By Alexander Kliment

Russian President Vladimir Putin's last minute decision to skip a G8 summit with President Barack Obama is a snub to Washington, but the Russian president's no-show may in fact increase the chances for a constructive relationship between the two countries.

Last week, just days after his inauguration, Putin let it be known that he would not attend the upcoming G8 summit at Camp David, where he and Obama were set for a one on one meeting.

The White House, in turn, said Obama wouldn't attend the 2012 Asia Pacific Economic Conference (APEC) summit this fall in Vladivostok, Russia -- though it was always hard to imagine Obama skipping the Democratic National Convention.

According to the Kremlin's official explanation, Putin can't leave Russia right now because approving the cabinet nominations submitted to him by Prime Minister Dmitry Medvedev is too sensitive a task for Putin to oversee by phone from Maryland. So Medvedev will send the list to Putin and head to the summit himself.

Putin's decision is a breach of G8 protocol, which expects that sitting heads of state will attend the group's summits. French President Francois Hollande, for example, will attend, just days after his 15 May inauguration. And by sending his number two to an organization in which Russia is already something of a second fiddle, Putin is raising questions about the wisdom of keeping Russia in the group at all.

Accordingly, many analysts have cast the move as a brazen rebuke to the U.S., which Putin alleges is behind the unprecedented street protests that have become a feature of Moscow life since last December.

It's true that the Kremlin's official explanation isn't wholly credible. Most cabinet decisions have likely been agreed upon already, Putin's re-election was never in doubt, and the G8 summit's date has been known for some time. That said, he reassumes the presidency amid rising popular opposition, which has sowed fresh doubts about his legitimacy. Keen to prevent infighting or, worse, insubordination among Russia's powerful elites, Putin could well be preoccupied with some last minute horse-trading at home.

The timing may, in fact, be no better in Washington than it is in Moscow.

Obama is entering a challenging re-election campaign in which he has already drawn fire from his Republican opponent Mitt Romney about the pursuit of a reset with Russia and his broader foreign policy track record. U.S.-Russia ties have deteriorated recently -- on account of disagreements over Syria, continuing friction over missile defense, and Putin's allegations of U.S. complicity in the protest movement -- meaning the U.S. president would be under pressure to take a hard line with Putin.

But that could risk an unpredictable flare-up with the notoriously sharp-tongued and pugnacious Putin. At the very least, it might complicate White House attempts to secure congressional support for granting Russia normal trade relations status so that U.S. companies can benefit from Russia's WTO accession.

In short, with both men facing heightened domestic concerns and pressures, Obama's meeting with Medvedev, who has warmer relations with Obama and who is seen chiefly as a messenger for Putin, carries much less political significance, but also much lower political risk. The practical result is that it leaves open the chance of greater flexibility between Washington and Moscow that could help maintain a pragmatic relationship in the medium term.

Alexander Kliment is an analyst with Eurasia Group's Eurasia practice.

By Antonio Barroso and Mujtaba Rahman

Francois Hollande's May 6 victory in one of France's tightest presidential elections ever will have few implications for the EU's management of the eurozone crisis. Hollande is taking shape as a pragmatist who will follow reason on the European front, as signaled by the candidates he's likely to put in important positions in France's new government.

The president-elect claims he has already selected the new prime minister, who will be revealed on May 15 after Hollande takes office. Socialist Party (PS) leader Martine Aubry and long-time socialist politician Jean-Marc Ayrault are the most likely candidates, although a surprise choice (for example Hollande's campaign director Pierre Moscovici) is not completely out of the running. Aubry's selection -- who the majority of the French left support, according to opinion polls -- would hint at a more leftist course for Hollande's government. Ayrault's nomination, however, would imply policy pragmatism. The former minority leader in the National Assembly would likely be better able to build consensus among the many leftist factions in parliament, especially if the government must adjust policies to match the challenging economic situation.

