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Jan 9, 2015 | 21:33 GMT

2015 Annual Forecast Preview

Before we get into the 2015 forecast, go back for a second to the end of 2008. That was when the world changed. The financial crisis laid bare the deep structural weaknesses in both Europe and China. Everyone forgets but Russia invaded one of its neighbors, making clear how far it would go to protect its buffer space. And the shale revolution took root, enabling the United States to eventually rival Saudi Arabia in oil output. That is what we call a generational shift in the international system. So when looking at 2015, think of the world going through a wave in a much broader trend line.

To begin, we need to look at the global economic environment. The structural economic decline in Europe and China were huge drivers behind the oversupplied oil market we find ourselves in today. With prices half of what they were a year ago, the world is going to feel the impact, most notably, Russia.

Russia has entered the year in a very critical economic state. At this point, we don’t think Putin will or even needs to make any bold military moves that would risk escalating sanctions and intensify the economic pressure on the Russian state. We in fact expect a de-escalation overall to frame the standoff over Ukraine.  The Europeans will likely ease sanctions by mid-year and Russia will maintain a low-intensity frozen conflict in eastern Ukraine. Debates within the Kremlin will widen over spending priorities, but Putin will be able to manage those splits.

Even with the conflict with Russia tempering a bit this year, Europe is still in for a very rough year overall. In our view, Europe is essentially sleepwalking into another financial crisis and Italy, Greece and Spain will bear close watching for triggers. The markets are hung on the assumption that Europe will undertake quantitative easing imminently, but do not underestimate German resistance to such stimulus measures. In any case, the ideas currently on the table to stimulate the Eurozone will not have the desired effect and the political fragmentation will only deepen on the continent.

With all this activity taking place in Eurasia, the United States will do its best to minimize distractions in the Middle East. Islamic State will be largely on the defensive and concentrated in the Iraq/Syria theater where the U.S. will rely on local forces to shoulder most of the fight while providing close air support. This will be slow and messy, but we do not see IS evolving into a more critical and strategic threat on the transnational level. Of course, you can't rule out grassroots attacks.

Iran will also be involved in this fight against IS, one of several issues in which we will see U.S.-Iranian cooperation. Now do not expect a grand rapprochement between the United States and Iran this year that dramatically increases the amount of Iranian oil on an already oversupplied market, but the negotiation between the U.S. and Iran will hold steady.

And with oil prices taking such a deep dive, we’ll be watching for a crisis to break out in Venezuela. The government is losing its ability to fund critical imports, and that's a perfect recipe for social unrest that President Maduro has to tackle with an already highly fragmented security apparatus. This is a conflict that will be largely contained to Venezuela, however. The biggest spillover effect has already taken place, with Cuba driven to diversify its options and reengage with the U.S. That relationship will progress slowly, as with the Iranian case.

Niger Delta oil politics, Chinese fiscal reform, Russia-Japan energy negotiations, the deepening of Euroskepticism, Turkey’s isolation, Central Asian instability and much, much more are covered in our 2015 Annual Forecast. Look for it on the website this Monday, Jan. 12 and we look forward to your feedback.

2015 Annual Forecast Preview
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