A Cautious Return to Normal: 2025.06.26
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Curated from the world’s leading sources of information, we provide you both the information and the objective, neutral commentary that you need to make sense of it all.
Finally, after a good 2 weeks of volatility and uncertainty, a semblance of calm has returned; for now at least, the Israel – Iran ceasefire is holding, and so, with the respite, EPM looks at the medium- to longer-term.
This is where events with US-led NATO comes into play, and the Shanghai Cooperation Organisation (SCO), its China-led counterpart.
As NATO wrapped up its meeting in The Hague, and members officially agreed to increase defense spending to 5% of GDP by 2035. EPM thinks that is a crazy number, as even the US spends only 3.5% and it has a global empire to uphold! So unless Europe is thinking about building a global empire itself, a 5% of GDP contribution to NATO is just crazy financing for the US-empire.
Fortunately for the good people in Europe, word on the street has it that their political leaders were willing to agree to anything the US demanded for its continued leadership role in NATO. Why? Europe needs time to develop a greater degree of strategic autonomy. It is unlikely, therefore, Europe will indeed ever hit the 5% target and EPM believes fierce public resistance is to be expected, since this increase comes at the expense of social program spending.
China created the SCO as a response to developments within NATO. But this meeting now also provides an excellent opportunity for the Defense Ministers of China, Russia and Iran to discuss the US – Israel Alliance war on Iran. EPM notes that lessons learned are likely to be shared.
Furthermore, in this roundup we look at:
The rumoured Shell interest in acquiring BP; and why BP’s debt could be a problem for potential buyers
The Trump Tariff War continued impact on the global flows of energy and petrochemical feedstocks
Why global carbon dioxide emissions from the energy sector keep rising
Indonesia’s ambition to accelerate its energy transition under new president Prabowo Subiyanto
General Energy
Shell is holding early-stage talks to acquire rival BP, writes the Wall Street Journal. Talks between company representatives are active, WSJ’s sources say, and BP is considering the approach carefully. Nothing regarding the deal could be learned and a tie-up is far from certain, warned people familiar with the matter. Bankers working on behalf of the companies have been engaged in the discussions, which are moving slowly, according to those involved. When asked, Shell formally denied any talks are taking place and BP has declined to comment as well.
While BP is currently valued at around $80 billion, its debt position is a problem for potential buyers, writes Reuters. BP says it has net debt of $27 billion, but its public disclosures indicate it has around $38 billion of additional liabilities. The largest of these are some $17 billion of hybrid bonds that blend debt and equity traits. While they pay fixed income like bonds, issuers can skip payments, making them riskier and costlier. These often do not count as debt, helping preserve credit ratings. BP also has $12.5 billion in lease obligations for assets such as vessels and rigs. Unlike Shell, which includes $28.5 billion of such liabilities in its $41.5 billion net debt, BP excludes them. Finally, BP is still paying for the 2010 Macondo disaster, when a blowout at an offshore platform in the Gulf of Mexico caused one of the world's worst oil spills. BP still owes $8 billion from the spill, the remainder of a $70 billion bill, company public disclosures show. This remaining liability is also excluded from its net debt (which only makes sense if the total value of its assets are evaluated). As an aside, TotalEnergies also holds about $12 billion in hybrids, while Shell holds none.
Trump’s Tariff War continues to impact the global flows of energy and petrochemical feedstocks. During later May and early July, the US paused ethane exports to the US. On Wednesday Reuters writes, the US Department of Commerce sent letters to Enterprise Products and Energy Transfer informing the companies they may load ethane on vessels destined for China, but they may not unload the ethane in China without prior US approval. This effectively maintains the block on ethane exports to China. If vessels do make their way to China, it may be difficult to stop them from offloading ethane; companies could face penalties of up to twice the value of the shipment if they do.
Geopolitics
As to Iran, the Washington Post confirmed open speculation that Israel sought to force regime change in Iran. During the initial hours of its surprise attack, Israel wiped out Iran’s top military leaders. Soon thereafter, WaPo says, Israel started contacting the second- and third-tier leaders in the army, threatening them with assassination as if they did not publicly announce they were distancing themselves from the current Iranian regime. One of WaPo’s confidential Israeli sources estimated that more than 20 leaders in various positions of power were contacted and indicated that some senior Iranian figures received had warning letter under their door, some received a phone call directly, and while others were contacted through their spouses. The Iranian government will likely take quick and brutal action in order to send a clear message - don’t think about it - to those considering taking action against the regime.
