The shifting geopolitical balance: time for a “grand reset”?

When it comes to geopolitics, perceptions can vary dramatically depending on where you sit. The 2022 CEO Retreat featured divergent viewpoints on geopolitical matters from leading thinkers based in Washington, Beijing, Moscow, and New Delhi. As a result, perspectives on issues from the Russia–Ukraine conflict to the global balance of power and the global economic outlook were wide ranging.

On the situation in Ukraine, one participant argued that Russian President Vladimir Putin decided to invade his neighbor after surveying the debacle of the US withdrawal from Afghanistan, the discontinuity and distraction caused by the pandemic, and intense domestic political divisions in the United States. However, in deciding to act during a moment of perceived weakness and division in the West, he underestimated the leadership of Ukrainian President Volodymyr Zelenskyy, the impact of the conflict on global opinion, and the capacity of the Western alliance to respond. Initial Russian plans of removing the Zelenskyy government and installing a pro-Russian regime to command the entire country have now failed. Russia currently controls 15 to 20 percent of Ukraine but lacks the manpower and military hardware to conquer larger portions of the country. One participant argued that the result is a situation that will likely end up looking like the Korean War—ultimately leading to a negotiation to stop major military activity and create an armistice but resulting in a frozen conflict. The participant added, “everyone will hate this imperfect, unpopular outcome.”

Others disagreed, however, on the rationale driving the situation in Ukraine. One participant argued that the conflict was the start of a process of transformation for Russia. The country’s post-1991 role in the world, serving as a raw materials producer dependent on the outside world, was effectively over after February 24. The relationship between Beijing and Moscow will remain very important as both sides seek changes in the geopolitical world order—namely a shift away from continued United States dominance and toward a more evenly weighted system with other major powers. Another participant added that the world “continues to be globalized but has entered a new stage in which regions emerge as the key players. We are going through a regionalization of the global system.”

The broader implications of such an outcome are significant. One participant argued that the United States and China will be less likely to become bogged down in an active military situation and that China will be less inclined to invade Taiwan after what happened in Ukraine, adding that India will likely continue to play both sides, but overall economic forces will outweigh geopolitical forces, keeping the world from breaking down from competing blocs. The one important exception is Russia, which has been significantly weakened by the conflict and is unlikely to return to the international fold for the foreseeable future. Another participant suggested that the “one-system world,” in which tech standards, language, and currency are all based around the United States, will be placed under strain because of the situation in Ukraine. Further, the freezing of Western currencies in Russia—totaling some $300 billion—may have long-term repercussions for the global currency regime. Having seen the penalties that can be exacted by Western governments, one participant argued, other countries may become less likely to trust in the dollar.

The discussion of the dollar gave way to debate on the need for adjustments in key aspects of the international system. One participant agreed that globalization is at a crossroads and that the Ukraine crisis has fragmented both the global trading and global economic systems. The Bretton Woods monetary system and key institutions such as the World Trade Organization and the World Bank will need to be recalibrated and reimagined to meet 21st-century challenges. Failure to do so, particularly amid energy and food crises, puts global governance at risk.

Regardless of the future that unfolds, there was consensus that China will play a crucial role on the global stage. The country remains a major supplier for global value chains and is home to some of the largest ports in the world. As one participant noted, the country has also made strides as a leader in artificial intelligence and in the production of wind, solar, and hydropower. China’s Belt and Road Initiative has extended throughout much of the developing world, enhancing infrastructure and creating new growth opportunities. And the country’s regional development banks, including the Asia Infrastructure Investment Bank and Asia Development Bank, are creating new avenues for investment funding for emerging economies. While China has faced a steep learning curve in coping with the pandemic, growth is still expected to reach between 4.3 and 5 percent in 2022, with Shanghai back at full production and the Hong Kong stock market stabilizing.

Yet there remain many outstanding questions around China, particularly on how US–China bilateral relations will unfold over the next 10 to 15 years. One participant argued that “the United States cannot defeat China, and China cannot defeat the United States, so both countries have a moral responsibility to work together wherever possible.” This point was stressed in the context of a potential conflict over Taiwan or the South China Sea: “neither side wants to have a war that destroys the world.” Another noted that the biggest threats to continued peace are domestic political pressures in Beijing and in Washington and called for greater military to military communications between the two countries to prevent accidents. And one participant called for cooperation between the two countries on existential global issues—namely climate change, pandemic response, and disaster relief efforts.

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