Eurasia Group's weekly selection of essential reading for the political risk junkie -- presented in no particular order. As always, feel free to give us your feedback or selections @EurasiaGroup or @IanBremmer.

Must-Reads

1. "Freshmen From Kennedy to Double Amputee Join Polarized Congress"
Steve Walsh, Bloomberg

An interesting glimpse at some of the new personalities in the 113^th Congress, a group of representatives that runs the gamut of conceivable paths to Washington -- and the new Congress breaks records, with 81 women in the House and 20 women in the Senate (both all-time highs).

2. "Discordant Development and Insecurity in Africa"
Richard Joseph, allAfrica.com

How to reconcile the similar economic growth we've seen in Mali and Ghana with their starkly different development trajectories? There's no simple answer, but this piece is a good primer on many of the variables involved. 

3. "The Art of Snore"
John Arquilla, Foreign Policy

On US defense spending, are there more than budget cuts to fear?  Is there an innovation deficit? Arquilla outlines what he perceives as shortcomings in the current military spending approach -- as well as some interesting solutions.  

4a."Myanmar Launches Airstrikes on Kachin Rebels"
Simon Roughneen, Christian Science Monitor

4b."Burma's Military Follows Own Course in War against Kachin Rebels"
Jonathan Manthorpe, The Vancouver Sun

When Barack Obama and Hillary Clinton visited Myanmar in November, it was an historic occurrence -- the first-ever US presidential visit to the country, and a firm endorsement of the recent reforms that have taken place. But while national hero and opposition leader Aung San Suu Kyi warmly greeted the visitors, she also admonished that "we have to be very careful that we are not lured by a mirage of success." Fighting between the military and Kachin rebels in the north has clouded reform efforts. And, as Jonathan Manthorpe explains, Myanmar's relations with China -- and water security issues -- underpin much of the issue. These are two sources of conflict that are only trending upward throughout the region as a whole. 

Longer Reads

5. "Better Than Human"
Kevin Kelly, Wired

At Eurasia Group, we've devoted a lot of attention to the long-term labor force impact that the advent of robotics and 3D printing will have, particularly on emerging markets like China, where the country's greatest resource -- cheap labor -- could very well become one of its biggest obstacles as its citizens are displaced from manufacturing jobs following technological advances. Kelly looks on the bright side of a robotic future, outlining the opportunities for innovation and productivity that come with a mechanized work force. His vision is a bit rosy, but it's a useful counterweight to the much-discussed downside risks.  

By Shaun Levine

It is befitting that Indonesia has become the latest darling of the investment community, drawing private equity firms, retail and consumer giants, and the world's largest automakers to its shores. Even in a depressed global economy, the world's fourth most populated country continues to grow strongly, perhaps by as much as 6.2 percent in 2012. Indonesia is also blessed with natural resources, shipping its coal, nickel, copper, and gold to supply many of Asia's giants, including China and Japan, with the precious materials they need for their own economic engines.

Indonesia's stubborn affinity for subsidies, however, remains a major impediment to its longer-term growth.  President Susilo Bambang Yudhoyono's government remains committed to unsustainable funding for subsidies, which will potentially consume up to 20 percent, or $30 billion, of the 2013 budget-nearly the amount spent on education. The largest portion of this spending, nearly $20 billion, will be allocated to fuel subsidies, which the government acknowledges largely benefit the country's more affluent households.

Indonesia's current high growth rates mask the problems that, if left untouched, will likely make the country an example of a booming emerging market economy that never quite reaches its potential.  Without a realignment of spending priorities away from subsidies and toward vital infrastructure and education, investors are likely to take their dollars elsewhere.

Unfortunately, the political context is not conducive to a reduction in subsidies in the near term, despite external pressure from ratings agencies, the World Bank, and the IMF. Subsidies remain highly popular with a large portion of the voting population, and given this reality, Yudhoyono appears reluctant to press for reforms any time soon. Such a move would certainly dampen his party's electoral prospects: Recent polling suggests that if the 2014 parliamentary election were held today, Yudhoyono's PD would lose its top ranking, ceding substantial ground to rivals Golkar and PDI-P. Parliament also appears to reject subsidy reform, and political parties want to make sure it would be Yudhoyono's prerogative to reduce popular subsidies ahead of the 2014 elections.

But subsidy spending will shrink Indonesia's growth potential. Improving the country's decrepit infrastructure remains paramount: Even though parliament boosted Yudhoyono's planned infrastructure spending by $3 billion to $20 billion in 2013, that number is dwarfed by spending on subsidies, which offer no return on investment. Indonesia's backlogged and rickety ports, crumbling road and rail networks, and antiquated system of airports remain a large handicap for this country of 17,000 islands. Despite the size of its economy, Indonesia's level of spending on infrastructure, at nearly 2 percent of GDP, remains far below that of another favorite of investors-neighboring Vietnam (9 percent-10 percent).

At the moment, though, investors appear to be placated by government pledges to improve Indonesia's infrastructure. The country has reported record foreign direct investment thus far into 2012, perhaps a yearly total of more than $22 billion; investment officials proudly boast of having $75 billion more in the pipeline. New laws have been passed helping to ease the process of land acquisition, and spending continues to increase. But how long can Indonesia squeeze growth out of a flawed model before the darling of investors becomes the disappointment?

