There’s no denying that geopolitics affect markets – for good or for bad. Therefore, looking at the bigger picture of the geopolitical landscape is a valuable exercise. Whilst nobody can predict what the markets will do, being aware of what’s going on in the world can prepare us for the potential of turbulence.
One of our longest standing clients, Stephen O’Sullivan, is an expert in geopolitics and global markets. His career spans over 40 years working in a wide array of roles within the global energy market. This included a stint as Visiting Research Fellow at the Oxford Institute for Energy Studies, where he published several major studies focusing on the Chinese energy market. During his career, he has lived and worked in China, Russia, Central Asia, Eastern Europe, Southern Africa and the Middle East. He currently resides in Hong Kong, where he regularly authors papers on geopolitical movements and contributes to several international think tanks on global energy issues.
In his own words, from his extensive expertise, here’s what Stephen believes are the biggest geopolitical risks as we head into 2025.
What are some of the risks?
With Vladimir Putin raising the spectre of nuclear weapons in Ukraine, China looking menacingly across the strait at Taiwan, Syria suddenly imploding and Trudeau resigning, a casual reader might have enough on their plate without looking to Washington DC for the biggest source of geopolitical risk in today’s markets – the arrival of Donald Trump on January 20th as the 47th President of the United States of America.
How will President Trump behave?
The news flow is replete with “what ifs” and prognostications of doom by many seasoned observers of the Washington scene and the political machinations that go on there. Facebook once used the slogan – internally at least – of “move fast and break things”. President Trump may prefer “break things and return for another attempt” so heavily hyped is the return of the previous 45th President as the imminent 47th President.
Should everything that Trump says be taken literally? Probably not, given the volume and breadth of messages coming out of Washington – but certainly some ground is being staked-out by those focused on advancing their own agendas during a second Trump term in the White House.
This time it’s different and progress could be quicker
Trump 45 arrived with a modest list of things he thought he might achieve; Trump 47, however, has a more extensive list of objectives on his agenda, as well as the support of a range of individuals and organisations which will likely ensure greater progress on the Trump agenda during his second term when compared to the first in 2016.
What’s on and not on the Trump Agenda
Globalization?
Gideon Rachman of the FT, in an article titled “How America First will transform the world in 2025”, highlighted last month the approach of Davos, the world’s talkfest in the Swiss Alps, and noted that it was unlikely to be top of President Trump’s agenda. In fact, the 47th President has another appointment on the day the World Economic Forum opens. January 20th is also Inauguration Day in the US and Donald Trump is needed on the podium at the US Capitol Building at noon. Apart from the diary clash, President Trump is seemingly not a fan of Davos and its agenda of globalization, at least if his public comments are to be believed, so we may assume that he will not be overly concerned about missing out on the Davos glitz and glamour.
Manifest Destiny?
President-elect Trump has also raised the possibility of annexing Canada as the US’ 51st state as well as acquiring – forcibly if necessary – the Danish Arctic territory of Greenland – which he tried to buy a few years ago (not to mention ending Panama’s ownership of the – perhaps soon to be inappropriately named – Panama Canal). Acquiring Canada – a mature democracy – seems somewhat unlikely, while President Trump’s musings were not the first attempt to buy Greenland – the idea that the US should acquire Greenland as the most strategic island in the Arctic has periodically surfaced when global tensions mount, while Greenland’s deposits of rare earths as well as its oil and gas cannot have escaped the President’s notice.
America First
It is quite possible that Trump will continue his “maximalist” approach, demanding obeisance to US global leadership, asking for more than he reasonably expects but compromising where necessary to secure his overall objective – a good deal for the US. As far as European NATO, Ukraine, Russia, China, and other important players on the world scene are concerned, we – and they – must hope that they are reading the room right and that what President Trump actually wants is clear to them. The last thing we need, as we set out on this journey to the brave new world, are any unfortunate accidents.
This distaste for globalization and a focus on a more down-to earth “America First” agenda will inevitably bring clashes over both style and substance as we move into Donald Trump’s second four-year term as “the leader of the free world”. Where these strains emerge and how they affect the US and its relationship with the rest of the world are going to be key indicators of the direction in which Donald Trump’s United States of America will be moving – for good or for bad.
This article has been approved by Tideway Investment Partners LLP; however, the views and opinions expressed in the article are not necessarily the views and opinions of Tideway.
The content of this document is for information purposes only and should not be construed as financial advice. We always recommend that you seek professional regulated financial advice before investing.
About the Author
Stephen O’Sullivan was an ‘anchor’ client in the founding of Tideway and has been a client of James Baxter since 1999.
Stephen began his oil & gas career as an oil trader, economist and Asian corporate planner in the downstream and trading divisions of BP. He then spent several years with the upstream and gas divisions of Total, working with natural gas, NGLs, shipping, pipeline management and the Sullom Voe oil terminal. In 1989 he joined Coopers & Lybrand as a Senior Strategy Consultant in the oil & gas consulting team, working on the privatisation and restructuring of the energy sectors across emerging markets as well as on both sides of the nuclear sector. He lived and worked in China, Russia, Central Asia, Eastern Europe, Southern Africa and the Middle East in this period.
In 1995, he was appointed Head of Research and Oil & Gas Analyst at MC Securities in London – an Emerging Europe-focused investment bank, where his team was consistently number 1 ranked in EMEA oil & gas research. Following the sale of MC Securities to JP Morgan in 1998, he moved to Moscow as a Partner and Head of Research at United Financial Group, Russia’s leading independent investment bank, where he and his team were ranked the number 1 oil & gas research team and the number 1 Russia country team for nine years in a row.
After the sale of UFG to Deutsche Bank in 2005, Stephen became Head of EMEA and Latin American Research for Deutsche Bank where his research team was ranked the number 1 team across all the industry sectors, in both strategy and in economics, in country research for Russia & South Africa and across the entire EMEA region in 2006 and 2007. In 2007 he left Moscow and moved to Hong Kong as Head of Asian Research for Australia’s Macquarie Bank. In 2009 he joined Barclays Capital in Hong Kong to lead the build-out of the bank’s Asia ex-Japan equity research business.
Since 2013 he has been an investor in a range of businesses in technology, real estate and materials while living in Hong Kong. His major interests include China’s gas sector reform, China’s nuclear renaissance and the country’s global impact on energy markets. While based in Hong Kong he has also been a Senior Visiting Research Fellow at the Oxford Institute for Energy Studies, the world’s number 1 ranked energy think tank. At Oxford he published several major studies of the Chinese energy sector.
He is a contributing author to several international think tanks on global energy issues and has advised international law firms on the oil and gas sector globally.