Today, The Call presents our top risks for 2013. Click HERE for Eurasia Group's complete report.

1. Emerging markets -- The era of emerging market abundance is finished. As the United States and Europe slowly regain their economic footing, the political risk focus will return to the emerging market world, where differences among the largest players will become more obvious. Slower growth and rising expectations from larger and more demanding middle classes will create public pressure on governments, meaning that emerging markets -- including the increasingly suspect BRICs -- should no longer be treated as an asset class for outsized growth. Consideration instead should shift toward which developing country governments have enough political capital to remain on track to a more advanced stage of development.

2. China vs. information -- China's new leadership faces many challenges in 2013, most importantly the state's growing inability to control the flow of ideas and information across borders and within the country. Until now Beijing has been largely effective in isolating online discourse to focus on discrete issues without culminating in real challenges to the government's decision-making or policy. But every corruption scandal and example of official malfeasance makes the next event more difficult to navigate, and the risk is that a broad-based social movement for change will gain momentum in China in 2013, distracting the government from its domestic and foreign policy priorities and potentially weakening investor confidence in the stability of the mainland market.

3. Arab Summer -- We are far beyond the Arab Spring, and an Arab Winter, where dictators rebound and consolidate power, has not materialized. Instead we are approaching an Arab Summer, whereby the region will witness radicalized movements -- both sectarian and Islamist -- playing a much more important role. As outside powers look to avoid direct involvement in the region's risks, local powers -- Iran, Turkey, Saudi Arabia and others -- will compete for influence and play out their rivalries. At the center of this lies Syria, whose civil war now has implications that extend far beyond the humanitarian. Syria has become a proxy conflict for Shiite and Sunni powers, as well as a magnet for jihadists, increasing the geopolitical risk overall and sparking further insecurity throughout the region, most notably in Iraq, Jordan, and Turkey.

4. United States -- Every silver lining has a dark cloud. While the fiscal cliff was averted, the process by which the deal was reached casts a large shadow over hopes that the election might create a more conducive environment for cooperation, and dysfunctional American politics will weigh on both the U.S. economic recovery and President Obama's legislative agenda. This is not about a politically induced new recession, let alone a major financial crisis. But political uncertainty over corporate taxes and a series of noisy brinkmanship episodes will generate a modest but real drag on growth.

5. JIBs (Japan, Israel, Britain) -- These are the three current global trends that matter most: China is rising, the Middle East is exploding, and Europe is muddling through. Set against a G-zero backdrop, the structural losers of these trends are the JIBs (Japan, Israel and Britain): countries influenced most directly and problematically by changes now underway in the geopolitical order. All three countries are now in a similar position for three reasons: their special relationships with the United States are no longer quite as important; they sit just outside the major geopolitical changes underway, without the means to play a constructive role; and key domestic constraints in all three countries (political, social, historic, and otherwise) make it particularly difficult for them to respond effectively to the challenges posed by a shifting global order.

6. Europe -- There will be no grand implosion, but the muddle-through approach to crisis management carries risks of its own. The eurozone is headed for neither breakup nor resolution, and in 2013 the risks shift from a threat of financial crisis to a loss of momentum in creating the institutional and policy frameworks for a redesigned union. The weak economic outlook and the politics of crisis-fighting will also remain sources of uncertainty. Simultaneously, euro-skepticism is on the rise and resistance to reforms is increasing in the face of protracted austerity and few prospects for an economic turnaround.

7. Asian geopolitics -- In 2013, geopolitical risk will continue growing in East Asia in a new and potentially more dangerous way. Facing increased nationalism in China and Japan, the United States will look to play a larger role, giving oxygen to the hedging strategies of many regional states seeking closer American ties. Territorial disputes over the East China and South China Seas will also create new friction, and at risk overall is East Asia's decades-long distinction as a zone where positive-sum commerce and economics trumps zero-sum geopolitical tension.

8. Iran -- The significant risk in Iran this year is not the one everyone's thinking about. A strike on the country's nuclear program is unlikely, but biting sanctions, other forms of international pressure, and leadership tensions make Iran less predictable and heighten the stakes of an ongoing shadow conflict with Israel and the United States -- one with the potential to rattle markets and put upward pressure on oil prices.