Shaun Levine is an analyst with Eurasia Group's Asia practice.

By Michal Meidan and Carsten Nickel

There are many reasons why China's economy has begun to cool, but the dramatic slowdown within the European Union, China's largest trade partner, is among the most important. Fears for Europe's growth and stability weigh heavily in Beijing, and China's risk-averse leaders are willing to invest in Europe's recovery.

But Beijing won't risk throwing good money after bad with substantial bailouts for risky peripherals like Spain, Italy or Greece. That would play badly inside China, where public perception that government is bailing out wealthy Europeans during a slowdown at home wouldn't play well. Greek haircuts earlier this year left Chinese investors with huge losses, and to invest in the European Financial Stability Facility (Europe's current bailout fund) is to form closer ties with meddlesome bureaucrats in Brussels.

Instead, China is increasing its direct investment in Germany, still Europe's economic engine, and, by extension, in Berlin's ability to manage crises and restore the continent's growth. That's good news for German Chancellor Angela Merkel, who sees the strategic importance of improving relations with the world's other leading manufacturing-dependent surplus economy. China has become Germany's third-largest export market behind France and the United States, and with demand among Germany's neighbors unlikely to increase anytime soon, German manufacturers will grow increasingly dependent on China and its markets.

Economic ties between China and Germany began to tighten following the onset of the financial crisis in 2008 as demand generated by the Chinese stimulus plan became an important source of Germany's recovery. Closer ties with German automakers and producers of renewable energy help Chinese firms develop new technologies and climb the value chain.

There is a downside for Germany. Expanded commercial ties will force Merkel's government to contend with domestic concerns that China's labor practices fall far short of acceptable standards and that German companies doing new business in China will have their intellectual property stolen. But Chinese purchases of German Bunds will help Merkel ease domestic fears that German support for Eurozone weaklings will sap the country's strength. That's why Merkel's once vocal criticism of China's human rights record has all but disappeared -- and why Berlin, unlike European institutions in Brussels, has yet to demand equal access to Chinese markets.

That's crucial for China. Beijing will continue to pay lip service to its ties with EU institutions, but growing ties between Beijing and Berlin will complicate Brussels' efforts to develop a common foreign and trade policy toward China, increasing Beijing's bargaining power with individual European partners.

Today, when China's leaders look toward Europe's core, they see a weakened France, a marginalized Britain, and a rising Germany. By betting on Berlin, China is hoping that Germany will use its increasingly decisive role in EU decision-making to provide China with market economy status, and the commercial advantages that come with it, and even to help lift Europe's arms embargo on Beijing. For its part, Germany is hoping ties with China can boost growth at a moment when it's badly needed.

For the moment, it's an increasingly profitable partnership.

Michal Meidan is an analyst in Eurasia Group's Asia practice. Carsten Nickel is an analyst in the firm's Europe practice. 

By Willis Sparks

A few days ago, Google introduced a tool that warns its users inside China about the hundreds of sensitive words and phrases that can produce an error message or even freeze the site, at least for a moment. China Digital Times (CDT) has since compiled a list of the most interesting (sometimes surprising) search terms. Taken together, they offer a glimpse of the wide range of things that China's Internet monitors don't want Chinese citizens reading and talking about. Translations are provided by CDT.

All the terms you see below in bold are apparently considered sensitive subjects.

Why are Chinese authorities worried about truth, benevolence, and forbearance? Because these words are associated with the outlawed spiritual movement Falun Gong. Watch out for the phrase snow lion; it's a reference to the flag of Tibet. Not surprisingly, searches for Taiwan Political Talk, Xinjiang + independence, and the Tibetan government-in-exile produce similar reactions. References to dissidents like Chen Guangcheng and Ai Weiwei can get you bounced. So can entering the words Liu Xiaobo or the Nobel Peace Prize he won in 2010. In fact, you might want to avoid the word dissident.

Nor do China's Internet monitors want citizens thinking about Chinese people eating babies or baby soup. That goes double for pornography, Playboy, and boobs.

Other words and phrases are dangerously suggestive for different reasons. The expression blood house, which refers to forced evictions, is a problem. Perhaps that's because it can encourage curiosity about assembly, a student strike and a people's movement. As these kinds of events take on a life of their own, it can lead young people to explore the so-called three leaves -- leave the Party, leave the Youth League, leave the Young Pioneers -- the 21^st century Chinese equivalent of turning on, tuning in, and dropping out. It can also lead students into the public square, trigger a rebellion, a coup d'état or even a revolution. These kinds of things can provoke martial law.

It has happened before, though you won't learn much about that simply by searching for Tiananmen, tankman, block tank, or by entering 89 + student movement, Beijing + something happened, or what happened to Beijing. Lately, these sorts of spontaneous insurrections have been popping up in places like Egypt and Tunisia, stoking fears in Beijing of Jasmine + revolution, a Beijing spring or a China spring.

