Trump’s Grand Strategy

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM).

Today, once again, the Middle East is calling us away from the Greater Caribbean, but not really. Iran is helping us understand something fundamental, and it´s a shift in traditional U.S. foreign policy towards a region that has historically claimed more U.S. resources than it should. If the gamble works, it could help Trump focus on what truly matters to him: the Western Hemisphere.

On the other hand, another U.S. ally in the Americas is shutting some mouths, once again, with the historic ruling over the Burford Capital case. Milei has been vindicated against the Argentine left’s claims of the lack of sovereignty in relation to the United States. This will give the president some credit with independents when it comes to his relationship with the North.

All along, it was a quiet week geopolitically in the Greater Caribbean, which is especially soothing on the eve of Holy Week. Unless something truly remarkable happens—which would require a special edition—we will return after the festivities, on Saturday, April 11.

In this issue, you will find:

• This Is Trump’s Grand Strategy in the Middle East, And It Could Work

• The Geopolitics of Oil

• Milei’s Sovereignty Consolidation: A Victory Over Burford Capital

As always, please feel free to share GCaM with your friends and colleagues. We all, at the GCaM team, wish you a good weekend.

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Donald Trump’s second-term foreign policy in the Middle East is a breaking point from history, but its effectiveness is still unclear.

In perspective. What began in his first administration as a break from traditional U.S. diplomacy has now matured into a clearer strategic doctrine, where the United States will no longer try to reshape the region in its image. It will instead work with those who can deliver. At the center of that shift is Israel.

• For decades, U.S. support for Israel was framed through two overlapping logics: Cold War strategy and liberal diplomacy.

• Originally, Israel was a key ally against Soviet influence, but later, it became part of a broader effort to promote a stable, rules-based order in the Middle East, one that would eventually include a negotiated solution to the Israeli-Palestinian conflict.

• That balancing act—supporting Israel while pushing for peace—defined U.S. policy for years, and Trump broke that balance.

How it works. His first administration moved decisively away from the idea that the United States should act as a neutral broker. Recognizing Jerusalem as Israel’s capital, relocating the embassy, and acknowledging Israeli sovereignty over the Golan Heights were signals, instead of isolated decisions. Washington was choosing alignment and proved it was no longer interested in preserving diplomatic ambiguity. That shift was an ideological shift more than it was strategic.

• The old model had stalled, with decades of negotiations between Israelis and Palestinians having produced little beyond process.

• Meanwhile, the region itself was changing. Iran’s growing influence—largely sponsored by Obama—the fragmentation of Arab politics, and the emergence of shared security concerns between Israel and several Gulf states created new opportunities.

• Trump capitalized on that convergence, and the biggest result was the Abraham Accords.

Why it matters. By normalizing relations between Israel and countries like the United Arab Emirates and Bahrain, the United States demonstrated that regional alignment could move forward without resolving the Palestinian issue, something unthinkable to his predecessors. The logic was simple: shared existential interests—particularly around Iran—mattered more than unresolved ideological conflicts. It was a transactional breakthrough that redefined the diplomatic map of the region. In Trump’s second administration, that logic has deepened, and the escalations against Iran show it clearly.

• U.S. policy in the Middle East now rests on three pillars: full strategic alignment with Israel, aggressive pressure on Iran, and a deliberate reduction of direct U.S. military involvement.

• This last pillar only works if the second is completely fulfilled.

In detail. First, Israel is now officially the anchor of U.S. strategy in the region. Cooperation has expanded beyond traditional defense ties into areas like missile defense, cybersecurity, technological innovation, and now, joint military operations. Israel is not simply being supported, but integrated as a strategic partner capable of contributing to U.S. power projection. Second, Iran has become the central adversary. The administration has moved beyond containment toward a more aggressive posture aimed at neutralizing the regime entirely.

• Iran is seen as the primary source of regional instability, from its nuclear ambitions to its network of proxy forces. Diminishing its influence is no longer one objective among many—it is the main objective.

• Third, the United States is attempting to step back militarily without stepping back strategically. Unlike previous administrations that struggled to balance withdrawal with influence, Trump is pursuing a model in which regional actors carry more of the burden.

• Israel and its newly normalized Arab partners form the backbone of that approach, creating a decentralized but aligned security structure. Iran, then, is the U.S. involvement to end all future involvements.

Between the lines. This is about more than the Middle East. This represents a broader shift in how the United States understands its role in the world. The era of trying to transform regions through democratization and prolonged intervention is giving way to something more pragmatic and transactional, building coalitions based on shared interests, not shared values. That, however, does not mean values have disappeared. It simply means they are no longer the starting point.

