Note: Today is the eighth in a series of posts that detail Eurasia Group's Top Risks for 2013
The dangers emanating from the ongoing shadow war with Iran are greater than many observers believe. This struggle has consisted of several components, including a cycle of mutual killings and cyber attacks. While there is no hard proof, it is a reasonable assumption that Israel and Iran (or at least some officials in Iran) are responsible. The final theater is the ongoing proxy war in Syria.
In early 2013, the West will also become engaged in an effort to negotiate a solution to the standoff over Iran's nuclear program. Western countries, led by the U.S., would very much like a peaceful resolution, while Iran sorely needs relief from stiff economic sanctions. Talks will be intensive but on balance the talks will probably fail by late spring. The Iranian elite have an almost existential commitment to the nuclear program, while Supreme Leader Ali Khamenei possesses a deep seated enmity for the U.S.
As a result, the West and Iran will probably return to escalating sanctions and shadow war, with two drivers boosting the ferocity of that struggle. First, the Iranian regime will feel compelled to show resolve and retaliate in the face of new sanctions. Second, the regime faces a period of profound economic weakness, though it will not collapse. But weak governments are prone to lashing out, both to rally domestic support and to portray an image of strength.
These new drivers will likely intensify the shadow war and could lead to new fronts. The chance of miscalculation and overreaction on both sides would rise, especially in the face of provocations such as a successful assassination plot in the U.S. similar to the alleged attempt against the Saudi ambassador in October 2011 or an episode such as the 2008 swarming of U.S. Navy frigates by Revolutionary Guard boats.
Iran's nuclear program is the second area of concern in 2013. Israeli rhetoric will remain at a high pitch, but is intended to increase diplomatic leverage and economic sanctions. Still, the probability of an Israeli attack in 2013 is low because Iran's nuclear program is unlikely to pose an imminent threat this year. Also, Israel can inflict only limited damage on Iran's nuclear facilities and there will be a lack of consensus among its political leaders about the wisdom of a strike. Polling also shows the Israeli public firmly opposes unilateral action. Finally, the U.S. would likely attack only if Iran tries to acquire a nuclear weapon and that is unlikely.
There are, however, a number of worrying scenarios. Developments at the Fordo enrichment facility make up one. Iran will have enough medium-enriched uranium to make a bomb by early summer, but weekly IAEA inspections leave enough time for detection and action. The central question is whether the Israeli government will trust the U.S. or strike on its own. Israel is unlikely to attack, but this dilemma slightly boosts the chance of Israeli strikes during 2013 (to roughly 20 percent).
A scenario involving a detectable Iranian breakout would probably elicit a U.S. attack. Yet Tehran has been very cautious and slow. Iran probably wants to become a latent nuclear power; that is, the world knows it could develop a bomb quickly. But Iran's threat perception will become more dire this year, making an irrational dash to a bomb, and a U.S. attack, slightly more likely.
Next week, we'll profile Risk #9: India
IIPA via Getty Images
Note: Today is the third in a series of posts that detail Eurasia Group's Top Risks for 2013.
The Middle East will enter a new phase in 2013. Arab Spring will give way to Arab Summer, as the region faces a series of increasingly complicated overlapping conflicts. As Americans and Europeans resist deeper involvement, rivalries among Saudi Arabia, Iran, and Turkey, competition for influence between Sunni and Shia, a lack of economic progress, and a resurgence of militant groups will each heighten tensions.
Syria remains the central arena of conflict, as Shia powers -- Iran and Lebanese Hezbollah -- on the one side, and Sunni states -- Turkey, Saudi Arabia and Qatar -- on the other compete for leverage. Jihadists have also entered the fray, and turmoil has spilled across the country's borders into Lebanon, Turkey, Jordan, and Iraq.
Emerging conflicts elsewhere are less obvious. Egypt, Tunisia, and Morocco now have moderate Islamist governments. In Jordan and Kuwait, Islamist opposition groups threaten the governing dominance of secular administrations. But while the words and actions of mainstream parties like Egypt's Muslim Brotherhood and Tunisia's Ennahda make headlines in the West, the more serious risk comes from militant organizations that threaten the ability of new leaders to govern and maintain security.
