The Global Transactionalism Playbook

Has diplomacy become a series of transactions?

Feb 13, 2025

Trump and Putin spoke on the phone, agreeing to start talks on how to end the war in Ukraine. This shows a broader reality: diplomacy today is increasingly transactional. Trump’s transactionalism is often put as uniquely American, but it reflects a broader global trend. China uses debt-trap diplomacy to expand influence. India hedges between the West and Moscow, while Gulf states use energy for their interests. This presents a challenge: how do you operate in a world where diplomacy has turned into a series of transactions? In a system driven by power politics rather than partnerships, those who fail to adapt risk losing. Geopolitically Correct breaks down the history, strategy, and impact for you.

In this edition:

The Rise of Transactional Diplomacy
From Bretton Woods to Bargain Politics
Scenarios for the Future

The Rise of Transactional Diplomacy

Transactionalism in foreign policy is not new. However, Russia's revisionist agenda and Trump's policies have accelerated a shift back to power-driven deal-making.

FOR GOVERNMENTS. Alliances still matter, but are increasingly subject to transactional thinking. Under the Trump administration, security guarantees are no longer given freely but treated as strategic deals. As a result, diplomacy is increasingly based on quid pro quo rather than long-term trust. We see this in the US withdrawal from multilateral organizations and agreements. Indeed, this saves costs in the short term. However, it makes cooperation more difficult. China is using its Belt and Road Initiative (BRI) and creating economic dependency through loans. It is also weaponising rare earth minerals and technology restrictions against the West. Similarly, Russia has weaponised energy supplies to pressure Europe and linked its military support in Africa to diplomatic loyalty. Smaller states like Switzerland must now rethink their strategy. The key will be to use its smart power — like neutrality — as an instrument in its foreign policy.

FOR BUSINESS. Transactionalism creates opportunities for companies, but also risks. Companies that align themselves with political changes, such as Elon Musk’s closeness to Trump, may gain favour in the short term. But as Tesla’s market volatility shows, political transactions are unpredictable. Therefore, companies must weigh short-term gains against potential long-term instability. In global trade, companies must prepare for unexpected tariffs, export restrictions and unpredictability of economic alliances. China’s use of economic investments in European countries, shows how foreign investment and supply chains can become strategic assets to be leveraged for political influence.

From Bretton Woods to Bargain Politics

For decades, Western-led institutions such as the UN, WTO, IMF and NATO formed the backbone of a rules-based international order. Agreements were based on trust, norms and institutional cooperation rather than immediate transactional gains.

FOR GOVERNMENTS. After the Second World War, the global powers built a new order to prevent economic chaos and geopolitical instability. The United Nations system was designed to promote diplomacy, while the Bretton Woods system established institutions such as the IMF and World Bank, anchoring the global economy to stable monetary policies and economic predictability. This long-term stability fuelled the post-war economic boom, particularly in the West, and enabled the rapid industrial and financial growth of the late 20th century. On the security front, NATO emerged not as a short-term arrangement but as a collective defence mechanism - an alliance based on shared commitments rather than immediate quid pro quos. The OSCE, established by the Helsinki Accords in 1975, represented a co-operative approach to security in which diplomacy aimed to reduce tensions rather than maximise individual national gains.

FOR BUSINESS. The globalisation boom of the 1990s further consolidated this system. Free trade agreements and the expansion of the WTO promoted economic interdependence, reducing the role of transactional politics in favour of integrated markets and common regulatory frameworks. The assumption was that countries had more to gain by playing by the rules than by bargaining unilaterally. But today this cooperative system is eroding. Instead of rules-based institutions, global politics is moving towards tactical bargaining and strategic leverage. Power politics and quid pro quos increasingly define diplomacy. China’s Belt and Road Initiative, Russia’s energy blackmail in Europe and Trump’s conditional alliances all point to a world where rules take a back seat to who has the most leverage.

Scenarios for the Future

Where does this shift to a more transactional world lead? Three scenarios:

Best-case scenario: A New Multilateralism.

Europe strengthens internal resilience by reducing dependency on US security and China’s economy. New trade agreements with other states or regions like MERCOSUR create stability in a transactional world. This makes way for a new multilateralism, moving beyond unipolar (one power) or bipolar (two powers) lead systems to a stable multipolar order.

Worst-case scenario: Fragmented Alliances, High-Risk Trade.

NATO weakens, within the EU political fragmentation increases, and transactionalism dominates. Supply chains are disrupted by high tariffs, and Europe struggles to manage pressures from others states.

Middle Ground: Adaptation & Selective Realignment.

Europe positions itself in a transactional world with a hybrid approach, keeping US security ties while deepening intra-European economic cooperation. Switzerland maintains neutrality as its strategic niche while actively engaging in foreign policy to manage a transactional world.

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Your Take

Last week, Geopolitically Correct asked readers about who can lead a Metternich-style negotiation in 2025? 33% of you said that neutral states are best placed to lead such negotiations. Neutral states can provide a platform and mediate between conflicting parties. But in a transactional world, states with the necessary hard power must also be present and support such talks. This week we’re asking: Should states build autonomy, double down on neutrality, or hedge between major powers? Vote below!

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In Review

History offers a lesson. In 1814/15 European leaders met in Vienna to draw up a post Napoleonic order that would prevent further continental wars for almost a century. Their success was due in no small part to Klemens von Metternich, the Austrian diplomat who understood that peace required not idealism but a pragmatic balance of power. Can a Metternich-style settlement be reached in Ukraine in 2025? Geopolitically Correct analyses the historical parallels, the strategic realities of today, and what this means for governments and businesses.