A Crash Course in Why Global Instability is and Will be a Challenge for Your Business
With nearly 40 years in the international intelligence business, Sir John Scarlett, former chief of Britain’s MI-6 Secret Service (“no, I am not James Bond and I don’t have a license to kill”) describes a world in turmoil that reaches every corner of the U.S. economy.
From the chaotic Middle East and angry, prideful Russia to the diminishing security of the Internet economy and our old and vulnerable industrial control systems, Sir John says business communities across the globe face “times of exceptional instability.”
Two major “black swans”—unpredictable events—emerged in 2014 and remain pernicious today. Russia’s drive into the Ukraine and the emergence of ISIS, “are now the two most important preoccupations of our governments. We could have done a much better job of understanding Russia,” he said. “But ISIS emerged so quickly I’m not sure we could have seen that.”
Both the United States and Britain entirely underestimated the impact that the collapse of the Soviet Union had on its government and people in 1991. “You can’t overestimate the humiliation and resentment they felt,” he said. “Russia needs to be acknowledged as a great power and that is in large part what is behind its offensive into the Ukraine. For Russians, the Ukraine has never been a foreign country.”
Now therefore, we face a period, perhaps a long one, of “managed confrontation” which will begin to have an impact on the U.S defense budget. “The real question now is whether Russia and its badly faltering economy are strong enough to manage this situation,” Scarlett said. “This will go beyond Putin who has a great deal of public support. A lot of anti-Americanism has emerged in Russia. Putin has proven that, for the moment at least, Russia is back.”
We face a period, perhaps a long one, of “managed confrontation” which will begin to have an impact on the U.S defense budget.
“In the Middle East, the rise of the Islamic State impacts every country in the region,” he said. “Consider that the Assad regime in Syria may be about to crack. Libya is completely unstable, in Yemen the government has collapsed and Iran desperately wants to get out from under our government sanctions. We can no longer count on stable oil production in the region.” And the increasingly unpredictable, not centrally controlled terrorist attacks that all this has created, “will certainly continue.”
His talk was a convincing argument for optimizing energy efficiency in business and at home to minimize the impact of unpredictable volatility in oil and gas prices and supplies. Electric bills, fuel for vehicles and metals production costs will all be affected by ongoing global turmoil, with no end in sight. He left little doubt that the United States must continue its aggressive drive toward energy independence.
In addition, he said, “All our economies are increasingly dependent on the Internet, which is 12.5% of the UK economy today and about 5% in the U.S.” A significant percentage of websites are vulnerable, he said. And outdated industrial controls systems mean that “hackers can target hard assets,” such as pipelines and power grids.
For more information on global instability and what it means for your business, attend MSCI's upcoming conferences: