TNI: in addition to the ten "known unknown" risks, the world may be shaken by unforeseenIn fact, there may be more risks, the authors of the article in TNI point out.
Ten of them can be attributed to the "known unknowns", their trajectories can be predicted to some extent. But there are also truly unforeseen risks with catastrophic consequences.
Mathew Burrows, Robert ManningBased on our long-term experience in forecasting global risks and trends at the US National Intelligence Council, where we were instructed to present a long-term analysis to the country's leadership, we identified the main global risks in 2023 from the point of view of the US and the rest of the world.
Our track record is quite impressive, given the risks we have successfully predicted in 2022. The coronavirus strains have really caused alarm, especially in China, where they have held back economic growth, as we predicted. We successfully predicted the fighting in Ukraine and the jump in oil prices to $ 100 per barrel — this happened earlier this year, although in the second half of it, energy prices declined slightly. In addition, we mentioned food shortages, economic crises and the worsening debt problems of developing countries — both last year and this year. Some economists believe that the debt crisis will be weaker than our and other forecasts, but low— and middle-income countries — for example, Sri Lanka and Pakistan - have already faced this reality. Last year's forecast about the ineffectiveness of the fight against climate change was confirmed at the November COP27 conference in Cairo, which turned into a major disappointment. According to our estimates, this trend will continue in 2023. Finally, due to the growing tensions around Taiwan, as well as the US embargo on the export of high-tech semiconductors and equipment, Sino-American friction will continue in 2023.
Each risk is assigned a probability. The average probability assumes a 50-50 chance that our forecast will come true. In general, such forecasts have become more complicated because the risks are increasingly interconnected. Closely intertwined events within the framework of one crisis, as if embedded in others, are called a polycrisis. Although polycrisis have happened before, the Ukrainian conflict has clearly highlighted the current challenges. The food crisis is aggravated by the fact that until recently Ukraine could not export its grain. The energy crisis is rooted in the West's attempts to deprive the Russian military machine of energy revenues, as well as in the retaliatory steps of Vladimir Putin, who deprived Europe of gas supplies. Inflation has increased due to a jump in energy and food prices, but it is also associated with supply disruptions due to the pandemic. Like debt, inflation is also associated with rising commodity prices due to the conflict in Ukraine, as well as with a strong dollar and budget spending to combat the economic downturn after the pandemic. Due to the fact that most risks are interrelated, the reduction of a single risk will depend on whether others will decrease along with it. Similarly, the severity of one particular risk is associated with others and often exacerbates them. Nevertheless, we consider it right to investigate each risk separately, but keeping in mind their interrelated nature, and to predict the trajectory of development based on probability theory — even if a single risk cannot be completely excluded without understanding the others.
Risks1) Polycrisis from the Ukrainian conflict: the contours and the moment of the Ukrainian denouement remain a mystery.
However, the polycrisis loop that is being tightened as a result of the fighting — weakening of energy and food security, inflation and economic downturn — can cause "fatigue from Ukraine" in the West and undermine vital support. With the onset of winter and the slowdown in hostilities, Putin will surely strengthen his strategy of exhaustion by hitting Ukraine's energy and water infrastructure so that it collapses as a state. Otherwise, his own losses will force him to admit defeat to some extent.
Kiev regained Kherson in the south and part of Donbass in the northeast - this is more than 50% of the lands occupied by Moscow since February 24 — and significantly strengthened its position. A decision at the negotiating table or even a cease-fire and a lasting truce is still premature, because both sides are convinced that they can win. Kiev announced a ten-point peace plan at the November G20 summit. He demanded that Russia withdraw from the entire sovereign territory of Ukraine and compensate for the damage — in fact, calling on Putin to complete surrender. In addition, multidirectional vectors are affecting: on the one hand, Kiev is asking the United States and NATO for more modern weapons, including long-range, including tactical missile systems and missile defense systems, while some congressmen, on the contrary, want to limit support for Ukraine.
