Things to Watch - 2025
Message from the Founder, Ben Goddard
Welcome to the second edition of ESI’s Things to Watch. Our team of research analysts have once again gathered insights on the global trends and developments likely to shape the year ahead.
As 2025 unfolds, the world faces a volatile and complex landscape. The return of Donald Trump to the White House signals a renewed focus on protectionism, with significant implications for global trade and defence alliances. This policy shift, alongside escalating tensions with China, is likely to disrupt international trade negotiations and supply chains, forcing businesses to reassess their strategies.
Elsewhere, the Arctic is becoming a new geopolitical flashpoint as nations compete for control of untapped resources and strategic routes. The ongoing conflict in Ukraine continues to strain European economies, compounding the challenges of energy insecurity and sanctions on Russia. The EU’s increasing reliance on LNG marks a notable shift in energy policy, but rising costs and competition from Asia expose vulnerabilities in its supply chains. Across Europe, political instability in key economies like France and Germany underscores the urgent need for industrial policy reforms, further fuelling a shift in investments towards resilient and cost-effective regions like Eastern Europe. In the Middle East, instability remains a pressing concern. Military strikes in Yemen and overspill from the Israel-Palestine conflict add to the region’s turbulence.
Meanwhile, technological risks are becoming increasingly prominent. The rapid rise of AI and cyber threats, alongside the proliferation of misinformation, pose complex challenges for businesses and governments alike. From potential supply chain disruptions to data security concerns, these risks underscore the importance of adaptability in an evolving geopolitical environment. Amid this uncertainty, the global clean technology sector is poised for significant growth, with investments in renewable energy, energy storage, and clean hydrogen gaining momentum. However, these advancements are not immune to disruption, with geopolitical tensions in the Indo-Pacific, particularly in the South China Sea and Taiwan Strait, threatening critical supply chains. Businesses must navigate these challenges while seizing opportunities in emerging green technologies.
In this ever-changing geopolitical environment, ESI continues to identify opportunities for adaptation and growth in 2025, equipping businesses with the tools they need to navigate uncertainty.
Trump’s Return: America First in a Changing World
by Ben Goddard
Donald Trump will inherit a much more fractured global order than that which he left in 2020. The return of his infamous hardball, brinkmanship diplomacy offers hope for near-term cessation of conflicts in Ukraine and the Middle East, while reasserting a key counterbalance against the so-called ‘CRINK’ powers. However, this approach risks alienating war-weary leaders, who may respond with impatience or impulsiveness, worsening global tensions instead of resolving them. Trump’s strategy will likely focus on isolating these powers, avoiding actions that could inadvertently strengthen a more unified alliance, such as BRICS, which might challenge US global influence. While reduced US financial support in European defence will require many countries to increase their defence spending, the abandonment of NATO remains highly unlikely.
Trump’s renewed interest in Greenland, along with his rhetoric on other strategic locations like the Panama Canal, is unlikely to lead to any concrete action, particularly in 2025. Instead, as with his earlier mentions of Greenland, these statements are more likely to serve as a catalyst for Denmark and Panama to strengthen their roles in securing key strategic shipping routes and resources. Trump’s foreign policy approach continues to rely on broad threats and leveraging US power to extract concessions or enforce transactional relationships with smaller states. However, there is growing domestic pressure to scale back US military and economic overreach, redirecting resources toward addressing internal challenges left by the previous administration. This same approach to trade policy makes increased tension with China highly likely, with amplified tariffs set to shock existing supply chains flooded with Chinese steel, renewable tech and vehicles in H1. However, Congress holds the ultimate power over these tariffs, and the initial threat of a 10-20% tariff across all imports serves as a pre-administration signal to usher in a return to quid pro quo trade negotiations. This protectionist turn could prompt allied countries, and the EU, to adopt similar measures, offering a window of opportunity to reshore supply chains and revive sluggish sectors like green tech and manufacturing.