Insurrections aside, mere political embarrassments ring alarms, as well. Searches for Governor Bo Xilai or Chongqing, the province he governed before scandal charges brought him down, make the list -- as does Heywood, the family name of the British businessman his wife is suspected of having murdered. Add Chen Jian, victim of an earthquake who gave a live interview before dying beneath the wreckage and Zengcheng, a city in Guangzhou with the misfortune to have hosted a riot among migrant workers last summer.

Then there is Twitter and Facebook. Expect problems if you hunt for Wikileaks + China. China Digital Times is on the list along with traditional foreign troublemakers like Voice of America and Radio Free Asia. Expect glitches if you investigate the country's great firewall, the web brigade of Internet censors who help hold it in place, and freegate, dynapass or ultrasurf, tools for those who want to climb over the wall.

It's a bit more surprising that searches for Mao, Deng Xiaoping and Jiang Zemin raise red flags. Even the names of today's leaders (Wen Jiabao and Hu Jintao) and tomorrow's (Xi Jinping and Li Keqiang) can create a disruption. Same for searches of the nine elders who operate behind the scenes in the Politburo Standing Committee. Simply entering Chinese Communist Party can create a problem, to say nothing of its less flattering nicknames the Common Disabled Party, Common Tragic Party, or the more colorful red bandits.

It's clear that Chinese authorities don't want citizens reading Mein Kampf. It's less clear why they appear to frown on the Coen Brother's film Burn After Reading. It's easier to understand sensitivity about the phrase best actor when you learn that's it a derisive nickname for Premier Wen Jiabao. But one mustn't get too curious about another of his popular nicknames: teletubbies.

Taken together, these and hundreds more words and phrases demonstrate just how hard it is to "manage" communications in a country of 1.4 billion people, more than half of whom have already found their way online.

Unfortunately for all concerned, this list of words and phrases is only getting longer.

Willis Sparks is an analyst in Eurasia Group's Global Macro practice.

By Roberto Herrera-Lim

Economic reforms that are the most significant in Burma since the 1990s confirm that the country's recent awakening has repercussions that go farther and deeper than politics alone. The news that the local currency will be floated on April 1, coupled with the likely passage of a new investment law, signals that the reform agenda has strong support throughout the leadership, not just with the visible President Thein Sein. The floating of the kyat -- with its potential to upset entrenched corruption and deny state enterprises and well-connected businesses privileged access to foreign currency -- reveals that reformers are relatively secure in pushing through with this change despite the risks to powerful interests. By doing this, the government is also showing a willingness to deal with near-term popular risks such as inflation, which may increase as state enterprises are forced to price their goods and services at market rates. The kyat float sets the stage for unwinding distortions that have led to corruption, lack of transparency in official transactions, and ineffective monetary policy. It will also enable Burma to use development aid more efficiently; the EU has already promised an additional $200 million in aid over the next two years. Meanwhile, the new investment law will allow foreigners to set up businesses without the need for local partners, and may provide a five-year tax holiday.

None of this would have been possible if the leadership were fracturing. Burmese politics, for the most part, remains very opaque despite the changes of the past few months. This creates near-daily speculation regarding the positions of the different cliques and institutions on the trajectory and pace of reform; serious disagreement can give hardliners the upper hand. Every instance of disagreement or lack of coordination -- whether between parliament and Thein, or between the central government and local military commanders -- is micro-analyzed for signals of dissent and fracturing of the senior leadership. This is why the substantive steps forward on economic reforms provide such a clear signal of a sustained commitment to reform.

On April 1, the former pariah nation will also hold its first free elections since the 1990 vote won by the opposition (but which the military refused to recognize). By the numbers alone, the outcome shouldn't matter much in the parliamentary balance of power. Up for grabs are a measly 40 seats in the 440-seat house, six seats in the 224-seat senate, and two for regional chambers. Including those regional assemblies and the 25 percent of seats automatically allocated for the military, Burma's legislature totals 1,158 seats. But the vote will be an important marker for democratic reforms-an idea that no one was willing to connect to Burma even a year ago -- because it opens the next political chapter for opposition leader and democracy symbol Aung San Suu Kyi. Suu Kyi and her opposition allies in the National League for Democracy (NLD) are expected to win most, if not all, of the seats being contested. Suu Kyi has not given any signals about her future political role, whether as an opposition leader validating the process of political change or as a more integrated participant in Thein's push for reform.

Burma is not yet fully out of the woods -- there are still several ways in which the reform process can be derailed. But with the raft of economic reforms, this is starting to look more and more like the highly praised "doi moi" (renovation) of Vietnam. It might be a bit too early to call it that, but it is becoming more and more difficult to bet against it.

Roberto Herrera-Lim is a director in Eurasia Group's Asia practice.

