Global Risk Analysis
2023

PHP Global Risk Analysis Project
PHP Research Institute(Summary)© 2023 PHP Institute, Inc. All rights reserved.
Neither this summary nor excerpts thereof may be reprinted, copied, or retranslated
without the express permission of the PHP Institute, Inc. Citations must specify thesummary as a source.
The views expressed herein are those of the project as a group and do not necessarily
represent the views of any organization which project members are affiliated.
PHP Global Risk Analysis Project, PHP Research Institute

PHP Institute, Inc.
NBF Toyosu Canal Front Building
5-6-52 Toyosu, Koto-ku, Tokyo 135-8137, Japan
E-mail: think2@php.co.jp

English Summary of the“2023 PHP Global Risk Analysis” Report

Introduction
This English-language summary presents the essence of the “2023 PHP Global Risk
Analysis” report, published at the end of 2022 in Japanese by PHP Sōken (PHP ResearchInstitute), the policy think tank of the PHP Institute, Inc.
The annual “PHP Global Risk Analysis” reports are the output of focused analyses byexperts in a broad range of fields, from geopolitics and regional studies to international
finance, global economics, energy, and cyber security issues. The 2023 edition is thetwelfth report in the series. The full report, published in Japanese, may be downloaded
from the following URL:
https://thinktank.php.co.jp/policy/7781/
The full report in Japanese comprises a “Global Overview” describing the worldwide
context for the various risks we face and detailed analyses of 10 global risks that will
require particular attention from Japan in 2023. The report explores the potential
impacts of each of these risks on the nation, as well as the policy implications for it, andalso includes two additional essays on risk issues. This English-language version is acomplete translation of the “Global Overview” and the key analysis points for each of the
10 risks.
Russia’s ongoing invasion of Ukraine has exposed the danger of judging geopoliticalsituations based on rationales we have heretofore taken for granted. The outcome of thisconflict remains uncertain, but there can be no doubt that what the Russia-Ukraine war
tells us about the details of the world’s power relationships, and the dynamism withwhich they are shifting, will impact the shape of the international order in years to come.
In the wake of the October 2022 Chinese Communist Party National Congress and the US
midterm elections in the following month, the strategic rivalry between China and theUnited States—underlying the power structures seen today—is showing interplay withthe domestic political situations in each country as it takes on new structures along
multiple axes. At the same time, we must pay attention to the nations of the global south,
with their diverse concerns that do not fit neatly into a simple dichotomy of democracy
or autocracy. Trends among these states are bringing about new dimensions in theinternational order.
The nations of the Middle East are now seeking to play a central role in the energy andgreen domains, a development that will increasingly govern the course taken by theworld of tomorrow. Japan, which has long been excessively reliant on this part of theworld to meet its own energy needs, must be more aware of this. Nor can we ignore thelikelihood that a Russia weakened by the war in Ukraine will introduce chaotic elements
to the complex, multifaceted game of geopolitics.
Economic and societal paradigms are beginning to undergo dramatic shifts today, as weleave behind the era of ultralow interest rates and monetary easing and see the rising
impact of climate change and destructive technologies. The interplay between the logic
underpinning the realms of politics and economics will see considerable change. In thisreport we touch on the issues of “overlooked risks” and “the risk of unknown
unknowns.” Now more than ever, we are called on to deliberately clear our minds of bias
rooted in the status quo as we consider the issues we face.
The 10 risks in this report are not presented in order of their importance. They havebeen arranged so as to highlight the connections among them and to better allow
readers to grasp the overarching structure of the global risks we face.
It is our hope that the twelfth “PHP Global Risk Analysis” report will provide readerswith valuable insight as they take a dispassionate look at the reality of our world today,
helping them to squarely face the era of crisis we are now experiencing.
February 2023
PHP Global Risk Analysis Project, PHP Research Institute2023 PHP Global Risk Analysis
Global Overview
The International Order Walks a Tightrope●