9. India -- India in 2013 will be one of the prime examples of the intrusion of political factors into what had until recently been seen as a long-term economic success story. The country's dysfunctional politics and looming elections feed the risk of an economic shock, and in 2013 the ability of the government to implement robust economic policies will decline even further, perpetuating India's "stalling or falling" outlook.

10. South Africa -- In aggregate growth terms, Africa as a whole looks to be on a trajectory to continue its recent position of positive performance. But in South Africa -- one of the continent's largest and most sophisticated economies -- the outlook is far less rosy. Populism, spearheaded by the ruling ANC party, is on the rise, and it is hard to see any real movement on labor, education, and budgetary reforms. Coming retrenchments in mining will almost certainly spur another bout of labor unrest, which has the potential to spread into other sectors as well. Taken together, all these factors increase the risk of further credit downgrades.

In addition to these, Eurasia Group's red herrings for 2013 include:

The geopolitics of energy -- 2013 isn't the year to get overly concerned about geopolitical risk spiking energy prices. For one thing, most of the Middle East risk in the coming year isn't about energy -- it's about everything else -- and the energy revolution happening in the Western Hemisphere will be a boon for consumers across the globe. 

Global protectionism -- The G-20 can afford to agree on protectionism because there's less of a threat here than meets the eye. The trend in fact is toward hints of competitive trade liberalization, especially within the European Union, which is generating a strong internal consensus on the need for a new major transatlantic economic cooperation package.

Radicalism in the developed world -- Many fear the growing gap between rich and poor will instigate class warfare and cause significant instability across the developed world. We think not. For much the same reason that emerging markets are the top risk this year, it's the underlying stability of advanced industrialized democracies that will come through in 2013.

European separatism -- There is no doubt that there are very real separatist pressures building in Catalonia and in Scotland, and national unity remains fragile in Belgium. However -- as much as we all would love to watch Barca field its own team in the World Cup -- there is almost no chance that any of these issues will grow into an actual crisis leading to separation in 2013.

? - North Korea -- Sometimes, you just can't know what's happening, and with North Korea in 2013 that's really the case. In the face of a sudden leadership transition in the world's most totalitarian state -- now run by an untested 28-year-old -- it's almost impossible to assess whether North Korea is becoming more stable. All signs point to the country remaining a perilous bet, but what causes trouble and when? It's hard not to lose sleep over it, but at the same time working harder to assess what exactly is going bump in the night doesn't feel very purposeful. Sorry.

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

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. "Al Qaeda 3.0: Terrorism's Emergent New Power Bases"
Bruce Riedel, The Daily Beast

In a world where international governance is breaking down, leaders are focused more on domestic than on foreign policy challenges. This trend extends to al Qaeda, an organization transitioning from global to local goals.

2. "India's African ‘Safari'"
Sudha Ramachandran, The Diplomat

We hear a lot about the US and China's conflicting investment approaches in Africa, but there's precious little written on Africa's fourth largest trading partner: India. With trade increasing by a factor of 17 over the last decade, India-Africa relations are becoming much more interesting. 

3. "How Crash Cover-Up Altered China's Succession"
Jonathan Ansfield, New York Times

How will Beijing's leadership manage the challenges that come with an era of more open information? What will the rest of us learn about the Chinese leadership's taste in cars, clothes and once-hidden power politics?

4. "Merkel's mastery of politics"
Michael Fry, The Scotsman

Is Angela Merkel the most talented politician in the world?  Her domestic political tactics shed light on her policies with regard to the Eurozone and beyond. 

5. "A free-trade agreement with Europe?"
David Ignatius, The Washington Post

Though still on the drawing board, the Trans-Pacific Partnership has far-reaching security and economic implications for North America and the Asia Pacific region.  Progress on an Atlantic equivalent seems beyond the horizon. But is an ‘economic NATO' already in the planning stages? 

6. "The mother of all worst-case assumptions about Iran"
Stephen M. Walt, Foreign Policy

Would a nuclear Iran carry "shattering geopolitical significance?" This piece overstates its case at times, but it's a question that demands consideration.