By Scott Rosenstein

In November and December of 2011, two teams of researchers submitted papers to Science and Nature magazines, apparently revealing the mutations necessary to make H5N1 avian influenza (a.k.a. bird flu) easily transmissible among humans. In its current form, the virus is exceedingly difficult for people to catch. If a beefed-up version were to circulate outside a lab while maintaining its lethality, though, the ensuing pandemic would likely be devastating. The scientists' research launched a heated debate, and on Jan. 20, 39 scientists announced a 60-day moratorium on all avian flu transmission research. But in a world where rapid gains in technology and scientific knowledge have made virus manipulation available to an expanding cohort -- some with less-than-honorable intentions -- that probably won't be enough time for policymakers and scientists to strike a balance between security and pandemic preparedness.

As Laurie Garrett has detailed in Foreign Policy, security experts worry that the information in the pending papers, or even the existence of the mutated virus in a lab, poses a security threat that outweighs the possible benefits of identifying the pathogen strain early and developing vaccines and antivirals to beat it. Scientists, meanwhile, argue that censoring scientific inquiry sets a dangerous precedent, while doing little to diminish the capabilities of nefarious actors. One of the first questions to ask, therefore, is who might those actors be, and would bird flu really be their weapon of choice?

The most obvious candidate is al-Qaeda. The terrorist group is struggling to reassert itself after the death of Osama bin Laden and has expressed interest in staging a biological attack. Hillary Clinton, in her Dec. 7 speech in Geneva, singled out the group's recent call to arms for "brothers with degrees in microbiology or chemistry to develop a weapon of mass destruction." But bird flu may not be the best choice here. Flu spreads fast, circumnavigating the globe multiple times a year, and making it a less-than-ideal weapon if your target is a specific population or geography.

If you were hoping to target all of humanity, bird flu could be more attractive. And since doomsday agendas tend to be associated with misfits and loners, it's worth asking: Would an individual be able to unleash bird flu alone? The details of the studies remain shrouded, but there is reason to believe that developing a lethal virus might be possible for those with access to the necessary technology and a relatively basic background in genetic engineering. Perhaps not the most common educational path for would-be terrorists, but the situation is worrying nonetheless -- particularly as the necessary technology becomes more widespread and easier to use.

Increasingly accessible technology presents another concern, one that doesn't require a nefarious actor: a lab accident. Virus leaks certainly happen, as demonstrated by an Ebola incident in Russia and SARS in Singapore. Both sides of the debate agree that we need better global coordination on bioweapons and biosafety. But the 1972 U.N. Biological Weapons Convention is outdated and mostly unenforceable, and the basic definitions and protocols for biosafety around the world are far from standardized, creating gaps that could allow negligent or suspect activities to go unnoticed.

So now what? Per the suggestion of the National Science Advisory Board for Biosecurity, a U.S. agency tasked with issuing guidance on potentially dangerous experiments, both bird flu papers will likely be published soon, with significant methodological components redacted. This compromise has satisfied neither side, and in the meantime, the World Health Organization (WHO) is planning to hold a summit on the issue. But a two-month research moratorium and a WHO summit are unlikely to be sufficient. WHO is the most logical arena for the discussion and could help diffuse criticism that the U.S. is dominating the debate. But massive funding shortfalls at the organization and the security risks at play could stymie their efforts. So while the doomsday scenario remains a fat tail risk, improved international coordination will likely remain challenging, as a diverse set of actors navigate mostly uncharted political and scientific territory.

Scott Rosenstein is a director in Eurasia Group’s global health practice.

Today, we turn to risk #5 in our series of posts on Eurasia Group's Top Risks for 2012 and answer the most common questions we've gotten about it.

Here's a summary:

North Korea: Implosion or explosion? North Korea recently became the world's first nuclear-­armed power without a clear leader, and competition and uncertainty within the ruling elite pose significant risks for East Asia in 2012. The secretive nature of the regime makes the likeliest threat -- belligerent military action or substantial domestic instability -- less predictable and much more worrisome.

Q- Is Kim Jong-Un really in charge in North Korea?

A- There's always been a clear limit on what outsiders know about how the North Korean elite makes decisions. That's still the case. But there are plenty of reasons to doubt that this political novice is fully in charge. He hasn't had much time to prepare for his new job. His grandfather Kim Il-sung brought his father, Kim Jong-Il, gradually into power over more than 20 years. Kim Jong-Il inherited the keys to the kingdom in 1994 at the age of 53. The preparation of 28-year-old Kim Jong-Un began only recently as it became apparent that Kim Jong-Il's health was failing.

For the moment, the regime appears stable. Kim Jong-­Il's family and entourage -- the so-­called guardians --look to have firm control of the ruling Korean Workers' Party and the Korean People's Army. The country's military continues to serve as guarantor of North Korea's baseline security. In the two years before his death, Kim Jong­-Il positioned his brother­-in-­law and the regime's previous number two, Jang Sung-­Taek, as regent for his son. Jang is believed to have strong personal ties with senior military officials, and he'll probably hold considerable power -- at least until Kim Jung-­Un can earn the confidence of the country's ruling elite. If Kim can't consolidate power, the guardians may push for another leader to ensure the survival of the regime. But for the moment, it's probably some combination of Kim Jong-Un's status, Jang Sung-­Taek's resourcefulness, and the military's authority that gives the regime whatever cohesion it now has.

Q- Why can't this arrangement last indefinitely?

