An investor’s view on UK defence policy and geopolitics

As allocators of capital, markets see themselves as rational, analytical, calculated and unemotional. By nature, equity investors providing permanent capital are the optimists of the species, their glasses are half full; fixed income investors providing loan capital and wanting their money back on the due date are innately sceptical, of necessity their glasses are half empty. While approaching investment from very different perspectives and making different judgements, they share the same fundamental characteristic: they make objective and subjective estimates about future prospects and discount them back to what they regard as the intrinsic value of an investment today; they then judge whether in their view it represents good or poor value.

Judging risk is an essential component of this calculation. Consensus, or one opinion holding a dominant sway over others, dictates the direction that markets move; the symptom of disagreement is volatility. Whatever the result of investors’ analysis, their common comfort zone is what they can see, count, measure, evaluate and reduce to a number, whether it be a share price or a bond yield¹, or the value of a currency or any other asset. They prefer to deal real-time with what they can quantify, chart and model. Factors outside this comfort zone or beyond their view tend to be set aside, filed under the double-meaning acronym ‘TBD’: To Be Decided (i.e. defer making a decision until it is unavoidable) or Too Bleeding Difficult (i.e. absolutely no idea, therefore ignore it and hope it goes away).

Today the world is in its least stable state geopolitically since 1990 and arguably since the 1930s. The extensive analysis which follows in this series lays out the geopolitical risks and more importantly how to help contain them and mitigate against the possibility of a risk crystallising as a real-life event.

Investors are not remote, impartial actors. When examining how it is today that many western governments are so financially constrained that they struggle to maintain national security policy and to contain risk, investors need to ask themselves to what extent they themselves have been complicit. Governments set fiscal policy and central banks apply the appropriate monetary policies. But if enduring deficits require support from borrowings (as has been the case continually in the UK and the US for 25 years), markets have a significant say about the limits and the cost, the latter of which is expressed not only through the nominal bond yield but also the difference in that yield compared to other countries’ bonds as a measure of relative risk.

Investors should delve deep in to their souls and ask themselves whether, even if the value of their investments were appreciating, was it responsible in the post-Global Financial Crisis decade to support the concept of ‘free money’ when the central banks kept interest rates close to zero or even below it? Even more pertinently in the near-two year period spanning mid-2019 to early 2022 when more than a third of government debt globally was on a negative yield and markets were actively paying governments to borrow, was that rational and wise (when even the German 30-year bond was on a negative yield, bond holders were inventing excuses as to why this was sound portfolio management: it was justified that a pre-determined fixed loss at the end of 30 years gave a secure anchor point in a bond portfolio and therefore fulfilled a role and provided value: surely the definition of the Law of the Greater Fool when investors should have been saying ‘this is quite mad’ rather than ‘this is completely justifiable’)?

A fundamentally different way of doing things is needed

Today, at the dawn of 2025, the reckoning is here. The French government has imploded thanks to irreconcilable differences about how to deal with a burgeoning deficit and a mountain of debt. Germany’s Traffic Light coalition did the same, driven onto the rocks over disagreements about how legally to fund growth and to stop the economy ossifying. On wobbly fiscal foundations beforehand, Rachel Reeves’s budget in the UK has made a bad situation a whole lot worse. With out-of-control borrowings, the US is about to confront the debt ceiling again. In the meantime, NATO leaders and Donald Trump are going to demand a big increase in defence spending which few members will be able to meet, at any rate not quickly. There will be painful choices and compromises in the near-term but the threat to national security does not become less simply because governments don’t have the financial wherewithal to mitigate against it. The opposite is likely to be true: those who would do us harm are more likely to take advantage of our increasing relative weakness.

However difficult a challenge politically, surely the confluence of a series of events (high debt, high funding costs, high tax burden, no growth, increasing geopolitical risk) all points to a fundamentally different way of doing things: one which delivers better tangible outcomes for less government spending, which reduces the tax burden and improves investment opportunity. A strong, vibrant, match-fit, innovative and competitive economy ultimately gives a government options: it puts the country more in control of its destiny rather than it being constantly at the mercy of events. The investment community is central to this, not just thinking specifically about military defence but also seeing through the lens of industrial and technology policies, and food and energy security.

Investors have a national security responsibility too

The government wants investors to ‘get behind defence’. The trend towards ESG investing and its long list of exclusions (i.e. what it will not invest in) has tended to have negative consequences for the capital available for defence contractors. Nobody can dictate what anybody else’s ethics should be, but surely there is a strong moral argument about our communal safety and the protection of our society and the need to defend us. That requires investment. The crude ‘you’re either with us or against us’ argument is reductive and unhelpful, but in terms of national security investors should ask whether their consciences are clear if they abrogate the responsibility to others to look after them.

When it comes to investors and national security, if markets think they are aloof and impartial, nothing quite drives the message home as the following anecdote: at the Jupiter Investment Conference in 2016, General Sir Richard Shirreff was the guest speaker. He had just written a novel entitled “War with Russia, 2017” (a good yarn labouring under clunky dialogue, its foretelling of what would happen in Ukraine was entirely accurate, and it offers a remarkable insight from a former NATO insider about how the politics of decision-making work in practice; spoiler alert, coming within a cat’s whisker of Armageddon, common sense prevails in the end!). An adviser asked, “General, in the event of a tactical nuclear war launched from Kaliningrad, what would be the effect on European GDP?”. To which Shirreff shot back, “you won’t care. You’ll be looking for the biggest kitchen table to hide under to avoid being burnt to a crisp”. Best make sure it never happens so we don’t need to find out.

For the investment community wanting to understand defence, the risk analysis and the insights as to how NATO and the UK government procure military kit are intended to inform and educate as they distil down towards making direct investments in defence contractors. For policymakers, especially government, the military and the civil service, given it is taxpayers and investors who foot the bill, the market perspective on the financial framework supporting defence and national infrastructure spending should be instructive.     

For digestibility, what follows is divided into five parts:

• Part 1: Executive summary; conclusions.
• Part 2: ‘NATO: Mutually Assured Protection’: modus operandi; budget; political risk.
• Part 3: ‘Assessing risk in an unstable and dynamic world’: geopolitical risks.
• Part 4: ‘Auditing the British Armed Forces’: capability; capacity; resilience.
• Part 5: ‘UK policy-Taking back control’: the political and fiscal requirements for national security; holistic strategy; the UK defence budget; procurement. 

Part 1: Executive Summary and Conclusions

As we embark on the second quarter of the century, armed conflict or its direct effect pervades almost the entire line of land mass from the Gulf of Aden to the Baltic. At least 12 countries are directly involved as combatants or are in the firing line. In the Ukrainian war, the 32 members of NATO supporting President Zelensky are ranged against North Korea as a direct combatant backing Vladimir Putin, and Russia’s proxies including China, Iran, India and South Africa who are actively helping maintain Putin’s ability to wage war. If World War Three is not already formalised, it is getting very close. 

