China, the USA and Oil – A Potential Geopolitical Scenario
The rise of China, the unrests in the US and the low price of oil may all contribute towards significant geopolitical changes in Eurasia.
July 14, 2020, Max Stucki
Even though much of the world has stood still in lockdowns, the geopolitical events have kept developing. The world is realigning itself, and the new order could be quite different from the one preceding it.
FUTURE OF WORLD GEOPOLITICS
There are three geopolitical changes to consider.
First of all, the Chinese economy has long been on the way to becoming the largest in the world. Whether it will become number one in nominal terms within the next decade is not as relevant as China’s use of its economic influence. The country tries to secure the Eurasian markets with its Belt and Road Initiative to ensure future growth.
China's Belt and Road Initiative Explained - Source: Vox
Second, the price of oil plummeted in early 2020 due to a price war between Russia and Saudi Arabia. This has caused economic damage to all oil-producing countries.
Third, the unrests in the US, exacerbated by the pandemic but an otherwise long time coming, are turning the country’s attention inwards. Trump’s election was already a signal that reflected the fact the citizens do not necessarily want to see their country policing the world.
All these together may produce some tectonic shifts.
If the unrests in the US continue, and the divisions are not healed at least to some extent, an increasing share of its resources likely need to be devoted to keeping up the internal order.
Furthermore, it is possible that welfare spending may need to be increased to lower the tensions. All this, together with the fact that the US is currently also a major oil producer, could lead to a situation in which the Americans no longer see the need, or have the means, to retain their influence around the world, and especially in the strategic oil regions.
If at the same time, the budgets of the Gulf states are slashed, they may at some point start to see their defence budgets shrink, creating insecurity. Should the US begin to retreat from the region during the defence cuts, some of the local governments may turn towards the Chinese for external protection.
CHINA’S GEOPOLITICAL STRATEGY & THE FUTURE OF THE MIDDLE EAST
All this could pose a tricky situation for many countries since if the Chinese could have a say to the oil policies of some major Middle Eastern producers, while at the same time operating in concert with Russia, there could be a real possibility for, at least a short term, blackmail through energy. Geopolitically speaking, a Chinese foothold in the Middle Eastern oil areas would give its added leverage over the Eurasian space.
If the situation, especially economically, in the US does not improve, and the oil prices keep at low levels, all this could come together.
GEOPOLITICAL CONSEQUENCES OF THIS SCENARIO
The ramifications of such geopolitical change would be widely felt. On the state level, the interests of China would have to be recognised more carefully. Furthermore, the need for contingency planning, especially regarding the security of supply of energy, would have to be revised and improved.
The companies and other organisations would have to prepare for energy shortages in cases of political disagreements with the new Eurasian superpower. Also, Beijing’s views might have to be increasingly accommodated in trade and technology-related issues.
On the level of the individuals, the possible effects would be felt as an increased need to prepare for potential economic difficulties and shortages of fuel in cases of international turmoil.
TURN THIS SCENARIO INTO ACTIONABLE FORESIGHT
Whether the world will go the way described here is still an open question. However, some trends indicate that this is a real possibility. However, it requires foresight to anticipate the potential changes this, or any other scenario would have on your organisation or work.
To prepare for the presented scenario, you can find the discussed trends on the Futures Platform tool and easily invite your colleagues to evaluate and assess them, and their impact on your organisation. Start the 15-day free trial to see how you could benefit from the Futures Platform tool.
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THE COLLIDING PHENOMENA
To write this article, Futures Platform's futurists have collected the data from different phenomena and found the linkages among them. Here are the three colliding phenomena that are causing this trend:
China No1 Economy
China is currently either the world’s largest or the second-largest economy, depending on the way of measuring. In the future, it is reasonably likely that China’s economy will continue to grow faster than that of the US and other first-world countries, meaning it is in the process of eclipsing the US as the world’s number one economy. However, there are several trends and events that could steer China off this path.
Oil Price War
The latest oil price war broke out when OPEC and its allies failed to agree on reducing oil production due to the coronavirus-induced collapse in oil demand and prices. Russia rejected the deal. Saudi Arabia, which wanted cuts, consequently announced it would increase production and sell oil at lower prices. As a result, the price of crude oil continued to fall. The single-day drop in price was the highest since 1991.
Civil War in the US
The US sliding into a civil war is no longer an impossible scenario. The atmosphere among the divided people can get so tense that even the slightest incident could launch a deepening spiral of conflict, resulting in a second civil war.
You can find more detailed descriptions about these phenomena and their impacts on Futures Platform.
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