Geopolitics 2015

Posted: December 1, 2014 in Uncategorized

2015 will probably be a continuation and evolution of 2015.

The US will still by far the best economy, but it will have a few issues. The combination of high US Dollar and low oil prices will put pressure on oil companies – specially the shale gas sector. On the political side President Obama will be fully a lame duck president with the US Congress fully Republican. Thank God the Tea Party seems not any more so strong, but we will see.

South America: Brazil will keep on trying to be the US of South America, but it has still a lot of reforms and hard work to do. The entire South America is shifting, as influence sphere, to Russia/China and away from the US as they are considered “bullies”.

The low oil price will have consequences: it will be  a positive for Europe, China, Japan – but several countries will be in recession or even civil unrest (Russia, Venezuela, Libya, Algeria, Ecuador, Nigeria mainly).

Russia will be in recession. It will be posturing aggressively  specially in Ukraine, Georgia, Moldova etc. They will more and more align with Asia, trying to open markets with South Korea and all the Asian Tigers. And also pushing towards South America. How aggressive they will be? Well depends from how bad the recession is and also how aggressive are the Americans (if the US Congress pushes for arming Ukraine the situation could worsen). At this stage Russia will try to avoid a full confrontation as they are hard pressed for budget constrains and re organizing their military. Definitely they will keep on pushing for the subtle long game – the de-dollarization of the world economy.

Europe: the division from North and South will keep growing as unemployment shows (lowest unemployment in Germany and Austria – highest in Greece, Spain, Italy). I would keep a watch on France as if the Government falls there will be full on consequences (luckily for the markets bi French elections this year). A Second French Revolution is always possible – at this level of social issues. But after a year of relative tranquillity, political turmoil will return. But the low oil price is a big boost.

UK will be “pumping along”, but the idea of drifting away from the EU, to join its USA cousins will be growing. A Non EU Great Britain will be having full on consequences specially for the anti European parties in South Europe.

Middle East. The usual mess. Islamic State at least for the media has been seriously diminished (in reality I doubt) – but they need a media coup to go back to former glory. A They could attempt a terrorist act, but now is much more hard and IS is not a terrorist organization with capacity to operate in hostile territory like US and Europe. Not that they will not try, but it  is hard. The more likely target is Egypt and the Sinai peninsula, Jordan and Saudis. But again they are not against Iraq and Syria, but against the strange and powerful alliance US, Saudi, Egypt, Israel.

Iran will strive to be seen as an acceptable power by the West increasing is force, to the terror of the Saudis (funny enough Iran has always been more Western than the Saudi).

Saudi are full on pushing for Asian market and using their “oil power” against the US shale oil danger and the everlasting enemy Iran.

Turkey will as usual balance its various stances (part of NATO, full Islamic population – a lot of it radicalised). It will try to project power – but more focus on not being ripped apart by internal issues. It is a steady path to a be again a “Ottoman” style empire (but without the military aggression) – unless something internal happens.

Asia: apart the buildup (as usual) between India and Pakistan (and different alignment Pakistan with Russia/China and India with the US/Australia – a role reversal in a few years), Asia will be pumping along helped by lower oil price.

China will keep on having a slow growth, but not at the point of a crash. Still they cannot find a solution and their slow descent in a full on crisis is almost guaranteed by the aging population without a safety net. At least the Government is really pulling all the strings to try to avoid it. If they can, I do not know. But not in 2015.

Next year it will be the truth year for Japan, instead. We will see if the kamikaze move (as there is no turning back) will work or not. I tend to think it will as Japanese are very obedient. In this case will see the return of the Rising Sun – not as an evil empire,, but a force to be reckoned with it – specially for China and South Korea.

Last, by not least, Australia. Australia is still a lucky country (as per the original phrase – governed by second tier politicians). As China hit the stops, Japan resurgence will help. Unknown to most Japan is still our 3rd economic partner, and by 2016 with the LNG orders coming on line will be the second – overtaking China!

Logically iron ore and oil will keep things not so happy, specially for the budget (still one of the best budget around the globe – the crisis is just in the mind of our politicians)- maybe spurring some good outcome – a refocus of the industry and some diversification (did anyone notice that also India has over a billion people?).

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