By Ayham Kamel

During their fight for the White House, President Obama and Governor Romney made clear they do not believe Syria poses a substantial enough threat beyond its borders to require direct foreign intervention on the ground. Take a closer look. Even if intervention is not a realistic option just yet, it's hard not to notice that Syria's problems have become its leading export.

Syria bloody struggle continues with no end in sight. The international community is paralyzed; it can neither live with an Assad regime that commits daily atrocities nor afford a risky intervention in an already unstable Middle East. To add fuel to the already raging fire, Jihadists are increasingly interested in hijacking the Arab Spring.

This problem is now redefining the rocky relationship between Jihadists, who once focused mainly on global goals, and Salafists who focused on a local agenda. Especially after the killing of Osama bin Laden, Jihadists have shifted their priorities and gone local, as well, working side-by-side with Salafist allies. Ayman al Zawahiri's call for Jihad in Syria highlights this trend. While the struggle against the West remains a long-term goal, Jihadists are focusing on regaining alternative bases. That's why so many foreign fighters -- though clearly not a majority of rebels -- have joined opposition ranks to fight the Assad regime.

Syria is now the crown jewel for Jihadists. It provides access into Europe through Turkey, a border with Israel, a launch site for a new insurgency in Iraq, and easier access to Salafists in Jordan and Lebanon. The opportunity to find a new recruitment hub is also invaluable: The two movements have always been ideologically close and many Jihadists are exploiting that relationship to boost their ranks.

The ripple effects of this conflict are evident across the region. In Lebanon, the assassination last month of General Wissam al Hassan, head of the intelligence division of domestic security forces, will probably undermine an already shaky security environment in that country. Northern Lebanon has effectively become a zone of instability. Salafist groups, among others, have claimed a share of the money headed for Syrian rebels, joining a battle that is both morally required and financially supported.

Jordan is beginning to experience the contagion. Recently, the Jordanian General Intelligence Directorate (GID) uncovered a plot by a Salafist terrorist cell. The group acquired weapons and arms from Syria and crossed into Jordan to carry out operations against civilian targets. Both Salafists and Jihadists in Jordan are beginning to view instability in Syria as an opportunity to expand their networks and improve their capacity to carry out attacks. Jihadist forces in Syria, which are currently fighting the regime, have broader goals. As the Assad government grows weaker these groups may be willing to support their allies elsewhere, including in Jordan. While the Jordanian security services have a significant intelligence and operations capacity, it will become increasingly difficult to monitor events across the Syrian border. More importantly, while the GID was able to preempt the most recent terror attacks, their success in the future can never be guaranteed.

Iraq, whose long border with Syria has always been porous, faces growing risk of cross-border militancy. In recent years, Prime Minister Nouri al Maliki has built a loyal army that succeeded in containing a Sunni insurgency. But he is now right to worry that Sunni forces in Syria are encouraging and supporting their counterparts inside Iraq. Maliki, who initially supported Assad, had feared that a new Sunni government would become a hostile neighbor to Shia Iraq. But he now appears more concerned with Jihadist and Salafist groups. Cooperation between Jihadis across the border and potential flow of new fighters into Iraq are especially problematic for Iraqi stability. While violence is now concentrated in areas that are not core to oil production, the situation could change if Sunnis succeed at mounting a more robust insurgency.

Soon, Americans may again be hearing about a fight with insurgents for control of Iraq.

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

By Ayham Kamel

Recent, though futile, efforts to resolve the crisis in Syria have demonstrated the absence of leadership from global powers such as the U.S. and likely set the stage for possible contagion. The unwillingness of the major powers to intervene in crises such as in Syria -- a marker of what Eurasia Group has called the G-Zero World -- has allowed regional players to step into the breach, notably Qatar via the Arab League. But the League's efforts have also exposed a regional power vacuum and tensions among Middle East nations that could potentially escalate into a proxy war in Syria.

