It is beyond dispute that China’s global influence has expanded rapidly under the banner of its Belt and Road Initiative, with the country’s economic tentacles moving across South Asia into Africa and beyond. While many analysts have rebuked Beijing for implementing an exploitive strategy which mostly ignores governance, human rights, and rule of law issues, others – including this author – have noted that you can’t beat something with nothing. In recent years, it has seemed that Washington has lacked a cohesive strategy for dealing with new geopolitical realities.
However, last August US President Joe Biden signed the Inflation Reduction Act (IRA) into law. The massive bill, which includes a $369 billion investment in energy security and climate change provisions, was hailed as a major domestic legislative accomplishment, indeed a priority for the administration.
The IRA represents the largest investment ever in climate change, conservation, green energy, and retooling America’s manufacturing base. With all the goodies tucked into IRA, the US is on track to cut greenhouse gas emissions by more than 50 per cent from 2005 by 2030. At the same time, the bill aims to create millions of new jobs in the clean energy and tech sectors; it has already reportedly created 100,000.
“The business of America is business” – US President Calvin Coolidge’s famous quote has proved quite durable. Business and economic strength have long been the foundation of US global influence: agriculture and food stuffs, automobiles, appliances, energy, pharmaceuticals, computers and technology, even commercialised pop culture and fast food restaurants. Years ago, stepping off a Ford bus near China’s Great Wall, I was greeted not by an eager historian but by a large billboard featuring Colonel Sanders, arguably America’s most well-travelled diplomat. KFC aside, the point remains that business has been the harbinger of American influence abroad.
Although not advertised as a foreign policy bill, the IRA is already having enormous international implications. Indeed, if the IRA achieves even half of its expected deliverables, the newer, greener, more sustainable business model constructed by Washington will have more global impact than any policy decision implemented in decades. This was part of the message recently delivered to students and faculty at the University of Central Florida during a visit by Frances Colón, a member of the President’s Council of Advisers on Science and Technology. Colón is also the senior director of Climate Policy at Washington’s Centre for American Progress.
Colón and other proponents note that while the IRA makes massive government investments, what it really does is provide the necessary incentives for private sector industry to transform America’s industrial base, in so doing forcing global competitors to react similarly lest they risk being left in history’s dustbin. This will have an enormous impact on industrial processes and products, the labour market, and global trade. It could have more of a long-term impact on climate change and the environment than any climate agreement.
The point is that while American citizens will certainly benefit from jobs and tax credits, reduced greenhouse gases, a cleaner more sustainable energy mix, and a healthier environment, the IRA is also transforming global industry and economics. Europe and Asia are debating how to respond to the IRA, and others, trade partners and competitors alike, will be forced to move swiftly and boldly to keep pace with the US.
The IRA’s timing also comes as Russia finds itself locked in an increasingly deadly and draining war in Ukraine. What was supposed to be an easy Russian victory has turned into a costly quagmire. Moscow’s invasion brought a renewed sense of unity and purpose to NATO. Russian President Vladimir Putin’s attempt to use the EU’s reliance on Russian natural gas as a weapon to undermine the West caused short-term harm. But counter-intuitively, it also created a path for Europe to wean itself off Moscow’s fossil fuels.
The conflict has strengthened and sped up the EU’s shift to renewable energy. Russia will remain a major international player, economic and otherwise, after the Ukrainian conflict is resolved. But it will be forced to adjust to new economic realities due to its own short-term decision making. This includes the drive to cleaner energy and new supply chains, as well as the implications of the IRA and the inevitable policy and planning changes other nations will implement in response to it.
At the same time, there has been much debate as to whether the US-Saudi bilateral relationship is cooling. There is plenty of anecdotal evidence suggesting that Riyadh and Washington are not singing from the same sheet – including Saudi King Salman’s snubbing of former US president Barack Obama, the killing of Saudi journalist Jamal Khashoggi, the war in Yemen and Syria, and OPEC’s decision to decrease the supply of petroleum. But while all these items, and others, are troublesome, they miss the greater truth that both Riyadh and Washington acknowledge.
Saudi Arabia has long sought to export as much petroleum as possible, for as long as possible, at the most optimal price. Fossil fuels fill Riyadh’s coffers, and this money is being used to reboot the Saudi economy, making it more resilient and diversified. Saudi Arabia intends to stay an economic power and a major player in global energy. But it knows the days of oil will not last forever. A Saudi economy less dependent on black gold makes the Kingdom stronger and creates more opportunities in more sectors for partnerships with the US. Most of the Arab OPEC nations have adopted development plans similar to Riyadh’s ambitious 2030 plan.
Meanwhile, the post-Covid 19 world has seen a raft of supply chain issues that have contributed to inflation and spikes in global food prices. These have been felt most acutely in the developing world. Africa and North Africa in particular face food scarcity issues that have been acerbated by the war in Ukraine, with both Kyiv and Moscow being major suppliers of grain.
Geopolitics are never static. Climate change, the water-energy-food nexus, natural disasters, migration, supply chains, and stability are very much in the forefront of international politics and economics today and will remain so in the coming years. With the IRA, Washington has implemented a new global strategy, not just an important domestic policy. The conflict in the Ukraine, developments in Saudi Arabia, and the decisions and debates under consideration in developing nations must be assessed not only on the surface, but also with an understanding of the changing global context.
The writer is executive director of the University of Central Florida’s Office of Global Perspectives and International Initiative.
* A version of this article appears in print in the 27 April, 2023 edition of Al-Ahram Weekly
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