Global Risk Indexes (20-12-2024)

Global 88 (-1 ▼)
MENA 98 ( —)
APAC 90 (-1 ▼)
Europe 89 ( —)
Africa 83 (+1 ▲)
AMERs 78 (-1 ▼)
Markets 90 (-2 ▼)
Markus Schmidt, Europe region analyst at Worldwise Analytica

Markus Schmidt

Analyzing Today, Anticipating Tomorrow

Europe Confronts Heightened Tensions in Ukraine, Hybrid Threats, and Economic Stagnation

The Ukraine conflict escalates further, with Russian missile strikes on Kyiv causing significant damage and casualties during rush hour. Russia's use of hypersonic Kinzhal and Iskander missiles underscores its intent to maintain a psychological and strategic edge. Ukrainian President Volodymyr Zelenskiy's call for increased transatlantic unity at the EU summit reflects Kyiv's reliance on external support to counter Russian advances, particularly in critical regions like Pokrovsk.

Russia's provocative rhetoric deepens tensions, as President Vladimir Putin proposed a 'missile duel' with the United States to demonstrate the capabilities of Russia's Oreshnik hypersonic missile. While dismissed by Ukrainian officials, this statement reflects Moscow's ongoing efforts to test Western resolve and exploit divisions within NATO.

Energy security concerns persist, as Ukrainian officials consider conditional transit of Russian gas under strict limitations. Zelenskiy's remarks highlight the complex interplay of economic necessity and geopolitical resistance to Moscow's influence. Concurrently, Moldova's continued state of emergency due to gas shortages underscores the broader vulnerabilities of Eastern Europe's energy landscape.

Hybrid threats in the Baltic Sea come into focus, as investigations into the Yi Peng 3 vessel suggest potential sabotage of undersea cables linking Finland, Germany, Sweden, and Lithuania. While China's involvement remains unproven, Western intelligence assessments suggest deliberate interference, complicating EU-China relations and emphasizing the need for robust critical infrastructure protections.

France grapples with domestic and international pressures, as President Emmanuel Macron pledges emergency measures to support Mayotte following Cyclone Chido. Macron's promises of expedited reconstruction laws aim to address criticisms of neglect but come amid mounting fiscal challenges, highlighted by Moody's recent credit downgrade.

Economic concerns across the EU deepen, with Germany's industrial stagnation and France's political instability reflecting broader challenges to economic recovery. Italy's relative political stability contrasts with its systemic economic vulnerabilities, as investments in manufacturing remain insufficient to drive sustained growth.

Geopolitical realignments emerge, with Norway's central bank signaling cautious optimism about economic resilience, despite the broader global slowdown. Meanwhile, NATO's operational command in Wiesbaden highlights a shift toward European responsibility in Ukraine's defense, amidst uncertainties about U.S. commitments under President-elect Donald Trump.

In conclusion, Europe faces an increasingly volatile geopolitical landscape, with escalating conflict in Ukraine, internal economic and political challenges, and external threats testing the region's resilience. Decisive leadership and stronger transatlantic coordination remain essential to navigating these crises effectively.

Geopolitical Risk Assessment for the Europe
(20-12-2024)

Geopolitical risks across Europe remain at a critical level due to escalating military tensions in Ukraine, Russia's increasing assertiveness, and persistent economic challenges in key EU nations. Energy vulnerabilities, hybrid threats, and the potential for geopolitical realignments further stress the region's stability. While efforts toward EU-NATO cooperation continue, internal divisions and external pressures hinder effective responses.

Geopolitical Risk Index

Developments to Follow for the Europe (See All Global)

Direct (20-12-2024)

Russian missile strikes on Kyiv and Pokrovsk advances

Impacts:

Short-term: 9, Long-term: 8

Assessment: The attacks intensify Ukraine's vulnerability, highlighting the need for enhanced Western air defense systems and broader strategic support.

Direct (19-12-2024)

Ukraine's missile and drone strikes on Russian oil infrastructure

Impacts:

Short-term: 9, Long-term: 8

Assessment: The strikes aim to weaken Russia's war economy but risk escalating military responses, challenging NATO's deterrence strategies.

Direct (18-12-2024)

Deployment of North Korean troops in Russia's Kursk region

Impacts:

Short-term: 9, Long-term: 8

Assessment: Russia's reliance on foreign troops highlights its operational challenges but also signals a dangerous escalation with broader geopolitical implications.

Direct (17-12-2024)

Deployment of North Korean troops in Russia's Kursk region

Impacts:

Short-term: 9, Long-term: 8

Assessment: The inclusion of North Korean forces signals a troubling internationalization of the Ukraine conflict, raising geopolitical stakes and testing NATO's cohesion.

Direct (15-12-2024)

Intensified Russian attacks on Ukraine's infrastructure and use of hypersonic missiles

Impacts:

Short-term: 9, Long-term: 8

Assessment: Russia's escalation threatens Ukraine's energy and economic resilience while pressuring NATO to accelerate technological and strategic responses.

Indirect (15-12-2024)

NATO's push for greater defense spending

Impacts:

Short-term: 8, Long-term: 9

Assessment: Increased defense budgets are critical for addressing long-term security threats but face resistance due to fiscal constraints, risking alliance cohesion.

Direct (14-12-2024)

Russia's aerial assault on Ukraine's energy infrastructure

Impacts:

Short-term: 9, Long-term: 8

Assessment: Russia's escalation aims to erode Ukraine's resilience while testing NATO's commitment to counter long-range missile threats. The attacks raise strategic questions about Europe's preparedness to defend critical infrastructure.

Indirect (14-12-2024)

NATO's push for heightened defense budgets

Impacts:

Short-term: 8, Long-term: 9

Assessment: The push for increased defense budgets is critical for countering long-term threats but risks deepening divisions within the alliance over fiscal and strategic priorities.

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