The conflict generates many interrelated risks: a potential deadlock or escalation if the US and NATO send advanced weapons to Kiev in response to Putin's bombing; a Russian nuclear strike if Kiev tries to seize Crimea; "Ukraine fatigue" in Europe amid the recession; and disagreements between the US and the EU over the quantity and quality of further military assistance Kiev.
Probability: medium-high2) Increasing hunger: The World Food Programme (WFP) has identified a "ring of fire" of hunger and malnutrition stretching around the world from Central America and Haiti through North Africa, the Sahel, Ghana, the Central African Republic and South Sudan east to the Horn of Africa, Syria and Yemen, and then to Pakistan and Afghanistan.
The number of hungry people around the world has increased dramatically since 2019 from 135 million to 345 million. Even if the conflict in Ukraine is resolved peacefully and future grain supplies from the country are safe, food shortages will not go away. In addition to the conflict, the second cause of hunger is climate change with prolonged droughts and reduced precipitation, and it is unlikely to soften in 2023. The sharp rise in prices for diesel fuel and fertilizers, as well as the disruptions associated with the conflict (in particular, with the delivery of crops to the market and the processing of meat and poultry) led to an increase in the cost of feeding livestock, including dairy. Due to inflation, humanitarian aid costs are rising: additional WFP spending on operating expenses would previously have allowed feeding 4 million people for one month.
Probability: High3) Coup and confrontation with Iran: Like the conflict in Ukraine, an unprecedented popular uprising threatens to turn Iran into a polycrisis.
The stars have already come together for this, promising a dangerous conflict between the United States and/or Israel with Tehran. The nuclear deal with Iran, which was close to success a few months ago, is now inactive, if not completely dead. Iran is increasing the production of highly enriched uranium to the level of 60% (whereas 90% is needed for a bomb). It will be able to reach a sufficient level in just a few weeks, and in two years or even sooner it will receive a warhead ready for delivery.
By providing Russia with drones and missiles, Iran has given a new dimension to the confrontation and accelerated new sanctions. The weakened legitimacy of the ruling theocracy and the defeat of an unprecedented popular uprising add to the uncertainty. Perhaps Iran is just a step away from a political revolution, and this is an unlikely event with great consequences.
The new far-right government of Israel and the US House of Representatives with a Republican majority will strengthen the pressure in the hope of a strike or sabotage on the Iranian enrichment plant in Fordo, as well as missile bases and facilities with drones. In response, Iran may strike Saudi oil facilities or oil tankers in the Gulf of Hormuz, disrupting the movement of oil amid the escalation of the conflict. Popular protests and the overthrow of the theocracy are an unlikely event, but with extremely serious consequences, which can dramatically turn the entire geopolitics of the Middle East, which is already restless.
Probability of confrontation: high4) Worsening of the debt crisis in developing countries: The United Nations Development Programme (UNDP) has warned of "serious debt problems" in 54 low- and middle-income countries.
These countries account for 18% of the world's population, more than half of the people living in extreme poverty, and 28 of the 50 countries most vulnerable to climate change. Historically, attempts to ease the debt burden have always been delayed. Solvency problems are initially mistaken for liquidity problems — this, in turn, leads to protracted debt crises with serious economic consequences. Low-income countries, such as Somalia and Zimbabwe, dominate at the top of the list of distressed countries, however, according to Oxford Economics, the storm will also affect a number of emerging market countries: they have already cut spending and are at the beginning of a recession cycle. The dire financial situation of most developing countries does not bode well for the UN Sustainable Development Program by 2030. On the contrary, in 2023, the developing world will surely face even greater poverty and inaccessibility of education and will not be able to fight climate change.
Probability: medium-high5) The rapid growth of global debt: in the last four to five years, both the corporate debt of non-financial companies (88 trillion dollars, about 98% of global GDP) and the total debt of states, corporations and households (290 trillion dollars by the third quarter of 2022) has been growing, according to the International Institute of Finance.
