At SFNet’s Asset-Based Capital Conference in Las Vegas this month, geopolitical analyst David Chmiel addressed how a Russian invasion of Ukraine could set off far-reaching geopolitical impacts and further accelerate China’s aggressive geopolitical plans. 

In a virtual fireside chat recorded Jan. 30 with questions posed by Business Editor Stuart Rock, founder of Devonia Road, Chmiel said China is certainly watching closely to see how unified the response to Russia’s escalation has been from Ukraine’s allies in Europe and North America.

“We’ll probably have an issue where energy gets weaponized,” he said, if Russia is cut off financially and politically from nations that depend on Russian energy. He also said port closures could affect food supply lines, and Russian cyberattacks are likely to disrupt critical European communication and financial systems.

While facing that dangerous situation, along with the ongoing pandemic, and burgeoning economic nationalism around the world, the effect of Brexit is hard to tease out, Chmiel said.

He also pointed to an expansive new national security and investment act in the UK aimed at monitoring foreign investments and covering 17 national sectors. While Brexit was supposed to open the UK to trade globally, the UK government estimates that between 70 and 90 inbound investment acquisitions will get reviewed annually compared to a total of only 16 in the past 18 years before the new law was implemented. It is not just happening in the UK, either, Chmiel says. 

“This legislation is symptomatic of the world we are in right now.”

“Has the pandemic led to reshoring manufacturing and protecting borders?” Rock asked. 

According to Chmiel, in 2020 when the Pandemic hit, Americans immediately saw the impact of their reliance on global supply chains when they were unable to access necessary personal protective equipment.

“It’s going to be a harder issue for politicians to advocate for open investment since the Pandemic,” he added.

In the shifting economic and geopolitical sands, he sees alliance structures developing with countries such as India, Japan and Indonesia. Combined, these countries will likely have a larger population, GDP and defense budget than China by 2040. The new buzzword for this shift, he said, is “Indo-Pacific” rather than “Asia-Pacific.”

Chmiel also said we could see the emergence of some sort of investment block of trusted nations receiving clearance based on acceptable trade behaviors, but he said the picture is quite complicated in this area.

According to Chmiel, the “elephant in the room” is China--but that the world also needs to pay more attention to the economic impact of rising nationalism in Latin America.

When asked what he thought would be a perfect storm from a geopolitical perspective, Chmiel said a disruption of shipping in the Persian Gulf, or the Indo-Pacific would have major implications for supply chains. To this point, Rock noted how ironic it is that the Pandemic stimulated more digitization of markets, yet the biggest threat to commerce may be in centuries-old maritime transportation lanes.

In such a perfect storm, insurers would withdraw, raising risks for shippers and thereby creating major implications for supply chains, and that would feed into political discord and further nationalistic responses, Chmiel explained.

More coverage from SFNet’s most recent Asset-Based Capital Conference will be coming; stay tuned.