Resource Wars 2.0: How Energy Empires Are Reshaping Our World #255
Fossil West vs Renewable East
Grüezi!
China’s manufacturing might wobbles as export growth plummets to 9.3% – but its dual energy strategy remains unmatched
America’s last AAA credit rating vanishes as debt hits 120% of GDP – is the global financial system’s cornerstone cracking?
Europe faces trillion-euro security bill as US-Russia ‘Cold Peace’ threatens to turn the Arctic into a new frontline
[ENERGY SHIFT]
1. Energy Empires: When Fossil Feudalism Meets Climate Capitalism
Resource geography now shapes geopolitics more powerfully than Cold War ideologies, with nations increasingly aligning in fossil vs renewable blocs.
Great powers operate on fundamentally incompatible time horizons—extractive urgency versus renewable patience.
China occupies a masterfully ambiguous position—simultaneously fossil fuel consumer and renewable manufacturing hegemon.
Power politics goes post-carbon
The geopolitical chessboard faces fundamental redrawing. Russia’s hydrocarbon hegemony confronts Europe’s renewable revolution. America, energy-schizophrenic, plays both sides – leading global production in oil and gas whilst making unprecedented clean tech investments. China, is a mirror image – the world’s biggest oil importer, has reduced its electricity costs to nearly nothing.
Traditional alliances fray while new energy coalitions emerge. The great game has gone green-versus-gas.
“We’re witnessing not merely an economic transition but a comprehensive realignment of global power around competing energy systems.”
Fossil powers and renewable nations operate on irreconcilable timelines. Hydrocarbon states face inevitable depletion and diminishing social licence; their strategic imperative becomes maximum extraction before their window closes. Renewable-focused nations accept high upfront costs for perpetual energy flows. The calculus differs profoundly, creating a clash of civilisational outlooks.
The International Energy Agency now projects global fossil demand peaks by the late 2020s, breaking decades-long dominance. Fossil fuels’ share of world energy drops to 73% by 2030, with renewable power approaching half of global electricity generation.
China’s masterful middle-path
Beijing occupies the most fascinating position in this paradigm – simultaneously the world’s largest fossil fuel importer and the world’s dominant renewable technology manufacturer. China produces about 70% of global solar panels and leads in batteries and electric vehicles. This dual identity allows it to maintain petrostate relationships while positioning itself as the manufacturing centre for the green transition. Hedging, brilliantly.
“The Belt and Road Initiative creates infrastructure for both fossil distribution and renewable manufacturing supply chains simultaneously – a masterclass in strategic ambiguity.”
America: a house divided
The US finds itself pulled in opposite directions both internationally and internally. Under the Biden administration it swung toward climate action with the Inflation Reduction Act – the largest climate investment in US history. Yet “drill, baby, drill” is back with Trump and domestic energy policy remains highly polarised along partisan and state lines, creating a “Texas versus California” split that runs through American politics.
Russia: waning leverage, eastern pivot
For Russia, this realignment poses an acute threat. Fossil fuels still account for approximately 40% of Russia’s federal budget revenues. Yet that traditional power erodes rapidly – the Ukraine war accelerated an energy divorce with Europe, which moved with surprising speed to slash Russian imports. Moscow’s pivot toward China and India provides some economic lifeline, but at the cost of weakened leverage and dependency on these Asian giants.
Internal fault lines
The realignment plays out not only between nations but within them. Different regions often have opposing stakes in the fossil-renewable divide. Energy transitions create winners and losers domestically, leading to political frictions that reshape national policies. France’s populist protests against fuel taxes demonstrated how “oppressive” climate policies can face fierce resistance.
The great reordering
The evidence suggests something profoundly transformative: global power reorganising around competing energy systems rather than traditional ideological markers. This restructuring determines not just economic relationships but military alliances, political identities, and our ecological future.
By 2030, renewables will dominate new power investments while fossils scramble for shrinking shares. The climate clash isn’t some distant concern – it’s reshaping geopolitics now. Fundamental.
What to Watch:
IEA’s June quarterly outlook – will fossil projections drop below 70% for 2030?
EU Carbon Border Adjustment Mechanism implementation (October)
Qatar’s next round of 25-year LNG contract allocations
[ECONOMIC INTEL]
2. China’s Industrial Checkmate
China’s manufacturing dominance (35% global share) exists alongside concerning domestic economic indicators.
But recent data shows a slowdown in China’s growth momentum that challenges easy narratives.
Neither “Chinese century” nor “Decline of the West” captures reality.
Kyle Chan’s NYT op-ed appeared like one of Peter Navarro’s prison nightmares: ‘In the Future, China Will Be Dominant. The US Will Be Irrelevant.’
Chan, a smart Princeton academic, was less prophesying a world ruled from Beijing, more arguing that American self-sabotage is boosting its main rival.
