Hudson Institute

Geopolitical Implications of the Coronavirus

Hudson experts analyze the virus' effects on the Indo-Pacific, Europe, and the Middle East.

Asia-Pacific Security Chair
Senior Fellow and Director, Center for Peace and Security in the Middle East
Senior Fellow and Director, Center on Europe and Eurasia
(Peter Zelei via Getty Images)
(Peter Zelei via Getty Images)

Four Geostrategic Implications of the Coronavirus in the Indo-Pacific
Patrick Cronin

The coronavirus is both a public health and global financial crisis. But it is also a geostrategic challenge to America’s power and influence in the Indo-Pacific. Without knowing the full impact of the virus, it seems probable that the shock will amplify several existing economic, technological, and security trends already underway in the region.

First, the post-coronavirus environment will fuel rather than defuse U.S.-China geoeconomic competition. Although pandemics call for international cooperation, the virus that gripped Wuhan and spread globally will exacerbate preexisting tensions between the world’s two largest economies. The coronavirus has damaged China’s already slowing economy. The CCP will likely put off painful economic reforms and look for short-term stimulus. Xi will further abandon economic and financial liberalization reforms accompanying the 19th Party Congress. Toxic debt and the misallocation of capital to state-owned enterprises will mount. At the same time, the CCP will need to shift more resources to deal with a brittle public health system and an aging population. The resulting demands for sustained Chinese growth will ensure that Beijing’s variant of state capitalism will further exploit free-market vulnerabilities through state-backed IP theft, subsidized national champions, and other means. Expect China to deepen investment in the digital technologies that advance both its economic and security interests.

At the same time, the United States economy will also face headwinds. The virus will disrupt the economy and daily life in the United States. Trends suggest the U.S. may experience a recession. Russia’s bid to crush America’s shale-oil may fail, but it adds another stress to a key pillar of the U.S. economy. China may take advantage of even relative U.S. weakness or distraction to back-pedal on its agreement to purchase up to $200 billion in additional U.S. goods, including LNG, over the next two years. Meanwhile, as nations turn inward, expect China to fill the void and build out its network of CCP-compliant or U.S.-independent regional and international institutions.

Second, U..S-China techno-nationalism and protectionism will sharpen. The CCP leveraged Big Data, Artificial Intelligence, facial recognition technology, and drones to police its Wuhan crisis. The positive results will only further accelerate Beijing's plans to advance the surveillance state further. It will also prompt Beijing to double down on investments in Made in China 2025 technologies vital to achieving information superiority and the China Dream. As a result, America and selected allies are likely to accelerate plans to disentangle critical technologies and reduce strategic dependencies on China. Other countries will also step up plans to relocate manufacturing and business hubs outside of the Mainland. For the United States, the great disentanglement will take time, leadership, and the ability to mobilize the private sector and coalition partners. One challenge might be called the Microsoft problem. That is, how can a large U.S. company wholly cut itself off from Huawei, ZTE, and other Chinese national champions without reducing its market share and thereby starving itself of necessary R&D for future innovation? The virus is also likely to hasten competition for setting international technology standards and rules.

Third, the coronavirus will create new fissures in the CCP and a potential leadership crisis in North Korea. China’s initial cover-up on the severity of the outbreak created a moment that could be Xi’s "Chernobyl," especially in the wake of revelations regarding the brutal crackdown in Xinjiang, heavy-handedness in Hong Kong and harassment of Taiwan. The persistent criticism of Xi’s early attempts at covering up the scope of the outbreak, and his call for the Chinese people to follow him in a "People’s War" is instructive of both enduring CCP legitimacy problems and Xi’s preferred theory of victory narrative.