Donald Trump’s pledge to lower energy costs and reshape US energy markets includes plans for a significant boost in oil and gas production while scaling back some green energy policies, such as those under the Inflation Reduction Act. While this shift may provide economic benefits in the short term, it could also slow the momentum for renewable energy investments and impact global climate efforts. Immigration policy will take centre-stage in the early months of Trump’s administration. With the key distinction of legal vs illegal immigration often overlooked, the administration will be eager to satisfy voters with deportation figures after surges in illegal migration during the Biden administration. While the administration’s push for stricter limits on legal immigration, including a merit-based system prioritising skilled workers, is intended to satisfy voters, it is likely to hinder planned growth in sectors such as construction, agriculture, and manufacturing in the medium term.
Trump’s presidency in 2025 will largely mirror his previous approach, marked by hardline tactics, protectionism, and transactional diplomacy, but with a more fractured global context to navigate. While his strategy will continue to prioritise US interests through aggressive posturing and limited global engagement, the complexities of international relations and domestic challenges may force him to adjust his methods in ways that prevent exacerbating tensions rather than resolving them.
Towards a Ceasefire in Ukraine
by Ed Dragusin
Now entering its fourth year of all-out war, the Ukraine conflict remains a defining geopolitical crisis of the 21st century. 2024 has seen the war grind to a halt, with neither Russia nor Ukraine making decisive strategic gains. Despite the world being stunned when Ukrainian troops advanced into the Kursk region and encountered North Korean soldiers on the battlefield, the front line remained largely static throughout 2024. Russia continues to control vast swathes of the Donbas region and Zaporizhzhia, having cut off most of Ukraine from the Black Sea. This has now become a war of attrition, one in which both sides are terminally exhausted while thousands of Russian and Ukrainian soldiers are being sacrificed for mere metres of territorial gain. The frontlines in 2025 have solidified along the contours established in late 2024.
Ukraine's counteroffensive operations, supported by Western military aid, have regained limited but symbolically significant territory in eastern Donetsk and southern Zaporizhzhia. However, these gains have been achieved at great cost, including many lives and much equipment. Russia, for its part, has shifted its strategy from offensive manoeuvres to fortifying occupied territories, building extensive defensive lines, and leveraging its air superiority to target Ukrainian supply chains. Domestically, Moscow continues to suppress dissent while portraying the conflict as an existential struggle against NATO, ensuring a steady — albeit strained — supply of manpower and resources for the war effort.
Meanwhile, the human toll is staggering. Civilian casualties and displacement continue to mount, with millions of Ukrainians still unable to return to their homes. Economically, both nations are bearing immense strain, and Western sanctions have further weakened Russia’s economic position. Yet, the Ukrainian economy is also faltering, dependent on continuous foreign aid to sustain basic functions and military operations.
The prospects for Ukraine in 2025 are looking increasingly dire. Western unity in supporting the war effort remains robust, but there is growing domestic pressure in key NATO countries to seek a resolution. In the United States, the new administration is set to vastly reduce military and financial support to Ukraine. European nations, grappling with economic challenges and energy insecurity, are also seeking a diplomatic solution to put the conflict to bed. Russia is finally beginning to show it is not immune to external pressures. The Kremlin faces quiet but growing dissatisfaction among its elites, whose wealth and influence have been eroded by prolonged sanctions and war expenses. Crucially, China, a vital partner for Russia, has signalled it longs for a return to global economic stability.
As exhaustion sets in on both sides, the contours of a ceasefire are beginning to emerge. Maps will be redrawn along the current lines of control. Ukraine will insist on preserving its territorial integrity. Russia will demand guarantees against NATO expansion and EU accession. A ceasefire will not be the cure but rather a precarious dose of antidepressants. Both sides would retain the ability to reignite hostilities, and the absence of diplomatic channels will hinder meaningful reconciliation.
Unlocking the Arctic: Melting Frontiers and Polar Minerals
by Hannah White
For centuries, the Arctic has been defined by its distinctive geospatial structures, harsh environment, and frozen expanse. Yet as climate change accelerates the warming of ice, once-dominant features like permafrost and glaciers are retreating to reveal deposits of mineral resources previously invisible to governments. This is sparking renewed interest and strategic competition amidst the global push for green technologies. International powers are now scrambling to stake claims, and the polar regions are quickly becoming a high-stakes geopolitical flashpoint, with Greenland at the nexus of US-China interests.
