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Scenarios for the Future of Libya – Sc 3.2 A Nationalist Libya

This article focuses on the second of the scenarios depicting a total victory for one Libyan faction, where the nationalist coalition – loyal to a non-Islamist and nationalist government – is victorious and guides Libya towards a secular and nationalist state where Sharia is not a source of governance. In our previous scenario we detailed the scenario of an Islamist victory where the new government gradually, with different paths according to speed, implements Sharia law and puts Libya on the path towards an Islamic state.

Note: Considering the future names of potential factions that would result from a new split between the unity government, we shall use the label nationalist for those that supported the nationalist-dominated Council of Representatives (COR) and any future anti-Islamist factions; Islamist to note those that supported the General National Congress (GNC) and any future pro-political Islamic movements; and Salafist will remain the label of choice for groups that reject democratic institutions and embrace jihadism.

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Sub-scenario 3.2 A Nationalist Libya

In this scenario, a “real victory” refers to the cessation of major hostilities resulting from a belligerents military domination of the other. Once a belligerent militarily defeats the other, it will be in a position to rebuild Libya as either an Islamist or secular state.

By achieving a real victory against the Islamist-dominated coalition and government, the nationalist coalition sets up its non-Islamist government and endeavours to organize the new Libyan state. This new government projects a secular-nationalist rule of law, and firmly opposes the use of Sharia law as a basis for legislation.

The nationalist government is determined to first secure the porous southern border. It knows it has two major options. Either it makes a deal with the Tuareg and Toubou to increase their representation in government and promises to address their other grievances if they secure the southern province to prevent jihadists from entering the country and assist in stabilization efforts throughout the Fezzan. Or, it exclusively pre-occupies itself with post-civil war affairs in the north and begins to ignore the Tuareg and Toubou. Both minority tribes in the south thus feel abandoned – the Toubou are angry that their alliance with the nationalist coalition did not result in a seat at the power table, or even a request for meaningful post-war assistance, while the Tuareg are afraid that they especially will be left out, considering their opposition to the nationalists during the war. In this case, the odds to see them deciding to split away from the Libyan state in protest and form their own tribal states, or to hold southern Libyan oil resources as collateral for political concessions – thus forcing the government to address the minority tribes increase. Considering both the value of past war alliances and the risks entailed by not doing so, the nationalist government finally chooses the first option.

The nationalist leaders start implementing a strict anti-Islamist agenda. Not wanting to include former adversaries that promoted a system alien to their beliefs and challenged their legitimacy, the new government takes measures to dissolve the Muslim Brotherhood-affiliated Justice and Construction Party. In an effort to completely dismantle Islamist movements in Libya, the government arrests, charges, and prosecutes prominent Islamist politicians and militia leaders. It then welcomes those affiliated with Qaddafi’s regime to be involved in the new state, partly as a means to increase domestic legitimacy among the Qaddafists, but also as a means to consolidate power. This announcement draws much support from former Qaddafi officials and particularly Qaddafi’s tribe – the Qadhadhfa – who felt marginalized after the revolution and whose men and also some elders became a recruiting pool for the Islamic State in Sirte. Seeing this as an opportunity to restore some of their influence in the government, as well as seeing that the Islamist defeat leaves only the Salafist groups left to be targeted (to which many Qadhadhfa fighters belong), the pro-Qaddafi tribes that didn’t originally ally with the nationalists now shift their support to the new government.

Bolstered by the new government’s actions to ignore Sharia law, the Salafist groups denounce Libya as a kafir state and state their intention to destroy it. However, as far as the Islamic State is concerned, they are weakened by the loss of the pro-Qaddafi tribes, which spurs a renewed propaganda push to attract more foreign jihadists. Salafist groups that experience a surge of foreign jihadist recruits renew their insurgency against the Libyan government. Those which do not succeed in either attracting enough foreign recruits or local ones grow weaker and unable to hold territory as they did during the civil war. Thus, they shift from a more centralized semi-state with territory and governance to a decentralized underground terrorist organization that avoids conventional warfare, causes mass civilian casualties through terrorist attacks, and specifically targets security personnel, secular judges, and political and military leaders under the nationalist government. However, this renewed insurgency and its outcome would require new scenarios to fully understand its depth.