A- The steady deterioration of North Korea's economy and infrastructure over several decades, particularly outside the capital, ensures that this new generation of leaders will have less political capital and a less sure popular mandate than their predecessors. Conflicts are likely to develop within the elite as rivals and factions compete behind the scenes for power and personal survival. There is evidence that, once he knew he was ill, Kim Jong-­Il tried to sideline as many as possible of his son's potential rivals. In fact, there were a suspicious number of fatal automobile accidents involving senior officials over the past two years -- all the more striking given how little traffic there is in the country. Some officials still in power probably wonder how long they can remain in favor and could move to protect themselves. It's also unclear what role Kim Kyung-­Hee, Kim Jong-­Il's sister and Jang Sung-­Taek's wife, might play in coming months.

Q- It seems clear that there's a threat of aggressive action from North Korea, since they've stirred up trouble many times before. There's also always the risk that the government will collapse. That could create a refugee crisis and a scramble for control of the country's nuclear weapons that draws in outside powers. But beyond 2012, what's the long-term risk for North Korea and its neighbors?

A- The DPRK has defied predictions of collapse for decades, mainly because China and South Korea have always been willing to bail the country out to avoid another war on the peninsula and to prevent North Koreans from starving. Yes, there is the risk that North Korea might use its nuclear capability. Even if it doesn't, its conventional arms are powerful enough to launch a horrendous attack on the South. This is also the scenario most likely to put U.S. and Chinese forces at odds with another and in the same arena.

But the longer-term problem is that, despite the efforts of outsiders to keep things going, North Korea will one day buckle beneath the weight of its contradictions, and an international debate will begin about who will pay to clean up the mess. Studies conducted over the years suggest that the reunification of North and South Korea will prove more complicated and far more expensive than the reunion of East and West Germany. Who will pay for it? Imagine the stresses on South Korea and its economy as 20 million North Koreans come in from the cold. Today this is hypothetical, but one day it will be a very real problem.

One of the most important lessons of last year's Arab world turmoil is that brittle authoritarian regimes can remain in place for a very long time with changes ongoing beneath the ice that outsiders don't see until cracks emerge. Anyone could have predicted that the governments of Tunisia, Egypt, Libya, Yemen, Bahrain and Syria were vulnerable, but no one could have seen that the desperate act of one Tunisian vegetable vendor broadcast across the Arab world would trigger a wave of revolutions.

Given North Korea's isolation and the regime's secrecy, the fall of North Korea might come even more abruptly.

Next up, dark clouds over Pakistan.

By Roberto Herrera-Lim

Secretary of State Hillary Clinton's visit to Myanmar this week was a public relations coup for that regime and for Western advocates of engagement. The New York Times featured a photo of Clinton smiling with freed opposition leader Aung San Suu Kyi, both clad in white. But while the visit and Myanmar's incremental reforms have ignited hopes that relations between that nation and the West could thaw considerably in the near term, some skepticism is appropriate regarding how quickly things will change. The regime will continue balancing reform with control, suggesting that progress will be slow and gradual. That will not stop the U.S. from offering diplomatic and administrative concessions to the new Burmese government, but in the absence of major reforms in the near term, Washington will be too consumed by other issues to take up what would be a contentious congressional debate on sanctions.

Myanmar's reform process began sometime in 2007 or 2008, possibly in the wake of the 2007 Saffron Revolution of Buddhist monks. Barack Obama's presidential win in late 2008 secured buy-in for that process within the military junta; the expectation was that the Obama administration would be more open to dialogue and engagement than previous U.S. administrations had been. Since then, President Thein Sein's government has begun implementing some of the country's most serious political reforms in a decade. It has allowed more open discussion of political and economic reform, suspended construction of a Chinese-funded dam due to the population's concerns about its environmental side effects, and -- most prominently -- freed Suu Kyi.

But only guarded optimism is warranted. First, the reforms being implemented are calculated moves, rather than signs of any wholesale embrace of democracy. The government -- which includes proxies of the former junta -- is unlikely to adopt reform for reform's sake, but instead as a means of soothing internal tensions and reducing external threats to the military. As such, the carefully planned changes can be read as a way for the government to maintain control and protect the aging, retired members of the former junta.

Second, Myanmar has a history of stalling or reversing reforms. In 2004, political infighting led to the ousting of the relatively reformist prime minister Khin Nyunt and stalled the "roadmap to democracy" with which Myanmar had hoped to establish credibility with Washington. (This setback followed the 2003 attack on Aung San Suu Kyi's convoy by armed groups suspected of acting on behalf of hardline military factions.) And several times -- in 1992, 2004, and 2005 -- former junta leader Than Shwe released political prisoners but followed up with nothing else. Similarly halting reform won't be enough for Washington, which will likely insist on major moves such as the release of most political prisoners, an end to the persecution of minorities, and free and fair elections in 2015 before lifting sanctions. While this may happen, it will take some time.

In the meantime, incremental reforms could keep improving the West's informal engagement, which might in turn reinforce the regime's good behavior. Suu Kyi, who was the most visible sign of the country's slide into authoritarian rule, will be a critical determinant of this diplomatic trajectory. Indeed, there will be no more important signals for Washington than those coming from her about the pace of Burmese reform and whether or not the time is right to lift sanctions.

