It’s clear that we’re living through a new era, said Mark Carleton-Smith, former head of the British army, during a fireside chat on European security during the Cross-Border Distribution Conference in Kirchberg on 16 May 2024. As to whether these are the early stages of a “new Cold War,” as Yuri Bender, editor-in-chief, Professional Wealth Management, Financial Times, put it, Carleton-Smith argued that “it would be optimistic to say that this looks like a new Cold War.”

“Long as it lasted, essentially, that was a single strategic undertaking against a monolithic Soviet threat. And--of course--one that was successfully concluded, and without the requirement for the confrontation to break out into conflict.”

International system underpinned by “hard power”

Carleton-Smith has seen three strategic inflection points in his professional career, which began in the 1980s and included service during the Troubles, the Gulf War, the Kosovo War, the Iraq War and the war in Afghanistan. The first was the fall of the Berlin Wall on 9 November 1989; the second was the 11 September 2001 terrorist attacks; and the third was 24 February 2022, with the start of Russia’s full-scale invasion of Ukraine.

“What it has done is reminded us all that the rules-based international system--that has shaped the international contours in the post-war world--is neither self-sustaining nor self-organising,” said Carleton-Smith. “The rules-based international system is actually underpinned by power. It’s underpinned by hard power, predominantly--albeit not exclusively--American hard power.”

“Today, unlike the Cold War, the United States and the Pax Americana that it offers us all finds itself stretched in three opposing directions by three authoritarian states--Russia, Iran and China--each seeking their own sphere of influence separate to any American-backed global order, which of course they would claim is simply code for western hegemony.” The very day that the cross-border distribution conference took place, he noted, Russian president Vladimir Putin arrived in Beijing for a state visit.

An “increasingly bifurcated” world

“We may yet already be at the high watermark of globalisation,” said Carleton-Smith. “We’re certainly witnessing some of the truncation and rollbacks of its most constructive and progressive elements. We seem to be living in a world that’s increasing bifurcated, hinged predominantly around China,” marked by strategic unpredictability and volatility.

And that, of course, is seen most dramatically in eastern Europe, “with the most intensive and destructive war in the continent since the second world war, fought between Europe’s two largest countries [Russia and Ukraine], at a scale and intensity that I think has surprised us all.”

“It’s been a strategic miscalculation on everybody’s behalf,” he argued. “It’s been clearly a failure in deterrence, because this one we probably saw coming.” It fits a “pattern” in Putin’s behaviour that can be tracked across Georgia, Syria, Libya and across sub-Saharan Africa, and it’s a “requiem” for the post-Soviet peace of the Cold War.

Three geo-strategic trends

This will probably “the most significant challenge for this particular political generation,” said Carleton-Smith, further complicated by three macro geo-strategic trends.

There’s the re-distribution of global power and its shift--predominantly--from west to east, “with Asia Pacific destined to become the economic powerhouse of the middle of the century.”

“The second is the growth of systemic competition in all our lives; the notion of great power, rivalry and balance of power once more the currency of strategic exchange.”

And finally comes the technological revolution--artificial intelligence, quantum science and robotics--which will “fundamentally transform” our lives. “I think you could go as far as to say that we’re also living through an age of data imperialism where the main players aren’t countries. They’re not even governments. They’re actually private companies and hyper-empowered individuals. And there’s no law of nature that suggests that they should either be good or even benign actors in that space.”

“I think taken together--a Cold War would be a good result. I think we’re in for a much more volatile, unpredictable and bumpy ride than that.”

Complacency in response to Putin

When Putin invaded Crimea in 2014, “we didn’t think necessarily that Ukraine’s long-term security necessarily represented vital strategic national interest of Nato’s contributing powers. The United States itself was distracted. We were probably complacent, and we didn’t necessarily believe that this was the opening gambit in what would become a forcible attempted annexation of a major country in eastern Europe.”

This “complacency” continued to “characterise our response to a series of Russian incursions, with respect to poisoning operations--certainly in the United Kingdom,” where, for example, Sergei and Yulia Skripal in 2018, or with regards to cyberattacks against infrastructure.

