Business owners must take geopolitics very seriously, an expert told Arabian Business, as global trade and power dynamics continue to shift and the BRICS expansion puts de-dollarisation efforts centre stage.
“The one thing you must be looking at is geopolitics. It is becoming much more important than understanding what central banks are doing, what fiscal policy is going to be about,” said geopolitical risk expert and Partner at Confluence Consultants, Nicolas Michelon, in an interview on the AB Majlis podcast.
“Geopolitics will hit you where it hurts if your company is not prepared, equipped and trained to anticipate those events and build contingencies for them,” he cautioned.
Earlier this month, the BRICS bloc which previously only comprised of Brazil, Russia, India, China and South Africa, was expanded to also include Saudi Arabia, the UAE, Iran, Egypt and Ethiopia as new members.
The move was widely seen as a major geopolitical development with the potential to reshape Western-led power dynamics globally. Michelon expects power cards to be reshuffled again in the coming years as new countries might be invited to the bloc, such as the likes of Turkey and Morocco.
And with Saudi Arabia, a strong US ally historically, joining the grouping which consists of countries with aims to de-dollarise the world economy, “it says a lot” about retreating US influence.
However, he cautioned that a concept like de-dollarisation is no easy feat that will take a long time to accomplish.
“It’s like a drug addict that is trying to get out of crack and heroin. You have to go slow or they may die. Economies will collapse if they try to wean themselves away from the US dollar because in order to do that, you need to have currency reserves at the proper level held by your central bank to enable the financing of trade in other currencies,” he warned.
While the bloc aims to increase trade and collaboration between themselves, understanding how it could impact the current geopolitical environment is crucial for businesses. As seen in US-China rows in the past, companies are now being targeted as extensions of their country. For instance, the US has weaponised Dutch chipmaker ASML to weaken China’s semiconductor industry.
“Companies need to understand [that] in this day and age of hybrid warfare – basically war between countries outside the realm of the military, using economy, trade, the law, information, etc – the company represents the country where it comes from whether it likes it or not,” explained Michelon.
“If you are unfortunate enough to have become a champion in your country, you will be targeted as such by the opposing government because by hitting you, they would be defeating your government behind you.”
Luckily, he said, the GCC offers a safe haven for businesses and investors due to its stability and transparency, particularly in comparison to other emerging markets like those in Africa.
“We are in a place where you can do business with a fair level of service and it’s going to become more and more attractive going forward,” he said.
“Even Europe is going to lack this visibility which it used to enjoy before. Who’s able to say whether the Italian government is going to stay in power for another two or three years? Who’s able to say who’s going to replace Macron in France? Because he cannot run again. It’s extremely difficult.”
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