Geographically linked to North America, the Danish autonomous territory is home to one of the largest reserves of rare earths globally, with known deposits of up to 43 critical minerals. These include cobalt, graphite, PGMs and strontium – with each playing a pivotal role in the high-tech industries that fuel world economies. In this context, polar minerals are primed to bring a new era to global supply chains, and Greenland is at the helm.
An observer state of the Arctic Council, China has already positioned itself as a key player in the race, with long-standing ambitions of a Polar Silk Road, a part of its Belt and Road Initiative. Keen to access the region’s mineral and oil sectors, it has invested in Greenlandic infrastructure and Russian LNG projects, where it owns minority shares. With promises of alternative shipping lanes, energy security solutions and diversified supply chains on the horizon, new questions arise for Arctic governance, already riddled with gaps and lacking transparency. 2025 will see these dynamics play out further, particularly with the return of Donald Trump as US president. His expressed desire to acquire Greenland – a notion that its autonomous government has categorically rejected – has already ruffled feathers in the EU, which signed a Memorandum of Understanding (MoU) with the territory in 2023 to explore polar minerals sustainably. The statements have demanded a swift response from the Greenlandic and Danish governments, who are willing to engage in diplomatic dialogue with the Trump administration on mining and defence matters, conditional on the understanding that the island is not up for sale.
Elsewhere, cooperation between China and Russia will likely intensify, as both states are keen to exploit Arctic sea routes and develop new projects beyond Arctic LNG 2 to enhance their energy independence. As China establishes a steady foothold, it is likely to further cultivate ties with Arctic states like Norway and Canada, while Russia looks to new partners to realise its Far North ambitions. In 2025, India will likely become an emerging player on the scene in response to these shifts, potentially bringing other APAC countries into the fold.
For businesses, the landscape remains risk-laden. Operating in tundra regions brings unique challenges. Inhospitable conditions limit accessibility, while disappearing ice sheets create unstable ground for on-site businesses. Risks compound when high costs, commodity price volatility, and environmental concerns over fragile Arctic ecosystems are considered. In the short term, stakeholders will need to navigate these with caution, while investors in this space would be wise to keep a keen eye on regulations and legislation surrounding the mining, extraction and refining of polar minerals, which are likely to evolve over the course of 2025. For the medium term, opportunities in Arctic tourism, transportation and fisheries will almost certainly remain stable, while businesses in renewables like geothermal and hydroelectric are expected to see healthy returns over the long term, especially as local governments seek new ways to capitalise on their clean energy potential.
Europe's Energy Challenges: Navigating Supply Shortfalls, High Prices, and Strategic Shifts
by Adam Mutaf
On December 31, 2024, the expiration of Gazprom's transit agreement with Ukraine resulted in a 15 billion cubic metre (bcm) shortfall in the EU's annual gas supply. Efforts are underway to negotiate a potential supply swap with Azerbaijan to offset this loss, but the EU has had to ramp up LNG imports to bridge the gap. Meanwhile, ten EU member states have pushed for a sixth round of sanctions targeting Russian pipeline gas and LNG imports. Implementing such measures would require unanimous agreement among all EU members, including Hungary and Slovakia, who remain hesitant to endorse the proposal. Both countries are hesitant due to their significant reliance on inexpensive Russian gas. Slovakia faces a significant risk, as the absence of Russian gas could cost the country nearly EUR 500 million a year in lost transit fees, an important source of revenue for its national economy.
This heightened uncertainty poses significant risks for the EU as it enters 2025. Europe is expected to deplete its gas storage more rapidly this winter, with levels projected to drop to around 40% by March 2025, down from 58% in 2024. With the expiration of the Ukraine-Russia transit agreement at the end of 2024, Europe will need to secure additional gas imports, potentially up to 13 bcm annually, to meet demand. Gas prices are likely to remain volatile through the summer as the EU races to achieve 90% storage capacity by November 1. Following the expiration of the EU’s price cap at the end of January 2025, prices could fluctuate between EUR 50 and EUR 70 per megawatt-hour, depending on market conditions and weather-related demand.