The Weekly Bonus:

"Floating Housing (And Golf Courses) For Post-Climate-Change Island Paradises"
Co.EXIST blog, Fast Company

In a G-Zero world, don't expect political leaders to tackle climate change. An ineffectual climate summit meeting in Doha this week makes that all the more obvious.  If climate change continues unabated, the Maldives will end up underwater.  The government knows it, hosting a cabinet meeting on the ocean floor in full scuba gear in 2009, and inquiring about land purchases abroad. But even the most daunting risks come with opportunities, however whimsical they may seem.

By Ayham Kamel

Iranian leaders believe more and more that Western and Arab involvement in the uprising against Syrian President Bashar al Assad is designed to weaken the Islamic Republic. Tehran feels threatened by the so-called Sunni Triangle's (Turkey, Qatar, and Saudi Arabia) support for Syrian rebels, which Iran views as a complement to sanctions that aim to limit its regional influence and prestige. The United States's alliance with these countries makes it more difficult to resolve any disagreements over Syria. In this context, Iran finds supporting Assad -- at least in the near term -- as the best worst option. This policy isn't new, but the parameters of what Tehran is willing to provide have expanded.

The audacious bombing of the National Security Council in Damascus on 18 July probably represented a watershed moment in Iranian thinking about the uprising in Syria. The "nuclear" option, dispatching units of the Iranian Revolutionary Guard Corps to assist Assad's weakened forces, is very unlikely -- it would likely trigger a so-called Chapter 7 UN resolution authorizing Western military intervention or provide enough impetus to inspire a coalition of the willing. But Tehran, now more than ever, is willing to do more to help Syria's embattled president.

First, the Iranian regime is likely to divert perhaps tens of millions of euros to help Assad counteract the flight of foreign reserves. It views support of Assad as important enough to justify the diversion of scarce reserves despite the increasing domestic economic pain caused by international sanctions. Second, Iran is likely to boost its provisions of arms and intelligence to the Assad regime. It has so far been reluctant to provide a large amount of support out of fear that doing so would play into the Syrian opposition's efforts to divide the regime's base on sectarian grounds. As the threat to the Assad regime has grown, that calculus has changed. Finally, Hezbollah forces have a great deal of fighting experience that would be valuable to Assad. However, the regime will likely dispatch them in a covert manner to avoid destabilizing the Lebanese government.

Iran, for now, may have an unrealistic view of Assad's chances of staying in power, and of its own ability to influence the outcome. It is likely that Iran will eventually reduce or eliminate its assistance to Assad as the latter's position grows increasingly untenable. Biting sanctions, declining oil revenues, rampant inflation, and dwindling foreign reserves will force Iran to focus internally. In the long run, the Islamic Republic will not be able to afford supporting a sinking Syrian regime either financially or diplomatically.

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

By Cliff Kupchan

News that Tehran is reportedly planning to deploy faster centrifuges at a hardened site and intends to triple production of highly enriched uranium increases somewhat the risk of Israeli strikes, if Iran can follow through. If these steps are successfully implemented, Iran would have the ability to make a nuclear weapon more quickly. However, Tehran frequently overstates its capabilities, and the degree of looming threat is uncertain. Observers will need to watch future International Atomic Energy Agency (IAEA) statements carefully.

If Iran places both advanced generation machines and a large stockpile of 19.75 percent uranium at the hardened Fordo site near Qom, the threat of dash to a bomb would significantly increase. Even using very conservative assumptions, Iran could make a bomb in 12-18 months, depending on how many advanced machines are deployed, their efficiency, and other factors. The possibility that Fordo may not be vulnerable to air strikes increases the chance an Iranian breakout could succeed.

There are doubts, however. First, Iran's ability to make and operate advanced machines that work well, individually and in cascades, is uncertain. Second, Iran may not have enough component material to make large numbers of advanced machines.

Several explanations are possible for why Iran is, rhetorically at least, again emphasizing its nuclear program. Supreme Leader Ali Khamenei may now feel the need to boost the regime's domestic legitimacy and international influence, for two reasons. The Iranian regime is concerned about the effect of Syrian President Bashar Assad's possible fall on its regional clout, and may seek to augment that clout through progress on the nuclear program. In addition, Khamenei faces the prospect of a low turnout from a disaffected population at parliamentary and presidential elections in 2012 and 2013, and could be seeking to preempt a loss of legitimacy through nuclear advances. Finally, Iran may have made at least enough progress on advanced centrifuges to deploy two cascades and reap the political benefits of doing so.

