 The map that you see in front of you now is a map of the IWS, the International Institute for Strategic Studies, that demonstrates the extent, range and depth of conflict around the world today. The majority of those conflicts are internal conflicts, and the thesis that I'm putting forward to you today is that the nature of international relations today is such that the possibility of great power conflict is back. Arguably its likelihood is higher now than at any point in the last 25 years, and this is because two of the big powers in the world, China and Russia, are beginning to try to challenge the global predominance of the United States and its allies. And they're doing so not only on the ground, but also through their declaratory policy. Vladimir Putin, our commanders always have the authorization to use any means for the defense of the Russian Federation. The chief of his general staff, we must not copy foreign experience and chase after leading countries, but we must outstrip them and occupy leading positions ourselves. President Xi Jinping, we will make it our mission to see that by 2035 the modernization of our national defense and our forces is basically completed and that by the 21st century our people's armed forces are being fully transformed into world-class forces. And the French naval commander noting the strategic landscape is changing rapidly. China, for example, built in the last four years the equivalent of the entire French navy. And I'll put a footnote to that to say that in September 2016 the French navy was outstripped in the Mediterranean by the presence of the Chinese navy. There were more Chinese naval vessels in the Mediterranean than there were French. And at present the US administration is of course having a challenging time in working with its NATO allies, working with its Asian allies. There's a degree of unpredictability in the geopolitical environment. Europeans for their part are becoming a little bit more conscious that the world is a dangerous place, but their capabilities have been hollowed out since the end of the Cold War and perhaps even more hollowed out in the wake of the austerity that they've had to conduct after 2008. Now great power conflict isn't inevitable, but we are at an inflection point and I think that some of the initiative is moving towards the challenges to the status quo rather than those who wish to protect the status quo. But defense spending is still an interesting indicator of the distribution of effort and you can see from that slide that still today the United States remains by far the largest defense spender in the world at more than US $600 billion in the last year, 38% of the total. But Russia and China are spending quite well themselves. The difficulty is that Russian and Chinese defense spending is not very transparent. For instance, China that is indubitably the second biggest defense spender in the world, we estimate their defense expenditure at 195 billion, the official budget in China is 150 billion and the difference resides in fact they don't put a lot of things in their defense budget. The Council for example of China is in charge of arms purchases and that's not part of their defense budget. The other interesting thing that has happened in recent years is the way in which defense spending has changed region by region. Since 2011 defense spending in Asia has surpassed total spending in Europe and during the Cold War while NATO states dedicated a high degree of their national wealth to military expenditure with defense expenditure sometimes being as high as 6% of GDP, almost all key NATO states spending way above the current declared minimum of 2%, now only 5% do. And this slide shows a little bit those trends. Look at those numbers in 1980. France spending 3%, Germany 2.7%, Turkey 5%, the UK 6%, the United States 6%, and then you come down all the way down to 2017 and you see those numbers rather dramatically reduced. 1.9% for France, 1.1% for Germany, United Kingdom just about holding it 2% and the United States even with this great talk about making America great again and spending a lot of money to ensure the United States stays ahead of their peer competitors 1.1% it still is a proportion of GDP, a lot less than what United States was spending at the height of the Cold War. China is the country that is moving most rapidly to become a peer competitor of the United States. They have made rapid strides in the field of air to air missiles putting high value platforms of the United States that used to be able to loiter safely outside of engagement zones in the Taiwan straits for example under great risk. Within the next two years the United States will lose its monopoly on operational stealth combat aircraft with the Chinese J-20 entering service that J-20 having stealth technology that the Chinese state stole from Western industry through their intellectual property theft operations. China continues to pursue advanced technologies, extremely high performance computing, quantum communications, AI and what this slide is demonstrating is that they're making a lot of their advanced weapons available for export where the United States is unwilling to sell the Chinese will often enter that vacuum and the result is that there are more lethal weapons in more hands in more places and the West will have to deal with an environment in which all military domains are more contested. Now it's important also to underline that technology in itself is not the only factor that matters. The enemy gets a vote too as military commanders like to say. The current US National Security Advisor General McMaster has a nice phrase. He says there are two ways to fight the United States military asymmetrically and stupid and of course countries that have less technological capacity vote for fighting the United States asymmetrically and it's also true that technology is difficult to adopt within armed forces. Chinese military lacks combat experience. They're in the process still of developing joint doctrine and training but the point here is that China is catching up fast and Chinese defense spending and military capabilities are not limited by mainland China's geographic borders. China is of course hugely concerned about maintaining its sovereignty over the South China Sea and since 2013 China has reclaimed landed outposts in the South China Sea and by 2015 it reclaimed 2,900 acres of land or 17 times more than all the other claimants to that territory combined and while President Xi