The Shifting World Order – Center on Global Energy Policy at Columbia University SIPA | CGEP

Tom Donilon: The United States and China are engaged in a large-scale competition to seize the commanding heights of technology leadership for the 21st century. And that’s rooted in an understanding of what’s important from a military perspective, but also what’s important from an economic perspective as well. And that’s the dynamic I think that we’re in.

Jason Bordoff: Geopolitics loom large over the global economy. A recent client survey by Goldman Sachs found geopolitics is the top investment risk of the year overtaking inflation in the upcoming U.S. presidential election.

The market impacts of the wars in Europe and the Middle East, the rising tensions between China and Taiwan, all are uncertain and hard to predict. The rise of protectionism, economic fragmentation, and industrial policy are inflaming tensions in a new era of great power competition. A strained and more fractured world seems to be the new normal.

So, how should we understand this shifting world order? What’s coming next in the Middle East following Iran’s attack on Israel? And how do energy and climate change impact national security?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff.

Today on the show, Tom Donilon. Tom is chairman of the BlackRock Investment Institute. From 2010 to ’13, he served as National Security Advisor to President Barack Obama. He’s worked closely with and advised three U.S. presidents since his first position at the White House in 1977 working with President Carter, and he later served in senior roles in the Pentagon and the State Department.

Tom joined me at the 2024 Columbia Global Energy Summit here in New York City to cover a number of topics including the escalating conflict in the Middle East, the war in Ukraine, and the evolving relationship between China and the United States. I hope you enjoy the conversation.

So, we’re going to jump right in. We’ve got so much to talk about. We will not have enough time, but I want to start with events of the weekend, Tom. We’re in a moment that seems rife with conflict, potential conflict in Israel-Gaza, Russia-Ukraine, China-Taiwan. So, let’s start with the events of the weekend in Israel.

And it seems like 24, 48 hours later, there’s this conversation about whether this was for show and performative, and Iran had to do something to retaliate for Damascus, but they signaled it was coming. And you can see it’s not hard to shoot down 300 missiles and drones, so this all should end now, or this is a really significant and unprecedented kind of escalation direct from Iran, direct into Israel. Talk about how you see it and particularly what that might mean for the Israeli response coming next.

Tom Donilon: And thank you, Jason, and it’s terrific to be here back here at the center. I just wanted to, before I start, say what a terrific job you’ve done here and what a terrific job has been done by the Center really in providing just spectacularly high-quality intellectual capital in the climate and energy area.

Really, just in 10 really short years, it really has become kind of a go-to resource I think for the world in these areas. Rigorous, fair-minded, quite useful for policymakers I think around the world, so congratulations-

Jason Bordoff: Thank you.

Tom Donilon: … on the work that you’ve done here at the Center. I was proud to have been here the first day when we walked in.

On Israel in the Middle East, I don’t think you can say what happened over the weekend, you can’t really call it performative. It was a serious attack and serious time. I think we’re not through the cycle at this point, frankly. A couple of points to lead into it.

One, it was, Jason, an unprecedented and direct attack on Israel. If this had not happened, if we had not had a situation where Iran had from Iranian territory attacked Israel in Israel proper. When I say never, I mean, since the founding of the Islamic Republic of Iran in 1979. So, it was a change but then what had been the circumstances in the Middle East and it was direct. It was unprecedented.

Second is, and it goes to your question about whether it’s performative or not. It was large scale. Now, it had been telegraphed, and I think it was probably intended to keep in its focus on military targets, but it was a large-scale attack. Over 300 projectiles were fired from Iran but also from other places around Israel.

It was a multidimensional attack with different kinds of armaments being fired at Israel to try to evade the Israeli air defense and rocket defense systems. It was intended to do significant damage because the Iranians could not have had any idea that we, the United States, and the Israelis and others in the coalition, would’ve had a 99% success rate in taking down the projectiles that were targeted at Israel.

The defense was highly effective, and I think that’s a testament to the progress that the Israelis have made in terms of their systems. But it also would not have been anywhere near as effective, I don’t think, if it hadn’t been for the coordinated, integrated defense that had been put in place in the Middle East, led by the United States. And our central command, the so-called CENTCOM, had been deeply involved in this for a number of years.