The central question is how quickly Iran is able to move forward. Several signposts in quarterly IAEA reports will be telling. The reports will reveal how quickly Iran deploys the two test cascades and then how quickly, in what quantity, and with what efficiency Tehran deploys these machines at Fordo. Finally, these documents will provide information about how much 19.75% material is being accumulated.

The chance of Israeli strikes remains now very low for now, as Israel has been pleased with the effect of covert action and sanctions. But Israeli officials have revealed increasing concern over these issues. Progress by Iran on the above agenda will increase the chance of strikes; movement of advanced centrifuges into Fordo would be especially provocative. Unless Israel believes it could successfully attack the hardened site, it will face a very tough decision point. This more dangerous scenario would very likely rattle markets.

Cliff Kupchan is a director with Eurasia Group's Middle East practice

By David Gordon and Cliff Kupchan

"You don't want a messianic apocalyptic cult controlling atomic bombs," Israeli Prime Minister Benjamin Netanyahu told a journalist in 2009, in reference to Iran's nuclear program. He wasn't the first or last Israeli official to use such inflammatory rhetoric. References to Iran as an existential threat or to the country's nuclear program as raising the specter of another Holocaust have been typical among Israeli officials. But on a recent research trip to Israel, we heard surprisingly little anxiety. No official spoke about a threshold beyond which Iran's program would be unstoppable -- a deadline that in the past was always one year off. And elites across the political spectrum for now favor sanctions and covert action, rather than military force, to deter Iran. As a result, the chance of Israeli strikes in the next eighteen months is very low.

So what accounts for the sea-change in the Israeli approach? Success, essentially. Iranian officials have claimed that successive rounds of international sanctions have benefitted the country by forcing it to adopt necessary economic reforms. But top Israeli officials stressed to us that sanctions are crippling Iran's economy and sparking debate about nuclear policy among the ruling elite. Likewise, the triumph of the Stuxnet computer worm -- credited with destroying 1,000 Iranian centrifuges and widely believed (though not confirmed) to be an American-Israeli creation -- and possibly other covert measures have encouraged Israeli policymakers. While officials wouldn't talk in detail, they said that Iran's nuclear program has been slowed.

Buying time is an important reason to stick with sanctions and covert action. For one, as the repercussions of ever harsher sanctions sink in, Tehran may be forced to make concessions at the negotiating table. Second, in the wake of Stuxnet, Israel is probably more optimistic about its ability to impair Iran's nuclear program over the long term. Third, an extended time horizon opens the door for domestically induced regime change in Iran -- a remote but real possibility that bears monitoring as disaffected crowds again take to the streets of Tehran.

There's probably also a public relations angle to Israel's transformed rhetoric. As some sources noted, breathless statements about existential threats and points of no return likely strengthened Iran's hand, both diplomatically and publicly. Moreover, Israeli public opinion has turned its gaze elsewhere, to what it considers the more imminent threats of Gaza, Lebanon, and Egypt.

It would be wrong to read the shift in the Israeli approach as a rejection of military action, though. While no sitting politician said so, there is a widespread belief among the country's elite that the government still considers force a viable option: Netanyahu would not stomach a nuclear Iran. But unless sanctions and covert action lose their credibility in the eyes of this (or a similarly inclined) Israeli government, strikes in the next year and a half will remain unlikely.

David Gordon is head of research at Eurasia Group. Cliff Kupchan is director of the firm's Eurasia practice.

By Hani Sabra

When James Fallon and I wrote about Lebanon last month, domestic tension was rising over the possibility that the international tribunal set up to prosecute the assassins of former prime minister Rafiq Hariri looked set to indict members of Hezbollah, Lebanon's most powerful military force. The tribunal hasn't issued indictments yet, but things have gotten a lot more complicated. As in the past, trouble in the region could fuel trouble inside Lebanon, but regional collaboration could help head off a political crisis inside the country.

