<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JEREMY MAGGS: Global order is being reshaped, and for investors the consequences are becoming increasingly difficult to ignore. The United States is using tariffs, sanctions and military power more aggressively. The conflict in the Middle East has put some of the world\u2019s most important trade and energy chokepoints under pressure.<\/p>\n
Traditional alliances are being tested, while China appears content to play a quieter and potentially much longer game. So are we witnessing American decline or simply a more muscular and disruptive use of American power?<\/p>\n
Read: Mideast oil chiefs warn world needs to share Iran-war costs<\/p>\n
Speaking at the Stanlib Asset Management Offshore Summit in partnership with JPMorgan Asset Management, was General Sir Nick Carter, former UK Chief of the Defence Staff. General Carter, a very warm welcome to you.<\/p>\n
Maybe let\u2019s start with a broad geopolitical overview, are we mistaking American disruption for American decline?<\/p>\n
NICK CARTER: I think that we\u2019re seeing probably President Trump\u2019s administration being a catalyst, rather than the reason why things are as they are now.<\/p>\n
I think for the last 15 years, it\u2019s become obvious that America was becoming ever more challenged to fulfil the role of a global policeman and everything associated with that.<\/p>\n
I think we\u2019ve had hints of it as Europeans, that successive American presidents were looking for us to step more up to the plate in Europe, and I think that\u2019s the case globally. So no, I think this is a catalyst in a long process that\u2019s been underway definitely for 15 years or so.<\/p>\n
JEREMY MAGGS: Interesting to know what the end game is. Washington is using tariffs, sanctions, military power all simultaneously. One has got to ask if it\u2019s a coherent grand strategy or too many instruments, maybe without a clear end state.<\/p>\n
NICK CARTER: Yeah, I think it is interesting. I think you have to go back to almost a year ago, when Donald Trump\u2019s national security strategy was published at the end of November, I think.<\/p>\n
Of course, at that stage, it was pretty clear that it was going to be a much more enhanced focus on the Western Hemisphere, as he called it.<\/p>\n
You\u2019ll remember people being amused by what looked like what was called the Donroe Doctrine, because it was something that copied what former President James Monroe did back in the day.<\/p>\n
That\u2019s why there\u2019s been quite an intense focus on Greenland, perhaps on Cuba, on Venezuela, potentially on the Panama Canal and so, but definitely more interested in South America, which has not really been the case for probably 30 or 40 years.<\/p>\n
So I think there\u2019s a very heavy Western Hemisphere focus.<\/p>\n
I think there\u2019s also \u2013 and we\u2019ve seen that in the visit that Donald Trump made to Beijing in May, and we saw it the week before last when Xi Jinping came to Washington \u2013 that actually he\u2019s looking for a relationship with China.<\/p>\n
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Read:<\/p>\n
Trump risks China blowback with plan to isolate Iran\u2019s economy
\nTrump and Xi address warnings AI could pose a threat to humanity<\/p>\n
I wouldn\u2019t say it\u2019s a partnership, but it\u2019s much more a relationship that\u2019s based upon some form of strategic stability, as it was described. So I think he\u2019s clear about China\u2019s position in the world and he\u2019s clear, I think, that China has got significantly more leverage in relative terms than the US.<\/p>\n
Even in the last five to 10 years, and we see that particularly, for example, with rare earths, where China has 90% of the world\u2019s processing and refining capability.<\/p>\n
So I wouldn\u2019t say you\u2019re seeing a US president as a supplicant, but you\u2019re seeing a US president showing much greater respect for China than perhaps has been the case before.<\/p>\n
So, yeah, I think we are seeing the world being looked at through American eyes as a world of spheres of influence, rather than something where the US, as it did when we had, at the end of history, it was strutting its stuff globally.<\/p>\n
It\u2019s not going to be like that in the future, I sense.<\/p>\n
JEREMY MAGGS: What\u2019s very interesting is the game that China is playing and it\u2019s been relatively silent. Do you think Beijing is allowing Washington to absorb the political, military and financial costs, such as it\u2019s doing, while it quietly accumulates influence, and particularly in this neck of the woods.<\/p>\n
NICK CARTER: Yeah, I think in a way people might argue that China is getting the US that she\u2019s always wanted.<\/p>\n
At the end of the day, though, I think we\u2019re seeing something that has been styled by Joseph Nye \u2013 who was the author of Soft Power, who sadly died last year \u2013 and what he called the Kindleberger Trap.<\/p>\n
