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.

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. 

Long-arching trends tend to quietly build over decades and then noisily surface as the politics catch up. The longer economic pain persists, the stronger the political response. That loud banging at the door is the force of nationalism greeting the world's powers, particularly Europe and the United States, still the only superpower.

Annual

A main theme of U.S. President-elect Donald Trump's campaign was the idea that the United States will pull back from overseas obligations.

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.

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.

What happens in France, Germany and Italy &ndash; the eurozone&#39;s three biggest economies &ndash; in 2017 will influence one another and indeed the entire currency union. The elections in France and Germany will test the Franco-German alliance, upon which the European Union was founded, and the economic duress in Italy will test the stability of the eurozone. Political tension will again develop between Northern and Southern Europe, which hold different views on the future of the eurozone.<a class="connectedContentTrigger" href="/article/french-conundrum" data-nid="236517" type="On Geopolitics" title="The French Conundrum" data-timestamp="1492867260">France will be preoccupied with its elections</a>&nbsp;for the first few months of 2017. During this time, the outgoing government will not introduce any significant reforms. The same cannot be said for the new government, regardless of who wins. Though most of the presidential candidates have similar stances on security issues &ndash; most, for example, support tough measures to fight terrorism and limit immigration &ndash; they differ markedly on economic issues. Voters will have to decide whether they want programs that will deregulate and liberalize the French economy or if they want added protectionism.The presidential election, held in two rounds and scheduled for April and May, will show that a significant number of voters support anti-globalization and nationalist positions, as will the legislative elections. This will affect France&#39;s moves even if the moderates win. The next government is likely, therefore, to be skeptical about free trade and focus on security and defense &ndash; and support plans to enhance both at the EU level. The president can be expected to introduce measures to limit immigration. The president will also push Brussels to redesign the Schengen agreement and to improve the European Union&#39;s border controls. Paris will criticize the European Commission, even going so far as to demand that it scale back its responsibilities.If moderates win, they will petition the eurozone to repatriate some powers to its constituent members (something that will clash with Germany&#39;s demands for a more apolitical administration of the common currency). The new government will probably also push for better relations with Russia. If the far-right National Front wins, the French government will probably introduce measures to limit the free movement of goods, people, services and capital throughout France. It can also be expected to announce plans for a referendum on France&#39;s EU membership.&nbsp;And therein lies the problem for the European Union: The bloc has been breaking apart for several years, but without France &ndash; a founding member whose alliance with Germany was the basis for its very formation &ndash; its dissolution is likely irreversible. In the ensuing crisis, the union would fragment into smaller regional groups. Questions about the future of the eurozone would trigger a run on Southern Europe&#39;s banks and precipitate the collapse of the currency area.Ahead of its own general election in September or October, Germany will try to keep the European Union united. But it will be difficult for Berlin to do so. The members of the ruling coalition, composed of center-right and center-left parties, will try to distinguish themselves from one another before the vote, during which the government in Berlin will avoid making any significant decisions on EU issues. Conflicting national interests among EU members will also make consensus on EU reform difficult to find. (One of the few areas where Germany and its EU peers can find some degree of understanding, however, is defense and security.)Significant EU reforms on financial or economic areas should not be expected. Germany and its northern neighbors will be even more at odds than usual with the south over the management of the eurozone, given the political pressures endemic to election seasons. The government in Berlin will remain skeptical about issues such as granting debt relief to Greece or allowing eurozone members to miss the European Union&#39;s deficit targets. Germany is also likely to conflict with the European Central Bank (ECB), especially if&nbsp;<a class="connectedContentTrigger" href="/article/europes-central-bank-bind-over-bonds" data-nid="269965" type="Assessments" title="Europe's Central Bank Is in a Bind Over Bonds" data-timestamp="1476868512">the economic case for quantitative easing continues to weaken</a>. Germany and its northern neighbors will advocate the program&#39;s termination, though the ECB, in light of continued economic weakness in the periphery, may resist any effort to that end.Security and immigration will feature prominently in the German electoral campaign. The right-wing opposition, and even some members of Chancellor Angela Merkel&#39;s coalition, will push for tougher immigration legislation and for granting more resources to security forces. The general election will show that German voters are willing to support smaller parties on the left and on the right. This will probably lead to a more divided parliament and to difficult coalition talks. While the nationalists may perform well enough to get some members into the legislature, they will be excluded from coalition negotiations.What could force Germany to take a more decisive role in the European Union, however, would be a victory by the Euroskeptic forces in France or Italy. If that happens, Berlin would try to preserve the bloc and reach an understanding with the rebel governments to introduce internal reform. But the government in Berlin would also hedge its bets by making plans with its regional allies in the event the European Union and eurozone do, in fact, disintegrate.As for Italy, political uncertainty, fragile banks, low economic growth and high debt levels will once again raise questions about the future of the eurozone&#39;s third-largest country &ndash; and about the currency union as a whole. Italy&#39;s caretaker government will be weak, and early elections are possible.&nbsp;<a class="connectedContentTrigger" href="/article/understanding-italian-defiance" data-nid="236476" type="On Geopolitics" title="Understanding Italian Defiance" data-timestamp="1453795518">No matter who is in charge</a>, the Italian government will push for flexibility on EU fiscal targets and demand solidarity from its EU partners to deal with the immigration crisis. The government in Rome will also be ready to act unilaterally and criticize the European Union to achieve its goals.If Italy holds early elections, the fear of a victory by anti-establishment forces would hurt Italian banks, raise borrowing costs and generate pressure on the euro. A victory of the Euroskeptics would put Italy on a collision course with the European Union. The first reaction by Germany and EU institutions would be to accommodate the new government in Rome and try to prevent it from putting membership in the eurozone to a vote. In the long run, however, that kind of referendum will be difficult to avoid. In 2017, therefore, Italy will be one of the greatest risks to the currency area.The Netherlands, one of the eurozone&#39;s wealthiest countries and an important player in Northern Europe, will hold a general election in March. As in other eurozone countries, Euroskeptic and anti-immigration forces there will have a prominent role, showing that discontent with the status quo is strong. Even in the likely case the Euroskeptics fail to access power, their influence will force the Dutch government to become more and more critical of the European Union, resisting plans to deepen Continental integration and siding with other Northern European countries in their criticism of events in the south. If events in France and Italy bring about the collapse of the eurozone, the Netherlands would react by continuing to work with Germany and other Northern European countries.Elsewhere, in the European periphery, the minority government of Spain will be forced to negotiate with the opposition on legislation, leading to a complex decision-making process and to pressures to reverse some of the reforms that were introduced during the height of the economic crisis.&nbsp;<a class="connectedContentTrigger" href="/article/catalonia-struggle-secession" data-nid="269265" type="Assessments" title="In Catalonia, the Struggle With Secession" data-timestamp="1452551442">Catalonia will continue to push for its independence</a>&nbsp;as its government challenges Madrid in some instances, ignores it entirely in others, and negotiates with it when necessary. Even if negotiations to ease frictions between Madrid and Catalonia take place, the central government will not authorize a legal referendum on independence, and Catalonia will not abandon its plans of holding it. Tensions will remain high in 2017, but Catalonia will not unilaterally declare independence this year.In Greece, the government will continue pushing its creditors for additional measures of debt relief, but because of the German elections there will be little progress on the issue. With debt relief temporarily off the table, Athens will demand lower fiscal surplus targets and will reject additional spending cuts. Relations between Athens and its creditors will be tense, but there should be room for compromise. The resignation of the Greek government is possible, albeit improbable, considering that the emergence of opposition forces in the country makes the outcome of early elections highly uncertain &ndash; and the government has no guarantee of retaining power.

European Disintegration

The United Kingdom may have voted to leave the European Union, but it can’t escape geography; it will have to define its political and economic relationships with the countries closest to it no matter what. And the process by which it does so will take years to complete. Immigration, membership in the EU internal market and the future of the British financial sector will all be points of negotiation — and of contention. Going forward, the United Kingdom will turn to a familiar strategy, one that it has employed since the end of World War II: balancing its relations with Continental Europe while strengthening ties with the United States.

The United Kingdom may have voted to leave the European Union, but it can’t escape geography; it will have to define its political and economic relationships with the countries closest to it no matter what.

In 2017, the debate in the United Kingdom will not be whether the Brexit should happen&nbsp;<a class="connectedContentTrigger" href="/article/uk-plots-its-brexit-course" data-nid="270084" type="Assessments" title="The U.K. Plots Its Brexit Course" data-timestamp="1481879705">but how it should happen</a>. The British government will be divided on how to approach the negotiations with the European Union, and the Parliament will demand a greater say in the process. The issue will create a constant threat of early elections, but even if such elections do come to pass, they would only delay the Brexit, not derail it. The government and the Parliament will eventually reach an understanding, however, and the United Kingdom will formally announce its intentions to leave the European Union.Once the negotiations begin, the United Kingdom will push for a comprehensive trade agreement to include as many goods and services as possible &ndash; one that would also give the country more autonomy on immigration. This would involve either signing a free trade agreement with the European Union or agreeing on Britain&#39;s membership in Europe&#39;s customs union, an area where member states share a common external tariff. A transitional agreement to buy London more time to negotiate a permanent settlement will probably also be part of the discussion. London and the European Union will also negotiate the terms of the United Kingdom&#39;s withdrawal, including its EU budget commitments and the status of British citizens in the European Union and the status of EU citizens in the United Kingdom. Given the magnitude of these issues, not to mention the magnitude of the elections in France and Germany, several of the most important decisions will be delayed until at least 2018.

Brexit

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.

Countries of Central and Eastern Europe will circle the wagons to protect themselves from what they see as potential Russian aggression &ndash; and from the uncertainty surrounding U.S. foreign policy.&nbsp;<a class="connectedContentTrigger" href="/article/poland-takes-new-direction" data-nid="236462" type="On Geopolitics" title="Poland Takes a New Direction" data-timestamp="1450771209">Leading the charge will be Poland</a>, which will try to enhance political, economic and military cooperation with its neighbors. It will also support the government in Ukraine politically and financially and will lobby Western EU members to keep a hard stance on Moscow by advocating the continuation of sanctions, increasing military spending, supporting Ukraine, etc. &ndash; a position the Baltic states and Sweden are likely to support. Unsure though Warsaw may be about the Trump administration, the government will still try to maintain good ties with the White House as it continues to defend a permanent NATO presence in the region. Countries in the region may even pledge to spend more on defense.Not all countries will react the same way to this new geopolitical environment, of course. Hungary or Slovakia, for example, do not have the same sense of urgency as Poland when it comes to Russia, so their participation in pre-emptive measures could be more restrained.Moscow&#39;s attempts to exploit divisions within the European Union will strain German-Russian relations. Germany will try to keep sanctions against Russia in place but will face resistance from some EU members, which would rather lift sanctions to improve their relations with Moscow. Germany will also defend cooperation on defense and security as a way to deal with uncertainty about NATO and Russia. The German government will continue to support Ukraine politically and financially, but not militarily.In the meantime, Russia will exploit divisions within the European Union by supporting Euroskeptic political parties across the Continent and by seeking to cooperate with the friendlier governments in the bloc. Some countries, including Italy, France and Austria, will advocate improved relations with Russia, giving Moscow a better chance to break the sanctions bloc in the union. Some level of sanctions easing from the European Union is likely by the end of the year.

Divided EU Foreign Policies

Immigration presents leaders a difficult dilemma: How do you weigh the stewardship of your own people against the moral imperative — and in some cases the economic need — to allow foreign peoples to cross your borders? The answer to this question is growing increasingly complex as instability and economic duress drive migrants from the developing world to the developed world. When native populations oppose immigration, as they often do for economic reasons, their leaders often ride a wave of nationalism to political power. But this elides the fact that many of these same countries will need immigrants to offset some of the demographic problems aging, shrinking societies will soon face.

Immigrants can offset some of the demographic problems aging, shrinking societies will soon face.