• This shift also helps explain the changing domestic dynamics around Israel. While support for Israel was once a rare point of bipartisan consensus, it is now becoming more polarized.

• Republicans—not conservatives necessarily—have aligned more closely with the Israeli government, while segments of the Democratic Party have grown more critical.

• Yet beneath that political noise, the structural relationship remains strong. Military, intelligence, and technological ties between the two countries continue to deepen, largely insulated from electoral cycles.

The bottom line. Because even as U.S. politics evolve, the strategic logic underpinning the relationship is unlikely to disappear. Israel’s role in missile defense, intelligence sharing, and regional deterrence makes it too valuable to marginalize. It is that simple. There is no grand conspiracy and Christian affinity with Israel is merely a discourse. What matters is power and power projection. The form of the relationship may shift, but its core will endure.

• Trump’s Middle East policy is about managing conflicts through alignment. By strengthening ties among actors with shared interests and reducing direct U.S. exposure, the administration is attempting to create a more sustainable balance of power—one that does not depend on constant American intervention.

• Whether that balance holds is an open question. The region’s underlying tensions have not disappeared, but the approach marks a decisive departure from the past.

• The days of freedom and democracy in the Middle East are over, but so could be the days of boots on the ground and terrorism farming.

The graph captures a pattern that is often misunderstood: oil prices do not respond mechanically to geopolitical events, but to perceived disruptions in supply under specific market conditions.

In perspective. Across the 21st century, price movements follow a recurring cycle—shock, spike, adjustment, and normalization—yet the intensity of each spike varies depending on how credible the threat to supply actually is. This is why not all conflicts generate the same reaction. The U.S. invasion of Iraq produced only a moderate increase, while Russia’s invasion of Ukraine triggered a much sharper spike. The difference lies in exposure.

• Russia is a systemic supplier, deeply embedded in global energy markets, while Iraq’s disruption was, to a large extent, anticipated and partially priced in.

• Markets do not panic over conflict per se; they panic over uncertainty regarding the continuity of flows.

How it works. At the same time, the graph makes clear that the most dramatic price movements are not always tied to geopolitics. The 2008 peak—arguably the highest point in the series—was driven less by conflict than by global demand dynamics and financial conditions. Conversely, the sharpest collapses, particularly in 2008–2009 and during COVID-19, are tied to demand destruction rather than geopolitical stabilization.

• Oil prices fall not when the world becomes safer, but when economic activity contracts.

Why it matters. What is structurally different in the most recent segment is the context in which the latest spike occurs. The current surge—linked to conflict involving Iran—takes place in a more fragmented and constrained system. Sanctions on major producers, tighter spare capacity, and the politicization of energy flows have reduced the market’s ability to absorb shocks. In previous cycles, supply disruptions could be offset more easily; today, the system operates with thinner margins and fewer stabilizing mechanisms.

• And yet, this is where the most important takeaway emerges: the current price spike is notably more contained than historical precedent would suggest.

• Given the centrality of Iran and the strategic importance of the Strait of Hormuz, markets could have priced in a far more severe disruption.

• The fact that they have not indicates an underlying expectation—not certainty, but expectation—that escalation will be managed, or that supply routes will ultimately remain open.

The plot twist. This opens a critical scenario. If the United States were to effectively secure and stabilize the Strait of Hormuz, and more broadly impose order over Iranian supply dynamics—whether through direct control, deterrence, or regime-level stabilization—the result would not simply be a short-term price correction.

• If this were to happen, it could mark the beginning of a structurally more stable oil market.

• By restoring predictability to one of the world’s most sensitive chokepoints, the U.S. would reduce the geopolitical risk premium that currently underpins price volatility.

In conclusion. Hidden in plain sight, the graph suggests that we are not just observing another cyclical spike, but testing the limits of a more fragile system. The number of actors capable of disrupting supply has increased, while the capacity to manage those disruptions has declined.

• Oil, once again, is not just a commodity, but a very effective geopolitical lever.

• The bottom line is, the market is signaling that risk exists, but that it may still be containable.

• If that containment becomes credible—particularly in Hormuz—the next phase may not be another spike, but an unusually durable period of price stability.

Argentina has secured a pivotal legal victory in the US Court of Appeals, providing a momentary reprieve in the multi-billion-dollar litigation over the 2012 nationalization of YPF.

In perspective. This ruling challenges a previous lower court order that mandated a USD 16B payout to litigation funders, shifting the momentum of a decade-long judicial battle. The decision offers the South American nation critical breathing room as it navigates a complex economic recovery and seeks to redefine its standing in international financial markets. The current legal dilemma started as a fundamental clash between sovereign policy and the corporate bylaws established during the privatization era of the 1990s.

