top of page

By:

Correspondent

23 August 2024 at 4:29:04 pm

Chaos Diplomacy

Donald Trump has always understood one thing better than most modern politicians that markets respond to perception. In the grinding drama over Iran, the American president appears to have weaponised uncertainty itself. One day he hints at a diplomatic breakthrough with Tehran and signals the reopening of the Strait of Hormuz which causes investors to breathe a sigh of relief. However, hours later, he reverses course by declaring there is “no rush” for a deal and that restrictions will remain...

Chaos Diplomacy

Donald Trump has always understood one thing better than most modern politicians that markets respond to perception. In the grinding drama over Iran, the American president appears to have weaponised uncertainty itself. One day he hints at a diplomatic breakthrough with Tehran and signals the reopening of the Strait of Hormuz which causes investors to breathe a sigh of relief. However, hours later, he reverses course by declaring there is “no rush” for a deal and that restrictions will remain until Iran bends fully to American conditions. The markets wobble again Trump’s defenders may argue that unpredictability is a negotiating tactic. Henry Kissinger once cultivated strategic ambiguity during the Cold War. Richard Nixon perfected the so-called ‘madman theory’ to keep adversaries guessing. Yet Trump’s oscillations differ in both scale and intent. In recent weeks, analysts and ethics experts in the United States have raised uncomfortable questions about whether political messaging is increasingly shaping market volatility in ways that benefit insiders, speculators and politically connected traders. When geopolitical brinkmanship begins to resemble a financial instrument, public trust in democratic institutions erodes. Nearly a fifth of the world’s oil passes through Hormuz. A closure or blockade affects fuel prices in Mumbai as much as manufacturing costs in Shanghai or inflation in Berlin. Trump’s repeated shifts between escalation and reconciliation have had grave implications for India, which imports more than 80 percent of its crude oil requirements. Any prolonged instability in Hormuz translates directly into higher import bills, inflationary pressures and stress on the rupee while ratcheting prices of essentials. India has spent years carefully balancing its ties between Iran, the Gulf monarchies and the United States. Tehran remains important for connectivity projects such as Chabahar Port and for India’s access to Central Asia. But allies and adversaries alike are forced into a perpetual state of recalibration because American policy itself appears unstable. Trump’s Iran manoeuvring reflects a dangerous transformation in global politics, which is the merger of geopolitics with spectacle capitalism. International crises are increasingly consumed like market-moving entertainment. This may generate short-term leverage for him or even produce tactical victories at the negotiating table. Iran, under immense economic strain, reportedly agreeing in principle to surrender its highly enriched uranium stockpile is no small development. Yet diplomacy built on volatility carries long-term costs and lead to the weakening of institutions. Markets become addicted to chaos and chaos, once normalised, rarely remains controllable. The world’s largest economy cannot afford to conduct foreign policy like a reality television script, with cliffhangers designed to manipulate sentiment every news cycle. Great powers are supposed to provide stability, not amplify uncertainty for strategic theatrics. Trump may believe that time is on America’s side. But for an anxious global economy already strained by wars, inflation and fragmentation, time spent trapped in manufactured uncertainty is becoming increasingly expensive.

What to Expect in 2025: Challenges and Opportunities

Updated: Jan 6, 2025

Donald Trump

The return of Donald Trump to the U.S. presidency in January is expected to dominate the global narrative in 2025. His second term will likely see a revival of the “America First” agenda, marked by economic nationalism, renewed trade wars, and a more transactional approach to alliances. Analysts predict that Trump’s instincts will drive U.S. foreign policy.


The tensions between the USA and China are expected to increase as Trump’s unpredictable leadership style could lead to unexpected overtures. There are already news reports that Chinese President Xi Jinping has declined Trump’s invitation to attend his inauguration.


Meanwhile, Trump’s expected focus on resolving the Russia-Ukraine War could also upset some of his NATO allies, especially if perceived concessions favour Russia. Domestically, Trump’s plans for sweeping bureaucratic changes may paralyse U.S. governance, creating a power vacuum that adversaries could exploit.


