This Advent, we encourage you to support worthy causes that bring hope and healing to those in need by giving to organizations that we as a firm and as individuals support, such as Mercy Ships, Gifts to Children of Ukraine, and initiatives led by Nicholas Kristof. We wish you a blessed holiday season!
Welcome to this week’s edition of Geopolitics & the Day After. Each week, we curate and synthesize key developments from global politics, economics, and financial markets, drawing from a wide range of trusted sources. Our goal is to provide you with a clear, concise, and insightful overview of the forces transforming the world today and shaping tomorrow. Below is an overview of what we cover this week:
Geopolitical Concerns takes a look at how Ukraine’s experience shows that smaller states, when integrated into Western networks, can resist larger adversaries in prolonged conflicts, while the U.S. shifts its 2025 National Security Strategy toward regional priorities and a conciliatory stance on major powers, reshaping global diplomacy amid evolving Russia-India ties.
Geoeconomics examines how the global economy faces rising volatility and fragmentation as states weaponize economic tools and capital allocation amid high debt, tariff disruptions, uneven tech gains, and China’s growing trade surplus, making geoeconomic competition and financial vulnerabilities central to the next phase of global order.
Global Junctions dives into the AI and financial sectors as they are undergoing major realignments, with Alphabet gaining dominance over OpenAI, while rapid advances in AI heighten disinformation risks, and tokenisation emerges as a transformative force in financial markets.
Global Trajectories reviews China’s mounting fiscal stress from surging local debt and deflationary pressures, while global supply chains strain under critical mineral shortages, and climate change intensifies governance and adaptation challenges across vulnerable regions.
Geopolitical Concerns
Ukraine, Europe and the new economics of war
Elina Ribakova, Financial Times
Breaking down Trump’s 2025 National Security Strategy
Scott R. Anderson, Aslı Aydıntaşbaş, Pavel K. Baev, et al., Brookings
Putin and Modi Deepen Relationship That Has Drawn Trump’s Anger
Tripti Lahiri and Thomas Grove, The Wall Street Journal
The Five Elections That Will Be Pivotal for Global Politics and Democracy in 2026
Frida Ghitis, World Politics Review
Ukraine’s wartime experience continues to reshape assumptions about the relationship between economic capacity, resilience, and military performance. As Russia struggles to convert its larger size and industrial base into strategic advantage because of sanctions, technological dependence, demographic strains, and inefficient mobilisation, Ukraine has sustained resistance through macroeconomic reforms, innovation, and extensive Western support. This shows how a smaller state, when effectively integrated into Western financial and technological networks, can withstand a prolonged war of attrition and complicate Moscow’s campaign, even as the conflict imposes substantial costs and uncertainty. Against this backdrop, the Trump administration’s 2025 National Security Strategy has sharply shifted its rhetoric, deemphasizing great-power competition and adopting a more conciliatory tone toward Russia and China. The NSS prioritizes regional balances of power, domestic issues, and hemispheric focus over global rivalry, signaling a worldview that diverges from the strategic framing that guided previous administrations and raising questions about how Washington’s posture toward major powers will evolve.
This repositioning has implications for U.S. diplomacy and alliances, particularly as Russia seeks alternative partnerships to offset its dependence on China. Putin’s visit to New Delhi reflects Moscow’s efforts to maintain India as a critical economic and diplomatic lifeline that offers discounted oil and defense cooperation, even as India manages tensions with Washington over energy imports and arms ties. Although New Delhi has reduced purchases of Russian oil amid U.S. sanctions pressure, the long-standing Russia-India relationship is regaining momentum, with both sides exploring expanded economic and technological engagement despite India’s parallel interest in stabilizing relations with the United States. At the same time, democratic processes will shape the geopolitical landscape in 2026, with pivotal elections, from the United States to Hungary, Israel, Colombia, and ultimately postwar Ukraine, set to influence alliances, domestic legitimacy, and global democratic resilience.
Geoeconomics
Erik R. Peterson and Terence Toland, Kearny
Jared Cohen and George Lee, Foreign Policy
It’s time to sound the alarm on growing fiscal and financial risk
Martin Wolf, Financial Times
China’s record $1 trillion-plus trade surplus shows the renminbi should be allowed to appreciate
James Kynge, Chatham House
The global economy is entering a period of heightened volatility, policy uncertainty, geopolitical fragmentation, and uneven technological gains. While headline growth projections have been revised slightly upward for 2025–2027, the overall outlook remains constrained by tariff disruptions, persistent inflation, and rising public debt levels that now exceed $100 trillion globally. Businesses and policymakers face pressures as supply chains reconfigure, trade contracts, and AI-driven investment becomes a partial but uneven counterweight to macroeconomic headwinds. Within this environment, states are increasingly turning to economic tools like tariffs, industrial policy, chokepoint control, and capital deployment to advance strategic aims. This trend is exemplified by the rise of “instrumental capital,” in which sovereign wealth funds and state-directed investment vehicles, especially in the Middle East, deploy vast pools of capital to diversify economies, secure technological advantages, and exert geopolitical influence. With the Gulf monarchies expanding their reach across critical technologies, infrastructure, and global financial markets, capital allocation is becoming a central arena of competition as governments seek resilience, leverage, and alignment in a fragmented global order.
