Asia-Pacific

The Asia-Pacific is home to more people than any other region. Centered on the western rim of the Pacific Ocean, this region includes the easternmost countries of continental Asia as well as the archipelagos that punctuate the coast. Several of these countries, most notably China, experienced rapid economic growth in the second half of the 20th century, giving the region a new sense of global economic relevance that continues today. That relevance, however, depends largely on China, a power in transition whose rise is testing the network of U.S. alliances that have long dominated the region. How effectively Beijing manages its transition will shape the regional balance of power in the decades to come.

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Centered on the western rim of the Pacific Ocean, the Asia-Pacific region includes the easternmost countries of continental Asia as well as the archipelagos that punctuate the coast. 

As we look at what 2015 holds in store, we know the oil markets are oversupplied, Europe and China will continue to stagnate, and Russia will work under heavy constraints to deny the West a strong foothold in crucial areas of its periphery while the rest of the world deals with the repercussions of these trends. The ebb and flow of this tumult is covered in the forecast that follows.

Annual

2014 was the year in which the world -- most notably the United States, Europe and China -- was finally shaken out of complacency.

Eurasia

Eurasia is the world&rsquo;s most expansive region. It connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia. Forming the borders of this massive tract of land are the Northern European Plain, the Carpathian Mountains, the Southern Caucasus Mountains, the Tien Shan Mountains and Siberia. At the heart of Eurasia is Russia, a country that throughout history has tried, to varying degrees of success, to extend its influence to Eurasia&rsquo;s farthest reaches &mdash; a strategy meant to insulate it from outside powers. But this strategy necessarily creates conflict throughout Russia&rsquo;s borderlands, putting Eurasia a near constant state of instability.

Eurasia connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia. 

From the battlefields of the Middle East to the borders of Eastern Europe, Russia and the United States are clashing once again. As a global power, Russia is a shadow of its former self, but that won’t stop Moscow from using every means at its disposal — its military, security services, financial tools, cultural ties, propaganda, political connections and cyber-capabilities — to defend itself from what it sees as Western encroachment on its border, on its borderlands, on its interests around the world.

From the battlefields of the Middle East to the borders of Eastern Europe, Russia and the United States are clashing once again.

The Ukrainian crisis and the ensuing standoff between Russia and the West was the result of a collision between two geopolitical imperatives:&nbsp;<a class="connectedContentTrigger" href="/article/geopolitics-russia-permanent-struggle" data-nid="265881" type="Assessments" title="The Geopolitics of Russia: Permanent Struggle" data-timestamp="1334497673">Russia&#39;s imperative</a>&nbsp;to maintain buffer space in its former Soviet periphery &mdash; particularly Ukraine &mdash; to feel secure and project power, and&nbsp;<a class="connectedContentTrigger" href="/article/geopolitics-united-states-part-1-inevitable-empire" data-nid="269696" type="Assessments" title="The Geopolitics of the United States, Part 1: The Inevitable Empire" data-timestamp="1467625768">the United States&#39; imperative</a>&nbsp;to prevent the rise of a hegemon in Eurasia.In 2015, the tension between Russia and the West will persist but de-escalate. Russia began the year at a disadvantage; there is no major military move Moscow can make without triggering a larger, and potentially crippling, response from the West. Moreover, because of&nbsp;<a class="connectedContentTrigger" href="/article/ruble-free-fall-us-pushes-putin-edge" data-nid="275019" type="Reflections" title="With Ruble in Free Fall, the U.S. Pushes Putin to the Edge" data-timestamp="1418777663">Russia&#39;s increasingly vulnerable economy</a>, Russian President Vladimir Putin will have to consider the state&#39;s economic survival, as well as stability within the Kremlin, in any decision he makes in trying to protect Russian interests in the former Soviet periphery. Russia will thus avoid making a major military push into Ukraine, opting instead to keep the conflict in eastern Ukraine frozen with the potential for the separatist territories to resume economic ties and political contacts with the rest of the country. Russia also will avoid any major military actions to undermine the pro-Western governments of Moldova and Georgia, but will continue using opposition groups, protests and its existing military presence in their breakaway territories to&nbsp;<a class="connectedContentTrigger" href="/article/eu-borderland-deals-will-not-end-russias-challenge" data-nid="267953" type="Assessments" title="EU Borderland Deals Will Not End Russia's Challenge" data-timestamp="1403861372">maintain pressure on these countries</a>.At the same time, the West will likely refrain from taking action that risks pushing Russia &mdash; a massive, nuclear-armed country &mdash; over the edge. The Europeans in particular do not want to see Russia collapse, given the potential impact to their own economic and security standing. Barring any major miscalculations on either side, the European Union is unlikely to&nbsp;<a class="connectedContentTrigger" href="/article/russias-economic-concerns-could-have-calming-effect-ukraine" data-nid="275022" type="Reflections" title="Russia's Economic Concerns Could Have a Calming Effect in Ukraine" data-timestamp="1419292880">increase meaningful sanctions against Russia this year</a>. The current European sanctions in place will automatically expire throughout the year, and extending them would require approval from all 28 EU member countries. Thus, an easing is more likely than an extension or intensification of the current sanctions. Russia will follow this timeline carefully and moderate its behavior accordingly to ensure it has enough European support to neutralize the sanctions, even as more hardline states, such as&nbsp;<a class="connectedContentTrigger" href="/article/amid-conflict-poland-pushes-ukraine-align-west" data-nid="268177" type="Assessments" title="Amid Conflict, Poland Pushes Ukraine to Align with the West" data-timestamp="1411463063">Poland and the Baltics</a>,&nbsp;fight to sustain this economic pressure.On the security front, NATO is unlikely to push into Central and Eastern Europe beyond the rotational exercises and&nbsp;<a class="connectedContentTrigger" href="/article/reinvigorated-nato-looks-future" data-nid="268129" type="Assessments" title="A Reinvigorated NATO Looks to the Future" data-timestamp="1409735075">ballistic missile defense deployments already planned</a>. Meanwhile, Ukraine, Moldova and Georgia will not be brought into the military alliance, although the United States could increase bilateral security assistance, including potential weapons sales, to these countries. The United States also has the option of leveraging strategic weapons systems, such as long-range missiles and nuclear weapons, in its military posturing, to the detriment of existing Cold War-era treaties. However, such threats will remain rhetorical, as Europe will resist the&nbsp;<a class="connectedContentTrigger" href="/article/us-russia-nuclear-treaty-shows-weaknesses" data-nid="268349" type="Assessments" title="U.S., Russia: A Nuclear Treaty Shows Weaknesses" data-timestamp="1418897707">increasing deployment of such weapons systems on the continent</a>.

Echoes of the Cold War

History shows that all too often the biggest threats to Russia come from within. Such is the case in the current era, a time when Moscow must manage a standoff with the West, a weak economy, limited financial resources, social unrest, demographic shifts and political infighting in the highest echelons of power. As its leaders try to prevent Russia from collapsing altogether, the country will cease to be the nominal democracy it is now and become an outright autocracy. But Moscow can use its alienation from the West to its advantage: Demonizing an external enemy is an effective way to shore up national support.

History shows that all too often the biggest threats to Russia come from within.

Sanctions are only part of Russia&#39;s economic woes. Low oil prices and the effects that ongoing tensions with the West are having on Russia&#39;s investment climate will make the Russian economy one of Moscow&#39;s greatest challenges in 2015, inflicting both&nbsp;<a class="connectedContentTrigger" href="/article/russias-economic-crisis-reveals-fault-lines" data-nid="268347" type="Assessments" title="Russia's Economic Crisis Reveals Fault Lines" data-timestamp="1418845430">social and political pressures on the Kremlin</a>. Market hysteria aside, the Russian economy will continue to decline in 2015, but it will not sink to the depths of the 1998 crisis.Russia will go into recession officially in 2015 as inflation rises to double digits, foreign investment remains low and capital flight remains high. With the&nbsp;<a class="connectedContentTrigger" href="/article/when-oil-prices-drop-some-countries-lose" data-nid="268262" type="Assessments" title="When Oil Prices Drop, Some Countries Lose" data-timestamp="1415095208">decline of oil prices</a>, the Russian ruble will continue to weaken, its value changing chaotically. Additionally, the major Russian firms &mdash; including energy, banking and industrial firms &mdash; will have limited access to credit and will face mounting debts.According to the Russian government&#39;s current budget, which is based on oil at $80 per barrel, Russia could face a fiscal crisis unless Moscow makes deep spending cuts and withdraws a large amount from its cash reserves. Russia does have approximately $400 billion in those reserves as of December 2014, but the&nbsp;<a class="connectedContentTrigger" href="/article/putin-must-choose-spend-now-or-save-later" data-nid="274976" type="Reflections" title="Putin Must Choose: Spend Now or Save for Later" data-timestamp="1412027831">debate over where and how much to spend</a>&nbsp;will only add to friction within the Kremlin. Russia will have to prioritize financial assistance for many strategic state firms and banks, such as&nbsp;<a class="connectedContentTrigger" href="/article/russia-armors-rosneft-against-eu-sanctions" data-nid="268145" type="Assessments" title="Russia Armors Rosneft Against EU Sanctions" data-timestamp="1410212454">Rosneft</a>, Novatek, VTB Bank and Sberbank. Social spending will be key for Moscow as it tries to mitigate the social costs of the recession, such as increasing inflation and higher unemployment, by subsidizing gasoline prices or capping food prices. The poor economic situation will likely spur demonstrations across Russia, though the government will be able to manage the unrest.Russia will increase defense spending moderately this year but will postpone its large armament programs until after 2015. This will allow Moscow to maintain its current military presence and projection in the former Soviet periphery, but Russia&#39;s long-term overhaul of its military and defense sector will be put off for the time being.Amid Russia&#39;s economic troubles and its standoff with the West, divisions will grow deeper among the Kremlin elite over how to address the country&#39;s various crises. The declining economy means that the Kremlin&#39;s power circles will have less money to draw from for their own clans and companies. Moreover, Russian President Vladimir Putin will face increasing pressure from many oligarchs, whose companies and fortunes are in massive decline. However, the Kremlin will focus mostly on the elite and on companies in the business of energy and banking, such as Rosneft, Novatek, Sberbank, and VTB, instead of the oligarchs and most of the private sector. The increasing competition among the elite will force Putin to spend more time arbitrating, though this will keep the competing clans focused on each other instead of the Russian leader, enabling Putin to manage any potential challenges to his rule this year.

Russia's Internal Struggle

For proof that the Cold War never fully died, look no further than Ukraine, the site of a much broader standoff between the West and Russia. After the Euromaidan uprising of 2014, protesters replaced a government allied with Moscow with one allied with the West — an act to which Russia responded by annexing Crimea and by supporting separatist rebels in eastern Ukraine. The West has since levied sanctions against Russia. The government in Kiev is still viable for now, but security, economic and political support from the West will ultimately determine whether Ukraine can stay intact.

For proof that the Cold War never fully died, look no further than Ukraine, the site of a much broader standoff between the West and Russia.

Like Russia, Ukraine will face&nbsp;<a class="connectedContentTrigger" href="/article/ukraines-economic-woes-create-problems-kiev" data-nid="275026" type="Reflections" title="Ukraine's Economic Woes Create Problems in Kiev" data-timestamp="1419981923">significant economic challenges</a>&nbsp;this year. With a gross domestic product decline of 7.5 percent in 2014 and an ongoing separatist conflict in eastern Ukraine, Kiev comes into 2015 under significant economic and financial strain. However, foreign financial assistance is likely to keep Ukraine afloat this year. The International Monetary Fund and foreign governments will follow through with their current commitments and provide Ukraine with additional financial assistance as needed. Such aid will require the implementation of significant new austerity measures, including cuts in subsidies and social spending, which will lead to some protests. Ukraine&#39;s weak economy and volatile political situation will allow Russia to exert influence over Ukraine in areas like energy, trade and security matters, though on the whole Kiev is likely to maintain an economic and political orientation toward the West.Ukraine also will encounter greater domestic security challenges as far-right and nationalist groups seek to pressure the government with protests. Some armed far-right groups that fought in eastern Ukraine will remain active throughout the country. On the other side of the spectrum, Russia-backed groups are likely to launch terrorist-style attacks in Ukrainian cities such as Kharkiv, Odessa and Mariupol, though these attacks will be limited in their scope and effectiveness.On the energy front, a deal that Kiev and Moscow reached at the end of 2014 for the resumption of&nbsp;<a class="connectedContentTrigger" href="/article/ukraine-russia-reach-natural-gas-agreement" data-nid="268254" type="Assessments" title="Ukraine, Russia Reach a Natural Gas Agreement" data-timestamp="1414711929">natural gas imports from Russia</a>&nbsp;will continue into the early months of 2015 in order to avoid major energy shortages in Ukraine during the winter. However, periodic cutoffs could occur later in the year as the two sides negotiate over a longer-term agreement regarding natural gas pricing and deliveries. A large-scale cutoff that affects Europe is unlikely for 2015.On foreign policy, Ukraine will take steps to integrate further with the European Union within the framework of the EU Association Agreement, and Kiev will seek to increase cooperation with NATO and the individual militaries of NATO states. However,&nbsp;<a class="connectedContentTrigger" href="/article/ukraines-alignment-pivot-does-not-guarantee-nato-membership" data-nid="275023" type="Reflections" title="Ukraine's Alignment Pivot Does Not Guarantee NATO Membership" data-timestamp="1419369791">actual EU and NATO membership</a>&nbsp;will not be considered for Ukraine. A low-level frozen conflict will continue with pro-Russian separatists in eastern Ukraine, but Ukraine will not seek to militarily regain control of Crimea and the self-declared republics in Donbas.