Meanwhile, the nationalist coalition and government struggles at first to gain international legitimacy. The Western powers tread lightly in regard to signaling open support for the new government – mostly to see the initial actions made by the new government that signify its national and international intentions. With the migrant crisis still a serious problem for the EU, it opens diplomatic relations with the nationalist government to work out a solution that would stem the flow of migrants from Libya’s shores. In a unilateral move that is the result of unsatisfactory solutions put forth by the EU, the United Kingdom offers assistance to Libya in an effort to counter the human-trafficking networks that significantly contribute to the migrant routes through Libya. (In an alternative sub-scenario, where the migrant crisis is already abated, the EU stands alongside the U.S. as they wait to see how the government sets the tone for stabilization and rebuilding). Meanwhile, Russia expands its ties with the nationalists and quickly negotiates arms deals with the government – knowing that the new Libyan military will need to be outfitted, while it allows Russia to further gaining influence with a new power in the Middle East/North Africa region.

General Haftar represents a strong anti-Islamist ideology in Libya, which appeals to Egypt and the UAE.

Egypt and the United Arab Emirates continue to support the nationalist government as it takes action to exclude Islamists from power and crack down on Muslim Brotherhood-affiliated supporters throughout Libya. Libya’s other neighbors also recognize the legitimacy of the new state and begin working with the government to make sure no insecure borders could lead to renewed insurgency. Having backed the Islamist government – whom they considered the legitimate government – and seeing the new government’s efforts to crack down on Islamist groups, Qatar and Turkey denounce the nationalist government.

Indicators to Monitor

Below are the main indicators we identified that impact the likelihood to see scenario 3.2 occurring. They should thus be monitored.