Fueling this trend is the reality that, across the region, new leaders are trying to consolidate power and build popularity at a time when complicated economic problems demand solutions that will make large numbers of people angry. New governments in Tunisia, Libya, Egypt, and Yemen will last only if they can deliver tangible economic progress for an increasingly frustrated and impatient public.
The risk that a Salafist or jihadist group can exploit these frustrations to seize power in 2013 is low, but groups like al Qaeda in the Islamic Maghreb, al Qaeda in the Arabian Peninsula, al-Shabab, and smaller affiliates continue to attract support and new followers by using resentments against local regimes to foster anger at America and the West.
But Iraq may become 2013's newest hotspot. Sunni-Shia tensions are growing, and none of Syria's neighbors is more vulnerable to the threats created inside that country by radical Wahhabi clerics, often with Saudi or Qatari support, now fueling the emergence of an increasingly radicalized and militarily experienced Salafist movement. The Kurdish regional government is becoming more aggressive in promoting its energy development agenda at Baghdad's expense, and Sunni-led violence inside the country might well encourage Iraq's Shia-led government to forge closer ties with Tehran, antagonizing the governments of Saudi Arabia and Turkey.
The Obama administration wants to focus on domestic challenges and an ongoing foreign policy shift toward Asia. But regional rivalries are heating up, and Americans and Europeans will only add to the uncertainty by keeping their distance -- in hopes that they don't get burned.
On Wednesday, we'll profile Risk #4: Washington Politics.
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.
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
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
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 Nicholas Consonery and Willis Sparks
For China's top leaders, this is not a good time for confrontations with the neighbors. The country's once-a-decade leadership transition is expected to unfold this fall, and neither outgoing nor incoming officials want uncertainty or ugly international headlines to interfere with the official choreography.
Thus the worry that Asian governments like the Philippines and Vietnam, emboldened by a commitment from Washington to maintain a robust strategic presence in the region, are pushing more aggressively to assert territorial claims in the South China Sea. More worrisome still, China's leaders face patriotic pressures from within for a forceful response.
China and its neighbors could be working together on joint oil and gas exploration in these disputed waters. Proven and undiscovered oil reserves in the South China Sea are estimated to be as high as 213 billion barrels, according to a 2008 report from the U.S. Energy Information Administration. If accurate, that's larger than the proven oil reserves of all but Saudi Arabia and Venezuela. But territorial disputes continue to block efforts to prove these estimates, and the potential for open hostilities in the area is growing, threatening to disrupt trade flows and stoking regional tensions.
The most recent conflict is the impasse
between the Philippines and China over the Scarborough
Shoal, a small island 100 miles off the coast of the Philippines
claimed by both countries. In April, Philippine naval vessels discovered
Chinese fishing boats in a lagoon of the Scarborough Shoal, provoking a three-month
standoff in which Beijing used trade barriers to pressure Manila, which called
on Washington for help. Though the standoff seemed to have been resolved in
June, there are still Chinese fishing boats in the shoal.
Manila is pressing the issue both to stoke national pride at home, to justify greater defense spending, and to draw the U.S. deeper into territorial disputes. Vietnam has similar motivations, though Hanoi appears to have less appetite for tension than Manila at the moment. Neither Chinese neighbor wants to punch toe-to-toe with Beijing, and cooler heads are always likely to prevail. But confrontations at sea can spin beyond the control of state officials back on shore.
There is a similar problem in Beijing. When Chinese officials discuss how best to manage territorial claims in the South China Sea, there are lots of negotiators seated around the table. Local leaders, maritime police, customs and border officials, as well as representatives of national oil companies and the Chinese Navy each have their interests to assert. Any of these actors can play to increasingly hawkish public opinion to operate outside the limits set down by senior leaders.
That's why, though the leadership would like to put a lid on territorial tensions, China has been making so much South China Sea news in recent weeks. Two weeks ago, the state-owned China National Offshore Oil Company (CNOOC) opened nine blocks for exploration in waters also claimed by Vietnam. Not long after, a spokesperson for China's Defense Ministry announced that the navy was conducting combat-ready patrols in the area.
