oil

4 hot-button global issues, according to a Davos attendee

January 21, 2014: 5:24 PM ET

We talk to the Eurasia Group's Ian Bremmer about what's really important at the buzzworthy annual economic forum.

Ian Bremmer 2013

FORTUNE -- The bloviating, partying, and high-minded panel-discussing that is the World Economic Forum in Davos, Switzerland, is just getting underway this week. Which prompts the question: What's really important this year?

To answer this, I called my favorite Davos Man, Ian Bremmer, just before he hopped on an airplane to Europe. He gave me his preview of what he'll be discussing in his public and private meetings during the week. (The swells who attend WEF actually refer to their one-on-ones in Davos as "bilaterals.")

If you're unfamiliar with him, Bremmer, 44, runs the political-risk consultancy Eurasia Group, based in New York. A political scientist by education, Bremmer wrote his doctoral dissertation at Stanford University on the impact of the imploding Soviet Union on the Russian Diaspora who would suddenly be expatriated from the Motherland. (He concluded that, for the most part, Russians had made themselves at home far from Russian soil and would do just fine under new regimes.) His firm, which he started in 1998, consults with large multinational companies, financial institutions, and governments which, he says, "observe the rule of law." He aims to provide "unvarnished analytical information and research," he told me. "I wouldn't want to be in a position to write something about clients that isn't accurate."

On a daily basis, Bremmer is in a position to offer opinions and analysis about just about anywhere in the world. I asked him to tell me his three hot-button issues heading into Davos. Overachiever that he is, he gave me four. (He also appeared last week with celebrity economist Nouriel Roubini in a session moderated by Rana Foroohar of Time magazine.) Notably, Bremmer believes the most pressing concerns at Davos this year will for the most part not be economic, which stands in contrast to recent years where subjects such as the eurozone crisis, U.S. fiscal embarrassments, and a feared China hard landing have preoccupied decision-makers and opinion-mongers in Davos.

Bremmer's hot list, below.

Chinese reform

Bremmer observes that the Chinese political leadership under President Xi Jinping is "more engaged in substantial reform than we've seen in 20 years." At the top of their list: corruption, financial-sector reform, a free-trade zone in Shanghai, and making state-owned enterprises more transparent to government leaders. "All of those things are really overdue," Bremmer says. "But they will create losers. The reason they haven't done anti-corruption before is that it will piss a lot of people off." For example, cleaning up China's massive shadow banking system will cut off a lot of credit, no small factor for economic and political stability in China. "This is why Xi has created a lot of power around his own person," Bremmer says. "He has an understanding that this stuff is not easy, and that his actions will create a backlash."

The reforms may well create an opportunity for Western companies. "Some will see that as state-owned enterprises are squeezed for capital they're going to be interested in working more with large multinational corporations," Bremmer says. "In this regard, U.S.-Chinese relations will improve. China wants more stability given all that is going on internally. At the same time, I don't think we'll see improvements in intellectual property and other cybertheft emanating from China."

MORE: Yet another China credit crunch: What's going on?

Renewed emphasis on U.S. foreign policy

Bremmer notes that the non-issue of 2014 -- the U.S. economy -- boosts the significance of US. foreign policy. With the conventional wisdom that the U.S. economy is not in decline, a major concern at past WEF gatherings, and with President Obama not burdened by budget showdowns and other crises over the domestic economy, his second-term team can focus again on matters abroad. Unfortunately, Bremmer doesn't see things going very well for the U.S., especially given that many of its allies are having a more difficult time with their own foreign policies. "Britain, Japan, and Israel have no choice" but to follow the U.S., he says. Ditto Mexico and Canada. "Everyone else is hedging. That creates problems for multinationals." For example, U.S.-based companies increasingly are being asked to prove they are not working with the National Security Agency.

As well, Bremmer isn't particularly high on the U.S. Secretary of State. "John Kerry is a smart guy," says Bremmer. "He's capable. But he wasn't Obama's first choice. He doesn't have the access to the President that Hillary did. He got his legs cut out on Syria. He doesn't know Asia well." Bremmer thinks Kerry does have a shot at completing an Iran deal; he is less optimistic about Kerry's chances brokering an agreement between the Israelis and Palestinians.

MORE: 10 most shocking NSA revelations of 2013

Emerging markets

Developing countries have, in Bremmer's view, a success problem. "As these places get wealthier their people demand more," he says. Citizens in Turkey, Brazil, and Thailand, for example, want accountable governance. "In that environment, political capital for leaders is hard to come by. The domestic environment is more challenging," and along comes an international problem: "With the U.S. coming out of recession and easing its monetary support, capital is harder to come by." This has hurt capital markets in developing countries, which creates domestic concerns. Bremmer's run-down of emerging markets to watch? Columbia and Mexico ("the next developed nation, which is great") are in good shape. Brazil and Indonesia look reasonably good. "Turkey looks horrible. India looks bad. Argentina and Venezuela are disasters. Russia looks bad."