  1. The government’s level of priority to include minority tribes in the state. Once it begins functioning as the country’s sole political authority, the new government will take measures to first stabilize war-torn Libya, and then begin the rebuilding process. Depending on a variety of factors and agendas, the government could potentially prioritize other issues over the political inclusion of minority tribes; issues such as eliminating terrorist groups, ramping up oil production and exports, developing a new and united military, finding a solution to the massive migration problem, securing financial assets, and mitigating any existing financial crises.
  2. The tribes’ willingness to break away from the state in a partition. If the new government begins passing important legislation or drafts a new constitution without their full representation and blatantly ignores their political grievances, then the tribes could take action to form their own autonomous tribal states. A past indication occurred when the Amazigh tribe refused to recognize a Libyan constitution drafted by a constitutional assembly that lacked sufficient tribal representation because “we do not recognize those who do not recognize us,” (Nationalia, February 21, 2014). The Amazigh Council then announced its intention to create an Amazigh-only Parliament (Ibid.). A similar indication occurred when Toubou and Tuareg militia leaders “threatened to pursue regional autonomy for Fezzan” when one of the former Libyan transitional governments cancelled “fake” ID cards held by the Tuareg and Toubou (Lacher, Security Assessment in North Africa, February 2014).
  3. The tribes’ willingness to hold oil resources as collateral to gain full representation in the new government. An alternative to tribal partition in response to the lack of political inclusion or civil rights could take place in the form of holding resources as collateral. Considering oil production would be a priority for the new government, the takeover of oilfields, pipelines, or production facilities by tribes would impair the government’s ability to control its own resources needed to rebuild the country. The Libya Herald points out that the Amazigh, Toubou, and Tuareg are all “within striking distance from one sort of oil facility or another” (Zaptia, Libya Herald, July 27, 2016), making this action a real possibility for any of the minority tribes. Past indications occurred in October 2013 when armed Toubou tribesmen blockaded the Sharara oilfield (Lacher, Security Assessment in North Africa, February 2014); in late October 2013 when an Amazigh group occupied the Mellitah terminal and threatened to cut the gas flow to Italy if the Amazigh representation in the constitutional drafting committee was not increased (Pack and Cook, Majalla, December 9, 2013); a day later when a Tuareg group shut down the southern Sharara oilfield demanding “greater access to citizenship registration, development of local areas, and the reinstatement of local council members rejected by the central government,” (Pack and Cook, Majalla, December 9, 2013); and in December 2013 and January 2014 when the Toubou occupied the Sarir power station to “demand greater representation in Kufra’s municipal government,” (McGregor, The Jamestown Foundation, January 23, 2014).
  4. The existence of belief systems on the nationalist side that vary from fiercely nationalist to a milder version of the nationalist ideology, as well as the relative strength of their supporting groups. Once the nationalists achieve a real victory, there may be various levels of beliefs that impact the reach of the government’s anti-Islamist agenda. There are certainly those that are fiercely nationalist, like General Haftar, but there may also be factions of the nationalist coalition that see a risk in completely excluding the Islamists from a post-war Libya or view such actions as indicative of a dictatorship. Haftar’s Libyan National Army and Libya’s actual military forces appear to fall under Haftar’s fiercely nationalist ideology. Armed factions from Zintan are strong opponents of both the General National Congress and Islamists in general (Al Jazeera, June 2, 2014), so they too would probably rank closer to the side that wants to rid Libya of Islamist groups altogether. The other end of the spectrum – which fought in the nationalist coalition during the war but exhibits less willingness to embrace the nationalist ideology – is the Petroleum Facilities Guard (PFG), led by Ibrahim Jadhran. In 2014, the government announced its agreement with the Council of Representatives “to work together and defeat Islamist terror,” (CIPPE, September 4, 2014). Two years later, Jadhran – who considers himself a moderate Muslim – has taken a middle ground. “We stood by the government, but at the time the National Congress started to lean toward the Islamists and the parliament [Council of Representatives] leaned towards the militarization of the state and the return of a dictatorship. So we saw that we were the only ones standing in the middle,” (Nathan, Politico, August 25, 2016). If the nationalist coalition defeats the Islamists, the Petroleum Facilities Guard would still exist. Since the PFG protects most of the country’s oil industry, it would probably be coerced into supporting the new government – even though the PFG provides little to no support for the strong nationalist ideology. The PFG has over 20,000 men in its ranks, which does not compare to the combined strength of the stronger nationalist factions (see Mitchell, Nationalist Forces I and II), but does have the potential to force a strong nationalist government to consider a less-extreme stance on an Islamist crackdown – especially considering that the PFG protects Libya’s most important source of income.
  5. Willingness of the new government to go beyond dissolving Islamist parties and crack down on prominent Islamist political and militia leaders. If leaders of the nationalist government are driven by a strict anti-Islamist agenda, they will be more willing to crack down on Islamists – in the same way that Egypt cracked down on Egyptian members of the Muslim Brotherhood (Al Jazeera, December 29, 2013). A past indication highlighting a means of justification occurred when the nationalist government labeled Libya Dawn (the Islamist-dominated armed coalition supporting the General National Congress) as a terrorist group on the same level as Ansar al-Sharia (Wehrey and Lacher, Carnegie Endowment for International Peace, October 6, 2014; St. John, Libya: Continuity and Change, May 15, 2015); which is identical to incidents when Egyptian authorities claimed that Islamists were arrested on suspicion of belonging to a terrorist organization (Al Jazeera, December 29, 2013).
  6. The level of inclusion of former Qaddafi officials. Contrary to an Islamist victory where the government would ban former Qaddafi officials from power, the nationalist government would likely allow Qaddafi officials to participate. During the civil war, the Council of Representatives took legislative action to allow former Qaddafi officials to be involved in politics, and made no effort to purge its military forces of Qaddafi military officers. Past indications occurred when the Council of Representatives revoked the 2013 Political Isolation Law that banned Qaddafi officials from participating in government (BBC News, February 2, 2015); when the nationalist coalition included “elements of the Qaddafi-era armed forces” (Watanabe, Center for Security Studies, June 21, 2016); and when the political advisor of the head of the Council of Representatives, Abdallah Atamna, confirmed that “some officers inside the army led by General Khalifa Haftar are supporters of Qaddafi” and that the Council of Representatives itself included “members and workers who are Qaddafi supporters,” (Libya Prospect, October 26, 2016).
