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Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy. Curated from the world’s leading sources of information, our analysis and commentary is designed to help you make sense of the events driving the major developments in the world.
In this roundup, we take a closer look at how the negotiations between Russia and the US over Ukraine could have far reaching implications for the global energy markets – and even lead to the end of the EU as we know it.
Furthermore, we look at:
- Hezbollah’s statement that the group remains “committed to the ceasefire” with the US – Israel Alliance; where 3W explains why this position is dangerous for the group
- The recent phone call between US president Trump and Chinese president Xi; where 3W explains why the most likely forward trajectory remains conflict
- The developing geopolitical conflict involving Türkiye and the UAE
- The decline in China’s LNG demand; where 3W explains how this could turn out to have global ramifications for the LNG industry
- The shorter and longer term outlooks for crude oil prices
- Volkswagen’s confirmation that China by far leads in electric vehicles
Geopolitics
As to Lebanon, Hezbollah officials have said the group remains “committed to the ceasefire” with Israel and will not respond to recent attacks, writes The National. Despite a ceasefire that began a year ago, on November 27, Israel has continued assassinating Hezbollah operatives and striking mostly civilian targets inside Lebanon, killing more than 125 people. On Monday, Israel killed Haitham Ali Tabatabai, commander of Hezbollah’s forces, in an air strike on a suburb of Beirut. The assassination marked Israel’s most significant breach of the ceasefire to date. 3W notes that the statement by the Hezbollah officials is not only idiotic, but also conflicts with the organization’s interests. There is a paper with the title “ceasefire” on it, but the fact is that the US – Israel Alliance has nevertheless continued to attack Hezbollah on a daily basis. There is no real ceasefire, therefore. As to how Hezbollah should respond, opinion can differ. But at a minimum it must take a firm verbal stance through describing the situation as it is. The US – Israel Alliance has not just broken but discarded the ceasefire deal. Continuing talk of the ceasefire as though it still has a practical reality is delusional. And people with delusions rarely make wise decisions about to deal with practical reality realities on the ground.
As to Ukraine, US presidential envoy Steve Witkoff will lead a delegation for talks in Russia next week, a Kremlin official said, according to Bloomberg. Trump earlier said that he had dispatched Witkoff to Moscow for a probable meeting with Putin next week, and that the envoy might be joined by the president’s son-in-law, Jared Kushner. Army Secretary Dan Driscoll — who has been meeting with the Russians in Abu Dhabi — was directed to talk with the Ukrainians, he said.
Meanwhile, Russia is angry that phone conversations involving its special envoys Ushakov and Dmitriev, as well as US special envoy Witkoff, were leaked, writes Reuters. The leak came via Bloomberg. It includes a conversation between Ushakov and Witkoff from October, in which Witkoff explains to the Russians how they should approach Trump with a peace proposal. It also includes a conversation between Ushakov and Dmitriev where they debate how strongly Moscow should push for its demands. All a bit embarrassing, 3W notes, for both Russia and the US, which mean the leaker was someone / an entity with an interest in embarrassing them. As to who this might be, we refer to our analysis of the impact the Ukraine peace plan would have for energy markets, and thereby on the EU’s internal cohesion, under the section Energy.
As to the US – China competition, the US-China Economic and Security Review Commission published its annual report this month, writes Axios. The report’s main conclusion is that China is attempting to “construct an alternative world order” in which Beijing sits at the center and is propped up by fellow anti-democratic states, such as Russia and North Korea. That thinking is what is behind the US – China competition, 3W notes.
Nevertheless, according to US president Trump, he had a phone call with Chinese president Xi on Tuesday. “We discussed many topics including Ukraine/Russia, Fentanyl, Soybeans and other Farm Products, etc.,” Trump said, according to Nikkei Asia. Trump also said Xi had invited him to visit China in April 2026, and that in return he would invite Xi to the US. Chinese state media confirmed the phone call, but did not confirm the invites. 3W notes that Trump is bombastic by nature, and since he spoke of his most recent meeting with Xi in Busa, South Korea, as a big success, in his mind he must now keep up the appearance that there he delivered a breakthrough. We note, however, that following the Busan meeting, China did not actually increase its purchase of US soybeans, as Trump then said Xi had promised. China only moved in this area on Wednesday, after the call, buying 10 cargoes worth $300 million, writes Reuters. The purchases were done despite US soybeans being priced higher than Brazilian supplies, which indicates they are really designed to placate Trump. Our 3W view remains, therefore, that the US and China remain on a collision course, irrespective of the Trump narrative.