The path toward successful termination of the “limited war” between Russia andUkraine remains narrow.
➢ Russia and NATO manage to mutually avoid direct conflict with one anotherthrough the nuclear deterrent effect at a strategic level. The conflict continues toplay out in a geographically limited area within Ukrainian territory. It is set tobecome lasting, as neither side can back down.
➢ The areas of Ukraine annexed by Russia will provide sparks that could produce
further escalation in the conflict, including the potential for tactical use of
nuclear weapons by a boxed-in Russia.
➢ The West will implement historically unprecedented economic sanctions
against Russia, dealing a severe impact to the country while still not amounting
to a decisive blow. Europe, which depends heavily on Russia for energy andother resources, will see blowback, and the two sides will end up grinding it out●

in an endurance contest.
Actors struggle for supremacy in determining the form of the new order.
➢ The post–Cold War order, with US liberal hegemony and global finance andcapitalism at its core, will see backlash in the form of the societal contradictions
it has engendered and the rise of authoritarian powers. Internationalism andmultilateralism will decline as social divisions accelerate and heavy-handed rulespreads.
➢ The Ukraine conflict is a watershed moment for the new international order. We
will see a structure taking clearer shape in the strategic contest moving forward,
with advanced, liberal democracies like the United States, Europe, Australia,
Canada, and Japan on one side and authoritarian states like China and Russia on
the other. All of this takes place even as discord continues to be seen within eachcamp.
➢ The Joe Biden administration, while keeping an eye on a weakening Russia, willremain firmly committed to its strategic competition with China as the top
priority. However, divisions on the home front will weigh it down, sapping vigor
from its participation on the global stage. There are no other leaders among thenations of the West who can step in to fill the hole left by this American absence.

●➢ Xi Jinping, having entered his third term as China’s paramount leader, continues
to champion a Chinese approach to modernization as his administration digs infor a lasting confrontation with the United States. There are concerns that
China’s fear about reaching a peak in its power, as its economy slows and its
population continues to gray, and the growing cracks appearing in the US façade
could produce a situation where Beijing seeks to reunify with Taiwan by force.
Opportunism rises in the Global South.
➢ As the structure continues to take shape of a standoff between advanced, liberal
democracies on one side and China and Russia on the other, the vast majority ofnations will adhere to their wait-and-see posture as they consider their own
interests first and foremost, aiming for a way to become independent from thesetwo camps. Many nations remain reliant on Russia to meet their food, energy,
arms, and other needs. The United States will dial down its ideological approachand set out on fresh attempts to win support for its side.
➢ Central Asia, the Middle East, and other areas will see growing power vacuums
as Russia’s influence wanes, leading to a reorganization of regional orders.

A “Dark Gray” World Takes Form●●

The world sees a resurgence of naked violence as a means of statecraft.
➢ The Ukraine conflict sparks the real possibility of a full-fledged war breaking
out, with the world’s advanced liberal democracies on the defensive side. It
becomes increasingly clear that the actions of dictators cannot be assessed on
the basis of their economic rationality.
➢ The myth of the “nuclear revolution” begins to crumble in the face of Russia’s
nuclear threats, and the risk of attacks on nuclear power facilities become evermore tangible. China’s push to enhance its nuclear capabilities produces a
tripolar structure of nuclear superpowers, namely China, Russia, and the UnitedStates. Amid these fierce headwinds in the realm of nuclear arms, Japan hosts
the Group of Seven summit in Hiroshima.
➢ Against a backdrop of social unrest, terrorist attacks targeting politicians andother notable figures could trigger dramatic changes in societal conditions.
As mutual dependence and intensified confrontation coexist, a “gray zone” ofconflict falling short of full-fledged use of military force becomes the norm.
➢ Cyber spies go into action deeper undercover, on a broader scale, with an eye on
the potential for major crisis situations. Social media platforms become stillmore fruitful environments for influence operations aiming to foment fractures●in public opinion.
➢ Information, finance, trade, immigration, and much more will become means to
implement coercion and cause turbulence, in the “weaponization of everything”
argued by the political scientist Mark Galeotti.
Dual-use technologies with both military and civilian applications arise in all
sectors.
➢ The conflict in Ukraine has already illustrated the military value of space, cyber,drone, and artificial intelligence technologies. Competition will grow fiercer inthe development of electromagnetic, quantum, and other cutting-edge solutions
with military applicability. Inevitably, nations will be forced to pursue economic
security along with both their offensive and defensive efforts.
➢ The US firm SpaceX’s provision of Starlink satellite communications gear to
Ukraine and the formation of the Ukrainian “volunteer hacker” army show thatthe line has already blurred between the military and civilian technologicalrealms. SpaceX CEO Elon Musk’s capricious decision-making lays bare the risk ofdepending on the private sector for military needs.

