TOP 23 RISKS AND OPPORTUNITIES FOR 2023 - The Atlantic Council
Another world-shaking, world-reordering war in Europe. Brewing fears of war on an even greater scale in Asia. A coronation in China and political upheaval across the democratic world. Climate-induced catastrophes and emboldened movements to mitigate and adapt to them. The worst energy crisis in a half century and worst food crisis in over a decade. Spiraling inflation and the specter of global recession. A less acute but still-raging, still-hugely disruptive pandemic. Epochal ferment in social media and technology more broadly.
Recently, the leaders of the Atlantic Council’s sixteen programs and centers gathered to take stock of these and other developments and trends over the past year, peer into the future, and predict the biggest global risks and opportunities that 2023 could bring.
The results of this foresight exercise are below. Each scenario is assigned a probability; “medium” means a 50/50 chance that the scenario will occur within the next year. Many lower-probability but highly consequential scenarios are included because—as has been so vividly demonstrated this past year—those types of events tend to be some of the most disruptive and transformative. And keep in mind: Forecasts are not destiny. Political leaders and policymakers have agency in shaping whether and how these scenarios play out in the coming year or beyond. The primary purpose of assessing global risks and opportunities, in fact, is to gain insight into how to avert unwanted outcomes and achieve desired ones. To that end, don’t miss the policy prescriptions mixed into many of the entries below.
Top risks
A surge in climate adaptation curtails progress on cutting emissions, locking in at least 1.5 degrees of warming
Pakistan’s devastating floods in 2022, along with the tireless advocacy of Pakistan’s federal minister for climate change, Sherry Rehman, played a pivotal role in rallying parties at the COP27 climate conference to create a Loss and Damage Fund, where rich countries will provide payments to developing countries confronting the costly impacts of climate change.
But there is a strong possibility in the coming year that this new and desperately needed focus on climate resilience, loss, and damage will produce an unintended opportunity for backsliding on mitigating climate change. Moving from the COP27 agreement to an actual fund with money and a plan to disburse it will require tremendous international activism and action, which could reduce the pressure on governments and non-state actors to cut greenhouse-gas emissions and transition to clean energy. That would slow the already sluggish speed at which the world reins in global warming—the root cause of the destruction that has necessitated the Loss and Damage Fund in the first place. If country and corporate delegates show up in December at the COP28 climate-change conference in the United Arab Emirates with a focus on climate adaptation and loss and damage, but without major commitments to reduce emissions as well, we’ll know this scenario has materialized—and that this century the world will blow past an average increase in temperatures of 1.5 degrees Celsius above pre-industrial levels, which countries have sought to avoid as part of their commitments at the 2015 Paris climate conference.
In 2023, Iran is very likely to pass the point of no return and become a de facto nuclear-weapons state. Outside experts estimate that Iran’s dash time (the time it would take to make one bomb’s worth of weapons-grade uranium) has shrunk to just a few weeks. As Iran continues to ramp up its nuclear program, this timeline will soon shrink to zero.
With international nuclear talks stalled amid continuing protests inside Iran at the end of 2022, a diplomatic breakthrough to halt the program now seems implausible. Several consecutive US presidents, including Joe Biden, have said that the use of force is a last-resort option to keep Tehran from the bomb, but many suspect a bluff. Washington is not taking the steps (such as building domestic or international support for military action) that would be the obvious prelude to military strikes on Iran’s nuclear facilities. Iran is unlikely to test a nuclear explosive device in 2023—and it will take time (perhaps years) for it to put a warhead on a ballistic missile. But once Iran has enough weapons-grade material for its first bomb, the game is over. We will look back at 2023 as the year in which the bipartisan US and international effort to keep Tehran from the bomb failed.
Colombia has long served as the linchpin of US policy in Latin America, and it is currently the only major economy in South America that does not have China as its largest trading partner. But all that may be set to change in 2023. In pursuing his policy agenda, the country’s new president, Gustavo Petro, could generate a backlash in the US Congress, particularly the Republican-controlled House of Representatives.