Meanwhile, a full-blown health crisis in North Korea could produce unpredictable outcomes for the hereditary Kim dynasty. Just as North Korea’s Sixth Army Corps reportedly mutinied amid the 1996 famine, an overwhelmed public health system could trigger a coup or, even worse, propel Kim Jong Un into initiating a conflict to unify the population behind him. The virus also is likely to reify other existing security flashpoints. These include tensions over Taiwan as well as between the United States, its allies, and security partners. Pressure on U.S. allies and partners will grow, even as they seek to resist demands to share more significant burdens and risk getting caught in a potential major power conflict. Expect China to pray upon alliance tensions.

Fourth, the threats emanating from synthetic biology will multiply. The coronavirus most likely started in an illegal wet market, not a biology lab. However, the demonstrated impact of a dangerous new virus could encourage CCP authorities to set in motion new plans to weaponize synthetic biology. A range of future biothreats may emerge from clandestine laboratories through the use of CRISPR, DNA printing, and other synthetic biology advances. The CCP’s technological gains could encourage it to think the unthinkable: namely, how it might surreptitiously plant a future virus for economic, political, and strategic impact, perhaps amid a crisis or conflict.

The Coronavirus and Europe
Peter Rough

The central problem of the European Union (EU) today is that the primary allegiance of its people is to their home countries, not the EU. To overcome this shortfall, the EU essentially buys support for its agenda: In return for the free movement of people, EU members receive unfettered access to the European single market. The coronavirus, however, threatens not only the European populace but the idea of the EU itself.

The EU proved an attractive arrangement so long as Europe’s economy expanded and globalization (read: immigration) remained manageable. The twin blows of the Great Recession and the war in Syria hit Europe hard last decade, however. As the European economy slowed, the structural imbalances between northern and southern Europe grew wider and deeper. Just as the EU’s biggest asset— its economy—lost some of its attractive value, a surge of Arab, Afghan, and African immigrants further overwhelmed authorities. The upshot has been a wave of anti-establishment sentiment in elections across the continent. Nationalism, not supranationalism, is the ideology with momentum today.

Into the breach steps now the coronavirus. It is wreaking havoc on an already brittle and unequal European economy while highlighting the downsides to globalization, like the accelerated transmission of disease. This will further embolden nationalist parties, especially as leaders grasp for national, rather than European, solutions. To date, for example, the German government has promised to do whatever it takes to maintain stability but has provided minimal support (and supplies) to Italy; meanwhile, China is reportedly selling Rome key equipment. The European Central Bank is now undertaking emergency measures, but for Mediterranean countries that are already grappling with weak economies and high incidents of infection, the intervention comes late. The result will be a further erosion of confidence in the EU.

The coronavirus may also accelerate a shift in the global political economy. In decades past, the U.S. acted as the importer of last resort, absorbing huge European surpluses. Over time, this has created a European dependency on exports to America. Now, Europe is equally addicted to China. If the coronavirus substantially slows global markets or leads to a Sino-American standoff, the export economies of Europe (especially, Germany) will be hit hard. The coronavirus may very well signal the beginning of the end of Europe’s export-led economic model.
As the economies of Europe suffer and the downsides of globalization become apparent, anti-establishment leaders will have an opportunity to seize the advantage. This is the setting in Europe as we barrel toward the high-point of the coronavirus pandemic.

Will the Coronavirus Save Netanyahu?
Michael Doran

The coronavirus is a cross dresser. From a distance, it looks like a cousin of the seasonal flu. Compared to the Black Plague or Spanish Flu, to say nothing of Ebola, it is not particularly lethal. It poses little threat to children, and many people who are infected suffer hardly more than the familiar symptoms of the common cold. As you draw closer, however, it bares its fangs. To elderly people and those with chronic heart or lung issues, it is a killer—and a stealthy one at that. Asymptomatic carriers of the virus are contagious for many days and the virus stays alive on doorknobs and other surfaces for relatively long periods of time. As a result, it disperses itself widely without detection.