Multiple, Concurrent Regime Changes●

What the economist Nouriel Roubini terms “megathreats,” including inflation,
geopolitical risk, inequality, and climate change, are functioning synergistically totrigger paradigm shifts in governments’ economic and fiscal policy approaches.
➢ Stubbornly high inflation rates bring a close to the era of worldwide monetaryeasing. Countries find it increasingly difficult to engineer a soft landing
extracting them from the combination of stagflation and excess debt.
➢ The “mission economy” approach proposed by the economist Mariana
Mazzucato, with government taking the lead to produce innovation, becomes
predominant worldwide.
➢ The US Federal Reserve Board’s rate hikes being money flooding into the UnitedStates from the world’s emerging and developing economies. Exchange rate
fluctuations grow more extreme, producing conditions where the global
economy is increasingly swayed by US policy decisions.
➢ As the world’s major online platforms seek to monetize their users’ personaldata, it produces rising inequalities and poses a growing threat to free public
spaces. As this comes to be seen as a more worrisome issue, opposition to theplatform operators will heighten in the form of stronger regulation of the field,

led by the EU, and stricter taxation requirements for global corporations.

●●➢ Countries will increasingly turn away from the drive toward universal,
nondiscriminatory free trade and toward trade networks focused more on trust
and resilience.
➢ Issues like COVID-19, the Ukraine situation, and inflation prompt companies tochange the standards by which they gauge risk. Investment activities continue
to go through a trial-and-error phase as investors navigate an era of global
tensions.
Complications arise in ESG and decarbonization strategies due to the Ukraine
conflict and rising resource prices.
➢ Nations reevaluate the importance of existential goods, including energy, food,and defense resources. Vast amounts of money flow into the states of the
Persian Gulf.
➢ Multiple vectors coexist in the realm of energy, such as pragmatic decisions byGermany to extend the operating life of its fleet of nuclear reactors andaccelerated moves away from fossil fuels as part of efforts to reduce reliance on
Russia. In the short term, the side in control of fossil fuel resources will be at anadvantage.
➢ The interplay of energy, green technologies, finance, and power politics will bedecisive in the reshaping of the global order.
Mainstream forces are increasingly caught in crossfire from both sides.
➢ In the United States, political forces grow more extremist on both the far rightand far left. Losing candidates refuse to accept election results, provoking
violence as a way to defy them.
➢ If energy and food crises or stagflation set in for the longer term, it could touch
off a tsunami of populist movements on a worldwide scale.

Preliminary Skirmishes Ahead of 2024●

Europe and South Asia are potential flash points on the political calendar in 2023.
➢ In Europe, 2023 will see national elections in Finland, Poland, Switzerland,
Spain, Greece, among others. The impact of the Ukraine conflict and economic
setbacks could produce some surprise outcomes that shake the European
political scene.
➢ Turkey, which is increasingly striking out on its own path, celebrates the 100th
anniversary of its foundation. The May 2023 general election will determine
whether President Recep Tayyip Erdoğan continues his strong-armed rule ofthe country.

●➢ General elections also take place in 2023 in Pakistan and Bangladesh. India will
host this year’s Shanghai Cooperation Organization summit in May and theGroup of Twenty summit in September.
Fierce maneuvering gets underway ahead of the multiple key elections to take placein 2024.
➢ China and the United States step up the intensity of their psychological tactics
ahead of the January 2024 Taiwan presidential contest.
➢ In the United States, mudslinging among members of the Democratic andRepublican parties, and between the two sides, will escalate in the leadup to theNovember 2024 presidential and congressional elections. Developments in the
Ukraine conflict will impact the presidential election in Russia and the European
Parliament election, also taking place in 2024.
➢ Other contests slated for 2024 include presidential and People's Consultative
Assembly elections in Indonesia, and a general election in India, two standardbearers for the Global South.
➢ In Japan, eyes are on Prime Minister Fumio Kishida to see whether he makes it
through what promises to be a challenging year in 2023 to make it to the Liberal
Democratic Party presidential contest in 2024, marking an end to his first termin that office.