The Ukraine Conflict

The Iron Curtain is gone, but the competition for the lands that once shielded the Soviet Union from the West lives on. The Caucasus, Eastern Europe, the Baltics and Central Asia are just as important now as they were during the Cold War — and for nearly the same reasons. Russia is compelled to use them to protect its borders, and the West is compelled to use them to halt the rise of Russian power. The survival of the countries that occupy these lands will depend on agile diplomacy, economic diversification and flexible security relationships.

The Caucasus, Eastern Europe, the Baltics and Central Asia are just as important now as they were during the Cold War — and for nearly the same reasons.

The effects of the standoff between Russia and the West over Ukraine will continue to spill over across the former Soviet periphery.Amid continuing efforts by Ukraine, Moldova and Georgia to get closer to the West, Russia on Jan. 1 launched the&nbsp;<a class="connectedContentTrigger" href="/article/tumultuous-birth-eurasian-economic-union" data-nid="268369" type="Assessments" title="The Tumultuous Birth of the Eurasian Economic Union" data-timestamp="1420020009">Eurasian Union</a>&nbsp;with Belarus, Kazakhstan and Armenia, and Kyrgyzstan is scheduled to join mid-year.&nbsp;This initiative will increase economic and security integration between Russia and these countries. The other Eurasian Union member countries will feel the negative effects of Russia&#39;s economic crisis due to their dependence on Russia and their integration with Russia in areas such as trade, remittances and currency pegs. These economic weaknesses will make protests and social unrest more likely. Belarus in particular will seek to build closer economic ties with Europe, but it will also maintain&nbsp;<a class="connectedContentTrigger" href="/article/amid-crisis-belarus-re-examines-its-political-and-security-situation" data-nid="268049" type="Assessments" title="Amid Crisis, Belarus Re-examines its Political and Security Situation" data-timestamp="1406883600">a strong military and security relationship with Russia</a>.The Baltic states will increase their efforts to diversify their energy supplies away from Russia, primarily with r<a class="connectedContentTrigger" href="/article/europe-and-russia-after-south-stream" data-nid="268352" type="Assessments" title="Europe and Russia After South Stream" data-timestamp="1418984112">egional pipeline connections</a>&nbsp;and Lithuania&#39;s liquefied natural gas import terminal. This greater independence from Russian energy supplies will give them more room to maneuver politically regarding Moscow. NATO will maintain its commitments to the Baltics in terms of semi-permanent troop rotations and exercises, but these will not expand significantly. Pro-Russian demonstrations and activities will&nbsp;<a class="connectedContentTrigger" href="/article/pro-russian-activity-raises-concerns-latvia" data-nid="268297" type="Assessments" title="Pro-Russian Activity Raises Concerns in Latvia" data-timestamp="1416478522">worry the Baltic governments</a>, but they will be more of an irritant than a serious threat to stability.In the Caucasus, Georgia will see an increase in political instability as the ruling Georgian Dream party experiences&nbsp;<a class="connectedContentTrigger" href="/article/infighting-weakens-georgias-government" data-nid="268271" type="Assessments" title="Infighting Weakens Georgia's Government" data-timestamp="1415354438">greater internal divisions</a>,&nbsp;though this will not offset the country&#39;s broader EU and NATO integration drive. With Russia more focused on domestic and economic issues and thus less likely to intervene in skirmishes over Nagorno-Karabakh, Azerbaijan will try to challenge the status quo of its conflict with Armenia with more military activity on the front line. Although increased hostilities on the border can be expected, a&nbsp;<a href="/article/downing-armenian-helicopter-stokes-tensions-old-conflict">full-scale military conflict</a> drawing in larger neighbors is unlikely.Gradually rising tensions have been a common feature in Central Asia for the past few years, though 2015 could see these tensions spike. Tajikistan and Kyrgyzstan, both of which have seen significant political and security turmoil in recent years, will hold parliamentary elections this year. Perhaps more important, Uzbekistan will hold presidential elections in March 2015, just as the country is in the middle of a&nbsp;<a class="connectedContentTrigger" href="/article/uzbekistan-today-power-breakdown-and-volatility" data-nid="267524" type="Assessments" title="Uzbekistan Today: Power Breakdown and Volatility" data-timestamp="1388488556">shaky succession process</a>. All three countries will experience greater economic pressures as remittances from migrants in Russia decline, further contributing to the potential for political and security volatility in the region. Further adding to Central Asia&#39;s security challenges is the risk of greater militancy as a result of the&nbsp;<a class="connectedContentTrigger" href="/article/central-asia-after-us-drawdown-afghanistan" data-nid="267312" type="Assessments" title="Central Asia After the U.S. Drawdown in Afghanistan" data-timestamp="1380105173">U.S. drawdown in Afghanistan</a>&nbsp;and the potential return of militants fighting in the Syria/Iraq theater. &nbsp;On the energy front, the&nbsp;<a class="connectedContentTrigger" href="/article/russia-puts-brakes-south-stream" data-nid="275010" type="Reflections" title="Russia Puts the Brakes on South Stream" data-timestamp="1417478753">cancellation of South Stream</a>&nbsp;will make finding replacement projects a priority for both Russia and the Europeans as they seek to circumvent the troublesome Ukrainian transit route. Russia will build closer energy ties with Turkey. The Europeans will court Azerbaijan and Turkmenistan to participate in new projects on the Southern Corridor route &mdash; though&nbsp;<a class="connectedContentTrigger" href="/article/proposed-pipeline-lends-turkmenistan-greater-importance" data-nid="267794" type="Assessments" title="A Proposed Pipeline Lends Turkmenistan Greater Importance" data-timestamp="1398419237">Turkmenistan</a>, still mindful of Russian interests, is not likely to participate in any such projects this year.

The Fight for Russia’s Borderlands

Europe

To the west of Eurasia lays Europe, a region predisposed to division. It is surrounded on nearly all sides by islands and peninsulas that make it difficult for Europe to cohere. The northern half of the continent, moreover, sits on a plain whose short, meandering rivers tend to empower countries without forcing them to work with others. The southern half is situated on more mountainous terrain that has historically impeded the creation of strong, unified economies. As a result, Europe is a continent riven by pockets of distinct cultures whose differences are all too often irreconcilable.

Europe is a continent riven by pockets of distinct cultures whose differences are all too often irreconcilable.

That countries act in their own interests and not the interests of others is a fact that has always haunted EU foreign policy. It is for this reason that its foreign policy is reactive, not proactive as it was meant to be. And this dynamic is not lost on other foreign powers such as Russia, Turkey and the United States, which exploit EU divisions for their own benefit.

That countries act in their own interests and not the interest of others is a fact that has always haunted EU foreign policy.

The European Union, divided as it is among widely varying interests, will remain largely reactive to events in Ukraine and to the standoff with Russia overall. NATO will continue its rotation of troops in Poland, Latvia, Lithuania and Estonia, but barring an unexpected event (such as the downing of the Malaysian Airlines flight MH17 in 2014) the European Union is unlikely to force an escalation of tensions with Moscow. It will keep the current sanctions regime in place during the first half of the year but allow parts of the sanctions package to expire when they come up for review in mid-2015 if Russia appears more cooperative.Even as Germany maintains firm demands on Russia regarding the crisis in Ukraine, both sides will prioritize keeping their communication channels open. As far as Berlin is concerned, it is Moscow&#39;s responsibility to take the first steps to de-escalate the crisis. Russia is likely to act first, giving Germany the political room to support letting the sanctions expire in mid-2015. Meanwhile, Berlin will back multilateral forms of financial aid for Kiev while pushing the Ukrainian government to implement structural reforms.

Divided EU Foreign Policies

As the European Union’s political order breaks down, so too will its monetary union, the eurozone. At the core of the crisis is the struggle over the good of nations versus the good of the whole. Put simply, richer nations are tired of shouldering the financial responsibility of the entire union. And as some eurozone members become increasingly weighed down by high debt and deficit levels, fragile economies and weak banking sectors, other eurozone members are turning to Euroskeptic and nationalist parties that want to leave the currency union altogether.

As the European Union’s political order breaks down, so too will its monetary union, the eurozone.

In 2015, the currency bloc will have to deal with four major problems: economic stagnation, high unemployment, low inflation and high debt. There will be intense debates about how to address these problems, but the diverging interests of member states and the artificial calm created by the&nbsp;<a class="connectedContentTrigger" href="/article/perception-and-reality-eu-crisis" data-nid="274692" type="Reflections" title="Perception and Reality in the EU Crisis" data-timestamp="1367561151">European Central Bank</a>&nbsp;will undermine the European Union&#39;s efforts to take coherent measures to deal with its long list of unfinished business.The&nbsp;<a class="connectedContentTrigger" href="/article/conversation-europes-growing-political-fault-lines" data-nid="271537" type="Videos" title="Conversation: Europe's Growing Political Fault Lines" data-timestamp="1415136810">debate</a>&nbsp;between countries pushing for more stimulus in the eurozone (such as France and Italy) and countries insisting on further economic reforms (led by Germany) will continue. Paris and Rome will keep pushing for greater EU-wide investment and more investment plans in Germany. However, Germany&#39;s domestic constraints will limit its ability to take action. The zero-deficit policy is very popular among German voters, and conservative sectors of the government and the Euroskeptic opposition are pressuring Berlin to avoid making concessions to countries in the eurozone periphery. As a result, Germany is not likely to apply any significant stimulus packages at home or at the European level in 2015.However, Berlin will likely tolerate eurozone countries that are not honoring their debt and deficit commitments. For example, during the first quarter of the year, France and Italy will apply modest economic reforms aimed at partial economic liberalization to appease the European Union. By the end of the first quarter, the bloc will assess those measures and will decide&nbsp;<a class="connectedContentTrigger" href="/article/brussels-gives-france-and-italy-economic-reprieve" data-nid="268320" type="Assessments" title="Brussels Gives France and Italy an Economic Reprieve" data-timestamp="1417601019">not to apply sanctions against France and Italy</a>.This will have two main effects. On one hand, Paris and Rome will slow their economic reform to avoid an escalation of social unrest and to prevent the political divisions within their center-left governments from widening. On the other, these governments will become increasingly ineffective, and social discontent will remain strong. A relaxation of fiscal consolidation measures also will take place in Spain and Portugal, both of which will hold general elections in late 2015. Germany and the European Union will not make any real moves to punish Madrid and Lisbon.In addition to the &quot;stimulus versus reforms&quot; debate, there will also be a fierce discussion about the European Central Bank&#39;s role in fighting deflation and promoting economic growth. In 2014, the bank applied a series of controversial measures, including negative interest rates, cheap loans for banks and asset-purchase programs. In 2015, the institution will have to deal with the difficult question of whether or not to undergo a large-scale purchase of sovereign debt, a move&nbsp;<a class="connectedContentTrigger" href="/article/eurozone-quantitative-easing-remains-menu" data-nid="268326" type="Assessments" title="In the Eurozone, Quantitative Easing Remains Off the Menu" data-timestamp="1417774511">commonly known as quantitative easing</a>.The introduction of quantitative easing in the form of the European Central Bank directly purchasing sovereign debt from countries in the eurozone periphery will face resistance from the German government, which believes the measure would prevent such countries from applying structural reforms. The Bundesbank and other central banks in the eurozone will oppose the measure as well. As a result, the European Central Bank will delay a decision on quantitative easing for as long as possible while assessing whether ongoing policies are working. The European Central Bank will try other measures (for example, corporate bond purchases) before buying sovereign debt. The European Central Bank could also authorize alternative forms of debt purchases, such as allowing national central banks to do so themselves, letting them assume the risk instead of the European Central Bank. The European Central Bank could also limit triple-A countries&#39; purchases of alternative debt to mitigate German resistance. Even if quantitative easing is introduced at some point this year, Stratfor believes it will do little to resolve Europe&#39;s structural shortcomings and the growing political crisis on the continent.In fact, the eurozone is sleepwalking into a new financial crisis. Soaring sovereign bond yields &mdash; a problem that the eurozone&#39;s policymakers thought they had consigned to the past &mdash; could reawaken the currency bloc in 2015. In December 2014, Standard &amp; Poor&#39;s put Italy&#39;s sovereign credit rating just one notch above the speculative grade, mostly because of the country&#39;s political uncertainty and lack of reforms. In Greece and Spain, popular left-wing parties are campaigning on a promise to renegotiate their countries&#39; sovereign debt. It would take further downgrades of Italy&#39;s credit rating or a serious push by Greece or Spain to renegotiate their public debt for the European Central Bank&#39;s promise of intervention to be tested and for financial instability to return to the eurozone. Such a scenario would weaken Berlin&#39;s resistance to a new round of unorthodox measures.Finally, the eurozone is also waiting on the European Court of Justice to rule on the&nbsp;<a class="connectedContentTrigger" href="/article/germany-fights-two-fronts-preserve-eurozone" data-nid="236268" type="On Geopolitics" title="Germany Fights on Two Fronts to Preserve the Eurozone" data-timestamp="1412064115">legality of the European Central Bank&#39;s bond-purchasing program</a>. Although they may introduce a few conditions, the European magistrates are likely to rule that the program is legal, making quantitative easing harder to challenge and more politically acceptable. In any case, quantitative easing would probably not be the silver bullet many think it will be. Such a measure would buy distressed eurozone countries more time, but it would not solve the bloc&#39;s underlying problems.