In months to come, China's top leaders will do their best to strike a delicate balance-to appease belligerent voices at home and within the government while reassuring outsiders that China is not becoming more aggressive. But each time one of the neighbors makes another provocative move, Beijing's balance becomes a bit harder to maintain.
Nicholas Consonery is an analyst in Eurasia Group's Asia practice. Willis Sparks is an analyst in the firm's Global Macro practice.
HOANG DINH NAM/AFP/Getty Images
By Joao Augusto de Castro Neves
When Brazilian President Dilma Rousseff travels to Washington next week, she won't be looking for a free trade deal or military assistance. Her country, the "B" that begins the "BRICS," primarily wants recognition -- specifically U.S. support for a permanent seat on a revamped U.N. Security Council. But this time around, Rousseff won't even be getting a state dinner.
Washington, due mainly to bureaucratic inertia, isn't ready to give Brazil the recognition it wants. Its reluctance may actually encourage other nations to behave in ways contrary to U.S. interests.
Years of macroeconomic stability, sustainable economic growth, and a cluster of successful social policies gave rise not only to a new and thriving Brazilian middle class, but also to Brazilian multinational companies, the so-called national champions. Externally, these changes translated into greater confidence -- inside and outside official circles -- and a wider scope of international ambitions.
Brazil is beginning to display the characteristics of a regional hegemon -- it has attracted more illegal immigrants from surrounding countries, and helped Colombia's government conduct rescue missions for hostages held by the FARC. And since 2004, Brazil has been leading the U.N. stabilization mission in Haiti. But Brazil's "holy grail" remains a seat at the Security Council table. And it won't get recognition (yet) from the most important member of the Permanent Five, whose support it very much covets.
According to many foreign policy specialists in Washington, Brazil does not deserve a place in the top echelons of the U.N. because it is not a nuclear power and is unwilling to share the burden of leadership. Another line of reasoning highlights the fact that the U.S. does not endorse Brazil's bid -- as it did with India -- because South America is not a very relevant region in the U.S. strategic chessboard. The remaining argument point to the fact that a potential endorsement could hurt U.S. interests with other key allies in the region, specifically Mexico and Colombia.
Even if some of these considerations may hold elements of truth, at the end of the day they hamper the deepening of relations between the two largest democracies and economies in the Western hemisphere. Brazil could do a better job explaining to the U.S. -- and the world -- how it would behave as a permanent member of the Security Council; but the U.S. could also rethink some of its arguments against Brazil.
The fact that Brazil is not a nuclear power and that South America is not a relevant strategic hotspot should count in favor of Brazil's aspirations, not against. If the region is relatively calm, it is because of the collective effort of Brazil and Argentina to end their economic and military rivalry in the 1980s. As a matter of fact, the rapprochement also defused the nuclear component of the rivalry, something that India and Pakistan were not able to do. The U.S. decision to endorse India's bid and ignore Brazil's sends a perverse message. It awards a country that snubbed every major nonproliferation regime while punishing a country that willingly adhered to these very same regimes.
Although the repercussion of the endorsement of Brazil's bid over U.S. interests with key allies in the region is likely to be negative, its importance is widely overplayed. Even nuclear Pakistan's outright resistance did not factor in U.S. geopolitical calculus when it endorsed India's bid. In addition, for some time now, the U.S.-Latin American agenda is in fact a collage of increasingly specific bilateral relations. Any dissatisfaction, therefore, could be dealt with bilaterally without any relevant repercussion on the regional agenda.
Next week's visit by Rousseff is likely to pass without the words that Brazil wants to hear from President Barack Obama. Those words will eventually come from Obama or a future U.S. president, but their absence in the short term will keep relations between the Western Hemisphere's two most important democracies from reaching their productive potential.
Joao Augusto de Castro Neves is an analyst in Eurasia Group's Latin America practice.