And I think we saw it pay off over the weekend, involving the United States and UK and France and Jordan and other countries in the region. So, really an important point, I think, that this was a large-scale attack on Israel that was taken down by an extraordinary performance of an integrated air defense system.

Now, there is no guarantee that you get a 99% success rate on one of these things every time that it happens. Now, the Iranians have expended an important part of their armaments, but you can’t really count on that performance, I don’t think, obviously in every circumstance. Now, you asked what had changed in the Middle East as a result.

Jason Bordoff: Iran seemed to say we’re done now, and then the Biden administration wants everything to get calm. Oil prices fall the next morning, not withstand, so I think that’s right.

Tom Donilon: And the Iranians, the United States obviously at least publicly has been saying that they would urge caution and prudence at this point, right? Proceeding further, and the Iranians declared it the end of the cycle, but there was a change, and the change was this direct attack on Israel from Iran.

Jason Bordoff: And how do you think Israel-

Tom Donilon: And the declaration, the declaration by the Iranians, that this was quote, unquote “a new equation.” And that in fact what they say is that anytime now, Israel attacks an Iranian interest or person that they would respond directly to Israel in many cases from Iran. That’s a change. And so, although in the short term here, maybe it hasn’t escalated out of the events of the weekend.

Long term, it is a structural increase in the risk profile in the region because of that dynamic, which you could have with Iran attacking Israel directly, and Israel responding now on the response. The Israeli war cabinet has met, I think, for the fifth time, met five times to consider their response. I think they’re trying to calibrate this of establishing deterrence, saying that an attack of that scale in Israel, which did result in a few getting through and actually doing some damage to Israeli air base in Southern Israel, but that’s not accessible.

So, we have to establish deterrence at the same time, not launching a response that would escalate the situation. I think that’s what the Israeli or cabinet is wrestling with right now. I do think there’ll be a response though. I think the response, it’s hard to, I don’t think from this distance at this point that we can kind of predict what the timing, the scope scale will be, but I think there will be a response from… So, the cycle is not complete, and there’s been an increase I think in the structural risk profile in the region, as I said.

Now, one thing though, I’ll finish up on this if I might that shouldn’t be forgotten, is that Israel is in the midst of a war effort in Southern Israel and in Gaza, which is nowhere near completion. The next military target for the Israelis is probably a southern city in Gaza called Rafa. There are probably three or four Hamas brigades that remain to be dealt with in southern Gaza, but there are also a million two, million three Gazans who have been displaced and who are in dire need of humanitarian assistance.

This is the challenge. This was the challenge of the United States, and Israel we’re trying to work through before the events of this weekend, which is to address the legitimate security concern of remaining three or four brigades of Hamas with the need to do a much better job at dealing with the humanitarian situation and, even further down the line, to deal with some sort of perspective, if you will, on governance in Gaza post-conflict.

We’re not anywhere near conclusions on this, so we are really quite I think early in the Gaza story, and it’s a tragic story. It’s a tragic story on October 7th, obviously. It’s been a tragic story inside Gaza where the numbers now. You can argue about the numbers, but 30,000 dead, maybe 12,000 children. It’s a dramatic humanitarian situation that needs to be addressed.

My wife, Cathy Russell, is the CEO of UNICEF, and so this is a conversation, you can imagine, that I have a lot at home, lots of challenges.

Jason Bordoff: When you look at where things might be headed with the horrific conflict and suffering in Gaza, possibility of a ceasefire, of talks about a two-state solution, of Israel-Saudi normalization, of a security guarantee for Saudi, all of these things that were out there, how do they look different today after the attack this weekend than they did before?

Tom Donilon: Well, I think number one is I do think the Israelis will be determined to deal with the security situation in Southern Gaza, number one. Number two, the issues that you talked about, the humanitarian situation, the government situation, the security situation remain in front of us.