There is only so much EU member states can do to stem the flow of migrants in 2017. In the Central Mediterranean route, Brussels will try to halt migrants from leaving Africa by cooperating with their countries of origin and by working with the primary transit states. But the difficulty in actually&nbsp;<a href="/article/north-africa-other-side-europes-migrant-crisis">severing African migration routes</a>&nbsp;and the absence of any viable government in Libya will limit the European Union&#39;s ability to halt the flow of peoples through the Central Mediterranean.

In the Eastern Mediterranean route, the European Union will keep its line of communication with Turkey open, its political differences with Ankara notwithstanding. European elections and internal divisions, however, will prevent the bloc from giving in to many of Turkey&#39;s demands, particularly the one that grants visa liberalization for Turkish citizens. A short window of opportunity on the issue will open in the first months of the year, but if no progress is made before Europe&#39;s electoral cycle begins in March in the Netherlands, the issue will be postponed for the rest of the year. Progress on less controversial issues such as trade and funds will be somewhat easier to make.Aware of how unreliable their outside partners are, EU members will try to shield themselves as much as possible. They will continue to toughen their national migration laws, and to increase deportations, to discourage migrants from coming in the first place. The option of introducing border controls within the EU will also be on the table as a way to sever migration routes. This will continue to be a source of debate &ndash; one waged between the countries of arrival (such as Italy and Greece) and the countries of destination (Northern Europe) &ndash; over Brussels&#39; failure to develop a coherent migration policy.

Crossing Borders

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. 

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.

Europe, and its policy toward Russia,&nbsp;<a class="connectedContentTrigger" href="/article/wests-divides-give-russia-hope" data-nid="270078" type="Assessments" title="The West's Divides Give Russia Hope" data-timestamp="1481707812">is as divided as ever</a>, so at least partial sanctions relief is within Moscow&#39;s grasp. Understanding the import of this year&#39;s European elections &ndash;&nbsp;<a class="connectedContentTrigger" href="/article/year-may-decide-europes-fate" data-nid="236628" type="On Geopolitics" title="The Year That May Decide Europe's Fate" data-timestamp="1481616006">elections that could bring about the eurozone&#39;s demise</a>&nbsp;&ndash; Russia will support anti-establishment and Euroskeptic forces and exploit divisions on the continent through cyber attacks and propaganda campaigns.France, Italy, Austria and Greece will end up seeking a more balanced relationship with Russia, while countries that tend to be more vulnerable to its vagaries &ndash; Poland, Romania, the Baltics and Sweden &ndash; will band together to fend off what they see as potential Russian aggression. Germany will try to play both sides, something that will be increasingly difficult to do as it also fights to keep the eurozone intact. Germany&#39;s distraction will, in turn, enable Poland to emerge as a stronger leader in Eastern Europe, extending political, economic and military support to those endangered by the West&#39;s weakened resolve.That is not to say that Russia will be entirely unconstrained. Though Washington appears somewhat more willing to negotiate with Moscow on some issues, the United States still has every reason to contain Russian expansion, so it will maintain, through NATO,&nbsp;<a class="connectedContentTrigger" href="/article/making-most-nato-summit" data-nid="236558" type="On Geopolitics" title="Making the Most of a NATO Summit" data-timestamp="1468310593">a heavy military presence on Russia&#39;s European frontier</a>. This is bound to impede any negotiation. Still, Russia will use every means at its disposal &ndash; military buildups on its western borders, the perception of its realignment with the United States, the exploitation of European divisions &ndash; to poke, prod and ultimately bargain with the West. And in doing so, it will intimidate its neighbors and attempt to crowd out Western influence in its near abroad.Even a hint of reconciliation between Moscow and Washington will echo throughout Russia&#39;s borderlands. Russia will almost certainly maintain its military presence in eastern Ukraine, but the United States and some European countries will adopt a more flexible interpretation of the Minsk protocols to justify the easing of sanctions. And because this will&nbsp;<a class="connectedContentTrigger" href="/article/picking-where-west-leaves" data-nid="270067" type="Assessments" title="Picking Up Where the West Leaves Off" data-timestamp="1481274022">leave the government in Kiev more vulnerable to Russian coercion</a>, Ukraine can be expected to intensify military, political and economic ties with Poland and the Baltic states.&nbsp;In fact, the prospect of a U.S.-Russia reconciliation will all but halt the efforts of otherwise pro-West countries &mdash; Ukraine, Moldova and Georgia &ndash; to integrate into Western institutions, as will the growing divisions in Europe. These countries will not fully ally with Russia, but they will be forced to work with Russia tactically on economic issues and to soften their stances on&nbsp;<a class="connectedContentTrigger" href="/article/russia-some-conflicts-are-colder-ever" data-nid="270026" type="Assessments" title="For Russia, Some Conflicts Are Colder Than Ever" data-timestamp="1479374163">pro-Russia breakaway territories</a>.Just as Ukraine will strengthen security efforts with Poland and the Baltics for security, Georgia will strengthen security efforts with Azerbaijan and Turkey. Turkey will maintain its foothold in the Caucasus and in the Black Sea, but it will also make sure to maintain energy and trade ties with Moscow, lest it jeopardize its mission in Syria.Russia will remain the primary arbiter in&nbsp;<a class="connectedContentTrigger" href="/article/game-much-larger-nagorno-karabakh" data-nid="269509" type="On the Road" title="A Game Much Larger Than Nagorno-Karabakh" data-timestamp="1460898057">the Nagorno-Karabakh dispute</a>&nbsp;between Armenia and Azerbaijan, playing the two against each other to its advantage. And with the European Union&#39;s Eastern Partnership and other EU-led programs likely to suffer from the bloc&#39;s divisions and distractions, Russia will have the opportunity to deepen its influence in the region by advancing its own integration initiatives such as the Eurasian Economic Union and the Collective Security Treaty Organization.

The Fight for Russia’s Borderlands

Mostly cut off from the West by economic sanctions and by soured relations, Russia has begun to build bridges with the East. To that end, Moscow has expanded its trade ties throughout the Asia-Pacific region, particularly with China, South Korea and Japan. But those ties come at a price: Moscow has begun to involve itself in the affairs of others, jumping into contentious regional issues to gain influence and to challenge the United States. Meanwhile, Eastern powers are also encroaching on Moscow’s sphere of influence in Far East Russia and in Central Asia — a presence Russia will struggle to curb as it spends more time and resources managing its long-term internal problems.

Cut off from the West by economic sanctions and by soured relations, Russia has begun to build bridges with the East.

With the prospect of things quieting on Russia&#39;s western front, Moscow will try to improve its strategic position on its eastern front. Moscow and Tokyo will slowly try to end a decades-old territorial dispute, and as they do they will enhance relations through major investment and energy deals. (They are even exploring the idea of connecting their countries with an oil pipeline.) Tokyo may also follow the West&#39;s lead in easing sanctions on Russia.China, too, will pursue similar deals with Russia, albeit for different reasons: It is motivated in part by Russia&#39;s newfound friendship with Japan and in part by the United States&#39; newfound friction with China. Beijing can be expected to increase cooperation with Moscow this year on energy projects, military coordination (particularly in the Arctic) and cyber-technology.Russia will play China and Japan off of each other, strengthening its own position in the region while not fully aligning with either. Russia will also continue to build up trade linkages with South Korea while maintaining ties to North Korea as the nuclear threat it poses grows.

Moscow Looks to the East

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.

For all the opportunity Russia has abroad in 2017, it will have perhaps even more challenges at home. Even if it pulls itself out of recession, it still faces a prolonged period of stagnation, and the government will have to&nbsp;<a class="connectedContentTrigger" href="/article/russias-federal-budget-better-late-never" data-nid="269983" type="Assessments" title="Russia's Federal Budget: Better Late Than Never" data-timestamp="1477648069">adhere to a conservative budget</a>&nbsp;until oil prices rise meaningfully again. The Kremlin will continue to tap into its reserve funds and will rely more on international borrowing to maintain federal spending priorities.Russia&#39;s regional governments are even more financially vulnerable; they will have to depend on the Kremlin or on international lenders for relief. This reliance will only add to&nbsp;<a class="connectedContentTrigger" href="/article/russias-growing-regional-debts-threaten-stability" data-nid="267566" type="Assessments" title="Russia's Growing Regional Debts Threaten Stability" data-timestamp="1390219408">existing tensions between the central and regional governments</a>, tensions that will compel the Kremlin to tighten and centralize its control.What economic relief does come the federal government&#39;s way&nbsp;<a class="connectedContentTrigger" href="/article/russia-saving-jobs-not-economy" data-nid="269650" type="Assessments" title="Russia Is Saving Jobs, but Not the Economy" data-timestamp="1465982104">will not trickle down to the Russian people</a>, who will continue to bear the brunt of the recession. Protests will take place sporadically throughout the year, and the Kremlin will respond by clamping down on unrest through its security apparatus and through more stringent legislation. The Kremlin will, however, increase spending on some social programs later in the year ahead of the 2018 presidential election.As the government becomes more authoritarian, power struggles among the security forces,&nbsp;<a class="connectedContentTrigger" href="/article/fate-russias-liberals" data-nid="275408" type="Reflections" title="The Fate of Russia's Liberals" data-timestamp="1479258373">liberal circles</a>, energy firms and regional governments are bound to ensue. President Vladimir Putin will try to curb the power of his potential challengers, particularly Rosneft chief Igor Sechin and his loyalists in the Federal Security Service, through various institutional reorganizations. Restructuring, of course, will entail occasional purges and appointments of loyalists, the ultimate purpose of which is to consolidate power under Putin. His grabs for power, however, will isolate him, and in his isolation he will have fewer and fewer allies.

Russia's Internal Struggle

The countries of Central Asia are predisposed to instability. Their economies are in disrepair, itinerant workers are returning from Russia and militants from neighboring countries spill across their borders. More important, however, is their geographic location, which throughout history has been an arena in which greater powers have vied for influence and, in more recent years, competed for natural resources. That competition will continue to play out so long as there is economic opportunity in this troubled region.

Central Asia has throughout history been an arena in which greater powers have vied for influence and, in more recent years, competed for natural resources.

Instability, as is so often the case, will plague Central Asia in 2017. Such is the hallmark of a region marked by weak economies, the near constant threat of militant attacks and uncertain political transitions, which include the replacement of long-serving Uzbek leader Islam Karimov, who died in September, a looming succession in Kazakhstan, and presidential elections in Kyrgyzstan. Central Asian governments will manage instability by centralizing power and&nbsp;<a class="connectedContentTrigger" href="/article/central-asias-leaders-scramble-secure-power" data-nid="269936" type="Assessments" title="Central Asia's Leaders Scramble to Secure Power" data-timestamp="1475659867">cracking down on security threats</a>&nbsp;to a greater degree than they have before. This will invite more security involvement from Russia and China, which will compete and cooperate with each other as the situation warrants.In Kazakhstan, succession concerns and economic stagnation compel the elite to make some critical power plays in 2017, particularly in the energy and financial sectors. These kinds of moves, however, will test the government&#39;s plan for a cohesive succession.In Uzbekistan, despite its best efforts to stay strategically neutral, the government will find itself cooperating with Russia on energy, military and political issues. Kyrgyzstan and Tajikistan are likely to see intensified security cooperation with China.

Instability in Central Asia

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.

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.

It is tempting to think the Syrian civil war will end in 2017, now that the forces loyal to Bashar al Assad&nbsp;<a class="connectedContentTrigger" href="/article/syria-aleppos-fate-sealed" data-nid="270012" type="Assessments" title="In Syria, Aleppo's Fate Is Sealed" data-timestamp="1478854819">have retaken the critical city of Aleppo</a>. Indeed, they now control a few major cities and have the luxury of consolidating the gains they have made. But the conflict will not end,&nbsp;<a class="connectedContentTrigger" href="/article/beginning-end-syrian-civil-war" data-nid="270077" type="Assessments" title="The Beginning of the End of the Syrian Civil War" data-timestamp="1481651148">at least not in 2017</a>. The loyalists are simply pulled in too many directions to achieve a decisive victory. In addition to holding their territory in the north, they must now try to clear the rebels located between Aleppo and Damascus and around Damascus itself. They will also be drawn to areas held by the Islamic State in the eastern city of Deir el-Zour, where their comrades are currently besieged. Retaking territory in the energy belt around Palmyra will be a priority too. Put differently, there is still a lot work left for them to do, and any number of things can shift&nbsp;<a class="connectedContentTrigger" href="/article/syria-stakes-are-high-deck-stacked" data-nid="275371" type="Reflections" title="In Syria, the Stakes Are High, but the Deck Is Stacked" data-timestamp="1473731467">the balance of power in such a conflict-ridden country</a>.

