We do not engage in geopolitical analysis. However, in the last several weeks some events took place that strongly indicate further changes that will have a significant impact on business in this and the following years. That is why we have prepared this short analysis, to encourage more thinking and further consideration, rather than to give definitive answers. This is just our view of probable changes in geopolitics in the world, and especially in the EU, and the possible impact of those changes on business in Serbia and the neighbouring countries in which SEECAP also operates at the time of writing this analysis, the beginning of February 2025
New developments in the West
The first of the interesting events is the interview of the US Secretary of State Marco Rubio given to the journalist Megyn Kelly when he explained that the US wants to conclude peace in Ukraine in direct negotiations with Russia, which will mean the withdrawal of the US from the "Project Ukraine". He pointed out that the war in Ukraine must end through negotiations with the use of diplomatic means, which America has stopped doing for some time. The goal is lasting and sustainable peace in Ukraine and Europe.
Another event is the article "EU debates return of Russian gas as part of Ukraine peace deal". The return of Russian gas is wanted not only by "small" EU countries such as Hungary and Slovakia, but also by some large EU members, Germany was mentioned. The main reason is that Russian gas will reduce both consumer and industrial gas prices in Europe and stop the deindustrialization of Germany and the decline of economies in many EU countries.
In this context, it should be interpreted that the Danish Government concluded an agreement with the Russian Gazprom to provide it with unhindered access to the Nord Stream gas pipeline in order to consider the damage caused by the sabotage of the North Stream gas pipeline in September 2023 and possibly restore the gas pipeline to operational condition.
Public opinion in Europe is changing. Federal elections in Germany are scheduled for 23rd February 2025. According to the latest public opinion polls, the popularity of political parties advocating for peace in Ukraine and the restoration of economic relations with Russia, such as AfD (Alternative für Deutschland, Alternative for Germany) or Sahra Wagenknecht Alliance (Sahra Wagenknecht Alliance) is growing. The popularity of French President Emmanuel Macron and British Prime Minister Keir Starmer are at record lows because of their support for the continuation of the war in Ukraine. European citizens no longer want to sink into poverty to finance the war in Ukraine. The possibility of a trade war between the EU and the US due to the introduction of customs barriers in the US puts additional pressure on the EU to return to the lost market of Russia, which it can only do by lifting sanctions against Russia.
Russia has become the largest economy in Europe and the fourth economy in the world according to information from the IMF, overtaking Germany in Europe and Japan in the Far East. On 3rd February 2025, S&P Global announced that Russia's Manufacturing PMI (the PMI index shows the level of confidence of purchasing managers in the movement of the economy, any index above 50 is considered excellent) rose to 53,1 in January 2025, up from 50,8 in December 2024, representing the fastest expansion since July 2024. This sharp improvement in business conditions in Russia was driven by the rapid growth of production and new orders.
ADDENDUM 15/02/2025: After the publication of this article, several new significant events occurred that only confirm our analysis above. The first telephone conversation between US President Donald Trump and Russian President Vladimir Putin took place on 12/02/2025 which began diplomatic negotiations on ending the war in Ukraine.
The second is the speech of US Defence Minister Pete Hegseth at the NATO headquarters on 13/02/2025 in which he made it clear that the current US Administration wants to end the war through negotiations and announced the withdrawal of the US from Europe. The third is the epic speech of Vice President J.D. Vance on 14/02/2025 at the Munich Security Conference (MSC) when he expressed many objections to the lack of democratic capacity and undemocratic practices of leading European countries and the European Union. Finally, Secretary Rubio and Minister Sergey Lavrov had a telephone conversation on 15/02/2025 during which they agreed further normalisation of diplomatic, political and economic relations between the USA and Russia, including the possible return of American companies to the Russian market. In the coming days they will arrange a summit between President Trump and President Putin to discuss bilateral relations, of which Ukraine is one but not the only topic.
As a conclusion, there are strong indications of the normalization of relations between Russia and the collective West, which will at some point mean the lifting of sanctions against Russia. Because not only the West imposed sanctions on Russia, but Russia also imposed sanctions on the West, because of which the West suffers great damages. Pressure to lift sanctions is growing in the West, mainly in the EU but not in Russia. What was until recently a taboo topic and unacceptable in the political and media sphere (peace with Russia, the defeat of Ukraine, etc.) is now becoming an acceptable media and political discussion. Of course, there are power centres that will continue to advocate the continuation of the war with Ukraine and sanctions against Russia, but their political strength is weakening. For this reason, we believe that the tendency to normalize relations between the collective West and Russia will prevail.
New investment cycle
All of this, of course, can have a positive impact on business in the Balkans and lead to a new wave of investments both from the EU (because the EU will come out of the recession it is currently sinking into by normalizing relations with Russia) but also from Russia, which has strengthened economically in the previous 3 years and where a strong investment cycle results in increased inflation, which the Central Bank of Russia is trying to reduce with high interest rates. Such positive developments would open even wider doors for the export of goods from Serbia to Russia and further to the CIS. Tourism and the real estate sector in Montenegro would also receive a strong boost, as Russian tourists and Russian investors made a strong contribution to Montenegro's GDP growth before the sanctions were imposed.
We should monitor the further geopolitical development of the situation between the collective West and Russia and prepare for a new investment and development cycle. If you need a loan or equity capital, financing for construction of residential real estate, or for construction or purchase of a hotel, or if you want to sell your company or expand your activity by purchasing another company, we are at your disposal to make your development and investment cycle as successful as possible. We remind you that Serbia received an investment credit rating in early October 2024, so it is now easier to get capital that was unavailable before receiving the investment rating.
For real estate equity financing we cooperate with European and Middle Eastern investment funds and family offices where we are currently able to raise equity capital of up to €50 million per project. For loan/debt real estate financing we cooperate with international financial institutions and commercial banks that work in our countries of operation.
Review our current investment offers on our Properties listing page.
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