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A look back at “Top Risks 2022”
Every January, Eurasia Group, our parent company, produces a report with its forecast for the Top 10 Risks for the world in the year ahead. Its authors are EG President Ian Bremmer and EG Chairman Cliff Kupchan.
Next Tuesday morning, the 2023 report will drop, and we’ll let you know what’s in it. But today, we’ll look back at EG’s predictions for 2022. What did Bremmer and Kupchan nail, and where were they wrong?
Disclaimer: Your Signal author has contributed to these Top Risks reports for the past 18 years.
A year ago, these were EG’s Top 10 risks…
1. No Zero COVID: China’s zero-COVID policy will disrupt China and the global economy.
2. Technopolar world: Information technologies that govern the way we live, interact, vote, work, and do business will disrupt our lives, and big tech companies will do little to help.
3. US midterms: Results of congressional and state elections will set the stage for a potential constitutional crisis in 2024.
4. China at home: The pandemic and a series of longer-term problems will weigh heavily on China’s economy.
5. Russia: Diplomacy will probably prevent a full invasion of Ukraine, but Russia’s relations with the West will get much worse.
6. Iran: Tensions between Iran and the West will intensify.
7. Two steps greener, one step back: COVID recovery will slow the transition to greener energy.
8. Empty lands: A lack of global leadership will allow chronic conflicts to worsen and pose new threats in Afghanistan, Yemen, Venezuela, and other exporters of instability.
9. Corporates losing the culture war: Cancel culture and the growing power of social media as a weapon for activism will force large companies to spend more time and money navigating political minefields.
10. Turkey: President Recep Tayyip Erdoğan will drag Turkey’s economy and international standing to new lows.
There were also three “red herrings,” risks that EG considered overrated: The US and China will not descend into Cold War 2.0; a presidential election will not threaten Brazil’s democracy; and there will be no migration crisis in Europe.
Here’s the full 2022 report.
So, what did Eurasia Group get right? Bremmer, Kupchan, and EG’s China team were warning that China’s lockdown and testing intensive zero-COVID policy would last longer than many expected, would inflict considerable pain on China’s economy, and would stoke social unrest.
They also saw that China’s problems in 2022 would extend well beyond COVID, even as leader Xi Jinping consolidated more power.
They were right that Brazil’s election might generate controversy and even violence, but that a peaceful transfer of power would follow.
And they were correct that US-China hostilities would remain better contained than some feared, though one of the primary reasons for that leads us directly into the report’s biggest shortcomings.
What did EG get wrong? Bremmer and Kupchan did not believe Russia would launch a full-on invasion of Ukraine. (Apparently, many of Vladimir Putin’s generals shared that mistaken view.) The report acknowledged that a much more limited military incursion was possible, but they did not foresee how far Putin would go – or that Russia’s military failures in Ukraine would make China’s government more cautious in relations with the US and Europe.
Bremmer and Kupchan were also too pessimistic about the willingness of American voters to reject the candidacies of 2020 election deniers at the state level, though many did win seats in the House of Representatives. The risk of a major constitutional confrontation in 2024 is now much lower than some feared a year ago.
Finally, though there was no new flow of refugees from the Middle East into Europe, missing the full-on Russian invasion meant missing the flow of millions of Ukrainians into Poland and other neighboring countries.
Watch this space. On Tuesday morning, we’ll give you a look at Bremmer and Kupchan’s predictions for 2023, and we hope you’ll tell us what you think of them.
China vs COVID in 2022
Omicron has arrived. It's more contagious, but less severe. Some parts of the world are even looking forward to the pandemic becoming endemic.
Not China. Xi Jinping's zero-COVID strategy has worked wonders until now, but it's unlikely to survive omicron, explains Ian Bremmer on GZERO World.
Why? China's vaccines are not as effective against the new COVID variant as mRNA jabs, and the Chinese population has no protection from previous infection.
Without a homegrown mRNA vaccine, China is vulnerable to local omicron outbreaks, which will lead to severe lockdowns and, in turn, greater economic disruption.
That's the last thing Xi wants less than a month out from the Winter Olympics, and later this year, when he hopes to get an unprecedented third term in office as China's leader.
Watch this episode of GZERO World with Ian Bremmer: Omicron and the undoing of China’s COVID strategy
The technopolar world: A new dimension of geopolitics — Kevin Allison
Kevin Allison, director of geotech at Eurasia Group, is concerned about the rise of very powerful tech companies disrupting centuries of geopolitics led by the nation-state.
The virtual world is in a worse shape than the G-Zero world, since it has not developed the capacity to govern the spaces they created.
Tech companies have created an entirely new dimension of geopolitics, a realm in cyberspace where they are more powerful than governments.