A new UK Strategic Defence Review (SDR) is under way under the responsibility of current Defence Secretary John Healey. In fact it is led by one of his predecessors, Lord (George) Robertson of Port Ellen, a former Labour Secretary of State under Tony Blair who subsequently went on to be a successful Secretary General of NATO. Roberston is being helped by two additional Reviewers, General Sir Richard Barrons (former head of Joint Forces Command) and Dr Fiona Hill CMG (highly respected British academic who served under Democrat and Republican US administrations including Donald Trump’s first where she was an adviser on Russian Affairs for National Security).

Why emphasise the word ‘current’ in the context of Healey? Because including Robertson he is the seventeenth to hold that position since 1990 (under Gordon Brown to whom defence was so unimportant, the role was combined with managing the Scottish Office and looked after as a job-lot under Des Browne) and the eighth since 2010. The average tenure over three-and-a-bit decades is two years; since 2010, it is one year and nine months, including Ben Wallace being in post for four years. This will be the 11^th such review or re-fresh since 1990 (Options for Change) at the end of the Cold War, and the sixth since 2010 (David Cameron’s Strategic Defence and Security Review, SDSR) in the post-Global Financial Crisis era. Over the last decade-and-a-half, therefore, what is defined as ‘strategy’ has had an average duration of less than two-and-a-half years.

As a full Review, this one however stands out having the benefit of three years’ perspective of seeing Russia in action in a full-scale state-on-state war. Ukraine’s is the most current, most knowledgeable and battle-tested armed force in the world when it comes to conflict with Russia. Much has been learned from the Ukrainians not only about how weapons and systems perform but also new tactics when it comes to trying to prevent Russian advances or to outmanoeuvring them. There is speculation that with the government’s enthusiasm for “the white heat of technology” being the cure for all ills, much of the focus of the SDR will be on re-defining the role of the armed forces to rely more heavily on technology (e.g. AI, Big Data, digital solutions) as the preferred solution with which to outwit and enemy, rather than more people and more firepower with which to defeat him.

It is no exaggeration to say that every defence review since the Cold War has left our armed forces less capable and weaker than they were before the review took place. ‘Hollowed out’ is the common phrase. Being generous, most set out with the intention of balancing the defence of the Realm, looking after our national interests and meeting our NATO and other treaty obligations, with affordability; none could claim to have addressed genuine capability and the need for fundamental reform in defence spending. There are two clear cases of deliberately cutting the financial commitment being the strategic aim: the Conservative 1990 post-Cold War ‘Options for Change’ programme was an active decision to halve the percentage of GDP allocated to defence in favour of health spending and benefits; however much the post-Global Financial Crisis Coalition 2010 Strategic Defence and Security Review (SDSR) was dressed up as grand strategy, that review was an implicit exercise in reverse engineering. Much more concerned with saving money than meeting the strategic threats, it was based on the Treasury application of false logic: essentially the starting thesis was that chancellor George Osborne would not pay to maintain standing forces in Europe for a state-on-state war which might not happen, therefore state-on-state war would not happen. He failed to understand that weakening our defences would raise the risk of that very eventuality, even if not on his watch.

All were the culmination of the best military, intelligence, civil service and industrial brains under the direction of ministers and within the constraints of each review’s ministerial terms of reference and budget. Yet here we are today at the turn of 2025, facing the biggest and most complex global threats certainly since the Cold War, possibly since the mid-1930s. The geopolitical analysis of such informed persons as the current heads of the British Army and the Norwegian armed forces, a British former Deputy Supreme Allied Commander NATO, the most recent UK defence secretary and the German defence minister is that we are potentially on the verge of World War Three within the foreseeable future, perhaps within as little as three years. Yet Great Britian has the smallest professional Army since the Napoleonic Wars and worse, its stocks of anti-tank missiles and artillery shells are so low that its fighting endurance is measured in days and weeks, not months and years; the Royal Navy is so hopelessly out of balance that what little still floats is virtually unfit for purpose; and the Royal Air Force has so few combat aircraft and so many operational commitments that the rubber band that keeps it aloft has already almost reached breaking point.

The Terms of Reference (ToR) of the Review are published online.² Its Purpose is defined as follows:

“The SDR will determine the roles, capabilities and reforms required by UK Defence to meet the challenges, threats and opportunities of the twenty-first century, deliverable and affordable within the resources available to Defence within the trajectory to 2.5%. The Review will ensure that Defence is central both to the security, and to the economic growth and prosperity, of the United Kingdom.”

There is the old joke about asking an Irishman the way to Dublin; his oblique but entirely logical answer is “whichever way you want but you wouldn’t be starting from here, now, would you?”. But with UK defence, ‘here’ is where we are and ‘Dublin’ seems no more than a Utopian concept rather than a firm destination. For the uncomfortable truth, described by one General as the “Voldemort Factor” (the one of which we do not speak), is that today’s armed forces are configured for threats that existed more than a decade ago while being directly confronted by ones that were dismissed at the same time as never going to happen; and yet in a flash-back to a previous era, here they are.

Anyone from the armed forces, the defence industry, the Ministry of Defence (MoD) or central government reading what follows will almost certainly tut-tut and say, “yes, we know all that. Tell us something we don’t know and come up with the solutions”. To which the riposte is blunt: if you know it, and your predecessors knew it, please explain today’s parlous predicament. Perhaps a good dose of the obvious is just what is needed. Apart from “within the trajectory to 2.5%” there is absolutely nothing in the overarching ToR above that has not appeared in virtually every SDR in the past three and a half decades.

This analysis set out initially to focus specifically on the military. However, as it developed and taking the title of the Review at face value and the liberty of adding the words ‘and security’, in fact it is a strategic polemic, a blueprint for broader national security and self-reliance. Invoking Sir Keir Starmer’s phrase on the election stump, it is about ‘taking back control.’ The author’s is a very different slant from Starmer’s about what it is to take back control. The SDR terms of reference give the impression that recommendations will be considered rather than automatically accepted (though if they are within the ToR constraints there is no reason why they should not be accepted). The inference is that some debate will follow. It is too late for that now given the pace at which events are overtaking us. As General Sir James Everard observes, opponents such as Putin will not hang about waiting for us to take our time thinking about getting stronger; if he’s going to act, the rational player will take advantage of our weakness and strike early.

The author is most grateful to General Sir James Everard, a former NATO Deputy Supreme Allied Commander Europe (DSACEUR), for his invaluable insights into NATO, and correcting obvious factual errors. Any errors that may remain are wholly those of the author, so too - for the avoidance of doubt – are all opinions expressed in this series, unless specifically referenced.

Conclusions

It is beyond the time for recommendations, so my conclusions come in the form of instructions.  If I am at risk of being accused of being unimaginative, precocious and presumptuous, or war-mongering or looking for ghosts where there is none, so be it. I’d rather be safe than sorry. Would you not too?

