The European Union faces a complex and evolving geopolitical landscape fraught with challenges that could significantly impact its future stability and prosperity. These risks stem from various sources, including weakened global governance structures, shifting international alliances and the rise of new global powers. This chapter will explore some of the key geopolitical risks confronting the EU and their potential implications.
Multilateralism and Global Governance Challenges
The existing multilateral system is facing significant strain. Institutions like the United Nations are often rendered ineffective by power imbalances and a lack of consensus among major players. This weakness in global governance is further exacerbated by geopolitical flashpoints such as the conflicts in Gaza and Ukraine, which have highlighted the lack of enforcement mechanisms within multilateral institutions. The complexities surrounding the regulation of technology, and particularly artificial intelligence (AI), are adding to the list of things that keep leaders and policymakers awake in 2025.
These issues demand international cooperation, yet solutions remain elusive, increasing the risk of escalation, meaning low predictability in planning and further instability.
Adding to these uncertainties are the changes that the new US administration is bringing about in terms of significant shifts in foreign policy and national priorities, further disrupting international cooperation on critical issues like climate change, trade and global security. Such changes could have far-reaching consequences for the European Union, undermining its ability to address own internal challenges, as well as its capacity to navigate and weather regional and global shifts. EU solidarity may also be impacted by the fact that only certain member states are involved in discussions at G7 and G20 levels.
EU and US decoupling
The transatlantic relationship, a cornerstone of European security and stability for decades, is facing growing uncertainty. The recent and abrupt shift in US foreign policy, particularly regarding its commitments to the historically strong US-Europe alliance as well as its stance on Ukraine and Taiwan, could create a power vacuum with significant implications for the global (dis)order. This could result in new security and intelligence risks due to the European Union’s lack of access to Five Eyes Intelligence briefings. These dynamics are compounded by a growing trend of bilateral agreements between the United States and individual European countries, bypassing the European Union as an institution and potentially weakening its collective bargaining power.
Furthermore, there is a growing perception within Europe that the US may pose a threat to EU stability. This sentiment is fuelled by the early signals from President Trump, which have exacerbated concerns about potential US disengagement from international commitments and a more unilateralist and aggressive foreign policy approach. Such a shift, combined with the tense political dynamics in some of the largest European countries, could leave the European Union increasingly vulnerable.
The future of the European Union
In addition to the external shifts, the European Union faces internal challenges that could further complicate its response to external pressures. The rise of populism and nationalism across Europe poses a threat to democratic institutions and the European project itself.
These dynamics are coinciding with concerns about the declining global influence of the European Union. Economic stagnation and lagging innovation, coupled with political fragmentation, has weakened the European Union’s standing on the international stage. This decline is particularly evident in the context of rising global powers like China and the North-South recalibration of the 21st century, which are increasingly altering the established institutions and rules of engagement of the last century. The ongoing development of BRICS+ as an increasingly coherent grouping will present its own challenges. A rebalancing is not necessarily a negative development in itself, but any transition of such magnitude has the potential to create instability.
The European Union’s over-reliance on its Transatlantic allies means that changes in the foreign policy priorities of those allies could leave it exposed and without adequate capacity to address emerging security challenges.
This dependence underscores the urgent need for the European Union to strengthen its collective capacity-building efforts, including joint investments in defence and strategic technologies.
Deglobalisation, Technological Shifts and Geopolitical Tensions
The general trend of deglobalisation presents further challenges. Increased barriers to trade and investment create difficulties for European companies seeking to diversify their operations and manage risks. This trend also threatens the nation-state structures that underpin the European project, as market economies prioritise competition over solidarity. And the sheer size and influence of large companies potentially exacerbates social and economic inequalities.
The escalating tensions between the United States and China, further fuelled by the United States’ increasingly confrontational rhetoric, risk further destabilising the global economy before an orderly power rebalance can occur, pushing the two regions closer to a new Cold War scenario. This rivalry could have significant consequences for the European Union, forcing it to choose sides or navigate a complex web of competing interests.
The very real threat that respect for international law could be further undermined and diminished, and the potential shift away from the prevailing rule-based international order, may present additional challenges for the European Union.
War and Geopolitical Instability
The threat of war and geopolitical instability looms large. The conflict in Ukraine and the fragile peace agreement in the Middle East highlight the fine line between order and chaos and the potential for rapid escalation. These conflicts also underscore the importance of strong legal frameworks and diplomatic cooperation to enforce international rules and prevent further violence. So far, the regulatory frameworks and international bodies have come up short on any meaningful enforcement. European defence strategy is also likely to be further complicated by NATO’s strategy given the intersection of EU and NATO membership.
The increasing use of economic sanctions as a foreign policy tool adds another layer of complexity. While sanctions can be effective in exerting pressure on target countries, they also have unintended consequences, disrupting global trade and investment flows and impacting businesses operating in affected regions.
Furthermore, the increased targeting of critical infrastructure by cyberattacks and physical damage poses a significant threat to European security. The digitalisation of societies and economies increases the potential impact of cyber warfare. A uniform global approach to Cyber Crime is needed, to ensure efficient prosecutions that may act as a real deterrent to criminals.
Finally, the potential for currency wars and instability in the global financial system adds to the economic risks facing the European Union.
These risks are further compounded by the fragile position of Russia. While no major power benefits from a complete destabilisation of Russia, the potential for unintended consequences remains a significant concern.
To sum up, the European Union faces a multitude of geopolitical risks that could significantly affect its future. Addressing these challenges will require strong leadership, effective international cooperation, and a renewed commitment to strengthening the European Union’s collective capacity to act decisively in the face of growing global uncertainty.