The Fate of the Eurozone

European geography lends itself to political and economic fragmentation. Fundamental differences among Northern, Southern, Eastern and Western Europe have always prevented wholesale cooperation on the Continent, and the creation of the European Union never really reconciled those differences. If anything, it aggravated them when, beginning in 2008, it proved incapable of guaranteeing prosperity during times of economic and political duress. Many voters in Europe have since found sanctuary in the notion of the nation-state and, in doing so, have fueled feelings of nationalism, Euroskepticism, protectionism and isolationism. Those forces will tear the very fabric of the European project, leading to smaller alliances of like-minded countries.

European geography lends itself to political and economic fragmentation.

Six years into the European economic crisis, nationalist, protest and anti-EU parties have evolved to a point where they could actually enter governments. Because of this, 2015 will be a year when mainstream parties make&nbsp;<a class="connectedContentTrigger" href="/article/europe-when-unthinkable-becomes-possible" data-nid="275012" type="Reflections" title="Europe: When the Unthinkable Becomes Possible" data-timestamp="1417646864">alliances to remain in power that seemed unthinkable</a> before the crisis began. In some cases, the alliances will allow the mainstream parties to survive longer; in others, they will not.Several EU members &mdash; including the United Kingdom, Spain, Portugal, Finland, Poland, Greece, Denmark and Estonia &mdash; will hold general elections in 2015. In most of these elections, parties that oppose different aspects of the European Union will perform strongly.In the United Kingdom, the elections will lead to a fragmented parliament and difficult coalition talks. The electoral system (in which the candidate with the highest number of votes, not necessarily a majority, is elected) will keep the U.K. Independence Party from winning a substantial number of seats in parliament. The mainstream parties likely will retain power, but only after long negotiations to form a government, and a second election cannot be ruled out. The United Kingdom&#39;s electoral system will come under harsh criticism, but the reform process will probably not be completed until after 2015.Regardless of who wins the elections, London will also campaign to get back prerogatives from Brussels and strengthen the role of national parliaments. The European Union will agree to discuss some of the measures proposed by the United Kingdom, but Stratfor does not expect Brussels to accept any proposals that involve treaty change. Moreover, the United Kingdom will introduce additional&nbsp;<a class="connectedContentTrigger" href="/article/uk-immigration-remains-controversial-issue-cameron" data-nid="267466" type="Assessments" title="U.K.: Immigration Remains a Controversial Issue for Cameron" data-timestamp="1386066022">bureaucratic controls for immigrants from other EU nations</a>.The situation will be more dramatic in Spain, where the strong performance by the protest&nbsp;<a class="connectedContentTrigger" href="/article/europes-anti-establishment-wave-reaches-spain" data-nid="274995" type="Reflections" title="Europe's Anti-Establishment Wave Reaches Spain" data-timestamp="1415056846">Podemos party</a>&nbsp;will put an end to the country&#39;s traditional two-party system. Closer cooperation between the mainstream center-right and center-left seemed impossible in 2014 but will become likely after the general elections in late 2015. A &quot;grand coalition&quot; in Spain cannot be ruled out.In Greece, the general elections will not end the country&#39;s political instability &mdash; quite the opposite. The elections are likely to result in a fragmented parliament and long coalition talks. Greece will have a new government eventually, but it will be weak. Regardless of who is in charge, Athens will ask its international lenders to let it relax its austerity measures. The European Union will likely reach an agreement with Athens regarding the slowing of economic reforms, but Brussels will not accept a renegotiation of Greece&#39;s debt. While the political situation in Greece will remain very volatile, Stratfor does not expect Greece to leave the eurozone in 2015.

European Disintegration

The breakup of the European Union isn't random or scattered: It's happening along distinct lines. The more prosperous northern European countries are tired of picking up the tab for southern Europe and are fighting for more control over the south's fiscal policies. Southern European countries want the opposite. Some countries in the east, meanwhile, see the European Union solely as a trade bloc and are becoming increasingly irritated by many of its other policies. As the economic and political environment in Europe becomes more contentious, these fundamentally opposed interests will come into conflict more and more often, further destabilizing the union.

The breakup of the European Union isn't random or scattered: It's happening along distinct lines.

Domestic political friction is likely in Romania because the country has&nbsp;<a class="connectedContentTrigger" href="/article/romania-after-presidential-election" data-nid="268291" type="Assessments" title="Romania After the Presidential Election" data-timestamp="1416257893">a center-right president and a center-left government</a>. However, this will not affect Bucharest&#39;s foreign policy; Romania will remain interested in its alliance with the European Union and the United States. The Romanian part of NATO&#39;s ballistic missile defense system will be installed in the country&#39;s southwest in 2015. Romania will also try to attract investment in its energy sector to reduce its dependence on energy imports.Something similar will happen in Poland, where the two main political forces will compete before the general elections slated for the final quarter of 2015. However, Warsaw will remain interested in keeping close ties with the White House, ties that allow it to purchase arms and receive military protection.For countries in Central and Eastern Europe, the diversification and security of energy supplies will be key issues in 2015. The year will be defined by numerous debates about projects to build liquefied natural gas terminals and interconnectors between Central and Eastern European countries. Some projects will actually become operational in 2015, including the Slovakia-Hungary interconnector and Poland&#39;s liquefied natural gas terminal. However, most of the debate will remain at the rhetorical level, especially when it comes to&nbsp;<a class="connectedContentTrigger" href="/article/europe-and-russia-after-south-stream" data-nid="268352" type="Assessments" title="Europe and Russia After South Stream" data-timestamp="1418984112">potential alternatives to the South Stream natural gas pipeline</a>.

EU: Regional Blocs

Middle East and North Africa

The Middle East and North Africa is the world&#39;s crossroads. It encompasses the Arabian Peninsula, the mountains of Iran, the plains of Turkey, the deserts of the Levant, the lands north of the Sahara and all coasts in between. The story of the region, as is so often the case of places stuck between foreign players, is the story of trade, exchange and conflict. The traditional powers of the region are Turkey and Iran &mdash; Saudi Arabia and Egypt are the current Arab powers &mdash; and their competition for influence over the region&#39;s weaker states makes the Middle East and North Africa an arena of violence and instability.

The Middle East and North Africa encompasses the Arabian Peninsula, the mountains of Iran, the plains of Turkey, the deserts of the Levant, the lands north of the Sahara and all coasts in between.

The United States is an empire, albeit a reluctant one. So vast are its interests that it is invariably drawn into conflicts, even difficult, faraway conflicts, it might otherwise avoid were it a weaker nation. But the United States cannot involve itself in every situation that impinges on its power; doing so would exhaust its resources and leave it vulnerable to challenges from potential rivals. It will instead use its military, economic and political influence to exploit regional rivalries around the world, rivalries that will keep larger countries consumed with one another rather than unified in their efforts to undermine the United States. Managing the interests of competing powers in volatile regions can be messy business, but such is the business of empire.

The United States is an empire, albeit a reluctant one.

While the United States prioritizes a strategy to hem in Russia, its strategy for the Middle East will focus on trying to minimize distractions stemming from this region. This mission appears simple on the surface, but will be complicated in practice.Russia will use the Middle East to influence its engagement with the United States. In the first part of the year, Russia is likely to propose negotiations to reach a power-sharing agreement in Syria to end the civil war. This agreement will lack enforcement and is unlikely to gain much traction, but&nbsp;<a class="connectedContentTrigger" href="/article/russia-positions-itself-mediator-syria-and-lebanon" data-nid="268342" type="Assessments" title="Russia Positions Itself as Mediator in Syria and Lebanon" data-timestamp="1418724015">Moscow will use the proposal to position itself</a>&nbsp;as a responsible mediator. Understanding that it will not be able to derail U.S.-Iranian cooperation, Russia will try to insert itself into the negotiations between Washington and Tehran by positioning itself as Iran&#39;s nuclear fuel supplier, thus making the United States more dependent on Russia to manage the region&#39;s conflicts. Russia will also use its tight energy relationship with Turkey to try to undermine Southern Gas Corridor energy projects designed to circumvent Russia.Russia&#39;s moves in the Middle East will do little to deter Washington from the&nbsp;<a class="connectedContentTrigger" href="/article/virtue-subtlety-us-strategy-against-islamic-state" data-nid="236259" type="On Geopolitics" title="The Virtue of Subtlety: A U.S. Strategy Against the Islamic State" data-timestamp="1410250066">main thrust of its strategy for the region</a>: Avoid a large-scale commitment of ground troops to this theater and try to shift more of the burden to regional players to manage common threats like the Islamic State. The divergent interests of those regional players, as well as the U.S. preference to prepare local forces to lead ground offensives against the Islamic State, mean progress in Iraq and especially in Syria will be slow and uneven.

The U.S. and the Balance of Power

The Islamic State is in decline. Under pressure from all the enemies it has made in its rise to power, the group continues to lose territory in Iraq and Syria — and thus its claim as a legitimate caliphate. But for all its losses on the battlefield, it has lost none of its potency as a terrorist group, one that will continue to attack its foes in the Middle East and beyond. The Islamic State’s degradation, meanwhile, is fueling a competition for the lands it used to control, pitting the Iranians, Turks and Kurds against one another for influence in the absence of another authority.

The Islamic State is in decline.

The Islamic State has risen to challenge al Qaeda as the leader of the global jihadist movement, but it will remain concentrated in the Iraq/Syria theater of operations. The group will find itself increasingly constrained by unreliable support networks and attacks on its logistic and financing networks. Although the Islamic State will retain its ability to carry out conventional and terrorist attacks in its existing areas of operation, the group will not be able to mass forces or significantly expand the territory under its control.Even if other jihadist groups or grassroots jihadists from beyond Iraq and Syria take up the Islamic State banner, the group&#39;s capabilities are not likely to improve significantly. Given the Islamic State&#39;s focus on Iraq and Syria and its general lack of transnational terrorist tradecraft, a major shift that would lead to an&nbsp;<a class="connectedContentTrigger" href="/article/islamic-state-admits-weakness" data-nid="236298" type="On Security" title="The Islamic State Admits a Weakness" data-timestamp="1418288628">appreciable spike in transnational terrorist attacks is unlikely</a>. Moreover, jihadists in Iraq, Syria, Yemen, Pakistan, the Caucasus, Somalia and Africa&#39;s Sahel region are likely to remain under considerable military pressure this year. While assisting local ground forces in the fight against Islamic State, the United States will rely principally on air power to strike at jihadist targets in the region &mdash; primarily in Iraq and Syria&nbsp;<a href="/article/us-campaign-against-islamic-state-could-expand">but potentially elsewhere</a>.&nbsp;

The Fight Against the Islamic State

Mobilizing local forces in Iraq and Syria to dislodge the Islamic State will be a slow and trying process. In Iraq, attempts to muster a national army to deal with the threat will be plagued by distrust among both Sunni and Kurds toward Baghdad. The Kurds will want to exchange security cooperation for energy rights, spurring calls for autonomy in Basra. The Sunnis, while assembling their own militias, will want to bargain for rights to energy resources in Kurdish-held disputed territories in exchange for security cooperation. The actions of less-disciplined Shiite militias operating in Sunni areas will run the risk of undermining political progress in these negotiations. Baghdad will limit how much it concedes to any of these groups as it tries to preserve central authority in Iraq while trying to deal with the more immediate issue of the Islamic State.As Stratfor anticipated in 2014, Turkey drew a line at underwriting Kurdish independence in Iraq and has instead chosen to re-engage with Baghdad on an energy understanding with the Kurdistan Regional Government. Financial strain and the common threat of the Islamic State have driven the Kurdish authority in Arbil back to the negotiating table with Baghdad, which will allow increased oil output in the north and more exports through the north in 2015 to add to Iraq&#39;s overall production. However, with a number of core issues unresolved, including the status of disputed territories, this compromise remains&nbsp;<a class="connectedContentTrigger" href="/article/iraq-baghdad-arbil-agreement-sidesteps-major-frictions" data-nid="268319" type="Assessments" title="Iraq: Baghdad-Arbil Agreement Sidesteps Major Frictions" data-timestamp="1417559525">vulnerable to disruption</a>. Turkish-backed projects to develop and transport natural gas by pipeline from northern Iraq to Turkey will also stress the agreement between Baghdad and Arbil in the absence of a framework that stipulates which party will have the right to sell the natural gas.