PRAKASH SINGH/AFP/Getty Images
By Jennifer Lee
The new, young regime in North Korea surprised more than a few observers when it agreed last week to a moratorium on its nuclear activities in return for 240,000 tons of U.S. food aid so soon after Kim Jong Un assumed leadership. Instead of the legitimacy-building provocations expected from the young Kim (who is in his late 20s), the world got a measured concession from a totalitarian regime that demonstrated a degree of consensus and decision-making ability. In some ways, it was the story of the young son continuing his father Kim Jong Il's efforts to improve relations with the U.S. prior to his death.
There is general optimism surrounding the agreement, which stalls North Korea's uranium enrichment program, and nuclear and long-range missile tests, and allows the International Atomic Energy Agency to inspect the Yongbyon nuclear facility. Last week's step forward, however, does not necessarily presage a more substantive shift in North Korea's posture. The agreement allows North Korea to possibly address its immediate concerns (economic sanctions) and affect domestic politics in South Korea, without ceding its ability to provoke or flip the switch (again) on its nuclear program.
While it is easy to think that the U.S. food aid "carrot" must have been the main reason behind North Korea agreeing to this deal, it is unlikely the case. North Korea is not known for being particularly concerned about the hunger of its people (allegedly more than one million people died during the famine in the 90s, and food security has been dismal for the past few decades); and the totalitarian nature of the regime means that its leaders are not very concerned about their approval ratings.
North Korea is more concerned about the economic condition of the state and the long-term implications of sanctions (North Korea's version of the statement mentions that it would want to discuss the lifting of sanctions and provision of light water reactors if the Six Party Talks resume). The current move is probably a gambit to see if it can resume the Six Party Talks and have sanctions lifted without giving up the nuclear program. The deal is also likely an effort by Pyongyang to slight the Lee Myung-bak administration in Seoul, which it views with hostility, in the hope of increasing the chances of the liberal parties in South Korea's presidential election in December.
The U.S. and South Korea both have presidential elections this year. The agreement is likely North Korea's way of buying time for a year or so until the South Korean administration changes, while trying to extract concessions from an Obama administration that does not want any more conflicts on its hands during an election year. This is also a moratorium that is to last only while "productive dialogue continues." Everything North Korea has promised is reversible if it decides to back out. And it certainly has set a precedent for doing so. Furthermore, this moratorium applies only to the Yongbyun nuclear facilities; it is widely believed that there are several other nuclear development sites throughout North Korea that will be out of reach under this agreement.
It should not be forgotten that North Korea's nuclear capability has been extolled within North Korea as Kim Jong Il's most important legacy. It is undoubtedly seen as the single most powerful card that North Korea has, and with the recent leadership transition to a young new leader, there is little chance that the country will completely forgo this leverage, especially after the NATO operation in Libya that removed Muammar Qaddafi.
There is still a possibility that this could turn into something positive and lasting for U/S.-North Korea relations or North Korea's future behavior. Last week's agreement demonstrates that the totalitarian regime in North Korea was able to take a rational step for its self-interest. But it does not demonstrate that North Korea is contemplating giving up its nuclear weapons, or that it is on the verge of changing its behavior.
Jennifer Lee is an associate in Eurasia Group's Asia practice.
By Philippe de Pontet and Anne Fruehauf
The price of your favorite chocolate treat may not have gone up yet, but there is a real chance it will, despite the resolution to the impasse in Cote d'Ivoire, the world's leading exporter of cocoa. The arrest of former President Laurent Gbagbo after a four-month standoff significantly improves the prospects for a full resumption of cocoa exports. But there are still significant political and logistical hurdles that could affect how much you'll pay for a candy bar.
The immediate situation in commercial capital Abidjan is broadly reassuring. Gbagbo urged his supporters to stand down while the incoming President Alassane Ouattara struck a note of national reconciliation in his address to the country. These developments, together with the presence of about 10,000 U.N. peacekeepers, should limit regime-threatening instability, despite the charged atmosphere and the presence of armed militias that represent a potential source of unrest. There was further positive news on April 13 when the Ivorian government reported that the nation's two main ports would reopen and that cocoa exports would resume within days.
But there are several obstacles to the resumption of full exports that some observers may be missing. Even though the EU and Ouattara have lifted their export bans, cocoa revenues have long been funneled to Gbagbo's cronies. The incoming government will want to ensure that cocoa sales do not enrich the ex-president's associates at the expense of the state. That sets the stage for potentially disruptive reforms to the industry.