Michel Sapin, a socialist, is frequently mentioned as the candidate most likely to take the crucial post of finance minister. Sapin, who has already served as finance minister, is a close ally of the president-elect and helped draft Hollande's economic program. Another possible choice is Jerome Cahuzac, a socialist former president of parliament's finance committee who actively supports austerity and deficit reduction. Both men would make a good finance minister, given their experience and their commitment to a balanced budget.

But Hollande's victory will not fundamentally change how the EU is managing the ongoing eurozone crisis, though there will likely be some changes around the margins. Hollande's desire to introduce some focus on growth in the fiscal compact is easy for German Chancellor Angela Merkel to accept and there are already tentative signs that Berlin will support such efforts. Hollande's objective of securing a capital increase for the European Investment Bank (EIB) also is unlikely to prove controversial. But the biggest obstacle to growth -- moving away from regressive agricultural payments toward greater use of structural adjustment funds in the EU budget -- is actually more difficult for France to overcome than it is for Germany. Also, Hollande's pledge to seek a change in the European Central Bank's mandate is a non-starter. Such a change requires all 27 member states to agree, but it will face stiff opposition in Germany, where it is perceived as a French strategy to inflate away debt.

Antonio Barroso and Mujtaba Rahman are analysts in Eurasia Group's Europe practice.

By Damien Ma

Though the curious case of blind Chinese dissident Chen Guangcheng has badly embarrassed China's leaders, it has provided them one important benefit -- it has diverted attention from the far more dangerous story of Bo Xilai. Regardless of the outcome in either case, the Communist Party's image has been badly tarnished. For a Chinese government that seems bent on investing in soft power, these last few months have offered clear reminders that soft power cannot be bought. It must be earned.

For a Chinese government that prefers to keep its differences behind closed doors, the Bo Xilai episode is a nightmare, in part because the involvement of the U.S. and British governments in the case has brought an unusual degree of international media scrutiny. (One of Bo's deputies briefly took refuge in the U.S. embassy, and Bo's wife has been implicated in the murder of a British businessman.) China's familiar tools of propaganda have been overwhelmed by frenzied speculation about the case in the Western press and China's social media echo chamber -- yet another reminder that Beijing can no longer afford to ignore Sina Weibo, China's version of Twitter.

The party leadership has dismissed the Bo Xilai saga as a sideshow and Bo himself as an aberration within the country's otherwise upstanding roster of senior officials. But little of China's blogosphere appears to be buying it. Instead, Bo's story signals for many that China remains a corrupt and opaque place, that the unbridled capitalism practiced in China has mainly benefited politically-connected VIPs, and that greed has infected the leadership right to the top.

And though the drama surrounding Chen Guangcheng has given the public something new to speculate about, in some ways, the story reinforces the cynicism that Bo Xilai has exposed. Chen and Bo -- a powerless and once illiterate legal activist and a powerful political scion who long stood above the law -- seem polar opposites. But they have something important in common; both were left without a place to hide when the leadership decided they should be punished.

Few within the country believe that Bo or his wife will have their day in court, reinforcing public fear that average citizens have no real protection within a system manipulated for the benefit of the party. That Chen, like Bo Xilai's deputy, first sought sanctuary in the U.S. embassy underscores a point not lost on the Chinese public: The United States, not China's own government, offers protection of last resort in times of political turmoil.

These stories are engendering a growing trust deficit between the government and the informed public -- the very elites that the party counts as its crucial constituency. A perception of systemic "rot from within" and the lack of legitimacy it implies undermine the regime's monopoly hold on domestic political power.

Despite Premier Wen Jiabao's constant talk of political reform, the last decade of the Hu Jintao/Wen Jiabao administration saw an economy that raced ahead and a political system that changed very little. But to repair this latest damage to its "brand," the party may feel it has to produce some real change. Some within the leadership are already using this opportunity to push for political liberalization. In his closing arguments as premier, an increasingly legacy-conscious Wen Jiabao is making a final pitch for real political reform. But Wen is a lame duck.