Negotiations in Baghdad

For some, the Syrian civil war is a fight for survival. The minority Alawites that dominate the government — such as it is — face the prospect of persecution if they lose, and the assorted Sunnis who oppose them face the prospect of violent reprisal if they lose. But for others, the Syrian civil war is an opportunity. Turkey is using the conflict to advance its interests in the region — interests that include curbing Kurdish expansion. Iran is trying to preserve its arc of influence, which extends to the Mediterranean Sea, in the face of staunch Sunni opposition. Russia is using the war as leverage in broader negotiations with the United States, which is itself working to disable terrorist organizations there. Conflicting agendas in such an already chaotic environment will keep an enduring resolution to the conflict beyond reach.

For some, the Syrian civil war is a fight for survival. For Turkey, Iran, the United States and Russia, it is an opportunity.

In Syria, President Bashar al Assad&#39;s government will focus on re-taking Aleppo and will make some progress toward this end. However, government forces will be hampered overall by rebel activity in Idlib and Daraa as well as an ongoing push by the Islamic State to seize Deir al-Zour in the east. In trying to dilute the military strength of Assad&#39;s forces, the Islamic State will try to recruit jihadists to&nbsp;<a class="connectedContentTrigger" href="/article/significant-islamic-state-offensive-lebanon-unlikely" data-nid="268373" type="Assessments" title="Significant Islamic State Offensive into Lebanon Unlikely" data-timestamp="1420293616">push against Hezbollah</a>&nbsp;in the Qalamoun area of Syria bordering Lebanon&#39;s Bekaa Valley. The potential for a jihadist push into Lebanon will attract greater military support for Beirut. Hezbollah and its patrons in Iran will use the common threat to further negotiations with their sectarian rivals over a power-sharing agreement in Lebanon.

The Syrian Civil War

Iran’s domain in the Middle East stretches from the Persian Gulf to the Mediterranean Sea. It maintains this arc of influence through its use of militant proxies, political agents and economic relationships, fending off challenges to its power from Sunni rivals in Saudi Arabia and Turkey. Iran’s nuclear program, meanwhile, will continue to test relations with the West. But for all the program’s controversy, it is unlikely to spark a serious confrontation with the United States — Iran will instead leverage its control of the Strait of Hormuz, through which roughly 20 percent of all globally traded crude oil passes. In fact, some of the biggest challenges to Iranian power will come not from without but from within as new generations of Iranians drift further from the religious principles — principles guarded by the still-strong clerical elite — on which the revolution was founded.

Iran’s domain in the Middle East stretches from the Persian Gulf to the Mediterranean Sea.

Maintaining a relationship with Iran remains critical to U.S. strategy in the Middle East, but a comprehensive agreement broadcasting a U.S.-Iran diplomatic rapprochement is not likely in 2015. The relationship between Iran and the United States will not make a public leap forward. Rather, diplomacy will continue publicly while both sides cooperate quietly in areas where their interests coincide, such as Iraq and Syria, even if Washington and Tehran go to great lengths to deny such cooperation publicly.The nuclear issue is only one piece of this broader negotiation. An understanding between Washington and Tehran will endure this year and Iran will maintain limits on enrichment activity while the United States gradually eases sanctions, relying principally on executive power to do so. Lower oil prices will constrain Iran as will the prospect of Iran becoming a more politically viable energy alternative to Russia. These limits will help underpin this negotiation. However, the political complexities surrounding this process, along with technical constraints, mean the Iranian energy sector is unlikely to see a revival this year that significantly increases the amount of Iranian oil on the market.Iranian President Hassan Rouhani&#39;s inability to significantly improve economic conditions in Iran this year will only add to the domestic pressures he faces in sustaining the negotiations with the United States. Pre-emptively, Rouhani will&nbsp;<a class="connectedContentTrigger" href="/article/irans-presidential-camp-goes-offensive" data-nid="268377" type="Assessments" title="Iran's Presidential Camp Goes on the Offensive" data-timestamp="1420453829">try to undercut his opponents</a>&nbsp;in the Islamic Revolutionary Guard Corps through anti-corruption charges and other means that aim to undermine the corps&#39; position as a central cog of Iran&#39;s political economy. The corps will push back but ultimately will lack the institutional strength needed to significantly destabilize the Rouhani government and derail the negotiations.

Iran's Arc of Influence

At the height of its power, the Ottoman Empire stretched from Central Europe to the Arabian Peninsula. Turkey, the country that sprang from the Ottomans’ demise, is not an empire, but it is a country on the rise. Strategically located between East and West, the country is using its economic clout, its military might and its cultural weight to expand its influence throughout the Middle East. Larger powers such as the United States, Europe and Russia will therefore have to alternately work with and against Turkey as they pursue their interests in the region.

Turkey, the country that sprang from the Ottomans’ demise, is not an empire, but it is a country on the rise.

Though the United States and Turkey share a number of interests, from keeping Russian ambitions in check to stabilizing the Middle East, their&nbsp;<a class="connectedContentTrigger" href="/article/us-diplomacy-tries-break-turkish-isolation" data-nid="268299" type="Assessments" title="U.S. Diplomacy Tries to Break Turkish Isolation" data-timestamp="1416564098">partnership will remain strained</a>&nbsp;in 2015.Turkey will maintain a defensive military posture along its borders in spite of Ankara&#39;s ambitious calls for the implementation of a no-fly zone in Syria &mdash; a proposal the United States will keep its distance from as it remains focused on the fight against Islamic State. Turkey&#39;s backing of Islamist groups modeled after the Muslim Brotherhood, combined with its military reticence, will alienate Turkey from much of the Arab world, denying Turkey the broader following it seeks to legitimize its role as a regional leader.Also, Turkey will keep its distance from the U.S.-led effort to contain Russia, preferring instead to&nbsp;<a class="connectedContentTrigger" href="/article/europe-and-russia-after-south-stream" data-nid="268352" type="Assessments" title="Europe and Russia After South Stream" data-timestamp="1418984112">maintain a careful balance</a>&nbsp;between Russia and the West. For example, Turkey will proceed with the Trans-Anatolian Natural Gas Pipeline, Trans-Adriatic Pipeline and other Southern Corridor projects that circumvent Russia while strengthening its energy relationship with Russia. Unable to break its energy dependence on Moscow, Turkey would rather reap the commercial benefits as a transit state while taking advantage of the tense political climate to increase trade with Russia as European demand continues to lag.Turkey will also be preoccupied for much of the year with the lead-up to the June general election. The election will occur amid slowing economic growth, rising unemployment and a growing chorus of criticism against the ruling Justice and Development Party&#39;s foreign policy. The opposition will remain too fragmented to deny the ruling party a victory, but the Justice and Development Party&#39;s popularity in the polls will erode, making a two-thirds majority in parliament unlikely for the party. However, this will not prevent Turkish President Recep Tayyip Erdogan from recentralizing power under his presidency. Erdogan will face charges for violating the constitution, but the allegations will not be backed by enough institutional heft to paralyze the government or prevent Erdogan from managing the country.The Justice and Development Party will vie for the Kurdish vote through the ongoing peace process with the Kurdistan Workers&#39; Party, and Kurdish factions in Turkey will in turn use this election year to push forward their demands by way of street demonstrations and occasional attacks. There may be rhetorical claims of progress at certain points, but this negotiation will remain hampered by a number of constraints. With active battlefields on Turkey&#39;s borders, Ankara is not going to succeed in disarming the Kurdistan Workers&#39; Party, and the Justice and Development Party does not have enough political strength to unilaterally approve sensitive components of a peace deal.

Turkey's Resurgence

Though the Middle East has never been a picture of stability, the region has had at least a semblance of order for the past hundred or so years, held together as it was by authoritarian regimes that for all their failings managed to keep the region from devolving into outright chaos. That is no longer the case. The fall of Saddam Hussein gave Iran, the Middle East’s premier Shiite power, an opportunity to extend its influence from the Persian Gulf to the Mediterranean Sea. Its rise has galvanized the region’s Sunnis, led by Turkey and Saudi Arabia, against Iran in a series of proxy wars throughout the region. The disarray has given extremist groups the space to operate and has all but invited outside powers like Russia and the United States to intervene and exploit as they see fit. And though these powers may intend to avoid the quagmire that is the Middle East, competing agendas and transnational threats will challenge those intentions.

Though the Middle East has never been a picture of stability, the region has had at least a semblance of order for the past hundred or so years. That is no longer the case.

With Turkey weighed down, the Gulf Cooperation Council (GCC) states, led by Saudi Arabia, will attempt to fill a void in the region, reflecting a&nbsp;<a class="connectedContentTrigger" href="/article/saudi-arabia-faces-challenges-new-year" data-nid="236309" type="On Geopolitics" title="Saudi Arabia Faces Challenges in the New Year" data-timestamp="1420534814">rare and growing assertiveness</a>&nbsp;as the bloc works to secure Sunni Arab interests that it believes it can no longer rely solely on the United States to defend. The GCC began 2015 in a tenuous truce among member states as they pool their political and economic resources to combat the Islamic State through air power and support of local ground forces while trying to manage Iranian ambitions in the region.This will remain a fragile working relationship as divisions persist over working with political Islamists and over member countries&#39; varying levels of engagement with Iran. Bahrain and the United Arab Emirates will adhere closely to Saudi policy while Kuwait and Oman pursue a more cautious line. Qatar will cooperate selectively with this group to avoid isolation but will use its re-engagement to push other GCC members to integrate, rather than eliminate, Doha-backed political Islamists in places such as Egypt, Libya and Syria.With ample currency reserves, GCC coordination on energy will continue through 2015. Gulf producers will continue resisting production cuts and trying to defend their market share from the expansion of unconventional hydrocarbon production technology beyond North America.

Rebalancing Power in the Middle East

Though Yemen has always suffered from instability, its recent history has been especially violent. What started as protests during the Arab Spring eventually developed into open warfare. One president was replaced by another. Cease-fires were declared but later ignored. The economy is in shambles. Water is scarce. The extremist groups that thrive in such an environment are now the object of U.S. counterterrorism policy, not to mention a problem for Saudi Arabia, which is more exposed to spillover violence and displaced refugees than any other country. Saudi Arabia has no choice but to shoulder the burden of the conflict, even if its policies for doing so clash with those of its erstwhile allies.

Yemen has always suffered from instability, but its recent history has been especially violent.

Yemeni President Abd Rabboh Mansour Hadi&#39;s embattled regime will balance ministerial positions and other key posts among the factions jockeying for power as one way of staving off civil war. The al-Houthi sectarian group will continue to coordinate loosely with elements of Yemen&#39;s armed forces and some local tribes to push back against al Qaeda in provinces under al-Houthi influence. Though the al-Houthis made a large show of strength in 2014, they are not likely to attempt to seize power in Sanaa and rule directly. Instead, the al-Houthis will use their enhanced influence and military prowess to&nbsp;<a class="connectedContentTrigger" href="/article/yemens-president-forms-new-government" data-nid="268289" type="Assessments" title="Yemen's President Forms a New Government" data-timestamp="1416220226">bargain with the government over political and economic rights</a>.Al Qaeda in the Arabian Peninsula will remain active in Yemen, staging attacks against the state military and intelligence apparatus, opposing tribes and the al-Houthis. However, battling all of these groups will limit the al Qaeda franchise&#39;s ability to significantly expand control beyond its traditional territory in the east and parts of the south and will curtail its ability to stage large-scale and operationally successful attacks in the capital. In southern Yemen, the secessionist movement, emboldened by the al-Houthi expansion and a weak central government, will continue to stage protests and hold strikes in efforts to extract concessions from Sanaa. The southern secessionists, unable to achieve their goal of a federalist Yemen divided between the north and south in negotiations over the constitution, could resort to violence.Meanwhile, Saudi Arabia will keep a watchful eye on Yemen and balance among its neighbor&#39;s factions, including local jihadists, with the primary goal of preventing a spillover of violence northward. The Saudis will retain the option to intervene through air strikes should the need arise.

The Yemen Civil War

Israel lives under difficult geopolitical circumstances. A small country with limited resources and surrounded by potentially hostile neighbors, Israel survives by allying with powers that do have the resources to manage the balance of power in the Middle East — namely, the United States. Its geographic position also means that Israel must manage complex relations with its Muslim neighbors by quiet collaboration, by exploiting divisions and by parlaying its technological and economic advantages into strategic dependencies. To navigate all the challenges presented by its position in the Middle East, Israel will remain agile in its diplomacy and, when the situation warrants, steadfast in its pre-emptive strikes, its covert activities and its economic relationships.

Israel's geographic position also means that it must manage complex relations with its Muslim neighbors.

Israel will undergo a political transition this year that will pull the government further to the right. Israel&#39;s greater intractability on policies toward the Palestinian territories will strain relations with Washington and further enflame tensions in the West Bank and Israel proper as&nbsp;<a class="connectedContentTrigger" href="/article/israel-targets-hezbollah-weaponry-syria" data-nid="268331" type="Assessments" title="Israel Targets Hezbollah Weaponry in Syria" data-timestamp="1418119206">militants resort to more resourceful tactics</a>&nbsp;against Israeli targets and as Fatah&#39;s influence continues weakening in the West Bank. Israel will maintain a pre-emptive military posture and strike with impunity against targets in neighboring states when the need and opportunity arises.