Jinping pledged in 2015 not to militarize China's islands in the South China Sea Chinese occupied islands in the Spratlys now host munitions depots, sensor arrays, radar systems, missile shelters as well as three 3,000 meter runways on the big three islands and together China's presence in the Paracels and the Spratlys provides the PLA pretty comprehensive military coverage of the entire South China Sea and those of us gathered here in Davos have been extremely seized by that great Chinese geoeconomic experiment the Belt and Road Initiative and while it is primarily an economic project the Belt and Road Initiative will be giving China tremendous infrastructure on which it could choose to build military installations developing a wider international footprint they already have a base in Djibouti and they are exercising as I said earlier in the Baltic and Mediterranean seas so when you hear the People's Republic of China perhaps noting with concern the occasional appearance of American, French or British naval vessels in the South China Sea the Chinese have been as close to the Baltics and the Mediterranean themselves now moving back to Europe we are I think properly concerned about the resurgence of a potential threat from Russia Russia is a country that understands the laws of asymmetry in conflict they have been able to bring different levers of state power to orchestrate an effect in causing challenges in Western Europe the conflicts in which they have engaged in Ukraine, in Syria have served as tests and evaluation laboratories for Russian technology military doctrine and military personnel and Russia has demonstrated lots of anti-access area denial force projection capabilities that are creating more challenges for Europe we have a map here of Kaliningrad just to remind geographically that Kaliningrad is Russian territory it's an enclave within Poland and Russia has the option of potentially deploying intermediate range weapons in Kaliningrad and without wishing to frighten too much if you look at those ranges you can see that Davos would be within the range of Russian missiles that might be deployed in Kaliningrad but actually I don't think personally as a strategist that it's Russian military deployments they are the greatest threat now to European security stability and prosperity it's much more the asymmetric tactics that Russia is able to employ and is doing so without limitations from domestic or international law Russian strategy is to where possible undermine or open societies from the inside and there are at least three areas where people here gather in Davos interested in the Western liberal order, interested in business and prosperity should be concerned about in the way in which Russia now exercises its state power the first is the way in which they are leveraging their financial power including in the private sector potentially to purchase controlling shares in infrastructure in Europe that they might later be able to manipulate the second is the propaganda that they are targeting steadily and effectively at Russian speaking minorities in the Baltic states, in the Balkans and in animating pro-Russian political parties both on the left and the right wing of various political spectrums and the third is in their assertion of cyber power through interference and democratic processes and this includes the dissemination of perhaps not fake news but junk news, trolling and we should not rule out more direct interference we have a slide here showing RT and Sputnik and there should be no doubt that these are instruments of the Russian state in order to advance Russian thinking and to undermine support for the open prosperous societies in the liberal west the sad fact is that today's Russia does not seem to be overly invested in the current international order and while we worry about the rules based order being undermined from within our western societies because of the leaders that we sometimes actually elect or risk electing the challenge to the rules based order also comes from the outside and I think Russia is a principal challenger of that rules based order back to the debate on defense though again to see quite how big the gap has grown since the height of the Cold War look at the numbers there in 1990 the kinds of forces that West Germany alone had deployed or at its disposal and you add those with Italy, France, United Kingdom and the European command of the United States and then you look at the figures in 2015 all the way across this bottom screen if you added up all of these charts in the bottom screen Germany, Italy, France, UK, United States, European command they just about equal what West Germany alone had in 1990 so when people talk about the hollowing out of our military resources on the European continent the gap they're talking about there's no argument necessarily for going back all the way to those numbers but this gap is quite an extraordinary one especially at a time when Russia is determined to potentially use military force more on the European continent as they have in Georgia and in Ukraine just looking at the personnel deployed numbers look at those numbers from 1995 nearly four million coming down over the years to just under two million so when people are calling for an increase in defense budgets and increase in equipment and increase in personnel this isn't an attempt to go back to the numbers of the Cold War but just to begin to rebuild from the huge cuts that were optimistically taken when the Cold War ended and people thought there would be a peace dividend and then the cuts that were additionally imposed after 2008 when the economics of austerity took hold so in conclusion the United States and Europe are now going through about what I style strategic arthritis there is so much effort in strengthening our domestic economies on reconnecting with our people on ensuring social inclusion and the like understanding our electoral processes in the modern and digital age and we have let the first mover advantage slip from us to these other anti-status quo powers principally China and Russia and if I were to leave you with one message is that in geopolitics just as in business there is a first mover advantage and in the last few years Russia and China have been creating facts on the ground that complicate the maintenance of that liberal democratic order that we all champion and if we are to sustain it we need to gain the initiative politically and to a degree again even militarily thank you very much