Charles Kindleberger was an economic historian who wrote a book about the 1930s and what he observed was that the incumbent power, of course in the 1930s that was really the British Empire, was becoming less able to be the global stabiliser, but at that stage the United States didn\u2019t really want to step up to the plate to become the global stabiliser.<\/p>\n
That created a vacuum, and out of that vacuum came World War II and instability and everything associated with it.<\/p>\n
Read:<\/p>\n
Sunak says Trump is a \u2018symptom\u2019 of breakdown in global order
\nTrump says he does not believe Russia and China are helping Iran<\/p>\n
It wasn\u2019t until after the war that the United States eventually did step up and become the global stabiliser in terms of both the economy but also in terms of security. I think we\u2019re in a very similar position now.<\/p>\n
I think we\u2019re seeing Kindleberger again, where the United States is probably neither able nor necessarily so willing to be the global stabiliser.<\/p>\n
China is equally not yet willing to step up to the plate or indeed able perhaps to step up to the plate.<\/p>\n
That, I think, is why we\u2019ve now got a bit of a vacuum when it comes to global security and stability. We\u2019re going to see that playing out, particularly, I think, in the wars that will be crisscrossing the Red Sea over the course of the next six months to a year.<\/p>\n
We see that, of course, in Europe.<\/p>\n
I think that\u2019s what we need to be alert to, because as power transitions, if that\u2019s what\u2019s happening, we\u2019re going to have a vacuum and that\u2019s a dangerous position to be in, which is very different to the talk of the Thucydides Trap, which everybody bangs on about, which, is the rising power, eventually ends up having a conflict with the incumbent power.<\/p>\n
I don\u2019t think that\u2019s going to be the case. I think this is going to be much more about how power transitions to a different system.<\/p>\n
JEREMY MAGGS: While that is happening, Europe is talking increasingly about strategic autonomy. Does it have the military and economic capacity though to achieve it?<\/p>\n
NICK CARTER: I think it slightly depends how it does it. The answer is that Germany has changed its fiscal rules in the last 18 months to be able to invest significantly in defence and it also depends very much where you sit.<\/p>\n
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People always talk about Europe as one lump.<\/p>\n
The reality is that if you sit in Eastern Europe, you have a very different perspective of the threat from Russia than if you sit in western or southwestern Europe, where you worry much more about Africa and the threat of terrorism.<\/p>\n
I think those countries who sit nearer Russia are genuinely spending money on defence.<\/p>\n
I think there\u2019s a question mark about how well that money is being spent, whether it\u2019s being spent on the right stuff and for that matter, how interoperable the answer will be between the relevant European nations because up until now, the United States has really been the military glue that has held Nato (North Atlantic Treaty Organisation) together in terms of its interoperability and the ability for people to work together, and that\u2019s going to be ever less, as I think the United States inevitably is stepping back.<\/p>\n
JEREMY MAGGS: So as that happens, alliances are starting to shift. You\u2019ve commanded coalition forces before. Let me ask you this. When political trust between allies fracture, how quickly does that translate into military weakness? And we\u2019re already starting to see that to a greater or lesser extent, are we not?<\/p>\n
NICK CARTER: Yeah, I think up to a point. I think there\u2019s been much talk and there always is much talk about the UK\u2019s \u201cspecial relationship\u201d with the United States. I think the reality is that that special relationship has always had perturbations when it comes to the political level, as we\u2019ve seen over the last couple of years.<\/p>\n
Read: World economy holds up, nears limits of resilience, IMF says<\/p>\n
But the reality is that the special relationship, certainly in terms of the UK and the US, is actually about institutions and it\u2019s about our intelligence services, about our militaries and so on.<\/p>\n
I have to say, even though I\u2019m now four years out of it, I\u2019m in no doubt that the institutional relationships remain very strong between Britain and the United States, and they remain adequate in terms of the other partners in the military and, to a degree, of intelligence service terms across the other Nato nations.<\/p>\n
Read:<\/p>\n
SA defence group Paramount says Nato market has \u2018opened\u2019
\nTrump\u2019s Greenland obsession returns: \u2018Stupidly, we gave it back\u2019<\/p>\n
The idea of Five Eyes, that\u2019s the sharing of intelligence between Australia, New Zealand, Britain, America and Canada, that remains solid.<\/p>\n
I think, yes, politically it looks very vulnerable.<\/p>\n
The political relationship between Canada and the United States is obviously very challenged, for example. But I think at the institutional level, we remain strongly connected in terms of understanding the threat and what we need to do about the threat.<\/p>\n