Risk Focus: Europe’s Geopolitical Influence and Place in the Global Value Chain
Europe’s geopolitical influence and role in the global value chain are undergoing profound transformations driven by shifting economic power dynamics, technological advancements, regulatory changes and global political tensions. As emerging economies strengthen their positions and geopolitical rivalries intensify, Europe faces increasing challenges in maintaining its economic resilience, competitive advantage and strategic autonomy.
Europe’s geopolitical influence and place in the global value chain are at a crossroads. While it remains a significant economic and political force, growing challenges from global competition, trade disruptions and internal fragmentation threaten its standing. Addressing these risks through strategic foresight, policy innovation and coordinated action will be essential to ensuring Europe’s continued influence on the world stage.
Key risk aspects include:
Strategic autonomy
Europe must balance economic openness with the need for greater independence in critical sectors such as energy, technology and defence.
Resilience in supply chains
Diversification of trade partners and investment in regional supply chains will be essential to reducing external dependencies.
Strengthening alliances
Maintaining strong transatlantic and global partnerships, even in a diverging world, while forging new economic relationships, will be critical to Europe’s long-term influence.
Innovation and competitiveness
Increased investment in R&D and strategic industries will be key to maintaining, or even regaining, Europe’s economic and geopolitical relevance.
Key risk management takeaways
Expand resilience-planning for extreme scenario
Business continuity plans must now account for high impact geopolitical risks that were once considered unlikely, such as democratic destablilisation in Europe, conflict with Russia or nuclear escalation. These scenarios should be stress-tested and integrated into contingency and recovery strategies.
Embed geopolitical risk into strategic decision-making
Risk Managers should work closely with leadership and external partners to ensure that geopolitical risk is central to strategy and risk frameworks. This includes:challenging regional biases with diverse geopolitical perspectives; using real-time intelligence and expert input; proactively monitoring political, economic and security developments.
Drive internal dialogue on structural adaptability
Risk Managers should initiate internal discussion on regional autonomy for faster response to local disruption; resilient supply chains through diversification or near-shoring;and strategic positioning by balancing diversification against market concentration.
Scenario
Example: Applying scenario planning to geopolitical risk
Axes:
1. Atlantic relations (EU/US)
Aligned Agendas
The EU and US maintain close coordination on strategic, political, and economic agendas, continuing a historically strong partnership.
Separate Ways
The EU and US diverge in their geopolitical goals, economic strategies, and global governance, leading to reduced cooperation and competition in key areas.
2. EU cohesion
EU United
The EU and US maintain close coordination on strategic, political, and economic agendas, continuing a historically strong partnership.
EU Fragmented
The EU and US diverge in their geopolitical goals, economic strategies, and global governance, leading to reduced cooperation and competition in key areas.
A
B
D
C
Close/aligned
Transatlantic relations
Fragmented
Europe
European
cohesion
United
Europe
European
cohesion
Transatlantic relations
Divergent/alienated
A. Aligned Agendas & EU Fragmented: "Friendships differ"
While transatlantic relations remain strong, internal fragmentation within the European Union limits its capacity to act as a unified bloc. Key issues like climate policy, migration and defence spark divisions among EU member states, weakening Brussels’ ability to negotiate as a single voice. Despite these internal challenges, individual member states (especially larger ones like Germany and France) maintain close ties with the United States. This scenario leads to a two-speed Europe, where smaller states are sidelined while stronger economies take the lead in shaping the future of EU-US relations.
Implications:
Europe remains relevant but lacks strategic coherence, relying on US leadership rather than shaping global affairs itself.
B. Aligned Agendas & EU United: "Atlantic ties"
In this scenario, the European Union and the United States continue to work closely together, aligning on key strategic and geopolitical issues such as defence, trade and technology. A united European Union strengthens its position as a reliable partner to the United States, reinforcing multilateral institutions and global governance structures. Together they address challenges like climate change, AI regulation and security threats from Russia or China. This cooperation enhances global stability, and the European Union emerges as a cohesive political and economic force, able to project influence beyond its borders.
Implications:
A stable, influential Europe with strong international partnerships, benefiting from economic growth and shared security.
C. Separate Ways & EU United: "European autonomy"
In this scenario, the European Union takes a more independent approach, distancing itself from the United States on issues like trade, defence and global governance. Rising strategic autonomy becomes a core principle for the European Union, which remains united internally but pursues its own path globally, perhaps driven by shifting geopolitical interests or dissatisfaction with US foreign policy. The European Union strengthens internal solidarity, reinforcing its institutions and focusing on European self-reliance in areas such as defence, digital technologies and energy. A stronger European Union works closely with other global partners, but its transatlantic relations cool significantly.
Implications:
A resilient Europe that charts its own course, but with risks of geopolitical tensions and economic realignments.
D. Separate Ways & EU Fragmented: "Fractured West"
In this scenario, both transatlantic relations and EU cohesion deteriorate. The European Union struggles to maintain internal unity due to diverging national interests, while the United States and the European Union drift apart on major geopolitical issues. Without a coherent strategy, the European Union is unable to form a strong collective stance on defence, climate policy or trade, leaving individual member states to pursue separate strategies. This fragmentation weakens the European Union’s influence on the global stage, and both Europe and the United States become more inward-looking, resulting in a less stable and less cooperative international order.
Implications:
A weak, divided Europe that struggles to maintain economic and geopolitical relevance, vulnerable to external pressures.