The Arab League's late-January initiative called on President Bashar al-Assad to step down, leaving the vice president to negotiate with the opposition, but it reflects neither the complexity of the Syrian conflict nor the domestic power balance. For example, the opposition is still deeply divided and there is still considerable support for the regime among business interests and some minorities. The Syrian regime is likely to retain power throughout most of 2012, but the risk of collapse will rise considerably in the last quarter.

Other players have taken advantage of major powers' unwillingness to get involved in Syria. Qatar has been pushing for more hawkish Arab League policy on Syria, but the organization lacks the power to push through such initiatives. Turkey, Iran, and Saudi Arabia have also staked out a role. But, the lack of interest in producing a negotiated solution effectively means that the Syrian regime can disregard the Arab League on many issues.

Divisions in the League between Gulf Cooperation Council (GCC) states and other members also limit the group's ability to formulate and pursue effective policies. The 24 January decision by the GCC to withdraw monitors from Syria highlights this division. Both Egypt and Algeria, traditionally important players in the organization, are uncomfortable with what is increasingly seen as Qatari and Saudi dominance. In the near term, Egypt's leverage will likely decrease given its own political transition, but major stakeholders (such as the military and the Muslim Brotherhood) will eventually seek a more proactive foreign policy. Within the GCC, there is also a subtle, but important, tension between Qatar and Saudi Arabia. Saudi royals are wary of Qatari calls for direct military intervention as a tool for democratic reform in Syria or any other Arab countries, a precedent that could be later used against Riyadh.

Syria is a key part of the regional balance of power between moderate pro-U.S. states and the so called resistance camp lead by Iran. Seeking a broader realignment in the Middle East, regional powers are likely to increase their support of their local allies. Saudi Arabia, Turkey, and Qatar are actively encouraging the uprising driven by conservative Sunnis. Meanwhile, Iran is providing the Assad regime with intelligence, and technological equipment to suppress the uprising.

The Syrian conflict has fanned Sunni-Shiia tensions and the risks of contagion in Lebanon, Jordan, and Iraq are considerable. In Iraq, Sunnis are emboldened by a resurgence of conservative movements across the Middle East. Lebanon could become more unstable as the Syrian conflict has divided political factions in an increasingly delicate struggle. Jordan's own communities could reconsider their allegiance to the Hashemite monarchy as communal divisions between Jordanians of Palestinian descent and tribal elites begin to increase. Potential Syrian or Iranian support to Kurdish separatist groups in Turkey is likely to become a problematic issue. Finally, covert action by either the Sunni axis (Saudi Arabia, Qatar, and the Arab League) or Shiias (Iran and Iraq) entails significant risks to regional stability and could spur a violent proxy war that would hurt the business environment and oil flows.

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

By David Bender

What exactly did Iraq wait 8 months for? 

It's been seven weeks since Iraq smashed the record for the longest period of time between an election and the formation of a government. But last week there was finally a breakthrough of sorts between the country's squabbling political factions. It's not yet a done deal, but it's now finally possible to speculate about what the next Iraqi government will look like -- and time to ask the question of whether it was all worth the wait. 

The deal struck last week between the Shia-dominated National Alliance, Sunni-backed Iraqiya, and the Kurdish alliance provides the basis for the next government. But it isn't a basis for a stable government. The agreement was an attempt to satisfy everyone in the short term, while delaying decisions on important political issues further into the future. The next government is likely to have little policy coherence, much infighting, and numerous contradictory agendas. That's a troublesome dynamic given that Iraq faces an impending onslaught of tough technical and political questions in 2011. The Kurds will press hard for progress on their territorial issues and their right to sign their own oil contracts, provincial governments will call for greater shares of the profits from Iraq's oil and gas, al Qaeda is attempting to reassert itself going after soft targets, and someone competent will need to direct and oversee the upcoming massive infrastructure expansion needed for the growing Iraqi oil industry.