  7. The willingness of pro-Qaddafi tribes to change their allegiance to the nationalist government. If Salafist groups – particularly the Islamic State – are being progressively defeated by the nationalist forces, and if the nationalist government announces its inclusion of former Qaddafi allies, the pro-Qaddafi tribes that had ties to Salafist groups will likely be more willing to shift their allegiance to the government. If the desire to regain political influence in the sole Libyan government (like these tribes had under Qaddafi’s regime) is strong, the likelihood of this scenario increases.
  8. The ability of Salafist groups to reinforce their ranks. By denouncing the new nationalist government, the Salafists can launch a new propaganda campaign calling for jihadists to come to Libya and overthrow the kafir government in hopes of establishing a true Islamic state. Especially if the pro-Qaddafi tribes shift their support to the government, Salafist groups will face a shortage in fighters and may be forced to heavily recruit from outside the country. The ability to increase its ranks of fighters will allow Salafist groups to renew the insurgency.
  9. The level of territorial defeat that cause the Salafists to change strategy. Libya’s complex civil war has fostered an environment where Salafist groups can hold territory and govern the inhabitants as Islamic semi-states (notably Derna and Sirte). However, once the nationalist forces defeat the Islamists, the Salafist groups will be the last remaining opponents that hinder the reconstruction of Libya. If nationalist forces – possibly with the military support of external actors – launch military operations to reclaim Salafist-held areas and begin to make significant progress, there is the possibility that these groups could shift to a more decentralized, state-less strategy driven by assassinations and deadly attacks on civilian populations. Ryan and Johnston discuss the Islamic State’s progressive loss of territory and a similar strategic shift beginning to take shape (War on the Rocks, October 18, 2016). In their report on jihadist strategy and centralized vs. decentralized strategies (War on the Rocks, November 10, 2016), Clarke and Gartenstein-Ross discuss the strategy shift faced by ISIS leaders that Libyan Salafist groups would also face in the midst of territorial loss.
  10. Ability of the new government to integrate militias into the new military. If the new government continues to rely on a mix of military units and militias without integrating the latter under the same chain of command (the militias that were loyal to Operation Dignity) to fulfill the role of the military, the government risks losing the cohesion of its coalition, and therefore will not be able to sufficiently address the Salafist insurgency.
  11. Ability of the government to eliminate, or at least contain, the Salafist groups. In order to contain and eliminate this insurgency, the government will need a strong, centralized military and external assistance. A capable fighting force also needs a leader that can successfully destroy Salafist strongholds. A past indication occurred when General Haftar and his coalition successfully defeated and repelled Salafist groups from areas in eastern Libya, although at the alleged expense of excessive collateral damage (Chorin, Forbes, September 16, 2016).
  12. The level of support offered by external actors to help stabilize Libya. The United States and European Union will likely offer various types of support, particularly to address the massive migration problem stemming from Libya’s shores. Egypt and the United Arab Emirates will also likely assist the new nationalist government as part of their regional interest to undermine and ultimately prevent political Islamic movements from coming to power. The likelihood of a successful nationalist Libya increases as the level of support offered to the new government by the international community increases. However, countries like Turkey and Qatar – who are pro-Islamist and backed the Islamist coalition – will likely denounce the new government as illegitimate when it takes action to ban Islamist movements.
  13. The severity of the migration crisis. Europe’s migrant crisis will play a key role in how quickly the European Union recognizes the government’s legitimacy and offers support. If the number of refugees heading towards Europe significantly decreases by the time the nationalist government takes power, the EU may not be as quick to grant recognition without first seeing what type of government lies just across the Mediterranean (especially focused on the incorporation of democratic values). However, if the migrant flow remains steady or increases, Europe may forsake caution in order to gain the nationalist government’s assistance in mitigating the migrant flow from Libya.
  14. The UK’s willingness to act unilaterally to mitigate the migrant crisis. If the European Union is still experiencing a migrant crisis and has no viable solutions, the United Kingdom may act unilaterally to drastically reduce the number of migrants coming from Libya’s shores. A past indication occurred when the UK offered drones and warships to combat the human smuggling networks in Libya that facilitate the migrant flow (RT, May 18, 2015).
  15. The level of Russia’s desire to be involved in a post-war Libya led by a nationalist government. There are several incentives that could convince Moscow to play a large role in Libya after the nationalists achieve military victory. First, the new Libyan military would need to be rebuilt from the ground up, meaning significant arms deals and military training by foreign advisers. Second, Libya will need new technology to boost its oil production. Third, a friendly Libyan government may offer Russia the chance to expand its oil interests in the country. Fourth, Libya will need help rebuilding its entire country, which could offer Russia the chance to gain influence and acquire a key ally in the region. This could also gain Moscow the use of key Libyan ports in the Mediterranean. Past indications that support Russian incentives occurred when Russian companies had significant investments in Libya’s oil and gas sectors just prior to the 2011 revolution (which highlights the fact that Russia indeed has energy interests there) (Deutsche Welle, August 31, 2011); when Libyan oil producers set a meeting in Moscow with Russian companies to discuss Libya’s need for Russian technology in the oil industry (Sputnik, May 19, 2016); when Russia was the only country that was willing to print currency for the central bank branch under the nationalist government – despite the fact that a unity government already existed (Lewis, Reuters, June 3, 2016); when General Haftar made an official request to the Russian government to supply his military forces with weapons and military equipment (which highlights the serious potential for Russia to be the military supplier of a nationalist government) (Libyan Express, September 28, 2016); and when Russian military advisers allegedly arrived in eastern Libya to support Haftar’s nationalist forces – which may indicate Russia’s preference for General Haftar and the nationalist coalition (The Libya Observer, November 8, 2016).