Technopolarity makes governments and Big Tech compete and attempt to litigate who ultimately will have control and sovereignty over cyberspace.
This scramble, in turn, instigates disinformation, fuels US-China competition, and continues to pose problems around privacy and the use of data.
"That is the heart of the risk. It's the heart of the argument.”
Watch the full discussion here: https://www.gzeromedia.com/events/top-risks-2022-w...
- Why Big Tech companies are like “digital nation states” - GZERO ... ›
- Big Tech: Global sovereignty, unintended consequences - GZERO ... ›
- Nicholas Thompson on the outsized influence of Big Tech - GZERO ... ›
- Big Tech's big challenge to the global order - GZERO Media ›
- US pushes back on EU's proposed laws impacting US tech companies - GZERO Media ›
Podcast: The problem with China’s Zero COVID strategy
Listen: Xi Jinping's zero-COVID approach faces its toughest test to date with omicron. Why? Because China lacks mRNA jabs, and so few Chinese people have gotten COVID that overall protection is very low. A wave of lockdowns could disrupt the world's second-largest economy — just a month out from the Beijing Winter Olympics.
That could spell disaster for Beijing, Yanzhong Huang, senior fellow for global health at the Council on Foreign Relations, tells Ian Bremmer on the GZERO World podcast. If things get really bad, though, Huang believes China will pivot to living with the virus, especially as the cost of keeping zero COVID in the age of omicron becomes too high.
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.- China's coming COVID crisis? - GZERO Media ›
- Kevin Rudd: COVID has made Xi Jinping zero-risk - GZERO Media ›
- Ian Bremmer: Zero COVID no longer works, and China will pay a ... ›
- How China decides to handle omicron will have global implications – Yanzhong Huang - GZERO Media ›
- Eastern European leaders visit Kyiv in unprecedented show of support - GZERO Media ›
- China isn't budging on zero-COVID - GZERO Media ›
- China’s discontent & the Russia distraction - GZERO Media ›
- China's year of unpredictability - GZERO Media ›
- COVID protests spread in China - GZERO Media ›
- Podcast: How we overcome infectious disease with a public health renaissance - GZERO Media ›
- Podcast: No Empire lasts forever: How China’s rise could trigger a new world order - GZERO Media ›
- COVID immunity gap could spell disaster for China — global health expert - GZERO Media ›
- Omicron & the undoing of China's COVID strategy - GZERO Media ›
Corporations losing the culture wars — Angela Hofmann
For Angela Hofmann, practice head for Industrial & Consumer at Eurasia Group, the world's most visible brands are in for a very rocky year.
Navigating culture wars will be very tricky, as well as fighting with competing demands from consumers, employees, and regulators on issues like China, diversity, and voting rights.
Consumers, empowered by social media, are using their voices and purchasing power to influence non-market issues, with a focus on supply chains.
These consumers are forcing multinationals to have visibility and accountability for all of their levels of production.
Firms face be a double-edged sword: fury from hyper-charged consumers utilizing social media, and pressure from US regulators.
Hofmann says companies must focus on ESG "with a particular focus on that S."
“Reinventing supply chains and investing in compliance issues, but with the expectations from the public and new regulations on the way, there's just simply no going back."
Watch the full discussion here: https://www.gzeromedia.com/events/top-risks-2022-w...
What is China’s zero-COVID policy?
We've all heard about there being zero COVID in China. But there's more to Beijing's pandemic containment strategy, which started immediately after the initial Wuhan outbreak.
"Through swift action, lockdowns, quarantine and contact tracing, the country was able to quickly reduce cases," says Yanzhong Huang, senior fellow for global health at the Council on Foreign Relations.
"The success in Wuhan led to greater implementation countrywide, and ever since Beijing has kept COVID at bay." Zero COVID, by the way, "means zero — not close to zero," which explains why Shanghai Disneyland shut down and 30,000 tests were conducted after a single suspected infection.
Despite lockdowns, Huang says the policy is quite popular in China, where many people "are even proud that the country has gotten the virus under control, especially as the United States struggles."
- Ian Bremmer: Zero COVID no longer works, and China will pay a ... ›
- China's coming COVID crisis? - GZERO Media ›
- The Graphic Truth: COVID deaths falling in leading countries ... ›
- China isn't budging on zero-COVID - GZERO Media ›
- No optimism after Austrian leader’s meeting with Putin on Ukraine - GZERO Media ›
- China's big problem isn’t Ukraine — it’s COVID - GZERO Media ›
- Who cares if Elon Musk bought Twitter? - GZERO Media ›
Iran’s nuclear program runs hotter
Talks between Iran’s government and world powers over the future of Iran’s nuclear program continue. The US and Iran are still not communicating directly; Britain, China, France, Germany, and Russia are shuttling between them.