The energy landscape is evolving, with the EU increasingly dependent on alternative suppliers, exposing it to new challenges, opportunities, and risks. North America is expected to provide nearly 90% of the 27 million metric tons of new LNG supply this year, with new facilities under development. This growing reliance on LNG, coupled with rising demand from Asia, may place pressure on U.S. domestic supply for the first time since 2020. Global natural gas demand is expected to return to pre-pandemic growth levels, with much of this increase coming from the Asia-Pacific region. This will intensify competition for natural gas deals in Asia, putting additional pressure on the EU. In 2025, continued high prices are expected, further limiting affordable energy, especially amid low economic growth in the EU. This may prompt the EU to reconsider its commitment to economic independence and decoupling, as its weak energy security leaves it unable to compete with China and the US on equal footing.
Syria's Fragile Rebirth: Between Power Struggles and Foreign Influence
by Ryan Shaban
In late 2024, Syrian President Bashar Al-Assad’s 24-year regime collapsed, marking a pivotal shift in the nation’s history with significant regional and policy implications for 2025.
Earlier in 2024, Syria began reintegrating into the Arab world, renewing diplomatic ties and rejoining the Arab League. Yet, the regime's downfall was sudden. Rebels, primarily from Hayat Tahrir Al-Sham (HTS), a former al-Qaeda affiliate, swiftly took Aleppo and seized Damascus by 8th December. Assad fled to Moscow, leaving HTS leader, Ahmed Al-Sharaa, as the de facto ruler of Syria. Al-Sharaa, originally the founder of al-Qaeda’s Syrian affiliate, Al-Nusra Front (later HTS), has since distanced himself from the group’s extremist roots, adopting a more nationalist stance. Following his rise to power, the US revoked its USD 10 million bounty on him.
Diplomatic outreach from regional and Western powers is underway to establish relations with Syria’s new leadership, focusing on trade and sanctions. However, the country remains volatile. Sectarian tensions flared after reports of militants burning Alawite shrines and targeting minorities. Although the new regime has called for coexistence among sects and minorities, the rising tensions suggest an imminent outbreak of sectarian violence in the near to medium term if economic and security conditions worsen.
Clashes have reignited between the Kurdish-led, US-backed Syrian Democratic Forces (SDF) and the Turkish-backed Syrian National Army (SNA), with a major Turkish offensive against the SDF appearing increasingly likely. The United States has pledged to maintain its troop presence in Syria to support the SDF and counter ISIS, heightening the likelihood of escalating tensions between Washington and Ankara. Should the proposed negotiations to merge the SDF under the umbrella of the Syrian Ministry of Defence be successful, however, these tensions will largely be avoided.
Russia, a key ally of the Assad regime, has maintained its military presence in Syria despite growing pressure from European nations to withdraw. Al-Sharaa has stated that the future of Russian troops should be decided by the Syrian people, though he indicated they could potentially remain. While a decrease in Russian troops in Syria in 2025 seems imminent, Moscow will likely seek to maintain its strategic presence by agreement with Damascus. Meanwhile, Iran, another former Assad ally, seeks reconciliation with the new regime. The regime's rhetoric, blaming Tehran for Syria’s hardships, makes such efforts unlikely in the short term—a significant blow to Iran, which had considered Assad’s Syria a vital pillar of its Axis of Resistance.
The Israeli Defence Minister stated, "we have toppled the Assad regime in Syria," suggesting Israel’s involvement was pivotal. After the fall of the regime, Israel carried out almost 500 airstrikes on Syrian military targets and captured areas of southern Syria, signalling an intention to consolidate control in the region at a time of instability. Despite widespread criticism of the Israeli invasion, it is highly likely that Israeli presence will continue in the long term in many of the areas captured.
As Syria adjusts to this power shift, its future remains precarious. The country stands at a crossroads, grappling with ongoing vulnerability under its new leadership, while foreign involvement is set to shape the country's future.
Turkmenistan's Authoritarian Path and Uncertain Future
by Imran Khan
Central Asia remains deeply influenced by its Soviet legacy, grappling with authoritarianism, systemic corruption, and widespread human rights abuses. Turkmenistan epitomises these challenges, operating as one of the world’s most repressive states. Political rights and civil liberties are virtually non-existent, with tightly controlled elections, state-dominated industries, pervasive corruption, and harsh suppression of dissent. With 2025 well underway, further centralisation of power under President Serdar Berdymukhamedov is anticipated, with his administration likely to implement constitutional changes to solidify his rule and suppress political opposition. Tighter internet controls and increased surveillance measures may reinforce his grip, yet risk pushing dissent further underground and exacerbating public discontent.