Bibliography

Feature Photo: Posted on the Council of Representatives Facebook page, May 30, 2016

Adam Nathan, “Militiaman who became Libya’s oil kingpin,” Politico, August 25, 2016

Aidan Lewis, “Separate banknotes symbols of Libyan disunity, financial disarray,” Reuters, June 3, 2016

“Amazigh Supreme Council boycotts Libyan Constitutional Assembly election,” Nationalia, February 21, 2014

Andrew McGregor, “Tripoli Battles Shadowy Qaddafists While Tribal Rivals Fight Over Southern Libya,” The Jamestown Foundation, Terrorism Monitor, January 23, 2014

Colin Clarke and Daveed Gartenstein-Ross, “How Will Jihadist Strategy Evolve as the Islamic State Declines?” War on the Rocks, November 10, 2016

“Egypt widens crackdown on Muslim Brotherhood,” Al Jazeera, December 29, 2013

Ethan Chorin, “A ‘Rogue’ General is Breaking Libya’s Stalemate,” Forbes, September 16, 2016

Frederic Wehrey and Wolfram Lacher, “Libya’s Legitimacy Crisis,” Carnegie Endowment for International Peace, October 6, 2014

“Gaddafi supporters and Haftar” Libya Prospect, October 26, 2016

“Haftar asks Russia to lift arms embargo and to apply the Syrian scenario in Libya,” Libyan Express, September 28, 2016

Jason Pack and Haley Cook, “Breaking the Libyan Oil Blockade,” Majalla, December 9, 2013

“Libya Needs Russian Technology to Return Country’s Oil Industry to Normal,” Sputnik, May 19, 2016

“Libya revokes bill which banned Gaddafi-era officials from office,” BBC News, February 2, 2015

“Libya’s former rebels to keep oil flowing amid Islamist surge,” CIPPE, September 4, 2014

Lisa Watanabe, “Libya – in the Eye of the Storm,” Center for Security Studies, June 2016

“Mapping Libya’s armed groups,” Al Jazeera, June 2, 2014

“Migrant crisis: UK offers drones, warships to help tackle human traffickers in Libya,” RT, August 26, 2015

Patrick Ryan and Patrick B. Johnston, “After the Battle for Mosul, Get Ready for the Islamic State to go Underground,” War on the Rocks, October 18, 2016

Ronald Bruce St. John, Libya: Continuity and Change, Routledge, May 15, 2015

“Russian experts are supporting Haftar’s forces via Egyptian-Emirati assistance,” The Libya Observer, November 8, 2016

“Russian business interests are casualty of Libyan conflict,” Deutsche Welle, August 31, 2011

Sami Zaptia, “A wider political settlement is a prerequisite to increased Libyan oil production? Analysis,” Libya Herald, July 27, 2016

Wolfram Lacher, “Libya’s Fractious South and Regional Instability,” Security Assessment in North Africa, February 2014

Businesses and Geopolitics (1): Caught up in the Whirlwinds?

What if, by May 2017, “non-liberal” movements and parties were in power in the U.S. with Donald Trump, France with Marine Le Pen and Austria with Norbert Hofer? The overall geopolitical configuration would most probably greatly change, in areas such as the tensions between “the West” and Russia, the upheavals between the U.S. and Eastern Asia, the Trump, Clinton, U.S. election, scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planningEuropean Union’s definition, policies and survival, or the TTIP and more largely the neo-liberal economic approach, without forgetting relations with the Middle-East. Would this impact most businesses? Yes, most probably.

What if the defeated parties, candidates and their supporters, in these three coming presidential elections – whichever they would be – refuse to accept the results? Considering the way some proponents of the “Remain” in the U.K. refused – and still refuse – to accept the democratic vote of the “Brexit”, such reactions, unthinkable a few years ago, have become scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planning, Brexit, referendum, democracya very real possibility (e.g. Brendan O’Neill, “The howl against democracy“, 26 June 2016; “Democracy is hanging by a thread in this country“, 6 September 2016, The Spectator; Uri Friedman, “Should the Brexit Vote Have Happened at All?” The Atlantic, 27 June 2016; BBC News, “Brexit case ‘of fundamental constitutional importance’“, 13 Oct 2016), even if likelihood still must be discussed. Would we head towards institutional deadlock, extreme polarisation, or instability, if not civil wars in the U.S., France and Austria? Is the trend towards less democracy to continue? Would this impact most businesses? Yes, most probably.

Should businesses envision such scenarios (even if their likelihood widely varies) coldly, without considering any personal and individual preferences? Should businesses, actually, envision all possible scenarios, not only those outlined above? Yes, they definitely should, because it is only by properly identifying  scenarios for the future that correct answers may be designed, and profitability – to say nothing of survival – be ensured. In turn, all staff should also be keen to see their employer properly designing answers, because, at the end of the day, their job is at stake, with overwhelming consequences in all areas of their lives should their company downsize or close down.

The question is: will businesses consider these political and geopolitical risks and uncertainties and how?