Because despite its relative manufacturing decline, America had maintained some structural advantages:
Higher R&D intensity (3.4% of GDP vs China’s 2.68%)
Continued attraction of global talent
Institutional resilience through economic cycles
All provided foundations for future competitiveness. The current administration is threatening all of them.
America’s erratically executed ‘Executive Order authoritarianism’ seems no match for the patient incrementalism of China’s institutional bureaucracy.
And yet? Is it quite so simple?
China’s industrial machinations: can technology triumph while the economy tumbles?
China’s carefully constructed narrative of technological ascendance is facing its stiffest test yet. The April 2025 economic data presents a sobering reality check for Beijing’s strategists. Industrial value-added growth slowed to 6.1% (from March’s 7.7%), while exports in renminbi terms fell to 9.3% (from 13.4%).
“China’s industrial policy isn’t simply imposed from above... Cities typically back sectors where they already have comparative advantage”
Three Million Bits of Red Tape
The early industrial policy of China was planned under the Three Red Banners slogan. A groundbreaking study by Chinese economists examined three million government documents and found that from 2000-2022, local and national authorities issued more than 770,000 separate industrial policy documents—way beyond the handful of headline initiatives like Made-in-China 2025 that dominate Western discussions.
China’s industrial strategy is labryinthine not monolithic.
And contrary to popular belief, it isn’t simply imposed from Beijing. Cities typically back sectors where they already have a comparative advantage, with wealthier regions doing this even more systematically. A third of city-level documents “modify” central directives to suit their own regional strengths. This creates a fascinating tension between central directives and local implementation.
US-China tensions: the tariff impact emerges
The April data provides concrete evidence that Trump’s tariff-focused approach is having tangible effects. The export growth decline from 13.4% to 9.3% in just one month represents a significant deceleration that could threaten manufacturing employment if sustained.
Rather than comprehensively reducing Chinese competitiveness, these measures may accelerate China’s push for technological self-sufficiency while simultaneously constraining its resources to achieve those ambitions. Counterproductive?
Risk horizon: what to watch
Three immediate threats loom: a potential deflationary spiral with core inflation stuck at 0.5%; accelerating contraction in property sales spreading to adjacent sectors; and further export shock amplification from US tariff escalation.
Looking ahead, July’s Politburo meeting will likely introduce new stimulus measures targeting both consumption and strategic industries, while October should bring the full impact assessment of US tariffs. With property sector stabilisation potentially delayed until Q1 2026, China faces a challenging 24 months that will test whether it can maintain tech momentum amidst broader economic headwinds.
What to Watch:
July Politburo meeting – new stimulus package details
Core inflation figures – potential deflation if below 0.3%
Export trends following latest tariff round implementation
[SECURITY ALERT]
3. Arctic Annex, Western Wedge? The Consequences of Cold Peace
Europe faces a trillion-euro security bill as American guarantees evaporate.
The UK-EU defence pact becomes existentially necessary rather than merely beneficial.
Arctic resources and routes emerge as critical pressure points for Russian leverage.
Germany’s dilemma – caught between industrial needs and security imperatives – threatens EU cohesion.
Climate chill: Arctic becomes the new frontline
After the Trump-Putin phone marathon, a US-Russia rapprochement with a harsh Ukraine settlement can’t be ruled out. It would trigger geopolitical tectonic shifts across Europe – a fundamental recalibration of post-Cold War certainties that would force European powers to confront long-neglected strategic realities.
The High North would transition from collaborative scientific zone to strategic battleground overnight. Russia’s Northern Sea Route dominance—coupled with its vast Arctic resources—creates a potential stranglehold on European energy and mineral supplies.
Nordic NATO members would discover their membership certificates provide cold comfort against Russia’s regional advantages. Finland’s 1,340km border suddenly looks rather long.
The Arctic isn’t merely warming – it’s becoming a strategic pressure point that could leave Europe with economic frostbite.
No major European power faces a more precarious position than Germany. The Merz government would confront a triple-bind:
dependence on global markets
urgent security requirements
and the weight of post-WW2 strategic restraint
Berlin’s industrial backbone relies on cheap energy and export markets—both immediately threatened. The choice between rearmament and maintaining industrial competitiveness would become excruciating, with neither option offering clear salvation.
Counterintuitively, the UK could leverage its awkward position between America and Europe to strategic advantage. Its nuclear deterrent, submarine capabilities, and special relationship with Washington suddenly gain outsized importance.
The May 2025 UK-EU defence pact would transform from diplomatic gesture to continental cornerstone. Britain’s tattered security umbrella might finally deliver the negotiating leverage over Brussels that Brexit originally promised but never delivered.