Over the course of the next few months, China will introduce a new generation of top leaders. Any political changes they might produce are unlikely to fundamentally recast Chinese politics or to appear soon. But they may soon find that delivering go-go growth is no longer enough. They may find that, particularly in the online public square provided by social media, a growing segment of China's people will expect a new degree of accountability -- and a new kind of change.

Damien Ma is an analyst in Eurasia Group's Asia practice.

By Carsten Nickel

"It's not for Germany to decide for the whole of Europe," Francois Hollande, the socialist candidate favored to win the presidential run-off, reminded Chancellor Angela Merkel on French TV last week. Gone seem the days of the "Merkozy" era when Merkel decided that austerity was the way forward out of the euro crisis -- and President Nicolas Sarkozy followed suit. With much of Europe caught in recession and political opposition from Paris on the rise, the question is: Is the austerity doctrine coming under pressure in Germany? The answer is: Probably not.

A growth-versus-austerity debate has already kicked off in Germany and is set to further intensify over the next few weeks. The second round of the French elections, Greek parliamentary elections, and elections in the German federal state of Schleswig-Holstein -- all held on May 6 -- will amplify the pressure on Merkel. After Hollande's strong display in the first round of the French presidential elections, the German Social Democratic Party (SPD) congratulated its French counterpart and told Merkel that it would delay the ratification of her prestige project, the European fiscal compact, because it was lacking the growth component demanded by Hollande. The chancellor, notoriously inclined to political U-turns, quickly began proclaiming growth-enhancing policies as the "second pillar" of her eurozone strategy. German commentators saw her encircled by advocates of fiscal expansion.

But the current noise should not be overestimated. Germany's overall preference for fiscal prudence is likely to prevail because of two factors. The first is the political weakness of the opposition, providing Merkel with a strategically comfortable position at the center of German politics. The second is the country's coordinated market economy, which prioritizes supply-side adjustments to limit wage restraint; expansionary policies would abet inflation and wage growth.

Social Democrats might perform well in the upcoming state elections, but the party's program regarding the euro crisis remains shallow, while public support for expansionary policies stays weak. Moreover, voters have not forgotten that it was former chancellor Gerhard Schroeder's SPD government that introduced the supply-side reforms to Germany, which Merkel now wants to prescribe to the rest of Europe. Meanwhile, the rise of the internet activists' Pirate Party diminishes the chances for a coalition of SPD and Greens after the 2013 Bundestag elections. And the chronic weaknesses of Merkel's coalition partner, as well as her own high personal approval ratings, provide her with much political leverage.

Merkel will pragmatically co-opt growth rhetoric over the next few weeks, and the opposition might delay ratification of the fiscal compact, both of which the SPD will sell as a success. But the party will not demand substantial growth-enhancing policies in return for their support of the compact in the Bundestag, and Merkel has already spelled out what her agenda for growth looks like: Enact labor market reforms, increase the pension eligibility age, and liberalize your economies, she told European partners. Not quite the expansionary policies many German commentators saw forthcoming.

Germany's coordinated market economy is behind its recent economic success and its resistance to spend. In key sectors such as the automotive industry, organized workers and employers bargain without political interference. Firms offer generous welfare schemes and job security, receiving highly skilled manual workers and-crucially-wage restraint in return. Germany's answer to rising competition from Asia has been to increase productivity in a coordinated effort. With Germans unwilling to see their export surpluses as a key factor behind the eurozone's woes, their preference for austerity is here to stay.

Carsten Nickel is an analyst with Eurasia Group's Europe practice.

By Carlos Ramirez

Allegations that WalMart-Mexico's executives bribed local officials to speed up permitting for new stores highlight the issues of corruption in Mexico, but will have little impact. In the short term, the Mexican federal government has announced an investigation regarding the federal permits granted to the retailer. But that seems to be a political response to the growing criticism of inaction by the authorities rather than a serious case against the company. Because the allegations of wrongdoing relate to local-level permitting, any federal investigation will likely turn up little, if anything, of note. Furthermore, with the present federal administration entering its last few months, the investigation will probably fail to reach any meaningful result before its November 30 deadline.

