5 Big Geopolitical Risks for 2015

Critical events of early 2015 cheap oil and Middle East violence will
probably continue to take their toll as the year goes on, according to a new
projection of geopolitical hotspots. Lower overall prices for commodities may
hurt the economies of resource-rich nation.
Aon Risk Solutions, a unit of Aon Plc, today issued its annual Political Risk Map,
intended to provide the British insurer's clients with answers to common
questions about where its getting safer, and more dangerous, to do business.
There isn't a lot of good news. Just seven of 163 developing countries reduced
their political risk since last year, and most of those, like Zimbabwe and Laos,
still have plenty of room for improvement. Twelve countries face greater strain
this year, including Libya, Haiti, and Pakistan.
The last 12 months have just been catastrophic country-risk-wise, said Curtis
Ingram, vice president of the political-risk practice. Its almost like a vacuum
has opened up and a lot of bad actors have moved in, in Crimea and Eastern
Ukraine, Nigeria, Iraq, and elsewhere.
Aon and research partner Roubini Global Economics, founded by the economist
Nouriel Roubini, evaluate each nation across nine categories of risk, such as
foreign currency exchange and capital conditions, law and regulation, and
political interference and violence. The report considers only developing
nations; members of the Organization for Economic Co-Operation and
Development (OECD) together form the baseline for the research and are
therefore excluded.
Here are five of the things the report says we should keep an eye on in the
months ahead.

Russia

Low oil prices and international sanctions stemming from the Ukraine conflict
have taken their toll on the Russian economy. The murder last week of Boris
Nemtsov, an opposition leader and Yeltsin-era deputy prime minister not
mentioned in the report but a dark omen has exacerbated internal political
tensions.
Russias instability will continue to cast a shadow over the region, according
to the political risk report, which projects consequent hardships for trading
partners Belarus and Kazakhstan. Researchers see a possible frozen conflict
and continued sanctions in Ukraine, unlikely to be resolved in the months
ahead.
Oil and other commodities
Russia, Venezuela and Iran have drawn much of the attention, and punishment,
from the oil glut. Its also a problem for smaller powers, such as Uzbekistan and
Turkmenistan, whose fragile foreign currency exchange and capital policies
leave them vulnerable to trade shocks. Mining- and energy-heavy nations in
Africa Angola, Cameroon, Congo, and Nigeria all face weaker incomes and
likely spending cuts.

Conflict and violence

The horrors of Islamic State in Syria and Iraq, and Boko Haram in Nigeria, are
top threats to regional stability. Porous borders and immature civic institutions
in parts of the Middle East and Africa make nations there particularly sensitive
to violence.

Interest rates

Even modest interest-rate increases by the Fed will intensify the

global competition for capital and make it costlier to service external debt.

The Middle East and North Africa

Countries such as Egypt, Tunisia, and Morocco should see a boost from the oil
price drop, the report's authors suggest. Yet all three countries, rated either high
or very high risks, face countervailing security risks from what the report calls
power vacuums in Iraq, Libya and Syria.
There's also everywhere else. Private insurers have offered political risk
coverage for several decades, to help companies take some of the edge off doing
business in new and emerging markets. But, like most of us, the problems of
these places like to travel. Turkey and Mexico, for example, may be particularly
politically or economically vulnerable to tumult in the Middle East and Latin
America. But as OECD members, they pose risks that arent addressed in the
report.