Meanwhile, Iran declared that its nuclear installations were “badly damaged” by US airstrikes, writes Bloomberg. “Our nuclear installations have been badly damaged, that’s for sure,” Foreign Ministry spokesperson Esmail Baghaei told Al Jazeera TV in an interview on Wednesday. He did not provide further detail and said local authorities were still assessing the situation on the ground. Baghaei noted the US’ attacks were a “detrimental blow” to international law as well as the nuclear Non-Proliferation Treaty (to which Iran is a signatory). The International Atomic Energy Agency’s Director General, Rafael Grossi said “very significant damage is expected to have occurred” at Fordow, Iran’s main uranium enrichment site. Satellite imagery shows that US military planners were careful not to hit the reactors at the Isfahan research facility, which appear to have been intentionally left untouched. EPM notes these statements come after the damaging leak of the US military’s initial damage assessment, and could therefore also to be understood in terms of supporting the Trump Administration’s preferred narrative.
And, in what EPM sees as a related event, this Thursday China will welcome Russian and Iranian Defence Ministers to a meeting in its eastern seaside city of Qingdao, writes France24. It will take place as part of the 10-member Shanghai Cooperation Organisation (SCO) meeting. China designed the SCO as a counterweight to NATO and is why the meeting is scheduled to take place a day after the NATO meeting in The Hague concludes. EPM notes that the meeting provides an excellent opportunity for discuss the US – Israel Alliance War on Iran – and lessons to be learned from the conflict so far.
As to the NATO summit in The Hague, Reuters writes that member states agreed to raise defense spending to 5% of GDP, exactly as US president Trump demanded. Pledges were made to spend 3.5% of GDP on core defence such as troops and weapons and 1.5% on broader defence-related measures such as cyber security, protecting pipelines and adapting roads and bridges to handle heavy military vehicles and is to be achieved by 2035. Yesterday we shared that our sources told us that European countries and Canada would have agreed to anything and everything the US demanded in order to keep it in NATO for the short- to medium-term, but that in reality, they have no intention of living up to their pledges. EPM notes that the Europeans, and certainly Canada, were struggling mightily to achieve the 2% target on hard defense before the NATO confab. Meeting the goal of 3.5% of GDP will forcethe political elites to make some really tough and painful economic and financial choices, which are likely to have a significant negative impact on social security, pensions, education and health care spending and, thereby, result in growing popular unrest. This would be a major political challenge if the political elites had a sincere intent to achieve the goal; however, as the pledges are insincere, it will not be much of a problem for them (unless Trump figures out a way to stay in power after his second term ends).
Reuters expressed its skepticism that the Europeans will meet their pledges. They have saddled themselves with pledges that – with the notable exception of Germany, whose finances are solid after years of fiscal frugality – most members will find hard to keep. Nick Witney at the European Council on Foreign Relations noted:
The potential losers are not just future generations saddled with huge debts, but today's societies. Disgruntled populations, whose sense of economic wellbeing has never recovered from the global economic crash of 2008, will likely become even easier prey for populist or nationalist politicians gathering strength across Europe."
Yet, Reuters notes, that by this “simple target focus” Europe sidestepped a potentially much more impactful debate about how they could use their existing military budgets more efficiently, for example with national governments agreeing on joint development and procurement of weapons systems.
Energy Transition
According to the Energy Institute's annual statistical review of world energy, global carbon dioxide emissions from the energy sector hit record highs for the fourth year running last year because fossil fuel use kept rising even as renewable energy reached a record high, writes Reuters (so much for the efficacy of net zero). Globally there was a 2% annual rise in total energy supply in 2024, with all sources of energy such as oil, gas, coal, nuclear, hydro and renewable energy registering increases. Of all global fossil fuels, natural gas saw the largest increase in generation, growing 2.5%. Meanwhile, coal grew by 1.2% to remain the largest source of generation globally, while oil growth was under 1%. This led to carbon emissions increasing by around 1% in 2024 and exceeding the record level set the previous year at 40.8 gigatonnes of carbon dioxide equivalent.
Senior executives at Indonesia's two sovereign wealth funds on Wednesday said they will expand investment in clean energy transition projects this year, writes Nikkei Asia. Ridha Wirakusumah, CEO of the Indonesia Investment Authority, or INA, said renewable energy projects currently make up 12% of its $4 billion investment portfolio. INA is aiming to increase that proportion to between 15% and 20% by the end of 2025. “Investment in renewable energy and the area of nature-based solutions, as well as electric vehicles, is important," Wirakusumah told Nikkei Asia. He added that geothermal, solar panels and waste-to-energy projects are among the other areas INA is looking to focus on, in addition to early decommissioning of coal-fired power plants. Pandu Sjahrir, Danantara's chief investment officer, said the fund also hopes to invest in the development of and upgrades to Indonesia's power grid. Aging transmission lines built for electricity generated from fossil fuels are a primary obstacle to the country's effort to shift toward renewable energy. His statement follows state utility Perusahaan Listrik Negara's National Electricity Procurement Plan for 2025-34, which was released last month. The plan calls for 69.5 gigawatts of new power generation, 61% of which is to come from renewable sources.
