Ian Bremmer is considered one of the top strategic thinkers on how political developments move markets. FPA Contributor Reza Akhlaghi interviewed the Eurasia Group president on the emerging world order following the so-called “Arab spring,” Iran’s chances of becoming a key player in the global economy and the rise of Turkey.
Let’s start off with your well-publicized assertion that we currently live in a ‘G-Zero’ world, as opposed to one led by a G-8 or G-20. In a ‘G-Zero’ world absence of leadership is at the heart of so many emerging political and economic challenges. What is the G-Zero and how does it deal with today’s global challenges?
The G-Zero plays itself out on a number of fronts. As new trade and investment barriers rise in response to domestic demand (in both established and emerging powers) for job protection and local development, trade flows are more likely to be regional than global. We won’t see a new Doha trade round. We will certainly see more protectionism as governments look to preserve political capital. There won’t be a new Kyoto-type agreement on climate change. Without a common policy approach to the problem, individual countries will have to create individual strategies. That means that very few countries will be willing to make the sacrifices needed for a credible approach to a problem without borders. Nor will there be coordination on the eventual transition away from reliance on the dollar as the world’s dominant reserve currency. The transition will therefore be messy and destabilizing. And with America involved in “quantitative easing,” the Chinese resisting pressure to allow the yuan to appreciate to a degree that substantially rebalances trade flows, and Brazilian officials warning of a currency war, it’s clear that economic levers of power are the new weapons of international competition—and perhaps conflict.
Just as significant trade volumes will move from the global to the regional level, we’ll see the same in the exercise of political and military power, as well. China will play a dominant role in East Asia, Russia across former Soviet territory, Brazil will probably become the dominant player in South America, and Saudi Arabia will use leadership of the Gulf Cooperation Council to play a larger role in the Middle East. This dynamic will breed competition in regions where it isn’t clear who is the dominant power. Think Chinese/Russian competition in Central Asia, for example.
With military strikes against Libyan targets underway, how is this conflict likely to play out, and will it impact the global oil market?
By itself, Libyan oil shouldn’t be a game-changer for prices. Libya is already virtually entirely offline. But markets are jittery because, while there is confidence that the Saudis can cover the current shortfall, what happens if there is a second major shut-in somewhere else?
The no-fly zone, even with an aggressive approach in other areas, is unlikely to oust Qadhafi. Instead, we’re probably looking at an extended stalemate. The US/Europeans can prevent Qadhafi from slaughtering the rebels, but the rebels aren’t strong enough to push Qadhafi from Tripoli. It’s too soon to say, but it could well end in a kind of de facto partition of the country, with Libyan oil offline for quite some time.
Staying with Libya, Jerry Seib of the Wall Street Journalrecently opined that Iran looms large in Libyan calculations. Do you agree?
I’m really not sure why he’d focus on Iran rather than Bahrain. That’s the more immediate issue. In Bahrain, you have a Shia majority (70%) ruled by a Sunni king just 16 miles across the King Fahd Causeway from Saudi Arabia, where a restive Shia minority sits atop a large percentage of Saudi oil and oil infrastructure. Bahrain’s own security troops have proven unable to contain the protests, and Saudi troops have entered the country.
But I have to add that authoritarian leaders in Tehran (or anywhere else) don’t need lessons from Qadhafi on how to attack protesters. Look at Laurent Gbagbo in Cote d’Ivoire. He and his entourage have proven willing to shoot civilians to hang onto power. And he’s so far getting away with it in part because the world is focused on events in North Africa and the Middle East. In general, the G-Zero problem that we’re seeing play out in debates over command and control of the effort to oust Qadhafi will make it easier for rouge states to resist international pressure. That’s precisely because international pressure will have less focus.
Where does Iran fit in this evolving picture?
That the U.S. and Iran are nominally on the same side on the Bahrain issue won’t in any way improve relations between the two. The U.S. is trying to contain Iran via sanctions at the moment. That won’t change, because there is consensus within Iran in favor of Iran’s right to a nuclear program. That’s one of the very, very few sources of consensus inside Iran, by the way.
If Iran’s Arab rivals deteriorate further, that’s certainly going to embolden Iran. We got a little glimpse of that when Iran marked the ouster of Mubarak last month by sending two ships through the Suez Canal for the first time since the revolution in 1979. That’s a pretty clear example of Iranian opportunism. On the other hand, I really don’t see Saudi Arabia spinning out of control, and that’s the real potential game-changer here.
On the larger question of Iran’s stability, the basic problem for the country’s leadership is that 70 percent of Iranians aren’t old enough to remember the revolution that the theocracy claims gives the government its legitimacy. As a result, Iran’s ruling elite has to continually find new ways to establish the regime’s right to exist. The nuclear program is an important part of that equation, but the legitimacy problem, exacerbated by the disputed election of Ahmadinejad a couple of years ago, isn’t going away.