The good news is that they’re all still talking. The bad news is that, after eight rounds of negotiations, the main players haven’t agreed on anything that would constitute a breakthrough.
Even the good news isn’t that great. No, Iranian officials haven’t yet exited the room in anger, but they have good reason to just keep talking, according to Eurasia Group’s Henry Rome — even if they have no intention of working toward a deal. Negotiations, Rome warns, “provide political cover to advance the nuclear program.”
They make it harder for the US and Europe to dial up new pressure on Iran or for Israel to target its nuclear facilities and scientists. They give Russia and China a reason to defend Iran’s position.
They also protect (what’s left of) Iran’s economic stability by ensuring sanctions don’t immediately get tighter. And perhaps, Tehran may reason, the Americans might improve their offer.
Iran’s (mis?) calculation
But Iran’s government, now led by Ebrahim Raisi, a president more openly hostile than his predecessor toward the West, may feel it has little more to lose by continuing to say no.
After all, Iran’s “resistance economy” have survived tough sanctions before, and the government believes that new protests inside Iran against economic hardship can be contained — or, if necessary, crushed.
And what if Donald Trump becomes US president again in three years? Won’t he just tear up whatever Iran has signed, just as he withdrew the US from the last nuclear agreement?
Maybe. But revival of the nuclear pact, according to Rome, “is the best option for Iran’s economic stability.”
A new deal could free up $100 billion in frozen foreign reserves. It would allow Iran to sell much more oil at market prices. It would draw new trade and investment into the country.
That's a plus for Iran’s cash-poor government and for its long-suffering people. Without an agreement, Iran faces the indefinite extension of US sanctions, which might one day trigger public unrest that Iran’s security forces can’t contain.
Escalating tensions
The Biden administration — focused for now on COVID, domestic political headaches, inflation, China, and Vladimir Putin — is well aware that Iran’s willingness to talk may not offer hope for a breakthrough. US and European officials have said publicly that a deal must come within “weeks, not months.” That deadline could be extended, but only if genuine progress offers credible hope for an agreement.
In short, if there’s no deal by late spring, it will be time for all sides to brace for trouble. A breakdown of talks will persuade the Biden administration to squeeze Iran’s economy still harder. Iran could accumulate enough highly enriched uranium for several bombs, set more advanced centrifuges spinning, and advance closer to a nuclear weapon than ever before.
If so, warns Rome, Israel may be ready to come back off the sidelines “with cyberattacks and sabotage inside of Iran against military, economic, and nuclear sites, aimed at degrading Iranian capabilities and destabilizing the government.” Israel might also conduct military exercises that put the Middle East — and global oil markets — on edge.
The risk of military conflict, deliberate or accidental, can’t be ignored. In fact, Eurasia Group sets the likelihood of direct Israeli and/or US airstrikes on Iranian nuclear facilities in 2022 at 20 percent. Given the stakes, that’s a frighteningly high number.
In short, there’s a reason this story features in Eurasia Group’s report on Global Top Risks for 2022.(Some of) your 2022 Top Risks questions, answered
This week, our parent company Eurasia Group published its annual list of top geopolitical risks for 2022, which we hosted a livestream conversation about on Monday. During the program we received many great questions from our viewers, but couldn’t answer them all in the time allotted, so we thought we’d have some Eurasia Group experts tackle them here.
What are Jair Bolsonaro’s chances in Brazil’s upcoming presidential election?
He has a chance, but they aren’t good. Bolsonaro has the support of close to 30 percent of Brazil’s electorate, with his anti-establishment message still resonating amongst his core base of support. But he has paid a high price for mismanaging the pandemic, and with inflation squeezing the disposable income of poor families, economic discontent has also risen. With most economists forecasting close to zero growth in 2022, odds are he won’t recover. His best shot remains one of reaching a run-off against former president Lula da Silva, and exploring the latter’s vulnerabilities over the massive corruption scandal that rocked the Worker Party’s two previous administrations. Possible, but unlikely to succeed.
Chris Garman. Managing Director, Americas
In Turkey, what share of the country’s youth backs the leadership?
The ruling Justice and Development Party gets more votes from the older age groups. It’s the same for the AKP’s parliamentary ally, the Nationalist Movement Party. The AKP receives only 17 percent of its support from those aged 18 to 34, whereas its average support is close to 24 percent. Young Turks are also the most dissatisfied with the state of the economy, with around 85 percent of those aged between 18 and 34 evaluating the economy as very bad or bad.
What is the probability of war between the US and China in the next 15 years?
Very low, but likely to grow over time.