The constraints on the loyalists, however, are but one factor preventing the conflict&#39;s resolution. In 2017, the presence of foreign powers will also complicate the Syrian battlefield, much as it has in years past. The United States will adapt its strategy in Syria, favoring one that more selectively aids specific groups in the fight against the Islamic State rather than those fighting the al Assad government. Washington will, for example, continue to back Kurdish forces but will curb support for rebels in Idlib. The consequences of which will be threefold. First, Turkey, Qatar and Saudi Arabia will have to increase their support for the rebels, including the more radical ones, the United States has forsaken. Second, their support will give radical elements room to thrive, as will the reduced oversight associated with Washington&#39;s disengagement. Third, Russia will be able to cooperate more tactically with the United States and its allies as it tries to exact concessions, including the easing of sanctions, in a broader negotiation with Washington.Notably, Russia will cooperate only insofar as it helps Moscow achieves those goals, but given Moscow&#39;s limited influence on the ground in Syria,&nbsp;<a class="connectedContentTrigger" href="/article/syria-cease-fires-failure-casts-long-shadow" data-nid="275376" type="Reflections" title="In Syria, a Cease-Fire's Failure Casts a Long Shadow" data-timestamp="1474418700">there is only so much it can actually do</a>. Still, that will not stop Russia from trying to replace Washington as the primary arbiter of Syrian negotiation.While other powers are preoccupied with the fight against the Islamic State, Turkey will&nbsp;<a class="connectedContentTrigger" href="/article/turkeys-careful-incursion-syria" data-nid="275362" type="Reflections" title="Turkey's Careful Incursion Into Syria" data-timestamp="1472085100">expand its sphere of influence in northern Syria and Iraq</a>, driven as it is by its imperative to block Kurdish expansion. In Syria, the presence of Russian troops will probably prevent Turkey from venturing any farther south than al Bab in northern Aleppo.&nbsp;<a class="connectedContentTrigger" href="/analysis/iraq-syria-battlespace-0" data-nid="222423" type="ZZZ_DEPRECATED_Analysis" title="A Creaky Cease-Fire Threatens to Unravel" data-timestamp="1483469421">From al Bab</a>, Turkey will try to drive eastward toward the town of Manbij to divide and thus weaken areas held by the Kurds. Turkey will also&nbsp;<a class="connectedContentTrigger" href="/article/syria-turkish-allys-untimely-departure" data-nid="270032" type="Assessments" title="In Syria, a Turkish Ally's Untimely Departure" data-timestamp="1479723343">lobby for a bigger role</a>&nbsp;in anti-Islamic State operations in Raqqa. Turkey will deploy more of its own forces in the Syrian fight, both to obstruct the expansion of Syrian Kurdish forces and degrade the Islamic State.There are, of course, some drawbacks to Turkey&#39;s strategy. Namely, it runs the risk of clashes with Russian and Syrian Kurdish forces. Ankara will thus have to concentrate on&nbsp;<a class="connectedContentTrigger" href="/article/sit-down-moscow-undeterred-envoys-murder" data-nid="275427" type="Reflections" title="A Sit-Down in Moscow, Undeterred by an Envoy's Murder" data-timestamp="1482290937">maintaining closer ties with Moscow</a>&nbsp;to&nbsp;<a class="connectedContentTrigger" href="/article/russia-keeps-its-friends-close-and-turkey-closer" data-nid="275353" type="Reflections" title="Russia Keeps Its Friends Close and Turkey Closer" data-timestamp="1470784990">avoid complications on the battlefield</a>, even as it manages tensions with the United States over Washington&#39;s&nbsp;<a class="connectedContentTrigger" href="/article/what-restored-turkey-russia-relationship-means-middle-east" data-nid="275355" type="Reflections" title="What the Restored Turkey-Russia Relationship Means for the Middle East" data-timestamp="1470972021">continued support for the Kurds</a>.In Iraq, too, Turkey will extend its influence in the north &ndash; notably, to where&nbsp;<a class="connectedContentTrigger" href="/article/mosul-end-beginning" data-nid="236605" type="On Geopolitics" title="In Mosul, the End Is the Beginning" data-timestamp="1476777626">the Ottoman Empire&#39;s border was once drawn</a>&nbsp;through Sinjar, Mosul, Arbil and Kirkuk. And as it does, it will compete with Iran for influence in the power vacuum left by&nbsp;<a class="connectedContentTrigger" href="/article/different-battle-iraq" data-nid="270072" type="Assessments" title="A Different Battle in Iraq" data-timestamp="1481538390">the Islamic State&#39;s defeat in Mosul</a>. Baghdad, for its part, will struggle to control Nineveh province once the Islamic State loses Mosul. Meanwhile, Turkey will bolster its proxies to position itself as the patron state of the region&#39;s Sunnis.

Turkey&#39;s resurgence threatens Iran&#39;s arc of influence across northern Syria and Iraq, and Tehran has plenty of ways it can respond. The government will encourage Shiites in Baghdad to resist what&nbsp;<a class="connectedContentTrigger" href="/article/iran-flexes-its-muscle-baghdad" data-nid="275157" type="Reflections" title="Iran Flexes Its Muscle in Baghdad" data-timestamp="1440034553">they will characterize as a Turkish occupation</a>. It will also rely on Shiite militias to block Ankara by contesting territory and exploiting divisions among Iraqi Kurds. Saudi Arabia and the rest of the Gulf Cooperation Council, who have comparatively less influence Iraq, will rely on Turkey to uphold Sunni interests.The fall of Mosul will further divide Iraq&#39;s Kurds. The inevitable scramble for territory and influence will pit the Turkey-backed Kurdistan Democratic Party against the Patriotic Union of Kurdistan,&nbsp;<a class="connectedContentTrigger" href="/article/historic-settlement-iraqs-differences" data-nid="270081" type="Assessments" title="A Historic Settlement of Iraq's Differences" data-timestamp="1481793655">which is more closely aligned with Iran</a>. Kirkuk, a city and province awash in oil, will be particularly contentious. The KDP will try to keep what it has gained there, while Baghdad, backed by Iran, will try to take it back. This will impede sustainable cooperation in&nbsp;<a class="connectedContentTrigger" href="/article/why-iraqi-kurdistan-struggling-pay-its-bills" data-nid="269307" type="Assessments" title="Why Iraqi Kurdistan Is Struggling to Pay Its Bills" data-timestamp="1453973407">energy production and revenue-sharing operations</a>&nbsp;between Baghdad and Iraqi Kurdistan.

The Syrian Civil War

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.

For all of Turkey&#39;s challenges abroad, it has no shortage of them at home.&nbsp;<a class="connectedContentTrigger" href="/article/untangling-threads-terrorism-turkey" data-nid="236503" type="On Security" title="Untangling the Threads of Terrorism in Turkey" data-timestamp="1458634554">Kurdish militant attacks are a perennial problem</a>, of course, and Ankara&#39;s role in strangling Islamic State escape routes in Syria will meanwhile make it a prime target for attacks in 2017. But perhaps more important, the ruling Justice and Development Party (AKP) will hold a referendum in 2017 on constitutional amendments meant to&nbsp;<a class="connectedContentTrigger" href="/article/constitutional-reform-change-turkeys-parties-can-believe" data-nid="269846" type="Assessments" title="Constitutional Reform: A Change Turkey's Parties Can Believe In" data-timestamp="1472202913">strengthen the presidency under Recep Tayyip Erdogan</a>. The AKP has still has substantial support despite a highly polarized electorate,&nbsp;<a class="connectedContentTrigger" href="/article/rough-seas-ahead-turkish-economy" data-nid="269991" type="Assessments" title="Rough Seas Ahead for the Turkish Economy" data-timestamp="1477990807">but the economy it helms is shaky</a>. Turkey&#39;s dollar-denominated debt will grow as the dollar strengthens, and the lira&#39;s instability will spook investors, who are already alarmed about the country&#39;s political crackdowns. Those crackdowns will also complicate Turkey&#39;s EU accession talks. Not that Turkey expected to make much progress in that regard; it simply needs to&nbsp;<a class="connectedContentTrigger" href="/article/eu-turkey-search-lasting-migrant-deal" data-nid="269639" type="Assessments" title="EU, Turkey: In Search of a Lasting Migrant Deal" data-timestamp="1465465513">keep the dialogue going over migrant controls</a>&nbsp;to keep a foothold in the West and&nbsp;<a class="connectedContentTrigger" href="/article/search-more-perfect-union-turkey" data-nid="275428" type="Reflections" title="In Search of a More Perfect Union With Turkey" data-timestamp="1482361008">to maintain market access to the European Union</a>.

Turkey's Resurgence

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.

2017 will test the durability of U.S.-Iranian relations. The new U.S. government is expected to be less tolerant of what it sees as Iranian aggression &mdash; naval harassment and&nbsp;<a class="connectedContentTrigger" href="/article/new-military-chief-rises-iran" data-nid="269705" type="Assessments" title="A New Military Chief Rises in Iran" data-timestamp="1467968410">ballistic missile testing</a>, for example &mdash; even if it does not directly&nbsp;<a class="connectedContentTrigger" href="/article/deviating-plan-iran" data-nid="270023" type="Assessments" title="Deviating From the Plan in Iran" data-timestamp="1479287704">infringe on the nuclear deal</a>. Strong U.S. responses to such aggression would, from Iran&#39;s point of view, be a violation of the agreement, but Iran can be expected to challenge the agreement only if the United States does first. (Russia stands to benefit from U.S.-Iranian tensions. In its search for additional leverage against the United States, it will tighten its relationship with Iran through economic and military deals, knowing that Tehran will use Russia to balance against Washington as the questions emerge about the nuclear deal&#39;s viability.)Still, the Iran deal will survive the year, despite U.S. threats to the contrary. For all the heated rhetoric surrounding U.S.-Iranian relations, Washington has little interest in becoming mired in further Middle East conflicts, least of which with Iran. Likewise, Iran needs to boost its economy, something it will not be able to do without the foreign trade, investment and interaction the nuclear deal allows.The Iranian economy, in fact, will be perhaps the determining factor in the presidential election, scheduled to take place in May. President Hassan Rouhani, a moderate by Iran&#39;s standards, will try to argue that the partial removal of sanctions and the stabilization of the inflation rate will benefit ordinary Iranians. His hard-line opponents in the Islamic Revolutionary Guard Corps accuse him of being soft on the United States, however, and conceding&nbsp;<a class="connectedContentTrigger" href="/article/iran-economic-reforms-hit-hard-line" data-nid="269498" type="Assessments" title="In Iran, Economic Reforms Hit a Hard Line" data-timestamp="1460538906">too much control of the economy to international parties</a>.Regardless of the election&#39;s outcome, Iran will remain under&nbsp;<a class="connectedContentTrigger" href="/article/iran-political-change-measured-pace" data-nid="269370" type="Assessments" title="In Iran, Political Change at a Measured Pace" data-timestamp="1456310210">the influence of conservative politicians</a>. And these politicians are beholden to the supreme leader, who distrusts the United States but also understands the need to re-enter the global economy.&nbsp;<a class="connectedContentTrigger" href="/article/irans-oil-sector-returns-form" data-nid="236529" type="On Geopolitics" title="Iran's Oil Sector Returns to Form" data-timestamp="1462867207">The gradual increase of oil production</a>&nbsp;will help in that regard, but questions surrounding the sustainability of the Iran nuclear deal, not to mention the direction of U.S. policy, could prevent Iran from achieving its economic goals.