Immediate: give the forces a fighting chance:

1. Ammunition: Stocks of ready-use artillery ammunition and anti-tank missiles need not only replenishing immediately to replace those used in Ukraine, but inventories need building much further to meet the full combat need of the British Army for at least a year.
2. Lethality: For the Infantry, adopt Boxer as the light-role armoured personnel carrier but replace the Warrior Infantry Fighting Vehicle with either the US Bradley Fighting Vehicle or Swedish CV90.
3. Numbers (tanks): We need more not less heavy armour capacity. Upgrade all Challenger 2 hulls to Challenger 3.
4. Numbers (personnel): The armed forces manning crisis must be reversed. Set the medical admission default to ‘admit’ rather than ‘reject’; admission processing times need to be significantly speeded up (if Capita can’t do the job, find another who can or take it in-house: if a fifth of the forces are unfit to fight, at least they can recruit and train others who can).
5. Blow it up and start again: Defence procurement needs a top-to-bottom restructuring. Project delivery times of two decades are unacceptable. They need reducing by two-thirds. The pre-requisite is a radical overhaul of civil service, military but most of all government decision-making processes.
6. Life support: The National Ship Building Strategy needs turbo-charging. Construction hall capacity needs doubling and delivery times halving. The pre-requisite must be government orders significantly to increase the frigate and destroyer force at least three-fold back above 40 ships, and to add strategic logistics capacity to keep the two carriers at sea and operational. A committed naval expansion plan would draw in additional capital and attract greater competition, leading to keener pricing and faster delivery (and the prospect of actually going to sea would make it easier to recruit people who want to be sailors).
7. U-Turn: Reverse the decisions to scrap the amphibious assault ships HMS Albion and Bulwark and maintain them in service until their planned replacements arrive in 2038. The same with the RFA logistics ships facing the axe.
8. Ensuring The Few don’t become fewer and vanish: Shelve the plan to bin the Tranche 1 Typhoons. Or if impossible because of consortium constraints and lack of spares, replace with comparable but newer off-the-shelf substitutes e.g. General Dynamics F-16. Complete the original Lockheed F-35 purchasing programme thereby justifying the carrier rationale and restoring genuine strategic power. Bin the Pumas as announced, but stay the execution of the obsolescent Chinooks until replacement capacity is in place.
9. Missing in action: if conflict comes, direct invasion of the UK by the Russians is unlikely but aerial attack is highly probable. We have no Iron Dome. Invest in layered air defence systems. If the received wisdom is still that it is not worth it, the quid pro quo is comprehensive civil contingency disaster planning.
10. Doctor! Doctor!  Restore military medical services to be able to cope with mass battle casualties.

Political: ‘take back control’

1. Back to the future: Threats determine defence capability; the threat is not conveniently tailored to the defence budget. Near-term defence spending needs to more than double to 5% of GDP to mitigate against the simultaneous double-hit confronting the UK: the erosion to our armed forces over the past 30 years while threats have demonstrably multiplied over the past five years. All three armed services need to be at least double the size they are today, not just to meet NATO needs but to create their own self-reliance in the event we end up on our own. A hypothecated National Defence Loan (NDL, last raised in 1936) should be raised to underwrite the longer-term requirement to restore the army, navy and air force to 1990 end-of-Cold-War levels.
2. The Trump-Rutte axis and the dead hand of debt: The NATO spending bar is likely to rise to 3% of GDP in any case. An ongoing requirement 50% greater than today’s minimum qualification may be the norm to guarantee the Americans’ commitment to our security. UK Debt/GDP is already 100%; the tax burden is the highest outside wartime; we spend double the defence budget on debt interest payments. This needs to be the wake-up call for full-scale public sector reform and a re-ordering of public finances. Lower debt and interest offer choices for governments; high debt and interest are active constraints.  
3. ‘How’ is as important as ‘how much’: We spend more yet have less to show for it. Dispassionately dissect why it is that every marginal pound of defence expenditure yields a negative return and diminishing outputs, and has done for decades. Failure to understand why, and to remedy, will render the whole point of the SDR null and void.
4. Institutionalised torpor: With 17 secretaries of State in 35 years, it would be unsurprising to find the MoD is ossified, infected with Paperclip Syndrome. Risk aversion is all-pervading. The MoD is unique in government departments having large numbers of serving professionals rotating through on two-year postings, working alongside permanent civil servants. It ought to be a hive of dynamism, the one department in which thinking the unthinkable and preparing for it is a requirement not a heresy. John Healey needs to inculcate his department with a sense of risk, urgency, pace and efficiency.
5. Money where your mouth is: The Prime Minister wants investors to ‘get behind defence’. In the national interest, so they should. However whether providing permanent equity capital to UK defence contractors, or as secondary investors, they will be reluctant participants on financial grounds if they think returns will be inadequate because of inefficiency and unnecessary frictional costs. If funding an NDL through the bond market a) they need adequate compensation for the duration risk and b) confidence of repayment. Investors are unlikely to take speculative risk: as the sole commissioner/customer/licensor of military hardware and systems, the remedy is entirely in the government’s hands.
6. Hard hats and velvet gloves: our new foreign policy is baffling and incoherent notably with regards to the US, Israel, China and the British Overseas Territories. Reset.
   
7. National Security: industry, technology, energy and food security are integral to national security and should be embedded in the Review, not peripheral to it.
8. It cannot happen here! Actually, it can: wars in the Ukraine and the Middle East seem very dislocated from day-to-day life in Britain. That a full-scale war involving the UK and its people should not happen is very different from saying it will not happen. A public education programme explaining the need for defence, national public involvement and resilience needs to be made.
9. To the Colours! Conscription is a step too far, though the case for a return of National Service is stronger. Voluntary military service should be instinctive and the Reserve forces should be expanded significantly.

An investor’s view, part 2: NATO’s ‘mutually assured protection’

“We want to live in a world where sovereignty, territorial integrity, human rights and international law are respected and where each country can choose its own path, free from aggression, coercion or subversion. We work with all who share these goals. We stand together, as Allies, to defend our freedom and contribute to a more peaceful world.” NATO’s vision is as honourable as it is clear and explicit. Under the bonnet are a mass of complexities in an alliance that now has 32 members spanning two continents.

It was General Sir Hastings Ismay who, in 1949, at the foundation of NATO of which he was Secretary General, pithily summarised its purpose: “it’s there to keep the Americans in, the Russians out and the Germans down”. Eight decades later little has changed as far as the Americans and the Russians are concerned; Germany is going through a period of national insecurity and introspection. History says that NATO has been a great success: no state enemy has attacked a NATO member in the entire time of its existence. Putin’s miscalculation with Ukraine was to tip Finland and Sweden from being neutral states to NATO members.

It is not all about Trump

It is popular currency to cast Donald Trump as NATO’s principal internal threat, its home-grown monster and eminence grise. Admittedly, he does not help himself with his behaviour towards Denmark and Canada. But quite why it should be his particular preserve is far from clear. For years, led by Germany and France, key EU member states have tried to disintermediate the US defence hegemon in Europe. The EU’s determination to be an identifiable global power to rival the US and China remains a misguided pipe dream so long as it is nowhere close to being a homogenous nation state (which has the prerequisites of political, fiscal and debt union to complement monetary union); it has an almost childlike insecurity, an inferiority complex and resentfulness of America’s influence even though the US was and still is underwriting NATO’s bills and providing most of the military hardware, manpower and effectiveness for Europe’s defence. It was in 2019 that President Macron mischievously and corrosively pronounced NATO ‘brain dead’.

