Infrastructure by its inherent nature comprises part of a nation’s strategic assets. Throughout the history of warfare, infrastructure is usually one of the first targets hit in order to blind and decapitate an enemy. The recent alleged sabotage of both Nord Stream pipelines in the Baltic Sea is a sharp reminder that the current geopolitical risks to infrastructure are not only virtual – see ‘How to avoid getting in the crossfire of a digital cold war’ – but also physical. Given the escalation of current geopolitical conflicts around the globe, infrastructure investors therefore need to proactively assess the vulnerability of their respective investments to geopolitical risks and prepare accordingly.
The current environment for the majority of geopolitical attacks on infrastructure are surreptitious, whereby the attacker attempts to hide its identity (although the source is often identified) as overt attacks ultimately result in a declaration of war. The vast majority of these efforts to date have been cyberattacks. However, the attacks on the Nord Stream pipelines (with majority ownership belonging to Gazprom) highlight the vulnerability of infrastructure assets in international waters and maritime boundaries.
With respect to marine infrastructure, not only are pipelines at risk, but also submarine communications and power cables (occasionally combined), oil rigs, offshore wind farms, energy storage facilities, ports as well as ships. The size and amount of investment in this kind of infrastructure is staggering. For example, in 2022 it is estimated there are some 486 submarine communication cable systems with some 1,306 landings that are currently active or under construction around the globe, worth an estimated $27.57 billion.
Maritime infrastructure is generally the most vulnerable in times of non-declaration of war. Given the vastness of open space, it can be stealthily attacked by mini-submarines and/or underwater drones, whereas large ships/submarines/planes can be more readily detected/followed. In addition, explosive charges could be covertly lain nearby infrastructure assets and be remotely activated at a later time. It has been reported that various NATO countries are now deploying parts of their naval fleet in the Baltic Sea and elsewhere in order to ensure the protection of national/members’ infrastructure. No doubt other countries around the world involved in geopolitical conflicts are now mobilising as well, if not already heightening their level of security.
However, one should note that land-based infrastructure is not exempt from the impacts of geopolitical conflicts during ‘peacetime conflicts’. Naturally, any attacks on maritime infrastructure will have some form a direct impact on correlated land-based infrastructure assets – ie, submarine communication cables will impact data centres, shipping will impact ports, etc. Furthermore, land-based infrastructure can be sabotaged by nation states or domestic extremist groups utilising various means, including explosives, cyberattacks, electromagnetic pulse, etc. It has been widely reported that there has been a steep increase in cyberattacks across the globe, with attacks on high-profile infrastructure such as Colonial Pipeline. Many of these have been conducted by hacktivists, with some groups acting under the guise of being independent but, in reality, being proxies for certain countries.
Yet, what many investors are missing are the ‘softer’ threats to their infrastructure investments which arise from trade wars and/or government’s temporary or permanent bans on specific products/materials essential to the buildout/maintenance of greenfield or brownfield assets. An example of this was former President Trump’s ban of Chinese electrical equipment, which was later reversed in 2021 by the Biden administration. These events can have sharp short- to medium-term consequences as investors seek alternative suppliers.
Infrastructure investors now need to proactively assess and harden their infrastructure investments to geopolitical risks. This includes increasing their coordination with respective governmental entities, insurance companies as well as suppliers of various products and services for the buildout and maintenance of infrastructure. Ignoring such risks will undoubtedly put those infrastructure executives in the crosshairs of government authorities, investors as well as their consumers.
Jeffrey Altman is a senior adviser at Finadvice.