Sensemaker: Extreme continental – Tortoise

Long stories short

• At Davos, Scholz declined to promise Leopard tanks for Ukraine.
• Jacinda Ardern said she would step down as New Zealand’s prime minister next month.
• Greta Thunberg prepared to deliver a “cease and desist” letter signed by 800,000 people to fossil fuel CEOs at Davos.

Extreme continental

This year’s Indonesia pavilion at Davos takes up a whole block on the Promenade. The UAE has pride of place opposite the Belvedere. The Boccalino restaurant has been taken over by the Indian state of Maharashtra. Tamil Nadu is across the street. The Indian federal government has not one expansive lounge but three, and Saudi Arabia is represented by 80 feet of prime real estate plugging the desert fantasy known as Neom (more below).

So what? Not long ago the titans of global tech and commerce bestrode the Promenade unchallenged by mere states. Not anymore. Public money is back. Corporates are digging in for a global recession they still hope won’t come; many are surprisingly, if not convincingly, upbeat. 

This year’s big stories are about countries, not companies. They tell of 

• sovereign wealth in search of diversified returns;
• western governments in search of energy and supply chain security;
• deglobalisation despite the best efforts of free traders and Big Tech to suggest it isn’t happening; and
• the return of continental blocs that either don’t show up in Davos (Russia, China), or are less aligned in terms of vital interests than they claim to be (Europe, the US, India).

Planet Earth has turned somersaults in the three years of pandemic and war since the World Economic Forum last met in person in the snow. 

The US still accounts for 45 per cent of global military capacity and retains the whip hand in Ukraine even at a distance of six time zones. (Last night it hinted at new assistance to help Kyiv in Crimea.) But Biden’s $370 billion Inflation Reduction Act (IRA) – his climate and clean energy mega bill – is a huge and historic bet on self-sufficiency or protectionism, depending on your view. Either way, it caught Europe napping.

The EU is transfixed by Russia’s war and an energy crunch that Olaf Scholz said yesterday could require 2 per cent of Germany’s landmass (3,000 square miles) to be turned over to wind turbines. In principle, the Atlantic alliance is holding against Russia. In practice, the IRA has triggered a tense EU-US rivalry over who profits from going green. If President von der Leyen gets her way the EU will respond by breaking its own state aid rules with €800 billion in loans and grants for European firms.

In other circumstances, the UK might have cried foul. Today it’s represented by Sir Keir Starmer and Rachel Reeves as presumptive PM and chancellor respectively, with a message that Labour means business even if Brexit isn’t working. They tell Politico Britain’s share of foreign direct investment has halved since the Conservatives took over. 

India has come to Davos with a pitch to western investors and governments to help it replace China as the manufacturing capital of the world. An infrastructure and digitisation boom is already creating 1.5 million jobs per month, and the head of the giant Tata Group expects 6 to 8 per cent growth for the next decade. But don’t expect India to fall in line with Europe on the war.

“Ukraine has united the West but split the rest,” says David Miliband. Fifty countries hosting half the world’s population haven’t condemned Moscow, partly because they need cheap energy, partly because they resent being taken for granted:

• Developing countries can’t print money but have had to live with inflation caused partly by those that can.
• Despite Covid, they’ve had zero debt relief.
• Despite Covid, middle-income countries haven’t qualified for concessional IMF funds.
• Because of Covid, they went two years without tourism revenues.
• Rich countries haven’t kept their promise of $100 billion in climate finance.
• Poor countries see double standards behind the West’s response to war in Ukraine on the one hand and, say, Syria or Yemen on the other.

“Europe hasn’t bothered about what’s happened in our part of the world for a very long time,” says an official in Maharashtra House. Russia is meanwhile banned from Davos. China is barely there. Xi Jinping’s 2017 visit as a self-appointed champion of free trade seems an age away, because it is.

Davos is changing in an effort to stay relevant. Its enthusiasm for globalisation is shaken.  “Strategic autonomy” of big countries and big blocs of countries – i.e. self-reliance in energy, finance and tech – is one of this year’s big ideas. Here’s another: “extreme continental” is a climate pattern common to big landmasses and characterised by huge temperature swings. Where does that leave small countries like Britain? For now, out in the cold.