In reality, federal officials are legally constrained from pursuing the allegations. They would first need a formal accusation by a third party before being able to launch any investigation regarding the alleged bribery. Furthermore, the division of powers under Mexico's constitution gives states and municipalities control over construction and most environmental permits, and national prosecutors have limited leeway to investigate local affairs other than when federal crimes are suspected.

A formal investigation at the state and/or municipal levels is even less likely. Since Mexico's transition to democracy, political power has shifted from the once all-powerful presidency toward the 32 state governors and the mayors of some of Mexico's biggest cities. The governors have strengthened their leverage over important decision-making within their jurisdiction through their control of local institutions. Increased budgetary and debt resources, with little related accountability and transparency (which increase the likelihood of corruption), have only reinforced the governors' political clout. Moreover, because the alleged corruption occurred five or six years ago, and reelection is banned in Mexico, politicians who served at that time will no longer be in office, which would further complicate a formal investigation.

Ultimately, both federal and local governments welcome companies that bring jobs and economic activity and that will likely to trump other considerations. WalMart-Mexico is currently Mexico's largest private sector employer with more than 210,000 employees. Local and federal authorities are unlikely to constrain WalMart-Mexico's growth, particularly when citizens cite jobs as among their principal concerns. In fact, federal and local authorities are likely to continue to regard the company as an important contributor to the economy.

In the short term the most likely immediate outcome for WalMart-Mexico is increased scrutiny of its operations by the media, competitors, and NGOs that oppose its presence in the country, but this is unlikely to hamper the company's ability to keep expanding in Mexico.

The episode does raise questions about whether Mexico's next president, to be chosen in July, will be able to tackle the lack of local-level transparency and accountability. Not only do governors face few checks, but the ban on reelection also means that politicians have few incentives to govern with any concern for their longer-term public reputation. If Enrique Pena Nieto from the Revolutionary Institutional Party (PRI) wins the July election, cooperation between federal and local authorities would improve in some areas. Calderon was frustrated with the lack of cooperation from the states on security, leading to tense relations, especially with PRI governors.

But the fact that the PRI controls most states and many municipalities means there are few incentives for a PRI president to seriously attempt to improve transparency. If elected, Pena Nieto is likely to prioritize the need to win support from governors for his own agenda, rather than pursue the complex political reforms needed to seriously tackle accountability and transparency issues at a local level.

Carlos Ramirez is an analyst with Eurasia Group's Latin America practice.

By Anne Fruhauf

Zimbabwe's Robert Mugabe is a man of many talents: independence hero, accomplished educator, wily political strategist, cunningly cruel autocrat, and lately, a man skilled at cheating death. At his 88th birthday bash back in February, he cheerfully proclaimed to have "beaten Christ" (by being resurrected several times). The Old Man -- as he is usually referred to in Zimbabwe -- has outlived fellow rulers like Gabon's Omar Bongo and Malawi's Bingu wa Mutharika, whose (un)timely death this month will perhaps save Malawi from a deepening economic crisis and popular rebellion.

Cut from tougher cloth, Mugabe has outlasted more than a decade of political and economic crisis, in which the country's economy shrank by almost half, Zimbabwe set new records for hyperinflation (picture shoppers using bundles of 100 trillion Zimbabwe dollar notes), unemployment reached 80 percent, and millions of Zimbabweans fled the country in search of jobs and/or food.

But nearing 90 and suffering from metastatic prostate cancer, even Mugabe will (probably) one day meet his maker. His absences from the country have become more frequent, including at least nine 'medical tourism' trips to Singapore in 2011. In fact, the Old Man will probably leave office feet first (or through some form of incapacitation that is impossible to conceal). A smooth, negotiated retirement seems unlikely given succession squabbles inside his ZANU-PF party.

