Surveillance: Eurasia's Top 2023 Risks

the beginning of the year. We start strong with the top risks of your Asia group. It is a must. Reid twenty seven pages of brilliance. Far too optimistic this year on the comparative strength of American joining us with a brief throughout surveillance this morning. Ian Brehmer, Bill Dudley will join us on a divided America. Will do that in a bit, but right now not a divided China. G is at maximum power? Does it give way in two thousand three? Does this power after that Congress? Dr

Bremer doesn't have it? Doesn't Uh. I'm gonna be with you, Tom,

Happy New Year to you. It's always good to be kicking this off with you, Um, you know, there's no question that both for China as the second largest economy in the world, but also with she jun Ping having consolidated so much power in his hands and using it in ways that are capricious and are not in any way transparent, the global economy has never experienced anything like that, that level of uncertainty in the persona of one human being. We've we've seen it with the decision to do a

complete degree bothas with the pandemic and zero COVID. We've seen it with a trillion dollars off of market value of Chinese tech stocks because she Jun pin decided that he was going to squeeze them. That level of uncertainty as China reopens their economy this year with no level of data that we used to get five ten years ago from the Chinese, even as an enormously concerning issue, this is important and this goes to your colleague in

crime on this Elizabeth Economy. You see if ar now, a secretary of Ramando in Congress Economy told me years ago, don't overestimates power. Have we seen the maximum? Have we have we brought down? Do we see him weaken particularly off the COVID disaster. We see China weekend a little bit on the global stage. Certainly the lessons they're taking for Taiwan now that they've seen the United States and

NATO in Ukraine. The lessons they're taking from concerns about American economic strength visa viast China on semiconductors for example, on the ability and willingness to impose export controls, and the fact that Chinese have sat on their hands. J and Ping is not in the same geopolitical position he was in before the pandemic started, but politically inside China he is only shrunk. And that is a that that is the nature of the risk. For are you lead

with Russia in the top top ten risks? But how does China permeate out to all the other thinkings of the top risk this year? They just seem to dominate every conversation. Well, it's not that the Chinese do it, it's something very specific does which is the at the time that the United States democracy and economy is actually coming out more resilient and stronger than anyone out there

would have imagined one to three years ago. Uh. We are seeing around the world a significant number of super empowered individuals who aren't getting great inputs from experts, who are able to act with impunity and are not getting what they want in various ways. On the global stage, Putin is one, She is another, The Iranian supreme leaders a third, and a small handful of tech center billionaires are a fourth, and those individuals are driving it. Disc

menstrument amounts of global risk in the marketplace. Right now, let's look at your work G zero the concept of G twenty G seven down to a codified Bremer phrase G zero, or much more importantly, for Americans, us versus them, is the basic drama out there. How do we prosecute in two thousand twenty three a foreign policy with forget about Putin? How do we prosecute a foreign policy with China that gets something done twelve months from now? Well,

two different ways. On the competitive side, you lean lean into American strength, which turns out to be national security broadly defined. So in the same way that the Germans have made mistakes for decades and the Europeans are at large and letting too much of their energy security lean on Russia, the Americans have let too much of our technology national security lean on Taiwan a hundred miles away

from the mainland. Now, what we are now trying do not just the United States but with allies as well, and say we're going to redress that. We're going to redress it because of national security. So you, the Japanese, you, the South Korean's, you, the EU, the UK, the Canadians, You're all going to be with us on these export controls for anything the Chinese could use that would threaten our national security directly. And that's a policy that will

align the G seven more broadly on China. That's important. But at the same time, Biden does not want to be in a cold war where the Chinese doesn't want to fight over Taiwan. He doesn't want the impact of competition on national security to bleed out into the broader economic interdependence of the For something new here, and I haven't gotten from Secretary Blank, and I don't think I've gotten from the Biden administration. Let's go back to something

like the military industrial complex. This is back when Tulane had terrible football and they won a year ago. They you know, they stunned USC last night, which was great to see. But the shock of Tulane football. I'm looking for a shock in the Bremer world in your top risks. What's the thing our viewers and listeners have to look for six months in twelve months from now. Well, the shock that comes from a Chinese leader that is making

policies and in the end of zero COVID. A lot of people thought that it was going to be incremental after he secured power in that for that unprecedented third term in the Party Congress, he didn't move away from at all. No, it shocked everyone. No one was expecting this even three months ago, even two months ago. Why in response to sudden demonstrations, the information got to him, and he, as an individual dictator of the second largest

economy of the world, made that decision. We're going to see more uncertainty of that kind from the the most powerful individual on planet Earth. In three Putin is in a corner. I want to finish up here in China because we're gonna talk to Bill Dudley later. We're gonna talk to Mr RhoD of Australia later. Of course, focus focus, focus on Europe. We'll do that folks here in a bit with Carl Bill. Okay, fine, but is that the

chemistry of China change. The history is it's city states like Shanghai and the new Hong Kong and all that versus a federal Beijing. Is that traditional calculus still in place. I haven't seen it since Mao. What's happening right now? And at the time of Mao, the enormous amount of uncertainty in China didn't matter to the global economy. They weren't interconnected to it, and they were vastly less powerful.