However, In 2021, it was thanks to a US Democrat President, Joe Biden, that NATO came closest to a genuine self-inflicted near-death experience. Biden, without any reference to his allies (and notably the British who were much the most important and wholly enduring partner), summarily pulled all US forces out of Afghanistan literally without a by-your-leave. I wrote at the time that the unseemly, chaotic flight from Kabul as a rampant (and surprised) Taliban took full control of the country without opposition was not only a disaster for NATO and the people of Afghanistan, but the repercussions ‘would be felt all the way from Taiwan, through central Asia, to the Middle East, the Balkans, Ukraine and up to Finland’. NATO’s literal dis-integration in Afghanistan did not cause Putin to invade Ukraine but it did give him the confidence that were he to pursue that course of action, there would be no direct retaliatory response from NATO members (he made plenty of other mistakes and miscalculations but that was not one of them: while France and Germany were in full appeasement mode with Putin, it needed the unlikely figure of Boris Johnson to put vim and vigour into the US and broader NATO response, not least that only a few weeks before the invasion, Biden had publicly said that a limited Russian incursion into Ukraine would be ‘acceptable’).

Robust military strategy

Today, NATO is well back from the brink, far from brain dead. It has, or had, recovered its sense of purpose and poise and something of its mojo. Harried by Trump’s first term remonstrations against delinquent members (at that time, all bar 6) and accelerated by the reality of the first state-on-state war in Europe since 1945, most governments have made a determined effort to meet the minimum requirements in terms of defence and equipment spending. NATO strategists have a robust, multi-layered plan for every conceivable manner of Russian aggression towards its members and how best to deal with it. If there is a military tension, it is between what resources the Supreme Allied Commander Europe (SACEUR) needs to fight a full-scale war tomorrow, and what national governments account for in today’s spending for resources which might not be available for 20 years. There may be widespread disparity between members’ military capabilities, but other than the universal shortage of munitions, military thinking and awareness are not NATO’s problems. The future problem is political. Even in a formal alliance, any sensible government’s defence policy should contain an element of scepticism and a constant re-evaluation of ‘who can I trust and who can I count on’, the corollary of which is the reverse: ‘can others count on me too?’

A military alliance but a political construct

NATO’s is a democratic alliance. It is the nature of the beast that facing democratic governments on fixed electoral cycles is the threat posed by autocracies/theocracies/dictatorships often with enduring regimes and a very different relationship with their publics. NATO’s great strength is its size and its economic resources. Pooled together, its aggregate share of global GDP is a mighty 47.4%. Add in Japan, Australia, New Zealand and South Korea and it is over half the global economy. Its great weakness is its governance and the number of countries and governments involved: at 32 members, each with an equal vote and the right of veto, and requiring unanimity to grant accession to a new member or to agree on Article 5 being invoked³, it runs the risk of being almost unmanageable. Even when in agreement, decision-making can be sclerotic, with the potential to be catastrophically slow. The Secretary General (SG) derives his/her authority from the consensus of the 32 governments in the Alliance. This is fundamental: the SG communicates what members have already signed up to. A key role, particularly when a member government changes, is to educate/remind the new incumbent precisely what it is their country has already committed to. The SG’s role is that of an international hustler: herding cats in the right direction requires charm, persuasion, political guile, a dash of old-fashioned arm-twisting and a hint of judicious menace. Mark Rutte, despite having his Dutch government collapse under him, was undoubtedly the person for the job: an experienced and internationally respected European former prime minister who has a proven ability to get on with Donald Trump.

But if the military has an enduring consensus on strategy, the fact is that each country’s military leadership at NATO headquarters reports and is accountable to, and takes direction from, its own national government first; its responsibility to NATO is secondary. This why the SG role is so critical holding the political consensus together. When confronted with the reality of conflict, the recent history of NATO is rich in political indecision, splits and half-baked responses. Neither Gulf War produced a NATO participation consensus, even the First Gulf War to evict Saddam from Kuwait which had an explicit UN mandate and involved other non-NATO Coalition forces. In the Balkan conflict, the NATO force in Kosovo had only partial support from EU member states despite the war being on its doorstep. George W. Bush invoked Article 5 following the 9/11 attack on the Twin Towers; with a few honourable exceptions (including the UK) the response by most NATO members to participate in the subsequent Afghan campaign to combat Al Qaeda was nugatory at best, zero at worst.

When NATO forces have been committed, the purely military strategy has usually been very successful if often gruelling and difficult (for example Iraq was much easier than expected both times, Afghanistan much more difficult; the less said about the political misdirection in Libya and Syria the better). However, with the exception of the Balkans, all the military achievements have been undone by lack of after-battle Phase 4 operational planning: essentially an orthodoxy dictated by defence secretaries Dick Cheney and later Donald Rumsfeld, it was the neo-con doctrine that “the US does not do nation-building”. Leaving physical, social, economic and governmental rubble behind for someone else to clear up and piece together after you’ve bombed the place to bits and walked out, has been an abject failure. Political vacuums will always be filled, often by bad actors who perpetuate instability or those such as the Taliban who are even more repressive than the regime they replaced. It is a significant operational failing of NATO; it is entirely a function of the dominance of the US budget relative to the other members that what Washington says, goes.  

As strong as its weakest link

The core tenet of NATO is that of mutually assured protection. It has great strength when its integrity is intact. Break that and the whole edifice disintegrates. The examples above of variable rather than unanimous responses are to what can be termed either ‘out of area’ or ‘expeditionary’, rather than NATO itself having been directly attacked, even at 9/11. But today, particularly in the context of political change among its members, that unconditional and unequivocal underpinning of NATO is in question. Trump potentially not turning up is the most talked about example. But could it apply to the UK too? Playing devil’s advocate: we are one of the designated international ‘lead’ nations responsible for the defence of Estonia: will we unconditionally go to the aid of Estonia and be prepared potentially to ‘waste’ a large part of the Army reinforcing the current small UK garrison (around 900 troops comprising a squadron of heavy tanks, a recce unit and most of an armoured infantry battalion, plus an RAF Typhoon flight) in the event of a Russian attack? The automatic assumption is yes but what if political will is lacking or public opinion says otherwise? It is far from unthinkable: we did precisely that with Ukraine when in 2014 we failed to honour the Budapest Memorandum when Crimea was annexed, and we failed in 2022 to prevent a full-scale invasion (if we thought we would never have to honour the obligation we should not have made the commitment at all: it is a lesson for anyone else to whom we might strike the same bargain including all other major Non-NATO allies).