And I think that’s going to require setting forth the perspective on what governance looks like in Gaza and with Palestinians generally. That’s I think much more intense involvement from the major Arab states I think to try to address this going forward. So, these are all in front of us here, and I don’t even know that we’re midstream and trying to dealing with the outcomes of the Hamas. The Hamas launched a war on October, on October 7th.

The other thing that is of concern to me, as a security person, is the longer this goes on, I become increasingly concerned about knock-on effects in terms of terrorism in Europe and the United States, especially in Europe.

The numbers in Europe right now potential of threats and plots that were foiled are very high in all cases, particularly against Jewish interest, Jewish facility, Jewish people, and Jewish institutions. And the longer this goes on, Jason, I think the more you have to worry about knock-on terrorist effects around the world.

The last thing I’ll say is we also have a situation brewing in the northern part of Israel on the Lebanon-Israeli border, which has been going on since October 8th. We say it’s been controlled, but there’s been two… I think the Israelis have been pretty aggressive, and I think have killed 250 Hezbollah fighters in the north.

And at the same time, the Israelis people have been displaced. There’s 60,000 Israelis who don’t live in their homes today. I don’t think the Israel will allow this to go on.

Jason Bordoff: So, I wanted to ask if you could put this in a broader context of what you see happening in the world right now. I saw a poll recently with a recent poll of 500 institutional investors that talked about how geopolitics was the number one risk to the global economy that they see in 2024. I was wondering from your standpoint, how you see it, is that right? And how has that landscape and set of risks, how do they look today? How have they evolved in the 10 years since you joined us on day one?

Tom Donilon: It’s now recognizable from 10 years ago, Jason. Essentially, I think the way I’ve thought about this is we’re now in the third serious geopolitical set of changes that we’ve had since World War II. We had obviously the Cold War and the wake of World War II, the standoff between the United States and the Soviet Union.

And then, in the late ’80, ’89 to ’91, we had coming out of the post Cold War period with the fall of the Soviet Union and the integration into the global economy of China and Eastern Europe and that world, which was characterized, it had specific characteristics that were… it was US dominance, a agreement basically on integration of both China and Russia and former members of the Soviet and block into the global economy and global institutions.

Integration was the watchword of the day. You had a large and significant degree of cooperation and coordination between the great powers at that point, and you had an agreement really on economic management, globalization of Washington consensus, right? Lower tariffs, smaller government, less regulation. And that was essentially what was agreed on, I think, pretty generally in the world. That world is in the rear-view mirror. If you think about just the fragmentation issue, about the coordination and cooperation among great powers.

I was talking to someone earlier coming in here today. So one of the first assignments I had from President Obama was to work on the G20 Summit in London in April 2009, and the purpose of that summit was to deal with the great financial crisis.

And around the table was seated newly elected president of the United States, Barack Obama, the then president of the Russian Federation Dmitry Medvedev, the then general secretary and president of China, Hu Jintao, Gordon Brown was hosting a number of Europeans and developed a joint plan to deal with the great financial crisis.

That meeting would not take place today on any topic. And that, I think, in a nutshell, shows I think the degree of change in fragmentation. We were talking about Iran. Jason, as you know, I oversaw the pressure efforts for four and a half years on Iran, and our partners in their pressure effort were the permanent members of the security council that included Russia and China. And of course, they’re in a very different position right now with respect to the United States and with respect to Iran in North Korea.

So, a dramatic change I think, Jason, and the geopolitical lineup, if you will, it’s more fragmentation for sure, less cooperation, less effective in the operation I think of the international institutions. And then, really I think importantly just of two the quick ones, a rewiring and a rethinking of globalization to some extent.

Now, it’s not deglobalization because the trade numbers hold up pretty well, but it’s a very different approach I think to economic management, right? And this rewiring and building out as a result of these, as a result of these blocks in the United States, by the way, you’ve seen a very different approach to economic management, by international economic management, Jake Sullivan. It’s a speech that really bears careful reading and rereading.

Jake Sullivan’s speech at Brookings in April of 2023 essentially said that the neoliberal approach to managing international economics and US economics had failed. It had failed on three fronts. China, inequality in climate, and that a new approach was necessary including large-scale government interventions into markets. And we’ve seen that out of the Biden administration in a number of areas.