2023 PHP Global Risk Analysis
Global Risks 2023
1. A Weakening Russia as Destabilizing Factor in Realignment of the Global Order● Russia’s transitioning into a junior partner to China picks up speed● Russia adds fuel to the smoldering fire of the dynamic pitting the Global West against
the Global South2. Middle East Realigns, Japan Left Behind as US, Russian Influence Dwindles● The Middle East undergoes a reordering of regional dynamics while forging a newenergy order with the region at its core
● Turkey grows increasingly out-of-control as it celebrates its centennial
3. Divisions Deepen on Triple Fronts Due to Russian Energy Sanctions● The world is split into camps of nations that can and cannot purchase resourcesfrom Russia● Opposition arises on multiple fronts in connection with energy and green policy
choices● An expanding green policy “bubble” worsens tradeoffs with burdens to be borne in
the future
4. Upheaval in Global Money Markets as Low Inflation, Ultraloose Monetary Policy
Draw to a Close● Inflation rates climb across the board, worldwide● Rising rates on bonds produce instability in global markets● A growing number of investors are unable to adapt to the new reality of higher rates
5. Reemergence of the Nuclear Deterrence Paradox● The beginning of a major nuclear arms race and a new era of proliferation● Confidence falters in US nuclear deterrence as arms control and disarmament camps
see setbacks● Russia moves to make nuclear weapons “arms that can be used”
6. China Triggers Tensions in Multiple Theaters with Russia, North Korea● The Xi Jinping administration further escalates its military threats against Taiwan● Ties among China, Russia, and North Korea heighten instability in Northeast Asia
7. A World at the Mercy of “Volatile America”● Mudslinging heats up within and between the Democratic and Republican Parties● Actions taken by the US Congress make waves throughout the international
community● As America turns inward, an American “hegemony lite” increases uncertainty in theglobal order
8. A New Cold War Undermines Europe’s Growth Model Dependent on Russia,
China● A slowing European economy is unavoidable in the face of energy restrictions and arethinking of the China relationship● Disagreements on economic diplomacy policy among ruling parties triggers acascade of coalition dissolutions in European nations● Political turmoil in EU members places regionwide consensus out of reach,
deepening cracks in European solidarity
9. Cyber Threats Directly Impact the Real World● Invisible attacks in cyberspace cause sporadic losses and reduced functionality ofcritical infrastructure● Russia and China roll out enhanced cognitive warfare techniques, sparking more
extreme internal divisions in Western nations● Attacks on the software supply chain have a growing impact on economic activities
10. “Overlooked Risks” Confront Humanity Again and Again● Cognitive biases cause us to overlook real risks● The risk of “bad guy” Putin’s use of nuclear arms blinds us to the factors that could
trigger this
● A focus on scenarios for military clashes between China and Taiwan obscurerecognition of scenarios for peaceful reunification●

The US shift to an anti-China stance produces misconceptions and an overlooked
possibility of renewed US involvement in the Middle East

Project Members
Taisuke Abiru
Senior Research Fellow
The Sasakawa Peace Foundation

Seiya Nakajima
Visiting Professor
Fukui Prefectural University

Masafumi Iida
Head
America, Europe, and Russia Division,
National Institute for Defense Studies

Toshio Nawa
Executive Director/Senior Security
AnalystCyber Defense Institute, Inc.

Satoshi Ikeuchi
Professor
Research Center for Advanced Scienceand Technology, The University of Tokyo

Noriaki Oba
President/Energy Analyst
G.K. Post-Oil Strategy InstituteKuniharu Kakihara
Lieutenant General/Commander
Air Development and Test Command,
JASDF
Masafumi Kaneko
Director, Member of the Board/Chief
Research Officer
PHP Institute, Inc.
Haruyoshi Mabuchi, CFA
President
Bouquet de Fleurettes

Izuru Sugawara
Project Fellow
PHP Institute, Inc.
Koichi Tajima
Division Manager
Research Division, Japan Credit Rating
Agency Ltd.
Toshiyuki Yasui, PhD, PMP
Dean/Professor
Department of Social System Design
Eikei University of Hiroshima