The country’s lack of democratic stability undermines its ability to address pressing challenges. Key issues include agricultural inefficiencies, food insecurity, and strained relations with Uzbekistan over ethnic tensions and border disputes. With Turkmenistan's reliance on its hydrocarbon sector, particularly natural gas, remaining both an economic lifeline and a tool of political control, declining global demand or competition from Azerbaijan and Qatar could expose economic vulnerabilities. If diversification efforts fail, the regime may struggle to sustain public services and economic stability, potentially heightening domestic dissatisfaction. The looming threat of climate change exacerbates vulnerabilities, particularly water scarcity in this arid nation. Rising temperatures and transboundary water disputes with Uzbekistan and Afghanistan compound the pressure, and while recent diplomatic efforts suggest a willingness for cooperation, the potential for conflict remains high if resource management agreements are not effectively negotiated.
Civil liberties remain tightly restricted. Independent civil society is effectively non-existent due to draconian registration laws, and dissenters face severe reprisals, even abroad. Media freedom is equally suppressed, with limited internet access, blocked messaging apps, and severe crackdowns on VPN use expected to intensify in 2025. These measures not only stifle internal dissent but also isolate Turkmenistan from the global economy and limit access to critical information. However, increased restrictions could provoke a backlash, driving opposition movements into digital underground networks and fostering greater resentment among younger, tech-savvy generations.
This environment of repression extends to the prison system, where countless individuals remain forcibly disappeared, their fates concealed by the state. Turkmenistan’s failure to uphold basic rights, including freedom of association, information, and movement, not only erodes its democratic prospects but also poses risks to regional and international security. Continued violations may prompt stronger international pressure from the UN and EU, potentially resulting in targeted sanctions or diplomatic isolation. However, without substantive reform, Turkmenistan is unlikely to engage with international human rights frameworks, further limiting opportunities for foreign investment and economic diversification.
Turkmenistan is poised to deepen its authoritarian trajectory in 2025, perpetuating a cycle of corruption, repression, and socio-economic stagnation. A growing exodus of skilled professionals seeking better opportunities abroad threatens to weaken already fragile institutions and reduce the country’s economic potential. The government's continued suppression of religious and ethnic minorities risks inciting unrest, particularly in border regions, which could challenge state authority and necessitate an increased security presence. A more stable future hinges on the government’s willingness to embrace transparency, foster international cooperation, and respect fundamental freedoms—a shift that, as of now, remains elusive.
Yemen's Fragile Peace: Escalating Strikes and Proxy Conflicts
by Alex Vile
Yemen remains one of the most volatile regions in the Middle East, marked by years of conflict between the internationally recognised Yemeni government and the Houthi movement. While recent peace initiatives in Gaza have raised hopes for broader regional stability, escalating tensions linked to airstrikes by Israel, the United States, and the United Kingdom on Houthi positions could reignite hostilities in Yemen. Recent reports indicate that in late December, following US and Israeli-led airstrikes on Houthi positions, Yemeni army units launched attacks on the Houthi-held strongholds in the Haganah area of northwest Taiz. The assault reportedly resulted in the death of eight militia members and the capture of two strategic military sites in the province. These operations took place alongside artillery shelling by Saudi-backed groups on Houthi-controlled positions in Sa’da province, marking a rare instance of localised aggression, compared to the usual missile exchanges between the Houthis and Israel along with its allies.
With a ceasefire in Gaza seemingly underway, Israel appears to have turned its attention to combatting the Houthis with the intention of limiting their missile force projection. The collapse of the Iranian backed regime in Syria and the reduction of Hezbollah’s fighting capability in northern Israel and Lebanon, has afforded Israeli military leadership the ability to concentrate airborne capability on combatting the Houthis. Saudi Arabia and the UAE, which support the Yemeni government and the Southern Transitional Council respectively, may view the decline of Iranian influence in the Levant as a sign of weakness in their ability to stabilise their respective proxies and aligned groups. Taking advantage of this perceived weakness, the two Gulf states may join the US, Israel, and the UK in conducting simultaneous strikes to weaken the Houthis and strengthen anti-Houthi forces within Yemen. While tensions persist between the UAE-backed Southern Transitional Council and the Saudi-backed Yemeni government, a coordinated effort involving Coalition and Gulf state airstrikes and military operations could significantly reduce the Houthis' ability to target the GCC and Israel.
