Contagion: COVID-19’s impact on the Operational Environment (Part 1)

by Chris Ellesrepublished and adapted from an original article on MadSci blog

New Zealander Chris Elles responded to several queries from the Mad Scientist Initiative’s How Will the COVID-19 Global Pandemic Shape the Operational Environment? writing prompts with the following insights and conclusions:

How will the pandemic affect Russia and China, our current and emergent pacing threats?

OPEC’s complete loss of cartel pricing control for the foreseeable future, in the wake of declining energy demand due to COVID-19, has serious ramifications for Russia.

Approximately two thirds of Russia’s exports and half of total the Russian government revenue are dependent on collapsing energy prices.

It’s worth remembering the 1980’s Oil Glut and how the associated low energy prices played a significant contributing factor to the collapse of the Soviet Union .

While it is highly unlikely we will see a repeat of the 1991 Soviet collapse in today’s Russia, a most likely course of action for Vladimir Putin’s regime may include activities that are even further along the conflict continuum, away from conventional and towards unconventional action.

This is due to Russia’s declining fiscal capacity to support conventional kinetic options combined with Russia’s recent success with, and the relative affordability of, asymmetric unconventional options to achieve foreign policy objectives.

It would not be unexpected to see Russia’s near term foreign policy objectives designed to lift energy prices.

Source: www.kremlin.ru via Wikimedia Commons & Creative Commons Attribution 4.0

Iran’s interests are almost identically aligned with Russia, at least with this specific slice of fiscal and foreign policy.

Russian and Iranian activities to disrupt energy export competitors to accelerate market prices is likely to be a primary line of effort.

China’s recovery from COVID-19 will require the Chinese Communist Party / People’s Liberation Army (CCP/PLA) to place increased proportional emphasis on domestic economic stabilisation in the short-term, with low energy prices providing Chinese energy consumption an economic recovery tailwind.

China is likely to proportionally increase focus and effort inwards on its domestic recovery in the short term to conservatively guarantee CCP/PLA continuity. However, the greater the severity and longevity of economic disruption suffered, the greater risk of a hybrid Falklands/Grenada scenario with Chinese characteristics.

External distraction away from growing domestic crisis, akin to action by the Argentine junta in 1982, is an ever present option for China’s CCP/PLA — activating a nationalistic population that has not experienced foreign military adventure in two generations (i.e., the Sino-Vietnamese War of 1979). However, CCP/PLA conservatism in executing a near shore external operation would demand a similar result to the US intervention in Grenada.

The Chinese characteristics of a near shore hybrid Falklands/Grenada-like action to distract its population away from the potential for domestic crisis would likely include: absolute certainty of outcome, experimentation with recently introduced PLA platforms and doctrine, a clear signal of China as a rising global challenger, and it being quickly conducted to preclude disruption to global markets.

The aircraft carrier Liaoning and several guided-missile destroyers, frigates and dozens of aircraft attached to the Navy of the Chinese People’s Liberation Army taking part in a combat exercise in 2018 / Source: eng.chinamil.com.cn / Photo by Zhang Lei, public domain image via Flickr

However, China’s need for cheap energy imports from Russia and Iran to accelerate and fuel its COVID-19 recovery means China’s interests will be incongruent on energy policy with Russia’s and Iran’s interests as long as exceptionally low energy prices remain intensely painful for these high cost producers.

Exceptionally low energy prices will have grave and potentially existential consequences for nations dependent on energy exports. Energy exporting nations with the highest marginal production cost may be most vulnerable to disruption by external actors applying unconventional means.

But how can that foreign policy incongruence be leveraged between and amongst challenger (China), disruptor (Russia & Iran) and energy producer states to the advantage of the US and its coalition partners?

How will nations react to China’s Belt and Road Initiatives in light of these events?

Too soon to tell?