That requirement of unanimity to invoke Article 5 is a facet of governance that our opponents, particularly the Russians, will try to exploit. Putin will seek the weak spots which politically might produce an abstention or even better an outright veto. Slovakia’s government under Robert Fico has branded all foreign NATO troops hosted on its soil as ‘Nazis’ and is openly hostile towards Ukraine. Romania only narrowly avoided electing an anti-NATO nationalist to head its government at the end of 2024; there is no guarantee the far-right will not succeed in future. Hungary has robust defence spending and is an active NATO member but its president Viktor Orban maintains open dialogue with Putin; he claims he is a bridge between the EU, NATO and the Kremlin while others suspect he’s either disingenuous or being played for a fool (more pragmatically with a heavy reliance on Russian gas, arguably he has little choice but to treat with Putin). Turkey has one of NATO’s biggest defence budgets; it is the guardian and bastion of NATO’s south-eastern flank; Recep Erdogan and Putin have been on opposing sides in the long-running Syrian saga, and also in Libya; on the other hand, Erdogan bought air defence missiles from Putin and was a willing participant in the October 2024 BRICS summit hosted by Putin in Kazan. Washington remains sceptical as to whether Turkey is a reliable ally or a counterparty which hedges its bets and will go with whatever is in Turkey’s best interests at the time depending on the deal on offer. Even in western Europe there are uncertainties. Marine Le Pen in France is antipathetic to Ukraine and an admirer of Putin: what if she becomes France’s next president? In Germany, both on the far right and the far left, nationalism is demonstrably on the rise as is hostility towards Ukraine (the majority of Germans do not want Germany to provide either military or financial support Zelensky, according to YouGov); even if a centrist coalition is elected in February, that broad shift in public attitudes will be difficult to ignore.    

Shifting political sands

The political sands are constantly shifting. Just look at the photo of the key western leaders taken on OMAHA Beach on June 6th, 2024, at the Normandy commemorations. Seven months on: Sunak (in fact it was David Cameron standing in, Sunak having done an early bunk to do an ITV election interview), gone; Scholtz, about to be gone; Biden, gone; Macron, in office but not in power, on political death row praying for a reprieve. What has followed in each case, or is likely to, is a government with different priorities from its predecessor, different views about Ukraine, different views on Putin, different views on China, Israel, defence spending etc. When Trump raises the minimum GDP spending bar from 2% of GDP to 3% or even higher, divisions are going to appear immediately about affordability given most will have to increase national defence spending by at least 50% from their current levels. Two supposedly cornerstone governments, those of France and Germany, have just imploded because of irreconcilable differences about how to manage their deficits while trying to maintain economic growth; France’s almost total fiscal preoccupation on the hard left and the hard right (at both ends of which spectrum lies the real power in the French parliament) is with reversing Macron’s entirely rational and much needed pension and benefits reforms. The result will push the deficit towards 7% while Brussels insists the deficit/GDP ratio is more than halved to a maximum of 3%; increasing defence spending by 50% or more is simply not on any French party’s agenda. In Germany, to produce a legal budget, Scholz has just had to scale back on what should have been catch-up defence spending promises and has halved the proposed financial aid to Ukraine. The price or risk of failing to meet Trump’s demand is that in the event of an attack by Russia, Trump decides he’s going to stay away. How much do you want to test that he’s not bluffing?

Even if Trump does honour his commitments to Article 5 (and according to YouGov US public opinion supports America’s NATO mutual defence obligations⁴ as does the Pentagon and the majority of Congress), the greatest risk and the most likely series of events NATO will face is that of an isolated attack quickly becoming an all-consuming global conflict. If China attacks Taiwan, and the US, Australia and Japan are fully preoccupied dealing with Taiwan by going to its aid, that is precisely the time that Russia would opportunistically make a move in eastern Europe, while Iran would take aggressive action in the Middle East and North Korea would join the party too by invading South Korea (the same will happen if Russia is the lead actor and the US is engaged in Europe: China will have a crack at Taiwan, splitting the alliance etc). Politically, non-US NATO members should not be framing their decisions around Trump-proofing the Alliance (though if he is the lightning rod, so be it): regardless of who occupies the White House the strategic danger is that in the event of a full, all-consuming global conflict, the US cannot be saving everyone everywhere at the same time. It is particularly the case when very different from World War Two, in the age of widespread nuclear arms and the development of long-range hypersonic missiles the US mainland itself will almost certainly also be under direct attack.

While needing to demonstrate national leadership in the event of a crisis, governments are inevitably mindful of and susceptible to domestic public opinion and focus groups. A YouGov poll in 2024 tested international opinions about NATO and Article 5. On both sides of the Atlantic, the majority of those polled were in favour of NATO defending member states in general. However, when focus groups in individual countries were asked about defending named member states, significant variations were apparent. Clearest of all was that Spain, France and Germany would all convincingly vote against coming to the aid of fellow member Turkey (even the UK and America were lukewarm).

Budgeting more buck and more bang

Finally, the 2% of GDP minimum spend requirement is going to be raised to a minimum of 3%. It is already agreed in principle, expected to be endorsed at the annual summit in June. The terms are complex, in which the minimum proposed will be 3.7% but deductions will be made the more a country engages in joint purchases through the NATO Support and Procurement Agency. But Trump is likely to make the expenditure audit much more rigorous: he is well aware of the extent to which some governments (including the UK) are cheating the system with smoke-and-mirrors accounting by loading up additional costs which add to the headline expenditure but provide no direct military benefit. He is likely to demand hard, empirical metrics measured in bang for buck. It is addressing the theme running throughout this critique: the mismatch between financial inputs and military outputs. NATO has a ‘Capability Target’; it is one of the few elements of NATO policy that does not rely on full consensus (the vote is ‘consensus minus one’: no country can vote to support the target while unilaterally opting out on its own account). In the UK, we are on notice and likely to be publicly called out. 

A unified NATO is stronger than the sum of its parts and stronger than the opposition. United, it should be inviolate and impregnable. In the event of political dis-integration, the greater the likelihood that one or more of its members is violated, precisely what the Alliance is there to prevent. 

An investor’s view, part 3: Assessing risk in an unstable world

When assessing risk, the well-established adage applies: ‘there are known knowns, known unknowns and unknown unknowns’. Another way of looking at the same problem from a policy perspective: it is all about confronting what is obvious, considering what is conceivable (whether probable or improbable is irrelevant) and having the flexibility and spare capacity to insure against the totally unexpected.

Known Knowns: flashing red, alarm bells ringing

The UK armed forces’ Chiefs of Staff regard Russia as the most significant direct military threat. The intelligence agencies, particularly MI5 (domestic counter-intelligence) and MI6 (The Secret Intelligence Service, overseas intelligence gathering) see China as the greater strategic danger. That is not to say they disagree; it means that both are simultaneously significant threats but of a different nature.

Use of the term ’threat’ implies the potential for something yet to happen. In reality the joint threat posed by Russia and China has already crystallized: through destruction of infrastructure assets (for example think blowing up the Nord Stream 2 gas pipeline; or the destruction of the electricity cable between Finland and Estonia in December); or Russian state-sponsored assassination of nationals living abroad whom it regards as a threat; Russia’s active use of asymmetric forces such as the GRU and Wagner to channel illegal migration into western countries to create societal tensions and government instability; or China’s active and orchestrated programme of insinuation and espionage in commerce and particularly western universities (even the Royal Family!). Both are actively engaged in undermining western interests including those of the United Kingdom. They have been joined and augmented by Iran and North Korea. India is complicit with Russia: Narendra Modi is on strong terms with Putin and in mopping up surplus Russian oil has knowingly helped fund Putin’s war programme.