The outlook for a government capable of managing all these challenges is not good, and the process that got us here was chaotic. Nouri al Maliki will remain prime minister after he skillfully navigated the long political limbo by using his incumbency to project a sense of inevitability that he would retain the premiership. This occurred despite the fact that nearly every other political bloc in the country despises him. Maliki's hold on the job was finally sealed when Iran brokered a deal in Qom, the Iranian city home to many of that's country's senior religious leaders, between Maliki and followers of firebrand Iraqi cleric Moqtada al-Sadr, who had previously declared they would sooner support the devil as prime minister. It's not clear what the Sadrists have been promised in exchange for their support, but they are likely to be a meaningful player in the next government. That's bad news for virtually everyone, because the Sadrists' hard-line nationalism, religious extremism, capacity for violence, and generally uncompromising attitude will make them a disruptive force in Iraqi politics.

But Maliki needed more than just Sadrist support to gain majority backing in parliament. He also looked to the Kurds, who had enough seats to give him a comfortable majority. The Kurds responded with a long list of demands, but ultimately were likely to support him. The United States, which had been keeping its distance from talks, feared that Iraq was heading toward a narrow Shia-Kurdish government that would exclude Sunnis from any meaningful political participation, increasing the risk of a spike in sectarian violence. Washington began working feverishly behind the scenes to push Iraqi politicians to find a compromise that would bring Iyad Allawi's largely Sunni Iraqiya into the next government. So the United States succeeded, sort of.

The White House and other leaders hailed the "power-sharing" agreement that would permit a national unity government to be formed when Parliament convened on Nov. 11. How much power will be shared remains unclear. In the deal, Iraqiya was offered the position of Speaker of Parliament, while Jalal Talabani, a Kurd, would remain president. For Iraqiya, which actually won two more seats than Maliki's State of Law, being given what is perceived as the third best position in the government was an insult. This despite the fact that the speaker, who has control over legislation in the parliament, is arguably more influential than the president, whose powers are largely symbolic. Under the deal, Allawi is to be named head of a newly created national security policy council, which in theory will check Maliki's control over the security forces.

But formally changing the chain of command in Iraq would require a highly unlikely constitutional change, and it seems unlikely that Maliki will ultimately agree to a significant reduction in his powers. He has argued that the new council will function as an advisory panel with no independent authority. If Allawi decides he is powerless in his new position, he could resign and become a forceful leader of the opposition.

Between an unclear Iraqiya role, an uncomfortably large Sadrist contingent, rising Kurdish demands, and no unity of purpose among any of the political groups, the prospects for the next government are not great. But the overall situation in Iraq will probably improve anyway. The next government isn't going to resolve much of Iraq's deep social and political dysfunction, but having it in place will finally allow the oil sector, budget, and infrastructure projects to begin to move ahead.

Was it worth the eight (soon to be nine) month wait? No.

But is it a good thing that there's likely to be a government by the new year? Absolutely.

David Bender is an analyst in Eurasia Group's Middle East practice.

By David Bender

Remember when Iraq was all about the oil?

Bush administration officials predicted that a post-war spike in Iraq's oil production would pay for both the conflict and ease the country's transition to democracy. Anti-war protesters countered that the war itself was little more than an oil grab. Now that the American combat mission is officially over, where is all that oil, and how will it change Iraq and the world?  

It seemed for years that violent chaos inside Iraq made a big increase in oil production entirely unrealistic; but now there are growing signs that oil project work could begin on several fields in the south over the next six months. If these projects move ahead, over the next decade, Iraq could begin to contribute enough production to significantly influence the global oil market, providing enough supply to undermine assumptions that energy demand from emerging Asia and increasing production costs will squeeze energy markets and add serious upward pressure on prices in the mid 2010s.