Saudi Arabia and the UAE are unlikely to deploy their own ground forces in Yemen. In past conflicts, they have relied on mercenaries or Yemeni forces to avoid the risk of losing their own soldiers. Instead, they will likely conduct an extensive air campaign, similar to their previous operations, Decisive Storm and Restoring Hope, which successfully stopped Houthi advances into southern Yemen. Saudi Arabia has been outspoken in shifting away from the precision bombing strategies used by the Western coalition. Instead, they have supported the more aggressive approach of targeting infrastructure, similar to Israel's recent tactics, which include bombing power stations and port facilities. Israel, its Western allies, and GCC states may target both infrastructure and military sites to undermine the Houthis' ability to govern and reduce their capacity to carry out counterattacks, such as launching ballistic missiles. This combined bombing campaign would weaken the Houthis in their fight against the Yemeni government, potentially creating the momentum needed to make strategic gains in contested areas like the Ad Dali and Al Bayda Governorates. Similar to Saudi Arabia and the UAE, Israel is unlikely to deploy ground forces due to the distance from its territory to Yemen but will likely expand its air campaign to support any potential ground conflict.
Who Will Lead Europe?
By Karun Gopal
In 2025, the European Union faces heightened uncertainty, driven by leadership challenges within its core member states. France and Germany, the Union's cornerstone nations, are contending with significant internal instability.
In France, the aftermath of the June 2024 legislative elections has been marked by political turmoil and polarisation. President Emmanuel Macron’s popularity has waned, leaving a fractured parliament composed of opposing left- and right-wing parties. The deposition of Prime Minister Michel Barnier deepened the crisis, and current PM Francis Bayrou leads a tenuous government. His ousting and fresh elections appear likely in the medium term.
Germany’s challenges are equally significant. The traffic-light coalition led by Chancellor Olaf Scholz collapsed in December 2024 over debt management. Elections in 2025 suggest a comeback for the Christian Democratic Union (CDU) under Friedrich Merz, with the right-wing, Eurosceptic Alternative for Germany (AfD) projected to finish second. This scenario could compel Merz to navigate a challenging coalition landscape, potentially involving the AfD, bringing new dynamics to Germany's leadership and EU policies.
Both countries’ leadership woes are compounded by economic struggles. Germany has endured two consecutive years of economic contraction—the first since the early 2000s—due to factors like the war in Ukraine, rising energy costs, competition from foreign manufacturers, and delayed interest rate cuts by the European Central Bank. France’s deficit reached 6.2% of GDP in 2024, double the EU’s permitted limit. Other challenges include high energy costs, declining consumer confidence, and reduced business investment. The policies of Scholz and Macron have damaged their EU standing and fuelled internal Euroscepticism. With Germany and France stepping back from their traditional leadership roles, other countries may rise to fill the void.
Poland is well-positioned to take on a more significant role. Following Donald Tusk’s election as Prime Minister in 2024, the country has attracted foreign investment thanks to its strategic location, stable economy, and skilled workforce. Tusk’s political experience, including his tenure as European Council President, could elevate his role in the EU during 2025 as negotiations on a Ukraine ceasefire continue. However, divisions are deepening between staunch pro-Ukraine supporters and those advocating reduced funding for the war, such as Slovakia under Robert Fico and Hungary under Viktor Orbán. Fico and Orbán are expected to rally support among Eastern European nations and pro-Russian factions within the bloc. Italy’s Giorgia Meloni may also emerge as a prominent figure, backed by right-wing parties and her documented support for Ukraine.
Coalitions involving Meloni and Tusk could guide Europe through challenges like the green transition and migrant crisis, which will continue to shape EU parliamentary debates. Ultimately, 2025 will hinge on elections in France and Germany, where voter dissatisfaction caused by economic stagnation could lead to significant gains for populist parties. Internal discussions surrounding the war in Ukraine—a major obstacle to Europe’s physical and economic security—are likely to result in permanent fractures and could affect the integration of new members. This may prompt a re-evaluation of funding priorities and a broader debate about the EU's strategic direction.