Iran's Arc of Influence

An unspoken social contract keeps the peace throughout much of the Middle East. The terms of the contract are simple: Governments give their constituents a high quality of life, and their constituents give their governments their absolute loyalty. But the economic model that contract depends on — a model that features heavy subsidies, bloated public sectors and high commodities exports — has run its course. Thanks in part to low oil prices, governments have been forced to cut expenditures, raise taxes and diversify their economies, creating conditions for political unrest in some of the world’s most autocratic countries.

Thanks in part to low oil prices, governments have been forced to cut expenditures, raise taxes and diversify their economies, creating conditions for political unrest in some of the world’s most autocratic countries.

Saudi Arabia will relish the deterioration of U.S.-Iran relations. And, like Turkey, it will be driven to bolster its regional proxy battles with Iran. However, Riyadh will have to weigh expensive foreign campaigns against mounting pressures at home. After slashing capital expenditures and trimming its public sector bill in 2016, Saudi Arabia will be able to reduce its budget deficit in 2017. Still, the path to reform has been slow and bumpy, and it will be difficult for Saudi Arabia to translate its ambitious&nbsp;<a class="connectedContentTrigger" href="/article/vision-reform-saudi-arabia" data-nid="269528" type="Assessments" title="A Vision of Reform in Saudi Arabia" data-timestamp="1461629407">Vision 2030 and Vision 2020 plans</a>&nbsp;into tangible directives its struggling private sector can follow. With more than four times more money set aside this year than last for&nbsp;<a class="connectedContentTrigger" href="/article/saudi-arabia-new-budget-kickstarts-vision-2030" data-nid="235085" type="Snapshots" title="Saudi Arabia: New Budget Kickstarts Vision 2030" data-timestamp="1482442410">implementing Vision 2020 directives</a>, Saudi leaders will pressure the public and private sector to begin shifting operations accordingly and&nbsp;<a class="connectedContentTrigger" href="/article/taking-another-stab-saudization" data-nid="269884" type="Assessments" title="Taking Another Stab at Saudization" data-timestamp="1473670881">create more jobs</a>.Meanwhile, Riyadh will prepare for Saudi Aramco&#39;s initial public offering, which will take place in 2018, and will broaden the scope of its Public Investment Fund to adopt riskier investments abroad in a bid to turn its wealth repository&nbsp;<a class="connectedContentTrigger" href="/article/drilling-deeper-saudi-aramcos-bid-go-public" data-nid="269940" type="Assessments" title="Drilling Deeper Into Saudi Aramco's Bid to Go Public" data-timestamp="1475830809">into a true sovereign wealth fund</a>. Mimicking countries like Kuwait and the United Arab Emirates, Saudi Arabia will continue to diversify its overseas investments into various tech sectors &mdash; a tried and true way to generate revenue in the long term. The United Arab Emirates will lead&nbsp;<a class="connectedContentTrigger" href="/article/gcc-shared-goals-different-approaches" data-nid="269472" type="Assessments" title="The GCC: Shared Goals, Different Approaches" data-timestamp="1459762273">a Gulf-wide initiative</a>&nbsp;and put technical preparations in place to set up a standard value-added tax levied at 5 percent. The initiative is slated to kick off in early 2018.Saudi citizens will clamor for change as the drive toward reform presses on, but the government will prioritize the economy over social reform. Even a modest social reform risks alienating the Saudi religious establishment,&nbsp;<a class="connectedContentTrigger" href="/article/saudi-arabia-palace-intrigue-time-transition" data-nid="236469" type="On Geopolitics" title="Saudi Arabia: Palace Intrigue at a Time of Transition" data-timestamp="1452585613">whose support for the House of Saud will need</a>&nbsp;to manage homegrown jihadist threats.The rest of the Gulf Cooperation Council will act in concert to curb Iranian influence and defend against common economic and security threats. But there are cracks in the façade of unity. Saudi Arabia will struggle to steer Yemen toward a negotiated settlement while the United Arab Emirates firms up&nbsp;<a class="connectedContentTrigger" href="/analysis/operation-golden-arrow-begins" data-nid="223066" type="ZZZ_DEPRECATED_Analysis" title="Operation Golden Arrow Begins" data-timestamp="1483988040">its position in southern Yemen</a>. Oman, known for its relative neutrality, will not participate in the GCC&#39;s antagonizing of Iran.

Broken Contracts in the Middle East

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.

These same dynamics will appear in the GCC&#39;s foreign policy in North Africa. Saudi Arabia will continue to give its allies economic and security support in exchange for their support of its foreign policy in places like Yemen and Syria. The United Arab Emirates will be a more moderate voice, however, and in its moderation it will undermine the credibility of Saudi Arabia.Egypt will be economically stable enough in 2017 to formulate&nbsp;<a class="connectedContentTrigger" href="/article/limits-gulf-cooperation" data-nid="275419" type="Reflections" title="The Limits to Gulf Cooperation" data-timestamp="1481081968">a foreign policy independent of Saudi interests</a>. To that end, it will try to attract funding from as many external partners as possible. Now that Cairo has devalued its currency, agreed to a deal with the International Monetary Fund and enacted more fuel subsidy reforms, it must implement&nbsp;<a class="connectedContentTrigger" href="/article/egypt-hopes-benefits-economic-reform-outweigh-risks" data-nid="269984" type="Assessments" title="Egypt Hopes the Benefits of Economic Reform Outweigh the Risks" data-timestamp="1477649542">more fundamental, structural reform</a>, such as reducing public sector wages and raising tax revenue. The government of President Abdel Fattah al-Sisi will be only modestly successful in that regard, hamstrung as it is by the legislature and the people, who bear the brunt of the country&#39;s economic malaise.Egypt will meanwhile remain involved in Libya, where&nbsp;<a class="connectedContentTrigger" href="/article/tortuous-path-peace-libya" data-nid="270088" type="Assessments" title="A Tortuous Path to Peace in Libya" data-timestamp="1482138912">Egyptian and Emirati support for nationalist Gen. Khalifa Hifter</a>, who commands the Libyan National Army, is beginning to pay off. Hifter will be able to strengthen his military and political control in eastern Libya and will expand his control into Western Libya, but he will be unable to do so entirely. The Libyan National Army will try to&nbsp;<a class="connectedContentTrigger" href="/article/sun-sets-libya-dawn" data-nid="269467" type="Assessments" title="The Sun Sets on Libya Dawn" data-timestamp="1459603221">rally militias to its cause</a>, but not all of them will want to fight for Hifter. Regardless, Hifter&#39;s divisiveness is bound to impede U.N.-led negotiations to form and approve a unity government. And so Libya will continue to be a battlespace among rival militias that will limit the potential for a lasting peace deal in 2017. Whoever wins this competition will&nbsp;<a class="connectedContentTrigger" href="/analysis/powerful-show-support-house-representatives" data-nid="222906" type="ZZZ_DEPRECATED_Analysis" title="A Powerful Show of Support for the House of Representatives" data-timestamp="1484169510">win Libya&#39;s oil wealth</a>.The Islamic State, meanwhile, will lose a lot of its power but will find refuge and allies in the far reaches of Libya. At the same time, al Qaeda-linked militias will continue to quietly expand their influence.

The Difficulties of North African Reform

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 will lose power elsewhere too. Military campaigns in Iraq and Syria will degrade the group as a conventional military force but will do little&nbsp;<a class="connectedContentTrigger" href="/article/what-happens-after-islamic-state-loses-mosul" data-nid="236609" type="On Security" title="What Happens After the Islamic State Loses Mosul" data-timestamp="1477555207">to degrade it as terrorist or insurgent force</a>. Dispersed throughout the areas they once controlled, remnants of the Islamic State will remain relevant by exploiting ethnic and sectarian divisions throughout Iraq and Syria. Terrorist attacks will therefore return to Iraq in spectacular form. (Despite the military setbacks in Iraq, the Islamic State will have a little more latitude to operate in Syria, where the coalition effort to fight Islamic State is far more convoluted.)Islamic State attacks abroad, however, will be a much more limited threat. Militants returning home from Iraq and Syria are certainly a risk for Western countries, but they are a risk that will be mitigated by heightened awareness and intelligence oversight and increased risk of interdiction.&nbsp;<a class="connectedContentTrigger" href="/article/gauging-jihadist-movement-2016-grassroots-terrorism" data-nid="236471" type="On Security" title="Gauging the Jihadist Movement in 2016: Grassroots Terrorism" data-timestamp="1452758407">More resourceful grassroots terrorists</a>&nbsp;that do not have to rely on extensive networks and capabilities will be the bigger threat from Islamic State in 2017, especially for the West.While the Islamic State has commanded the attention of the international community, al Qaeda has been quietly rebuilding itself, honing its capabilities in multiple theaters to stage its comeback. Al Qaeda nodes that have restyled themselves under various names in Libya, Algeria, Mali, Tunisia, Egypt and Yemen are likely to become more active and influential. Al Qaeda in the Arabian Peninsula is particularly concerning. The tacit agreement it had with Saudi Arabia in Yemen has broken down, making the kingdom a viable target for the jihadist group.Jihadists will remain active elsewhere, too, though their attacks will be relatively unsophisticated. If attacks become more complex in places like Indonesia and Bangladesh, it means more experienced fighters in the Middle East successfully found their way back home.In Nigeria, Wilayat al Sudan al Gharbi, better known by its former name, Boko Haram, will continue to adopt al Qaeda&#39;s targeting strategy, which focuses on military and Western targets while refraining from attacking civilians and Muslims. The faction of the group under the leadership of Abubaker Shekau, however, will continue to attack mosques, Muslims, markets, civilians and other soft targets.

The Fight Against the Islamic State

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.

2017 will present Israel with a variety of opportunities, the biggest of which will come from its security guarantor, the United States. With Republicans firmly in control of the executive and legislative branches of government in the U.S., Israel will have freer rein to pursue its interests without rebuke. The country will benefit from a more assertive U.S. policy on Iran, and through Washington may try to place even more restrictions on Iranian uranium enrichment &mdash; after all, the new U.S. administration is liable to be more receptive to intelligence collected on Iran, especially if it points to infractions of the nuclear deal. An emboldened Israel will also probably accelerate settlement development in the West Bank, even if doing so incites attacks from Palestinian militants. An escalation in Israeli-Palestinian frictions will stress Israel&#39;s relationships with Jordan and Egypt, both facing internal stresses of their own. (The Palestinian issue will also notably be a source of competition between Turkey and Egypt. Ankara will try to develop better relations with Palestinian groups while managing a normalized but&nbsp;<a class="connectedContentTrigger" href="/article/israel-and-turkey-any-port-diplomatic-storm" data-nid="269512" type="Assessments" title="For Israel and Turkey, Any Port in a Diplomatic Storm" data-timestamp="1460970935">still tense relationship with Israel</a>.)But 2017 will also present Israel with a variety of challenges. To its north, it will have to contend with Hezbollah, arguably more powerful and experienced than it has been in years thanks to&nbsp;<a class="connectedContentTrigger" href="/article/israels-next-war-hezbollah-will-be-worse-last" data-nid="270036" type="Assessments" title="Israel's Next War With Hezbollah Will Be Worse Than the Last" data-timestamp="1479891615">its heavy participation in the Syrian civil war</a>. But Hezbollah has its hands full. It will consolidate territory in Syria for regime loyalists, it will&nbsp;<a class="connectedContentTrigger" href="/article/what-end-lebanons-power-vacuum-would-mean-rest-middle-east" data-nid="269986" type="Assessments" title="What the End of Lebanon's Power Vacuum Would Mean for the Rest of the Middle East" data-timestamp="1477759813">fend off political challenges in Lebanon</a>&nbsp;and it will meanwhile keep its eye on Israel. Worried about Hezbollah&#39;s military strength, cognizant that it will have a window of opportunity, and unencumbered by Washington&#39;s reproach, Israel is likely to intensify its operations in Syria and Lebanon in an attempt to weaken Hezbollah and limit their access to advanced weaponry.