One Belt, One Road initiative — China in Red, the members of the Asian Infrastructure Investment Bank in orange. The 6 proposed corridors in black. / Source: Creative Commons Attribution-Share Alike 4.0 International, by Lommes

Last year I wrote a Mad Scientist semi-finalist fictional story that incorporated the potential for China to aggressively export its largely domestic digital super platforms into its One Belt, One Road initiative in the near future.

Despite recent delays, Chinese efforts to deploy a Digital Yuan continue, while Facebook Libra is stillborn.

Most COVID-19 focus has been on China and the West and how we will all respond, reset, and recover — including the potential for new financial habits, behaviours, and norms.

The same will occur in the developing world and it is here where we must carefully monitor and respond to the potential for the Digital Yuan to be exported and injected.

Perhaps the needle moves towards Geodigital with the potential application of Moore’s Law to the Geopolitical arena.

What happens if China exploits an opportunity to export a digital triad, represented by super platforms like WeChat, surveillance tech running in the background shared with local nation government “moderators” accepting of Chinese “admins,” with platform transaction value shifting regional trade from U.S. Dollars to Digital Yuan?

What are the collective impacts this pandemic will have on globalization versus nationalism, and how will supply chains evolve?

GEN Stanley McChrystal, ISAF Commander (center), flying over Farah City onboard an Italian CH-47C Chinook helicopter, Afghanistan, 22 Jan 10 / Source: DVIDS, 2nd Lt. Karl Wiest

GEN Stan McChrystal ‘s book is well worth revisiting here. McChrystal posits that in a world of fast rising complexity, predictability is in steep decline. In an increasingly complex and unpredictable environment laid out by McChrystal, our global supply chains built on the singular pursuit of efficiency are at great risk of disruption from outlier events, such as COVID-19.

Globalisation is not over, but future global supply chains will likely bifurcate into national-strategic and non-essential.

We already possess national-strategic stockpiles ofcommodities, but in the wake of COVID-19, it is highly likely that we will redesign the architecture of manufacturing supply chain capability and senior national leadership will redesignate key lines as national-strategic.

We will likely shift from a capacity (national-strategic commodity stockpile) focus to include more capability (localised manufacturing supply chain for national-strategic homefront footprint) focus.

Was this a Black Swan or Pink Flamingo event, and what lessons regarding national resiliency can we learn to help mitigate future global crises?

I’m a big fan of concept of “obvious but ignored” Grey Rhino events.

In a Stanford Graduate School of Business political economics class back in 2016, we learned voters were far more likely to reward disaster relief than disaster preparedness. Senior national leadership face a considerable disincentive from investing in disaster preparation.

So in light of the headwind that disaster preparation investment represents to our senior national leadership, we have an opportunity to attack the problem from a different angle and develop policy with low political cost to leadership to shape supply chain adaptability for all redesignated national-strategic supply chain capability.

The more we move along the continuum away from a singular focus on efficiency and towards adaptability, the more we concurrently move along the continuum from relief towards prevention, meeting in the middle at rapid recovery.

Chris Elles is a Sergeant in the Royal New Zealand Infantry Regiment (Reserve) who has developed and delivered innovation training packages for both the New Zealand and Australian Defence Forces while serving as Phase Manager for the NZ Army Aumangea Assessment Programme. Chris is an entrepreneur, startup mentor, and angel investor. As an early stage employee, he was responsible for the physical launch beyond books for Amazon.com. He is an alumnus of Stanford University Graduate School of Business and completed Hacking 4 Defense Educator Certification at Georgetown University. Chris is curating the Innovator Handbook Mk I: A Handbook For Small Team Military Innovation. He can be found on Twitter @InnovatorHB

Disclaimer: The views expressed in this blog post do not necessarily reflect those of the Department of Defense, Department of the Army, Army Futures Command (AFC), or the Training and Doctrine Command (TRADOC).

Originally published at https://madsciblog.tradoc.army.mil on March 30, 2020.

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