MORE: Brazil's economic trap

Energy abundance, etc.

On that happy note, Bremmer turns his attention to a grab bag of other issues, including the ramifications of a potential oil glut. "Lots more production from the U.S. and Libya, plus Iraq in a low-growth environment mean prices go down. And then they go down again if an Iran deal happens. This is really problematic for petro states that haven't engaged in diversification and economic reforms." On the list of countries to be concerned about: Nigeria, Venezuela, Saudi Arabia, and Russia.

Bremmer concludes by noting that though we're not fretting over the U.S. economy or Europe this year, it's not as if everything is hunky-dory either. "It's a benign environment for the U.S. going forward. But Obama is unpopular. There is no upside for legislative gains. No free trade agreement, no immigration bill. No minimum wage hike. The gap between rich and poor is not moving. It's a true issue." He's not particularly upbeat about Europe, which is "just not an exciting topic this year. It's a hard slog. There's less concern about the eurozone collapsing, but there is no reason to do business there."

MORE: China's quest for a new energy source heads to space

But there's one good place for Ian Bremmer to do business in Europe, at least this week: Davos, of course.

  • Experts for Ecuadorian plaintiffs suing Chevron disavow all their scientific findings in the case

    New turn in $19-billion litigation.

    By Roger Parloff, senior editor

    FORTUNE -- In filings Friday morning in federal court in Manhattan, Chevron has submitted statements from the top two scientific experts for the Ecuadorian plaintiffs suing the company for alleged oil contamination, disavowing essentially all of their previous findings and conclusions in the case -- findings that formed the purported basis for a $19 billion judgment handed down by an Ecuadorian MORE

    Apr 12, 2013 12:01 PM ET
    Posted in: , , ,
  • Vitol tops $300 billion in revenue

    Oil giant Vitol would rank higher than Chevron on the Fortune Global 500 list if it were public.

    By Brian O'Keefe, assistant managing editor

    FORTUNE -- The world's largest independent oil trader, the Vitol Group, has surpassed $300 billion in revenues for the first time.

    According to results released on Thursday by Vitol, which is privately held, the trading giant's gross sales reached $303 billion in 2012. That figure was up modestly MORE

    Feb 28, 2013 8:00 AM ET
  • What I learned aboard Shell's grounded Alaskan oil rig

    Last year, Fortune went inside the Kulluk, the oil-drilling ship Shell planned to use to tap oil reserves in the Arctic Ocean. Now those hopes may be dashed.

    By Jon Birger

    FORTUNE -- Last March I became the first journalist in 25 years to board the Kulluk, the Shell oil-drilling ship now at the center of an environmental drama unfolding in the Gulf of Alaska.

    The Kulluk is a circular-shaped drilling barge, MORE

    Jan 3, 2013 8:58 AM ET
    Posted in: , , ,
  • Of ice and oil in Alaska

    Ecology, geopolitics, and big business intersect on the Arctic coast. A review of The Eskimo and the Oil Man: The battle at the top of the world for America's future, by Bob Reiss

    By Tory Newmyer, writer

    FORTUNE – Perched on the northern edge of Alaska, the town of Barrow is under siege. Rapid climate change threatens its physical infrastructure. Multinational oil companies seek to drill in the waters off its MORE

    Jun 8, 2012 6:38 AM ET
  • Why Shell is betting billions to drill for oil in Alaska

    This summer, the energy giant will begin exploring off the icy coast of Alaska -- after years of resistance by environmentalists. The payoff could be the largest U.S. offshore oil discovery in a generation.

    By Jon Birger, contributor

    FORTUNE -- Pete Slaiby is eating breakfast with an Eskimo businessman at a Mexican restaurant across the street from the Arctic Ocean when two Coast Guard admirals happen to walk in. It's 8 MORE

    May 24, 2012 9:19 AM ET
  • The NYMEX: Where the inmates run The Asylum

    Our Weekly Read column features Fortune staffers' and contributors' takes on recently published books about the business world and beyond. We've invited the entire Fortune family -- from our writers and editors to our photo editors and designers -- to weigh in on books of their choosing based on their individual tastes or curiosities. In this installment, writer Katie Benner reviews The Asylum: The Renegades Who Hijacked the World's Oil Market, Leah McGrath Goodman's wilder-than-fiction MORE

    Oct 21, 2011 1:14 PM ET
Search This Column
View all entries from this: Week, Month
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.