2023 Year End Special Edition Magazine
Partner – Global Issues Group
Middle Powers: a rising force in the new world order?
While there is no agreed upon criteria of what makes a country a middle power, the concept speaks to a multipolar world that is not dominated entirely by the US and China. Claudine Fry, Gabriel Brasil and Patricia Rodrigues discuss what makes a country a middle power and what this rising force in geopolitics means for business.
CF: Patricia, what does the concept of “middle powers” mean to you?
PR: The term “middle powers” tends to be equated with the BRICS (Brazil, Russia, India, and South Africa ) group. It’s becoming clear that we need to expand that list. It’s not only about economic clout – which is what a lot of these BRICS countries have – but about strategic positioning and access to resources.
If we think about Africa, the Democratic Republic of Congo (DRC) is a country that is gaining a lot of attention. The DRC is by far the world’s largest producer of cobalt, accounting for roughly 70 percent of global production. Cobalt is an essential mineral for energy transition, which means the DRC now finds itself at the centre of a variety of geopolitical conversations.
There are also regional powerhouses like Egypt, Kenya and South Africa. These are essentially anchor economies for their respective sub–regions within the African continent. Nowthey are increasingly positioning themselves to speak for the African continent in global affairs. Kenya is a really good example.
CF: Gabriel, how do you see middle power countries asserting themselves on global issues and at the diplomatic table?
GB: There is no academic consensus around the term, but to me it refers to countries with moderate capacity to influence geopolitics. This capacity arises from specific events or geopolitical developments that provide opportunities for these countries to play a prominent role.
For instance, Brazil has a clear opportunity in the climate agenda. Brazil boasts impressive clean energy credentials and an ambitious green plan for the next decade. Since the inauguration of President Lula in January, the country has regained its momentum in geopolitics. If Brazil addresses domestic climate challenges, it could emerge as a global leader on climate issues, particularly deforestation.
On the other hand, Brazil’s attempts at mediation in the war in Ukraine have been controversial, raising questions about the country’s neutrality.
CF: Gabriel, you raised an intriguing point about neutrality, especially in the context of Ukraine’s geopolitical situation. However, I believe that neutrality is not a defining characteristic of a middle power. I’d say these countries tend to assert their own positions and align opportunistically or on a case-by-case basis with other nations on specific issues, rather than maintaining an overall neutral stance.
GF: I would replace ‘neutrality’ with ‘pragmatism’. I believe pragmatism is the key feature when examining the foreign policy of countries like Turkey, Brazil, South Korea, India and South Africa. These countries have a specific set of opportunities and domestic challenges that they strategically address using resources from the international arena. They navigate their foreign policy based on convenience, risk appetite and ongoing trends.
CF: Patricia, can you explain South Africa’s assertive stance, its strained relationship with the US and the risks involved in hosting Putin at the upcoming BRICS event?
PR:: Understanding South Africa’s foreign policy approach requires considering two key factors. Firstly, there’s a sense of pragmatism and an attempt at neutrality, which is a common, though not uniform, stance in many African countries. African nations often choose not to take sides in geopolitical conflicts to maintain trade relationships with multiple parties. This pragmatism guides their foreign policy decisions.
Secondly, historical connections play a significant role, especially with Russia. South Africa’s ruling party, the ANC, has historical ties with Russia dating back to the apartheid era. As a result, there might be some reluctance to take an overly pro-US stance on Russia-Ukraine issues. This historical context has created complexities in South Africa’s relations with the US and has even led to potential consequences like South Africa’s suspension from the Africa Growth and Opportunities Act (AGOA).
South African President Cyril Ramaphosa faces challenges in pleasing both sides and finding a balance in his approach to Russia and the US. Luckily for Ramaphosa, Putin has decided not to attend the BRICS Summit. Still, the situation has strained relations with the US, which, unlike Russia, is a critical trading partner for South Africa. President Ramaphosa is navigating a delicate path to maintain relationships with both countries.
CF: What are the business implications when middle power countries take geopolitical stances?
GB: The concept of middle powers and their actions have tangible implications, particularly in areas like critical minerals – where countries can leverage their status to influence geopolitics. To understand a country’s foreign policy and strategic engagement on global issues, it’s essential to consider cultural, social, and historical drivers. Companies operating in markets impacted by middle power actions should be aware of the increased complexity they bring.Also, it is important to note that middle powers are not a bloc. They have different cultural priorities, economic landscapes and geopolitical interests.