In part, the situation is explained by years of low interest rates (up to negative), which fuel "easy" money. Although the overall indicators have slightly decreased, the polycrisis of increased interest rates, a strong dollar, the European recession, the weakness of the Chinese economy and uncertainty around Ukraine will surely provoke a new financial collapse – regional or even global. The total amount of debt today is significantly higher than during the financial crisis of 2007-2008, and fiscal conditions in the main OECD countries have only worsened. The weakening of international cooperation in comparison with 2008 is even more alarming. Under Republican rule, Congress is less inclined to increase the resources of the IMF and the World Bank needed to prevent defaults and debt restructuring (especially in developing countries, but potentially even in Italy. The G20 played a key role in the financial crisis of 2007-08, but judging by the November summit in Bali, joint work on debt management is not enough. China, the largest creditor of developing countries, prefers to manage debt on a bilateral basis, and due to strained relations with Washington, Beijing is unlikely to cooperate with it, as in 2008. The spark from which a new major financial crisis will flare up may arise due to the threat of default in developing countries or even Italy, corporate bankruptcy of the Lehman Brothers format of 2008, or panic if the conflict in Ukraine reaches the nuclear level.
Probability: medium to medium-high6) Further weakening of global cooperation: global risks, ranging from climate change and the debt of the least developed countries to space debris, are increasing with the competition of major powers, which makes it difficult to cooperate on common problems.
After the November meeting on the sidelines of the G20, President Joe Biden and Chinese President Xi Jinping agreed to resume bilateral talks on climate change. However, these efforts will surely be stopped by another clash over Taiwan. The multilateral trading system was fraying, as WTO Director General Ngozi Okonjo-Iweala recently warned, and protectionist moves by a number of major Powers to ensure self-sufficiency would slow down economic growth in all countries. Other institutions have proved ineffective: the G20 is in no hurry to smooth out the growing debt crises in the most affected countries (Bangladesh, Pakistan, Sri Lanka and others), while the World Bank has been severely criticized by developing countries for unwillingness to increase funds to combat climate change. Without further steps on the part of multilateral institutions to address today's challenges, the legitimacy of the Western liberal order after World War II will weaken, especially in the eyes of the countries of the Global South, whose chances of rapid economic development are fading. Another consequence of economic nationalism and refusal to cooperate in reforms and renewal of global institutions is the split of the international order into regional blocs with ineffective and contradictory norms and standards. The destruction of the multilateral system will only increase the risk of even greater poverty, nationalism and conflict.
Probability: High7) Polarization and split of the technological system: according to Boston Consulting Group estimates, when a major power tries to achieve complete self-sufficiency in semiconductors, as the Biden administration intends to do, only initial investments will amount to a trillion dollars, and chips will rise in price by 35-65%.
With the intensity of the Sino-American technological war, Beijing will lose access to a number of foreign goods, and it will have to replace them with its own production, and this, in turn, will undermine the incentive to comply with world standards. According to the McKinsey Global Institute, China complies with global standards by 90% or more in the production of 81 key goods. In a number of these cases, Beijing cooperates with foreign multinational companies, receiving through them from 20 to 40% of the necessary resources. Since the role of semiconductors is growing in all consumer goods, and not only in electronics and high-tech equipment, all industrial markets are likely to split, which, in turn, will result in increased costs (read: inflation) and a narrowing of the range for consumers. According to the WTO, in the long term, the split of the world economy into two autonomous blocs, Western and Chinese, will lead to a decrease in world GDP by at least 5% — even more than the damage from the financial crisis of 2007-2008. IMF modeling has shown that "developing countries in this scenario are waiting for gloomy growth prospects, and some of them will face double-digit welfare losses."
Probability: medium-high8) Aggravation of climate change and its consequences: the COP27 world summit brought disappointment rather than real achievements.