The benign face of the virus has tricked some politicians into thinking they can fight it with pep talks, advising their people against hysteria, and encouraging business as usual. The shortcomings of that approach are evident in the case of Milan, Italy. At first, the local government recommended social distancing, but then the mayor, no doubt concerned about the economic cost of keeping everyone at home, delivered a pep talk, encouraging people to go out and live a little. The bars and restaurants filled up again. Meanwhile, the hospitals believed that they were prepared for the worst.

Then the virus revealed its menacing face. An exponential explosion of cases erupted, quickly overwhelming the medical system, which lacked, among other things, an adequate number of ventilators. Overcrowding in hospitals further increased the spread of the virus. Doctors and nurses were worked to exhaustion.

The Italian example proved the wisdom of the approach taken by Israeli Prime Minister Benjamin Netanyahu, who did not fall prey to the pep-talk delusion. He determined that the best solution was to slow down the spread of the virus, thus delaying or possibly preventing the hospital overload that the Italians are now experiencing. Although some in Israel argued, “let’s not ruin our economy just because of a flu,” Netanyahu opted instead to take draconian measures: forcing anyone who enters the country to spend two weeks in quarantine, banning large public events, and closing schools.

This strategy will slow the advance of the virus, buying time to prepare facilities and acquire necessary equipment such as ventilators. In the absence of these strict measures, elderly and vulnerable coronavirus patients would quickly pack intensive care units. Some would die, and others would take beds away from patients suffering from other illnesses and injuries, resulting in a much greater loss of life—perhaps ten times as many people dead. Of course, the immediate blow to the economy will be severe. But letting the virus run rampant would, in the long run, impose an even heavier economic cost.

While most Israelis accept these arguments and the burdens they generate, the consensus is not without significant political implications.

Netanyahu led the country to this strategy in the aftermath of Israel’s latest election, its third in less than a year. Yet again, the results were inconclusive, with neither party enjoying an obvious path to assembling a coalition. Netanyahu worked to rally the nation while serving as a caretaker prime minister. The crisis thus allowed him to appear Churchillian, making very tough decisions and calling for shared sacrifice. As he successfully played the role of father of the nation, the leaders of Blue and White were working to topple him.

Here they made what was very likely a fatal blunder. To put together a minority government, Blue and White's leader, Benjamin Gantz, opened negotiations with the predominantly Arab Joint List—a step that, during the election, he promised never to take. Some members of the Joint List have extreme, anti-Zionist views that are anathema to a significant segment of Blue and White voters.

Gantz seems to have calculated that breaking a campaign promise was worth the risk. If the negotiations with the Joint List had succeeded, they would have allowed Gantz not just to topple the Likud from office, but also to decapitate it. Netanyahu is currently facing indictments for breach of trust, accepting bribes, and fraud. Israeli law permits him to remain as prime minister while fighting the charges, but it will not allow him leave office and come back while still under indictment. Thus replacing Netanyahu today would remove him from the scene for a very long time, possibly forever.

But there are reasons to think that Netanyahu’s exit from the political stage may not come so soon. Gantz’s gambit appears to have failed, not least because two members of his own party and the leader of the Gesher Party, a natural coalition partner, balked at his efforts to ally with the Joint List. Meanwhile, Netanyahu has seized on Gantz’s misstep by calling for Blue and White to join with Likud in a national unity government in order to tackle the emergency presented by the coronavirus and the related economic challenges.

Regardless of how the negotiations over a unity government finally shake out, Netanyahu now has the upper hand. Gantz must either accept Netanyahu’s terms or take Israel into a fourth election. That prospect must horrify him. If it comes to another election, Netanyahu will excoriate Blue and White for reneging on a campaign promise and seeking an alliance with anti-Zionists, and this line of attack will strike a chord even with some voters who supported Blue and White in the last election.

Only a few months ago, Netanyahu’s detractors had predicted that his political career was over. Once again, he is demonstrating himself to be one of the most adroit politicians of our time. He is not out of political and legal limbo yet, not by any stretch of the imagination. But his chances today look far better than they have at any time in the last six months.