Note: Today is the seventh in a series of posts that detail Eurasia Group's Top Risks for 2013

East Asia's geopolitical stability will continue to deteriorate this year. Countries such as the Philippines, Vietnam, and Japan will take tougher stances on territorial disputes with China and seek to involve Washington more closely in these issues. But China's new government will find it difficult to compromise and may even take more forceful positions given its need to consolidate internal support and channel growing nationalism. Meanwhile, the US will continue to enhance engagement with Asian partners -- particularly on the economic side -- which will raise skepticism in Beijing.

The most worrying concern during the early part of 2013 will be the Senkaku/Diaoyu islands, claimed by both China and Japan. Tensions surrounding the islands spiked in late 2012 following the Japanese central government's decision to purchase several of them from their private owners. The growing presence of Chinese ships and aircraft in surrounding waters is stoking nationalist sentiments in Japan and increasing the risk of a clash that could quickly escalate and ensnare the world's three biggest economies in an ugly dispute.

In 2013, regional governments will lean toward political considerations more than economic ones. In Japan, a new government led by the Liberal Democratic Party (LDP) Prime Minister Shinzo Abe will become more assertive on foreign policy issues. The LDP was able to capitalize on nationalist sentiments in its campaign, and Abe will carry through with some of his promises in 2013 by establishing a more assertive national security and foreign policy posture. Abe will also bolster the U.S.-Japan security alliance and likely commit Japan to joining the Trans-Pacific Partnership (TPP) negotiations. China will regard such moves as confrontational.

Meanwhile, Beijing's appetite for compromise will be limited. China's political transition will make it more difficult for Beijing to be flexible on foreign policy issues. The country's new leaders will need to consolidate internal support. Moreover, growing middle-class expectations and concern over the state's control of information are expected to encourage a more nationalistic foreign policy. If Beijing faces a foreign policy test, the incoming administration might feel the need to demonstrate its foreign policy mettle and avoid being seen as capitulating to outside interests.

Policies toward Asia from the U.S. will not change much: The rebalancing of its attention toward the region will continue, with more substance on the economic than on the strategic side. In particular Washington's trade negotiators will focus on negotiations for the TPP talks.

The South China Sea will be another hotspot. There has been relatively little tension there in recent months, but that calm is unlikely to continue. Vietnam and the Philippines, in particular, will maintain their aggressive postures toward China. Neither country has an interest in provoking a military conflict, but domestic politics make it difficult to back down without a perceived (even if minor) but unlikely concession from Beijing.

Later this week, we'll profile Risk #8: Iran

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 Ayham Kamel

It may be tempting to view the plethora of recent gatherings -- the Arab League summit, the U.S.-Gulf Cooperation Council Strategic Cooperation Forum, and the Friends of Syria conference -- as evidence that the global community is getting more serious about addressing the violence in Syria. But the summits really just exposed the rifts among the relevant players that will prevent a viable and coordinated response. Syrian President Bashar al Assad, in turn, will profit from the lack of coherence; he will only nominally entertain Kofi Annan's peace plan as he maintains his grip on power, and the bloodshed will worsen.

International powers remain hesitant regarding any form of direct intervention. They considered initiatives calling for buffer or humanitarian zones, but ultimately no country seems prepared to act. Key powers appear to be pursuing their distinct policies, with only a hint of coordination.

Saudi Arabia and Qatar will provide extensive support -- including arms -- to the Syrian opposition, but are unlikely to supply the heavy arms that would lead to an immediate change in the balance of power. Heavy arms are more difficult to smuggle and training rebels would be much more challenging than during the Libyan conflict. Moreover, the escalation could provoke an un-calculated response from Assad's military. While their interests differ, the two powers see Assad's survival as a threat to their influence. Riyadh's purpose is to limit Iran's regional influence. Meanwhile, Doha has invested significant diplomatic and political capital in the struggle against Assad and any failure to deliver would represent a tangible setback to its prestige. Behind the armament policy is also a deep concern that if Assad regains control, Damascus and Tehran would aim to destabilize the al Saud and al Thani ruling families' grip on power.