JEREMY MAGGS: Could I ask you a question about the economics of conflict, if I can. I saw a figure the other day that said we currently worldwide have 64 conflicts that are happening, some big, some large, and I wonder if we\u2019re focusing too much on the wars themselves and not enough on the choke points around them, and that impact on global supply chains.<\/p>\n
NICK CARTER: Yes, I think that\u2019s absolutely right. I think it\u2019s extraordinary, really, how the oil price has somehow managed to stay relatively low, despite the fact that not much oil has been getting out of the Strait of Hormuz.<\/p>\n
So, yes, now that the Bab al-Mandeb Strait is once again threatened by the Houthi minority in Yemen, those two critical chokepoints are a real vulnerability.<\/p>\n
Read:<\/p>\n
Decline in Bab al-Mandeb Strait traffic drives energy price spike
\nWhy a second global shipping chokepoint could soon live up to its name as the \u2018Gate of\u00a0Tears\u2019<\/p>\n
I think probably we\u2019re about to feel the pain of that, because I think that we\u2019ve used up so much of our oil and refined oil products insurance over the last six months.<\/p>\n
I think unless those two choke points become clear again, I think we are going to be more vulnerable in economic terms as we go into this winter in the Northern Hemisphere.<\/p>\n
So I think you\u2019re right to focus on it.<\/p>\n
A lot is going to depend on China\u2019s behaviour, though. China still has the most enormous stockpile of oil and refined oil products, and has been relatively generous about putting some of that on the market over the last six months.<\/p>\n
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It\u2019s interesting that despite Donald Trump asking Xi Jinping at the summit in Washington to release more diesel, in fact, the Chinese issued an export ban on refined oil products.<\/p>\n
That will have an impact upon the price and that will have an impact upon the global economy.<\/p>\n
So, yeah, I think we are we\u2019re definitely seeing the tightening economics of scarce resources in the light of what we\u2019re seeing in the Red Sea and also in the Strait of Hormuz, no doubt about it. So I think you\u2019re right to ask the question.<\/p>\n
Read: Saudi Arabia intercepts new Houthi attacks<\/p>\n
I think the other aspect of the economics of warfare, which you didn\u2019t ask, but I think is an implication of the question, is the extent to which, the American way of warfare, maybe the Western way of warfare has been revealed to be economically inefficient in relation to what an asymmetric opponent like Iran can do.<\/p>\n
We\u2019ve seen extremely expensive American air defence interceptors being thrown at relatively cheap Iranian ballistic missiles and drones.<\/p>\n
I often style it as some Ferraris being thrown at frisbees, and that\u2019s not really a position I think we could all be in for much longer.<\/p>\n
JEREMY MAGGS: Yeah, it\u2019s a very interesting analogy. Just a final question, General Carter, I don\u2019t know if you want to wade into this, but you are in South Africa right now. This country prizes its strategic non-alignment.<\/p>\n
But I wonder, in a world increasingly organised around competing blocs, as we\u2019ve been discussing, how long before non-alignment itself begins to carry a price. The evidence would suggest that we are already starting to see that.<\/p>\n
NICK CARTER: Yes, I think that India traditionally led the Non-Aligned Movement, as it was described, several decades ago. I think what we\u2019re now talking about is the opportunity for middle powers to be multi-aligned, and in that multi-alignment probably to play two ends off against the middle.<\/p>\n
Whilst South Africa is one of the original founders of the Brics movement \u2013 that\u2019s Brazil, Russia, India, China and South Africa.<\/p>\n
Read\/listen: Brics urged to turn promises into production<\/p>\n
The reality is that there are more people signing up for Brics and I think there are more middle powers, which I think South Africa reasonably should be seen as a middle power, having the opportunity to perhaps play two ends off against the middle.<\/p>\n
So I think there\u2019s an opportunity there.<\/p>\n
The trick will be making sure that once foreign security policies are robust enough, to be able to avail oneself of that opportunity. But we should be in no doubt that the international system is changing.<\/p>\n
As it changes, there will be opportunities for countries like South Africa with enormous economic potential, I think, to be able to achieve some effect.<\/p>\n
The United States ultimately needs South Africa and what South Africa can provide by way of scarce resources, and China does as well. It seems to me that if South Africa gets its act together in economic terms, it\u2019s got an opportunity.<\/p>\n
JEREMY MAGGS: General Sir Nick Carter, thank you very much indeed.<\/p>\n
#defence #chief #global #power #shift #investors #ignore<\/p>\n","protected":false},"excerpt":{"rendered":"
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