Israel's Survival Strategy

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 remains the center of gravity in the Asia-Pacific, and the economy remains the center of gravity in China. After three decades of rapid economic growth fueled by low-cost exports and state-led infrastructure investment, China is in the early stages of a protracted shift toward an economic growth model grounded in private consumption and high value-added manufacturing. Increased consumption will certainly help to ease the economic pain expected in 2017 &ndash; namely, stagnant exports and weak growth in the construction sector. But it will be many years&nbsp;<a class="connectedContentTrigger" href="/article/creating-chinese-consumer-base" data-nid="266683" type="Assessments" title="Creating a Chinese Consumer Base" data-timestamp="1360149329">before consumption becomes China&#39;s engine for growth</a>. In the meantime, China&#39;s leaders will have little option but to use state-led infrastructure investment, however inefficient it may be, to maintain the country&#39;s economic health and thus ensure social and political stability.<div>China&#39;s economic well-being will therefore depend on Chinese policy. And what will define Chinese policy more than anything is&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">President Xi Jinping&#39;s efforts to consolidate power</a>&nbsp;over the Communist Party and over the state&#39;s institutions ahead of the 19th Party Congress, which will take place around October. Xi&#39;s administration will do all it can to contain any social or economic instability that might threaten his political objectives and status within the Party, an imperative that will include sidelining potential rivals and&nbsp;<a class="connectedContentTrigger" href="/article/watching-signs-political-triumph-xi" data-nid="275395" type="Reflections" title="Watching for Signs of a Political Triumph by Xi" data-timestamp="1477357621">moving allies into key government posts</a>. (As many as five of the Politburo Standing Committee&#39;s seven members may retire this year, so Xi&#39;s cause is as urgent as ever.) Until then, he will also continue to employ his anti-corruption drive to displace rivals and threats to his power.That is not to say that amid all this political maneuvering Chinese leaders will ignore economic reform entirely. Where appropriate, authorities will take measured steps forward on initiatives such as a nationwide property tax and property registration system, and they will continue to encourage consolidation in heavy industries. But where such reforms create the risk of instability by, say, undermining employment or corporate solvency, they will be diluted or deferred. Instead, the government will use a tried-and-true method to maintain growth &mdash; credit creation and robust state-led spending on infrastructure and other construction-related industries &mdash; as Xi focuses on tightening his grip on the political system.This economic strategy&nbsp;<a class="connectedContentTrigger" href="/article/chinas-economy-living-borrowed-time" data-nid="270033" type="Assessments" title="China's Economy: Living on Borrowed Time" data-timestamp="1479723427">is not without serious risks</a>.&nbsp;<a class="connectedContentTrigger" href="/article/beijings-debt-swap-program-takes-shape" data-nid="269969" type="Assessments" title="Beijing's Debt Swap Program Takes Shape" data-timestamp="1477040445">Corporate debt in China has reached perilous heights</a>&nbsp;and is disproportionately concentrated in resources, construction and other heavy industries that suffer from overcapacity and inefficiency and that likely hold the lion&#39;s share of nationwide nonperforming loans. Even more concerning, corporate debt is maturing more quickly than ever across all industries, especially heavy industries and the construction sector, forcing companies to take on even more debt to invest and to cover old debt.</div>Corporate debt will be no less concerning in 2017. Despite unprecedented credit creation and robust government spending in 2016, the real estate sector &ndash; on which many of the above industries depend &ndash; saw continued declines in completed investment and construction starts last year. Taken together, these factors point to the steady degradation of credit and investment as tools of macroeconomic management and suggest that Beijing will have to expend even greater resources than in 2016 to maintain the economic status quo. The government has the resources to do so, of course, but maintaining the status quo in 2017 will only exacerbate corporate debt concerns in 2018 and beyond.

Daunting though China&#39;s internal challenges to economic stability may be, Beijing also faces pressing external challenges: a potential eurozone crisis and&nbsp;<a class="connectedContentTrigger" href="/article/trump-doctrine-work-progress" data-nid="236631" type="On Geopolitics" title="The Trump Doctrine: A Work in Progress" data-timestamp="1482220958">new trade policies under the Trump administration</a>. During his presidential campaign, Trump pledged to label China a currency manipulator and to impose across-the-board tariffs on U.S. imports of Chinese goods.&nbsp;<a class="connectedContentTrigger" href="/article/manufacturing-campaign-promise-cannot-be-kept" data-nid="275406" type="Reflections" title="Manufacturing: A Campaign Promise That Cannot Be Kept" data-timestamp="1478830688">Though the former promise is unlikely to materialize</a>, the administration could, if it wanted to, impose tariffs and anti-dumping restrictions on imports of goods such as steel from China. But even that would be fairly inconsequential; targeted protectionist measures would have a marginal impact on China&#39;s economic trajectory and would only encourage corporate supply chains to diversify in other parts of Asia with cheaper labor and large consumer markets. This dynamic will stir tensions between the two economic superpowers &ndash; tensions that could spill over into other spheres of U.S.-China relations, such as the status of and Washington&#39;s relationship with Taiwan.Trump has made clear his willingness to break with diplomatic norms governing U.S.-China relations, particularly his intent to&nbsp;<a class="connectedContentTrigger" href="/article/taiwan-trump-and-telephone-how-simple-act-called-out-contradiction-us-diplomacy" data-nid="236625" type="On Geopolitics" title="Taiwan, Trump and a Telephone: How a Simple Act Called Out a Contradiction in U.S. Diplomacy" data-timestamp="1481012462">use the question of Taiwan&#39;s status</a>&nbsp;as a bargaining chip in negotiations with China on other fronts, including cybersecurity, North Korea&#39;s nuclear program and trade. Beijing is unlikely to make any concessions on Taiwan, and Washington knows this. Instead of fundamentally re-evaluating Taiwan&#39;s status, the Trump administration will try to use the Taiwan issue to get concessions from Beijing. China can retaliate with trade barriers on selected goods and can threaten to limit cyber and military cooperation with the United States, as well as more&nbsp;<a class="connectedContentTrigger" href="/article/china-captures-us-navy-drone-south-china-sea" data-nid="235075" type="Snapshots" title="China Captures a U.S. Navy Drone in the South China Sea" data-timestamp="1481912923">openly confrontational actions</a>&nbsp;in the South China Sea or elsewhere. In the near term, Washington&#39;s willingness will give Taipei some breathing room from China. But the island will carefully manage cross-strait ties to avoid a direct confrontation with Beijing. China can be expected to use diplomatic isolation, military intimidation and targeted economic coercion&nbsp;<a class="connectedContentTrigger" href="/article/china-puts-squeeze-taiwan" data-nid="270059" type="Assessments" title="China Puts the Squeeze on Taiwan" data-timestamp="1481014818">to increase pressure on Taiwan</a>, a critical node in the global tech supply chain that is deeply integrated with the mainland.Beijing will also work, overtly or otherwise, to ensure that a favorable candidate prevails in&nbsp;<a class="connectedContentTrigger" href="/article/hong-kong-chafes-under-chinas-rule" data-nid="270011" type="Assessments" title="Hong Kong Chafes Under China's Rule" data-timestamp="1478771112">Hong Kong&#39;s chief executive election</a>, which is set to take place in March. The election will surely incite protests, but it is nonetheless an opportunity for Beijing and Hong Kong to improve their relationship &mdash; even though Beijing has designs to integrate Hong Kong further into the mainland.But Hong Kong and Taiwan are just two of many features in China&#39;s evolving strategic environment. Throughout 2017, eager to boost the economy&#39;s slow but steady shift up the industrial value chain, China&#39;s government will continue&nbsp;<a class="connectedContentTrigger" href="/article/chinas-investments-reveal-its-broader-ambitions" data-nid="236575" type="On Geopolitics" title="China's Investments Reveal Its Broader Ambitions" data-timestamp="1471331904">to promote overseas investment</a>&nbsp;into sectors such as high-tech manufacturing, culture and entertainment, and information and communications technologies. Beijing will meanwhile capitalize on the opportunity created by the Trans-Pacific Partnership&#39;s demise to promote alternatives of its own divising: the Regional Comprehensive Economic Partnership and the Free Trade Area of the Asia-Pacific.Continued economic weakness at home, combined with the government&#39;s efforts to curb illicit capital outflows, may slow the momentum of Chinese outbound investment somewhat in 2017. But it will not halt China&#39;s efforts to enhance infrastructural, economic and security ties to Central and Southeast Asia. The biggest obstacles confronting initiatives such as One Belt, One Road &mdash; the massive development and infrastructure strategy to better connect China to the rest of Asia, Europe and East Africa &mdash;&nbsp;in 2017 are&nbsp;<a class="connectedContentTrigger" href="/article/china-strives-secure-central-asia" data-nid="269924" type="Assessments" title="China Strives to Secure Central Asia" data-timestamp="1475140517">local opposition and security risks</a>&nbsp;in places such as Central Asia, Pakistan and Indonesia.

China in Transition

As its military power grows, China will struggle to balance its desire for friendly relations with its neighbors against the more fundamental need to secure its maritime interests — a need Beijing believes is best served through unilateral action. China’s rivals are doing all they can to contain this expansion, in part by leveraging economic cooperation with Beijing and in part by forging alliances with outside powers such as the United States, Japan and Australia. But as more powers enter these contested waters, the risk of confrontation will only rise.

China’s rivals are doing all they can to contain its expansion

Things are changing in the South China Sea. In its waters, China&#39;s influence has steadily grown in recent years, thanks to a campaign meant to expand and modernize the Chinese military and to develop the sea&#39;s islands. In 2016, however, the pace of expansion appeared to slow somewhat. In part, the slowdown was due to an international court of arbitration&#39;s ruling against China&#39;s maritime territorial claims. But it was also due to the fact that China, having achieved many of its goals in the South China Sea, is now replacing&nbsp;<a class="connectedContentTrigger" href="/article/great-power-politics-south-china-sea" data-nid="269083" type="Assessments" title="Great Power Politics in the South China Sea" data-timestamp="1445851813">a strategy of aggressive expansion</a>&nbsp;with a strategy that, in addition to coercion,&nbsp;<a class="connectedContentTrigger" href="/article/cooperation-means-all-ends-south-china-sea" data-nid="269918" type="Assessments" title="Cooperation as a Means to All Ends in the South China Sea" data-timestamp="1474882253">leaves some room for cooperation</a>. In fact, Beijing has increasingly sought to cooperate with potentially amenable claimants, such as Malaysia and&nbsp;<a class="connectedContentTrigger" href="/article/duterte-walks-tightrope" data-nid="269981" type="Assessments" title="Duterte Walks the Tightrope" data-timestamp="1477560604">the Philippines</a>, by making conciliatory gestures on economic and maritime issues. At the same time, Beijing has continued to press more outspoken critics of its regional claims through limited punitive economic measures and other confrontational actions.

China will try to maintain this strategy in 2017. To that end, it will prefer to handle disputes on a strictly bilateral basis, and it will likely extend concessions to areas such as energy development and potentially sign a code of conduct that limits its actions.And though this strategy eased maritime tensions somewhat in 2016, it may have more mixed results in 2017. Challenging its success will be a strained relationship with the United States,&nbsp;<a class="connectedContentTrigger" href="/article/south-china-sea-vietnam-stands-its-ground" data-nid="270083" type="Assessments" title="In the South China Sea, Vietnam Stands Its Ground" data-timestamp="1481878804">Vietnam&#39;s continued ventures into maritime construction activities</a>, and the entry of countries such as Indonesia, Singapore, Australia and Japan &ndash; none of them claimants to the South China Sea&#39;s most hotly contested waters &ndash; into regional maritime security affairs.Beijing will be particularly concerned about Japan, which will expand economic and maritime security cooperation with key South China Sea claimants. (Tokyo may also work more closely with the United States in the South China Sea and&nbsp;<a class="connectedContentTrigger" href="/article/east-china-sea-china-crosses-line" data-nid="270003" type="Assessments" title="In the East China Sea, China Crosses a Line" data-timestamp="1478511004">the East China Sea</a>.) Beijing may try to counter U.S.-Japanese cooperation by imposing an air defense identification zone, which would in theory extend Chinese control over civilian aircraft in the South China Sea, though doing so would threaten China&#39;s Southeast Asian relationships. And though China would probably prefer to be as conciliatory as it can as the situation warrants, heightened great power competition in the Asia-Pacific may compel it otherwise. The more Japan is involved, the more China will have to balance, with different degrees of success, its relationships and its interests with members of the Association of Southeast Asian Nations (ASEAN).