Iraq is now producing about 2.4 million barrels per day. The 12 contracts signed with some of the world's largest oil companies fuel hopes that Iraq can increase production nearly fivefold by 2020. That target is unrealistic, but even the likelier tripling of production levels will have important implications for the global economy and raise interesting questions about regional political dynamics. For the moment, Saudi Arabia is the only producer with enough spare capacity to single-handedly move prices. How will the Saudis respond if Iraq can produce enough oil to usurp some of that market power? How will Iran react if a surge in Iraqi production drives down oil prices, depriving Tehran of badly needed revenue? Globally, will Iraqi oil power Chinese and Indian growth? Will it kill the electric car? Iraqi oil production increases will have widespread effects-if they happen.

But Iraq will be a politically volatile and potentially unstable place to do business for the foreseeable future, and a spike in the country's oil production is anything but a sure thing. Nearly six months after parliamentary elections, U.S. combat troops leave behind a country without a government. Vote winner Iyad Allawi, incumbent Prime Minister Nouri al Maliki, an array of Shia sectarian leaders (including firebrand cleric Muqtada al Sadr), and the Kurds remain locked in a seemingly endless battle of diplomatic nerves, holding fruitless rounds of negotiations, forming and breaking alliances, and making declarations of principle with little bearing on political realities.

Read on

By David Bender

On March 7th, Iraq will hold its second parliamentary election and the world will again see pictures of Iraqis' purple fingers. But these images of democratic participation may obscure more than they reveal: Iraq's democracy is in trouble. Currently, only 28 of more than 500 banned opposition candidates will be permitted to run in the election. Through clever political and judicial manipulation, the opposition has been eliminated before election day and left with no clear constitutional or legal recourse.

Since January, an aggressive campaign to ban more than 500 largely Sunni and secular Shia candidates -- mostly from Iyad Allawi's largely Sunni and secular Shia Iraqiyya Alliance for alleged Baathist links -- has started to undermine the weak democratic process that was beginning to take shape in 2009. The Iraqiyya Alliance presented a non-sectarian alternative to the increasingly unpopular Iraqi Prime Minister Nuri al Maliki; and as a pro-US, secular nationalist, Allawi is a nightmare for pro-Iran factions in Iraq. With Maliki's support, the Justice and Accountability Council (JAC), which is charged with de-Baathification and is run by two notoriously pro-Iran figures, Ahmed Chalabi and Ali Faisal al Lami, ordered electoral bans against many Iraqiyya candidates linking them to Baathism.

Read on

By Ian Bremmer and David Gordon

Now for the red herrings, the places and problems where we think there is less risk than meets the eye.

In Iraq, elections in March will spark violence as foreign militants try to undermine the transition to Iraqi national sovereignty. A U.S. troop withdrawal beginning right after the elections will invite more violence. We could see a Sunni election boycott. But compared to what we've seen before, and what might have happened, the overall story is remarkably positive. For the markets, Iraq is suddenly an opportunity. The institutions are becoming legitimate (even with the unresolved Kurdish issue), the army is starting to work, and most importantly, political leaders from all communities are beginning to recognize the value of Iraq's tremendous natural resource base from which all can benefit if they make the compromises to maintain stability in the country. For all their basic governance problems, there's very little chance of Iraq actually becoming a failed state at this point -- a meaningful risk even a year ago. It's not a place we're ready to vacation in, but we're bullish on Iraq.

Iraq is also moving in a positive geopolitical direction. Ties with Turkey have grown particularly quickly -- not just in the Kurdish region in the north, but in Baghdad. That's one of the few positive stories for Ankara this year. Arab states in the region are still hesitant to build ties with Iraq as they wait for clarity on its next government. Maliki hasn't been a popular figure with neighboring gulf Arabs, but they recognize that Iraq's economic consolidation won't wait for another four years, and they'll start making political overtures to Baghdad if Maliki's mandate is extended. And if the Iraqi prime minister isn't returned (which is certainly plausible), we'll see a stream of head of state visits to place relations with a new leader on a more solid footing. So whatever the electoral outcome in March, we're likely to see Iraq on a faster path to integration with regional political and economic infrastructure next year. Meanwhile, Iran's role in Iraq has quietly receded. Iran's controversial presidential election and subsequent state violence did nothing to improve Tehran's influence among Iraq's Shia population, where Iraqi nationalism has been steadily growing.