Those policies include Petro’s efforts to reimagine (and potentially scale back) cooperation with Washington on judicial issues and criminal extradition, achieve a possible agreement with Colombia’s National Liberation Army guerrilla group, and move away from lockstep coordination with the United States on eradicating drugs and overall drug policy (a joint approach that has been the fundamental tenet of US-Colombia relations over the last twenty years). Fallout in the United States, could, in turn, offer China an opportunity to increase its clout in Colombia. More broadly, inflation and other economic woes in the United States could have outsize consequences for Latin American countries, including greater political polarization and social unrest that leads to democratic backsliding as well as sovereign-debt issues. China could then position itself as a provider of desperately needed relief for countries grappling with these challenges. In such a scenario, US policymakers might be at risk of increasingly losing influence in not just Colombia but Latin America as a whole. A secure position in its near abroad has long been a predicate for America’s robust global posture. Is that position now poised to further erode, even with a longstanding ally?
Authoritarians have been trying to assert control over their technology ecosystems for years, but 2023 could be the year they finally succeed in creating online information environments that they can fully command. Russia, for example, has increased efforts to censor or shut down entire digital platforms for allowing any information about its war of aggression against Ukraine, turning these platforms into a new domain of conflict. China is going further and seeking to build the backbone of an unfree internet beyond its borders by investing in information infrastructure as part of its “discourse power” strategy. Even some democracies such as Indiaand Turkey are instituting sweeping internet shutdowns and crackdowns on freedom of expression online. The US government, meanwhile, lacks a clearly articulated strategy to promote an alternative at home and abroad. What’s playing out is not a partitioning of the infrastructure on which the internet operates, but rather an intensifying contest over the rules that govern infrastructure that is inherently interconnected.
Don’t expect a switch to flip, but watch for a slow roll toward two internets: one designed to facilitate government control with built-in surveillance, and one at least aiming to be free, open, secure, interoperable, and governed by many. There is a low likelihood that a full-scale splintering happens in the coming year. But if it does, it would change the world for a long time to come—and it could have a catalytic impact on nearly every other risk and opportunity on this list. There is opportunity embedded in this risk, however: Through novel mechanisms such as the Freedom Online Coalition, the US-EU Trade and Technology Council, a new US State Department bureau focused on digital freedom (the Bureau for Cyberspace and Digital Policy), and new offices at the US National Security Council, democratic countries are now better staffed and resourced to craft that much-needed strategy for protecting an open, global internet. There is nothing inevitable about a “splinternet.”
- Energy shocks: The coming year’s energy crisis could be worse than this past year’s. With Russian gas flows no longer available to refill depleted European stocks early in 2023 and no significant new European import capacity coming online, prices in the region could stay elevated and produce a mad scramble for gas.
- Economic contraction: The economic ripple effects of gas shortages include the risk of recession, inflationary pressures, business failures, and all the attendant impacts on cost of living, living standards, and labor markets, which in turn have political repercussions. In the medium term, these consequences might do lasting damage to European competitiveness. We’re already seeing trade surpluses dwindling and key economic sectors idling production.
- The toxic brew of #1 and #2: The stabilization measures that European governments have put in place to respond to the two challenges above could fuel concerns about sovereign debt and lead to a new Eurozone crisis.
- Domestic dynamics: The Franco-German engine of European action is sputtering. Economic problems, French President Emmanuel Macron’s precarious parliamentary backing, and German Chancellor Olaf Scholz’s complicated three-party coalition constrain both countries’ leaders at home and in the region, and there is uncertainty about how Italy’s new right-wing, EU-skeptical government will relate to Brussels. Major elections in 2023 in Poland, Greece, Estonia, Finland, Spain, and other countries could bring Euroskeptic and Russia-sympathetic politicians to the fore—while also pushing existing governments in those directions.
When you drill down, though, it becomes clear that many countries would like to move away from the dollar even if it won’t be easy and there is no clear alternative in the near term. That shift is, in fact, already happening gradually. The dollar’s share of foreign-exchange reserves is declining. Nations around the world—not just US rivals such as China but also countries including India, Indonesia, Malaysia, and South Africa—are investing in technologies such as central bank digital currencies that could make them less reliant on the dollar. The unprecedented global sanctions regime swiftly imposed on Russia in the wake of its February invasion of Ukraine has only increased the likelihood of an accelerated move away from the dollar—perhaps to a probability of roughly 15 percent. If countries can find ways around the dollar, the impact of sanctions would be undercut over time. The next time an adversary violates another country’s borders, the US economic counterpunch might not be quite as painful.