One main business risk is on the regulatory front. Initiatives by middle power countries to enhance self-sufficiency in critical minerals often lead to export controls and alliances. This can impact the supply chains of sectors like mining, energy and tech.
For multinationals, navigating these risks requires scenario planning and an understanding ofconflicting interests.
PR: I would add reputational risk as well. Think of big companies operating in Africa in the mining sector. There is now a lot more scrutiny on how these critical minerals are being sourced – and a lot more attention being paid to the entire supply chain. For companies not in the extractives sector, they are reliant on investors – Western investors particularly. If these investors rely on operations in countries less aligned with the US, they could find themselves under pressure from domestic audiences and may be held responsible for foreign policy decisions that fall outside their remit as investors. It’s becoming increasingly awkward to manage reputational considerations when you’re operating in this multipolar world.
CF:What about opportunity? What does the middle power dynamic offer businesses seeking an advantage?
GB: Companies whose plans align with middle power policies and ambitions can benefit from subsidies or a more predictable regulatory environment offered by governments seeking to leverage critical sectors like extractives to further their foreign policy goals.
While navigating the complexities and risks, spotting these opportunities can be essential for long-term success. Sectors like mining offer significant benefits over time, making it a strategic and constructive move for companies looking to engage in long-term projects. Despite the lack of a clear playbook, seizing these opportunities can yield significant advantages for businesses operating in line with middle power policy objectives.
CF: That’s right. And many of the really exciting solutions and developments we’re seeing in renewables will all be coming from and going into middle powers. Parts of the Middle East, for example, are really hefty investors into renewables and a multitude of sectors globally. The region is playing a hugely influential role.
What do you think the geopolitical environment will be like in 10 years time? Which states would you identify as ones to watch?
PR: In Sub-Saharan Africa, there are three significant mega-trends to consider. Firstly, energy transition could be an economic boon for the region due to the abundance of critical minerals within Sub-Sahran Africa. The Democratic Republic of the Congo (DRC) has significant mineral wealth and is a key state to watch in this regard.
Secondly, the relatively young population in Sub-Saharan Africa compared to the aging global north will give the region an advantage. Nigeria and Ethiopia boast large populations of over 200 and 100 million respectively and could exert increased influence in global affairs through the sheer size of their labour force.
Thirdly, geopolitical fragmentation presents opportunities for Africa to become a destination for nearshoring, particularly for European markets, considering their proximity compared to other regions like Latin America.
I would also say that traditional regional economic champions like Egypt, Kenya, and South Africa are worth monitoring as they are likely to emerge as prominent global voices.
GB: In the coming decade, I anticipate that geopolitical volatility will remain a significant characteristic of the global environment. This volatility can be attributed to various factors, such as the ongoing conflict and tension between the US and China. Additionally, climate change will act as a threat multiplier, influencing how nations position themselves politically and economically. The interplay of these factors will result in trade-offs, anxieties and frictions, leading to a series of complex crises.
Climate change, in particular, will have far-reaching consequences, exacerbating issues like economic inequality, mass migration, pandemics, civil unrest and political instability. It poses a massive challenge that the world will grapple with in the coming decade.
From a geopolitical standpoint, several countries are likely to be influential players in addressing these challenges. Take climate change. South Korea’s interest in soft power and its strong semiconductor sector, India’s innovative space infrastructure approach, and Saudi Arabia’s significant role as a powerbroker within OPEC will all have a role to play as the world transitions to greener energy. Brazil, with its capacity to lead green agendas, and Chile’s noteworthy transition towards sustainability will also play key roles, particularly within the Latin American region. These countries are likely to be essential drivers of regional and global trends in the coming decade.
CF: We seem to be entering a dangerous period. There isn’t a global authority or a strong framework of institutions to maintain order and consistency in global affairs. The fragmentation of geopolitics has weakened these institutions, making it challenging for any country or organisation to serve as a stabilising force.
Despite this precarious state of affairs, I’d like to be optimistic. Perhaps in the future there will be alignment around a new set of values that a majority of states could rally behind. These values would serve as the foundation of a new world order, one suited to confrontingchallenges like climate change, adaptation and digitalisation.
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