The old phrase “may you live in interesting times” is an apt summary of 2014. Wrongly thought to be a Chinese curse it does, however, apply to China’s recent assertion of its new status in world affairs. China in the past several months has been flexing its military muscle, especially in the South China Sea. It has laid claim to virtually all of it, alienating neighbours like the Philippines (which has taken the dispute to arbitration in The Hague) and Vietnam while further antagonising old adversary Japan. Chinese President Xi Jinping’s strategic decision that it is time to turn away from the late Deng Xiaoping’s maxim of “Hide your strength, bide your time” is perhaps understandable given China’s power, but the risk of an escalation of hostilities with Japan or the US – a Chinese warship nearly rammed into a US missile cruiser last December – is higher than ever.
On another level, 2014 appears to have seen the end of the commodities supercycle, marked by a dramatic fall in oil prices. Oil behemoth Saudi Arabia’s aggressive role in maintaining its production of 10 million barrels of oil a day even as smaller producers that are part of the Organization of Petroleum Exporting Countries suffered has contributed to oil prices falling by over 40 per cent since June with forecasts that prices might fall to $ 50 a barrel – or lower – by next year. Paradoxically, the economic slowdown in China contributed to that fall as did the US’s new capacity for shale oil production. Saudi Arabia, like China, has its eye on the US – in this case pushing prices down to a level that would make shale production in North America unviable. The seemingly unstoppable rise in prices of oil and other commodities of the past several years has been halted in its tracks and it is now a decline that looks hard to reverse.
The law of unintended consequences has meant that the big loser thus far of this decline in commodity prices has been Russia, whose economy has been in free fall in the past few weeks, dragging the appetite down for emerging markets with it. Russian President Vladimir Putin’s bellicosity in the Ukraine is also to blame. Last week, in a three hour press conference, he railed at the West for Russia’s economic woes, accusing it of wanting to keep the Russian bear “on a chain”, till it was reduced to little more than a “stuffed animal”. Russia’s diminishing presence on the world stage is bad news for India, diplomatically and economically.
Russia’s troubles ought to have been good news for its old Cold War rival, the US, but Washington is up against a host of state and non-state actors. It has scarcely looked less the reigning global superpower than in 2014. First, the rampaging Islamic State militias tore through western Iraq and eastern Syria in the summer, beheading aid workers along the way. This year of retreat by the US was bookended bizarrely by the cyberhacking of Sony in America, allegedly by North Korea. The consolation for the US – and it is a large one – is that it is the only developed world nation whose economy is growing strongly. Japan tipped into recession this year after imposing an ill-conceived consumption tax and Germany and the Eurozone seemed mired in an economic malaise. Ponder yet another paradox: the world’s fast receding superpower in strategic terms against the odds looks in ruddier economic health than anyone could have foreseen.