Israel's Survival Strategy

Egypt’s modern history dictates that the military, battle-tested for decades by conflict at home and abroad, reigns supreme. And its geography dictates that it is uniquely influential in the region: Removed somewhat from the tumult of the Middle East, the country is a key ally in the United States' bid to maintain the Arab-Israeli balance of power. Now that Egypt has dealt with the political upheaval of the Arab Spring, it is looking to reclaim its regional influence. But doing so is no small task. Its persecution of the Muslim Brotherhood has driven political Islamists to militancy, and the public has grown restive of the structural reforms Cairo has implemented to try to reduce its dependency on foreign aid — and all the obligations that come with it.

Egypt’s modern history dictates that the military reigns supreme, and its geography dictates that it is uniquely influential in the region.

The military-backed government of President Abdel Fattah al-Sisi will try to consolidate its power this year. A key component of this process will be the March parliamentary elections. A&nbsp;<a class="connectedContentTrigger" href="/article/egypts-fragmenting-islamist-and-secular-camps" data-nid="268327" type="Assessments" title="Egypt's Fragmenting Islamist and Secular Camps" data-timestamp="1417874427">fragmented Islamist and secularist landscape</a>, along with skillful electoral engineering, will allow al-Sisi to realize a divided and thus pliable legislature. Disagreements over how much political space to cede to Islamists who do not oppose the government, such as the Salafist al-Nour Party, could limit the extent of the government&#39;s success. The government will still be dealing with protests from the Muslim Brotherhood, though those protests will remain largely contained. At the same time, Cairo will expend a great deal of energy trying to combat jihadist groups such as Ansar Beit al-Maqdis and Ajnad Misr both in Sinai and on the mainland.Egyptian security forces will continue focusing on the Sinai and Nile Delta regions as they seek to contain domestic insurgent activity, though the country&#39;s long desert border with an increasingly chaotic Libya will also warrant Cairo&#39;s attention. Cairo will work with its Gulf backers and the recognized Libyan government in Tobruk to limit the threats emanating from eastern Libya. However, Egypt&#39;s involvement will fall short of direct military intervention: Cairo&#39;s participation in the Libyan conflict in 2015 likely will be limited to logistical support, weapons and ammunition, and coordination in air strikes.

Egypt's Uphill Battle

The fall of Libyan leader Moammar Gadhafi shattered the country he left behind. No longer is there a central government but three competing ones, each with its own militia to support its claim to power. Caught in the crossfire of the conflict stands Libya’s oil industry, over which rival factions compete to secure the country’s largest source of revenue. There’s no question that the road to reconciliation will be long; the only question is how violent it will be.

The fall of Moammar Gadhafi shattered the Libya he left behind.

Fragmentation will define Libya over the next year, with regional governments and the international community pursuing various and often competing strategies. The country has missed self-imposed deadlines for drafting a constitution and holding elections for a permanent government, and now Libya&#39;s transition has ground to a halt as competing factions of revolutionaries, Gadhafi-era figures and militias from various ideological and sectarian backgrounds vie for influence. Violence and insecurity will prevent Libya from reaching&nbsp;<a class="connectedContentTrigger" href="/article/now-militia-leaders-posturing-unlikely-affect-libyan-oil-exports" data-nid="268264" type="Assessments" title="For Now, Militia Leader's Posturing Unlikely to Affect Libyan Oil Exports" data-timestamp="1415141538">full oil production capacity</a>, and strikes, protests and attacks will continue to cause swings and dips in overall output over the course of the year. However, the strategic value of Libyan oil supplies to international markets will diminish, especially as Gulf producers maintain production levels and output from other OPEC members Iraq and Nigeria expands or stabilizes.The United States and its coalition partners will watch Libya closely for significant jihadist activity. So long as groups affiliated with al Qaeda or the Islamic State remain isolated within small pockets of Libya and do not begin to organize attacks against neighboring Algeria, Egypt or the European Union, there will be less pressure&nbsp;<a class="connectedContentTrigger" href="/article/external-powers-have-good-reason-not-intervene-libya" data-nid="268149" type="Assessments" title="External Powers Have Good Reason Not to Intervene in Libya" data-timestamp="1410365293">for outside forces to strike proactively</a>&nbsp;against Libyan militants &mdash; a move that could further destabilize the country. Saudi Arabia, the United Arab Emirates and Egypt likely will limit themselves to logistical support and air strikes in their ongoing support for forces allied to the internationally recognized national government in Tobruk.There will be no clear or easy victories for the competing governments either in Tripoli or Tobruk; various parties are likely to express support for negotiations and enter talks, but neither lasting cease-fires nor a stable transition is expected in 2015. Any constitution written under the aegis of the government in Tobruk will not have national support, and if ratified it likely will prove temporary, extending Libya&#39;s political instability beyond 2015.<div>&nbsp;</div>

The Libyan Civil War

Between the Sahara Desert and the Mediterranean Sea lies North Africa, the birthplace of the Arab Spring, a region of high youth unemployment, militancy, porous borders and resource scarcity. The Arab Spring may have empowered the region’s political opposition movements, which have since pushed for a variety of reforms, but governments are pushing back, some more successfully than others. Restructuring social contracts under such conditions will be difficult task, one that will test the stability of governments that naturally want to stay in power.

The Arab Spring may have empowered North Africa’s political opposition movements, which have since pushed for a variety of reforms, but governments are pushing back, some more successfully than others.

Algeria&#39;s constitutional reforms will likely be announced this year. Of particular importance are the reforms pertaining to the structure of the government as a presidential or prime ministerial system, economic shifts &mdash; including the further liberalization of the hydrocarbon sector &mdash; and the creation of a more civilian-led state after decades of military dominance. The transition from ailing President Abdelaziz Bouteflika to his successor is not likely to happen this year, barring any unexpected health complications, and the current political machinery behind Bouteflika probably will remain largely in place to help manage the transition process.Beyond the internal workings of the political elite, Algiers will work to improve ties with France and the European Union to help bolster the government and attract much-needed foreign investment into the non-energy sectors of Algeria&#39;s economy, especially mining, steel and automobile manufacturing. Securing against regional militancy will remain Algeria&#39;s top security priority, especially regarding neighboring northern Mali, Tunisia and Libya. Tunisia will work to form a new government in early 2015, giving Algiers ample opportunity to entrench security and political cooperation with Tunis further. Algiers also will work to persuade western Libya&#39;s myriad tribal, militia and local political groups to participate in internationally backed negotiations between the feuding Libyan governments in Tripoli and Tobruk.

The Difficulties of North African Reform

For the past three decades, cheap exports and government-led investment have sustained economic growth in China. And in doing so, they have ensured political stability in one of the world’s largest and most populous countries. But leaders in Beijing understand that that model is unsustainable, and they have therefore begun to develop a new economic model, one built on consumption, an expanded services sector and technological innovation. The move from the old to the new will test the Communist Party’s will to reform and shake the very foundations on which its legitimacy stands.

China cannot evolve economically without also evolving politically. 

China enters 2015 amid a deepening economic slowdown. Steady declines in home prices, home sales and real estate-related investment, combined with the impact of still-weak external demand and rising input costs for Chinese exports, all but ensure that China&#39;s economic growth in 2015 will fall to its lowest level since 1990. Stable growth in services industries, buttressed by rising household consumption, will mitigate some of the negative social and political effects of slowing industrial activity. However, these components of China&#39;s economy are not yet strong enough to offset the inexorable winding down of China&#39;s decadeslong export and investment boom. The core questions for China in 2015 do not concern whether or for how long the country&#39;s economic slowdown will continue &mdash; declining growth will remain the norm this year. Rather, the questions are how this slowdown will play out socially and economically across China&#39;s many diverse regions and whether the country&#39;s political and administrative structures can&nbsp;<a class="connectedContentTrigger" href="/article/china-continues-wrestle-meaning-reform" data-nid="274987" type="Reflections" title="China Continues to Wrestle With the Meaning of Reform" data-timestamp="1413849455">evolve to meet its rapidly changing needs</a>.Slowing economic growth in 2015 will bring to the forefront deep-set regional economic imbalances &mdash; not simply between the coast and the interior, but between different parts within coastal and inland China. Some provinces will feel the pain of declining housing and infrastructure construction disproportionately. Northern China&#39;s traditional coal, steel and heavy industrial hubs like Hebei, Shanxi, Inner Mongolia and Heilongjiang, where reliance on the health of nationwide real estate markets is highest, will be hardest hit. Naturally, these provinces will be the locus for local government and corporate debt concerns in 2015. As average home prices fall further, the likelihood of localized debt, economic and employment crises in these regions rises substantially.At the same time, China&#39;s internal regional economic and financial fragmentation will limit these economic crises to a few provinces, providing a subtle but powerful buffer against nationwide financial contagion. This is the same fragmentation that Beijing seeks to overcome in the long run. Thus, even as the resource- and heavy industry-based northern Chinese economies grind to a halt this year, the country&#39;s more prosperous and heavily urbanized coastal and Yangtze River regions will see more stable growth bolstered by stronger services industries, more robust internal consumption bases and rising investment into higher value-added manufacturing.The Chinese government will not seek to reverse the country&#39;s economic slowdown this year. Instead, it will rely on a combination of tools to ensure that the slowdown remains measured. First and foremost, it will use centrally allocated infrastructure investment, direct capital injections and targeted relaxation of&nbsp;<a class="connectedContentTrigger" href="/article/china-stays-course-housing-woes-intensify" data-nid="274974" type="Reflections" title="China Stays the Course as Housing Woes Intensify" data-timestamp="1411610109">local government housing</a>&nbsp;and spending controls to support strategically significant industries and regions or to soften the impact of crises in others. Additionally, it will act as needed to ensure that the core state-owned banks and their provincial branches have ample liquidity to metabolize rising non-performing loan ratios and maintain a steady flow of credit to favored businesses. Beyond these measures, however, the Chinese government will let the country&#39;s economic slowdown do what central authorities have long struggled, and failed, to accomplish: push forward&nbsp;<a class="connectedContentTrigger" href="/article/chinas-struggle-reform-steel-industry" data-nid="266069" type="Assessments" title="China's Struggle to Reform the Steel Industry" data-timestamp="1340186436">industrial consolidation</a>, weed out unprofitable and wasteful investment, and curb endemic housing and basic materials oversupply. Ultimately, this process could pave the way for a more competitive and productive Chinese economy. However, during 2015, China will feel much of the pain and few of the benefits of industrial consolidation, all while maintaining just enough support to the economy to prevent that pain from becoming critical.Beijing will take advantage of the housing and construction slowdown to implement a number of long-awaited economic and social reforms in 2015. First, it will expand fiscal reform measures, such as a municipal bond pilot program and value-based resource taxes, in an effort to reduce local government reliance on land sales for revenue, thus removing a key structural driver of China&#39;s post-1990s housing and infrastructure boom. In conjunction with fiscal reforms, the expansion of property taxes to more regions and the creation of a&nbsp;<a class="connectedContentTrigger" href="/article/chinese-real-estate-slowdown-opens-avenues-reform" data-nid="268363" type="Assessments" title="Chinese Real Estate Slowdown Opens Avenues to Reform" data-timestamp="1419688913">national property registration system</a>, both set to take effect in the first half of the year, will undermine real estate speculation and help bring prices further in line with real average income levels, especially in the small- and medium-sized cities Beijing has targeted for future urbanization. China also will establish a national deposit insurance program, widely seen as a key step toward building a more mature and open financial system. Moreover, Beijing will adjust its household registration, or hukou, system to better manage shifting labor flows as some parts of the economy slow faster than others. Finally, the year will bring tangible progress on efforts to make the state-owned sector more internally competitive and to open key emerging industries &mdash; notably, shale gas exploration &mdash; to greater private and foreign participation.Implementing these and other reforms will not be easy. The central government&#39;s powerful security and Internet censorship apparatuses will keep visible signs of outright opposition to a minimum. Yet at the local level and within state-owned enterprises and ministries, resistance to measures that threaten employment, social stability and vested interests will run high. The deepening economic slowdown and rising urgency of reform will fuel continued efforts by&nbsp;<a class="connectedContentTrigger" href="/article/end-consensus-politics-china" data-nid="236244" type="On Geopolitics" title="The End of Consensus Politics in China" data-timestamp="1407225768">Chinese President Xi Jinping and his closest allies to consolidate their influence</a>&nbsp;over Communist Party, government and military apparatuses and to bolster the central leadership&#39;s public image. In 2015, as in the past two years, the anti-corruption campaign will be the central vehicle for doing both. As before, anti-corruption drives in 2015 will target a combination of high-level officials across the military and strategic industries and regions as well as local-level officials and middle-level functionaries, with perhaps a growing emphasis on combating local corruption through policies like the national property registry. In line with this, 2015 will likely bring several waves of large-scale arrests and demotions, along with rising capital flight as officials accused of corruption seek to move assets overseas.

China in Transition

China’s remarkable economic growth requires a remarkable amount of raw materials — more materials, in fact, than the once self-sufficient country can now produce on its own. And in an effort to procure these materials closer to home, Beijing has enacted the One Belt, One Road initiative, parts of which follow the ancient Silk Road trading route that connected the Far East to Europe. The initiative is a development strategy meant to integrate resources and markets throughout Eurasia, create new trading partners, ensure employment for Chinese workers and diversify the Chinese currency. Perhaps the ultimate goal of One Belt, One Road, however, is to insulate the Chinese economy from sudden disruptions — all the more important now that growth is finally slowing.