Eastern anxiety, Western wakening
Poland, the Baltics, Finland and Romania all face immediate security threats that no amount of NATO reassurance can fully address. The prospect of becoming a militarised buffer zone—reminiscent of Cold War frontiers—looms uncomfortably large.
Meanwhile, Western European powers would need to rapidly rebuild neglected defence capabilities. France’s nuclear deterrent and calls for “strategic autonomy” would move from political posturing to urgent necessity.
“Europe has sleepwalked through three decades of strategic complacency. The alarm’s now ringing and there’s no snooze button.”
Energy equation: Acceleration through desperation
European energy security faces twin challenges: accelerated transition to renewables while competing for diminishing fossil supplies during the transition period. Russia’s Arctic resources become both threat and temptation.
The green transition—previously framed around climate imperatives—would suddenly become a matter of national security. Expensive? Certainly. Optional? Not anymore.
Industrial independence or irrelevance?
The European defence industrial base would need complete independence from American technology—a generational undertaking requiring massive investment and political will.
Meanwhile, US-Russia economic cooperation would shift global technology standards away from European preferences. The resulting incompatibilities in telecommunications, aerospace, and digital infrastructure would create persistent competitive disadvantages.
The migration multiplication
A harsh Ukraine settlement would generate refugee flows potentially exceeding the 2022 crisis. Add potential economic distress in Eastern Europe triggering westward migration, and the pressure on social cohesion intensifies precisely when unity is most needed.
Southern European states would face increased Russian naval presence in the Mediterranean and competition with America for North African energy resources. Turkey’s position becomes pivotal, allowing Ankara to extract concessions from all sides.
The paradox of Cold Peace
This “Cold Peace” arrangement—not active conflict but fundamental realignment with tensions beneath surface cooperation—would be inherently unstable. The underlying values gap between Russia and Western democracies remains unresolved.
For Europe, the path forward requires unprecedented unity and investment. The bitter irony? A US-Russia rapprochement designed to end the Ukraine conflict could ultimately create more security risks than it solves, accelerating militarisation, economic nationalism, and geopolitical competition across the continent.
Europe might finally achieve the strategic autonomy it has rhetorically championed—but through necessity rather than choice. The question is whether necessity proves a sufficient catalyst for overcoming entrenched divisions, or merely exposes them further.
What to Watch:
UK-EU defence pact implementation timeline – June announcement expected
Finnish-Russian border – infrastructure developments along 1,340km frontier
Mediterranean naval deployments – Russian fleet movements post-settlement
[FINANCIAL ALERT]
4 America’s Financial Safety Net is Fraying. Is this time different?
Moody’s downgrade removes America’s last perfect credit rating.
US debt has reached 120% of GDP ($36 trillion).
Interest payments now consume 12% of government revenue.
Trump administration’s fiscal plan relies heavily on tariffs and Medicaid cuts.
The last bastion of ‘risk-free’ investment fell quietly last week. America now stands without a single AAA rating from major agencies.
The price of profligacy
America’s debt burden has crossed a psychological threshold that economists have long warned about. At 120% of GDP, the $36 trillion mountain now costs the Treasury $850 billion annually in interest payments alone.
These payments consume 12% of government revenue, diverting funds from infrastructure, defence, and welfare programmes.
The new administration’s fiscal strategy places remarkable faith in trade barriers and welfare cuts:
$700-800 billion in tariff revenue to shrink the deficit from 7.5% to 3.5% of GDP
$880 billion Medicaid cut – removing healthcare for poor kids, old people, the disabled, etc.
Bond markets are a polygraph test for this strategy. If they believe the administration, borrowing costs will come down. Instead, they’ve wobbling nervously, making American government borrowing more expensive.
Ten-year Treasury yields now hover at 4.5%, whilst 30-year yields are around 5%. Breaking above these levels would mean substantial rises in borrowing costs across the US economy.
Between a rock and a hard place
The Federal Reserve faces an unenviable dilemma. Inflationary pressures, potentially made worse by tariff-driven price increases, ought to mean sticking with high interest rates. Yet government finances desperately need lower rates to reduce the crushing burden of debt servicing costs. Checkmate?
Japan and Britain, once reliable purchasers of America’s debt, have shown signs of retreat. The dollar’s 10% decline compounds their losses, making Treasury investments increasingly unattractive to foreign capital. Should this trend accelerate, America’s borrowing costs could spike dramatically.
‘Least dirty shirt’ theory faces its test
For decades, US debt has retained its status as the world’s safe haven by virtue of being ‘the least dirty shirt in the laundry’. But as alternatives emerge and America’s fiscal picture deteriorates, investors may finally demand a meaningful risk premium. The implications for global financial markets could be profound.