The two other things that I think have changed, and I’ll shut up on this one, is a really serious increase in defense expenditures around the world because we have more unstable, volatile situations in the world, more chances of conflict, and a standoff, if you will, an increasing standoff between the major blocks, United States and Western Europe and its partners in Asia, China, Russia, North Korea, and Iran increasingly work more closely together than they have in decades on the other side, and you have an increase in defense monies.

And the last thing is a really serious, I know that’s something you all pay attention to, a serious degradation in the nuclear non-proliferation regime, where between the United States and Russia right now, we’re down to just one treaty essentially limiting us. The new start agreement, which we worked on in the Obama years and that, in a year or so, [inaudible 00:17:28].

Those are the characteristics today I think of the world that we’re dealing with, and I think that’s reflected in the survey that you talked about at the beginning of the question.

Jason Bordoff: So, this is a really important issue for our ability to have a clean energy transition because right now so much of those supply chains for clean energy, solar panels, batteries, electric vehicles, critical minerals, China plays a very significant, one might say, dominant role in.

So, that speech you talked about with Jake where you talked about a small yard with a high fence, there’s a small number of very sensitive defense, security, technologies we’re concerned about. But beyond that, we want a lot of trade. It’s not clear how small the yard really is.

And I’m wondering when you look at how US foreign policymakers are or should view China, is it an adversary? Is it a competitor? What does that mean for how much of a cooperative or confrontational approach to take? And what does that mean when we’re trying to ensure supply chain resilience, economic competitiveness, national security, but we got to grow clean energy supply chains among other things really fast?

Tom Donilon: Well, because there are competing policy priorities. I think on the US-China relationship, I think there was a significant meeting last November between President Biden and President Xi. And since that, there has been an effort on both sides to stabilize the relationship and to do two or three things. I would say stabilization measures including multiple visits back and forth. Janet Yellen, secretary of the treasury was in China for a week last week. The tone of the relationship I think has changed.

And third, most importantly I think, the military-to-military communications were reopened as a result of that summit. So, you have now I think a more stable, well-managed situation, but I think it is tactical and that underneath that remains the new normal, which is a highly competitive dynamic, I think Jason, between the United States and China, that will continue, and it’s focused on a few areas.

And you’ve touched on one which is technology, which respects obviously the climate agenda. And on the technology side, the United States and China are engaged in a large-scale competition to seize the commanding heights. And you’re going to see someplace. I’m sure people recognize that phrase, right? To seize the commanding heights of technology leadership for the 21st century.

And that’s rooted in an understanding of what’s important from a military and what’s important from a military perspective but also what’s important from an economic perspective as well. And that’s the dynamic I think that we’re in. So, you see things like a very aggressive effort on the US side to do two things. One, to advance its technological lead, and second, also to protect its economy and its workers.

And you see a whole range. We could spend a morning going through the range of steps the United States has taken in order to try to achieve those goals, starting with export controls on high-end semiconductors, but going all the way to a number of other steps that we’ve taken again here. And we’ll see this, by the way, we’ll see this combination of technological, competition, and goals that will have to stand beside and have to be balanced with the climate goals with respect to electric vehicles and everything.

I think that’s coming. Janet Yellen last week, as I said, was in China and made quite clear that there were a number of concerns the United States had, even though we’re engaged in this more stable back and forth. And one of them was China trying to export its way out of its growth challenges through exporting its overcapacity.

President Xi has been quite clear about what his priorities are in terms of that overcapacity, in terms of this new productive forces, as way he would phrase it, and they are electric vehicles, batteries, and solar panels and other clean technology. That is going to be the next big trade set of issues. And I think coming forward, the other one by the way is going to be on China’s support of the Russian industrial base in the war in Ukraine, but that’s another-

Jason Bordoff: I wanted to ask you about-

Tom Donilon: … that’s another meeting.

Jason Bordoff: … Russia-Ukraine as one other geopolitical hotspot of course. So, the US is having trouble finding political consensus to provide funding for Ukraine and Zelenskyy warns that without that military may be forced into retreat.