Fiscal and financial risks further complicate the geoeconomic landscape. As public debt in advanced economies climbs to postwar highs, concerns are shifting not only to overall debt levels but also to how this debt is being financed in a system increasingly dominated by non-bank financial intermediaries. The growing reliance on leveraged funds, FX swaps, and concentrated bond holdings raises the probability of discontinuous market stress, amplifying vulnerabilities across sovereign debt markets. At the same time, China’s record-breaking goods trade surplus, which is projected to exceed $1.2 trillion in 2025, shows its expanding technological competitiveness, particularly in electric vehicles, legacy chips, and shipbuilding. While U.S. tariffs have sharply reduced China’s exports to the United States, surging sales to Europe and the Global South have more than offset these losses. Weak import demand and a persistently undervalued renminbi reinforce this imbalance, prompting calls within China for gradual appreciation to avoid intensified Western protectionism.
Global Junctions
OpenAI Goes From Stock Market Savior to Burden as AI Risks Mount
Ryan Vlastelica, Bloomberg
AI Is Supercharging Disinformation Warfare
James P. Rubin and Darjan Vujica, Foreign Affairs
Larry Fink and Rob Goldstein on how tokenisation could transform finance
The Economist
The European Union needs more than the digital omnibus to make digital services competitive
Bertin Martens, Bruegel
Shifting dynamics in the AI industry and financial markets are revealing widening divergences between perceived leaders and lagging counterparts. The sharp reversal in sentiment toward OpenAI mainly due to concerns about profitability, financing complexity, and slowing product momentum following mixed reactions to GPT-5, has weighed on companies in its ecosystem, while Alphabet’s stronger balance sheet, breadth across cloud, chips, and data infrastructure, and the strong reception of its latest Gemini model have positioned it as an increasingly dominant force in the AI value chain. This reordering has made partners tied to OpenAI face greater revenue uncertainty, whereas those linked to Alphabet benefit from renewed investor confidence. At the same time, advances in AI have dramatically escalated risks in the information domain. AI-enabled disinformation, ranging from deepfake diplomatic messages to mass-personalized psychological profiling, has lowered barriers for malign actors and increased the scale and sophistication of influence operations. These developments overlap with a reduction in U.S. institutional defenses, creating vulnerabilities that adversaries are already exploiting, with the potential to undermine diplomatic trust, social cohesion, and electoral integrity.
Parallel transformations are underway in financial infrastructure and digital regulation as policymakers and industry leaders navigate both innovation and risk. Tokenisation is emerging as a foundational shift in how assets are recorded, moved, and traded, promising near-instant settlement, reduced operational friction, and broader investor access by converting traditionally illiquid holdings into digitized, verifiable units. Though early adoption remains small, rapid growth and increasing experimentation suggest that tokenisation could evolve into a bridge between legacy financial systems and digital-first markets, provided regulatory frameworks adapt with appropriate safeguards. Meanwhile, the European Union is pursuing its own digital overhaul through omnibus reforms aimed at simplifying fragmented data governance and recalibrating AI regulation. Yet the proposed changes introduce new inconsistencies, retaining unclear data-access rules under the Data Act, prolonging regulatory uncertainty within the AI Act through delayed obligations and a proliferation of future guidelines, and creating loopholes in digital privacy and data-sharing regimes.
Global Trajectories
China’s local debt rises to $18.9tn as property slump lingers
Yusho Cho, Nikkei Asia
The hunt for copper to wire the AI boom
Camilla Hodgson, Financial Times
‘Too hot to handle’: climate change pushing Arab region to limits, says WMO
Attracta Mooney and Chloe Cornish, Financial Times
Iran’s Water Crisis Is a Warning to Other Countries
Eric Lob, Carnegie Endowment for International Peace
China’s fiscal strains reveal deep structural pressures that will shape its economic trajectory in the coming years. Local government debt has surged to nearly $18.9 trillion, pushed by collapsing land-sale revenues, persistent off–balance sheet borrowing through local government financing vehicles, and the low profitability of infrastructure-heavy projects that depend on implicit guarantees and prolonged monetary easing. Record bond issuance and central government support may avert a near-term crisis, but deflationary conditions and narrowing gaps between nominal growth and interest rates show diminishing fiscal room as authorities attempt to stabilize demand while containing systemic risk. Alongside these challenges, global supply chains face emerging constraints from accelerating demand for strategic minerals. Copper, in particular, has become a bottleneck for the AI and energy transitions, with data centers, grid upgrades, defense requirements, and electrification collectively pushing consumption far beyond available supply. Aging mines, declining ore grades, community resistance, and long permitting timelines have created a widening gap between projected demand and feasible production, reinforcing concerns about concentrated supply, geopolitical vulnerability, and sustained price pressures.
Climate change impacts are intensifying parallel stress points across vulnerable regions, revealing governance gaps and long-term adaptation challenges. The Arab world is warming at twice the global average, with extreme temperatures surpassing 50°C, worsening drought conditions, and intensifying storms that threaten water security, food production, coastal infrastructure, and public health. These environmental pressures expose the limits of existing systems and compound socioeconomic risks across some of the world’s most water-scarce countries. Iran’s escalating water crisis illustrates the compounding effects of climate stress, decades of mismanagement, and overextraction, culminating in shrinking reservoirs, acute shortages, and widespread public discontent. Short-term measures offer limited relief in the absence of structural reforms to governance, technology adoption, and resource management.