Roberto Herrera-Lim is a director in Eurasia Group's Asia practice.

By Bob Herrera-Lim

The strong win by Pheu Thai (PT) Party representing the allies of former prime minister Thaksin Shinawatra at the July 3 parliamentary elections will allow the country to avoid any serious near-term instability. The incoming PT-led coalition government will have about 300 seats out of 500, which makes it much harder for anti-Thaksin groups to reduce the new government's majority, either through disqualifications or defections, and engineer a legal takeover as they did in 2008.

In the meantime, the military and the crown will pragmatically avoid any outright provocation or direct confrontation, a strategy the PT will also pursue. Army chief Prayuth Chan-ocha is strongly anti-Thaksin, but he cannot move without justification, such as a popular or political movement similar to large anti-Thaksin rallies in 2006. Prayuth will likely negotiate some near-term deal that avoids a major shuffle of military commanders and secures Thaksin's agreement not return to the country without proper legal proceedings.

The monarchy will be similarly constrained. The king appears disinterested in current politics, so it is the queen and Privy Council President Prem Tinsulanonda who will guide the monarchy's strategy. They too can only be effective if there is some "popular" movement that has effectively mobilized against the government. In the past, the Yellow Shirts (organized and financed by media mogul Sondhi Limthongkul) provided this momentum. But Sondhi's relationship with the military and the Bangkok elites has eroded significantly since 2008 when the Yellow Shirts blockaded the airport and precipitated a political crisis.

There has been some speculation that the PT's political agenda could provoke the military or the monarchy, but this risk remains relatively low. All signals indicate that the PT is aware of how any early and public attempt to secure Thaksin's return, or ban party dissolution could lead to an early and distracting political battle. Prime Minister-elect Yingluck Shinawatra was quick to emphasize national unity and deemphasize an immediate return by her brother. Laying the legal groundwork for his return, managing the political dynamics around it, and negotiating with the other elite factions will likely be done over the next few months behind the scenes. Constitutional change will also be pursued carefully to avoid triggering a similar fight.

Whether this temporary peace will lead to longer-term stability remains uncertain. The anti-Thaksin factions among the elites may now recognize that elections will sometimes deliver results they disagree with, but which they must respect. But they may instead maintain their belief that the popular vote is unreliable, that the electorate is susceptible to promises of economic largesse and populist rhetoric, and that when necessary the results must be overturned. The future of Thai democracy will be decided by the outcome of that decision.

Bob Herrera-Lim is a director with Eurasia Group's Asia practice.

By Roberto Herrera-Lim

Protestors depose an authoritarian leader. Crowds revel in the streets. Optimism is high. What we just saw in Egypt happened in the Philippines in 1986, when strongman Ferdinand Marcos was ushered out, and in Indonesia in 1998, after the ouster of former president Suharto. But years after shaking off their autocrats, both countries remain stifled by vested interests and corruption, and progress will continue to be glacial.

Last week, around the same time that the Internet activist Wael Ghonim was reinvigorating Egypt's protesters, a former Philippine defense secretary apparently shot himself, fatally, in the chest. The retired general was embroiled in a scandal involving kickbacks and alleged golden parachutes. Such turbulence is nothing new for the Philippines. Since 1986 the country has produced at least half a dozen coup attempts. Claims of election fraud and shady deal-making have been common and destabilizing.

In Indonesia, President Susilo Bambang Yudhoyono's reform efforts are stymied by fierce battles with Suharto-era politicians such as Aburizal Bakrie, one of the country's richest men and the leader of the opposition Golkar party. Yudhoyono lost his credible finance minister, Sri Mulyani Indrawati, after Golkar wrongly accused her of complicity in a supposedly mishandled bank bailout.

Both countries are better off than they were under despots. There is more freedom, and economic growth has enlarged their middle classes. But the sense of lost opportunity is palpable. The revolts that shook the Filipino and Indonesian political systems sidestepped and maybe even reinvigorated powerful economic and bureaucratic interests. After Marcos was forced out, new president Corazon Aquino simply gave the businesses that Marcos had seized back to her allies. And anyone attending the country's first senate session in 1987 might have done a double-take: The old but now wrinkled pre-Marcos oligarchy had returned. In Indonesia, the dynamics were essentially the same, although of the more recent Golkar vintage.

Growth and reform have come painfully slowly as a result. Investors complain of all types of corruption, from petty payoffs to interference in major deals, and citizens sometimes question whether the fight was worth it. In 2003, I met with Jose Almonte, a retired Filipino general who had participated in the revolt against Marcos and staunchly believed that the country should have a more level playing field. I asked him what unfinished reforms kept the country unstable, the military politicized, and economic growth uneven. He replied, "Too many to count."