Can you tell us where you see the conflict now? What does success for Ukraine look like? And if that’s possible to use that word, the likelihood a full Russian retreat seems low, and what implications does this have for European security or other things around the world, Taiwan or anything else more broadly?

Tom Donilon: There’s a lot.

Jason Bordoff: There’s a lot there.

Tom Donilon: There’s a lot there, but I’ll say a couple of things. One is that there’s been success, right? That we should not miss with respect to Ukraine. In February 2022, when the Russians invaded Ukraine, I think most folks thought that essentially they would succeed.

And the Russian goal at that point was to decapitate the government, put in place someone who would respond to Moscow, and essentially end the effort of Ukraine to tie itself more closely with the West. And that didn’t happen for a number of reasons, including obviously the courageous fighting by the Ukrainian people and pushing back the initial assault, it also had to do kind of with the low quality at that point and deep corruption in the Russian military, but it had a lot to do with over the longer haul with the United States and the West supporting Ukraine, which is essential because you given these battles, some cases in many cases are a battle of industrial bases.

And the correlation of forces between Russia and Ukraine on the natural is weighed heavily towards Russia. And what’s happened is that through this effort led by the United States and with close coordination with European and other partners, by the way, around the world, has been to more even out this correlation of forces to give the Ukrainians an opportunity to defend themselves in their battle with Russia. That’s absolutely essential.

Absent that support, evening out the level of correlation of forces, the Ukrainians are in a very difficult circumstance. I think that’s the circumstance you have right now on the two areas, where they are quite short of supply, is artillery, right? And when you’re in this World War I style battle in Eastern Ukraine, artillery matters a lot is a key part of the ability to operate.

And the second one, Jason, we saw this weekend the importance of it, and that’s air descent systems, absolutely critical. David Ignatius, the columnist for the foreign policy columnist of the Washington Post, was in Ukraine a couple of weeks ago. He did an interview with President Zelenskyy who really went into this, right? He said that is key for us. We need to have continued air defense, rocket defense, and mechanisms, right?

And our armaments are from the West. If you don’t have that, you can imagine what would’ve happened in Israel this week and if Israel hadn’t had that level of air defense and rocket defense, where you can imagine what can happen to Ukraine if they don’t. If you see it right now, you see the second largest city in Ukraine, Kharkiv, is under assault by the Russians constantly, and they’re trying to make it unlivable.

And essentially, what happens there, and I’ll finish up on this, is you have what had been a World War I trench warfare operation and the eastern part of Ukraine, it then becomes a World War II style bombing big cities and making those cities unlivable if you can’t push back both their aircraft and the missiles and rockets that they can fire you.

And, well, I’ll finish up on this. Ukraine has a much harder problem, which is why it needs these systems so badly. The Israelis dealt with the Iranian attack this weekend. Iran is 1100 miles from Israel. Russia is not 1100 miles from Ukraine, so the distances are so much shorter.

Secondly, Ukraine is a lot, lot bigger than Israel geographically. In terms of territory, much bigger place to defend. And the third is a lot of the drones over the weekend were shot down, not by missile defense systems, but were shot down by F-35 aircraft. And obviously, the Ukrainians do not have that kind of air force to be able to go back at drones launch from Russia. It’s a really serious situation, and it’s exceedingly irresponsible for us not to support them at this point with the measures that are before Congress.

Jason Bordoff: I have a little time left, but I wanted to… And we’re mostly talking about national security given your focus and your background, but I wanted to just ask you to reflect back on the remarks you gave here 11 years ago.

Again, you talked about two things, climate as an urgent national security issue, and you also talked about something that was just rising to the surface for at least for many people. Some parts of the country may have seen it coming far before, but the significant shift of the US to becoming much larger oil and gas producer.

And just to put it in context, I went back and, look, the way you said at the time was in 2005, 60% of US oil was imported. Today, the number is 40 and falling a dramatic move toward fulfilling the president’s goal of cutting oil imports in half by 2020. Of course, came in net exporter, so it’s just how significant that change was.