For years, and especially after Hariri's assassination in February 2005, Saudi Arabia antagonized Syria, a key ally of the Saudis' primary regional rival Iran. Riyadh, along with Hariri's son Saad, now Lebanon's prime minister, blamed Damascus for Hariri's killing. Syria maintained its ties with Lebanon's opposition camp in general and Hezbollah in particular.

Relations between the Saudis and Syrians warmed in 2009 as the Saudis saw an opportunity to drive a wedge between Syria and Iran, and Syria looked to expand its roster of contacts to ease its own isolation. Lebanon enjoyed a period of stability. To create some more breathing space at home, Saad Hariri worked to improve relations with Syria and (more or less) backed off claims that Damascus was responsible for his father's death. Domestic tensions lingered, but fears of an explosion of violence eased.

Now the Saudi-Syrian understanding appears to be fraying, raising the specter of turmoil again in Lebanon-especially with the tribunal's indictments expected soon. Riyadh may have overestimated Syria's willingness to try to block a bid by Iraqi Prime Minister Nouri al Maliki -- whom the Saudis view as too pro-Iran -- to keep his job following a close election. The Syrians appear disappointed that the Saudis haven't helped them torpedo the tribunal.

That could help explain why a Syrian court has indicted nearly three dozen people, including several Lebanese close to Hariri, on charges of providing false testimony in the assassination investigation -- a move that has provoked a rising tide of anxiety inside Lebanon.

Unless Riyadh and Damascus find a good reason to double down on better relations, Lebanon's domestic situation will deteriorate further. And if the Hariri tribunal issues indictments of Hezbollah members, Lebanon's opposition will probably withdraw its ministers from the government. The opposition has just 10 of 30 ministers, but it can easily persuade newfound friend and erstwhile Hariri ally Walid Jumblatt to withdraw one of his ministers, triggering a collapse of the government that could plunge Lebanon back into the state of sporadic violence and government paralysis that it suffered in 2007-2008.

In the less likely but more dangerous scenario, Hezbollah could respond to indictments as it acted in May 2008, when the group briefly seized control in Beirut. The group certainly has the firepower to take over the city to prove who has the real power in Lebanon.

The Saudis and Syrians could act to reduce the likelihood of these worst-case scenarios, but the point has been made yet again: Lebanon's stability largely depends on the calculations of other governments.

Hani Sabra is an analyst in Eurasia Group’s Middle East practice.

There's an interesting fight simmering inside Iran. Not over support for the nuclear program, which remains just about the only thing Iranians of all ages and ideological persuasions agree on. Nor is it another round in the conflict between the regime and the reformers that kicked into high gear following last year's disputed presidential election, though that one is far from over.

This fight is within the conservative elite -- with interesting implications for the future of President Ahmadinejad, Supreme Leader Ayatollah Ali Khamenei, and the balance of power within the establishment. It's a battle for the future of the regime.

The latest sign of strife between hardliners and more moderate conservative factions comes from a dispute over control of the $2 billion set aside for development of Tehran's metro.

The Majlis, Iran's parliament, green lighted funding for the project. Ahmadinejad, anxious over how unfriendly factions within the government might use the money, objected. Iran's Guardian Council, the six jurists and six theologians who make up the country's most influential body, ruled in favor of the Iranian president. But the Expediency Council, the advisory body with the final word on disputes over legislation between the Majlis and Guardian Council, turned the decision back to the Majlis.  

Ahmadinejad then announced he would simply ignore the Expediency Council's ruling. Khamenei refused to take sides directly, but referred the issue back to Ahmadinejad's allies on the Guardian Council.

This fight has been building for quite awhile. The president and parliament have been butting heads for years. In the spring, Ahmadinejad reportedly complained that the Majlis had passed dozens of bills that were "unconstitutional," "un-Islamic," or both. Following the metro dispute, the president has simply refused to recognize the parliament's right to make law, a view that Ali Larijani, the majlis speaker, has diplomatically dismissed as an "odd interpretation" of the country's separation of powers.

What does all this mean? Khamenei damaged his standing as a leader above politics last year by taking sides in the election controversy, and he's looking increasingly irrelevant on fights like this latest one.