The challenge is not new: what has changed in the past three years since Putin’s invasion of Ukraine is the fomenting of these autocracies/theocracies/dictatorships into a cohesive, identifiable military axis. Despite both being communist states, of great assistance to NATO during the Cold War era was that Russia and China at best were mutually antipathetic; they were ideological rivals. The Soviet Union was a superpower in a way that China was not but aspired to be. Today, far from having mutual contempt for each other, Russia and China are firm allies with a level of mutual dependency.  By dint of its size of population and being the second biggest economy in the world (and nearly ten times the size of Russia’s but, significantly, almost entirely reliant on imported oil of which, according to energy research analysts at Kpler, in 2024 an estimated 30% of China’s domestic consumption was provided by Russia and Iran supplying 15% each), China is now the senior partner even if it does not yet have the same magnitude of nuclear capability enjoyed by Russia. They have a formal cooperation agreement which includes joint military exercises; China is funding Putin’s war machine through substantial purchases of embargoed oil and gas and it would be amazing if through hidden channels it were not providing Russia with some form of military aid; Iran and North Korea are both supplying missile systems and ordnance to Russia in return for military intelligence and technological know-how, including nuclear; most recently Pyongyang has committed eleven thousand troops to the Ukrainian battlefield to help the Russians and is poised to provide greater numbers; western intelligence has proof that Pyongyang too is sanction-busting being in receipt of embargoed Russian oil delivered by deliberately obscure routes.

Russia: a paranoid wolf in wolf’s clothing

The risk of a post-Cold War, post-Perestroika reaction from Russia was recognised as far back as the mid-1990s. Susceptible to the seductive overtures from the West and as a positive statement of disengagement from Moscow, several former Warsaw Pact⁵ countries made it their public aim to join either the EU or NATO or both. Whether the post-Cold War ‘peace dividend’ (winding down defence thereby freeing up government funds to be made available for other government spending priorities e.g. benefits, healthcare, etc) was too powerful a fiscal factor, or the geopolitical tea-leaves were misread, or the potential threat was simply ignored as both inconvenient and improbable, the result was the same.

There is no need to re-hash the full history. The culmination of Russia’s paranoia with the increasing encroachment of both the EU (what Putin sees as a voracious but decadent and subversive bloc being a direct threat to ‘Russian values’ and the Russian way of life, i.e. a threat to Putin’s autocracy and the powerful supportive self-interests of the oligarchy and the kleptocracy) and NATO having significantly longer direct borders with Russia and its proxy Belarus (i.e. at the time, the Baltic States and Poland joining that of Norway) allied to Putin’s nationalistic desire to regain what he regards as always having been sovereign territory, led directly to his 2014 annexation of Crimea and the 2022 full invasion of Ukraine. Even if not recounting the history of Ukraine’s ‘threat’ to Russian sovereignty as perceived in Moscow, today there are startling parallels with emerging dynamics in Georgia and Moldova, each with its own domestic internecine political struggles about future membership of the EU and NATO.

Donald Trump wants a quick deal with Putin to end the carnage (more pragmatically, to get the US taxpayer off the hook). It may not be as simple as that. Zelensky will be encouraged or forced to accept partition but that does not preclude a continuing civil war in the Donbas and Crimea. NATO allies (especially the UK as a guarantor of the Budapest Memorandum) will almost certainly have to commit to substantial garrison/peace-keeping forces to be kept in Ukraine for the foreseeable future potentially splitting existing NATO operational formations. The big sticking points for both Putin and the European members of NATO are going to be over reparations from Russia, who foots the huge bill for rebuilding the country, what happens to the $320 billion of frozen Russian assets and finally, the indictment against Putin on charges of war crimes and genocide which he will demand are lifted.

Clearly much depends on the outcome of the Ukrainian conflict as to what Russia does next. Putin’s strategic aim is still to create a discernible politically and militarily sterile buffer zone between the EU and the Russian motherland (it was his demand before 2022 that all NATO foreign ‘trigger troops’ hosted by any NATO country on the Russian Federation western boundary should be removed).  In the event of what will be spun by Putin as a Russian ‘victory’ in Ukraine brought about by a Trumpian deal, will Putin next risk a head-on clash with NATO by attacking one of the several adjacent NATO frontier states? An attack could be through the Polish Corridor, or a right hook around the northern flank against the Nordic countries (a new calculation for Putin, or more accurately a miscalculation by him, now that Finland and Sweden have foregone their neutrality in favour of NATO membership; NATO planners had always assumed that he would not think twice about violating their neutrality if it suited him, but today an attack against either Sweden or Finland would explicitly trigger an Article 5 response by NATO). Or will he isolate the Baltic States by sending troops from Belarus through the Suwalki Gap separating Poland and Lithuania and linking with the Russian nuclear-armed oblast enclave of Kaliningrad on the Baltic Coast? He could then resort to tried and tested Trojan Horse techniques using ethnic Russian populations in the three Baltic States to destabilise their governments from within and either directly appropriate or seek to control territory under the disguise of having a democratic mandate through ‘referenda’, as practised in the Donbas oblasts of south-east Ukraine?

The most immediate risk is that if Trump’s peace talks fail and against advice he still withdraws all military funding from Ukraine, Ukrainian resistance is likely to fail, probably quickly. While NATO’s arsenals are largely empty and its immediate resilience is low, is that the time that Putin might rapidly switch fronts and spring an attack elsewhere on another country? If there is one thing which keeps NATO’s Supreme Allied Commander Europe awake at night, it is that “World War Three tonight” scenario.

Biden, Boris and the rest of NATO had it in mind that sanctions would take Russia out of the game; by now, to use their phraseology, economically it should be ‘on its knees’. It most certainly is not. It has suffered staggering losses and shed much blood and treasure and failed to conquer Ukraine (Ukrainian resistance and resilience have been amazing and inspirational). But Russia’s economic reserves remain largely intact, as do its sources of foreign income. Those who predicted Putin’s overthrow have been proved wrong; he is still firmly in command. Putin has the economy on a war footing and in 2025 will spend $132 billion on defence and security, 6.3% of GDP, 40% of total government expenditure and a 25% increase on 2024. Similar to China, it is dangerous to equate Russian purchasing power with that of the West (defence dollars buy more in China and Russia thanks to lower procurement costs and wages). It is also a dangerous assumption that because Russia has suffered so heavily in Ukraine it will be incapable of any similar venture. Betting against Putin has been expensive before and the odds are it will be again.  

China: a Tier 1 threat to national security

If the threat from Russia is overtly offensive by whatever means, that posed by China is more subtle and subversive but no less pernicious and (as assessed by MI6 in a foreign perspective and MI5 domestically) at least as dangerous.

US National Security Agency senior adviser Rob Joyce coined the memorable phrase “Russia is the storm; China is climate change”. China’s strategic aim is to lead a new world order (i.e. with China at the apex and everyone else a vassal, subservient or deferential); it is an explicit objective set out in Chinese Communist Party (CCP) literature. The terrestrial One Belt One Road and maritime String of Pearls infrastructure projects are designed to give China global leadership and to confer global strategic patronage on Beijing. The strategy is prosecuted through carefully planned economic support and investment extending not only across Asia and Europe but in Africa and Latin America. It is a well-planned programme of fiscal neo-colonialism which places ‘beneficiaries’ in the debt of the CCP. It is designed to give Beijing control (or at least significant influence) over natural resources, manufacturing, technology, infrastructure, trade routes and supply chains globally. In terms of its land strategy, Iran is key: blocking the entire land mass from the Gulf to the Caspian, Iran’s cooperation determines whether China’s New Silk Road is intercontinental or merely a pan-Asian cul-de-sac. These means of gaining advantage are backed up by significant military expenditure and innovation (as well as being a nuclear power, China now has the world’s biggest navy and is recognised as being a generation ahead of the West in the development and deployment of hypersonic missile technology).