If there is a war anytime soon, it is more likely to be the result of an accidental conflict resulting from miscommunication than one resulting from miscalculation. The US and China have the most robust trading relationship in world history. Unless there is a fundamental rebalancing of that economic relationship over the next 15 years — which is possible given ongoing decoupling in the tech and capital flows — the two countries are unlikely to escalate any conflict to disrupt that. Furthermore, the cyber capabilities and economic are so interlinked that any actual conflict is more likely to be limited to economic disruption, and not turn into a hot war.
The top flashpoint remains Taiwan, and China is years away from having the military capability and economic dominance to invade without major risks for economic and political stability. Even if the Chinese were to act fast enough to surprise and overwhelm Taiwan’s defenses, the US is likely to respond with sanctions and trade embargoes that would severely impact the Chinese economy, and significantly raise the costs of invading.
Fifteen years is a long time, of course. The conditions for war would include one and probably more than one of the following: accelerated decoupling in trade of physical goods between the US and China, a significantly more advanced Chinese military, an internally weak US president unable to rally Americans to defend Taiwan, more dependence of regional Chinese trade partners (India, Japan, and Australia), and a rebalancing of economic power in those countries away from the US towards China.
Jon Lieber. US managing director
How big of an economic and security threat are high energy prices?
High energy prices have become a significant drag on global economic growth. In China, Japan, South Korea, and many European countries — all of which are highly dependent on fossil fuel imports of natural gas and thermal coal — prices have skyrocketed since late 2020. Europe has the additional complication of security of supply due to escalating tensions with its biggest gas supplier, Russia. Major emerging economies like India and Indonesia are also affected by surging import costs and supply disruptions due to COVID.
In the best case, rising industrial and household energy bills weigh on economic growth prospects. In the worst case, there are supply shortages that lead to industrial closures or even localized blackouts.
Government reactions show the severity of the problem. European governments have implemented measures to secure affordable household energy during this winter, including by windfall taxes on the energy industry. China has repeatedly interfered in energy markets by capping prices, and shut down some energy-intensive industries. Indonesia, the world’s biggest exporter of thermal coal, suspended exports amid tight domestic supply. Even in the US, which is rich in domestic oil and gas reserves, the Biden administration in late 2021 interfered in markets by releasing part of the Strategic Petroleum Reserve in order to cool retail gas prices.
The global energy crunch has led to emotional and polarized debates about its cause. This will hamper climate action efforts, as governments juggle the long-term need to reduce greenhouse gas emissions with the immediate priority of ensuring affordable and reliable energy for everyone.
Henning Gloystein. Director for Energy, Climate & Resources
Should we expect more government regulation of crypto this year?
Following the massive inflow of capital into the crypto sector and increased industry lobbying in 2021, friendly lawmakers in the US Congress plan to introduce soon a sweeping piece of legislation to fully integrate digital assets into the financial system. The growing pro-digital asset group of representatives and senators want to provide clearer guidance for digital assets and will seek to normalize their use with rules for stablecoins, consumer protection provisions, and updated taxation guidance. While likely to spur debate across industry and regulators, the bill’s passage will probably be delayed by more pressing administration priorities and a lack of policymaker understanding of crypto issues.
New action by the Securities and Exchange Commission is likely before any new legislation is enacted. SEC Chairman Gary Gensler gave a series of speeches in late 2021 on the need for more regulation of the crypto sector, and the SEC appears nearly ready to launch a major regulatory probe of global centralized cryptocurrency exchange leader Binance and its CEO, likely on charges including money laundering. Jurisdictions in Asia and Europe already moved last year to rein in Binance operations. Nevertheless, major digital asset players have deep pockets and will certainly launch legal challenges to any SEC moves. The outcome of the current SEC lawsuit against Ripple — for which expert witness testimony was largely completed in December — will be closely watched for indications about where US courts stand on issues related to the definition of cryptocurrencies as securities.
Paul Triolo. Practice head, Geotech
What major shifts should we watch for in (sub-Saharan) Africa this year?
Upcoming elections around the continent will be a major watchpoint. Kenya goes to the polls in August to select President Uhuru Kenyatta’s successor in a race that is poised to be close, while Joao Lourenço is likely to win a second term as Angolan president in the same month despite an anticipated stronger showing by the opposition. Meanwhile, Nigeria’s two main parties will hold primaries to select their presidential candidates ahead of pivotal elections in 2023, while South African President Cyril Ramaphosa is favored to win another term as head of the African National Congress despite growing factionalism within the party. Finally, the African Continental Free Trade Area is likely to launch this year once technical negotiations are completed, creating the world’s largest trade community by area. Yet the economic benefits of the agreement will take years to materialize given the persistence of non-tariff barriers to trade.
Tochi Eni-Kalu. Analyst and Practice Manager, Africa