Asia-Pacific: A Region on Edge

Across Asia-Pacific, governments are likely to face political and economic hurdles as they navigate a complex geopolitical environment.


China is expected to focus on stabilising its economy, with aggressive policies targeting the real estate sector and local government debt. Concurrently, Beijing’s assertiveness in the South China Sea could heighten regional tensions. Its outreach to Latin America and strategic moves in Southeast Asia signal China’s ambitions to expand its global influence.


In Japan, political instability under Prime Minister Ishiba Shigeru could complicate relations with Washington, particularly as Trump revisits cost-sharing agreements for U.S. military bases. Japan’s domestic challenges will test its resilience in the face of external pressures.


South Korea enters the year in political limbo following the impeachment of President Yoon Suk Yeol. With snap elections on the horizon, the nation must adapt to shifting U.S. policies that could disrupt defence and economic ties.


Southeast Asia: Conflict and Reforms

The ongoing civil war in Myanmar will likely intensify as resistance groups gain ground against the military junta. China’s mediation efforts may shape the conflict’s outcome, though achieving a lasting peace remains uncertain. Given the risk of instability and violence in states like Manipur, Mizoram, and Nagaland, India must keep a close eye on the developments in Myanmar.


In Vietnam, the new leadership under To Lam has pledged sweeping reforms aimed at boosting efficiency and economic growth. The success of these initiatives will be closely watched as the nation balances domestic priorities with rising geopolitical tensions.


Thailand is expected to progress in its economic recovery, driven by government initiatives targeting household debt and consumer spending. However, persistent political instability could derail its momentum.


The Pacific and Oceania: A Contest for Influence

The Pacific region is set to remain a focal point of US-China rivalry. Taiwan will likely continue to be a flashpoint, with both superpowers vying for influence in the region. Trump’s administration may double down on security initiatives while Beijing strengthens its economic and diplomatic ties with Pacific nations.


In Australia, anticipated elections could bring new leadership, potentially reshaping its approach to Pacific relations. Smaller Pacific nations will face increasing pressure to navigate the competing interests of Beijing and Washington as the region becomes a key battleground in the global geopolitical contest.


Europe and Russia: Fragile Alliances

The Russia-Ukraine War will remain a critical concern, with the Trump administration likely attempting to broker a settlement. Such efforts could strain European relations, especially if they are perceived as undermining NATO’s collective security.


In Central Asia, Russia’s influence over regional governments will persist, even as public discontent grows. The region’s reliance on Moscow for security and economic support will be tested as new dynamics emerge.


Middle East and North Africa: Conflict and Continuity

The Middle East will very likely continue to experience instability, with the Israel-Hamas conflict and broader regional tensions dominating headlines. Governments in the region will need to recalibrate their strategies to align with anticipated shifts in U.S. foreign policy under Trump.


Economic and Security Challenges

Economic recovery will be a top priority for many nations as they confront structural weaknesses exposed by the pandemic. China’s reforms, Thailand’s recovery measures, and Pakistan’s fiscal stabilisation efforts underscore the global need for resilience and adaptation.


Security hotspots, from the South China Sea to the Russia-Ukraine War, will demand careful diplomacy. Meanwhile, militant activity in Afghanistan and Pakistan could pose renewed threats to regional stability. India should also keep a close watch on this conflict, as it also has the potential to destabilise J&K once again.


Conclusion: A Pivotal Year Ahead

As 2025 unfolds, the world faces recurring challenges and new uncertainties. Political turbulence, economic fragility, and geopolitical competition will test nations and leaders. Despite challenges, the year also offers opportunities for collaboration and new approaches to problem-solving. How nations address these issues will play a key role in shaping the global landscape in the months ahead.


(The author is a foreign affairs expert. Views personal.)

Comments

bottom of page