• In 2012, the Argentine government moved to reclaim a 51% controlling stake in YPF from the Spanish energy giant Repsol, citing the strategic necessity of energy sovereignty. However, the administration bypassed the company’s 1993 bylaws, which explicitly required any entity acquiring a majority share to launch a formal tender offer to protect minority shareholders.

• While Repsol eventually negotiated a direct USD 5B settlement for its shares, the rights to sue for the breach of the tender offer clause remained with the Petersen Group—the Eskenazi family—which held a 25% stake but entered bankruptcy proceedings in Spain shortly after the expropriation occurred.

• Burford Capital, a specialist in litigation finance, recognized the legal vulnerability and purchased the rights to pursue the claim from the bankrupt Petersen entities for approximately USD 15M, setting the stage for a payout that could reach USD 16B—a speculative upside that represents a staggering potential return of over 100,000% on the initial capital risked.

The Tender Clause. The inclusion of a mandatory tender offer was less a matter of corporate etiquette and more a strategic poison pill designed to anchor foreign investment during Argentina's neoliberal transition. In the 1990s, to successfully list YPF on the New York Stock Exchange, the Argentine State had to provide ironclad guarantees that any future shift in control—specifically re-nationalization—would not result in the dilution or entrapment of private capital. The tender offer clause functioned as a financial firewall, ensuring that any majority acquisition would trigger a mandatory buyout of all remaining shares at a predetermined, market-linked price.

• From a structural perspective, this mechanism balanced the sovereign risk inherent in emerging markets by aligning the interests of international Wall Street investors with the local administration. It essentially stripped the State of the ability to seize control cheaply, forcing any political or economic actor seeking dominance to prepare a massive capital outlay to compensate minority partners fairly.

• The core of the legal challenge by the plaintiffs does not contest the sovereign right of Argentina to expropriate assets for the public good but rather focuses on a breach of contract within a commercial framework.

• Burford Capital argued that by assuming the 51% stake without launching the contractually required tender, the Argentine State acted as a private commercial debtor that defaulted on its obligations to its partners, thereby triggering the massive indemnity on dispute.

Sovereignty concerns. The Second Circuit Court of Appeals has fundamentally altered the case's trajectory by voiding the record-breaking financial penalty previously levied against the Argentine State. In a landmark 2-1 decision, the 2nd US Circuit Court of Appeals in Manhattan overturned the USD 16.1B judgment—which had escalated to over USD 18B with interest—ruling that the breach-of-contract claims were not cognizable under Argentine civil and public laws governing expropriation.

• The sheer scale of the original award represented approximately 45% of Argentina's total 2024 national budget, a liability so disproportionate that it threatened to fundamentally destabilize the State’s financial capabilities and derail the current administration's efforts to return to international credit markets.

• The litigation sparked intense diplomatic friction due to a 2025 turnover order that attempted to compel the transfer of YPF shares held within Argentina's Caja de Valores—the nation’s central securities depository and clearinghouse—to Burford-backed plaintiffs.

• This was perceived in Buenos Aires as a direct violation of sovereign immunity, where a foreign court attempted to seize domestic strategic assets to satisfy a commercial claim.

Between the lines. The appellate reversal is not merely a legal correction but a strategic maneuver reflecting a shift in US–Argentina bilateral relations. Under the Milei administration, Argentina has been elevated to the status of a primary regional ally, a transformation cemented by an unprecedented USD 40B US financial support package—including a critical USD 20B currency swap—which provided the macroeconomic stability necessary for Milei’s party to secure a landslide victory in the October 2025 legislative elections.

• By overturning the USD 16.1B judgment, the US judiciary effectively de-escalated geoeconomic pressure that threatened to bankrupt a key partner. The ruling redirects the dispute toward international arbitration channels, moving away from a direct, zero-sum confrontation that would have otherwise compromised the Argentine State’s solvency.

• The timing of the ruling aligns with a critical window of global energy volatility sparked by the 2026 conflict with Iran with the Strait of Hormuz paralyzed and oil prices surging past USD 100.

• The US is prioritizing energy consolidation within the Western Hemisphere, viewing Argentina’s Vaca Muerta shale reserves and its reliable pro-Western leadership as indispensable to regional energy security.

In conclusion. The victory in the YPF case represents more than a financial dilemma—it is a validation of Argentina’s rapid integration into the US strategic orbit. While the risk of a Supreme Court appeal remains, the immediate removal of a USD 16B liability allows the Milei administration to focus on its ambitious structural reforms and energy expansion.

• Ultimately, the ruling underscores a new era where judicial outcomes are increasingly intertwined with the geoeconomic imperatives of a world in conflict.