The direct military threat from China currently focuses on Taiwan and the China Sea. Chinese forces are instructed to be prepared to invade Taiwan no later than 2027. The consequences of China gaining control of Taiwan are significant globally: Taiwan accounts for 90% of all semi-conductor manufacturing capacity; were that capacity seized intact, China’s global industrial control would be obvious; were it to be destroyed as a means of Taiwan denying control to China, so ubiquitous is the use of such chips that global manufacturing could potentially quite literally grind to a halt. As well as developing the global String of Pearls, China has been actively appropriating disputed atolls in the South China Sea, including the Spratley Islands, the Paracels and recently, surveying the Scarborough Shoals; applying the adage of occupation being nine tenths of the law, to secure its new ‘possessions’ China quickly develops and militarises such reefs and atolls including equipping them with airfields and missile batteries.

Iran: do its strategic miscalculations with Israel make it less of a threat or more dangerous?

To date, Iran’s offensive stance has been oblique more than direct. Its funding, arming and direction of a number of proxy non-state organisations (many but not all of which have been proscribed by several but not all western governments as terrorist groups; Iran’s own Revolutionary Guard is one that has not been proscribed by the UK despite evidence of active subversion and alleged political assassination on British soil) has been its means of waging asymmetric warfare against its targets, the principal of which is Israel. Its hostility towards the United Sates is explicit, as it is to the UK by association. But as the late General Sir Mike Jackson, a former head of the Army, made clear, Iran’s use of force, even by proxy, is merely a means to an end, not the end itself. The end it wishes to achieve is the supremacy and imposition of Shia Islamic fundamentalism: until the West confronts the cause (Iran) rather than the symptoms (its proxies), it is chasing the wrong threat actor. John Bolton, a former US National Security Adviser and leading neo-con hawk, believes that a direct attack by the United States against Iran is both inevitable and warranted.

Western intelligence and defence agencies are trying to evaluate the effect on Iran of the collapse of the Assad regime in Syria. Optimists hope on top of the damage inflicted by Israel directly against Hezbollah and Hamas, Iran’s proxies, that no longer having a safe route through Syria to Lebanon to help re-build Hezbollah will significantly undermine Tehran’s ‘Ring of Fire’ around Israel; they see the regime in Tehran being thrown on the defensive potentially to the point of implosion. Pessimists worry that a deeply defensive regime in Tehran will react by lashing out across the region and accelerating its nuclear programme with the full intention of using it. 

North Korea: a mystery inside a riddle within an enigma

North Korea is as enigmatic as it is dangerous. An entirely closed state, North Korea is difficult for western intelligence agencies to penetrate and analyse. Pyongyang has consistently surprised western governments with how advanced and sophisticated its nuclear and missile programmes are. So advanced are they that they represent a credible threat not only to South Korea and Japan but also the western seaboard of the United States.

US Policy: Trump and trade

Much anxiety today arises from the risks posed by Trump’s programme of Make America Great Again and perceived US isolationism, particularly through his new trade war and his blanket tariffs on all US imports with special tariff premia levied on China, Denmark (over the ownership of Greenland), Panama (he wants the canal) and Canada (the “51^st State”). The actions against his allies are sure to be corrosive and unhelpful. Trump is no diplomat: he does not “do” partnerships, he trades and negotiates with counterparties for advantage; apart from President Macron of France no senior western leader is still in office who was there in Trump’s first term. They need to learn to deal with him all over again. But looking beyond, do not assume that the only concern is Trump. Joe Biden’s Inflation Reduction Act containing $340bn of environmental initiatives and tax incentives was just as nationalistic, protectionist and disruptive to global trade flows as anything Donald Trump will do with tariffs. It can all happen again in a different form under a future president.  

Known Unknowns: joining the dots

Nuclear & WMDs

The biggest of these is nuclear proliferation and other weapons of mass destruction (WMD). In the post- Second World War era of the Cold War, the established nuclear powers were the US, the USSR, the UK and France. They were joined by India, Pakistan and China. Israel has nuclear weapons though never publicly acknowledges it. North Korea now has a nuclear capability, and despite the JCPOA (Joint Comprehensive Plan of Action, the failed and discredited treaty designed to contain Iran’s nuclear capability) Tehran either already has it or is within reach of achieving it. South Korea has announced that it is actively investigating the pros and cons of a nuclear programme with which to deter Pyongyang. In the past, countries such as Egypt have actively pursued nuclear weapons programmes but abandoned them. Libya under Gaddafi had an extensive arsenal of WMDs (including a nascent nuclear programme) which he was persuaded to give up in return for being no longer treated as a pariah and sanctions being lifted. Ukraine surrendered all the old Soviet nuclear weapons on its territory in return for security guarantees and that weasel word ‘assurances’ (the infamous 1994 Budapest Memorandum of which the guarantors were the US, the UK and Russia whose guarantees and ‘assurances’, in the event, amounted to being as worthless as a tin of beans; make no mistake, failure to honour the sovereignty guarantee is a massive policy failure on the part of the US and UK governments). The future risk is not only which countries might harbour the ambition of a full nuclear capability but those including rogue non-state players who might develop ‘dirty’ weapons, in the case of nuclear not to create an explosion but to spread toxic nuclear material far and wide, or other forms of crude chemical and biological weapons for indiscriminate use against civilian populations.

Climate change

Climate change is a real threat. Foreign Secretary David Lammy said in an essay in September 2024 that it and loss of biodiversity are the greatest preoccupations of his department, they are ‘at the heart of everything the Foreign Office does.’ Dismissing the likes of Russia and China, he said that ‘climate change is a much greater threat than terrorism or an imperialist autocrat’.  There is merit in his argument about the pernicious effect of climate change (though while a threat for some, it represents an opportunity for others). But he misses the most fundamental point: if the threat from climate change is as he describes it ‘pernicious’, the threat from climate change politics is far-reaching, immediate and direct. It is far from being about kumbaya and the universal fight against global warming. The race to achieve carbon net-zero, and in particular what I have termed in the past as the great ‘Climate Change Compression and Competition period’ over the next 10-15 years represents the third in a series of immense shifts in geopolitical influence and power since the industrial revolution in the 18^th century: first the exploitation of coal to transform fledgling technologies through to full-scale industrialisation; next, the second phase comprising the primacy of oil and transformative nature of internal combustion and jet engines; and now embarking on the third which is the exploitation of rare earth elements, ores and minerals including lithium, copper, nickel and cobalt for new forms of motive power in the post-hydrocarbon era; this exploitation extends to the sea-bed and especially where the earth’s tectonic plates meet and immense natural forces drive such elements and ores close to the surface of the earth’s crust.

