Geopolitical risks are rising around the world and dragging down the global economy, according to an investment outlook written by Scott Mather and Greg Sharenow of PIMCO.

Mather is CIO for U.S. core strategies at PIMCO and one of three new managers of the Total Return Fund after Bill Gross’ sudden move to Janus. Sharenow is an executive vice president at PIMCO.

They argue that there are three “clear policy tools” that could help counter the admittedly “extremely complicated” problems geopolitical risks create, particularly regarding energy.

First, European central banks and governments should coordinate their efforts to offset negative economic effects. Further, leaders in Europe should develop policies to wean themselves off Russian energy sources.

Finally, the United States should revisit its “long-standing policy against oil exports” and position itself as an energy supplier.

Europe is in a tenuous position, according to Mather and Sharenow, who called its economic recovery “fragile.” Although the region started 2014 with optimism, in just six months, confidence and growth have both fallen, and the disinflationary forces in play at the beginning of the year haven’t improved.

The authors predict that if the situation in Ukraine remains frozen, growth in Europe will be around 0.3% of GDP. However, if the conflict escalates and sanctions are increased, those negative effects could spread from direct trade to energy price and supply.

“Although a near-infinite number of scenarios can be constructed with many economic outcomes, it is clear that both proactive fiscal and monetary policy should be considered to combat deflation and support the fragile economies,” they wrote.

Mather and Sharenow suggested relaxed budget constraints and an accommodative monetary policy in Europe, including quantitative easing, would be the best approach for Europe.

Energy plays a pivotal role in the conflict in Europe and its recovery. Ukraine’s role as a transit state through which Russian natural gas and oil is passed to Europe makes the outcome of the conflict important to recovery. The author’s suggested European policies should reflect a move away from Russian energy sources by “revisiting plans to phase-down nuclear power, continuing to develop renewables supplies and technologies to enhance energy efficiency, and supporting greater integration and connectivity so that energy can flow across regions to prevent any one member from being held captive to any one supplier.”

The authors predict the U.S. will soon be one of the biggest exporters of natural gas, but the country is not in a position to help Europe with its energy woes through the coming winter. Still, the United States should step up its efforts to position itself as a major energy player by speeding up the approval process and approving exports to any country, not just free-trade countries.

They also argued that the U.S. should ease up on restricting crude oil exports. Opponents to energy exports believe that keeping energy here will support the industry domestically, but Mather and Sharenow wrote that “while some of the discount will narrow, the U.S. energy advantage would not go away. We view increasing U.S. exports as net supportive of the U.S. economy, likely depressing global prices in time and providing allies with some certainty over the security of supply.”

– Check out: Gross’ First Janus Outlook Addresses PIMCO Exit, Gloomy Financial Era on ThinkAdvisor.