Davos: International conflict is world’s top threat

Dimitar Dilkoff | AFP | Getty Images

Conflicts that impact whole regions are the biggest threat to world stability in 2015, the World Economic Forum (WEF) warned on Thursday.

Following Russia's incursion into Ukraine's Crimea region last year, and the subsequent rounds of global sanctions and counter-sanctions, experts interviewed by the Switzerland-based body voted international conflict the biggest—and most likely—danger for the next 10 years.

Here are the top risks facing the world: Davos   

"In the 25th year after the fall of the Berlin Wall, geopolitical risks are back on the agenda," said WEF in its "Global risks 2015" report, published a week before the body's flagship meeting in Davos, Switzerland.

"The dispute over Crimea in March 2014 serves as a forceful reminder of the consequences of interstate conflicts with regional consequences that seemed long forgotten and unfathomable."

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The report is the tenth published by WEF and is based on a survey of 896 respondents working across the world in business, government, academia and non-governmental organizations. It was conducted between mid-July and the end of September 2014.

Russia weighs

Pro-Russian activists seize the main administration building in Donetsk, Ukraine.
Alexander Khudoteply | AFP | Getty Images
Pro-Russian activists seize the main administration building in Donetsk, Ukraine.

In the ongoing case of Russia and the West, WEF highlighted the widespread impact of the tensions.

"(It) has caused disruptions in the supply of gas to European countries, while sanctions imposed by the European Union and the Russian Federation have restricted access to specific sets of goods and forced some companies to review the architecture of their supply chains," the report said.

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Analysts have warned that relations between the West and Russia could worsen rather than improve in 2015.

Alastair Newton, senior political risk analyst at Nomura, rated Russia as the second-biggest country- or region-specific risk for financial markets this year, behind the Middle East and North Africa.

"I see little prospect of an easing of tensions with Russia—indeed, if anything, the contrary as the Russian economy slows further," he said in a forward-looking report published earlier this month.

Terrorist attacks

Geopolitical risks for 2015 go far beyond Russia, however.

The threat posed by Islamic militant groups was thrown into sharp relief by last week's terrorist attacks in Paris, in which 17 people were killed. Al Qaeda claimed responsibility for the attack on French satirical magazine "Charlie Hebdo," Reuters reported on Wednesday.

WEF also warned of the rise of Islamic State (Isis), which it said had brought the possibility of both "state collapse" and the "failure of national governance" to the fore. Both of these issues made it into WEF's top five concerns looking ahead.

"The rapid rise and brutality of Isis, as well as the response of the international community, may underlie the increased likelihood and impact attributed by respondents to the risk of the deployment of weapons of mass destruction and the higher potential impact than in previous years associated with large-scale terrorist attacks," the WEF report said.

'Extreme weather events'

Mohamed Nureldin Abdallah, Reuters

"Extreme weather events" such as floods and storms, and the major damage to property, infrastructure and environmental damage, as well as human loss, caused, were also ranked highly by WEF.

In particular, the body warned that 15 of the world's 20 megacities—those with over 10 million inhabitants—were located in coastal zones threatened by sea level rises and storm surges.

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"Heat waves, extreme rainfall and drought-related shortages of water and food will increasingly test the resilience of infrastructure in these and other cities," the report said.

Unemployment

Although economic worries still loom large in the euro zone, only one such risk made it into WEF's top five list: high structural unemployment or underemployment.

"While the world has made progress in addressing and preventing financial crises, and small improvements in fiscal issues and unemployment have been achieved, the danger of complacency compared to other risks exists: experts remain concerned about significant residual risks, which may have been underestimated by survey respondents," said the report.

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The body warned that lower economic growth and technological change would likely keep unemployment at elevated levels in advanced economies until 2018.

Unemployment in the G-7 countries (France, Germany, Italy, Japan, the U.S., the U.K. and Canada) averaged 6.2 percent last November, according to the Organisation for Economic Co-operation and Development (OECD), and 11.5 percent in the euro zone countries.