2 Reasons To Brace For Geopolitical Chaos

January 27, 2015

Planet Earth has entered a period of heightened geopolitical instability as fallout from the end of the Cold War a quarter century ago continues to manifest, Robert Kaplan, journalist and geopolitical strategist, told attendees of ETF.com’s 8th annual Inside ETFs conference.

Updating themes he first developed in an Atlantic magazine article 21 years ago titled “The Coming Anarchy,” Kaplan said the end of a bipolar world organized around U.S. and Soviet Union influence has revealed that a still-dominant U.S. can’t quite control all the world’s problems.

Kaplan said instability, notably the protracted U.S. efforts to manage the bellicose behavior of Cold War-era dictators such as Saddam Hussein has delayed “pivoting to Asia,” where China’s rise in economic stature has created huge opportunities and challenges for the U.S. He also argued that the rise of brutally violent Islamic militants is a symptom of a broader power vacuum.

For investors wondering how much Middle East instability or a more militarized Asia might affect their decision-making, Kaplan stressed that the stakes of this instability for investors are as varied as the world is big.

“If there were war in the South China Sea, it would be bad for the stock market,” Kaplan told the audience of several hundred financial advisors and investment industry professionals. “If Yemen collapses, no one would care, but if Saudi Arabia collapses, it would reverberate in oil markets.”

About 1,900 people are attending the four-day event, with about 60 percent of them financial advisors. Inside ETFs, the world’s biggest ETF conference, runs from Sunday, Jan. 25 through Wednesday, Jan. 28 at the Diplomat Resort & Spa in Hollywood, Florida. It is being put on by ETF.com, the ETF news and data provider.

Get Used To ISIS

Kaplan implored the audience not to hold its breath about any quick solutions to problems in the Middle East, arguing violence could continue another 30 years in places like Iraq, Syria and Libya, which he says have never been particularly stable over the centuries.

Conversely, Kaplan argued that Iran is quite different in this regard, saying Persian stability and influence has been a major characteristic in the Middle East for thousands of years.

As far as that goes, Kaplan said notwithstanding considerable suspicions on both sides, he hoped that the U.S. and Iran can strike some grand bargain aimed at restoring order in the region over the longer term.

Indeed, Kaplan said a carefully crafted U.S.-Iran partnership makes a lot more sense than the so-called close relationship the U.S. has with Saudi Arabia, an inherently unstable state with scant history of deep geopolitical influence.

Iran, too, has considerable energy resources, and Kaplan says it makes more sense for the U.S. to partner with Iran, given Iran's inherent stability as well as expanding U.S. energy production.

 

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