Following G7 and NATO meetings last week it was evident that two distinct geopolitical and ideological groups are currently competing for global economic, political, and military control.
On one side is the West (US and Europe) with Russia and China jointly on the opposite side, alignments which are similar to pre-1989 cold war alliances. Oil has become a geopolitical weapon in this new Cold War, in a way that is upsetting global energy security.
The new Cold War has been evolving for some time, with the ongoing Ukrainian war only succeeding in making various countries to identify which side of the geopolitical divide they sympathise with, or confirmation of neutrality.
When the West was busy containing global terrorism post 2000, China was expanding its global control of natural resources (energy and minerals), while expanding export trade and global infrastructure development.
By 2010, China was already second largest global economy after the US. At this point, China’s attention appears to have turned to global political and military ambitions.
On its part, from 1990 Russia was successfully expanding its oil, gas and minerals export capacity mainly using western capital, technologies, and markets. In mid-2010s, Russia was visibly into military excursions in Syria, Crimea, and Eastern Ukraine, while forming critical diplomatic alliances in the oil producing Middle East-Iran, Saudi Arabia, and Iraq.
The ultimate prize for Russia was joining the Organisation of Oil Exporting Countries plus (Opec+) in 2016, giving it influence in global oil markets. China and Russia are currently investing heavily in the Middle East oil sector, especially in Iran and Iraq.
By the time President Joe Biden came to power, he found a Middle East diplomatically under a strong influence of Russia and China, a predicament that the US president is belatedly trying to sort out during this month trip to the Middle East. In the emerging Cold War, most of the Middle East is in guarded sympathy with Russia and China.
Riding on globalisation, China and Russia forged ties with India, Brazil, and South Africa to form BRICS, a block for economic expansion in southern hemisphere. Recent stepped-up Chinese diplomacy has seen China more involved in the Horn of Africa (including Kenya), and the Pacific Islands, an effort seen as laden with global military ambitions.
The Russian invasion of Ukraine is the first theatre where the new cold war is playing out. The West has decreed trade and financial sanctions on Russia which exports most of its oil and gas to Europe. Targeting oil and gas exports is expected to hurt Russia’s revenues.
The reverse logic is that Europe is heavily dependent on Russian oil and gas, and this gives Russia a strong political leverage in the ongoing war. Russian oil and gas are a double-edged weapon for both Europe and Russia.
Notwithstanding, Europe appears determined to stop all oil and gas imports from Russia by the end of this year. The unintended consequence of such action will be disruption of established global oil and gas supply chains, considering that Europe would have to locate alternative sources for as much a s four million barrels per day of Russian oil.
This is as global oil demands continue to rise, and capacity to increase production remains limited. The end result will be sustained high oil prices globally.
The West’s dilemma is how to effectively use the oil boycott weapon against Russia without adding more harm to global economies which are already stressed by inflationary impacts. Nor is the West comfortable promoting new oil and gas production across the world when the accepted climate goal is to universally reduce production and use of fossil fuels.
The ongoing Cold War and specifically the war in Ukraine will continue to frustrate recovery of global economies, with prices of oil and other goods remaining high.
On the geopolitical side, increased diplomatic competition between the West and Russia/China will be quite visible. The West will definitely be coming into Africa (and Kenya) with increased investment offers to counter a very entrenched Chinese position.
From historical experience, Cold War will weaken global consensus on many issues, including timely attainment of climate goals. Unimpeded distribution of global resources (including energy and technology minerals) will suffer. Kenya will need a leadership that wisely steers the country along a clearly neutral but beneficial path.
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