What happens when the democratic world is led by people whose electorates largely don’ttrust them—or even the elections that brought them to power? The potential outcomes include repeated leadership changes, continued chaos around elections, and more contestation of the validity of election results. In parliamentary systems especially, frequent elections introduce volatility that the world can ill afford. If the top of a democracy is unsteady enough, eventually it will shake the foundations.
Top opportunities
For many European leaders, the past year’s dramatic developments answered some of the unresolved questions about European strategic autonomy. Russia’s war unequivocally underscored the United States’ indispensable role in European security. It also killed any remaining illusions about a European special relationship with Russia and converted even the most dovish proponents of that position in Berlin. Europeans are now much more strategically aligned on the question of the European Union’s relationship with power, even if the EU’s instruments for exercising hard power are still lacking. More hawkish views on China are on the ascendancy in the region as well. The coming year will be about how to put these ideas into practice geopolitically, diplomatically, and especially militarily. What might that look like exactly? If EU military aid continues to flow to Ukraine, that would be an indication that the shift to a more geopolitical EU is happening in practice. In Berlin, it could take the form of operationalizing the government’s ambitious Zeitenwende conceptfor how to engineer a turning point in German foreign and defense policy. Elsewhere, watch for the European Peace Facility (the security-assistance fund from which EU military support for Ukraine is drawn) to be replenished.
Just as the Ukrainian government applied to join the EU within days of Russia’s further invasion of the country, leading the EU to speedily accept Ukraine’s candidacy (and that of Moldova), the conflict may well accelerate the EU membership bids of the Western Balkans countries in the coming year. Albania, Bosnia, Kosovo, Montenegro, North Macedonia, and Serbia will likely feel increased urgency to obtain the greater prosperity and security that they believe EU membership would provide, and EU leaders could be more inclined to embrace them—as Germany’s chancellor, for example, has recently signaled.
One of the most significant outcomes of this past year’s United Nations COP27 climate-change conference was that it produced a path forward for the 2015 Paris Agreement’s Global Goal on Adaptation. That includes $230 million(admittedly still a drop in the bucket compared with an expected need of hundreds of billions of dollars per year) in new pledges by governments and development agencies to help countries adjust to a changing climate, as well as the announcement of the Sharm el-Sheikh Adaptation Agenda to enhance resilience in the world’s most climate-vulnerable places by 2030.
Outside the official negotiations at COP27, I witnessed numerous efforts to accelerate investment in climate resilience, including new initiatives to mobilize capital for adaptation to extreme heat and for cooling food, medicine, and buildings through methods ranging from light surfaces to green spaces and roofs to machines powered by renewable energy. The select non-governmental “Climate Champions” at COP27 also endorsed existing projects where the insurance industry is taking risk-transfer approaches to advance climate adaptation along with disaster preparedness and response. European Union regulators, meanwhile, have developed a taxonomy for the financing of climate adaptation, helping refine how to measure such investments. Less than 10 percent of total climate finance currently goes to climate adaptation. But the stage is set for an innovative cast of public and private actors to make 2023 a breakthrough year in which investments in climate adaptation more than double to account for a quarter of total climate finance.
The nearly 2 billion people living in South Asia, one of the world’s least economically integrated regions, all face a much higher-than-average risk from climate change, as was poignantly on display during Pakistan’s deadly floods this past year. One recent study, for example, found South Asia to be the region most at risk of suffering economic losses from climate change.
The threat has become dire enough that, as my colleague Harris Samad has pointed out, climate change may be the one chance to generate constructive transnational conversations in South Asia over the coming year. The catch that makes major progress unlikely? These conversations would need to occur among civil-society organizations, since the governments in the region have effectively closed down all cross-border scientific cooperation. Still, collaboration of any kind—from standardized climate curricula to a public-private forum for data-sharing to common strategies for building climate-resilient infrastructure —would present an opportunity to save countless lives. At the regional and local levels, it would also serve as a model for how to counteract climate change despite deep geopolitical divisions.
