Geopolitical Flashpoints and Global Economic Risks: A Contemporary Overview on South China Sea , Gaza and Ukraine: By TV Krishnamurthy

The South China Sea remains one of the most contested maritime regions in the world. China claims nearly 90% of the area as its exclusive territory and seeks to exploit the vast oil and gas reserves found beneath its waters. In addition to asserting control over the sea, China has laid territorial claims on islands that are internationally recognized as belonging to Vietnam, the Philippines, Malaysia, Brunei, and Taiwan. The situation is further complicated by China's aggressive stance on Taiwan, which it views as a breakaway province. China has openly threatened reunification with Taiwan at any cost, despite Taiwan's strategic location across the Taiwan Strait to the northeast of the South China Sea.

China has been using its air force to intimidate neighboring nations involved in these disputes. In response, the United States has deployed its powerful navy to the region, signaling its intent to counterbalance China’s growing influence. However, the U.S. remains ambivalent about direct military intervention should China launch an attack on Taiwan. At present, the risk of conflict escalation or war is considered low to moderate, and the economic consequences are similarly assessed. This cautious optimism stems from the belief that China is unlikely to sacrifice the extraordinary gains it has made over the past three decades in economic development, military modernization, scientific advancement, artificial intelligence, and space exploration. With projections indicating that China may surpass the U.S. economy within the next decade, and with its development of 3nm chip designs expected to enter mass production within three years, China is likely to adopt a long-term strategic approach. Drawing from its historical experiences and Confucian philosophy, China may choose to wait until it becomes the world’s leading power before taking any drastic action.

Despite its assertive posture, China is expected to pursue a politically negotiated solution for Taiwan’s reunification. The United States may play a role in this process, given its strategic interests in the region. To maintain stability in the Indo-Pacific, the U.S. has formed an informal alliance known as the Quad, comprising Australia, Japan, India, and itself. However, India is unlikely to engage directly in any conflict with China in the South China Sea. Another alliance, AUKUS—consisting of Australia, the United Kingdom, and the United States—has been established to manage potential crises in the Indo-Pacific. Due to strained relations with the U.S., India’s active participation in the Quad remains uncertain.

Turning to West Asia, the Gaza War has raised profound humanitarian and geopolitical concerns. The conflict began as a retaliation by Israel following a hostage crisis. Since 2022, the Israeli Defense Forces (IDF) have systematically dismantled the Hamas and Hezbollah networks operating in Gaza, Lebanon, Syria, and Yemen, aiming to secure peaceful borders and neighborhoods. Iran, widely regarded as the architect of these terror networks, was nearly neutralized through coordinated efforts by Israel and the United States. Because Hamas was deeply embedded within the Palestinian population, Israel’s military operations resulted in the near-total destruction of Gaza. Tragically, nearly 100,000 Palestinians—mostly women and children—have lost their lives, and the population has endured prolonged periods without access to food and medical aid. This humanitarian crisis continues unabated.

Israel has expressed its intention to remove all Palestinians from Gaza, an area of approximately 150 square miles, and has urged Arab nations to accept them as refugees. According to the United Nations, rebuilding Gaza will require an estimated $58 billion.

Meanwhile, the United States has proposed a $100 billion redevelopment initiative, dubbed the “Riviera,” to be managed by American authorities and funded by private investors. However, questions remain about the legality of such a project under international law. European nations have voiced their support for recognizing Gaza as a Palestinian state, though this long-standing promise remains unfulfilled.

The destruction of Gaza has significantly reduced the likelihood of further warfare in the region, but major challenges persist. Arab nations have refused to accept Palestinian refugees, leaving the region deeply unstable. Gaza’s economy, valued at approximately $2 billion, has been completely decimated, with unemployment soaring to 90%. While redevelopment efforts may eventually create housing and jobs for Palestinians, the short-term outlook remains bleak. Israel’s economic growth has also suffered, declining from 6% to 2%, with broader deterioration across key economic indicators.

In Europe, the Ukraine War stands as the most destructive and dangerous conflict since World War II. Russia’s invasion of Ukraine in February 2022 has destabilized both the European and global economies, with far-reaching consequences. The war has led to shifting global alliances and heightened the risk of nuclear escalation. Russia and China have intensified efforts to undermine the transatlantic alliance, and finding a resolution that satisfies both Russia and Ukraine remains a daunting challenge. The estimated damage to property and infrastructure in Ukraine stands at $180 billion.

The conflict has triggered a massive refugee crisis, with 3.7 million Ukrainians displaced across Eastern and Central Europe. According to the United Nations, reconstruction in Ukraine would cost approximately $600 billion if the war were to end immediately. Russia has suffered around one million military casualties, including 250,000 deaths and 750,000 critically wounded. The war costs Russia between $500 million and $1 billion per day, and approximately $600 billion in Russian assets have been frozen globally. The economies of all European nations have been impacted, with rising fuel and food prices contributing to widespread inflation.

The military risks continue to escalate. NATO member states are considering deploying ground troops to Ukraine, while the United States has expressed willingness to provide air security if a peace deal is reached. Russia, however, strongly opposes these measures and refuses to return annexed territories such as Donbas. Ukraine demands the restoration of all lost territories, and if NATO involvement intensifies, Russia may resort to using tactical nuclear weapons.

The economic risks are equally severe. A complete embargo on Russian oil could prevent countries like India and China from purchasing it, leading to a sharp rise in global oil prices and inflation. Nearly all nations, including OPEC members, would suffer due to severe supply chain disruptions and rising costs of food, commodities, and metals. The war is also reshaping global alignments, with the United States and NATO on one side and Russia and China on the other, creating a new and uncertain geopolitical landscape.

The Ukraine war has become the most defining crisis since World War II, affecting all nations either directly or indirectly. It has redefined global alliances, exposing them as largely transitory and tenuous. The Chinese philosophy that alliances formed out of crisis will ultimately crumble, while those built on common interest will endure the test of time, has been validated. The myth of a unipolar world has been shattered; today, the world is bipolar or even multipolar.

This war has also redefined the nature of future conflicts. Wars will no longer be fought with nuts, bolts, springs, and screws on the battlefield. Instead, technology will enable warfare to be conducted from air-conditioned rooms, where operators can control and destroy enemy military bases and population centers across land, air, and sea.

(The views express are of his own and does not reflect the views of C3S.)