Acute geopolitical uncertainty: what can we expect from 2023?
In an exclusive client webinar Kate Leppard, Head of Wealth Management UK Client Service, interviews General Sir Nick Carter, Senior Adviser at Schroders, about his thoughts for 2023 and beyond.
Nick Carter has held a distinguished career with over 45 years of military service, and has been principal military adviser in the UK to the Prime Minister, the National Security Council, and the Secretary of State for Defence, as well as the Head of the UK Armed Forces.
Their discussion ranged from the battlefield in Ukraine to tensions over Taiwan, geopolitical risk and its consequences.
To watch the full recording, click the play button on the image above.
This interview was undertaken in a closed client webinar and as such it was undertaken in a ‘Chatham House Rule’ environment. None of the comments in this webinar can be quoted or used externally.
Kate Leppard (KL): Nick, welcome. Thank you for joining us today. Could you perhaps start by reflecting on the build-up to the invasion of Ukraine?
General Sir Nick Carter (NC): It’s a pleasure to be here. We often say in the military that you need to get a bigger map. You need to look at history. If we had looked at what Mr Putin was saying and doing as far back as 2007, we’d have seen the indications that he was becoming increasingly assertive and belligerent. I think what events in Ukraine also tell us is that the global, multilateral system that we’ve all grown up with is now increasingly at peril. This is a much more competitive and confrontational world than we’ve seen in a generation. What we’ve seen in Ukraine is not the last of this sort of thing that we’ll see in the next decade or so.
KL: What do you think is motivating Putin?
NC: Mr Putin always said that the greatest global strategic catastrophe was the collapse of the Soviet Union. So I think a lot of this is about him wanting to remind the world that Russia is a great power, and should be treated as such. Putin is also motivated by his revisionist view of history. I suspect he spent quite a lot of his Covid lockdown in a dusty library in the Kremlin reading about what the Russian Empire looked like. I think we are now seeing imperialist behaviour. There’s also the business of railing against NATO enlargement. Mr Putin finds it beneficial to suggest to his people that this is an existential struggle against the West and NATO.
KL: How do you explain Russia’s poor performance in the war?
NC: The invasion has shown us that the nature of war doesn’t really change. If you go to war based upon dodgy assumptions, you will end up with a bloody nose. We often relearn these lessons. Mr Putin thought the Zelensky regime would fall over very quickly. He thought the Ukrainians wouldn’t fight. So he entered Ukraine in a way that ignored all the principles of war. The danger of the system that Mr Putin has created is that he lives in an echo chamber of sycophants and probably doesn’t listen to people as much as he ought to. So I don’t think it was necessarily the incompetence of his armed forces that is so surprising: it was the fact that they invaded based upon extraordinarily dubious assumptions.
Having said that, the extent to which Western weaponry has been effective against Russia has been reassuring. We’ve learned that the Russian military is really quite hollow. In 2008, Mr Putin ordered a significant modernisation of the Russian armed forces. Since then, we’ve all been impressed by the technology on display at annual May Day parades. But the reality is that not much of that technology has actually been fielded in his army proper.
KL: What do you think has been the key to Ukraine’s success?
NC: One key factor is morale. The Russians are struggling with it while the Ukrainians have it in spades. We’ve also all been very impressed with President Zelensky’s leadership and the way in which he has motivated his country with a sense of nationhood. The Ukrainian army has benefited from good training since 2014. And, from February onwards, it has been significantly re-equipped with very good NATO military equipment. So I think you’ve got the beginnings there of something really rather competent.
KL: What is your view on the risks around the deployment of a nuclear tactical weapon?
NC: On the nuclear issue, the rhetoric seems to have settled down a bit. But I’ve always felt that nuclear use at this stage was unlikely. Finding a suitable target would be a challenge on a very dispersed battlefield. Mr Putin would also be very worried about the response he’d get from China and India. It would probably tip them into a position where they would no longer support what he is trying to do. The Western response would of course also clearly be significant: it would probably be a massive conventional attack. If we end up in a scenario where Mr Putin is fighting for his existence, who knows what he might do. But at the moment we’re nowhere near that.
KL: Do you think there is any prospect of a negotiated settlement?
NC: So much depends on your assumptions. The Ukrainian position is critically dependent upon Western aid and Western weapons. If the West remains united, then I think Zelensky is in a very powerful position. But if fault lines appear in that alliance, that changes. So clearly a lot depends upon your assumptions about Western unity. From a Russian perspective, it again depends upon your assumptions. Are Russia’s newly mobilised soldiers prepared to fight? Will Russia’s population continue to support Mr Putin? My own view is that we are unlikely to see negotiations anytime soon. I suspect both sides want to try and do something more decisive in the spring. Much will depend upon how that unfolds before you get to a position where either side is prepared to compromise.
KL: Are you worried about a continued squeeze on energy supplies?
NC: Coming into this winter, Europe managed to get a significant quantity of Russian gas and stockpiles were as full as they could be. The problem comes next winter. We have to assume we will not be getting any more Russian gas. It’s not obvious yet where alternative gas supplies will come from. Europe’s energy infrastructure is all oriented towards Russia. Even if alternative supply is there, building the infrastructure to import it is not something you can do overnight.
KL: Our focus last year was on Ukraine. But what other areas of the world keep you awake at night?
NC: The one that everybody focuses on is Taiwan. Personally, I don’t think the Chinese will invade. First, I don’t think that the Chinese military is ready to conduct what is an extraordinarily difficult military operation. The Americans considered trying to take Taiwan back from the Japanese in 1944. By that stage, the Americans were a successful military in the Pacific. But they decided on Okinawa instead. It was also difficult, but they concluded it was more straightforward than Taiwan. China has also taken note of the Western response to Ukraine. There’s probably a lot they would want to do before they risked it. Not least, making sure that China’s foreign reserves cannot be frozen by Western governments. Last, I think the Chinese believe they can regain Taiwan in a different way. They will be well aware of Sun Tzu’s doctrine that the supreme art of war is to subdue your opponent without fighting. So they will seek to use what we call political warfare: coercion, cyber, information operations and perhaps the odd blockade here and there. These strategies may push the Taiwanese population into thinking it is safer being part of China than not. If that doesn’t work, the probability of an invasion may go up. But my view is that China will play a long game on this. I don’t think they will want to take the risks of a military invasion for now.
KL: Turning to Iran, what are your thoughts on their nuclear ambitions?
NC: I think the Iranian regime will have concluded from what’s going on in Ukraine that having a nuclear weapon is very useful. The talks to find a new nuclear agreement with Iran collapsed the moment Russia invaded Ukraine. So I think we have to assume that Iran is heading towards a nuclear weapon. That will have a significant dynamic on the region as a whole, especially as we now have a Netanyahu-led government in Israel. He is not going to tolerate Iran having a nuclear weapon, given what Iran has said about what it wants to do to Israel. I think this is definitely one to watch.
KL: Can you share any lessons that you have learnt over your career?
NC: One inevitably realises that you can’t predict the future. And that you must be forever adaptable. Funnily enough those lessons probably resonate in your profession as well! I think that we are now going to live through a very turbulent era which is much more like the 1930s than perhaps any of the decades since. To get through it, we will need to be constantly adaptable. Who would have predicted the end of the Cold War? Who would have predicted 9/11 and a war in Europe? None of these things can be forecast with any clarity, and that means the organisation or the country that can adapt quickest is the one that’s most likely to prevail.
This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.
This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.
All data contained within this document is sourced from Cazenove Capital unless otherwise stated.