The headlines for Iraq next year will undoubtedly be the timing/delays/pace of the US troop withdrawal. But the real story is going to be a moderate government, growing geopolitical influence, and the most exciting new investment opportunities the region has seen in a decade.

Read on

By Eurasia Group analyst Willis Sparks

The Iraqi government draws 95 percent of its revenue from oil production. Every plan its political leaders can imagine will depend on reliable access to oil profits, and every political faction knows that the country can't achieve lasting political stability until a durable agreement is reached on who owns the estimated 115 billion barrels of reserves and who holds the right to sell them. As tens of thousands of US troops withdraw from the country over the first eight months of 2010, competition for control of that oil will intensify.
 
After years of haggling, Iraq's political leaders have yet to reach agreement on a hydrocarbon law that determines how oil profits will be divided among the country's competing factions -- a plan that is necessary to revive an energy sector that has suffered from years of under-investment -- and a steep drop in oil prices from $147 per barrel last July to less than $65 today.
 
Plans to attract badly needed investment and technical expertise from international oil companies face serious political obstacles. Many Iraqis continue to believe that the United States invaded Iraq to grab control of its oil. As Iraq fell under foreign military occupation, its would-be political leaders discovered that pledges to protect Iraqi oil for Iraqis boosted their personal popularity. Support for opening the country's oil sector to Western companies won't win many votes in upcoming parliamentary elections, now scheduled for January.
 
Political competition for control of the country's oil will sharply intensify next year. The post-Saddam constitution stipulates that Iraq's natural resources belong to the Iraqi people. But different political factions read this idea in different ways. The document also provides that "the federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields." Some interpret this clause to mean that the central government in Baghdad has the right to manage Iraq's oil. Provincial leaders argue that this stipulation gives local governments the right to exploit resources located on their territory, especially in newly discovered fields.
 
This is the dispute that generates constant tensions between Baghdad and the Kurdistan Regional Government (KRG). Kurdish leaders, ever ready to assert the KRG's political and economic autonomy and much less resistant to doing business with Western companies, claim the right to formulate their own energy strategy and to award contracts to international oil firms. Baghdad insists these contracts are invalid and has "blacklisted" companies that invest in the Kurdish region. This multilevel game of chicken stokes political instability and fuels mutual suspicion.
 
And though the two sides managed to agree on an improvised revenue-sharing scheme that gives the KRG 17 percent of the profits from the oil exploited on its territory, the lack of an established energy law limits the inflows of investment that Iraq's rusting energy sector badly needs if it's going to maintain current levels of production -- let alone expand output.        
 
The Iraqi government has now received its wake-up call. On June 30, Baghdad launched an international bid round to offer service contracts for field development. Iraqi officials calculated that access to some of the country's vast reserves would persuade reluctant firms to ignore the considerable political and security risks and jump into Iraq's oil sector. They gambled that the bid round would make for good television, broadcasting it across the country. They were wrong. Oil Minister Hussein al Shahristani now faces an uncertain political future.
 
As Iraq moves toward the next parliamentary elections scheduled for January 2010, oil will remain at the heart of every political debate. And as US troops begin to leave the country in large numbers, the Iraqi government will need steady flows of oil revenue to finance reconstruction of the country, further development of Iraq's army and police forces, and the social spending needed to provide Iraqis with basic services. Until Iraq's various political factions forge the political compromises necessary for equitable sharing of oil profits, and until large-scale outside investment in oil infrastructure expands production and export capacity, there will be plenty to fight over and no guarantee that Iraq can be rebuilt.  

MARWAN IBRAHIM/AFP/Getty Images