Many Filipinos are frustrated with their country's incomplete transformation, but maybe there is hope. Computerized elections in 2010 significantly reduced questions about legitimacy. While President Benigno Aquino III is unlikely to target vested interests directly, his aim of improving regulation and tackling corruption could ultimately lead to stronger democratic institutions. In Indonesia, meanwhile, the battle between Yudhoyono and Golkar will intensify before the 2014 elections, limiting the scope for substantive policymaking. The real promise is after the elections, if Golkar's power diminishes and Yudhoyono's anti-corruption and reform programs take root. Then the last vestiges of Suharto's reign might finally take their bow.

Roberto Herrera-Lim is a Director in the Eurasia Group's Asia practice.

By Eurasia Group's Asia practice

Next in our series of regional outlooks is Asia, where most economies not named Japan are enjoying quicker and stronger recoveries than in other regions. Asian states have also gained new weight within the G-20 and the Bretton Woods institutions. But traditional strategic rivalries persist, and China's growing economic clout and North Korean belligerence are likely to generate most of the headlines in 2011.

Across the region, Chinese demand is a central driver of other countries' economic growth, and for many Asian countries, China is the top trade partner. In the coming year, China will boost its role at the center of a growing web of economic and financial connections that are gradually, but inexorably, integrating East Asia. Beijing will also strengthen its economic ties across South Asia, notably in Pakistan, Sri Lanka, Bangladesh, and even India, with a focus on investment in infrastructure. China-centric free trade agreements have proliferated. Beijing has also adopted its own standards in some areas of information and communications technology and will try to have them adopted internationally. China will continue to try to reshape the region's trade and investment architecture, largely on a pan-Asian basis and without the United States.

But Beijing's long-term strategic intentions inspire deep anxiety, and its foreign and defense policies have rattled its neighbors. Beijing will suffer consequences in 2011, as India, South Korea, Japan, Indonesia, Vietnam, Malaysia, Australia, and others strengthen their defense ties to the United States. Joint exercises, drills at sea, and weapons sales will periodically raise tensions. So too will trade conflicts, as debates over China's industrial policies at home and investments abroad mix commercial worries with national security fears.

Traditional geopolitical risks in Asia, including China-Japan and India-Pakistan frictions, should be manageable in 2011, but North Korea remains a wildcard. Pyongyang continues to make succession arrangements for an ailing Kim Jong-il, and the regime has used military action in the past to bolster its domestic legitimacy.

Further North Korean provocations are highly likely. We could see a third nuclear test in 2011, but additional conventional attacks would rattle markets with greater force. Significant military escalation is unlikely, however, unless Pyongyang strikes U.S. assets -- like ships participating in joint exercises -- or launches conventional strikes at peninsular South Korea. The former would prompt U.S. retaliation. The latter could lead to counterstrikes on peninsular North Korea, though an innately conservative Seoul will try to modulate its response to avoid an escalation of violence.  

This post was written by analysts in Eurasia Group's Asia practice.

Almost as soon as the midterm elections ended, President Barack Obama set off on a 10-day Asia swing. He's found friendly footing abroad so far: a receptive India looking for a general counterweight to China and a rapturous day in Indonesia, where Obama spent several formative years as a child. Next came a G20 summit hosted by South Korea, a strengthening U.S. ally, and then he'll hit Yokohama for an APEC summit and to commemorate the fiftieth anniversary of the U.S.-Japan alliance. But this happy-go-lucky itinerary doesn't even hint at an overarching foreign policy. Which got me thinking, is Obama ever going to come up with one?

Plenty of commercial and defense deals were delivered during the India visit, which shows how that relationship is improving. There were high hopes for a breakthrough in Seoul on the U.S.-Korea trade agreement, though that now seems unlikely (at least for now). The Japan visit should include broad agreement on Tokyo moving ahead (along with the United States) with a trans-Pacific partnership (TPP). But these are all small things.

What's the big picture?

I was thinking about this while listening to Undersecretary of State Bob Hormats around-the-world speech at the World Affairs Council in Washington last week. I couldn't help but compare it with a similar speech from Secretary of State Hillary Clinton a couple months before. They both talked about the necessity of focusing on issues of bilateral cooperation with China, on Japan as the lynchpin of U.S. policy in the region, on the necessity of promoting free trade, the determination to stay focused on fighting terrorism, and to continue to support democracies around the world. There was talk about not neglecting traditional U.S. allies in Europe. And then, at the end, both emphasized the need to maintain strong commitments with America's key allies in the Western hemisphere, Canada, and Mexico.

I also thought about a speech I had heard from then Secretary of State Colin Powell in 2005. How different were the speeches? How much had the basic precepts of U.S. foreign policy changed over the course of the last two administrations, and during the past five years? To be charitable, I'd say 2 percent. Maybe. Primarily, the difference is that Asia is now taking up a little more attention, Europe getting slightly shorter shrift. Yet in that same period of time, the world has clearly changed more than 2 percent.

I'd say the world has hit a decisive inflection point, even more profound than after the collapse of the Soviet Union. The fall of the wall produced a new global security balance, to be sure -- the United States emerged as the sole hegemon. But in terms of the global economic and policy order, the world basically moved from the G7 to the G7+1. And to be blunt, the +1 sped up the process of globalization, but it did not reflect a new world order. Once the financial crisis hit, by contrast, the G7+1 became the G20. And that, however unworkable, is indeed a completely new ordering principle. It means different types of countries and governments vying for influence, power, and preference on key issues of global governance-from trade to currency to the politics of austerity, on climate, and on conventional and cyber security.