But as we saw, there’s understandable concern about the surge in production when we just had COP28 call for moving away from transitioning away from fossil fuels. And we’re running out of time to bring emissions down. Just talk about today how you see the role of the US in the global energy landscape and also climate landscape.

Tom Donilon: Well, we’re running out of time here, but the speech that I gave here, which we worked on the roots of that speech for our years together in the executive branch had two focus. And two things were happening at an incredible speed. The first was this dramatic change in the US energy supply situation.

And essentially, the United States was becoming a country that has, since the 1970s, regarded itself as an energy-poor nation, a nation that was dependent on oil and is buffeted by events far beyond its borders. And that was changing pretty dramatically.

And the second of course was the transcendent issue and the accelerating issue of climate. And those are the two focuses of the speech. Reflecting back on it, we’ve obviously had on the energy supply side, dramatic changes in the United States right now, obviously, as everybody here knows is the largest supplier in the world of natural gas and oil. And that’s an important to meet the demand as we move towards and hopefully accelerate the transition to a cleaner energy world.

You do have to reflect though, Jason, on what the impact of that has been on the US economy and a geopolitical position in the world including, we were just talking about Ukraine, including the ability to supply natural gas to European allies after the invasion of Ukraine. And also look back again on the economic changes in the United States and what the benefits were of that.

At the same time, the United States, under the Biden administration, has pushed to accelerate the transition pretty aggressively. And I think that was hopefully foreshadowed in the speech as well. And the Biden administration obviously has set aggressive goals, engaged in diplomacy, and obviously intense regulatory agenda.

But also, I was reflecting preparing for today on the Inflation Reduction Act as one element of that, which has been extraordinary piece of legislation. I mean, it was well-designed, it had the right incentives, it was pretty simple, and it’s long ranged.

And so, what’s going to happen there is, basically, I think the current estimates by different banks on the street right now are that, in fact, the level of incentive will be maybe a trillion dollars over the next 10 years, and it might produce 3X that in investment in clean energy, which would be an extraordinary outcome, I think, for us.

So, I think both. I think that the United States, obviously, you have to reflect back on what the situation would’ve been economically and geopolitically for the United States absent that change in supply and also the importance of moving forward with initiatives like the Inflation Reduction Act.

Jason Bordoff: So, very briefly, a close on, we have a lot of young people who will be coming out of grad school or college looking for jobs soon. And how do you get a job in the White House straight out of college, and how do you manage a national convention at the age of 24?

Tom Donilon: Well, all right, Jason, here’s the deal. So, you were trying to be polite. At the beginning, you mentioned I started my career in the car administration. So, I’m looking around the audience here, including the students, right? You might as well have said he worked in the Benjamin Harrison administration, right? So, I got that right, a historic event for most people.

As I look around in this audience, I was very lucky with mentors and had opportunities. And I started working in the White House when I was 21 years old. My first big job for President Carter was in this city where I managed the convention down the street here in Madison Square Garden. And it was one of the great nomination battles and modern history, the Democratic Party.

It was the battle between Senator Ted Kennedy challenging then incumbent President Jimmy Carter for the nomination, and I was fortunate enough to be able to manage that convention and learn a lot about politics. Keep on moving with my advice, be open to lots of things and changes.

And my career, obviously, has changed radically a number of times from, I don’t think, when I was sitting in the trailer and deep in the Madison Square Garden worrying about delegates from Illinois that I could see myself as National Security Advisor, but things have worked out.

Jason Bordoff: You were lucky with mentors and I was as well, and you’ve been one of them. So, thank you. Please join me in thanking Tom Donilon.

Thank you again, Tom Donilon, and thank you for listening to this week’s episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia University School of International and Public Affairs. The show is hosted by me, Jason Bordoff and by Bill Loveless. The show is produced by Erin Hardick from Latitude Studios. Additional support from Lily Lee, Caroline Pittman, and Q Lee. Roy Campanella engineered the show.

For more information about the podcast or the Center on Global Energy policy, please visit us online at energypolicy.columbia.edu or follow us on social media at ColumbiaUEnergy. And please, if you feel inclined, give us a rating on Apple Podcasts. It really helps us out. Thanks again for listening. We’ll see you next week.