In an effort to procure these materials closer to home, Beijing has enacted the One Belt, One Road initiative, parts of which follow the ancient Silk Road trading route that connected the Far East to Europe.

Economic, social and political stress at home will not halt China&#39;s push to expand its diplomatic and security presence in the countries with which it shares land borders. China also will work to expand its overland transport, trade and energy connections with its land neighbors. In particular, Beijing will focus in 2015 on bolstering security and investment ties with Central Asian countries and Afghanistan and Pakistan as it seeks to stifle unrest in Xinjiang and curb its rising dependence on&nbsp;<a class="connectedContentTrigger" href="/article/chinas-ambitions-xinjiang-and-central-asia-part-1" data-nid="267324" type="Assessments" title="China's Ambitions in Xinjiang and Central Asia: Part 1" data-timestamp="1380537076">overseas trade in energy, resources and goods</a>. Likewise, Beijing will continue cementing infrastructural ties to mainland Southeast Asia, with a focus on expanding rail and road transport between southwest China, the Greater Mekong Subregion and Myanmar. Last but not least, China&#39;s leading energy firms will deepen cooperation with their Russian counterparts in 2015 as Beijing looks to diversify its energy supply routes and hedge against Japanese-Russian energy cooperation.This year will not be quiet by any means in the East and South China seas, especially with several Chinese construction projects on islets and atolls in island chains such as the Spratleys scheduled for completion. Likewise,&nbsp;<a class="connectedContentTrigger" href="/article/us-and-china-react-shifting-balance-power-east-asia" data-nid="274879" type="Reflections" title="The U.S. and China React to a Shifting Balance of Power in East Asia" data-timestamp="1397001498">as Stratfor has noted before</a>, the steady proliferation of naval and commercial maritime vessels in both seas raises the likelihood of accidental collisions or confrontations. However, Beijing will also work to mitigate strong reactions from its maritime neighbors. Although China is seen as an assertive, and by some accounts aggressive, power in the South China Sea, it also carefully weighs its actions to avoid the strongest countermeasures. Beijing will make its maritime security elements &mdash; essentially its coast guard &mdash; more active than its navy in order to force China&#39;s neighbors to focus their procurement dollars on coast guard rather than naval vessels. It also will continue to hold out a potential code of conduct to the Association of Southeast Asian Nations as a way to keep the group divided and reticent of stronger military ties with outside partners, as they see some opportunity to constrain Chinese actions without being caught between Beijing and Washington and Tokyo.

The New Silk Road

Kept dormant for two decades by the weight of economic malaise, Japan has awoken again, ready to reclaim its place in the international order. Standing in the way, however, are unprecedented economic and demographic problems, the solutions to which will require radical changes to the country’s technological, political, social and economic structures — changes that will difficult to accept, let alone implement. But if it does, Japan will be a case study for governments that find themselves in similar predicaments.

Japan has awoken again, ready to reclaim its place in the international order.

<a class="connectedContentTrigger" href="/article/japan-gives-abenomics-second-chance" data-nid="268338" type="Assessments" title="Japan Gives Abenomics a Second Chance" data-timestamp="1418507938">National snap elections in December 2014</a>&nbsp;gave Japanese Prime Minister Shinzo Abe and his hopes of precipitating a Japanese economic, diplomatic and military revival a second wind. In 2015, Abe will try to use his strong parliamentary position to push through the politically sensitive structural economic and social reforms necessary to transform the temporary gains of monetary easing and fiscal stimulus &mdash; the first two &quot;arrows&quot; of his economic strategy, known colloquially as Abenomics &mdash; into&nbsp;<a class="connectedContentTrigger" href="/article/japans-economic-strategy-hits-snag" data-nid="275002" type="Reflections" title="Japan's Economic Strategy Hits a Snag" data-timestamp="1415929749">sustainable, long-term economic growth</a>.At the top of Abe&#39;s agenda this year will be reforms to the worker dispatch law to make it easier for businesses to hire and fire employees, and measures to increase immigration and expand female workforce participation. Efforts to open domestic agriculture markets to foreign competition will help pave the way for Japan&#39;s accession to the Trans-Pacific Partnership in 2015. At the same time, Abe will continue pushing Japanese conglomerates to raise wages, offsetting the costs to businesses by further cutting corporate tax rates. In 2015, these measures will compound continued monetary expansion and steady fiscal stimulus to stem the tide of recession from 2014. However, unless and until structural reforms are firmly in place &mdash; and have the desired effect of raising worker productivity and substantially expanding the workforce &mdash; any gains likely will be temporary, especially as prolonged low oil prices dampen the effects of the Bank of Japan&#39;s monetary stimulus efforts.Abe&#39;s economic maneuvers will meet with stiff resistance from powerful industrial lobbies and ministries, including the Ministry of Finance and elements within the Bank of Japan concerned about the mounting costs of servicing Japan&#39;s staggering sovereign debt and covering other social expenditures. During 2015, resistance within and beyond the government is not likely to reverse Abenomics, but will constrain any future move by the prime minister to expand bond purchases and fiscal stimulus.Economics is only one component of Abe&#39;s national revival strategy. Equally important are military normalization and diplomatic engagement, especially in Southeast Asia. In 2015, Abe will make as much, if not more, lasting headway on these fronts as on the economy, with Japanese investment and trade ties with ASEAN set to grow and with Abe set to push harder for a formal revision of Article 9 of the Japanese Constitution, which would allow the country to have a regular military instead of just self-defense forces. However, in 2015 these matters will take a backseat to the debate over Abenomics.In the area of foreign policy, some progress could occur in Japan&#39;s relations with Russia. Tokyo and Moscow are simultaneously facing constraints and compulsions that make it more vital than before to move beyond their lingering territorial disputes and enhance their energy and resource investments and trade, and both countries&#39; leaders see a brief period where action can be taken to solidify a deal. Although far from guaranteed, a diplomatic agreement on the disposition of the Kuril Islands, which Japan calls the Northern Territories, is likely in the first half of the year, paving the way for both the formalized end to any lingering uncertainties from World War II and a shift in Japanese investments in the Russian Far East. Overall, Russia can be expected to be more active in Japan and China and both Koreas in 2015 and in expanding its economic relations in Southeast Asia, particularly Vietnam.

A Japanese Awakening

Few countries are better positioned to capitalize on the opportunities created by China’s economic transition than the 10 states that constitute the Association of Southeast Asian Nations. Its members understand that what is good for one is, in theory, good for the whole — so much so that unanimity was made a central tenet of their founding charter. But domestic political considerations often prevent them from acting as one. And it is this discrepancy between collective interests and individual interests that will determine how quickly their economies grow — and how deeply they integrate.

Few countries are better positioned to capitalize on the opportunities created by China’s economic transition than the 10 states that constitute the Association of Southeast Asian Nations.

This will be something of a watershed year for Southeast Asia. Plans to integrate the region into a single market for investment, trade and skilled labor by Dec. 31 &mdash; under the rubric of an Association of Southeast Asian Nations (ASEAN) &quot;Economic Community&quot; &mdash; will by no means be realized fully. Stratfor nonetheless expects significant discussion and concrete steps to be taken toward reducing the regulatory hurdles and bridging the political and economic divides that have long undermined ASEAN unity. As a result, Southeast Asia is likely to remain a favorite destination for overseas investment in 2015, especially from Northeast Asian investors like China, Japan and South Korea.Regionwide integration and investment trends will be amplified &mdash; and in some cases constrained &mdash; by internal developments in individual ASEAN member states. Indonesia faces an ongoing struggle to recentralize political and regulatory powers and create a more stable and transparent environment for investors. Thailand is attempting to maintain unity and cohesion in the face of still-simmering regional divisions and a looming royal succession. In Myanmar, the government is making efforts to reach some form of accord with ethnic rebel groups before general elections late 2015. On all fronts, Stratfor expects progress to be halting and limited, constrained as each country&#39;s leaders are by other forces.

Southeast Asia: Burdened by Consensus

Americas

The Americas stretch from the Arctic Circle in Canada to the southern tip of Chile. This geographically, culturally and politically diverse region is home to the United States, a nation whose geography helped it become the foremost economic and military power in the world &mdash; an ascendance aided in part by bringing Mexico and Canada into its sphere of influence. Farther south, the nations of South America are like islands, separated by vast spaces of impenetrable mountains, rivers and jungles. Try though these countries may to integrate more closely, deeper ties such as those that characterize North America will prove elusive.

This geographically, culturally and politically diverse region is home to the United States, a nation whose geography helped it become the foremost economic and military power in the world

Venezuela is one of Latin America's most dynamic and troubled countries. It had been relatively stable during the administration of President Hugo Chavez, but when he died, stability died with him, aided in no small part but the fall of the price of oil. His successor, Nicolas Maduro, is now being challenged not only by Venezuelan citizens, who are angry as they struggle to obtain the most basic living staples and foodstuffs, but also by politicians inside and outside his own political party. His ruling party may not survive the coming collapse, but if it does, it will have the daunting challenge of trying to rebuild the economy.

Venezuela had been relatively stable during the administration of President Hugo Chavez, but when he died, stability died with him, aided in no small part but the fall of the price of oil.

All the elements are in place to make 2015 a year of protests and difficult political decisions that will challenge the stability of the Venezuelan government. The downturn in global oil prices will strain Venezuela&#39;s public finances, which require oil prices to be much higher to satisfy the country&#39;s extensive social spending &mdash; a key element in guaranteeing voters&#39; support for the government. Venezuela will struggle to fund imports at levels sufficient to meet public demand, and prices of food and goods will continue rising throughout the year. These shortages and inflation will lead to rising discontent among the Venezuelan public, which could spur another wave of protests. As the economic crisis mounts during the year, factions within the ruling United Socialist Party of Venezuela will have more incentive to undermine President Nicolas Maduro&#39;s rule. With rising discontent from potential voters and impending legislative elections in December, these factions could move to erode Maduro&#39;s power or even seek his resignation.The stress on Venezuelan government finances&nbsp;<a class="connectedContentTrigger" href="/article/venezuela-braces-tough-2015" data-nid="268325" type="Assessments" title="Venezuela Braces for a Tough 2015" data-timestamp="1417773625">will force Caracas to make crucial economic decisions</a>. The government will try to obtain foreign currency wherever possible, but social spending cuts remain very likely. The degree of unrest on the streets will influence the scope of the government&#39;s cost-cutting plans. If widespread protests persist, Caracas will likely prioritize funding for domestic needs over debt payments to foreign bondholders or private firms. Venezuela&#39;s deepening economic recession likely will lead the government to continue reducing oil and refined product shipments to nations in the Petrocaribe energy alliance and to Cuba in an effort to maximize the country&#39;s foreign currency availability.The Venezuelan government will also face a key political challenge in the December elections. The ruling United Socialist Party of Venezuela will go into these elections without a strong and charismatic leader at its helm and in a severely depressed economic environment. If the ruling party suffers an electoral setback, such as the loss of the legislature, rifts within the party will widen, and political rivals could begin efforts to challenge Maduro.Driven by the potential threat posed by&nbsp;<a class="connectedContentTrigger" href="/article/united-states-and-cuba-begin-restoring-relations" data-nid="275020" type="Reflections" title="The United States and Cuba Begin Restoring Relations" data-timestamp="1418857787">Cuba&#39;s re-engagement with the United States</a>&nbsp;and the immediate threat from its ongoing domestic economic crisis, Venezuela will pursue a political rapprochement with the United States. Although Caracas will be looking for economic or political lifelines, Washington alone will not be able save the Maduro regime. The success of Venezuela&#39;s overtures to the United States will largely depend on Washington&#39;s desire to engage Venezuela.

Venezuela's Unraveling

With Venezuela spiraling downward, the Cuban government will compensate for the destabilization of its ally by re-engaging with the United States. Cuba and the United States will continue bilateral meetings and negotiations toward re-establishing full political and economic relations. Discussions on the resumption of diplomatic contacts, travel and trade will continue throughout the year, and agreements on individual issues within the negotiations are likely. However, a full rapprochement is not plausible this year, because numerous political issues remain unsettled, including the nature of a Cuban political transition away from the administration of Raul Castro and toward a government acceptable to the United States. Consequently, the United States&#39; economic embargo on Cuba is unlikely to be lifted in 2015.

The United States and Cuba

After five decades of conflict, the Colombian government is making peace with insurgents of the Revolutionary Armed Forces of Colombia and the National Liberation Army. And although the peace agreements they have forged will effectively reduce the threat of militancy and organized crime in the country, other illicit activities such as drug trafficking and illegal mining will continue largely unabated.

After five decades of conflict, Colombia is making peace with its rebel groups.