We today have the same level of concentration of power that you had during some of the worst episodes chapters of Chinese history. To that concentration the autocratic power with confidence, but also with strategic patients. In other words, take shots when you know they are important with allies strategically. The new policy that you see from Biden is on semiconductors and export controls. That is contained a sea change, but in other areas of the economy, don't allow that to

dictate what you're doing. One minute, here, we've got to get back to John and Lisa on the market's very very importantly. Here do you see a rekindling of what I'm gonna call from World War Two? MacArthur isolationism. No, no, don't want that. It's not that they don't want it. It's that everyone that throws money around in the United States strongly wants to ensure that doesn't happen. Furthermore, no American allies on the global stage. One it, not one,

not one, Not the Japanese, not the Europeans. That bad in cares about that. Thirty seconds, John Ferrold demanded, I asked you this question. You nailed Merkel in Germany two risks ago, top ten risks ago. Did Merkel fail in Germany? Did Merkel? Is a reason where where we are in Europe right now to tease the Carl built? Is it because miracle failed? Merkel failed on energy policy and now they are paying the price for that. The unit the European Union is stronger today in part because of work

that Merkel did. You have to give our a middle and grade that to twos. What we're gonna do with Dr Bremer here you raise your group, they celebrate the anniversary and very importantly their top ten risks stuff. William Dudley here, of course, formerly with a New York phone and ready for Bloomberg opinion Bill in your essay today for Bloomer Opinion. You focus on the fiscal part of the challenges here in the year four it is not so much a monetary impulse but a fiscal impulse. How

will that change the Fed's work? Well, the MANTA policy is still gonna be tricky. How how high do you go for how long and how much slow down to you to tolerate. I think the fiscal is the big risk, so that it's not remarked on by virtually anybody. Uh, We're gonna end end this business cycle at a budget deficit of about five percent of GDP, which is a

really horrible place to end the business cycle. Ad and that before we actually get all the costs associated with higher interest rates on debt service and the costs associated with social security and medicare as a baby blue generation retires. So I think the fiscal situation the US has deteriorated very sharply up to now. Markets have been extremely tolerant about this bill. Duddeley, I want to go back here, and it is a top ten risk of media, which

is the gloom up there. The world's gonna end, and we're gonna have the recession to end all recessions. Take us back to your study of recession history and guessing at Berkeley years ago, can we actually guess a recession in two thousand twenty three, Well, recession is pretty likely just because of what the FIT has to do. The FED has to drive up the unemployment rates sufficiently to slow down the economy. Uh, to generate slack in the layer market, to bring wage inflation down to a level

consistent with two percent inflation. But what's different this time, I think is that this if we have a recession, it's going to be a FED induced recession, and the FED can end the recession by subsequently see monitoring policy. I don't think that there's a big risk of a financial instability cataclysm that pushes the economy into a deep recession. I think this is a recession where the defense, you know,

has the controls. When they need to ease, they can do so that the challenge for them is to not ease too soon. Uh. And but these in a timely way, Bill, don't. I've got time for one question, and I want to bring it over to Dr Bremer's study at you raise a group of our risks, and our division is Republican or Democrat. Monetary policy are they really all that much different?

End of the day, it's really about how you treat the independence of the FED, what you actually criticize the FED through its actions, or do you leave it alone. The Democrats, really, starting with the Bill Clinton's administration, have been very hands off on the FED. Let the FED do their job. Republicans, especially under the Trump administration, and we're much more combative in terms of instructing the FIT

what the FIT should do. I think the Democratic approach is better because it keeps some markets more calm, allows the FED to be more effective and translating its actions in terms of the tightening of financial conditions that it needs to have to control the growth rate of the econmy but there's a difference between the two parties in terms of how independent they treat the FIT. Too. Short of visit Bill Dudley, thank you so much for joining us, and beyond qualified to speak of the Pacific rim of