Arming the rebels, who have had trouble obtaining ammunition sine the regime began its extensive military campaign in early February, will provide much needed psychological support and will help weaken Assad's forces. While the resolve of Syria's opposition will not abate, arms from the Gulf will neither arrive overnight nor will they immediately change the balance of military power, which is still heavily tilted in the regime's favor. An equally important element of the Gulf strategy is providing monetary incentives to officers in the Syrian army to incite defections. But Assad has built multiple safeguards to prevent defections, a tactic he inherited from his father.

The U.S. is willing to overlook, perhaps even support, GCC efforts to weaken Assad. But Washington is definitely not interested in playing an active role. It is concerned about Saudi Arabia's and Lebanon's support of Salafist rebels and al Qaeda leader Ayman al Zawahiri's call for jihad in Syria. While Sunni monarchies in the Gulf benefit from rising sectarianism in Syria, the U.S. interest in long-term regional stability could be compromised if the Sunni-Shia confrontations spread to Iraq and other countries. U.S. officials believe that a political settlement will be needed to prevent prolonged instability. Verbal support for the Annan process is a reflection of the desire to keep negotiations open, but U.S. officials are convinced that under current conditions the Annan plan will only enable Assad to retain power.

Assad will probably not implement key elements of the Annan peace plan, which calls for a halt of hostilities from all sides, and a negotiated settlement between the regime and the opposition. The regime views cooperation with the UN envoy as a way to secure the successes achieved by its military strategy and to gain some breathing space. While Annan is a shrewd diplomat, there are few reasons to think that success is in reach. Syria's opposition will probably not negotiate with Assad or agree to a settlement that keeps him in power. Meanwhile, there are no indications that the Lion of Damascus has reached a point where he would accept his own ouster.

Ayham Kamel is an analyst in Eurasia Group's Middle East and North Africa practice.

Today, The Call presents our top risks for 2012. Click HERE for Eurasia Group's complete report.

1. The End of the 9/11 Era -- It was a truism of globalization: economics drives markets, and national security drives geopolitics. No longer. Following the 2008 financial crisis, the killing of Osama bin Laden, the withdrawal of U.S. troops from Iraq, and an end date for the war in Afghanistan, politics and economics will overlap almost entirely in 2012. Political officials around the world will worry mainly over economic risks -- the eurozone crisis, the strength of U.S. recovery, and China's evolving role in the global economy in 2012. Market players, in turn, are anxious mainly about political decisions, especially those that will be made in Europe, America, and China this year, as shortsighted leadership from virtually all the major geopolitical players generates policy stalemate and uncertainty.

2. G-Zero and the Middle East -- The inability/unwillingness of major powers to bolster the region's balance of force will generate greater turbulence across North Africa and the Middle East as unresolved religious, sectarian, and ethnic tensions threaten more unrest. The lack of a viable regional security framework, continuing protests, autocracies at risk, and enormous challenges facing newly democratic regimes will add to the potential turmoil. As this dynamic plays out in Syria, Egypt, Iraq, Libya, Yemen and Bahrain, regional heavyweights -- Saudi Arabia, Iran, and Turkey -- will generate friction as they vie for proxy influence.

3. Eurozone: the rollercoaster ride rolls on -- In Europe, it's not the breakup of the Eurozone we need to fear in 2012 but the "reactive incrementalism" that could spin beyond the control of political officials. The uncertainty and volatility we saw in 2011 has only just begun.

4. United States: right after elections -- Once the votes are counted in November, lawmakers will take up the $5 trillion worth of tax and savings decisions that must be taken in the final nine weeks of the year. Investors face uncertainty about their taxes and government contracts as well as about the broader impact of lawmakers' choices on economic growth.

5. North Korea: implosion or explosion -- The world's most opaque nuclear-armed state enters a year of uncertainty as the battle for power and influence within the regime gathers force.

6 - Pakistan: turmoil, spillover -- The end of the 9/11 era threatens neglect of other hotspots, and none is more combustible than Pakistan, a terrorism-plagued, nuclear-armed power burdened with an unpopular civilian government, a meddlesome military, politically motivated judges and an increasingly dangerous security environment. The expected withdrawal of thousands of U.S. troops from Afghanistan this year will fuel regional competition for new influence.