Meanwhile, Ahmadinejad looks to be trying to ensure his own centrality in the regime's future by building his own distinct, domestic political brand -- one that fuses patriotism with intense religious fervor, blurring the lines that (in theory) separate spiritual and political authority.

It's a power grab, and one we better keep an eye on.

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 Greg Priddy

It might seem premature to address how the world oil market and other regional powers will accommodate rising Iraq oil production capacity -- considering that the outcome of Iraq's recent election remains unresolved, and the process of putting together a governing coalition has barely begun. But some of the broad dilemmas that more Iraqi oil will create are structural in nature, and not terribly dependent on the new government's makeup. One thing's for sure: Both Saudi Arabia and Iran will face major challenges to their interests if this scenario plays out.

The Saudi-Iraq axis is simpler than the Iran-Iraq one. If Iraq's production capacity rises to even half of the clearly unrealistic 12 million bpd by 2020, which was a goal cited by Oil Minister Hussein al Shahristani, it will likely serve to maintain some of the current overhang of spare capacity for longer than would have otherwise been the case. This would prevent a retightening of the world oil market that may have put upward pressure on prices. Saudi policy will have to confront how to deal with this situation -- both in terms of whether to delay investment in their own capacity, and how to accommodate what has the potential to be a much stronger second-place producer within OPEC. At some point, Saudi Arabia may approach the new Iraqi government for a discussion about how to renegotiate the system of OPEC quotas in order to accommodate Iraq's increasing oil production with both countries' interests in mind. But depending on how the bilateral relationship evolves, achieving this sort of cooperation may be problematic. Iraq has already added written provisions into its service contracts with foreign oil companies dealing with government-mandated output cuts. This demonstrates that the Iraqi side is beginning to grapple with the idea that it may at some point be adding capacity to an oversupplied market and need to exercise restraint.

The implications of increasing Iraqi oil are even more complicated when it comes to Iran. US secondary sanctions under the Iran Sanctions Act (ISA) have been reasonably successful at hindering development of additional Iranian oil and gas production capacity. While they haven't stopped activity altogether, they've kept it at a level where the volume of oil available for export is likely to continue its gradual slide over the next decade as production declines and domestic demand continues to grow. In this scenario, an eventual retightening of the world oil market with attendant higher prices would clearly be in Iran's national interest, helping it to maintain revenues even while volumes fall a bit during the next several years. The increase in Iraqi capacity, however, could prevent this from happening -- taking a toll on Iran's government finances, and potentially creating tension between the two Gulf neighbors. Given the substantial amount of Iranian influence within Iraq, and the still-latent disputes about the border and control over the Shatt al Arab waterway, this market-driven tension could potentially spill over into the geopolitical realm.

All of this, of course, is dependent on whether Iraq's internal stability permits large-scale oil development to move at a rapid pace, which remains a big "if" at this point. Still, it's not just a matter for the oil market. This situation has the potential to substantially redraw the map of state finances and national power in the Gulf.

Greg Priddy is an analyst in the Global Energy and Natural Resources practice at Eurasia Group.

Did everyone notice the Saudis suggesting that further sanctions against the Iranians are well and good, but that they'd rather see a quicker resolution? (The FT did, with the Saudis saying that they meant the Middle East peace process. Umm, that's not credible. And not what they've been saying privately.) 

I'd discount hints at support for the more direct approach as 90 percent bluster, since the Saudis know the Obama administration is completely committed to the present course. But the absence of routine communications between Saudi Arabia and Israel gives you the remaining 10 percent -- many in the kingdom could think of worse outcomes than having the Israelis "resolve" their looming Iranian nuclear issue through surgical strikes. 

At one level, given the attendant risks in the region, it's an eye-opening assertion. At another, in the absence of Bush administration hawks willing to keep the "or else" drumbeat going, it's a little less surprising.  

Having said that, when I was in Saudi Arabia a few weeks ago -- the geopolitical issue most frequently brought up was neither brewing tensions with Iran (No. 2 issue) nor the potential for a failed state and cross-border terrorism coming out of Yemen (No. 3 issue) ... but the enormous investment opportunities afforded in a stabilizing oil-rich Iraq. Not at all where the Saudis were a year ago. Interesting.