Yet there's a stark disconnect between our drastically changed world and US foreign policymaking. Over the past few decades, foreign policy has been the preserve of presidents, successful or not (think about the Carter, Reagan, Clinton, and Bush "doctrines"). But two years and a Nobel Peace Prize into the Obama administration, there's no sign of an Obama doctrine. This U.S. president has handled foreign policy primarily by managing conflict as it arises (stepping in directly when absolutely required), and otherwise making small, incremental policy gains on fronts with momentum. Obama has shaped America's foreign policy apparatus accordingly, with a strong and relatively autonomous Secretary of State in Clinton, a series of senior, competent special envoys in the State Department to handle intractable, longstanding foreign concerns, and loyal but comparatively weak, non-strategic national security advisers (namely, Jim Jones and now Tom Donilon, who primarily serve to coordinate policy communication and untangle disputes, not to leverage the National Security Council as a mechanism for executive policymaking.

The biggest new idea that the Obama White House flirted with, albeit briefly, was the prospect of a G2 -- a notion that the new world order could be jointly managed by the United States and China. But that concept was essentially stillborn as the first efforts to realize it came to an embarrassing naught at the Copenhagen climate summit last December. Since then, U.S-.China relations have steadily deteriorated on most fronts. For the world at large, that means a growing disconnect on global architecture -- think Gondwanaland, inexorably splitting into continents while the old government still embraces a single state. But faster. 

Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations? 

By Roberto Herrera-Lim

The on-the-ground situation in Thailand is changing quickly at the moment, and unrest could persist for quite some time. Red shirts are building forts out of spears and rubber tires in the middle of Bangkok's commercial district. Anti-Thaksin yellow shirts are threatening to take back the streets. Multicolored shirts are demanding that the government take a tougher stand on the red shirts. But one thing's for sure: The key elites that have -- for better or worse -- dominated Thailand's political landscape appear to be as incoherent and uncoordinated as they have been in decades in dealing with the polarization in the streets. That's why, regardless of the near-term outcome of the current crisis, the prospects for long-term stability are weak.

The so-called red shirts, anti-government demonstrators who support former Prime Minister Thaksin Shinawatra, now in exile, have occupied parts of Bangkok for the past 25 days. Clashes between protesters and security forces have so far killed at least 26 people and injured more than 1,000. Their numbers have dropped in recent days, though some red shirts in the countryside have reportedly removed their colors to pass undetected through military checkpoints as they enter the capital looking for a fight. The protesters have demanded early elections; the government has refused. In short, the government is close to a point of no return.

King Bhumibol Adulyadej offered the clearest signal yet on Monday that Thailand stands perilously close to serious bloodshed. With his first public comment on the unrest that has plagued his country for the past month, the ailing 82-year old monarch appeared briefly on national television to call on a group of the country's judges to "do the right thing" in maintaining law and order. The monarchy has been deliberately vague in the past, to fulfill its perceived role of guiding the country while maintaining an apolitical stance. Unfortunately, the long-awaited message from the king did not directly address the protests themselves, a sign perhaps that the monarch, hospitalized for the past seven months, fears he no longer has the clout to back the red shirts down.

Meanwhile, the military leadership, while still nominally on the side of the government, has hemmed and hawed on how to best deal with the protesters on the streets, maybe a sign of some hesitation on the part of army commander Anupong Paochinda to take responsibility for what will likely be a bloody crackdown so near his September retirement. It also reflects some doubt on the part of senior commanders on whether the lower ranks will hold in the worst case scenarios; talk of watermelon soldiers ("green on the outside, red on the inside") is rife. For this reason, Anupong may be trying to hold off some of his more conservative deputies, who believe that Thaksin, and by extension the red shirts, should be removed from any political equation.

Prime Minister Abhisit Vejjajiva, British-born and Oxford-educated, has raised alarms of "terrorist behavior" by the red shirt protesters, and wielded the royalist flag by claiming that the current crisis involves a "plot to overthrow the monarchy." Normally, the test for a leader hit by a crisis that, on its face, has the support of significant segments of the population, would test his mandate through elections, rather than revert to bogeymen.

And finally Bangkok may no longer be the elite's stronghold. Some local residents have taken to the streets, many under cover of darkness, to give aid and comfort to the red shirts.

Ominously, the government's warnings are based on assumptions that the old relationships will work, and that the key players can deliver the government from the red shirts, either by outlasting them or beating them back. Maybe the government's strategy will work. If the king's call for calm can help restore order, as it did during anti-establishment protests in 1973 and 1992, serious bloodshed can be avoided. Or the red shirts, many of them poor, will fade away as their resources wane. His government might then survive another few months, but the divisions will remain, and the center of power will continue to fray. In this case, the red shirts will simply return to fight another day, and the next protest, the next round of volatility, will only be a matter of time.

Roberto Herrera-Lim is an Asia analyst at Eurasia Group.