CAPITAL ECONOMY, BUSINESS AND FINANCE

Desert dream
Exhibit 1 in the argument that public money is roaring back to change facts on the ground is a 170-km line across northwestern Saudi Arabia. Until recently it existed only on maps and in the imaginings of Crown Prince Mohammed bin Salman. But he’s sent a PR team to Davos with footage of diggers apparently sinking the foundations of The Line, which the brochures say will be a single structure 500 metres high, 200 wide and home to 9 million people, stretching from the Gulf of Aqaba deep into the desert. There’s more: Oxagon – a giant container port; Sindalah Island – Monaco meets Dubai; and Trojena in the mountains, where desalinated seawater will fill a reservoir for frolicking and snow cannons. Total budget: half a trillion dollars. The boosters say Saudi will one day host the Winter Olympics. The IOC doesn’t know this yet. 

TECHNOLOGY AI, SCIENCE AND NEW THING

Not a game
The crypto universe is supposed to be imploding but you wouldn’t know that from the always-heaving Davos Blockchain Lounge – or a micro boom that blockchain fans and gamers (the overlap is big) are trying to engineer in in-game non-fungible tokens (NFTs) which take the form of weapons and apparel and can be rented out as they increase in value, a bit like houses. Here’s the pitch: 3 billion people play video games, on average for 15 per cent of their time. The blockchain may not be much use after all as currency but you can’t uninvent NFTs and – the thinking goes – they’re good for gaming. Yield Guild Games sell them, and the newer Meta Masters Guild is trying to get in on the act.  

The 100-year life health, education AND GOVERNMENT

Low income, high vaccination
As the pandemic unfolded Covax stumbled. The global vaccination initiative set up by the Gavi vaccine alliance didn’t get the doses it needed from rich countries to protect poor ones as it hoped to, or as they needed. But Gavi’s CEO, Seth Berkley, has been in Davos making the case that what was actually achieved was remarkable: a 54 per cent primary vaccination rate in low-income countries compared with 65 per cent globally; 81 per cent of all health workers covered; 2 billion doses delivered, of which only 3 per cent wasted. Not bad, but the gulf between first-world hoarding and vaccine deserts elsewhere was still shaming on a planetary scale. NB: Covax’s challenge now is not supply of boosters. It’s demand.

Our planet CLIMATE AND geopolitics

H2 flight
The best hope of jet zero in real life lies with hydrogen, not batteries. The latter are too heavy for anything but air taxi schemes that provide fodder for endless artists’ impressions and a few expensive prototypes. The former can be compressed or liquified and fed through fuel cells to power electric motors built into high-bypass engine casings very like those used in modern jets. Val Miftakhov, a Belarusian-born entrepreneur in sales mode in Davos, has a fuel cell-powered engine ready to go in a twin-engined Dornier 228 at RAF Kemble (now Cotswold Airport). The only snag is it can’t be tested safely yet in the rain, and Kemble is in the UK. Fun fact for the future of long-haul: liquified H2 has a higher energy density even than kerosene, even taking into account the kit needed to keep it super-cool. 

CULTURE soCIETY, IDENTITY AND BELONGING

Putin’s forever war
Ukraine House has been a must-visit for Davos dignitaries including Boris Johnson. It features a moving video of a young brother and sister walking triumphantly through liberated Kherson, singing profanely about Putin. He is of course NFI at Davos. Yesterday he visited St Petersburg instead to mark the 80th anniversary of the siege of Leningrad, which he blamed on “representatives of very many European countries”. He toured a weapons plant and said Russia’s military-industrial complex was ramping up production to match a steady build-up of troop numbers between now and 2026. The Institute for the Study of War reckons he wants to be able to conduct “large-scale conventional warfighting in general and not just for the current war against Ukraine”. Poland is already discussing a change of its defence doctrine.

Thanks for reading. Please tell your friends to sign up, send us ideas and let us know what you think. Email [email protected].

Giles Whittell
@GWhittell

James Harding
@hardingthehack

Choose which Tortoise newsletters you receive

IN OUR MEMBERS’ APP

David Carrick: a rapist in the ranks

On Monday, Metropolitan police officer David Carrick pleaded guilty to 49 offences including rape and sexual assault. Over 20 years, the Met had nine opportunities to stop him. Why didn’t it?