Buffer Zones: The Few Countries That Get to Stay Neutral

While most countries won’t get to choose neutrality, a few potential buffer states emerge: Singapore as the financial bridgehead between blocs, Saudi Arabia trading security for oil flexibility, and commodity producers whose primary value is non-strategic supply.

Singapore: The Financial Bridgehead

“Singapore is the obvious bridgehead, financial bridgehead between the China bloc and the US bloc. If there’s going to be vast capital flows going between the two blocs and some trade happening between the blocs too, it’s got to go through somewhere. Singapore becomes an obvious financial bridge.”

Singapore’s value is precisely in remaining connected to both sides – the neutral port in a divided sea.

Saudi Arabia: Security for Oil

The US is no longer dependent on Saudi oil, but wants Saudi in its defense/security orbit. The US “probably doesn’t mind Saudi sending vast amounts of oil to China, so long as it keeps Saudi in its defense, security, and technology orbit.”

Saudi’s trade has already transformed: one-fifth of exports went to the US in 1990; now barely 2-4%, with a quarter going to China. But security alignment hasn’t shifted.

Winners from Reorientation

Though the world as a whole loses from fracturing, some countries benefit from supply chain — as explored in how AI is restructuring the traditional value chain — reorientation:

Mexico: USMCA renegotiation likely to increase rules of origin requirements, benefiting Mexican producers

Vietnam: Clear beneficiary of supply chain diversification from China

India: Potential beneficiary, contingent on resolution of tariff issues around Russian oil purchases

Key Takeaway

Neutrality is a privilege, not a choice. The few countries that achieve it do so because they provide unique value as bridges between blocs – not because they successfully opted out.

Source: The Great Fracturing with Neil Shearing on The Business Engineer