Our aim with this series of articles is to understand better the relationship between businesses or the corporate sector and geopolitical and political risks and uncertainties, as well as those actors who are specialised in their study, and to suggest elements of answers and solutions that should help businesses to properly address these “risks”.

We shall first look, with this article, at general trends regarding the way businesses’ executives perceive and deal with geopolitical and political risks and uncertainties, using mainly the results of a survey published by McKinsey in May 2016*. This part will allow us identifying a first series of questions and features.

With forthcoming articles, we shall turn to three main examples where geopolitics and politics impacted businesses: the Brexit (“Lessons from and for the Brexit – Geopolitics, Uncertainties, and Business (2)“), the crisis in Ukraine and impact on some sectors (“Lessons from the conflict in Ukraine – Geopolitics, Uncertainties, and Business (3) and (4)”), the Islamic State’s terrorist attacks (“The Impact of the Islamic State Terrorist Attacks – Geopolitics, Uncertainties, and Business (5)”), and, to which we shall add a couple of emerging new or recent uncertainties. We shall use these examples to point out a few key elements related to geopolitical and domestic instabilities’ risks and uncertainties and what they mean (or should mean) for businesses. Finally, we shall deduce from these cases practical ways forward.

Geopolitical risks, what increasingly keeps executives up at night

Back in May 2016, McKinsey Global Survey on globalisation pointed out that “in two years’ time, the share of respondents [executives across regions, industries and companies’ sizes] identifying geopolitical instability as a very important factor affecting their businesses has doubled” (Drew Erdmann; Ezra Greenberg; and Ryan Harper, “Geostrategic risks on the rise, McKinsey & Company, 2016). Thus, 84% of executives now consider that these risks will have an impact on their business, and 49% a very important one, besides domestic instability, which is mentioned by approximately 66% of respondents (Ibid.).

scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planning, regulations

Interestingly, what businesses have in mind when they think about “geopolitical instability” and domestic ones, always according to the same study, is mainly “uncertain or restrictive regulatory environment” (from 40% to 54% according to sectors), followed by “political or social instability” (from 27% to 43%) – and “disruption to supply chain” (27%) for the manufacturing sector – “protectionist and trade related policies” (from 17% to 32%), and only far behind “volatile prices of commodities” (from 9% to 33%) or High levels of public debt (from 5% to 24%)(Ibid., exhibit 3).

The answers, logically, differ according to sectors. The manufacturing sector is more concerned about what can disrupt its production and its transportation, compared with financial services, which are obviously not so worried about these risks, indeed quite irrelevant for them, at least directly. The differences in answers thus first point out, as stressed by McKinsey, the need to consider corporate sectors according to type of activities rather than an undifferentiated “businesses”, if we want to deliver useful actionable anticipation.

Finally, businesses, assuming that McKinsey’s survey is representative, understand “geopolitical risks” differently from those who are meant to help them understanding these risks. First, the broad label of geopolitical risk has hardly anything to do with geopolitics, “a method of foreign policy analysis which seeks to understand … international political behaviour in terms of scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planning, wargeographical variables…” (Evans and Newnham, The Dictionary of World Politics, 1992). Then, specialists would tend actually to have in mind what is part of their field, mainly international relations – or international politics – and the study of escalation to war or out of war (in a nutshell, the discipline started by Alfred Zimmern right after World War I in Aberystwyth). To accommodate with historical developments, scholars then, in terms of issues, would look at what could impact security, understood as the security of human societies organised as polities. If we use Buzan’s pioneering work, we thus have five main sectors: military, political, economic, societal and environmental, “all woven together in a strong web of linkages” (Buzan, People, States and Fear, 1991: 20).

We thus have quite a strong disconnect between the perception of businesses and the communication of understanding and accumulated knowledge generated by “geopolitical experts”.** When the latter talk about war, be it civil war or interstate ones, at best they directly address, from a business perspective, only “supply chain disruption” (one of the risks deemed as least important, save for the manufacturing industry) and part of “political and social disruption”.

Yet, political and geopolitical scholars could also explain and contribute to monitor, for example, that high levels of public debts (a geopolitical risk which is not deemed as very important for businesses , see above) could have, at second and third order effect a much higher impact on businesses’ operations than thought. Indeed, the capability of a state to maintain a secure enough environment to allow businesses to operate depends also on the level of public debt or more exactly on the resources available to the state (see Seeking SecurityBudget Deficit and LiquidityPublic Resources and Lenders in The Chronicles of Everstate, RTAS January/Feb 2012): without resources the state cannot ensure its fundamental missions, and thus essential functions such as police cannot be fulfilled successfully. Infrastructures – if they have not been liberalised (note that their privatisation also faces its own challenges, e.g. water, “Learning from water privatization” in The Chronicles of Everstate, RTAS July 2012) – cannot be maintained. Also public debt and state budgets may imply institutional deadlocks – as has been the case in the U.S. (e.g. Clinton T. Brass, “Shutdown of the Federal Government: Causes, Processes, and Effects“, Congressional Research Service, 2011 ) – with also impacts on businesses’ main concern, regulations. It is thus crucial that political and geopolitical experts make the effort to help executives deciphering their geopolitical environment.