Asia-Pacific: Among Great Powers

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.

Greater involvement in the South China Sea, however, is just one piece of the Japanese puzzle. In the two decades following the end of the Cold War, Japan found itself strategically adrift. Today, buffeted&nbsp;<a class="connectedContentTrigger" href="/article/metabolizing-japan-worlds-oldest-nation" data-nid="236583" type="On Geopolitics" title="Metabolizing Japan, the World's Oldest Nation" data-timestamp="1472544073">by demographic decline</a>, China&#39;s rise and a growing recognition across the Japanese political spectrum that change is necessary, Tokyo is in the early stages of&nbsp;<a class="connectedContentTrigger" href="/article/prelude-japanese-revival" data-nid="236357" type="On Geopolitics" title="Prelude to a Japanese Revival" data-timestamp="1430208037">reviving Japan&#39;s economic vitality and military power</a>&nbsp;&mdash; and reclaiming its pride of place in the region.In 2017, the administration of Prime Minister Shinzo Abe will make notable progress in that regard. In addition to expanded involvement in the South and East China seas, the Abe administration is likely to ramp up Japan&#39;s diplomatic and economic outreach in Southeast Asia. Meanwhile,&nbsp;<a class="connectedContentTrigger" href="/article/russia-and-japan-inch-closer-toward-reconciliation" data-nid="275425" type="Reflections" title="Russia and Japan Inch Closer Toward Reconciliation" data-timestamp="1481861387">Abe will pursue a peace treaty with Russia</a>&nbsp;over longstanding territorial disputes. (Even without a formal treaty, the two countries will deepen bilateral trade and investment.) Above all,&nbsp;<a class="connectedContentTrigger" href="/article/japan-adjusts-global-changes" data-nid="275410" type="Reflections" title="Japan Adjusts to Global Changes" data-timestamp="1479436414">Japan will expand bilateral diplomatic and security cooperation with the United States</a>, seeking to ensure Washington&#39;s commitment and involvement in the region. At the same time, Japan will take advantage of opportunities opened by potential changes to the United States&#39; regional strategy &ndash; namely, a shift from multilateral partnerships like the failed Trans-Pacific Partnership to bilateral relationships &ndash; to play a more active leadership role to constrain China.Abe will use his strong political position &ndash; the ruling coalition has supermajorities in both houses of the Japanese parliament &ndash; to press his agenda at home. In 2017, Abe will do what he can to maintain the first two &#39;arrows&#39; of his economic plan &mdash; monetary easing and fiscal stimulus &mdash; while pushing forward with structural reforms (the third arrow) in areas such as labor, women&#39;s workforce participation and immigration. His administration may also seek to capitalize on heightened regional security competition and uncertainty over Washington&#39;s regional position to press for constitutional reforms meant&nbsp;<a class="connectedContentTrigger" href="/article/chronology-japans-remilitarization" data-nid="268845" type="Assessments" title="A Chronology of Japan's Remilitarization" data-timestamp="1436996571">to normalize Japan&#39;s military forces</a>.

A Japanese Awakening

North Korea is convinced that the only way to avoid foreign military action against it is to develop a viable nuclear deterrent — and it is now in the final stages of developing one. Sanctions and negotiations have failed to persuade Pyongyang to abandon this strategy, so world powers have only two options for coping with North Korea: militarily intervene before it acquires a deterrent or begin to shape defense strategies based on the assumption that it will inevitably acquire one. The dilemma is forcing China, Pyongyang’s only ally, to redefine its North Korea policy and is compelling countries such as South Korea, Japan and the United States to increase military cooperation.

North Korea is convinced that the only way to avoid foreign military action against it is to develop a viable nuclear deterrent — and it is now in the final stages of developing one.

Caught between a rising China and a resurgent Japan, both North and South Korea find themselves entering new and precarious strategic waters, albeit in different ways. Naturally,&nbsp;<a class="connectedContentTrigger" href="/article/facing-north-koreas-nuclear-reality" data-nid="236565" type="On Geopolitics" title="Facing North Korea's Nuclear Reality" data-timestamp="1469520058">the prospect of a nuclear North Korea</a>&nbsp;<a class="connectedContentTrigger" href="/article/china-weighs-costs-volatile-friendship" data-nid="269974" type="Assessments" title="China Weighs the Costs of a Volatile Friendship" data-timestamp="1477300510">has put China</a>, South Korea and Japan on edge &ndash; so much so that it has disproportionately contributed to Seoul&#39;s and Tokyo&#39;s military expansions in recent years. In 2017, North Korea may carry out additional nuclear missile tests for technical purposes and to remind the world, and especially Washington, of the country&#39;s strategic importance. This will pressure Seoul to build up its defenses and procure more arms,&nbsp;<a class="connectedContentTrigger" href="/article/riding-political-divide-south-korea" data-nid="275415" type="Reflections" title="Riding the Political Divide in South Korea" data-timestamp="1480478495">though its current political crisis may hinder its progress</a>. While Washington can be expected to expand its sanctions regime against North Korea, it will also petition Beijing to pressure Pyongyang as well. But such efforts may be made in vain: Barring signs of a collapse of the North Korean government, Beijing will avoid putting significant pressure on Pyongyang.

Coping With a Nuclear North Korea

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.

The prospect of a modest recovery in global commodities demand will be a welcome change to exporters such as Australia and Indonesia, but a decline in prices triggered by a slowdown in China&#39;s housing sector remains a real risk. In the year ahead, Asia&#39;s emerging economies may fall victim to potential trade protectionism in the United States, to U.S.-Chinese trade disputes, to a likely increase in the pace of&nbsp;<a class="connectedContentTrigger" href="/article/globally-fraught-fed-rate-hike" data-nid="275424" type="Reflections" title="A Globally Fraught Fed Rate Hike" data-timestamp="1481758508">U.S. Federal Reserve interest rate hikes</a>, and to China&#39;s continued efforts to consolidate heavy and resource-related industries. The countries most at risk to economic shock are those with greater exposure to foreign lending (Malaysia and Indonesia), those with undiversified economic and trade profiles (Cambodia), and those faced with domestic political uncertainty and instability (Thailand and South Korea). Still, Asia&#39;s smaller economies will continue to pursue regional economic, trade and investment integration, untouched as they are, so far, by the rising wave of trade skepticism in other parts of the world.

Commodities: A Cautionary Tale

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.

Thailand will focus on domestic affairs in 2017 as it mourns&nbsp;<a class="connectedContentTrigger" href="/article/thailand-threat-throne-left-empty" data-nid="269970" type="Assessments" title="Thailand: The Threat of a Throne Left Empty" data-timestamp="1477041361">the death of King Bhumibol Adulyadej</a>&nbsp;and as its military government tries to maintain domestic social and political stability. Its first major test will come during national elections, which are scheduled to take place sometime in the second half of the year.Meanwhile, the Philippines will continue to strike a balance between its partnership with the United States and its warming ties with China. (An unexpected confrontation over the Scarborough Shoal could change that dynamic.) This strategy will give Manila more space to focus on domestic issues, such as political reform and ongoing peace negotiations in the south. As long as President Rodrigo Duterte&#39;s popularity is high,&nbsp;<a class="connectedContentTrigger" href="/article/rumors-dutertes-demise-are-greatly-exaggerated" data-nid="270058" type="Assessments" title="Rumors of Duterte's Demise Are Greatly Exaggerated" data-timestamp="1480929307">no serious threats will emerge to his power</a>&nbsp;in 2017. His domestic initiatives and foreign policy agenda, however,&nbsp;<a class="connectedContentTrigger" href="/article/method-dutertes-madness" data-nid="269832" type="Assessments" title="The Method to Duterte's Madness" data-timestamp="1471944663">will require a lot of political capital to maintain</a>, even as they threaten to aggravate internal power struggles between members of the government and political elite.With Malaysian elections possibly in the offing in 2017, political fragmentation and economic uncertainty will test the delicate ethnic and social cohesion that has been in place since the country&#39;s independence.Likewise, concerns over domestic social, political and economic stability in Indonesia will both drive and constrain ongoing fiscal and economic reforms. These concerns come at a precarious time for Indonesia, a time when Jakarta is shifting its focus from ASEAN-wide mechanisms to bilateral negotiations to secure its maritime interests.For Vietnam, 2017 will be a year of the status quo. It will continue to try to ease its economic dependence on China, and its unstable fiscal conditions and rising debt load will constrain ongoing political reforms.Australia will seek to play a more prominent role in promoting regional trade and investment integration in the Asia-Pacific region. It will also try to ensure maritime security along vital trade routes. Domestically, however, the country will struggle to overcome&nbsp;<a class="connectedContentTrigger" href="/article/politically-adrift-australia" data-nid="269718" type="Assessments" title="Politically Adrift in Australia" data-timestamp="1468401324">growing political divisions and legislative gridlock</a>.

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

It’s difficult to ignore some of the benefits of globalization. Goods became cheaper, markets became more accessible, and people moved more freely across borders. But those benefits came at the expense of jobs and, depending on whom you ask, national identities throughout the developed world. It is little surprise, then, that globalization is now an object of contempt in the countries that were once its biggest advocates — countries that have begun to elect leaders who promise to right the wrongs globalization has wrought. International trade will continue, of course, but governments will replace ambitious globe-spanning trade deals with smaller ones, even bilateral ones, as the political challenges to negotiating free trade agreements grow.

The benefits of globalization came at the expense of jobs and, depending on whom you ask, national identities throughout the developed world.

<a class="connectedContentTrigger" href="/article/mexico-trying-year-trade" data-nid="270048" type="Assessments" title="In Mexico, a Trying Year for Trade" data-timestamp="1480412749">The North American Free Trade Agreement will&nbsp;remain largely intact</a> in 2017 despite U.S. campaign promises made to the contrary in 2016. The fact of the matter is that the trade ties and supply chains of North America are so tightly bound that a sudden and dramatic reversal to an agreement such as NAFTA would contravene the interests of all its members. The United States will nonetheless renegotiate the deal, albeit gradually, to honor the campaign promises made by president-elect Donald Trump. Those talks will likely extend beyond 2017.That is not to say the United States is without options for improving the terms of the contract. The Trump administration could increase regional content requirements for products to qualify for tariff-free export to the United States and use non-tariff barriers more selectively.&nbsp;Mexico will have much more at stake in the negotiations, but its imperative is far simpler. It means to leverage its low labor costs and its high number of&nbsp;free trade agreements&nbsp;to maintain as much of the status quo as possible on trade and to maintain foreign direct investment flows into domestic manufacturing. And so Mexico will have a few tools to use against the United States. Mexico could influence the Trump administration by allying with businesses and states that would be hurt by more expensive labor and goods. (As a matter of fact, it has already begun to do so.) It could, moreover,&nbsp;<a class="connectedContentTrigger" href="/article/decade-mexicos-war-drugs" data-nid="270069" type="Assessments" title="A Decade Into Mexico's War on Drugs" data-timestamp="1481464865">leverage intelligence cooperation on&nbsp;counternarcotics operations</a>&nbsp;to try and shape the dialogue.Lower investment flows that could result from the uncertainty surrounding the NAFTA negotiations could hurt Mexico in the meantime.&nbsp;But even this will be tempered by Mexico&#39;s proximity to the United States and its multitude of&nbsp;free trade agreements. Canada, with its advanced economy and high labor costs, will receive much less scrutiny. The Canadian government has indicated its willingness to take part in the NAFTA talks and will be seeking measures to protect its own manufacturing sector.&nbsp;Canada could also&nbsp;renegotiate&nbsp;NAFTA&#39;s investor-state dispute settlement, which allows an investor to sue a foreign government in international arbitration without going through domestic courts. Having been challenged under the ISDS procedure, Canada will certainly want to revisit its terms, even if a business-friendly&nbsp;Trump Cabinet&nbsp;were to resist&nbsp;measures that&nbsp;undermine&nbsp;foreign corporate protection abroad.