his Australia and China. Is a gentleman, fluent Mandarin, a PhD from Oxford on his studies of China, and most importantly he is the new Ambassador of Australia to the United States. The former Prime Minister of the nation. Kevin Rudd joins us this morning, of course a commitment to the Eurasia Group, pushing UH ten years. Dr Rudd, I've never called you that, Dr Rudd. Thank you so much for joining us today. What is the level of power of ge the opacity that Ian Bremer talks about when

we talk of China. What is your knowledge or perspective of the power of presidency? Well, great to be with you. I should correct the record slightly. I'm not yet the Australia ambass the United States that happens in March this year. I'm still president of the urge of society three months before I turned into a pumpkin. That's why I'm talking on your program. Bottom line, in terms of Chikin Pings as follows, he is numerous numero duo and numero tray

in the Chinese political system. And if he wanted any evidence of that, you look at the twentieth Party Congress where anyone who did not come from his group within the party was given an exit pass, and instead we had four people elevated to the POLP euro who will who are virtually lifelong career colleagues, friends and supporters of

Hi Jinping, so his authority is great. However, this policy you turn on zero COVID, which was actually cute it on seven December, will raise a whole series of questions in Chinese political circles about the fallibility of Chi Jan Pain's political judgments. And so therefore that does create a dent in the armor for the long term. I look Ian Bremer at this and Kevin Rudd turning into a

pumpkin and March is part of the issue. You can speak freely, what is that we have an allied response in Europe, we have an understanding of how to respond to Putin. I don't perceive an allied response from Australia up to Japan of the Pacific. Rim against China doesn't exist. Oh, it exists. It's just no one's happy about it politically, because every ally understands that you don't want China to fail.

Every ally understands that they're not happy with China's political, economic system and maximum she as Kevin and I describe it. And also every ally understands that we need to keep doing business with China even though we're concerned about what are our present level of interdependence and coupling implies. We

know that we can't suddenly rip it up. Now, that underlying reality, which does align the United States with the entire G seven, is very different from the political statements that need to be made by various leaders because no one's happy with China. Scoring points off of China is

very easy to do. And in between those two things, you have to find a policy where how are you going to hit the Chinese in ways that are absolutely essential to your national security without upsetting the entire relations distinction of this in Kevin rod, this is so important a question you'll answer now and not in April or May. Kevin Rodd, I look at the United States and a

republican and democratic coalition against China. How should the United States advocate to the broader Pacific rim if we're all on the same page in our distrust of Beijing. Well, let's look at in these terms. I'll challenge your premise before decided there is no solidarity between in US allies in Asia to it, Australia, Japan and the Republic of Korea and partners as well such as India. And let's

call it the broad thrust of administration China strategy. And I think frankly, Secretary of State Lincoln national Security Advisor Sullivan have done a good job in hurting the cats both in Asia and also frankly in Europe so far. However, for the future, what is the missing element in US

grand strategy. It's called the economy stupid, and that is you cannot continue to assume that there will be collective solidarity on security questions, but on the economy, the United States happy to throw some of its allies under a bus, and for those reasons, the United States Congress needs to embrace instead a different strategy which opens its markets more to its allies in Asia and in Europe, despite the overall overriding protection and sentiment of the US Congress and

political class more generally in that comments so important, you want to jump in here with the time that we've got. Why is there such an important state? And it's completely right. It's very easy to not have a common economic policy for the United States with Russia because we are literally decoupling Russia from the entirety of the G seven economy. We are not doing that with the Chinese. China is extremely important to the U s economy, the German economy,

the French economy, Japanese economy, Australian economy. But we the United States, do not have a trade policy. We don't have one. And so, as Kevin said, unless Congress, the Democrats the Republicans are prepared to actually speak coherently about a long term US economic strategy. The national security policy by itself doesn't get you a union in the time

that we've got left. Dr Rudd, very simply, or do you demand a week dollar to assist the Pacific rim well as a very polite as trade and we demand nothing. But my commentary would be as follows that what we want above all is to ensure that the economies of East Asia remain market competitive and with greater and greater levels of access to the American market. That lot therein lies the future success or otherwise of US grand strategy. You cannot have a strategy which has one arm tied

behind its back, namely trade the economy. You must in fact have both wings flying. Otherwise this bird doesn't take off Street Northwest and Washington. He will travel in March the future Ambassador Australia to the United States, Kevin Rodden. This is the lead of the top risk this year for EUR Asia Group, and no surprise it is I'm Mr Putin and in Russia with US Dr Bremer and joining us as well someone with a European and Russia perspective.