The Colombian government and the Revolutionary Armed Forces of Colombia, known as the FARC, will enter the&nbsp;<a class="connectedContentTrigger" href="/article/colombia-and-farc-negotiate-demobilization" data-nid="267972" type="Assessments" title="Colombia and FARC to Negotiate Demobilization" data-timestamp="1404380223">final phase of negotiations</a>, in which issues critical to negotiating a successful peace agreement will be discussed. A peace deal between the two is plausible in 2015. The Colombian government is likely to yield on key issues, such as the dismissal of outstanding criminal cases against specific FARC commanders, and will begin crafting the transitional justice mechanisms for guaranteeing the demobilization of the militant group. The government has tentatively set an October deadline for a national referendum for voters to approve an eventual peace deal, but this is a soft deadline that could be moved if the two sides fail to reach an agreement on time.The Colombian government will also attempt to bring the smaller National Liberation Army, or ELN, into negotiations. If the government makes notable progress in talks with FARC throughout the year, it raises the likelihood of the smaller group joining the negotiations.

Colombian Peace Process

Mexico’s geography is a blessing and a curse. Its proximity to the United States has given it a rich, powerful and stalwart trading partner right across its northern border. But this has made Mexico dependent on the United States — vulnerable, in other words, to changes in U.S. policy. And changes over immigration and trade policies may well be in the offing. The more protectionist the United States becomes, the more it will aggravate tensions with Mexico. But ties between the two countries are simply too tight to unravel. North America will continue to thrive from its integration, of which Mexico is an important part.

Mexico's proximity to the United States has given it a rich, powerful and stalwart trading partner right across its northern border. But this has made Mexico dependent on the United States — vulnerable, in other words, to changes in U.S. policy.

With energy reforms legally locked in place, Mexico will focus on laying the foundation for an eventual rise in hydrocarbons production. The government will hold&nbsp;<a class="connectedContentTrigger" href="/article/mexico-moves-open-its-energy-sector" data-nid="268344" type="Assessments" title="Mexico Moves to Open Its Energy Sector" data-timestamp="1418810408">several rounds of energy auctions</a>, auctioning off the first fields in the second half of the year.Mexico City will continue working to establish or strengthen the rule of law in several regions of the country. Many of the principal security concerns in 2014, such as the proliferation of self-defense militias, the expansion of fuel theft, social unrest in the southwest and high levels of criminal violence, have continued into 2015. As a result of these continuing challenges, President Enrique Pena Nieto will attempt to overhaul his existing national security strategy in 2015 by pushing for constitutional reforms regarding public security that could better enable the federal government to strengthen, or bypass, weak local and state institutions that can impede the federal security strategy.Tamaulipas state and Mexico&#39;s southwest region, particularly Michoacan and Guerrero states, will continue to draw the focus of the national security strategy. The weak to nonexistent rule of law in many areas of the southwest &mdash; which has fostered particularly high levels of criminal violence, the proliferation of civilian militias, and current unrest triggered by the abduction of student teachers &mdash; will continue to challenge Mexico City&#39;s efforts to contain the crime and unrest. However, if the government fails to contain the situation, it risks another expansion of militias, the emergence of anti-government guerrillas, and prolonged or expanded unrest in Mexico&#39;s southwest region in 2015. Continued protests in the southwest could also continue driving protests in Mexico City and elsewhere in the country during the year as participants seek to influence the country&#39;s national elections, scheduled for July.

The Importance of Mexico

Argentina will hold presidential elections in October 2015. The election could result in a more free market-oriented, politically moderate candidate taking office. The vote is not likely to strongly affect Argentina&#39;s national economy or regulatory framework this year, since the winner will not take office until December.Argentina will begin negotiations with holdout creditors with the aim of reaching an eventual deal with that will allow Buenos Aires to exit its state of selective default on foreign debt payments. The seriousness with which the Argentine government pursues a final deal this year will depend on the state of its public finances throughout the year. A rise of cash inflows from agricultural exports and reduced spending on energy imports could give Buenos Aires the financial leeway to pursue a lengthy negotiation with the holdouts rather than hurriedly negotiating an agreement in the coming year.The&nbsp;<a class="connectedContentTrigger" href="/article/brazils-next-president-will-have-focus-economy" data-nid="268201" type="Assessments" title="Brazil's Next President Will Have to Focus on the Economy" data-timestamp="1412326837">slow economic growth</a>&nbsp;that has characterized the past two years for Brazil will continue into 2015. Uneven trade with economically stagnant Argentina will continue to hamper the steady growth of Brazilian manufacturing exports, which will spur Brasilia to seek increased exports to other South American and international markets. Brazil&#39;s slow growth will lead to government spending cuts this year equivalent to about 1.2 percent of the country&#39;s gross domestic product. Such cuts are unlikely to affect the popularity of the ruling Workers&#39; Party, as the cuts will avoid targeting major social spending programs that have underpinned its popularity.

Argentina and Brazil

In 2015, the Ecuadorian government will implement the final legislative steps to allow President Rafael Correa to run for a&nbsp;<a class="connectedContentTrigger" href="/article/ecuadors-correa-seeks-another-presidential-term" data-nid="267781" type="Assessments" title="Ecuador's Correa Seeks Another Presidential Term" data-timestamp="1398071676">fourth presidential term in 2017</a>. Ecuador&#39;s fragmented opposition will most likely resort to legal measures and street protests to prevent the decision. However, Correa&#39;s high popularity among voters and the ruling party&#39;s overwhelming control of the legislature will limit the opposition&#39;s ability to prevent Correa from standing for a third term.

Another Term for Ecuador's President?

South Asia

Everything that informs geopolitics can be found in South Asia: challenging demographics, geographic diversity, and contentious, ill-defined borders. The Himalayan Mountains form the northern border of South Asia, whose two main rivers, the Indus and the Ganges, support the region&rsquo;s great population centers. India is the region&rsquo;s dominant country, home to the world&rsquo;s fastest growing economy. But its rivalry with neighboring Pakistan, a fellow nuclear power and growing consumer market, has made South Asia one of the world&rsquo;s most dangerous nuclear flashpoints. The region is also a testament to how militancy and militarism can undermine the regional integration needed to unleash higher economic growth.

Everything that informs geopolitics can be found in South Asia: challenging demographics, geographic diversity, and contentious, ill-defined borders. 

India is its own worst enemy. The world’s largest democracy is not only a nuclear power but also one of its fastest growing economies, one that is supported by a massive labor pool flush with tech-savvy and English-speaking workers. And though this has created pockets of prosperity throughout the country, it ignores India’s high rates of poverty and corruption and inadequate infrastructure — problems that are difficult to solve with a political system as diffused, disruptive and bureaucratic as India’s. Leaders in New Delhi understand that economic growth is the key to absorbing the 12 million Indians who enter the job market every year, but growth is difficult when India’s services and manufacturing sectors are so vulnerable to workplace automation. As India tackles these domestic challenges, it will have the equally daunting foreign policy challenge of pursuing energy security and courting foreign investment while maintaining its nonaligned status.

Some problems are difficult to solve with a political system as diffused, disruptive and bureaucratic as India’s.

Indian Prime Minister Narendra Modi will remain fundamentally constrained in his attempts to transform his ambitious reform plans for India into reality. In 2015, Modi will grapple with challenges familiar to any Indian leader: securing a stable environment for foreign investment, reining in rampant corruption and bureaucratic inefficiencies and asserting the central government&#39;s authority over independent-minded states. Modi will not reverse India&#39;s geopolitical realities, but he will continue the slow process of consolidating national authority and garnering support through populist measures before attempting broader structural reforms. Modi will struggle to maintain the support of India&#39;s middle-class voters and the business elite as he fights to rein in a&nbsp;<a class="connectedContentTrigger" href="/article/indias-prime-minister-faces-opposition-within-his-own-party" data-nid="268354" type="Assessments" title="India's Prime Minister Faces Opposition Within His Own Party" data-timestamp="1419170234">large and diverse parliamentary majority</a>&nbsp;that at times will seem more committed to pursuing a Hindu nationalist ideology than Modi&#39;s more pragmatic economic reforms.Overall, economic growth in India will improve this year, driven primarily by higher investor confidence, lower energy prices and a strengthening dollar that will help exports. But overall gross domestic product growth is unlikely to top 5-6 percent because of structural issues regarding inflation, currency fluctuations and impediments caused by infrastructure deficiencies. The Modi government will continue efforts to divest shares in state-owned enterprises, but labor unions and bureaucrats are likely to stymie these plans. Large-scale strikes would affect coal and iron ore output while adversely effecting the steel, power and manufacturing sectors.India will increase government spending to upgrade its aging military equipment and improve domestic security. It will renew the push to allocate resources to fight Naxal rebels and reinforce borders threatened by Islamist militancy. Attempts to get local governments to cooperate (especially in key Naxal-afflicted states such as Jharkhand, Chhattisgarh and Odisha) will suffer as Modi continues struggling to secure control over his own party while communal pressures exacerbated by right-wing Hindu nationalist policies will risk social unrest in states like Uttar Pradesh and Bihar.Modi will struggle to create an investment climate that meets the expectations and promises made to a long list of states that sent officials to visit India in 2014. However, he will gain the most traction in building India&#39;s business relations with China, Bangladesh and the ASEAN countries and in ongoing efforts to&nbsp;<a class="connectedContentTrigger" href="/article/indias-prime-minister-comes-washington" data-nid="268189" type="Assessments" title="India's Prime Minister Comes to Washington" data-timestamp="1411912572">upgrade ties with the United States</a>. Meanwhile, India&#39;s traditionally positive relationships with Japan and Australia will face some tension as Tokyo and Canberra become frustrated with the slower-than-expected pace of reforms that is delaying planned investment projects. The resolution of a longstanding&nbsp;<a class="connectedContentTrigger" href="/article/india-border-disputes-local-politics-and-relations-bangladesh" data-nid="267216" type="Assessments" title="India: Border Disputes, Local Politics and Relations with Bangladesh" data-timestamp="1376994401">border dispute with Bangladesh</a>&nbsp;will likely happen in 2015, building on steadily improving relations between New Delhi and the ruling Awami League in Dhaka.Tensions with Pakistan will remain a concern as border violence continues into the new year. New Delhi has an imperative to avoid escalating military tensions with Islamabad, especially as the latter continues its anti-militancy campaign. However, New Delhi&#39;s political leadership remains caught between domestic crises and increasing hardline Hindu politicking, making it difficult for the Modi administration to de-escalate the situation without a clear victory. Similarly, Pakistan&#39;s military will need to avoid capitulating to India. Ongoing tensions will leave open the possibility of a miscalculation, which could lead to an escalation in fighting.

India's Own Worst Enemy

Dhaka will continue to work with the United States and the European Union to lift trade barriers and bolster investment hurt by concerns over the 2014 elections. As the Awami League works to consolidate domestic power, it will continue targeting right-wing Islamists while keeping the option to negotiate with a weakened Bangladesh Nationalist Party. Bangladesh will work primarily with China, Japan and India to try to expand and diversify investment in manufacturing. Reforms to energy regulations (especially to encourage more offshore exploration and domestic production), an expansion of special economic zones and other efforts to move the country up the manufacturing value chain are likely in 2015.Protests, unrest and violence have accompanied political change in Bangladesh, and 2015 will be no exception. The ruling Awami League will be able to largely contain the economic and social effects of protests and actions by the political opposition (including the potential for internal dissent over negotiations with the Bangladesh Nationalist Party) without serious risking the government&#39;s stability.

Bangladesh Needs Money

Sri Lanka

The island of Sri Lanka lies twenty miles off the southeastern tip of India. Slightly smaller than Ireland, the country sits at the center of the Indian Ocean, just northeast of the Maldives island chain.
 
Sri Lanka is divided into two geographic zones.
 
The southwest of the island is Sri Lanka's core. It consists of the inland Central Highlands, flanked to the west by Colombo's seaside lowlands. This area receives most of the island's rainfall and is the country's agricultural heartland, producing rice for food consumption and its cash crops: coconut, tea and rubber. It also contains the island's gem and graphite deposits. Colombo has a deep natural harbor, which receives substantial traffic from nearby shipping lanes. 
 
The northern part of the island is divided into the inland Vanni region and the Jaffna Peninsula on Palk Bay. The north is dry and agriculture is only possible because of large, ancient reservoirs. Fishing is the primary economic activity. The north is connected to India by a chain of islands and sandbars known as Adam's Bridge, which has historically eased the movement of goods and people to and from the mainland. 
 
Sri Lanka's main geographic challenge is to protect its core around Colombo, while promoting integration with the north. The most recent challenge to Colombo's dominance was from the Tamil Tigers insurgent group, who used the Vanni region and Jaffna peninsula regions as bases to mount terrorist attacks. Uniting the north with the core will allow Colombo to take advantage of low-end manufacturing leaving China, using its underdeveloped north as a source of cheap labor.

