Bremmer: The risks to watch in 2012

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Investors will be watching closely what politicians’ moves will be this year, says Ian Bremmer, president of the Eurasia Group and author of the “Top Risks for 2012” report. He added that despite the fact that the numbers will be better in 2012, a flood of liquidity will still not be coming in.

Source: CNBC, January 4, 2012.

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Case for a sustained $100 oil price

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The article below is a guest contribution by Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors.

In 2011, oil was one of the top performing commodities among those we track, with Brent rising more than 13 percent. Geopolitical risk and unexpected non-OPEC supply losses caused oil to rise significantly in early 2011. By October, we saw the black gold sink to a low of $80 per barrel before rising to its current level of nearly $108 a barrel.

This year’s unrest demonstrated how major oil-producing regions can significantly affect oil prices. As I’ve previously stated, according to PIRA, the Middle East accounts for over 70 percent of OPEC oil production and, along with North Africa, more than 95 percent of the cartel’s capacity growth.

A disruption of the supply chain can also influence oil prices. One of the largest chokepoints along the global oil supply chain is the Strait of Hormuz, which roughly 90 percent of all Persian Gulf oil tankers—some 18 million barrels per day—pass through, according to Barclays. With Iran controlling the entire northern border of the strait, there is a significant chance for disruptions should the country fall into conflict or war.

The story will likely continue into the new year, as “sanctions against Iran, including a possible European Union oil embargo, and fear of an Israeli attack on Iran’s nuclear facilities led 2011 to close on a bullish note” for oil, said PIRA Energy Group in its new report today. Additionally, there’s new political uncertainty in Iraq that may keep oil elevated.

The chart below sums it up: With more than 40 percent of the world’s oil controlled under autocratic rule, oil supply in democratic nations likely depends on the state of autocratic nations.

China Rises to Top of Energy Pyramid
Another significant development in 2011 was that China surpassed the U.S. to become the world’s largest energy consumer. BP’s Statistical Review of World Energy report calculated that China’s energy consumption rate grew 11 percent over the previous year, with the country consuming 20 percent of global energy.

Read China is World’s Largest Energy Consumer

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New word: Ineptocracy

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Ineptocracy (in-ep-toc’-ra-cy): A system of government where the least capable to lead are elected by the least capable of producing, and where the members of society are least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of an ever diminishing number of producers.

Source: Urban Dictionary (hat tip: Niels Jensen)

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Countries most likely to have armed riots

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This post is a guest contribution by Dian Chu, market analyst, trader and author of the EconMatters blog.

BRIC countries (Brazil, Russia, India and China) are among the highest risk regions to have armed conflicts based on the third annual Conflict Intensity Index, an annual study evaluating the intensity of armed conflict across 197 nations, released by risk analysis company Maplecroft.

On the country level, the study rates 12 countries as ‘extreme risk’:

  • Libya and Syria, which are ranked joint 1st
  • Afghanistan
  • Cote d’Ivoire
  • Iraq, Pakistan
  • South Sudan
  • At equal 8th are Nigeria, Somalia and Yemen
  • Egypt
  • India

Region-wise, three years data from Maplecroft show MENA (Middle East and North Africa), Central Africa, Indian subcontinent most at risk. BRIC countries are also at ‘high’ and ‘extreme risk’ Nevertheless, significant opportunities could also exist for businesses, and investors, if those risks are properly managed.

BRICs

Among the four BRIC countries, India is ranked 11 and ‘extreme risk’ for conflict intensity, while Russia (13) and China (29) are both rated ‘high risk.’ Maplecroft noted that protracted insurgencies and terrorist threats within these countries continue to present challenges to the business environment. Conflict, however, poses less of a risk in Brazil (60), which is rated ‘medium risk.’ According to the study:

India, the highest ranked of the BRICs countries, faces significant risks from Islamist terrorism. A particular source of concern is Lashkar-e-Taiba, a pan-Islamist terrorist group that desires the creation of a “caliphate” across the Indian subcontinent and the withdrawal of India from Kashmir. Lashkar-e-Taiba continues to launch attacks in Kashmir and India and is one of several groups suspected of the 13 July 2011 Mumbai bombings that killed at least 26. India is also enduring a 45-year-long Maoist insurgency from ‘Naxalite’ militants in the east of the country whose aim is to overthrow the current political system.

Shochwaves Of Arab Spring

The shockwaves from the Arab Spring have propelled Egypt, Libya and Syria into the most severe risk category.

Maplecroft notes that generally, North Africa has witnessed an increase in its risk profile over the past three years reflecting the Arab Spring shockwave contagion across the region. Egypt, for instance, just had the Black Sunday on Oct. 9, and the 2011 Egyptian revolution has resulted in significant loss of life with over 800 people estimated killed in the violence.

Continue reading Countries most likely to have armed riots

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Ian Bremmer on geopolitical issues

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Eurasia Group’s Ian Bremmer maps out the geopolitical investment pitfalls and political unrest.

Source: AOL, May 11, 2011.

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Ian Bremmer maps out investing pitfalls

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In this video clip, Eurasia Group‘s Ian Bremmer maps out the investing pitfalls of political unrest.

Source: AOL, April 14, 2011.

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