Iran seems to possess the right demographics for a take-off as an emerging economy; however, based on your own definition, an emerging market country is one where politics matter at least as much as economics to market outcomes. For Iran to join international markets and become integrated into the global trade system, would there have to be a wholesale transformation of its political system?
The first thing Iran would need to make that leap is an end to sanctions. It’s hard to see that happening without some form of fundamental change—in Tehran, in Washington and in Europe. And, as you say, foreign investors will have to contend with high levels of corruption, a formidable bureaucracy, and a bazaari system that operates under its own rules. It’s just extremely difficult to get a contract done there and to be sure that terms can be enforced. Having said that, sitting on top of so much oil and gas will help. That’s one reason that we continue to see significant foreign investment in Russia despite extremely high levels of corruption there.
To call the Saudi leadership nervous about events in their neighborhood would probably be an understatement, which brings us to your recent editorial piece in Financial Times in which you remarked that “the endurance of America’s special relationship with Saudi Arabia may now be next”.
The Saudis see Bahrain as strategically critical, and they were never going to tolerate the ouster of the monarchy there. Saudi military intervention certainly wrong-footed the West, the U.S. in particular, but the Saudis will not back off support for Khalifa and continued Sunni rule in the country. Iran is on the other side of that, certainly, and those tensions will persist and expand, but Iran is not going to go to war over Bahrain. Any involvement by Iran will be limited and covert. We will see nothing from Iran like the Saudis marching in soldiers.
Over time, the U.S. will play a less prominent role in the region. U.S. warships will still protect sea lanes through the Strait of Hormuz, of course, and there will be a U.S. presence in the Gulf. But the personal relationships that have always anchored U.S.-Saudi relations are not what they used to be. In Saudi Arabia, we’re going to see a leadership transition. King Abdullah is 87 years old. When he passes, the monarchy will be passed among the older generation until the family runs out of half-brothers. Then there will be a generational change in Saudi leadership, and it’s frankly impossible to forecast what that will mean for political reform in the kingdom or for relations with the United States.
It is an emerging economy with a well-established private sector. Its geopolitical aspirations are coming into fruition. What are Turkey’s key goals on the world stage?
First, let me say that Turkey has been pretty quiet lately in terms of domestic political risk, but that may be about to change. Elections will be held on June 12. If Prime Minister Erdogan’s Justice and Development Party wins two thirds of parliamentary seats, it will have the power again to enact constitutional changes. Those proposed changes could reignite the battle between the ruling party and the country’s most determined secularists in the media, military and business elite. That’s something to keep an eye on.
On foreign policy, Erdogan has rebalanced Turkey away from the traditional Kemalist drive toward Europe to play a leadership role in the Middle East that can, among other things, raise Turkey’s profile on the international stage. That’s not a hard sell for the Turkish public since it is pretty clear to all involved that Turkey’s bid to join the EU is going nowhere. This is not a total shift toward the Middle East or an abandonment of efforts to better relations with the EU. It’s a rebalancing of Turkey’s orientation to expand the country’s foreign-policy options.
Israel is not strategically important to Turkey in this story, and there’s been some diplomatic arrogance on both sides that hasn’t helped matters. Turkey doesn’t have to cut ties with Europe or Israel to win new prestige. Relations with the EU and with Israel will continue to be politically and economically valuable. But Turkey can be a heavyweight in the Middle East and use this new balance to its advantage.
Ian Bremmer is the president of Eurasia Group, the leading global political risk research and consulting firm. In 1998, Bremmer founded Eurasia Group with just $25,000. Today, the company has offices in New York, Washington, and London, as well as a network of experts and resources around the world. Eurasia Group provides financial, corporate, and government clients with information and insight on how political developments move markets.
Bremmer created Wall Street’s first global political risk index, and has authored several books, including the national bestseller, The End of the Free Market: Who Wins the War Between States and Corporations?, which details the new global phenomenon of state capitalism and its geopolitical implications. He also wrote The J Curve: A New Way to Understand Why Nations Rise and Fall, which was selected by The Economist as one of the best books of 2006, and The Fat Tail: The Power of Political Knowledge for Strategic Investing. Bremmer is a contributor for the Wall Street Journal and writes “The Call” blog on ForeignPolicy.com; he has also published articles in the Washington Post, the New York Times, Newsweek, Harvard Business Review, and Foreign Affairs. He is a panelist for CNN International’s “Connect the World” and appears regularly on CNBC, Fox News Channel, National Public Radio, and other networks.
Bremmer has a PhD in political science from Stanford University (1994), and was the youngest-ever national fellow at the Hoover Institution. He presently teaches at Columbia University, and has held
faculty positions at the EastWest Institute and the World Policy Institute. In 2007, he was named a Young Global Leader of the World Economic Forum. His analysis focuses on global macro political trends and emerging markets, which he defines as “those countries where politics matter at least as much as economics for market outcomes.”
Bremmer grew up in Boston, and now lives in New York and Washington, DC.
