The Red Sea, the Internet: Modem operandi
Also: the EU, Ukraine, Russia, Saudi Arabia, Israel, Palestine, and Japan.
In addition to our daily risk monitoring brief, the team behind Geopolitical Dispatch also provides advice, risk audits, scenario planning, executive masterclasses and board briefings among other services. Click here to get in touch.
THE RED SEA. THE INTERNET. Modem operandi
Tensions dial up in the Red Sea as undersea cables are severed.
Four submarine communications cables have been damaged by the Houthis, Israeli business daily Globes reported Monday. A joint US-German mission downed five Houthi suicide drones, according to US Central Command Tuesday.
INTELLIGENCE. The Houthis have not claimed responsibility, though they made thinly veiled threats to disrupt subsea cables last month. Since the Israel-Gaza war began, the Houthis have focused on disrupting trade flows. But attacking data flows also creates leverage. The Red Sea is one of the largest – and most vulnerable – internet chokepoints, with sixteen cables connecting Europe and Asia, accounting for approximately 17% of the world’s internet traffic.
FOR BUSINESS. Despite vulnerabilities, the Internet is more resilient than global shipping. Ships can take three routes from Europe to Asia; data can take multiples of that. Companies use a range of cables and, if one fails, traffic is re-routed. And Big Tech is building its own cables too, which at least should improve resilience internally. Google’s proposed Blue-Raman cable connects Europe to India via Israel, bypassing the Sinai, the world’s riskiest chokepoint.
Geopolitical Strategy is the advisory firm behind Geopolitical Dispatch. Our partners are former diplomats with vast experience in international affairs, risk management, and public affairs. We help businesses and investors to understand geopolitical developments and their impacts with clarity and concision.
EUROPE. UKRAINE. RUSSIA. Frozen inaction
The West remains divided over Ukraine.
European leaders continued to express divergent views on the West’s response to Russia Tuesday. US Treasury Secretary Janet Yellen said leaders should unblock frozen Russian central bank assets for Ukraine’s reconstruction.
INTELLIGENCE. Macron’s attempt on Monday to create ‘strategic ambiguity’ by not ruling out troops to Ukraine did more to expose Western divisions than scare Russia. The US, Germany and the UK have all flatly rejected the idea. Central European countries are even more divided: Czechia and Poland support Ukraine, including arms deliveries. Hungary and Slovakia, despite political differences, oppose sanctions, Ukrainian NATO membership and arms.
FOR BUSINESS. Congress is not the only Western institution split on Ukraine. Euroclear, one of the world's top central securities depositories, is now being pushed to commandeer Russian assets, but not all its members agree. And though liquidating assets is perhaps more appealing than more arms exports, doing so runs into legal complications, won’t help Ukraine defend itself, potentially weakens trust in the Euro, and ultimately won’t really damage Putin.
SAUDI ARABIA. UKRAINE. RUSSIA. Letting the mountain come
Crown Prince Mohammed positions himself as mediator.
Volodomyr Zelensky arrived in Riyadh Tuesday to meet Crown Prince Mohammed bin Salman. The speaker of Russia’s State Duma, Vyacheslav Volodin, visited the day before. MBS was last week speculated to be planning a trip to Syria.
INTELLIGENCE. Riyadh has been positioning itself as a peacemaker in recent years, though so far the conflicts it has been seeking to end – from Gaza, to Yemen, to Syria, to Sudan – continue to burn hot. Its motives to end the war in Ukraine are geopolitical, economic and strategic. It is attempting to bolster its stature as a global, not just regional, power, and wants to get a leg up on its chief rival Iran, an ally of Russia, which is not viewed by anyone as neutral.
FOR BUSINESS. After a rough start, MBS is demonstrating diplomatic savvy, including by securing a detente with Iran, a truce with the Houthis, and reconciliation among Qatar and the Gulf states. Riyadh very nearly obtained rapprochement with Israel, only scuttled by Hamas’s attacks. But a deal on Ukraine remains far-off so long as Moscow and Kyiv make demands the other can’t meet, the West remains divided, and Russian troops advance.
Emailed each weekday at 5am Eastern (9am GMT), Geopolitical Dispatch goes beyond the news to outline the implications. With the brevity of a media digest, but the depth of an intelligence assessment, Geopolitical Dispatch gives you the strategic framing and situational awareness to stay ahead in a changing world.
ISRAEL. PALESTINE. Lawfare
The International Court of Justice is set to weigh in on the occupation of Palestine.
Hearings on Israel’s occupation of Palestine at the ICJ have concluded after a year on Monday. Israel filed a report with the ICJ on measures taken to comply with an interim ruling on the separate ‘genocide case’ brought by South Africa.
INTELLIGENCE. The elevation of the ICJ to global public attention has been a surprise consequence of the war. South Africa’s case against Israel led the court to direct Israel to, among other things, take all possible measures to prevent genocidal acts and report back within a month on actions taken. Israel’s response has not been made public. South Africa has asked the court if the planned attack on Rafah, to commence around Ramadan, breaches its interim orders.
FOR BUSINESS. The public hearings on Israel’s occupation predate the war. In late 2022, Palestine marshalled 87 countries of the UN General Assembly to vote in favour of asking the ICJ for an advisory opinion on the legal consequences of Israel’s “occupation, settlement and annexation” of Palestine. Israel has refused to participate. A record 57 other states made written submissions. Any opinion will be non-binding and will likely be ignored.
JAPAN. Land of the declining sons
Tokyo’s demographics worsen, but investors don't seem to care.
The number of babies born in Japan fell for an eighth straight year, state data showed Tuesday. Core consumer price inflation slowed for a third month in January. Support for Prime Minister Fumio Kishida fell to a record low of 14%.
INTELLIGENCE. Japan faces a daunting task to stem depopulation. Births fell by 5% to a record low in 2023. Prime Minister Fumio Kishida has called the “gravest crisis our country faces”. Japan’s population will likely decline by about 30% to 87 million by 2070, with 40% being aged over 65. While its GDP is no higher than five years ago and per capita GDP growth has averaged only 0.7% per year since 1991, the stock market nonetheless continues to boom.
FOR BUSINESS. Foreign investors find Japanese stocks attractive. But absent structural reforms – to lifetime employment, the domination of conglomerates and the financial system that stymies innovation – Japan’s relative power will decline. The old (and ageing) guard will resist. South Korea, which managed to reform, surpassed Japan in GDP per capita in 2018. Absent a revival, stocks may rise but Japan will provide less of a counterweight to China.