It is widely believed that Mugabe's departure will be a watershed moment, releasing the country from a tyrant's grip on its political culture and economy. True, without his departure, Zimbabwe's political transition, which began hesitantly with the formation of a unity government in 2009, will stagnate, as will progress on the economic front. In this scenario, the long-suffering opposition MDC, now ZANU's unlikely bedfellow in the unity government, will win free and fair elections (technically due in 2013) and preside over political and economic reforms. That's assuming they prove themselves true reformers, of course.

But Mugabe's critics shouldn't  be too hopeful just yet. ZANU-PF and especially its generals -- few of whom are democrats or reformers -- are planning for a post-Mugabe future. Emmerson Mnangagwa, the country's fearsome defense minister, seems to be positioning himself for takeover against party rivals such as Vice-President Joyce Mujuru.

ZANU-PF knows that it faces potential implosion, and that its success at the next elections is not assured unless it builds its war chest and relies on coercion. That is why the country is now enduring an extended scramble for resources -- the indigenization drive against international mining companies, the controversial exploitation of the Marange diamond deposits and more recently a gold rush around Kwekwe, the country's mining heartland.

Zimbabweans have long lived by the motto that things can only get better. But life may yet get a little harder still.

Anne Fruhauf is an analyst in Eurasia Group's Africa practice. 

By Patrick Cullen

The international shipping industry and the governments that are ostensibly supposed to protect it have begun to radically rethink their long-held aversion to private armed protection at sea. The shift illustrates the inability and/or unwillingness of states to provide security, and presages potential ethical and legal controversy as the lines between commerce and state authority become increasingly blurred.

For decades, both the international shipping industry and the governing bodies that oversee it have been critical of the concept of putting armed guards on commercial vessels in order to protect them from violence -- and piracy in particular -- at sea. From the perspective of private industry, hiring armed guards has traditionally been viewed as a costly and risky move that creates more liabilities (financial, legal, and reputational) than it resolves. Furthermore, the shipping industry has also balked at the idea of paying for a service that it expects the world's navies to provide for them free of charge.

As recently as June 2010, a host of public and commercial maritime industry stakeholders -- including major shipping organizations -- explicitly stated that "the use of armed guards is not recommended" in a Best Management Practices maritime security document designed to offer shippers advice to mitigate the threat from Somali piracy.

States and international organizations such as the U.N. International Maritime Organization (IMO) and the International Maritime Bureau have long underscored the importance of maintaining the classic division between the state and the market, with the former maintaining a monopoly of the legitimate use of force, and the latter enjoying the privileges granted by this state protection.

The shift toward the acceptance of armed private security on ships has been recent and dramatic. In an unprecedented announcement last May, the IMO issued guidance to governments and shippers on how to engage with "privately contracted armed security personnel," and many states have followed in the IMO's wake, issuing similar policy announcements outlining their acceptance of armed private security teams operating onboard commercial vessels. And only weeks ago, on March 28^th, BIMCO, the world's largest international shipping organization, issued a standardized guard contract (GUARDCON) intended to help shipping companies responsibly select and manage teams of armed guards provided by specialized maritime private security companies. The same maritime industry players that were traditionally averse to the idea of placing armed guards on commercial vessels have now positioned themselves as key players involved in legitimizing this practice. This includes maritime insurance brokers and Protection and Indemnity insurance clubs that have begun to accept, and even endorse, the use of private armed security at sea.

So what has changed? Somali piracy has shifted from a small-scale and purely regional risk to a mature threat from professionalized piracy syndicates extending beyond Somali waters into the Indian Ocean and beyond. And recognizing that the current multinational and unilateral naval efforts to curb Somali piracy are falling short, governmental actors have sought to harness and regulate this emerging practice rather than ban it outright.

However, due to the novelty of the armed maritime private security, as well as the transnational and multi-jurisdictional nature of the global shipping industry, navigating this legal environment remains difficult at best. Placing armed guards on board ships has proven to be an effective method of deterring pirate hijackings -- to date, no ship with an armed escort has been hijacked -- but the use of armed guards poses its own set of serious risks. Last month, two armed Italian sailors on board an Italian flagged commercial vessel were caught and charged with murder by the government of India after allegedly shooting innocent fishermen within India's exclusive economic zone. Many commentators point out that it may only be a matter of time before a similar incident occurs with a private security team.