By Ian Bremmer

When Yemen makes international headlines, it's usually because outsiders look at the unrest there as yet another proxy conflict between regional heavyweights Saudi Arabia and Iran. It's one more version of the Sunni vs. Shia Middle East story. The Saudis are supporting Yemen's government in a fight with Shia Houthi rebels financed and trained by Iran. The Saudi, Yemeni, and Iranian governments each have their motives for feeding this simplification.

The Houthis are a Shia rebel group in northern Yemen, centered in the city of Saada. They've warned for years that they've been politically and economically marginalized by Yemen's government, and Houthi rebels launched a rebellion in 2004. There have been six rounds of fighting since. In August of this year, the Yemeni government, with Saudi support, launched another battle against the Houthis, and the conflict has spilled across the border into Saudi Arabia, where Houthis have fought pitched firefights with Saudi forces. In response, the Saudis have launched bombing raids on Houthi positions inside northern Yemen. Tens of thousands of people have fled the expanding conflict zone.

The spike in violence is now getting the regional attention it deserves-but for the wrong reasons. Yemen's weak government already has its hands full with a growing threat from al Qaeda in the Arabian Peninsula (AQAP) and increasing secessionist pressures in the south, adding to the risk that Yemen will become a failed state. The refugee problem is creating a risk of social unrest inside Saudi Arabia. These are serious issues. Less serious is the fear, fanned by both Saudi and Iranian officials, that Iran wants to use the Houthis to create an Arabian version of Hizbullah, a direct Shia threat to Saudi territory. The Saudis are playing up this threat to justify cross-border attacks into Yemen. Yemen's government is using the threat to justify its willingness to accept Saudi attacks on Yemeni soil and to gain Western military support and financial help. Iran feeds the story to pose as increasingly influential within the region.

The Houthis, though, have no reason to play along. They follow the Zaidi form of Islam. They're technically Shia, but theologically and historically distinct from Iran's Twelver Shia majority, which has cultural connections in Lebanon and (to a lesser extent) in Iraq -- but not in Yemen. The Houthi rebels need guns and cash and can't be picky about where they get them. If Iran is willing to sell, they're willing to buy. That doesn't mean they will use them to advance Iranian interests in Saudi Arabia's backyard.

In Yemen, at least, all militancy is local. Few outside al Qaeda relish the idea of the world's largest oil-producer sharing a border with a failed state. That's a risk worth worrying about, but it's not a good reason to over-simplify a complex political, economic, ethnic, religious, and social problem into some sort of regional proxy war between Sunni and Shia.

KHALED FAZAA/AFP/Getty Images

By Willis Sparks and Geoff Porter

As the world focuses on the diplomatic tug of war over Iran's nuclear program, Israel lives with the worrying hum of all those centrifuges spinning just a thousand miles to the east. Yet, Benjamin Netanyahu's government knows that if Israel launches airstrikes, there's a limit to how much damage can be done and how long Iran's progress can be delayed. It therefore has to persuade the Obama administration -- and anyone else who might help slow Iran's march -- to see the risks from Iran as Israel sees them.

It helped that Iran recently revealed the existence of an undeclared nuclear site near the city of Qom. At the very least, that revelation of Iranian dishonesty might have made it a little more difficult for Beijing and Moscow to justify continued resistance to sanctions. Yet, Israel remained quiet. Suddenly it appeared Netanyahu, Defense Minister Ehud Barak, and National Security Advisor Uzi Arad might have a wind at their backs. Though they'd like the wind to blow a bit more steadily and to get them to their destination quicker, they can't risk the rhetoric that might label them as blowhards.

But now there's talk of a diplomatic breakthrough. Following talks in Geneva with negotiators from the United States, China, Russia, Britain, France, and Germany, Iran has signed on to a tentative "interim agreement" to accept a U.S.-Russian proposal (that has been on the table for more than a year) to ship much of its low enriched uranium outside the country for reprocessing. Ensuring that this uranium is processed outside the country would help verify that it's used for civilian, not military, purposes. And then over the weekend, Iran ostensibly agreed to allow IAEA inspectors into the Qom facility on Oct. 25.