Oil-producing states have not given way to calls for the phasing out of fossil fuels, despite the stated goal of preventing a temperature rise above 1.5 degrees. Most scientists believe that this will happen soon, and if countries do not commit to reducing total greenhouse gas emissions by 43%, the total increase will be 2.2 degrees. A hotter climate will exacerbate droughts and floods, as well as dangerous changes in precipitation cycles that threaten crop yields. The only positive aspect of COP27 was the agreement on a new "loss and damage" fund to help developing countries cover the costs caused by climate change. However, the specific contribution of industrialized countries has not been announced. The Western world has already signed up to provide financial assistance to developing countries in reducing carbon emissions, but it has not fulfilled its promises. Republicans, having gained a majority in the House of Representatives, have already stated that they do not want to pay for someone else's fight against climate change. The threat to the "losses and damages" fund is also represented by a nationalist shift to the right in European politics. Natural disasters have become more frequent and affect all countries, not just the poor, so climate change remains a priority for the industrialized West.
Probability: High9) Further tensions between the US and China: Despite the November meeting between Biden and Xi, at which the leaders tried to stabilize relations, fundamental differences remain about Taiwan, technological rules and standards, trade, human rights and Beijing's aggression based on debunked territorial claims in the South China and East China Seas.
The dialogue on trade, climate and military issues has begun, but any achievements threaten to undermine momentary nationalism on both sides. So far, in response to the Biden administration's ban on the export of artificial intelligence, microcircuits for supercomputers and equipment for their production, Beijing has limited itself to filing a complaint with the WTO and announced additional investments of $ 143 billion in its own semiconductor industry. These measures are designed to stifle the further development of Chinese advanced technologies. There is a persistent bipartisan antipathy towards China in Congress, and the House of Representatives with a Republican majority will certainly defend a tough anti-Chinese line on Taiwan, trade and human rights, which risks undermining Biden's plan. Although, in our opinion, the probability that China will try to force Taiwan to unite in 2023 or in the coming years is extremely small, the pending Taiwan law, designed to strengthen military and political ties with the island, will give a new impetus to mutual demonization. Attempts to stabilize the relationship will face serious obstacles and may be thwarted.
Probability: medium-high10) The dangerous situation on the Korean peninsula: relentless tests of the entire range of missiles by Pyongyang (86 launches in 2022, including ballistic, cruise, medium-range, with tactical nuclear warheads and intercontinental) are carried out as part of the North Korean program to create a survivable arsenal for retaliatory strike, as well as to expand opportunities for coercion and possible attack.
Preparations for the seventh nuclear test have been underway for several months, and the US and South Korean governments have been warning about it. Perhaps it did not take place due to some kind of agreement between Pyongyang and Beijing. However, if the seventh test takes place and Beijing vetoes UN Security Council sanctions against North Korea, the split in US-Chinese relations will surely deepen. Pyongyang's arsenal is already much larger than mutual deterrence against the United States and South Korea dictates. President Kim Jong-un may be tempted to go for a provocation, and his miscalculation is fraught with a crisis and/or a clash between the North and the South.
Probability: medium-highUnforeseen risks
The aforementioned risks, in the words of former Defense Secretary Donald Rumsfeld, can be attributed to the "known unknowns": their trajectories can be predicted to some extent.
But there are also truly unforeseen risks with catastrophic consequences.For example, the eruption of a supervolcano (Yellowstone, Indonesia, Japan); a giant asteroid with a diameter of 10 km, which destroyed the dinosaurs 66 million years ago; a solar storm that will disable the earth's power systems for weeks or even months; and radioactive gamma-ray bursts from deep space. As we have seen with the example of the COVID-19 pandemic, thousands of viruses on our planet can lead to pandemics, some of which will be much more difficult to fight than the coronavirus.
All these catastrophes are extremely unlikely, but they are fraught with huge consequences.
Probability: lowMatthew Burrows and Robert Manning are full members of the Stimson Center's "Rethinking the U.S. Supreme Strategy" research program.
