Heat olive oil in a small, heavy saucepan. Add the red onion. Cover and cook briskly for about 10 to 15 minutes, until onions have softened, stirring often.

Remove lid, add sugar, and slowly cook another five minutes, until some of the onions begin to lightly caramelize, and liquid is nearly evaporated. Add the wine, and continue to cook, stirring often, until the wine has reduced and the mixture has no liquid pooling at the bottom when a spoon is run through.

Remove from heat and add vinegar, salt and pepper to taste.