History suggests that nations rarely address debt problems until markets force them to. With 10-year yields still at 4.5% – remarkably low given the circumstances – America lacks the immediate pressure that typically drives political action. This comfortable numbness may prove the greatest risk of all.
What to Watch:
Treasury auctions – bid-to-cover ratios below 2.0 would signal demand issues
Foreign holdings data – continued Japanese/British reductions could trigger market reaction
September budget reconciliation process – Republican fiscal hawks vs. tariff revenue projections
[LABOUR MARKET]
5 The Credential Trap: When Paper Trumps Performance
30 million American adults lack a high school diploma or equivalent (9% of the population aged 25+).
America’s unhealthy obsession with formal qualifications leaves 53.5% of them excluded from the labour force entirely.
That’s a potential pool of labour bigger than the workforce of Texas.
Employers’ credential requirements have become divorced from actual job needs, creating artificial barriers to economic participation.
America’s labour market has become pathologically credentialist. The data exposes a system where formal qualifications matter more than actual capability – a paper chase leaving millions of potentially productive workers sidelined.
The exclusion machine
Most shocking isn’t who’s working but who isn’t. A staggering 53.5% of Americans without high school credentials don’t participate in the labour force at all – not employed, not even looking. The system has convinced 15 million Americans not to try.
America hasn’t developed a skills gap so much as a credentials moat – deep, wide and specifically designed to keep certain people out.
Qualification inflation gone wild
Jobs requiring university today required only schooling yesterday and on-the-job experience the day before. This credential creep explains why degree holders enjoy 73% participation rates while the least educated languish at 47%. The qualification inflation continues unabated, with no signs of reversal.
The talent wasteland
With a majority of non-diploma holders outside the workforce entirely, America is wasting an enormous reservoir of potential talent. These aren’t people who can’t contribute – they’re people the system refuses to consider.
Credentials have become HR departments’ primary screening tool. The result? A 27% employment gap between the most and least educated.
Tell people without credentials they’re unemployable long enough, and eventually, more than half stop trying altogether. This isn’t employment market efficiency – it’s systemic discouragement masquerading as meritocracy.
“The modern labour market hasn’t discovered who can’t contribute – it has decided whose contributions it doesn’t want to value.”
The experience paradox
“No experience, no job; no job, no experience.” This noose tightens further when credentials become the only alternative currency for entry – a currency disproportionately available to the already advantaged.
Some employers are rediscovering skills-based hiring, recognising that paper credentials poorly predict workplace performance.
However, the 29% employment gap between degree holders and non-diploma workers shows how far this movement has to go.
When nearly half of Americans lack bachelor’s degrees, a labour market demanding such credentials for most quality jobs isn’t meritocratic – it’s excluding massive segments of the population based on increasingly arbitrary requirements.
What to Watch:
June employment report – labour force participation by education level
Hiring practice changes among Fortune 500 companies post-labour shortage
Impact of skills-based certification programmes on non-degree holder employment rates
[COMIC RELIEF]
6 Mistaken Identity: Ambushed by Anecdotal Mush on LinkedIn
Entrepreneur Janney Hujic shared a breathlessly meaningful tale of running into her former CEO and business hero Piyush Gupta, in a modest cafe.
The boardroom behemoth humbly listened to Hujic, posed for a photo, and – lo! – the shared moment was re-engineered as slopaganda for oversharing, complete with AI-generated aphorisms.
Just one problem.
It wasn’t Mr Gupta. And he took to the comments to set Hujic straight.
Hujic, bless her, was entirely unfazed – “he had your charms right on.”
This is why we’re there…
7 My Commencement Speech (Well, not the whole thing.)
Honorary doctorate awarded at Franklin University to newsletter author.
Graduating class represented 49 different nationalities.
Core message emphasised collaborative nature of meaning and communication.
Two cool things happened this weekend in Lugano.
I was awarded an honorary doctorate (🎓🎉) and had the privilege of giving the commencement speech to a diverse graduating class at Franklin University.
Here’s some of what I had to say:
You cannot dictate how your words will land in the world, or how others will interpret your intentions. Meaning is collaborative.
This matters for all of you who will go on to lead, to build, to speak in your chosen fields.
Your message forms only a fraction of the whole story.
The rest?
That exists in the minds of those who receive it.
Thanks for reading!
Best,
Adrian
Better, funnier than, The Economist, though I have given up reading the latter (too much content, too little takeaway for the money), and, becauseI dislike reading pixils at length, thus haven't yet master the trick of reading Seven Things through. It is least competetive with Ellis, though less easy to scan. Self-segregating generations? In any event, I don't know how you do it.
Length/complexity v. brevity an enternal problem. Still hard to beat print newspapers on this (when there is a choice), thought the NYT has reached a point at which I read its front section and discard the rest. The FT has pretty much solved the tradeoff.