Overview
Anni Coonan is a senior analyst with Steptoe’s Global Strategic Engagement Team and Editor-in-Chief of the Stepwise Risk Outlook. A risk analyst and researcher with a focus on US foreign policy, geostrategic competition, and the Middle East and North Africa, Anni provides forward-looking analysis on domestic and geopolitical developments for international clients, providing assessments and key takeaways to guide strategic decisions and stakeholder engagement plans. Anni has written and edited newsletters on the intersection of geopolitics and business risk for over six years, earning JD Supra readership awards at two previous law firms. She also supports due diligence investigations and research in support of litigation. Anni is based in New York.
As part of Stepwise’s “Meet The Team” series – which will run every Friday into September – Anni sat down with senior advisor Melissa Mahle (read her interview here) to discuss the Stepwise Risk Outlook, the Iran war, and under-watched global flashpoints.
As of July 6, the Stepwise Risk Outlook publishes analysis five days a week. What kind of content is the newsletter publishing now, and how are topics selected?
Our key objective is to highlight interesting, impactful, and under-the-radar geopolitical developments that we think the business community should be paying attention to. The switch to five days a week gives us more opportunity to be in readers’ inboxes, contextualizing and analyzing those developments at a much quicker cadence.
We’re also trying to systematize what we’re covering so that readers know what to expect on any given day – since July 6, we’ve been covering sanctions-related developments on Monday (with contributions by attorneys from Steptoe’s award-winning International Trade and Regulatory Compliance practice), defense issues on Tuesdays, geoeconomics on Wednesday, regional spotlights on Thursdays, and miscellaneous topics on Fridays. For the next month and a half or so that Friday content will be these team interviews – an opportunity for readers to get to know our team of analysts, and for our analysts to share their opinions a bit more directly.
Regardless of the new schedule, our topic selection is driven by what we believe is important for the business world to know about, and what our team of analysts think is interesting and consequential. That’s mostly driven by analyst pitches, but we also take requests from readers – please feel free to reply to this email or email me at any time if we’re not covering a development you’re interested in.
The Iran war is obviously at the top of the agenda for MENA watchers. Where do you think the conflict is headed in the near future, and what are key impacts for the business world?
Like many analysts following the Middle East, I’m pessimistic about the possibility of a comprehensive nuclear deal or even a durable end to the conflict. The key problem now is the US’ lack of leverage: after over four months of conflict, it’s clear that Iran can endure more pain than the US is willing or able to inflict. The June MOU (now apparently defunct) was driven more by domestic and international pressure on the US to end global economic disruption from the Strait of Hormuz closure than it was by Iran’s inability to endure the physical or economic toll of the war. That’s in part because the Iranian economy has become remarkably resilient during years of economic isolation by Western sanctions. And unlike Washington, Tehran does not have to be sensitive to domestic or international economic concerns.
The best achievable outcome for both sides might be the kind of imperfect ceasefire in place until last week. Those negotiations are almost certainly not going to produce a solid nuclear deal – and Iran will use any pause in fighting to rearm. But in a scenario where both talks and military pressure aren’t capable of creating incentives toward a better deal, a reprieve for the global economy in the form of an imperfect ceasefire seems most likely. Of course, Washington could drastically ramp up military engagement and change the reality on the ground in Iran – for example with a ground invasion in coastal Iran to open the Strait, an option Trump was briefed on this week. But in my opinion the costs – from escalatory risk to opportunity cost as military capabilities and assets are concentrated in the region to public opinion ahead of elections – are too high.
Topline consequences for business are well-covered – the cost of energy and resulting inflationary pressures being number one. Price shocks could be worse during this Strait closure as global reserves dwindle, and if China is less able to keep cutting its imports and consumption (a key factor cushioning prices throughout the war). If a semi-closed or Iran-policed Strait of Hormuz becomes the new reality on the ground (as Tehran is working hard to assert), elevated energy prices will be long-term but potentially static if most exporters are willing to pay protection tolls. Direct costs for Gulf tourism and economic diversification projects are also important, especially as continued fighting impacts certainty for investors.
Over the horizon, I’m watching impacts on Gulf AI ambitions (which rely on vulnerable undersea cables to export compute), the long-term stability of the hardest-hit Gulf countries, like Kuwait (and political ramifications there), and upside risks for non-Strait energy transit options (like pipelines) and renewables.
In the Stepwise Risk Outlook we try to surface geopolitical developments that may be flying under some business readers’ radars, rather than just relaying the headlines. What less-covered hotspots are you watching right now?
The Iran war is taking up a lot of oxygen in Middle Eastern news right now, but one flashpoint that’s especially interesting to me right now is the growing rift between the UAE and Saudi Arabia. Clashes over the Southern Transitional Council’s seizure of government land in Yemen in December was well-covered, but the dispute is reaching the level of day-to-day disruptions, like Saudi suspension of payments to Emirati accounts earlier this month (which reminds me of the early days of the Qatar blockade in 2017). The Iran war has really scrambled the region’s perceptions, and the rift is revealing a lot about how different countries are responding to the post-Epic Fury strategic landscape in the Middle East. The UAE is doubling down on alignment with the US and Israel, while Saudi Arabia is rethinking the value of the American security umbrella and looking for a more independent and diversified foreign policy strategy.
The division is putting Riyadh and Abu Dhabi on a collision course with each other and complicating the US’ future strategy in the Gulf (remember that Saudi Arabia scuttled the US plan to escort ships through the Strait of Hormuz last month by denying overflights). It also poses significant risks for global financial markets, which have come to increasingly rely on both countries as a critical capital source and transaction hub. Continued economic rivalry could force businesses to choose, jeopardizing capital, raising reputational risks in the region, and costing market access. And it’s not just a regional issue – Saudi-Emirati proxy competition is already taking place throughout Africa, for example. The rivalry is fueling conflict in Sudan, where both countries back opposing forces, and in Somalia, where Saudi Arabia is trying to counter Emirati attempts to legitimize Somaliland and increase its security footprint there.
I don’t want to overstate the case – the US-Saudi relationship is still incredibly strong. Saudi Arabia still relies on the US for its security umbrella, which no Saudi capacity building or hedging with Russia or China can replace in the foreseeable future. Meanwhile, the US sees both relationships as critical to its regional security strategy and, increasingly, economic ambitions. Intra-Gulf disputes have happened before and have typically remained at a manageable level, ultimately mediated by other GCC members. Gulf capitals are typically interested in stability and consensus-building. But increasingly open tensions between the region’s two biggest power players – once allies that moved in lockstep – reveal a genuine mismatch in long-term strategic visions for the region, which will have impacts for global business and for US strategy.
