Businesses Get Caught In New Geopolitical Storms
Control over operations is disappearing
As the world watches US forces build up in the Caribbean in preparation for a strike on Venezuela, thousands of miles away, a very different kind of headache has formed in Russia.
Over the weekend, hundreds of Porsche vehicles suddenly stopped working in the country. Owners of the car cannot start their vehicle, keep it on, or sometimes even get inside. According to Rolf, the largest dealership company in Russia, which owns Porsche dealerships, this could be a deliberate act. And there is no controlling which vehicle is hit next. The culprit is satellite connectivity, specifically a component called the Vehicle Tracking System (VTS), installed on all Porsche vehicles since 2013. If VTS senses that satellite connectivity has been lost, it paralyzes the car, believing a theft has occurred.
So the question is, what is happening to Porsche’s satellite connectivity in Russia? And, why was Russia the only nation affected by this?
More than likely, such answers will never materialize. More than likely, somebody somewhere has struck the satellite connectivity supplied to Russia over the war in Ukraine. Strange, however, that the target was Porsche vehicles. Was this simply the first test, a small probe?
Answering Geopolitics
Questions aside, there is a bigger story here.
Companies are battling new geopolitical storms, being drawn into geopolitics in new ways.
Porsche and its parent company, Volkswagen, will have to answer for an event out of their control. This could fall onto suppliers or even be blamed on Russian dealerships themselves (i.e., lack of maintenance). Geopolitics is squeezing businesses once again, and this time in ways that are far more intimate for consumers. Whether or not German automakers sell in Russia is one thing. However, if the vehicles that consumers own cannot start, that is something else.
Spy Games
Porsche is not alone.
At the end of November, a new report revealed a shocking proposal from ASML, the Dutch chip giant. It had offered to “spy” on its Chinese customers for America. This was part of a Dutch-government brokered strategy for ASML to “regain trust” of Washington after the company was caught selling more machines than it should to China.
One of the world’s most critical technology companies was offering to surveil Chinese companies, who were its own customers, on behalf of another government. This takes the geopolitics-business nexus well beyond supply chain diversification or decoupling from China.
Contradictory Steps
Companies are now stepping deeper into geopolitical battlefields, taking steps that few would expect. This creates a range of strange realities that complicate global operations.
First, businesses are taking steps that are contradictory to one another.
The idea of ASML spying on China, for the US, threatens the company’s access to the Chinese market, its largest market, representing 36% of its global sales. Should Beijing have found out, it would have responded in extreme ways, including phasing out the company in certain sectors. ASML was willing to take that risk.
Put differently, companies are willing to spy on markets where they are still trying to make money.
No Easy Choice
Second, companies are caught between a rock and a hard place more than ever before.
Volkswagen has to manage a dual crisis: its vehicles losing connectivity, and that so, in the world’s most sanctioned nation (Russia). Even if the German firm wants to help its Russian customers, it has to do so in a very calculated way. Too much support, and a Mondelez-type situation could form, where the US companies’ clients in Nordic states boycotted it over its continued operations in Russia. Too little support, and a certain signal will be sent to consumers in the non-Western world, that support gets sidelined when geopolitics flares.
Almost simultaneously, companies are either stepping deeper into geopolitics or are being disrupted by new crises. This is not just happening to Western firms. In Asia, OnePlus, the Chinese firm, is under scrutiny for censorship. Users of the phone’s “AI Writer” feature have reported that certain queries, like those about the Dalai Lama or Taiwan, have resulted in the app spitting out an error. OnePlus has disabled its AI Writer, citing a “technical error.” At the same time, Taiwan has blocked RedNote, a Chinese app, creating new uproar for Taiwanese netizens used to accessing the platform.
Wild Ride
Businesses across sectors and time zones appear to be on the chopping block.
For companies, it is no longer whether they reduce exposure to certain markets. Now, no matter what they do, geopolitics is transcending strategies and infecting their operations. For many, as unthinkable as it might seem, it is no longer a question of stopping what is happening, but whether they are prepared to be taken along for a ride they do not control - and toward a destination that has no name.
ABISHUR PRAKASH AKA. MR. GEOPOLITICS
Mr. Geopolitics is the property of Abishur Prakash/The Geopolitical Business, Inc., and is protected under Canadian Copyright Law. This includes, but is not limited to: ideas, perspectives, expressions, concepts, etc. Any use of the insights, including sharing or interpretation, partly or wholly, requires explicit written permission.