This leaves the Israeli government in a bind. First, because the details have yet to be worked out and Iran could renounce a completed agreement at any time, Israel can't take much comfort from it. Second, the fact that others treat it as a potential diplomatic breakthrough makes it even less likely than before that Israel could justify military strikes or that the US can persuade Russia and (especially) China to support sanctions tough enough to make any difference in Iran's strategic planning.

Israel has no faith that the potential for diplomatic détente between Iran and the US and EU is anything more than an Iranian stalling tactic, buying Tehran more time to speed toward the nuclear finish line. Likewise, Israel doesn't believe that sanctions -- no matter how tough they are -- will back Iran down. For Israel, diplomacy and sanctions are merely different forms of delay, but Netanyahu has little choice but to wait them out.

He'll be waiting for some time. First, diplomacy has to run its course. Following the tentative agreement in Geneva and the announcement that Iran will allow inspection of its Qom facility, the diplomatic track seems to be gaining momentum. Once that momentum slows and stalemate resumes, sanctions will be debated and some of them will be implemented. That won't happen before spring 2010 at the earliest.

In the meantime, Israel has little choice but to sit on its hands. Netanyahu knows that strikes on Iran's nuclear sites during delicate negotiations would inflict much more damage to Israel's international reputation -- and its relations with Washington, in particular -- than to Iran's nuclear program. Nothing brings this home more clearly than the U.N. Human Rights Council's report investigating Israel's military campaign in the Gaza Strip in 2008-09, which came very close to launching a legal process within the UN that could have produced a referral to the U.N. Security Council -- and possibly a war crimes tribunal. That's not going to happen, but it underscored already shifting international attitudes toward Israel.

Former Defense Minister Shaul Mofaz has said 2010 would be the year of sanctions. His government was hoping for a year of action. Instead, Israel will wait.

Willis Sparks is Global Macro Analyst and Geoff Porter is Middle East & Africa Director at Eurasia Group. 

Alex Wong/Getty Images

By Ian Bremmer

The George W. Bush administration learned the limits of a policy approach to America's antagonists (like Iran and North Korea) that relies almost exclusively on political pressure and economic coercion. Even as Washington issued warning after warning, Iran made enormous progress toward a nuclear capability, and North Korea amassed a small nuclear arsenal.

But the Obama administration is now learning the limits of constructive engagement. Iran is ignoring U.S. calls for an end to a crackdown on Iranian demonstrators, and North Korea is threatening the United States with a "fire shower of nuclear retaliation." What do we learn from this? That, as time passes, U.S. policymakers have less and less ability to influence events within isolated countries and the choices made by their leaders.

In fact, events inside Iran over the past two weeks represent something close to a worst-case scenario for Washington. Since Obama became president, his tactical approach to Iran has been governed by a simple principle: Don't do or say anything that will help Iranian President Mahmoud Ahmadinejad use Washington to rally support. That was a wise choice, but one that came to nothing because, as Joseph Stalin once observed, "It's not he who votes that counts but he who counts the votes."

Obama responded to the stolen election and the protests that followed with characteristic caution, using vivid language of condemnation only after the level of violence in Tehran demanded it. But it will be harder now to make the deal he wants over Iran's nuclear program, because whatever he offers Iran will open him to charges of "appeasement," and because Iran's weakened government will likely respond to U.S. warnings with renewed belligerence.

On North Korea, whatever the president's approach, uncertainty within that country is generating a level of anti-American vitriol that's unusual even by North Korean standards. Kim Jong-Il has apparently tapped his 26 year-old son, Kim Jung Un, to succeed him. Whether this latest of the Kims will actually rule or the North Korean military will wield new power within a kind of dictatorship by committee, we can only guess. But it's clear that, for the moment, U.S. officials can plan for various contingencies and respond to events, but can't do much to influence what comes next.

The Obama approach to these problems is to try to keep as many options open as possible. That might help to protect him against the charges of hubris that rained down on Bush-era neocons, but it also allows others who don't play by the same rulebook to outmaneuver him. Political decision-makers inside Iran and North Korea are now defining the terms of their engagement with the United States.