7. China: trouble in the neighborhood -- The Obama administration's recent emphasis on Asia will embolden China's neighbors to take more assertive positions with Beijing. Rising nationalism in China, its ongoing political transition, and the leadership's unwillingness -- perhaps inability -- to resolve internal debates about the country's role in the world suggest Beijing is especially likely to meet provocation with provocation in months to come with both naval and economic muscle.

8. Egypt: a transition in trouble -- Egypt faces the risk of political disintegration this year as anger builds between military and civilian political forces, both Islamist and secular. Egypt's base-line stability, its economic recovery, and its broader regional influence will suffer.

9. South Africa: populism ascendant -- The struggle for leadership of the ruling African National Congress will slow the pace of both policy and economic growth at a time when the eurozone crisis already weighs heavily on South Africa's trade and currency.

10. Venezuela: a no-win election -- The country's big political story this year is October's presidential election, which incumbent Hugo Chavez, if healthy enough for a vigorous campaign, is likely to narrowly win. But the outlook for economic and political stability is bad no matter the election result. Should Chavez die or abandon the race, the deep fissures between the Chavista movement and the opposition could stoke violence.   

In addition, Eurasia Group identifies four red herrings, the big stories we don't believe will happen in 2012.

Fallout from the 2012 political transitions -- In 2012, we'll see political transitions in the U.S., China, Russia, and France, countries that together represent nearly half of global GDP and four-fifths of the UN Security Council. But there's surprisingly little at stake in the outcomes for geopolitics and the global economy.

Eurozone breakup -- This is probably the single most overrated risk of 2012. The political will to maintain the eurozone remains strong among all the major political parties in the core Eurozone states, almost across the board in the European periphery and, just as importantly, among eurocrats in the ever-growing European bureaucracy. And there's no effective political mechanism for a Eurozone breakup.

China's hard landing -- There are signs of overheated growth in China, but the state has the tools and resources to manage short-term trouble, and it will pull out every stop to prevent a serious slowdown, especially during a major political transition.

Mayan apocalypse -- Just isn't happening. And if it does, well, sorry.

Over the next three weeks, we'll be posting more ideas and information on each of these risks.

Reading Ian Bremmer's post below on the idiosyncrasies of Kim Jong-Il and Saparmurat Niyazov, I'm reminded that one of the toughest challenges for any analyst of politics is in predicting how an individual leader will make a particular decision. It's especially dangerous to assume that the president, prime minister, great dictator or "dear leader" sees his available options as we see them -- and that the key to accurately forecasting his choice is simply to find the most rational solution to his problem. He's not us, and we're not him. It's also dangerous to dismiss certain leaders as "madmen" whenever they surprise us and take some action that undermines our interpretation of their interests.

Six months ago, my friend Geoff Porter and I wrote a piece on Muammar al-Qaddafi. In it, we argued that the Libyan leader loves to spring surprises, but that his political calculations are not as crazy as they appear. Similar arguments can be made for Kim Jong-Il and Mahmoud Ahmadinejad -- though the Iranian president made things a little tougher this week with a broadside attack on Paul the World Cup prognosticating octopus.

But what to make of Venezuelan President Hugo Chávez's recent decision to exhume the remains of Simón Bolívar, the revolutionary giant credited with liberating Venezuela, Colombia, Panama, Peru, Ecuador and Bolivia from Spanish imperial rule? Conventional wisdom among historians is that tuberculosis killed Bolívar in 1830. But three years ago, not long after losing a public referendum he expected to win, Chávez began claiming that his hero had been murdered by a Colombian rival. Chávez ordered the exhumation to verify that the body buried in Bolívar's grave is in fact Bolívar, to run tests to determine the great man's true cause of death, and to rebury him among people of whom Chávez has a higher opinion.

