Russia has built up its military presence in Syria and today they launched air strikes. They seem determined to reassert themselves in the international arena and to challenge western leadership. The world is getting more dangerous.
In the post-cold war era, otherwise known as Pax Americana, geostrategic risks were considered a thing of the past. Francis Fukuyama’s best seller “The End of History” captured the times. U.S.-Russian relations seemed destined for a permanent rapprochement, while the formerly communist countries of Eastern Europe modernized their economies and joined western institutions such as the EU and NATO. Meanwhile, China’s opening to the world was continuing apace.
But this benign international environment ended with a thud over the last few years, as geostrategic issues again dominate the headlines. Russia’s relationship with the West soured quickly with the former’s invasion of Ukraine and annexation of Crimea. And China seems determined to reassert itself both regionally and globally, challenging U.S. hegemony in both spheres. Fraught relations with Russia and China are tectonic shocks to the international landscape, making benign neglect of geostrategic risks untenable.
Here are some basic country risk definitions for one’s edification.
Country risk: A collection of risks associated with investing in a foreign country.
Political risk: The risk that an investment’s returns could suffer as a result of political changes or instability in a country.
Sovereign risk: The risk that a foreign central bank will alter its foreign-exchange regulations thereby significantly reducing or completely nulling the value of foreign-exchange contracts.
Credit risk: The risk of a government becoming unwilling or unable to meet its loan obligations.
Economic risk: The risk that macroeconomic conditions will affect an investment.
Geostrategic risk: The risk that international events, such as wars or diplomatic initiatives, will damage business or financial interests.