Carl Build is the former Prime Minister of Sweden. They are very much in the news, but with all sorts of other public service to his continental your Pectter Bremer, I want you to brief in here before we get to uh, Carl Build, there is an understanding of Finland and Sweden on down to Turkey. This border which you've talked about at your raise, your group for years. What is that border? That what that Eastern Front, whatever you want to call it? What does that view look like

from a rogue state of Moscow, a roadue state of Russia. Yeah, well it looks a lot worse if you're a rogue state, if you find the present global order unacceptable, and if you find that you're being humiliated through acts of your own um and and trying to get yourself into a

better position. What it means is that NATO is seen as aggressive, It is expanding, it is more forward deployed, and Ukraine, a non NATO country, increasingly has the best supplied, best deployed best trained, best intelligence of any military, vast capacity of any military on the ground in Europe. It could not have gone worse for former President Putin. And that border only looks more problematic when you, as Russia

do not have any military strategy to countenance it. Summary from your Asia group there to go to Carl Built again, the former Prime Minister of Sweet Mr Mill, thank you so much for joining Bloomberg Surveillance today, Carl Built. How alone is Vladimir Putin? I think he's increasingly loan. I think we should understand that the decision that he took contemporary the fourth last year to launch this particular war

was a decision taken by him. I think it was a very very close circle around him that was fully aware of his intentions, and of course that decision was then god doingly accepted by a lot of the Moscow elites. However, you a phrase that in the belief that he would actually succeed. But what has been happening since then is of course that he has gradually failed, failed with the

one part of the strategy of another. And that means, in my opinion, that is increasingly isolated in Moscow, without that necessarily being an active opposition as it yet, but a lot of uneasiness around him can't built the tension that Mr Putin enjoys and likes, say personified and you're Sweden and Turkey. The distance from Sweden to Turkey has been noted throughout this war. How did the allies coalesced around one voice? What is the process this year to

rebut this rogue state? Well, I think the last year has been and I think you'll see continuation of this year very impressive in terms of European actual solidarity and trans Atlantic bonds. I don't think. I'm very certain that put had not counted on that. He had counted on the Americans not being too engage following what happened in Afghanistan.

He had counted on the on the Eupeians being divided, which sometimes happens, and he had counted on the Ukrainians not being into video that in supporting the Independent on all of these accounts, he was fundamentally wrong, and now he's gradually paying the price. What do you need from our president buying from secretary of state? Blanket from a new American, particularly with the American politics, it's new here into a presidential campaign. What do you need from America

to steal for a long war? And they continued American support, both in political and military and financial terms, is very important. The European and American support is now roughly equal, but on the military side, the American support is of course much more important. And the political leadership that has to give be given by the President of the White House

has been important in order to bibilize global opinion. And we sincerely hope that that will and our indications of the country that that would continue to be the case to do this implet deal that is no ahead of US Ian Bremer we do. We deal with someone there who's just still in the pragmatic reality of European politics. I want to dovetail that with a new movie that's coming out, All Quiet on the Western Front, another treatment of a classic book, a classic movie from another time.

How can America assist Europe if a large part of America really doesn't want to be involved in Europe like we didn't want to be involved in the first American l en is making its way to Germany today. The United States is doing an enormous amount there by far the biggest military supporters of Ukraine. In the world today, and American technology companies by far the most important national security supporters of Ukraine in the digital space, in the cyberspace,

in the virtual space. That's enormously important too. That's not being paid for by the American taxpayer. Now you put all of that together, the risk in three is not that it falls apart. It's not going to fall apart this year. The risk is that Putin increasingly loseng on the ground from a national security perspective, of a military respective and economic respective, and diplomatic expective, with no friends,

becomes like a global Iran. He he is the most dangerous, most powerful rogue actor that the planet has seen in your and my lifetimes. And his willingness to go after NATO, to use a symmetric attacks when nothing on the ground or even in the air increasingly works against the well defended Ukraine. That's the risk of Trump get out front of this by questioning NATO and their commitment to their

investment in NATO. Was Trump ahead on this, he he helped Putin believe that there would not be a united response. Trump's America first helped lead to Macron's more uh rhetorical strategic autonomy for France and saying that NATO was brain dead. If you're Vladimir Putin after four years of Trump, you increasingly believe for reasons that Carl mentioned that the United States and the Europeans wouldn't care about Ukraine, we need to consider this further here, Carl Bill, thank you so

