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Halfway Point

At the end of the first two years of Donald Trump's term, it's time to review some major policy areas of his presidency, from relations with Saudi Arabia to disputes with China and OPEC over trade and oil

by Ian Bremmer
09 January 2019
6 min read
by Ian Bremmer
09 January 2019
6 min read

Look past the incendiary tweets and controversial rhetoric, and you see a Donald Trump presidency that has already proven enormously consequential, both because of the person sitting in the Oval Office, and because of the geopolitical uncertainty of today’s world. Trump assumed office just as the Pax Americana era of world history, one that largely coincided with the post-World War II era, was drawing to a close. It was inevitable that whoever followed Barack Obama as U.S. president would set the tone for the geopolitical era to come. So far, that tone has been one of increasingly hostility, particularly between the U.S. and China, and across numerous fronts, trade, technology, and yes, even energy. As the Trump presidency nears the 2-year mark, it’s time to consider some of Trump’s biggest geopolitical successes and failures to date and to evaluate what that means for the world’s energy future going forward.

Trump's nationalism creates global followers

Trump’s critics believe the man can do no right while his fiercest supporters believe he can do no wrong. The reality, as always, lies somewhere in the middle. Trump has broken decisively with his predecessors, Republican and Democrat alike, in their support of multilateralism and free trade as desirable ends unto themselves. Trump’s preference for striking one-on-one trade deals and holding the feet of traditional allies to the fire has resulted in some unquestionable short-term wins from the U.S., wringing concessions from stalwart allies like the E.U., South Korea and Brazil. Trump even managed to renegotiate the NAFTA trade deal with Canada and Mexico, a tough policy win for Washington even under the best of circumstances. Yet Trump’s effect on the world goes far beyond striking trade deals more favorable to U.S. interests. When Trump first came to power nearly a couple years ago, very few world leaders shared his nationalist outlook and nakedly-transactional approach to geopolitical relations. In less than 24 months, we have seen other leaders embrace “my country first” politics, both from those we’d expect, countries like the Philippines, Turkey and Hungary, to those genuinely surprising, like Brazil and Italy.

The politics of resentment

The Trump presidency has made acceptable a type of identity politics that has been largely ignored since 1945. This is the politics of the aggrieved, a type of politics that’s gaining momentum.  Trump has played a critical role in its spread. But the Trump presidency has come with significant costs to the U.S. as well. The general tenor of relations between the U.S. and its traditional key allies has deteriorated significantly, and it’s unclear whether those frayed relations can be repaired, and, if so, to what degree. The Trump presidency has also been marked by knee-jerk policy decisions that have shown little long-term strategy backing them. Look at Trump’s decision to pull out of the Paris Climate Agreement. The same goes for the Trans Pacific Partnership (TPP) trade deal, a behemoth free trade agreement that is set to go into effect this January, without the U.S. on board. Where it’s harder for the rest of the world to trudge on absent the U.S., though, is in maintaining stable oil markets, both because the U.S. is a major energy player in its own right, and because its most significant foreign policy interests these days revolve around other major oil producers in the Middle East. For the time being, Trump has seemingly cast his lot with Saudi Crown Prince Mohammed bin Salman (MbS), maintaining that MbS’s denials of any involvement in the affair of Washington Post columnist Jamal Khashoggi were credible despite the CIA’s own assessment to the contrary. This support from Trump, while certainly welcomed in the Saudi Kingdom, complicates oil policy for the Saudis because Trump wants the Saudis to abandon their push for a coordinated OPEC production cut that’s intended to prop up oil prices. The problem is that the Saudis do need higher oil prices ($70 Brent is the sweet spot) to ensure fiscal stability, which in turn undergirds the Kingdom’s political and social stability. The fallout from the Khashoggi affair and the expected loss in foreign investment only makes it more critical for the Saudis to ensure a steady flow of oil revenues. When the Saudis decide to go ahead with production cuts, Trump won’t be at all happy. But he’ll likely bite his tongue given his other focus in the region, Iran.

A boon for oil producers

Trump needs both stability in global oil markets and a united front against Tehran, making Riyadh an indispensable partner in both those regards. But its far from clear that Washington turning the screws on Iran via oil sanctions will cause Iran’s government to buckle under economic pressure and offer more concessions. If anything, its likelier to create more conflict in the region. Still, the Trump administration looks to press on with its Iran policy. The U.S. will lean on countries with waivers to cut back Iranian oil purchases. As of now, the market appears to be well supplied for next year, which is why OPEC+ is considering another round of production cuts. Meanwhile, Trump continues his push to loosen restriction on U.S. domestic energy production, to open up federal lands, including offshore, to drilling, to roll back Obama-era environmental policies, to reduce the corporate tax rate, and to weaken federal fuel economy standards, all of which are a boon to oil and gas companies. At the same time, Trump’s trade agenda, with its focus on hitting China and steel imports, could slow global oil demand (more a China story) while at the same time making it more expensive for oil producers to build pipelines and needed infrastructure (more a steel story). Adding yet another wrinkle to the proceedings, plenty of U.S. states have shown a willingness to go their own way in setting their own climate and environmental policies in opposition to the Trump administration, including attempting to pass measures that would impact drilling. Thus like Trump’s approach to geopolitics, his approach to energy comes with both positives and negatives. Trump isn’t going to change who he is at this point. In fact he may be the one point of predictability in our currently unpredictable world. It’s up to energy producers to negotiate that as best they can.

Author: Ian Bremmer

President of Eurasia Group and GZERO Media, and author of the New York Times bestselling book, Us vs. Them: The Failure of Globalism.