Sri Lanka begins the year with the ouster of strongman former President Mahinda Rajapaksa. His successor, Maithripala Sirisena, vows to embark on an ambitious political and economic restructuring of the island, including courting Indian and Western support and balancing Chinese investment.Social unrest and protests will are likely in weeks and months following the election, but the core of support behind the Rajapaksa administration &mdash; the economic elite, mainstream Buddhist religious and social groups, and the majority of the island&#39;s ethnic Sinhalese population &mdash; still opposes the rising political clout of the island&#39;s ethnic and religious minorities. Sirisena will have to expand his base of mainstream Sinhalese supporters, including the military, in order to push through a new constitution and move away from Sri Lanka&#39;s parliamentary system. Sirisena and his supporters have vowed to dissolve parliament and write a new constitution eliminating the role of president, but the new president leads an unruly coalition of competing ethnic, political and religious minorities that will prove difficult to organize into a stable coalition. Tamils and Sinhalese groups from the island&#39;s central regions are likely to push for a federal style government under the new constitution, creating rifts between hardline backers of the Rajapaksa administration and Sirisena and the minority groups who helped&nbsp;<a class="connectedContentTrigger" href="/article/sri-lankas-political-establishment-faces-challenge" data-nid="268382" type="Assessments" title="Sri Lanka's Political Establishment Faces a Challenge" data-timestamp="1420694256">vote the new president into office</a>.&nbsp;Clashes between hardline Buddhist elements and Muslims and Hindus could increase, creating the possibility for retaliatory or insurgent attacks. The military will continue its presence in northern Sri Lanka, and while a return to the levels of fighting that took place on the island prior to the 2009 cease-fire are unlikely, Sri Lanka faces an elevated risk of social and political unrest in the year to come.

Militancy is a fact of life in South Asia. Taliban insurgents, Islamic State jihadists, Baloch rebels and Kashmiri separatists all operate there, and they are able to do so because South Asian governments simply cannot control the farthest reaches of their territories — or the porous borders that define them. In some cases these governments even sponsor militant groups to work against their regional rivals. Whatever the cause, South Asian militancy will endure as long as governments refuse to grant the kind of autonomy for which these groups are fighting.

South Asian militancy will endure as long as governments refuse to grant the kind of autonomy for which these groups are fighting.

The coalition government comprised of the factions of Afghan President Ashraf Ghani Ahmadzai and CEO Abdullah Abdullah will likely endure this year, but it will come under intense strain, especially from Ahmadzai&#39;s decision to negotiate with the Taliban&nbsp;<a class="connectedContentTrigger" href="/article/afghan-pakistani-border-unlikely-resemble-syrian-iraqi-frontier" data-nid="275024" type="Reflections" title="The Afghan-Pakistani Border is Unlikely to Resemble the Syrian-Iraqi Frontier" data-timestamp="1419454067">and work with Pakistan</a>. In anticipation of a drawdown of NATO forces and the resulting vacuum that would allow Pakistani Taliban rebels to operate east of the Durand Line, Islamabad and Kabul will be compelled to cooperate on military matters and negotiate with the Afghan Taliban movement.In Pakistan, the military&#39;s battles against jihadists will take precedence, and the state will intensify security operations throughout the country. Social backlash from these policies can be expected from conservative social forces. In addition, political turmoil created by an opposition movement led by Imran Khan will force the government of Prime Minister Nawaz Sharif to seek negotiations with Khan&#39;s Pakistan Tehrik-i-Insaaf. The political unrest will constrain Islamabad&#39;s ability to make headway in its plans to improve the economy primarily by reviving the power and energy sectors.&nbsp;

South Asian Militancy

Sub-Saharan Africa

Sub-Saharan Africa is a study in diversity. Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, the region is home to countless cultures, languages, religions, plants, animals and natural resources. It&rsquo;s no surprise that it captured the imagination of Europe&rsquo;s earliest explorers &mdash; and that it continues to capture the imagination of current world powers eager to exploit it. And yet despite the region&rsquo;s diversity, Sub-Saharan African countries have common challenges &mdash; transnational terrorism, rapid population growth, endemic poverty and corruption &mdash; that prevent them from capitalizing on their economic potential. The coming years will be critical for the region, especially as its political institutions mature in a rapidly globalizing world.

Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, Sub-Saharan Africa is home to countless cultures, languages, religions, plants, animals and natural resources.

Though Nigeria boasts Africa’s largest economy, its march toward prosperity has always been a struggle, shackled as it is by political division, ethnic rivalry, militancy, theft and corruption. Its single biggest source of revenue is oil, most of which is found in the Niger Delta, a hotbed of militants and disaffected residents. Solving this region’s problems would help to keep oil flowing, but it won’t give Nigeria what it needs to be truly prosperous: a more diverse economy.

Nigeria's single biggest source of revenue is oil, most of which is found in the Niger Delta, a hotbed of militants and disaffected residents.

Nigeria will hold its presidential elections Feb. 14. Since the transition from military rule in 1999, Nigeria has operated essentially as a one-party state in which the ruling People&#39;s Democratic Party could be expected to win decisively. This, however, is no longer the case. The previously fragmented opposition has united under the All Progressives Congress, and the ruling party has suffered a number of defections to the opposition because of President Goodluck Jonathan&#39;s eligibility to stand for re-election. Regardless,&nbsp;<a class="connectedContentTrigger" href="/article/presidents-aspirations-threaten-nigerias-feeble-democracy" data-nid="268280" type="Assessments" title="A President's Aspirations Threaten Nigeria's Feeble Democracy" data-timestamp="1415830682">Jonathan will run to keep his position</a>, and ongoing legal attempts to block his bid for another term in office will fail.The main opposition candidate is Muhammadu Buhari, a former military leader whose personal support base is in the economically weak northern states. He will attempt to broaden his base by trying to channel political discontent over Jonathan, who hails from the Niger Delta, to win support from the economically powerful Lagos region in the southwest. During his previous stint as Nigeria&#39;s head of state, Buhari worked to minimize corruption. He may once again engage in significant anti-corruption campaigns within the Nigerian government if he is elected. Such campaigns are not likely to succeed in their aims and could lead to a degree of political infighting as Nigerian politicians try to protect their financial interests and patronage networks.Should Buhari win, one critical task for him will be to ensure that Abuja maintains a constructive relationship with the Niger Delta political and militant elite. Buhari would have to incorporate representatives from Jonathan&#39;s home region into his administration. During his previous rule, Buhari was criticized for not supporting this region of Nigeria enough. If he does fail to bring the Niger Delta into the fold, violent militancy could re-emerge in the region. If this were to occur, militants would threaten onshore oil production, which constitutes approximately one-third of Nigeria&#39;s production of 2.3 million barrels per day. Buhari, however, already has shown some consideration for the interests of this region by appointing Rotimi Amaechi, the governor from Nigeria&#39;s Rivers state, as director general of his campaign.The end of the election season will also see the return of important reform packages to the National Assembly, such as the controversial Petroleum Industry Bill that aims to reshape much of Nigeria&#39;s energy sector. However, the elections will leave the National Assembly deeply divided between the two main parties, making any sweeping reform bills unlikely to pass unless they are significantly watered down.The Boko Haram insurgency in its northeastern states will continue to plague Nigeria. The militant group&#39;s belligerence will persist regardless of which party or presidential candidate wins the elections. A Buhari administration, however, would make combating Boko Haram a higher priority. Throughout his time in power, Jonathan has dealt with the insurgency reluctantly. This stems from his fears of empowering the military and because Boko Haram operates in a part of the country where Jonathan has little interest. There is little economic gain to be made in northeastern Nigeria, and there is much to lose politically from Jonathan&#39;s support base in the Niger Delta if he were to redirect significant government attention to the north.Boko Haram will continue expanding the geographic reach of its attacks southward, possibly attempting to demonstrate a sustained capability to strike at soft targets using suicide attacks there. In the northeast, Boko Haram will continue its activities, ranging from suicide attacks to large raids. The group is also likely to continue staunch resistance in order to&nbsp;<a class="connectedContentTrigger" href="/article/boko-haram-claims-territory-northeastern-nigeria" data-nid="268153" type="Assessments" title="Boko Haram Claims Territory in Northeastern Nigeria" data-timestamp="1410512944">maintain territorial control</a>&nbsp;over large swathes of Borno state and adjoining states and to expand its territorial control where possible.

Nigeria: Obstacles to Prosperity

Economies that rely too heavily on commodities are hostages to the marketplace. When prices are high, the governments that manage these economies can afford the costs of political stability. When prices are low, however, their people get restless. Opposition mounts. Policy choices dwindle. Prolonged periods of low revenue sow the seeds of political crisis — something countries like Nigeria, Angola, Ecuador and Venezuela know all too well.

Economies that rely too heavily on commodities are hostages to the marketplace.

Whoever wins Nigeria&#39;s national election, the country will face the&nbsp;<a class="connectedContentTrigger" href="/article/when-oil-prices-drop-some-countries-lose" data-nid="268262" type="Assessments" title="When Oil Prices Drop, Some Countries Lose" data-timestamp="1415095208">significant consequences of lower oil prices</a>. The government depends greatly on oil export revenues for its budget, and the current government has already trimmed its budget to accommodate these lower prices. The value of the naira, Nigeria&#39;s currency, has also suffered, and this could impact Nigeria&#39;s ability to afford important imports such as food and petroleum products. While the price of exported oil has dropped, the price of domestically consumed petroleum products, has not, and demand for fuel subsidy increases could put yet more strain on the government budget as Nigeria&#39;s citizens wish to see lower oil prices reflected in domestic petroleum product prices.Other African countries will also notice the effects of the lower oil prices.&nbsp;<a class="connectedContentTrigger" href="/article/angolas-national-oil-company-continues-be-governments-backbone" data-nid="268127" type="Assessments" title="Angola's National Oil Company Continues to Be the Government's Backbone" data-timestamp="1409648415">Angola</a>&nbsp;will be forced to rethink its current development plans to carry out large infrastructure projects across the country. Angola already has announced austerity measures and now will have to reprioritize public expenditures. This puts an increased strain on the government&#39;s already limited efforts to diversify the Angolan economy away from its dependence on oil exports and specific infrastructure projects connected to those exports. Politically, low oil revenue will not significantly alter or strain the relationship between the national oil company &mdash; Sonangol &mdash; and the ruling Popular Movement for the Liberation of Angola and President Jose Eduardo dos Santos. This relationship is multifaceted and has lasted nearly 40 years despite a civil war and long periods of lower oil revenue. The Angolan government may have to slow down spending on some public policy and infrastructure initiatives, but the ruling party will not relax its grip on Angola, so the country&#39;s robust security services will contain any popular dissent arising from poor economic performance.In other, smaller, West African oil producers, domestic budgeting will be affected similarly, but in general investment in the oil industry is not expected to slow down. Particularly in areas where exploration is occurring or about to begin, larger investments and oil production are still five to 10 years away. The current low oil prices will not necessarily affect the smaller investments required to continue with exploration, particularly in areas with a great deal of potential.In East Africa, the process of initiating oil production in Uganda and Kenya will continue, although in 2015 it will reach only the preliminary stages of development. In Tanzania and Mozambique, the development of offshore natural gas fields will continue, and security and political dynamics hold little potential as disruptors. Tanzania will hold elections in October but the interests in natural gas development will be the same regardless of who wins. The Tanzanian government will support the approval of a new national constitution that redefines areas of responsibility between the Tanganyika mainland and the Zanzibar archipelago. However, the promising offshore natural gas sector will remain within the purview of the national government.South Africa, while not a significant oil producer, will also feel the consequences of slowing growth in global oil markets. The South African economy depends greatly on mineral exports and globally determined commodity prices more generally, which means that constraints on public spending and the weakness of the rand will continue. There is no single pressing event such as an election taking place in 2015, however, so the African National Congress-led South African government will delay making difficult policy decisions and instead will carry out policy adjustments that tweak the economy rather than making more fundamental changes. The exception is the power sector, where moderate reforms and a bailout package for Eskom, the national electric utility company, will take place in early 2015. Labor negotiations in South Africa&#39;s gold sector also will be impacted by the government&#39;s limited ability to accommodate the demands of the workforce and the potential resulting strikes could further affect the South African economy.

Commodities: A Cautionary Tale

When the Cold War ended, many African nations lost their foreign benefactors in the United States and the Soviet Union. Multiparty democracies, particularly the democracies that exist in name only, forced some leaders to search for more creative ways to extend their terms in office. But though tactics such as extended term limits will, in fact, prolong a leader’s time at the top, they will also increase the chances of their violent removal — and that their removal will destabilize their countries.

When the Cold War ended, many African nations lost their foreign benefactors in the United States and the Soviet Union.

This year, the leaders of the Democratic Republic of the Congo and Uganda are &mdash; much like Jonathan in Nigeria &mdash; seeking a controversial next term in office ahead of elections in 2016. These efforts could result in increased opposition activity and instability. In the Democratic Republic of the Congo, President Joseph Kabila&#39;s re-election attempt would require a constitutional change unless Kabila can delay the elections. Either an attempt to postpone the vote or an early battle for succession could lead to a&nbsp;<a class="connectedContentTrigger" href="/article/conflict-may-complicate-oil-development-democratic-republic-congo" data-nid="268358" type="Assessments" title="Conflict May Complicate Oil Development in the Democratic Republic of the Congo" data-timestamp="1419329132">breakdown of political stability</a>&nbsp;in the Democratic Republic of the Congo, where conflict often has pulled in many regional actors with interests in the country. In Uganda, opposition to the potential for another term for President Yoweri Museveni could lead to street protests and efforts to consolidate opposition parties and actors. These efforts will be conducted over the course of the year. Alternatively, Museveni could step down, but only to ensure that his successor would be a trusted ally.

2015 ANNUAL FORECAST

Asia-Pacific

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