Another geopolitical conflict could be developing involving Türkiye and the UAE. On Tuesday, Turkish prosecutor’s office released a statement it had arrested three suspects, and issued an arrest warrant for a fourth, over spying on the country’s military industrial complex. The statement said all men worked for the intelligence services of the United Arab Emirates, writes Al Jazeera. The UAE intelligence operatives allegedly used a mobile line obtained from a Turkish operator and fake online profiles to contact personnel working in key positions in Turkey defense industry, writes Xinhua. The suspects also attempted to access the phone used by the Ministry of Foreign Affairs and several foreign officials in an effort to gather biographical data on individuals in critical positions. Then on Wednesday, a drone attacked the Khor Mor gas field, one of the largest gas fields in Iraqi Kurdistan, causing major power cuts across the northern region, writes Reuters. The Pearl Consortium owns Khor Mor. The UAE’s Dana Gas and its affiliate Crescent Petroleum own 35% percent of the consortium, and Dana Gas is the operator of Khor Mor, which means the drone attacked UAE interests abroad. These might be unrelated coincidences. But that is rare in the world of international relations, 3W notes.
Energy
Oil prices fell on Thursday on expectations of a Ukraine‑Russia ceasefire which could pave the way for the unwinding of Western sanctions against Russian supply, writes Reuters. Brent crude futures shed 33 cents, or 0.5%, to $62.8 a barrel as of 0445 GMT, while WTI crude futures lost 32 cents, or 0.6%, to $58.33 a barrel.
Reuters also carries an overview of western sanctions on Russian (and Iranian) energy. At 3W we expect Russia t demand a complete lifting of sanctions in return for a Ukraine peace deal. The negotiations are with the US, with the EU on the sidelines, and we see no reason why the US would not agree to this Russian demand. That will leave the EU isolated, dealing with structurally higher energy costs than the rest of the world due to its sanctions policy. This, we at 3W expect, will further worsen internal EU cracks, as the structurally higher energy costs are putting EU industry in a disadvantaged position in the global market place. Some EU countries should therefore be expected to push for a reversal on the EU’s sanctions policy once the Russians and the US agree on a final Ukraine peace plan, and thereby expose the weak internal cohesion in the EU.
On that latter subject, Hungarian Prime Minister Viktor Orban plans to meet Putin on Friday, writes Bloomberg. Orban previously travelled to Moscow on a self-styled “peace mission” in July 2024. His trip triggering condemnation from European Union leaders who said he had no mandate to represent the bloc.
Chinese liquefied natural gas imports are at risk of another weak year, writes Bloomberg. Imports will fall by about 15% to 65 million tons this year, meaning China may lose its position as the world’s biggest buyer of the fuel to Japan. China was the fastest growing LNG market before Russia’s invasion of Ukraine in 2022 triggered a surge in spot prices. Back then, Asia’s largest economy had been expected to get to 100 million tons of imports by 2026, but analysts have been forced to repeatedly downgrade their outlooks on persistently weaker-than-expected demand. Forecasts are now that demand for next year will be at 73 million tons. Gas-fired power plants are facing intense competition from coal and rapidly expanding renewables like solar and wind, while lackluster economic growth (by Chinese standards) is limited the increase in Chinese electricity demand. The subject is likely to have global implications, 3W notes, as gas companies around the world are in the process of heavily investing in LNG facilities, in part because of the projected increase in Chinese LNG demand. If that doesn’t materialize, LNG prices will drop significantly.
It is not just gas where an industry crisis is likely, but also oil writes Javier Blas of Bloomberg. Unless OPEC+ cuts production significantly, and quite soon, oil prices will weaken further in the next few months, probably overshooting to the downside, he says. The oil market is oversupplied due to a combination of unusual factors. First, several giant oil projects long in the making have come on stream almost simultaneously in 2025 after their construction was delayed during the Covid-19 pandemic. Second, 2022’s high prices, when WTI surged briefly above $120 a barrel as Russia invaded Ukraine, turbocharged the US shale industry. Third, Saudi Arabia pushed the OPEC+ cartel into a series of production hikes despite a growing glut, in part after several members, notably Kazakhstan, the United Arab Emirates and Iraq, cheated on their output quotas. A little further out, while the futures markets indicates an expectation of $60 oil by 2030, Blas is more optimistic than that. Despite talk about the world shifting away from fossil fuels, oil consumption growth remains healthy. In both 2025 and 2026, demand is likely to increase at an annual rate of 800,000 to 900,000 barrels a day, not far from the 20-year average of about 1.1 million barrels a day. Barring a global recession, demand is likely to expand at a similar rate in 2027 and toward 2030, requiring quite a lot of new production.
Technology
Volkswagen has said it can produce an electric vehicle entirely made in China for half the cost of doing so elsewhere, writes The Financial Times. VW is preparing to release about 30 EV models in China over the next five years in a bet on localised research and development. The carmaker said that, compared with the 2023 production costs for EVs in Germany, the cost for some models in China had been reduced by as much as 50 per cent due to supply chain efficiencies, including battery procurement, shorter development periods and lower labour costs. The German group has invested billions in its innovation centre in Hefei, eastern China, where it has more than 100 advanced laboratories for testing software and hardware, alongside batteries and EV powertrains. The company is in discussions about increasing exports of Chinese-made cars as well as applying China breakthroughs throughout its global operations.