will crash the value of many of these diplomatic investments.

An example might be the ‘special relationship’ between the UK and the US, the seeds of which were sown by Roosevelt and Churchill during the second world war (Churchill coined the term in 1946), and later cultivated by Thatcher/Reagan and then the Bushes and Clintons with both John Major and Tony Blair. Today, it is very hard to see any personal chemistry, or philosophical common ground between Donald Trump and Sir Keir Starmer. If the ‘special relationship’ were a stock or even a crypto coin, its value would be at a historic low.

In more detail, the idea of the ‘diplomacy crash’ came to me the night before I voted in Ireland’s general election. Ireland is a very quirky, even eccentric country from a geopolitical view in that unlike many other European countries there is close to no debate in Irish politics on defence and security, and its defence capability is miniscule compared to benchmark countries like Norway and Sweden.

In that context Ireland, like many other mid-ranking developed countries, is about to suffer a diplomatic crash. It has, correctly, invested heavily in the UN and the rules-based order. Some of the pillars of this order, like the World Trade Organisation – effectively built by an Irishman (Peter Sutherland) – are in a state of dereliction. It may well be the case that the UN ceases to be effective in dispute resolution between states, world health policy and great power coordination.

In addition, together with Spain and Norway, Ireland has spent significant geopolitical capital supporting Palestine (all three countries recently recognized Palestine as a state). Here, it cannot be ruled out that a grand peace deal is made in the Middle East, between Israel, Egypt, the UAE and Saudi Arabia, whose goal is to create greater investment and commercial flows between these countries and strategically disable Iran, but whose outcome is to render the ‘two-state’ solution unachievable. This new, harsh reality would leave the humanitarian led foreign policies of many European countries well ‘off-side’, compared to the stance of the Trump administration.

Ireland is just an example here, and there are plenty of other crashes in diplomatic capital – Germany’s trade policy with China, and potentially Japan’s relationship with the USA, France’s relationship with Africa and in general the cultivation of the rules-based order by democracies.

In finance, when a market crash occurs, investors become structurally risk averse, run for safe assets and generally retract positions. This might be the same in diplomacy. The risk then is a more unsure, less engaged diplomatic world, and worryingly one where the international rule of law is ignored.

In Europe, reflecting the lessons of the euro-zone financial crisis, this may imply that EU foreign policy becomes more consistent across countries (though perhaps not yet unified) and more focused (Katja Kallas is perhaps the most forceful foreign policy chief that the EU has had). In addition, new policy coalitions and leadership groups will form, notably so in the case of the Nordic and Baltic states on defence and immigration.

The EU also needs to stop geopolitical hedging by its members. Hungary under Viktor Orban has become notoriously close to Russia, and whilst Serbia had tried to play both sides it seems more comfortable as a bona fide EU nation (it is an accession state).

Once Ireland’s election result is clear, the first task for its leaders may be to choose sides – solidarity with Europe and active participation in the EU defence effort, or a singular, eccentric relationship with the Trump administration.

Have a great week ahead,

Mike

Coherence

Kim Hong-Kyun is not a name that very many Europeans know, but they really should, given his grave diplomatic intervention last week. Hong-Kyun is the South Korean ‘first foreign minister’, who last week summoned the Russian ambassador to Seoul to register South Korea’s displeasure at the news that up to 12,000 North Korean soldiers are in or on their way to Russia to fight in Ukraine.

While North Korea’s contribution to the Russian war effort is already known (their armaments industry is producing as many shells as Russia itself – and more than all of Europe), the prospect of an Asian state sending soldiers to fight in a European country is unprecedented, and I am perplexed that European governments have not reacted to this (though South Korea, Australia and Japan sent representatives to a recent NATO meeting).

The South Koreans have pledged to arm Ukraine if North Korean troops fight there, raising the complicated prospect of an Asian proxy war in Europe – again something that would have been inconceivable years ago, and that also tilts us towards the notion of a world war.

Whilst some readers might find this an exaggeration, we are at a moment of coherence, when threads that have been developing over the years become clearer and begin to describe the contours of the emerging geopolitical order.

One of the notable formations here is the SCO or Shanghai Cooperation Organisation, which I wrote about in the Levelling (p. 245) describing them as a geopolitical ‘gang’ of the future and sort of anti-NATO coalition, or at least an anti-AUKUS group. Despite this, few of the university post-grads in international relations I have come across in recent teaching sessions knew of the SCO.

There is a sense that the shadow or the logic of the SCO was lurking behind last week’s BRICS meeting, given the perception that the BRICS is becoming an anti-Western alliance, which in reality is not true. Reinforcing this are the very different cultures across the BRICS countries, and the risk to their project that relations between them depend on individual autocrats rather than institutions or peoples.

Yet, a sign of the times is the manner in which large emerging nations like India and Turkey are hedging their bets in the sense of maintaining good relations with Russia and the US. For India in particular, the BRICS meeting was a chance to begin to repair relations with China.