Some say Chávez is simply manufacturing a murder mystery to divert public attention from Venezuela's deteriorating economy. True, things are bad. In the first quarter of 2010, Venezuela's economy contracted by 5.8 percent. Earthquake-ravaged Haiti is the only other country in the Western hemisphere to see its economy shrink so far this year. National oil company Petróleos de Venezuela (PDVSA) produces virtually all of the country's export revenue. The country's cash cow helped Venezuela produce 3.3 million barrels of oil per day (bpd) in 2001. But a massive strike in 2002, the firings of thousands of PDVSA employees that followed, and the president's habit of milking the company for extra revenue have taken a toll. The government claims that it still produces 3 million bpd. Some experts claim the number is closer to 2.6 million. OPEC says Venezuela is now producing closer to 2.3 million.

In June, inflation hit 31.2 percent year on year. Venezuela imports nearly three quarters of its food, but shortages of basic foodstuffs in state-run grocery stores have eroded Chávez's popularity. A scandal erupted this spring when officials discovered tens of thousands of tons of imported food that had been abandoned to rot in state-run warehouses.

In other words, Chávez has plenty of reasons to create a diversion.

It's also true that no one does political theatre like Venezuela's president. The honor guard in blue gloves and white biohazard suits opening Bolívar's coffin made for unforgettable (official state) television. Anyone who missed the moment (and speaks Spanish) can relive the magic by reading President Chávez's live tweets from the event. 

But history suggests it would be a mistake to overestimate Chávez's sanity when it comes to Simón Bolívar. He has renamed the country the Bolivarian Republic of Venezuela and refers to his political agenda as the Bolivarian Revolution. He has been known to punctuate public speeches with his hero's jewel-encrusted solid gold saber. Some have accused Chávez of believing he is the reincarnation of his hero.

That's not fair. In their biography of Chávez, authors Cristina Marcano and Alberto Barrera Tyszka recount an interesting story of how this mistake was corrected in the past. During the two years that Chávez spent in prison following a failed coup attempt in 1992, a former cellmate recounted a particularly memorable night of smuggled rum, kahlua and tobacco. Chávez "began to tremble and speak like an old man," the witness remembered. Addressed as the ghost of General Bolívar, Chávez replied, "No, I'm not General Bolívar. Don't flatter me." When another inmate guessed that Chávez might be inhabited by the spirit of his great grandfather General Pedro Perez Delgado, Chávez replied "That's right my son, here I am."

Maybe it never happened. Most of the witnesses who served as sources for this story are former allies who are no longer on Chávez's Christmas list -- though a key source mentioned by name in the account is now deputy foreign minister. It does seem to fit the profile that has emerged over the years of a megalomaniacal leader who believes he must fight American colonialism just as Bolívar fought Spanish imperialists -- a man who sometimes leaps across the boundary separating fantasy from reality.

In other words, to forecast what one individual might do, we have to account for every possibility -- including that, on some subjects, the man we're studying might be just a little nutty.

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

The 11 people arrested and accused of spying for Russia have titillated the tabloids and reminded Cold War veterans of the good old days. But they won't do much damage to U.S.-Russian relations. In fact, the two governments are getting along much better at the moment. There are three major reasons for this, and all of them have to do with the view from the Kremlin.

First, Russia's recently ailing economy is now feeling much better. The financial crisis inflicted more damage on Russia than on most other emerging markets, in part because of a steep drop in oil prices. When Obama first proposed a "reset" in U.S.-Russian relations, Moscow was hemorrhaging reserves, and Kremlin officials hadn't arrived at any clear idea on what to do about it. Prime Minister Vladimir Putin was traveling the country assuring local workers that complacent oligarchs, not state officials, were to blame for the volatility, and that their government would ensure that all would again be well. President Dmitry Medvedev and his more western-oriented advisors were beginning to look like convenient scapegoats should the public become restive and Putin run out of businessmen to punish.

Things have changed. The economy has picked up thanks to some skillful economic management and a rise in oil prices out of the danger zone.

Second, Russia is feeling much better about its neighborhood. The Orange Revolution is now a distant memory. In 2004, a presidential election in Ukraine lifted the Putin-endorsed Viktor Yanukovych over Viktor Yushchenko. But Ukrainian nationalists and several Western governments charged fraud, and the race was re-run. Yushchenko won the do-over, fueling suspicion and hostility in Moscow. But his leadership earned little public confidence during his five-year tenure, and Ukraine's latest election elevated Yanukovych, who has now taken his country's bid to join NATO off the table for the foreseeable future.

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