The negotiations will be slow going, no matter how they play out. Many of&nbsp;the&nbsp;points up for discussion would still center on concentrating economic production in North America, where supply chain interdependencies are developing organically.

Globalization

The belief that supply and demand will determine price is perhaps the most fundamental tenet of a market economy. But finding the equilibrium between supply and demand takes time, particularly in a market as temperamental as the oil market. That market, having been wrecked by overproduction in 2015, is slowly but surely beginning to recover. And though the speed with which it recovers will depend on U.S. shale production, the technology used in that production will continue to disrupt the oil market writ large and, by extension, undermine the power of OPEC, which has for decades been the arbiter of oil prices.

The oil market, having been wrecked by overproduction in 2015, is slowly but surely beginning to recover.

The Trump administration will loosen regulations on domestic energy, enabling North America to more easily integrate as an energy bloc. It plans to streamline the process for federal permits on energy projects and to pull back from climate change initiatives, measures that could also provide a relative boost to the coal and nuclear power industries. They could also enable the beleaguered U.S. energy sector to rebound after a prolonged depression in the price of oil. A gradual recovery in North American production will, in turn, allow for a modest increase in global oil prices since it will take time for increased North American oil output to offset coordinated production cuts by the world&#39;s oil producers.Canada and Mexico will meanwhile continue to make measured progress in energy integration with the United States. In Canada&#39;s case, this will include increased cross-border pipeline construction and supply integration. In Mexico&#39;s case, it will entail implementing broader energy reforms, including further liberalizing domestic energy prices and loosening Pemex&#39;s dominance in refining and distribution.

A Crude Recovery

Latin American commodities exporters will continue to feel the pinch of low commodities prices in 2017. The economies of Brazil, Argentina, Chile and Colombia will begin to recover somewhat, but slow demand growth from China, low oil prices and an oversupply of agricultural commodities such as soybeans will otherwise keep exports largely depressed.Further stunting economic growth and fiscal health is the strength of the U.S. dollar. Colombia, Brazil, and Chile have substantial dollar-denominated debt, which will become harder to repay or rollover. For Venezuela, which is already on the edge of default, heavier debt payments will increase the risk of default. For Brazil, Chile, Mexico and Argentina, more expensive debt payments amid the general commodity downturn will limit the amount governments can spend on domestic priorities.<a class="connectedContentTrigger" href="/article/opec-every-deal-flawed" data-nid="270054" type="Assessments" title="In OPEC, Every Deal Is Flawed" data-timestamp="1480670130">A modest&nbsp;increase in global oil prices</a>&nbsp;could meanwhile bring temporary relief for oil producing nations in Latin America. Even a temporary hike would be a welcome reprieve for central governments, which would then have a little more leeway in managing public finances. For Venezuela, a country already in an extreme state of economic deterioration, even a slight rise in oil prices could lower the odds that it will default on its foreign debt.And so, faced as they are with relatively low export growth, certain Latin American countries will seek increased access to markets abroad by advancing trade agreements with nations outside the region. In light of the demise of the Trans-Pacific Partnership and the rise of new if limited NAFTA negotiations, Mexico will tentatively try to enter discussions on trade deals with Asian states, particularly with China. The countries that comprise Mercosur, or the Common Market of the South, will also continue to negotiate with the European Union on a future trade agreement, though political constraints on both sides of that dialogue could drag things out.

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.

The price of oil will make or break Venezuela in 2017. Venezuelan state oil and natural gas company Petroleos de Venezuela &nbsp;faces a much higher risk of default on its foreign debt this year, but even a slight rise in the price of crude could buy the government valuable time. Still, this does not put Caracas in the clear.&nbsp;A debt default would reduce the lending and foreign capital Venezuela&#39;s energy sector depends on and would lower the country&#39;s oil output.&nbsp;The subsequent loss of oil revenue would hasten the decline of already reduced food imports, compelling more Venezuelans to either flee the country or to rise up in protest.To avert this crisis and preserve its power, the government will probably choose to cut imports rather than miss its debt payments.&nbsp;<a class="connectedContentTrigger" href="/article/when-currency-swap-goes-wrong" data-nid="270091" type="Assessments" title="When a Currency Swap Goes Wrong" data-timestamp="1482225323">But this will only&nbsp;incite unrest</a>.&nbsp;Venezuela&#39;s attempts to deal with runaway inflation will&nbsp;create&nbsp;additional triggers for unrest. The Venezuelan government will try to introduce higher denomination bills in the new year to keep up with rising prices. But if such measures are implemented haphazardly, they will inflict further economic pain on the population and raise the likelihood of further unrest.

Some political unrest is all but unavoidable. As the threat of default looms, Venezuela&#39;s currency will likely further weaken, driving inflation even higher than it is now. (Inflation is high because the government cut exports to keep making its debt payments.) The ruling party will try to contain unrest through security crackdowns and through increased control of the nation&#39;s food distribution networks.But the fate of the government rests in the hands of the armed forces. So far, the various factions of the government, including the armed forces, have presented a mostly united front against the political opposition.&nbsp;<a class="connectedContentTrigger" href="/article/venezuelas-last-ditch-effort-peaceful-political-transition" data-nid="270004" type="Assessments" title="Venezuela's Last-Ditch Effort at a Peaceful Political Transition" data-timestamp="1478595617">But there is&nbsp;dissension in the ranks</a>; some factions are inclined to hold on to power as long as possible. If Caracas defaults on its debt, the government would initially band together to tighten internal security, but its cohesion would be tested by the intensity and duration of the ensuing unrest. If factions of the armed forces believe siding with the government threatens their power, they may have to reconsider where their loyalty lies.

Venezuela's Unraveling

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&#39;s main priority in 2017 will be to implement the revised peace deal it struck with&nbsp;the Revolutionary Armed Forces of Colombia&nbsp;(FARC) in late 2016. Bogota knows it must act quickly, while it still has the momentum and political authority to do so. The government received fast-track legislative powers in December, so it will be able to pass legislation underpinning the FARC deal more quickly throughout the year. The administration of Jose Manuel Santos will begin the process of demobilizing the rebels with the intent of having as much of the peace deal implemented as possible&nbsp;<a href="/article/what-awaits-colombias-next-president">by the time it&nbsp;leaves office in 2018</a>.

Colombian Peace Process

Brazil will begin its climb out of economic recession this year, though growth will be hampered by relatively weak global demand for export commodities such as soybeans and iron ore and sluggish trade growth with its trading partners.Brazil&#39;s political stability will meanwhile be called into question &ndash; again. The corruption investigation into state oil firm Petroleo Brasileiro could ensnare much of Brazil&#39;s lower house and senate.&nbsp;If lower-level politicians are mainly implicated, the government could withstand such a blow. It would be harder to overcome, however, if the investigation implicated higher-ranking officials in the administration of President Michel Temer &mdash;&nbsp;himself an interim figure who replaced Dilma Rouseff after her August impeachment.Riskier still is a separate investigation concerning&nbsp;possible&nbsp;illegal donations to Temer&#39;s re-election campaign as vice president in 2014. If additional evidence leads to a conviction, Temer would be ordered to step down from his post. Such a scenario, of course, probably would not hurt Brazil&#39;s long-term economic prospects or affect the economic reform bills the president has already begun to move through the legislature. But it would throw Brazilian politics into utter disarray and would discourage foreign investment that Brazil certainly needs in the short term.

Brazilian Instability

In Argentina, economic growth will pick up again in 2017, but moderately high inflation and reduced trade with Brazil,&nbsp;<a class="connectedContentTrigger" href="/article/mercosur-mercy-other-markets" data-nid="269886" type="Assessments" title="Mercosur: At the Mercy of Other Markets" data-timestamp="1473758145">not to mention with the&nbsp;rest of Mercosur</a>, will keep that growth in check. The state of the economy will come into play in the lead up to legislative elections in October, during which the government will try to cater to as many constituents as possible. The administration of Mauricio Macri will therefore refrain from implementing major austerity measures to curb the budget deficit.And it will be unable to cut back on costly fund transfers&nbsp;to Argentine provincial governments &ndash; and on compensation to labor unions. Macri will continue to face domestic challenges from an increasingly united political opposition and from the backlash over utility price hikes, which are meant to raise state revenue and make natural gas&nbsp;projects&nbsp;more attractive in the long run. A more united opposition will limit what the ruling party can pass through parliament and prevent it from&nbsp;enacting economic reform&nbsp;without the opposition&#39;s consent.

In Argentina, the Opposition's Consent

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.

2017 will be a crucible for Prime Minister Narendra Modi&#39;s Bharatiya Janata Party (BJP). In 2014, the BJP became the first party in 30 years to win a majority in the lower house of parliament, at once dispelling, if only temporarily, the tradition of coalition government that has long defined Indian politics. But even with such a mandate, honoring promises of reform in a legislature as fractured and convoluted as India&#39;s is difficult, prone to slow, uneven progress.Now, the great challenge facing the BJP is to continue making progress on its promises and to streamline the country&#39;s onerous land, labor and tax regulations, all in support of unleashing the labor-intensive economic growth India needs in order to absorb the 12 million people who enter the job market every year. This is no easy task. The sheer scale of reform in a stratified, billion-citizen democracy such as India is so immense that its implementation is measured not in years but in generations. And so Modi has taken the long view, having used his first five-year term to lay the groundwork for a second term in 2019.To that end, Modi means to win state-level elections to bolster his party&#39;s numbers in the upper house of parliament; doing so, of course, would make it easier to pass legislation.&nbsp;<a class="connectedContentTrigger" href="/article/indias-economic-long-game" data-nid="270087" type="Assessments" title="India's Economic Long Game" data-timestamp="1482138903">The elections in Uttar Pradesh</a>, India&#39;s most populous and electorally most important state, are particularly important. A victory there would substantially bolster the BJP&#39;s numbers in the upper house and go a long way toward securing a presidential re-election in 2019.The outcome of the election is less important than the strategy the BJP employed to win it. This is because the three remaining bills of&nbsp;<a class="connectedContentTrigger" href="/article/contending-indias-democracy" data-nid="275347" type="Reflections" title="Contending With India's Democracy" data-timestamp="1469760980">the Goods and Services Tax</a>&nbsp;(GST) failed to pass during the winter session of parliament. The opposition capitalized on the ill will generated by Modi&#39;s demonetization campaign against black money (the measure entailed the withdrawal of 500 and 1,000 rupee notes from circulation). Modi expected this, of course, but he went through with the measure anyway as part of a bigger political calculation: He wanted to hone his image as a pro-poor, anti-corruption candidate ahead of the Uttar Pradesh elections.Failing to pass all of the bills in 2016 means that the BJP will have to push back its April 1 deadline for implementing them and focus on passing the remaining ones in 2017. Other reforms will therefore have to be put on hold. Moreover, given that demonetization is a necessarily disruptive process for a cash-based, consumption-driven economy such as India&#39;s, growth will slow in 2017. In turn, this will lower inflation rates and compel the Reserve Bank of India to loosen monetary policy.The rise of the BJP also gave rise to nationalism, a trend that will continue throughout 2017. Its renaissance will force the BJP to take a hard line against Pakistan, but this, too, is at least partly a political calculation: Opposition to Pakistan cuts across party lines, so admonishing Islamabad will make it easier for the BJP to keep&nbsp;<a class="connectedContentTrigger" href="/article/cows-symbol-divinity-and-discord-modis-india" data-nid="269853" type="Assessments" title="Cows: A Symbol of Divinity and Discord in Modi's India" data-timestamp="1472463018">an otherwise fractious voting base intact</a>.<div>&nbsp;</div>

India's Own Worst Enemy

In 1947, British India was partitioned into two independent states: India and Pakistan. Nearly seven decades later, the two countries — now both nuclear powers — are still fierce rivals. As Pakistan works to develop its tactical nuclear weapons, and as India seeks new means of deterring their development, South Asia will be uniquely vulnerable to the threat of military miscalculation. Pakistan’s ongoing struggle to rein in militants, some of whom have turned against the government in Islamabad, will only make matters worse. The ongoing spat over the disputed territory of Kashmir, meanwhile, will prevent New Delhi and Islamabad from normalizing ties. But though the prospect of conflict can never truly be ruled out, the states' mutual need for economic growth will temper their hostilities toward each another, much as it has for the past few years.