The other factor is the security situation both in Abidjan and in the restive western regions where most cocoa is produced. Cote d'Ivoire's west has been the scene of significant turmoil and ongoing retributions in recent weeks. This instability could threaten key transportation corridors from the cocoa fields to San Pedro, the port of departure for about a third of Cote d'Ivoire's exports.
Additionally, migrant farmers will need to travel back to the planting regions by the end of April in time for the May-July harvest that accounts for about a third of annual production. Instability, roadblocks, and bank closures could be a real deterrent. Commercial banks will need to resume operations for small traders to buy the harvest. Any delays or problems at this level could also influence international prices, despite expectations for a bumper crop.
Philippe de Pontet and Anne Fruehauf are analysts in Eurasia Group's Africa practice.
PHILIPPE DESMAZES/AFP/Getty Images
By Ian Bremmer and David Gordon
Individual hackers and organized crime organizations have targeted businesses for years, but cyberattacks have rarely created political risk. They do now. The centralization of data networks -- both in energy distribution (the move to the smart grid) and information technology more broadly (the shift to cloud computing) -- is increasing the vulnerability of states to potentially debilitating cyberattacks. As governments become more directly and actively involved in cyberspace, geopolitics and cybersecurity will collide in three major ways.
First, new cyber capacity allows governments to project power in a world where direct military strikes are much more costly and dangerous. There have been plenty of stories about well-funded efforts from inside China to manipulate access to the Internet, but it's the almost-certainly state-sponsored Stuxnet attacks on Iran's industrial infrastructure that provide the clearest early glimpse of what tomorrow's carefully targeted state-sponsored attack might look like. When a missile is launched, everyone knows where it came from. Cyberattacks are a very different story.
Second, we'll see more cyber conflicts between state-owned companies and multinational corporations, providing state capitalists with tools that give them a competitive commercial advantage. China and Chinese companies are by far the biggest concern here. Throw in Beijing's indigenous innovation plans, which are designed to ensure that China develops its own advanced technology, and this is probably the world's most important source of direct conflict between states and corporations.
Third, there is the increasing fallout from the WikiLeaks problem, as those sympathetic to Julian Assange unleash attacks on governments and the corporations that support them in targeting WikiLeaks and its founder. In fact, the principal cybersecurity concern of governments has shifted from potential attacks by al Qaeda or Chinese security forces to radicalized info -- anarchists undertaking a debilitating attack against critical infrastructure, a key government agency, or a pillar of the financial system. Whether attacks are waged for power (state versus state), profit (particularly among state capitalists), or for 'the people,' (as in the WikiLeaks case), this will be a wildcard to watch in 2011.
On Friday, we'll talk about Top Risk no. 4: China -- and why its policymakers will frustrate much of the international community this year.
Ian Bremmer is president of Eurasia Group. David Gordon is the firm's head of research.
JIM WATSON/AFP/Getty Images
One of the most frequently cited reasons you hear that attendees come out to Davos is that you can do about one month of meetings in 5 working days. In the ever faster, hyper-productive, blackberrified world, that's about as compelling an argument as you can have.
For the record, I hate blackberries. They don't sit well with my underlying sense of balance (or my tendencies towards compulsiveness), and it would make my colleagues utterly miserable. So I don't do it. Neither does U.S. Congressman Barney Frank, who I met with this morning. He then went further. "I don't do blackberries, I don't know CPR, and I can't put out a fire," he told me. His work is important, but apparently he's useless in emergencies.
Fortunately, nothing was burning during the CNBC debate this morning. Though Barney did get himself plenty worked up. We got into it a little bit on U.S. military spending, of all things. His top argument for balancing the budget was to slash military expenditures. I managed to get him to admit we needed more funds for cybersecurity. His fallback position was to stop spending for weapons that don't have enemies. If I could get him to add the caveat, "likely enemies over the next 20 years," I think we'll have a winner.
PIERRE VERDY/AFP/Getty Images
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
The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.