The gap between the two perspectives is not a fatality and only needs to be bridged, while a common vocabulary is developed. Yet, the bridge must be built if hundred of years of efforts are not to be wasted when it could be used by businesses, and if businesses are to improve their odds when facing and dealing with “geopolitical and domestic instabilities”.

A need to change perspective to go beyond negative impacts

Then, businesses estimate the impact of the geopolitical and domestic instabilities to be largely negative: 57% (for geopolitical scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planninginstabilities) and 58% (for domestic instabilities) (McKinsey, Ibid., exhibit 2).

Yet, and this time placing ourselves from the point of view of strategic foresight and warning, risk management (in its 2009 approach)  or more broadly, anticipation, we know that what has a negative impact is not so much “instabilities” but the inability to foresee them properly and thus to answer in a timely way these coming changes. To use the wealth of military and intelligence understanding existing on the topic (see J. Ransom Clark, The Literature of Intelligence: A Bibliography…, “Strategic Warning: Surprise, Intelligence Failures, and Indications and Warning Intelligence“), what must be prevented is surprise.

This was well expressed by Guenter Taus, the head of the European Chamber of Commerce in the Philippines, faced with the rapidly changing situation in the Philippines under the impulse of President Duterte (e.g. Reuters, “China confirms Duterte visit amid strained U.S.-Philippine ties“, 12 October 2016):

“We can all deal with risks. We can put measures in place to provide for risks… But uncertainty is a factor that we do not like in business, and that is exactly what we’re experiencing right now because we don’t know where we are heading.” (Guenter Taus in Associated Press, “Uncertainty over Philippine president alarms investors“, Asahi Shimbun, Oct 3 2016)

scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planning

By focusing mainly on instabilities, or risks (i.e. most of the time pre-identified probability x impact, which is still how most people understand a risk, despite the new ISO 2009 definition – see H Lavoix, “When Risk Management Meets Strategic Foresight and Warning“, RTAS, 5 May 2014, updated June 2016 ), the corporate sector deprives itself from the capability to, potentially, turn instability into an opportunity, as well as to answer an often inescapable instability better than its competitors, which would then provide a specific company with a definitive advantage.

Moving out of fatality?

Finally, McKinsey’s study stresses that, even though, executives have developed a new awareness of “geopolitical and political risks”, even though they point out the potential negative impact to their businesses, they have not started addressing properly these risks: only 13% have taken steps to address both risks of geopolitical and domestic instabilities (exhibit 4).

Furthermore, and strangely enough, although 58% deemed that “comprehensive scenario methodologies, integrated into a strategic planning process” – of the type we are promoting and doing here at The Red (Team) Analysis Society –  are the most efficient way to address these risks, only 18% of executives and their companies use “scenarios”. Meanwhile, the large majority tend to use internal analyses (ad hoc or not) and external think tank resources, such as specialised reports, ad hoc analyses, consultancy and dialogue with external experts, yet executives consider these ways to face geopolitical and domestic risks as less efficient (exhibit 5).

maze, scenario, geopolitics, geopolitical uncertainties, geopolitical risk, instability, business, corporate, risk management, political risk, client, strategic planning

The reason for the lack of efficiency of internal analysis, on the one hand, and of the use of external think tanks and consultants – probably specialised in international relations, on the other hand, lies in what we uncovered in the first part: the difference and discrepancy between languages, center of interests and education, somehow between supply and demand. If two sets of actors do not understand each other, and live on different planets – not to say in different universes – then it is most likely that unsatisfactory relationships will follow.

The more frequent use, nonetheless, of these two “inefficient approaches” most probably comes from the fact that these approaches are what is mainly available.

Furthermore, the absence of training of most international relations specialists in anticipation methodologies, and of “business-related anticipation experts” in international relations, most probably also participate in the generalised use of an expertise considered as inadequate.

Finally, developing scenarios, assuming the right expertise is available, if it is well done is also a relatively long, resource-intensive and thus more expensive and demanding process than buying a generalist subscription to one think-tank or another. This supplementary cost, fundamentally allows for more profit and less losses, but may also be perceived as just a new supplementary cost by companies. As a result, this perception might also be an element in the current lack of use of the methodology deemed most efficient.