The Paris Climate Accord fired the starting gun for what will be a tremendous tension between international cooperation on the one hand and about securing national competitive advantage and asserting global geopolitical leverage on the other. Success equates to economic and geopolitical ascendancy; failure to capitalise condemns losing countries to relative decline and weakness. China is exploiting the new paradigm ruthlessly. One small but clear example is already evident as it ‘weaponizes’ the development and sale of heavily subsidised electric vehicles to western markets with two aims in mind: 1) commercially targeting consumers in countries such as Germany with cars at price points no western manufacturer can possibly match and by undercutting them so significantly that it undermines key national industries and sows economic and social instability (consider the extent to which the intense pressure on VW’s fortunes in Germany are a national industrial disaster and are sure to be a factor in the February 2025 Federal election) and 2) to gather vast quantities of consumer data for intelligence purposes; the western response is tariffs.

US oil combined with natural enterprise and innovation conferred global industrial leadership on America. The principal global reserve currency is the US dollar whose hegemon was underpinned by oil: the ‘petrodollar’. China, aided by Russia and Saudi, are intent over time on breaking the supremacy of the petrodollar as part of a long-term strategic plan to undermine the US economy. Who knows if it will succeed, but the intent is there. Another potential shift in the global geopolitical tectonic plates which will have security consequences as the global balance of power shifts.

The Global South

Linked to this through the BRICS (originally Brazil, Russia, India, China and South Africa) economies is the challenge to the status quo from what is loosely termed the ‘Global South’. India’s Prime Minister Modi threw down the gauntlet at the G20 conference he hosted in September 2023. This expanding group of countries rejects the historic western hegemony over the established global institutions: the United Nations; the World Bank; the International Monetary Fund; the World Health Organisation and others. The decadent West is the Past, the dynamic Global South is the Future. The geopolitical tectonic plates are shifting; shift creates stresses and tensions; when the stress is too great, the resulting seismic release can be destructive. When and to what extent, nobody knows but that the plates are on the move is self-evident.

The shifting sands of western politics

There are western-based risks too. Exploiting the malleability of the public, manipulation through social media is a clear challenge to political norms, as is the rising influence of those individuals and corporations who own media channels (if Russia has its oligarchs, the US equivalent is the media mogul). Across Europe and in the US, there is a demonstrable rise in populism (both right and left) challenging the status quo. Electoral and political outcomes are less easy to predict. Resentment against the ‘establishment’ and the perceived democratic deficit, a breakdown of trust in politics, the increasing economic and social divide between the ‘haves and the have-nots’, immigration, climate change politics, all are contributing towards instability and reactivity making firm transnational strategic policy for organisations such as NATO more difficult to achieve and sustain.

Global Institutions

The cynical manipulation of and disregard for the Rules Based Order is already happening. Two shining examples demonstrate how structures and protocols put in place with the very best of intentions to maintain global security and integrity for the protection and safety of civilians have been systematically exploited. The first is the United Nations: how can it be that of the five permanent members of the Security Council, one, Russia, is still allowed to sit, vote and veto, aided and abetted by another, China? Russia has illegally invaded a sovereign nation and fellow UN member (Ukraine, with security guarantees and ‘assurances’ provided by two other permanent members, the US and the UK, lest it be forgotten) and its president has been indicted on charges of genocide and war crimes and yet the UN is powerless to hold Putin or Russia to account or to prevent his ambassador from being present. The UN has also managed to tie itself in knots over Israel: despite facing literally an existential threat in the form of extirpation and obliteration by Iran, and defending itself and its people robustly, Israel emerges as the pariah of the United Nations. Which leads directly to the second, the International Criminal Court which as well as indicting Hamas leaders has also indicted the prime minister and the former defence minister of Israel on charges of genocide and war crimes (charges endorsed by the new Labour government). It was Lord Sumption, a former member of the Supreme Court in the UK, who said ‘we judge our friends by higher standards’ in the context of Israel. 600 British lawyers and academics demanded and eventually secured the suspension of British military aid to Israel on the grounds that the contravention of Palestinian human rights in Gaza caused by Israel’s response to the unprovoked Hamas attack of October 2023 rendered such assistance illegal. That Hamas has no regard for the lives of its people and uses them cynically as a human shield is irrelevant. Whatever your views on the long-running Israeli-Palestinian conflict, who is right and who is wrong, is not the point. It is the precedent that in the event of an unprovoked attack by an unprincipled actor with no regard for international law, you are expected to behave at all times with dignity and decorum and to abide unconditionally by that law. Otherwise you will find yourself arraigned in the International Criminal Court on criminal charges. Turn up to a knife fight with a Tommy gun and you’re in trouble; come with boxing gloves and a copy of the Marquis of Queensberry rules and the lawyers will let you pass.

Painful to say but it appears increasingly the case that malign actors regard such institutions as either toothless tigers or, cynically, little more than useful idiots.

Unknown unknowns: who knows?

By definition a very short section! With the benefit of hindsight, a good example would be the rapid collapse of the Assad regime in Syria seemingly out of nowhere. Stretching credibility, Joe Biden claims direct credit through his support for Israel. The reality is that nobody saw it coming, let alone predicted when and with what spontaneity it would happen. Now that it has, however, what happens next in this highly febrile region, with a conflict that already encompasses countries at the nodal point of three continents, becomes a ‘known unknown’. Policymakers are rapidly recalculating, using probability trees to second guess the outcome and trying to effect stability. The key questions are what are the responses of the regional players who variously have the most to gain (Turkey, Israel) or the most to lose (Russia, Iran) or who are stuck in the middle (Lebanon, Jordan, Iraq) while former members of a proscribed transnational terrorist organisation (ISIS/L) attempt to form and maintain a stable government in a deeply divided sovereign nation?

Could a threat be found in central Asia if competitive tensions begin to rise between future Chinese and Russian leaders? Stuffed full of natural resources and with a northern coastline edging what in future years is likely to be an ice-free Northwest Passage (cutting many days off the global shipping transit times between the major Pacific and Atlantic ports), China undoubtedly harbours ambitions for self-sufficiency in raw materials including oil and gas by controlling Siberia in the event of a break-up of the Russian Federation. Trump’s ambition to control Greenland is no different.

I have referred to non-state players: will future threats to stability come from potentially resurgent organisations such as Al Qaeda, Daesh, Boko Haram and others? What about transnational coalitions such as ISIL and the Caliphate? What about entirely new organisations? HTS, the Sunni organisation that has recently overthrown Assad in Syria seems to have been a little known or misunderstood quantity which caught western intelligence agencies and their governments on the hop and yet is now forming a government in one of the most politically charged places on the planet.

Footnotes

¹The rate of interest or income on an investment, usually expressed as a percentage.
²Strategic Defence Review 2024-2025: Terms of reference - GOV.UK
³“Article 5 provides that if a NATO Ally is the victim of an armed attack, each and every other member of the Alliance will consider this act of violence as an armed attack against all members and will take the actions it deems necessary to assist the Ally attacked.” Source: NATO - Topic: Collective defence and Article 5
⁴The YouGov Big Survey on NATO and war: Americans on defense and reasons to go to war | YouGov
⁵Milestones in the History of U.S. Foreign Relations - Office of the Historian