Stratfor said at the beginning of 2015 that this would be the year when Europe would be knocked out of complacency. The third quarter is when the harsh reality of an unraveling eurozone confronts Berlin and the eurozone at large. Germany will act tough while a divided camp of creditors press Berlin for a deal for fear of setting a dangerous precedent with a "Grexit." Germany needs a deal with Greece and can negotiate one, but it will come at a price that threatens the credibility of its leadership in the eurozone. The Greek government under Syriza is likely to fall, either from a banking crisis or from a rebellion within its own ranks upon signing a deal. And any deal struck between Greece and its creditors will be doomed; Greece will be unable to implement deep reforms, and Germany will be unwilling to release funds under these circumstances. There will be a great deal of commotion this quarter over face-saving measures to avoid a Grexit. Beneath the speeches, the path to a Grexit is already being paved.
But this is not the only crisis afflicting Europe. The standoff between Russia and the West will become more visible as Russia and the United States engage in conventional military posturing on the Continent. Russia's tightening relationship with China will meanwhile be on display as the two advance joint initiatives to develop economic alternatives to the West.
China will not be immune to financial jitters either, as Beijing, for lack of better options, intervenes to prop up its stock market to avoid the political, social and financial consequences of an outright collapse. Beijing has the tools to manage a decline in its volatile stock market, but any moves it makes in the short term to tame the market without a reliable investment alternative come with the long-term consequence of slowing private consumption growth and thus upsetting its strategy to rebalance the economy amid a wider slowdown.
In the Middle East, the United States will be juggling three tasks: seeing through a negotiation with Iran, reassuring its Sunni Arab allies and preventing countries such as Turkey from adopting a renegade foreign policy. As the Syrian rebellion gains momentum, so will talk of a post-al Assad power-sharing arrangement. Divisions on the battlefield and among rebel sponsors, however, will prevent any such negotiation from coming to fruition.
Between a deepening European crisis, potential increases in oil output from major Persian Gulf producers and high summer demand in the United States and China, supply and demand in global oil markets do not point to any major swings in price. Venezuela will still be under deep financial strain as it feels out a negotiation with the United States and offers limited concessions to the opposition in hopes of finding economic relief. Mexico will stay on course with its energy reforms, taking its first big step in auctioning off shallow-water offshore exploratory blocks while taming challenges to restructuring from the Petroleos Mexicanos labor union. To the north, Canada will further its commitment to link its energy resources to global markets if the British Columbian parliament votes as expected to approve Petronas' NorthWest liquefied natural gas venture, Canada's first LNG export facility. With Canadian national elections in October, campaigning is fixated on how far Canada should go in cementing its place in the energy world.