They could be forgiven for doing so granted the impact that the outcome of the US presidential election will have on international relations. The choice is one between an effective continuation of the foreign policy of the Biden/Democrat administration in the context of growing pushback against American power, versus a Trump foreign policy that is unsure, opportunistic and likely goes against the deep grain of Republican foreign policy as established by Ronald Reagan, George H Bush, Colin Powell and Condoleezza Rice.

2025 will hopefully see the end of wars in Ukraine and the Middle East, following which the notion of the coherence of rival systems will come into sharper focus. It is increasingly clear that the leading autocratic states (Russia and China) are hell bent on undermining the democratic world, and any nations that toy with the idea of joining it (witness the heavy handed Russian interference in last week’s referendum on EU membership in Moldova, and it’s obvious interference in Georgia’s election which takes place this weekend).

The danger is that the sharpening coherence of the SCO is like the development of AI – it has been gathering pace amongst specialists for some time, and then a public event (the launch of ChatGPT) brings it into the public domain.

One of the obvious casualties of the emergence of the SCO and indeed the geopolitical trials the world is suffering, is the diminished influence and credibility of world institutions like the UN and WTO (World Trade Organisation), which are being reduced to the role of bystanders in this emerging geopolitical contest.

The scene is set then for the November 5^th election to either reinforce or undermine the world order.

Have a great week ahead, Mike

Cold War to Total War

As I stepped out on the street in Kreuzberg (Berlin) on Monday, all was calm, with little to worry about save the choice of the excellent local food, loud music, beer and football (the Dutch invasion was just starting ahead of Tuesday’s match against Austria). Kreuzberg was of course once on the frontier of West Berlin, looking across to East Berlin and will have featured in the high stakes espionage between the West and East (notably so when Markus Wolf ran the Stasi).

Having once run into Mr Wolf, I was pondering what Berlin was like at the time, and we should not be surprised that it is still regarded as ‘the city of spies’, and that it continues to feature in espionage literature.

Given that context, it was no surprise to learn that Germany continues to be targeted by foreign spies. Over a week ago, German Interior minister Nancy Faeser launched the annual threat assessment of the German domestic intelligence service – which pinpoints Russia as well as China and Iran as the authors of multi-faceted attacks (disinformation, cyber-attacks, manipulation of people flows and racial tensions) on Germany, not to mention a recent spate of assassination attempts in Germany by Russia.

Of great concern is the range of threats to Germany (the same is true in most other countries), from Russian operatives defenestrating enemies of Moscow, to plots to overthrow the German state by the far-right to Islamic terror (there are over 27000 known radicalised Islamists in Germany, and the threat of Islamic terror has been growing since the October 7 attack).

The tactics that the enemies of Europe (and democracy) are deploying are likely very different to those crafted by the likes of Markus Wolf. Espionage during the Cold War was motivated by a need for information, with plenty of proxy battles for influence taking place around the rest of the world.

Today, the aim seems to be outright destabilisation and provocation – from the multiple attacks on arms production facilities across Europe to an epidemic of coups d’état across Africa, to the waves of disinformation on our social media. There is also the impression that the US is being tied down in multiple conflicts around the world.

Today, the eyes of the world are on Gaza and Ukraine – and we are bracing for a new Trump Presidency – perfect conditions to ramp up outright destabilization and provocation. The issue then, is what the EU and its member countries need to do.

The first is to confront the problem and bring it into the open. Nancy Faeser’s report is just one of a growing number from security services across Europe – in May the head of Britain’s GCHQ outlined a similar, urgent threat landscape. The second will be for governments to give security services larger budgets (a Trump presidency might help), and potentially, to allow them a more flexible modus operandi.

The new development relates to the new EU commission. Following last week’s meeting of heads of state, it now looks likely that Ursula von der Leyen will continue as president – and with Katja Kallas as foreign representative, the tone of the next commission will tilt from ‘Green Deal’ to ‘security’ and ‘strategic autonomy’. Defence infrastructure and innovation will become a key trend in the private investment industry (private equity and venture). Von der Leyen has already flagged that enormous amounts of capital will be required to support this, and given the failure of the EU to build out its capital markets union (CMU) this will be an immense challenge.

One element that might help, a little, is von der Leyen’s proposal to create an EU defence commissioner. If it does happen, it will run into two of the common problems that beset bright ideas in Brussels.

First the role of defence commissioner will need to be based on the reallocation of powers from other commissioners – some defence innovation and military logistics responsibilities from Thierry Breton’s department, transport and infrastructure from the Transport commissioner (Valean) and various other responsibilities from the foreign representative.

The second issue is that it might take some power from national defence ministries, but there is also a strong argument that they need to be better coordinated.

In that sense the new EU defence commissioner might reflect changes that John Healey (currently the shadow defence minister in the UK) wants to usher in – an office for value for money in the Ministry of Defence and a restructured defence command.

The EU defence commissioner might also start by coordinating the purchase and use of heavy duty equipment, such as large transport aircraft, and driving the integrated use of new technologies across countries. Another potential task is to find means of better coordinating European security agencies and militaries, so that their collective, offensive capability becomes stronger.

It is a depressing, though necessary use of resources, and a sad sign of our times as globalization fades away.

Have a great week ahead,

Mike