much for joining us. The former Prime Minister of Sweden. We'd really like to get you on surveillance fire more. It's about many many other topics that you see of those top ten risks, including a focus on energy and a focus on technology this year as well. Not even mentioned this morning is Iran, which I think is exceptionally interesting and ties in dovetails in to what we see in Russia and China. Is uh. We do another next

coming days. We'll give you coverage on this and very importantly will drill down to some of those top ten risks that are a bit different. We have a perfect guest for that right now, Marcha sha k is at Stanford University. That barely describes her infinitive expert on thinking about technology and what it means for her Europe and far more, what it means for all of us around this world. And professor, thank you so much for joining

us this morning. We have seen the use of technology in the war in Ukraine, the speed of information and for that matter, the use of technology as part of military operations. After what we witnessed in two thousand twenty two, this time are we tech different? Is this time tech different? Well, we see an acceleration of the use of technology in

almost all aspects of our society. You mentioned the ongoing war, the unjust war in Ukraine waged by Russia, where technology plays a role cleverly used by the Ukrainians, but also when it comes to efforts to cause harm through cyber text on on the Russian parts. We should really prompt

us to ask ourselves when do wars really start? Is it when tanks roll over physical borders as Russia has done, or is it when civilian infrastructure, critical infrastructure is targeted with cyber attacks, which we've seen for much much longer than since February two. Then there have been remarkable events in the last year. Of course, Elon Musk owning Twitter now and and using it as his personal playground, it seems breakthroughs in generative AI, and some of you may

have been playing with that over the holidays. You know, those those chat bots that can help generate texts. I know some students are trying to have their homework being done for them. But all the all the fun and play with those new applications of a I can't really disguise the new risks that these AI applications also bring for spreading disinformation or more sophisticated span for example March.

I can tell you from your that there's an American tradition to stand for university in Palo Alto for students

to figure out how technology can do their homework. There's a history of that, to say the least, let me talk Let me talk about and this is cyber in sixty seconds, what you're doing with Dr Bremer at Eurasia, after what we've seen with Sam Bankman, free binance and all, and what we see in Europe our fear of cyber Do our institutions have control of technology or is it in this reality is uncontrolled as we all feel well,

the question of control is a political choice. I think that that is a very important thing to keep in mind. In Europe, the choice has been made to invest in regulatory initiatives, innovations, new ways of having oversight, transparency and accountability, but in the United States not as much. And I do think that the whole FTX meltown, but also Elon Musk on Twitter beg the question will Congress finally step up an act? Well, I mean, this is so important

and you know, let me let me ask you. I need to make some headlines here on on a slow Tuesday morning, MARCHA. Can Europe halt Elon musk experience at Twitter? Does Europe have the regulatory will to say to Mr Musk, No, that's not acceptable behavior. You can't do that in Europe. Absolutely. The laws that apply in Europe will apply to Elon Musk and and all other CEOs of tech companies as well.

So when he decides that he would like to, for example, allow the spreading of hate speech or other kinds of harmful content, if it's against EU law, he will not be able to get away with it, just like that

for European Internet users. He made these fines or questions about transparency over his algorithmic settings, and so the you has has taken a number of steps, some of the legislation still needing to enter into force, others already on the book, and must, like everyone else, will find out that the law applies to him as it does to everyone.

Professor's shot, Well, I want to go to where Ian Bremer is in his ten Risks of this Year, which is a discussion of TikTok, And I am certain that every American listener and viewer want me to ask one simple question. Should we fear TikTok that our kids use? Should we look at TikTok whether it's used by undergraduates at Stanford down the little children. Should we fear that it's some form of pipeline or conduit to institutions or authorities in China. Yes, we should not be naive about it.

No one should be naive about the use of data, the harvesting of data as they use social media, whether it's on TikTok or Facebook or YouTube. And I think for a long time it was American companies that dominated this mark it elsewhere. As a European I can say we were first flooded by Facebook, Instagram, YouTube, Snapchat. Now TikTok of course is very popular with kids here too, But the concern about where the data goes, who has access, what kind of profiles can be built about our children,

about ourselves. What might these be used for that is not all about fun dances and jokes and and snappy videos. Is something that I really hope everybody will make time to look into, because incident after incident reveals that misuse of data, commercial harvesting and selling of data is leading to all kinds of malign uses, whether it is commercially driven, politically driven, or actually criminally driven. And so there's just really, I hope in no more room for naive day about

how data is used. Blistering Mary, thank you so much for Stanford University and far more her public service. UH to European political systems. Can't say enough about that. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment,

and international relations. And subscribe to the Surveillance Podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keene and this is Bloomberg