Meanwhile, a timeframe issue may also emerge. If a business needs scenarios in the next hours – actually for yesterday because the crisis is now evident, when one month or a couple of months, according to the scope of the issue and level of details, would necessary to obtain proper actionable scenarios, then it may just give up and think it is too late to use scenarios. There are ways to overcome this challenge, including because it is never too late to make scenarios, accepting and taking hold of unfolding crises, within the bounds of possibility and quality.

If businesses are unsure of the way to address geopolitical and political uncertainties, and tend to believe that what is mainly on offer is inefficient for their needs and purpose, then it is not that surprising that they fail to take practical steps forward, and remain caught up in the geopolitical whirlwinds.

This is not, however, a fatality. Using the McKinsey study, we have identified a few crucial yet still general elements that shape the way businesses address  – or not – geopolitical and political uncertainties and started thus envisioning ways forward. With the forthcoming articles, using specific cases, we shall look at the way geopolitical and political uncertainties (and crises) impact businesses, so as to refine our understanding of what could be done better.

——–

*Initially, we planned to also use the part of the Global Risk Report 2016 (GRR), published yearly by the World Economic Forum,  which is dedicated to businesses and global risks (part 4 for the GRR 2016, pp. 69-78). However, the differences between the McKinsey study and the WEF approaches are so important that comparison and even complementarity, for our specific purpose, are impossible.

The McKinsey’s study concerns risks that will impact “global business and your own business” in the coming years, and more specifically (see exhibit 3) “risks that will most affect organizations in countries where they operate over the next 5 years”. Meanwhile the GRR questions are about “the five global risks that they [business executives] were most concerned about for doing business in their country within the next 10 years” (p.69, see also appendix C, p.90). The way the question is asked (at least as portrayed in the report) tends to rule out foreign operations as well as international trade – surprisingly considering the World Economic Forum outlook.

The GRR survey is thus less relevant to our purpose and will not bring us further insight into the relationship between businesses and “geopolitics”.

Furthermore,  the period when the survey were conducted is different too. The McKinsey survey was done between 3 and 13 November 2015, while the GRR was conducted between February and June 2015. Considering the evolution of the war against the Islamic State and its impact notably in Europe, to have a better understanding of the GRR results, we would need to wait for the forthcoming results, corresponding to a survey conducted around Spring 2016.

**Note that the discrepancy most probably comes from the fact that, initially, international relations – and foreign policy – belonged mainly to the state and that it was meant to serve the state and governments by training diplomats, analysts and policy-makers. The discipline thus covers and deals with issues and categories that are relatively congruent with the organisation of the modern state. With the withering away of the state (at least in the liberal world), businesses must face, in a novel way new tasks for which they are not prepared, while “geopolitical specialists” must work with new types of decision-makers, with very different concerns… and education.

About the author: Dr Helene Lavoix, PhD Lond (International Relations), is the Director of The Red (Team) Analysis Society. She is specialised in strategic foresight and warning for national and international security issues.

Featured image by Solomon_Barroa, CC0 Public Domain, via Pixabay.


Barry Buzan, People, States and Fear – 2nd edition: An agenda for international security studies in the post-Cold War era, (New York: Harvester Wheatsheaf, 1st edition 1983, 2nd edition 1991)

How to Read a Large Amount of Information

The first part of this article can be accessed as libre open access, the second part is exclusively for members and registered participants to our courses.

The incredible and growing amount of information available nowadays presents us with specific challenges we need to overcome first, if we want to be able to understand, foresee, warn about, and finally adequately answer accumulating dangers, threats, risks or more broadly changes and uncertainties. Our information age is indeed characterised by what Martin Hilbert called the “global information explosion” (“Digital Technology & Social Change” University of California Course, 2015), when we constantly face “information overload” (among many others, Bertram Gross, The Managing of Organizations, 1964; Alvin Toffler, Future Shock, 1970; also Stanley Milgram, “The experience of living in cities“, Science, 167, 1461-1468, 1970).

Google estimated in 2010 that 129,864,880 books had then been published (Leonid Taycher, “Books of the world, stand up and be counted! All 129,864,880 of you.” 5 Aug 2010). Wikipedia estimates that “approximately 2,200,000” books were published each year across the world. Meanwhile, it is almost frightening to look live at the constantly growing number of internet website: 1,080,387,230+ on 15 Sept 2016 (internet live stats). 

Those are general figures, but they are also representative of what we must face when we work on a specific topic, because we have to Continue reading How to Read a Large Amount of Information