“We assumed that Putin had taken a different set of lessons from the experience of our interventions in Iraq and Afghanistan, the big headline which seemed to be: ‘Don’t do it,’” argued Carleton-Smith. “It seemed that he had developed a hybrid playbook, which meant that he would exploit his advantages tactically below the threshold of conflict. And that was something that major European policymakers assumed was the price of peace in Europe in the second and third decades of the 21st century--which, of course, proved [to be] flawed assumptions.”

Hybrid warfare: drones and attrition

We’ve seen an increased use of drones, said Bender, but also “tragic, wholesale urban destruction.” Will a hybrid approach to warfare--with a combination of high-tech and first and second world war approaches--become “the new normal?”

“I think 10 years ago, people assumed that warfare was going to become very surgical--the military equivalent of keyhole surgery,” replied Carleton-Smith. Instead of “massed boots on the ground,” drones could be used. Instead of “large, expensive standing armies,” investment in cyber, space capabilities and autonomous systems would be needed. “That proved a very successful recipe to the challenge of countering the Isis caliphate in northern Iraq and northern Syria. And for a while, that seemed to be a successful model for future warfare.”

“That is, of course, today being turned on its head,” he argued. Warfare is more than drones on a battlefield. Today--yes--artificial intelligence and hundreds of thousands of intelligence data points are used to guide drones with precision, but that is “matched with the grinding, attritional nature of static defensive positions, men dug in 15 feet underground, being shelled by in the region of 6 to 15,000 shells per day,” a consumption rate seen in the first world war.

The $61bn package voted through the US congress last month is, alone, “certainly not a recipe for victory. It’s hardly, even, today a recipe for survival. So we are in a very long term, very attritional and destructive conflict,” said Carleton-Smith. “You need to remember that these sorts of confrontations: armies win battles, but nation-states and economies actually win wars.”

Putin is already geared up for a sustained military-industrial campaign. So, what is the west doing?

Ukraine’s ability to sustain their efforts is going to require not just the same from us, he said, but even more in the future. “Irrespective of which country you come from, you might be skeptical as the degree of commitment that you think the international community can continue to sustain.”

China a “major strategic challenge”

If we look back into history, said Bender, American president Richard Nixon and US secretary of state Henry Kissinger helped to disrupt a Sino-Soviet axis. Will rapprochement with China help?

“China is the major strategic challenge, particularly with the United States,” said Carleton-Smith. “Notwithstanding almost everything I’ve said, almost all the conversations I’ve had in Washington are about China, China, China.”

“We Europeans have become very used to the United States as a transatlantic nation. We’re going to have to become used to the fact that in the 21st century, the United States is going to predominantly be a Pacific nation.” Europeans will need to do more with respect to energy, defence and security in Europe.

But regional alliances and partnerships across the Indo-Asia-Pacific region will also be needed to manage a much more assertive and belligerent China. Think of the country’s president Xi Jinping as “Mao with an Iphone,” said Carleton-Smith. “He’s been very clear in his publicly stated ambition that China--under his watch--will be the pre-eminent global power by the middle of the century, underpinned by the world’s largest economy, fuelled by the gravitational pull of the world’s largest single consumer market and domestic consumption.” All that controlled “by the world’s single most successful communist party, with a very effective strategy of economic colonisation, financial coercion and military modernisation.”

Fortunately for us, he added, “the Chinese economic miracle is confronting very significant headwinds.” With the covid-19 pandemic, for instance, we saw that closed systems are less resilient and adaptive than open ones, and they’re managing their own “societal paradoxes and internal security issues.”

“China is watching events in Europe and the broader Middle East very carefully,” said Carleton-Smith, who noted that Xi had just “swung through” Paris, Belgrade and Budapest in the past week. “If there is a danger with China, it’s a strategic miscalculation.”

“And to avoid that, there needs to be a very coherent, structured, strategic dialogue, with sufficient tolerance to agree to disagree in those areas where our values are very distinct, but also to agree to act in unison in those areas where we do have a common interest.”

Reconstruction needs “political vision”

When it comes to the investment world, there’s an obligation for the financial community recognise that foreign direct investment (FDI) and reconstruction are going to be fundamental in Ukraine-- “and, at some juncture, one hopes in Gaza”--to stabilise those regions, concluded Carleton-Smith.

Issues to consider include security, governance and political vision. Without political vision, “you don’t attract investment, and without investment, you don’t get the reconstruction. That’s absolutely essential.”