A glimpse into uncertainty: 2020 geopolitical risks
2019 was undoubtedly a very turbulent one from a geopolitical standpoint, and while 2020 might look like mainly having negotiations on the table. Aside from the global pandemic which was not predicted, we have prepared a list of 5 risks surrounding geopolitical uncertainties:
Britain left the European Union on 31 January 2020. While this puts an end to a long period of political and business uncertainty, risks stem from the short 11-month window for the UK and the EU to formulate bilateral agreements. There is even less time to agree a negotiating mandate, and to seek ratification for the final trade terms.
Negotiations will potentially focus on pressing issues where no unilateral measures could easily be set to replace current arrangements. Risks to the volatility of the pound sterling remain as Prime Minister Boris Johnson has ruled out an extension to the transition period, which leaves the possibility of a No Deal Brexit. The manufacturing industry losses of 2019 will probably remain substantial during the year ahead and will have to be factored in during negotiations in Brussels.
Presidential Elections in the US
US Presidential elections set for 3 November 2020 bear twofold importance in terms of geopolitics. President Trump, like many of his predecessors, will most likely enjoy an incumbency advantage in the elections, which brings little surprise for US and global market security as the political platform is at home since the first mandate. However, President Trump’s ongoing impeachment trial puts a question on the legitimacy of a second term in office. Contestation of the result risks the continued decrease of public sentiment in democratic institutions in the US and creates a prolonged political vacuum. A re-election of a polarising figure like Donald Trump has immediate consequences on business, investment, and climate agreements.
US – China Trade Deal
A First Phase trade deal was signed on 15 January 2020 between the US and China, drawing a current pause on trade tensions. The US looks to develop economic relationship with China in the areas of intellectual property, technology transfer, agriculture, financial services, currency, and foreign exchange.
However, reshaping the trade relationship between the two biggest economies included sanctions, export controls, and boycotts in the past months. This leaves little room for transnational corporations to maintain geopolitical neutrality in the coming year. The US-China trade war will likely focus on spheres of influence, as evident from the launch of the new 5G technology. With the UK negotiating trade deals until the end of 2020, the US-China tensions add another layer of complexity for the financial markets.
Conflicts in the Middle East
The continuously growing tensions in the region are set to continue in 2020 – on the one hand, between the US and Iran, and on the other, between the Gulf countries and Iran in a clash for regional influence. The escalation of tensions with Iran saw the brief detention of the British Ambassador, followed by the Office of Financial Sanctions designation of Iran backed political and military wings of Hezbollah on the list of terrorist entities.
The risks to security remain volatile in times of tensions and 2020 might see proxy activity in retaliation to the growing isolation of the Iranian regime. Prolonged unrest in Lebanon and Iraq, alongside the growing tension in Libya and postwar Syria reconstruction will likely pose security risks and will remain on the political agenda in 2020.
The Green Deal
In 2020, ‘‘The Green Deal’’ debate will risk deepening geographic and socioeconomic divisions within Europe as it is already prompting populist campaigns against the deal and giving platform to climate change deniers.
In Eastern Europe, many countries largely use and rely on coal for energy, so when it comes to talks on carbon neutrality, Eastern Europe feels left behind and part of a two-speed Europe. ‘‘The Green Deal’’ not only creating interstate divisions, but also purveys political divisions within the majority of EU member states. France’s attempt to raise taxes on fuel in 2018 sparked the yellow vests movement. Deeply divisive across Europe, the deal will likely also see backlash from corporations which might struggle meeting the new rules.
We, at TenIntelligence, are committed to protect clients, people and their livelihoods from harm. We know investing or operating in adverse business environments or foreign jurisdictions is a daunting proposition for businesses. Environmental conditions, shifting regulations, political fluctuations and cultural changes are all risks that an organisation will face over time.