A mix of forces are shaping to create the highest levels of geopolitical risks in three decades, an analyst at Citigroup says in an outlook for 2015.

“From the grass roots to the geopolitical, the global system is under immense pressure. In some places, it is cracking.”

That is the stark message coming from Tina Fordham, an analyst at Citigroup who specialises on geopolitical issues of the sort that wealth managers, and others, need to watch out for. In a global political outlook note for 2015 entitled “Is This The Start Of The Breakdown?” Fordham says “politically-generated challenges to globalisation are transforming the landscape. The addition of falling oil prices, declining living standards, continued anti-establishment sentiment and uncoordinated attempts by great powers to assert national interests adds further uncertainty, with fragmentation risk remaining high.”

As far as 2015 is concerned, Fordham points to “continued geopolitical tensions, a busy EU election calendar featuring a crowded field including new, extreme and alternative parties, and asymmetric risks from terrorism and disease will be sources of unwelcome surprises in the year ahead, challenge ng leaders with shrinking majorities and limited policy options”.

“Geopolitical risks in 2014 have increased to levels not seen since the fall of the Berlin Wall in 1989. Measures include a rise in the number of conflicts and coups, the rate of terrorist attacks and the number of NATO-Russia “incidents”, which have nearly returned to Cold War levels,” she writes.

“At the same time, the rate of Vox Populi risk events (mass protests, rising support for non-mainstream parties and government collapses) as tracked in our own research also remains high, evidenced by the groundswell of support for Scottish independence, the so-called “umbrella protest” movement in Hong Kong and the growing popularity of European protest parties, a phenomenon which has increased in relevance following the announcement of snap presidential elections in Greece, and risk of early parliamentary elections bearing the risk that the far-left Syriza could emerge as the largest party,” she continues.

“The outlook for 2015 will almost certainly be dominated by the aftershocks of the two key geopolitical events that marked 2014: Russia’s annexation of Crimea and the emergence of IS from Syria to Iraq, which was followed by the almost immediate declaration of the end to the Middle East’s 1912 Sykes-Picot borders that have divided many regional tribes and ethnic groups. These two developments differ in the scale of their impact, but we regard them as a significant change in trend. History, it has been said, does not repeat itself. But it rhymes. In our view, these events suggest that the erosion of the post-War system and the relationships and institutions that underpinned it will continue, leading to greater instability, with the potential to negatively impact growth and reverse globalization” she says.

Fordham remarks that an unusual aspect of all this turmoil is how impact on markets has been, so far, remarkably muted.

Until recently, investors have localised political risks, treating them as one-off, idiosyncratic developments; tempests in teapots, spots of local bother. This stance has been generously supported by continued central bank liquidity and shale gas supplies, combining to minimize the impact - but also providing what may prove a false sense of security,” she says.

“While easy money and cheap and abundant shale supplies may have insulated markets and prevented regional disturbances from generating catastrophic impact on the global economy and financial system, we see the uptick in geopolitical risk as likely to be persistent; a source of frequent future disruptions in 2015 and beyond,” Fordham continues.

Fordham elaborates on the theme of “fragmentation”, looking at how some countries may be falling apart or coming under pressure to do so: “We identify two sets of countries most vulnerable to Vox Populi Risk: 1) Petrostates, especially those with weak government institutions, will be particularly vulnerable to protest amid falling oil prices and declining revenues 2) the spate of European Union countries heading to the polls, some for the first time since 2011, before the euro crisis had reached its peak: the United Kingdom, Spain, Portugal, Greece, Finland and Poland. Of these, the two most systemically significant are UK and Spanish elections, neither of which is expected to deliver a majority government. In each contest, we expect anti-establishment parties to have a significant impact, though fall short of attaining a majority.”