Business in the Era of Geo-Economic Warfare

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Business in the Era of Geo-Economic Warfare

More than ever before, business leaders need to be aware of the geo-economic contexts in which their companies operate. Over the coming decade, national decisions ranging from immigration policy, to trade sanctions, to free trade agreements, to natural resource development policies, will impact corporate alternatives more than at any time since World War II.

While businesses make strategic plans based on assumptions about their access to natural resources, capital, talent, and markets, the reality is that they have relatively little control over those factors compared to government leaders both at home and abroad. Despite the obvious benefits to businesses and consumers of an economy based on globalization, in recent months it’s become clear that most countries are pursuing geo-economic warfare at the expense of global trade.

A January 2015 report from the World Economic Forum expresses this point perfectly:1 “Although wars rage from Damascus to Donbas, the main battlefield is economic rather than military; sanctions are taking the place of military strikes, competing trade regimes are replacing military alliances, currency wars are more common than the occupation of territory, and the manipulation of the price of resources such as oil is more consequential than conventional arms races. The world is witnessing what Edward Luttwak called the rise of geo-economics, a contest defined by the ‘grammar of commerce but the logic of war.’”

Over the past 25 years, as both national governments and individual corporations embraced globalization, the economies of countries and the bottom lines of businesses have increasingly relied on cooperation with trading partners around the world. While this turn of events was once thought to be a path to peace and universal prosperity, it hasn’t quite worked out that way. Instead, global conflicts still rage, but the fact that countries are now so interdependent economically means that two of the most effective weapons one nation can use against another are to reduce the demand for its exports or to cut off the supply of its imports.

Nowhere is this war fought more fiercely than in the marketplace for oil. Many recent geopolitical events have either been driven by, or have made an impact on, the price of oil.

The Obama administration’s plan to lift economic sanctions against Iran in exchange for curtailing its nuclear program is expected to bring a flood of Iranian oil to the global market. The increased supply will push down the historically low price of crude throughout the world.

However, as Energy Freedom2 author Marita Noon points out, a war in Yemen is likely to lead to higher oil prices, and Iran is supplying the Houthi rebels...

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