The shift in attitudes among shippers and states is just another illustration of how the management of risk is evolving from the reactive to the proactive, and how the responsibility for providing security is becoming increasingly fragmented between states and the market.  

Patrick Cullen is an analyst in Eurasia Group's Comparative Analytics practice. Patrick is an expert in maritime private security, and is the editor of "Maritime Private Security: Market responses to piracy, terrorism and waterborne security risks in the 21^st century."

By Alexander Kliment

Vladimir Putin thinks that Russia's elections are over, and that it's time to move on with business as usual. The trouble for him -- and the system of "managed democracy" he has built -- is that Russia's season of elections is just beginning.

In his final address as Prime Minister to Russia's State Duma (the lower house of parliament) on Wednesday, Putin, who will return to the presidency on May 7, explained that in a "mature democracy, after elections are concluded there begins a more important phase of work." He called for unity and an end to the "heightened emotions" that have recently taken hold of Russia's politics.

So much for that. A few minutes later, the entire faction of the left-leaning Kremlin-created opposition party A Just Russia walked out of the hall in response to Putin's defiantly tin-eared response to a question about the disputed mayoral election in Astrakhan. In that city, the largest administrative center in Russia's Caspian littoral, A Just Russia member Oleg Shein has now entered the third week of a widely-publicized hunger strike to protest well-documented fraud in a mayoral vote that he lost on March 4, the very day that Putin was returned to the Kremlin.

The battle in Astrakhan, which anti-corruption crusader Alexey Navalny and other opposition figures have joined, follows a mayoral election in the northern city of Yaroslavl, where a former member of Putin's United Russia (UR) party ran as an independent, built unified support from several opposition groups, shrugged off scathing coverage from local media, and trounced the government's preferred candidate. More than a thousand election observers, mainly from Moscow, arrived to monitor the vote.

The controversies in Astrakhan and Yaroslavl have mainly to do with local issues, and Putin still has pre-eminent control of the country. United Russia, however tarnished by its new sobriquet as the "party of crooks and thieves," maintains its chokehold on the legislative and executive branches at all levels of Russian politics. But these local episodes underscore an emerging national reality: Opposition politics is taking root in Russia, and the regions will be the most fertile ground.

Despite Putin's wishful thinking, election season is far from finished. Later this year, regional legislative elections will be held in a half dozen localities. A similar number will vote in 2013 and 2014. By then, Russia's opposition forces may well have coalesced into a coherent national force, and voters will choose a new city council for Moscow, a city that Putin actually lost in last month's election.

Moreover, the Duma is expected to approve a bill in coming weeks that will reintroduce direct election of regional governors, though the president can still "filter" the candidates. Several regions could elect new leaders as early as this fall.

These elections will take place at a moment of unprecedented civil society activism, a trend that will cast a bright light on Russia's brand of democracy. Candidates for posts ultimately beholden to the Kremlin for their authority and resources must court an electorate increasingly skeptical of the prevailing power elite. Putin's "vertical of power," the system he has used to maintain political control across the country, already brittle thanks to the weakness of Russia's governing institutions, could begin to show real signs of stress as an increasingly restive public watches election results with new interest.

If so, the country's nascent opposition will have to begin to build a much broader infrastructure to help its leaders speak to a national audience about local problems. Change won't come quickly. Putin's approval rating stands at 68 percent, and Russia's economy is performing reasonably well. Moreover, few key regions face legislative or possible gubernatorial elections in coming months. But at the regional level, increased activism and attention from civil society and opposition groups, coupled with a threatening crisis of legitimacy for United Russia, could introduce a new element of unpredictability into local politics and, by extension, into center-regional relations.

Russia's opposition has a lot of building to do, but at least it now knows that a growing number of Russians are paying attention.

Alexander Kliment is an analyst in Eurasia Group's Eurasia practice.