Nearly seven decades after gaining independence, India and Pakistan — now both nuclear powers — are still fierce rivals.

August 2017 will mark the 70th anniversary of India and Pakistan&#39;s independence, so nationalism in each country will be running high. This uptick in nationalism, not to mention the perennial&nbsp;<a class="connectedContentTrigger" href="/article/unrest-kashmir-sets-india-and-pakistan-edge" data-nid="269777" type="Assessments" title="Unrest in Kashmir Sets India and Pakistan on Edge" data-timestamp="1470388507">cross-border militant attacks into Kashmir</a>, will have governments on both sides of the border on high alert. And even though the newest evolution of India&#39;s military doctrine,&nbsp;<a class="connectedContentTrigger" href="/article/india-military-strategy-guided-precision" data-nid="269939" type="Assessments" title="In India, a Military Strategy Guided by Precision" data-timestamp="1475746212">which is more tactical and precise</a>&nbsp;than its forebear, will deter attacks and minimize the risk of escalation, it will not remove the possibility entirely.<div>It is in this context that the India-Pakistan rivalry will take shape in 2017. The election season in India will promote anti-Pakistan rhetoric, which will only encourage Pakistan to continue to respond to intensifying cross-border shelling by Indian troops. (Incidentally, tensions have escalated since 2014, the year Modi came to power and the year NATO withdrew most of its troops from Afghanistan, enabling Pakistan to turn its attention from its border with Afghanistan to its border with India.)But Pakistan has elections too, slated for 2018, and this year Prime Minister Nawaz Sharif will begin his own campaign for an unprecedented fourth term. Criticism from the opposition that he is too weak on India will compel him to take a much tougher stance.</div>&nbsp;

The India-Pakistan Rivalry

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.

In 2017, South Asian militancy will be used as a means to political ends. India will continue to work with Afghanistan&nbsp;<a class="connectedContentTrigger" href="/article/iran-indias-gateway-central-asia-and-middle-east" data-nid="269373" type="Assessments" title="Iran: India's Gateway to Central Asia and the Middle East" data-timestamp="1456396221">to construct the Chabahar Port</a>&nbsp;in Iran, much to the chagrin of Pakistan, which believes New Delhi is also providing aid to secessionists in Balochistan. The aid, Pakistan suspects, is itself a way to sabotage&nbsp;<a class="connectedContentTrigger" href="/article/46-billion-tie-binds-china-and-pakistan" data-nid="269556" type="Assessments" title="The $46 Billion Tie That Binds China and Pakistan" data-timestamp="1462525613">the China-Pakistan-Economic-Corridor</a>, a central tenet of Sharif&#39;s campaign promise to reduce the country&#39;s natural gas shortages. Accordingly, Islamabad will resist calls to arrest members of the Taliban who live in Balochistan, using them as levers to force Washington and Kabul to include Pakistan again in negotiations with the Taliban.<div>&nbsp;</div>

South Asian Militancy

Pakistan has been described as a military with a country, not a country with a military. Even when it is not formally in control — as has been the case off and on for nearly half the country’s history — the military has still been singularly influential in Pakistan’s political affairs, endowed as it is with the power to make or break the heads of the civilian government. And though there are signs that the civilian government is growing more assertive, history is still on the military’s side.

Though there are signs that the civilian government is growing more assertive, history is still on the military’s side.

Underlying the dynamics of the region is how much power Pakistan&#39;s military, and particularly the army, has in the country&#39;s politics. It has ruled for nearly half of the country&#39;s 69-year history. It is too early to say how Gen. Qamar Bajwa, the country&#39;s recently appointed army chief, will alter&nbsp;<a class="connectedContentTrigger" href="/article/pakistan-army-country" data-nid="275414" type="Reflections" title="Pakistan: An Army With a Country" data-timestamp="1480392225">the civil-military balance of power</a>. But it is clear that the threat from India &mdash; real or perceived &mdash; will push the army to maintain the status quo, even in light of two milestones recently passed on the way to civilian rule: the completion of a democratically elected president&#39;s five-year term in 2013, and the abdication of power by an army chief after one three-year term in 2015.Either way, the Pakistani government will remain steadfast in its role in the Afghan conflict &mdash; which is to say, Islamabad will obstruct talks, if it allows them to emerge at all, if it feels as though it is being sidelined by Afghanistan or by the United States. But what also stands in the way of resolution are the divisions within the Taliban &mdash; manifested most notably this year by&nbsp;<a class="connectedContentTrigger" href="/article/template-peace-deal-afghanistan" data-nid="270006" type="Assessments" title="A Template for a Peace Deal in Afghanistan" data-timestamp="1478682159">its Doha faction</a>, which began vocalizing calls for the Taliban to transition from an insurgency into a viable political movement &ndash; divisions that will become all the more apparent in 2017. Instability will hamper progress on transnational energy projects such as the Turkmenistan-Afghanistan-Pakistan-India pipeline, which highlight the country&#39;s role as an energy bridge linking energy abundant Central Asia with energy deficient South Asia.

Pakistan: A Military With a Country

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.

The African National Congress has ruled South Africa since Nelson Mandela became the country’s first president of the post-apartheid era. But its support is dwindling, thanks in part to generational changes, structural economic issues, and the rise of a black middle class that demands improved service delivery and governance. And while it will continue to be the first among equals in South African politics, the cracks that have emerged in its base may force the ANC to revert to the more socialist policies of its founding. Were that to happen, it would be less inclined to accommodate the businesses that keep its economy afloat.

The African National Congress has ruled South Africa since Nelson Mandela became the country’s first president of the post-Apartheid era, but its support is dwindling.

For South Africa, the difficulties of 2016 will inform the decisions of 2017. Weak economic recovery and&nbsp;<a class="connectedContentTrigger" href="/article/south-africas-ruling-party-loses-another-city" data-nid="269833" type="Assessments" title="South Africa's Ruling Party Loses Another City" data-timestamp="1471964967">political losses from municipal elections</a>&nbsp;in August have eroded public support for the ruling African National Congress. The party will try to maintain its traditional support base among the rural and poor black working class even as the economy stagnates. To that end, the ANC will try to promote social welfare and appease pro-labor groups, even through state intervention, so that the left-wing elements of its support base do not defect to another party or challenge him within his own.The stage is thus set for a competition over who will lead the ANC, the vote for which will be held during the party&#39;s leadership congress in December 2017. President Jacob Zuma is supposed to abdicate his party chairmanship, and he wants his successor to come from the same ethnic Zulu and pro-labor circles as he did. But his rivals have other plans. In fact, a right-leaning, pro-business faction of the ANC is gaining steam, and&nbsp;<a class="connectedContentTrigger" href="/article/south-africa-presidents-party-turns-against-him" data-nid="269427" type="Assessments" title="In South Africa, the President's Party Turns Against Him" data-timestamp="1458207053">if a challenger from that faction assumes control of the party</a>, Zuma may be recalled as president in 2018.

The Post-Apartheid Era Ends

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.

African rulers cling to power in a variety of inventive ways. Over the past few years alone, three long-serving rulers &ndash; the Republic of Congo&rsquo;s Denis Sassou-Nguesso, Equatorial Guinea&#39;s Teodoro Obiang, and Uganda&rsquo;s Yoweri Museveni &ndash; did so through constitutional reform. In 2017, the leaders of Angola, Zimbabwe and the Democratic Republic of Congo will have to execute their own plans to retain power, if not for them than for those that are close to them.

Angola&#39;s transition will be the smoothest. President Jose Eduardo dos Santos, who has run the country since 1979, has announced that he will not stand for re-election in August. Though the 74-year-old is stepping down without a fight, he has&nbsp;<a href="/article/experienced-hands-emerge-steady-angola">a carefully crafted plan in place</a>&nbsp;to keep power in the hands of the ruling MPLA. Dos Santos will spend most of the year mentoring his designated successor, Defense Minister Joao Lourenco, and instructing him how to navigate the complex patronage network he spent several decades building. Dos Santos will also make sure his family&rsquo;s interests, which extend&nbsp;<a href="/article/angola-where-self-preservation-disguised-reform">into the state-run oil company and the country&#39;s sovereign wealth fund</a>, survive the transition.Zimbabwe&#39;s presidential transition will be considerably more ugly as&nbsp;<a href="/article/mugabes-unsustainable-legacy">the power struggle over the presidency intensifies</a>&nbsp;in the lead-up to 2018 election. President Robert Mugabe, 92, will not voluntarily step down, but if he leaves office involuntarily, whether by force or by natural death, he will be replaced by Vice President Emmerson Mnangagwa, who has the&nbsp;<a href="/article/zimbabwes-president-life">support of the country&#39;s security forces</a>. (If Mugabe is still around, he can be expected to run for re-election.) Under Mnangagwa, Zimbabwe would be more likely to open itself up to Western institutions for financial relief, if only to shore up his own legitimacy.

Joseph Kabila, the president of the Democratic Republic of the Congo since 2001, has employed more creative tactics to stay in power. Kabila has already&nbsp;<a class="connectedContentTrigger" href="/article/delaying-democracy-democratic-republic-congo" data-nid="270037" type="Assessments" title="Delaying Democracy in the Democratic Republic of Congo" data-timestamp="1479891631">delayed the presidential election from 2016 to 2018</a>, citing issues in voter registration and funding. There is no guarantee, of course, that the election will actually take place as planned, the possibility for 2017 elections notwithstanding. But even if it does take place, Kabila has plenty of time to find a successor or find another way to hold onto power. But the president may be overplaying his hand. He oversees an inherently weak patronage system in a country predisposed to rebellion and mired economic turmoil. By intensifying crackdowns in 2017 he risks losing critical international aid and military assistance from MONUSCO, the U.N. peacekeeping mission in the country. Such a loss would put him in an even tighter corner as he clings to power.<div>&nbsp;</div>

Old Leaders in a New Africa

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.

Nigerian President Muhammadu Buhari has another tough year ahead of him. Oil prices remain low and challenges to his ruling are rising. One such threat comes from within his own All Progressives Congress party. Facing more resistance within the congress, Buhari will try to rely more on executive action to pursue his reform agenda and sustain an anti-corruption probe. But that will only galvanize the opposition &ndash; so much so that the main opposition party, the People&#39;s Democratic Party, could seek an alliance with dissenting factions in the All Progressives Congress ahead of the 2019 presidential election. (As a matter of fact, the People&#39;s Democratic Party has already announced that it would select a presidential candidate in the north, an attempt to&nbsp;<a class="connectedContentTrigger" href="/article/nigeria-familiar-debate-resurfaces" data-nid="269876" type="Assessments" title="In Nigeria, a Familiar Debate Resurfaces" data-timestamp="1473411606">divide Buhari&#39;s northern support base</a>.) And with less oil revenue at his disposal, Buhari will have limited means to win over new allies and prevent his base from fracturing.The federal government will also be constrained in its ability to offer improved terms to&nbsp;<a class="connectedContentTrigger" href="/article/reconciling-expectations-and-reality-niger-delta" data-nid="270020" type="Assessments" title="Reconciling Expectations and Reality in the Niger Delta" data-timestamp="1479200419">the stakeholders of and militants in the Niger Delta region</a>. Consequently,&nbsp;<a class="connectedContentTrigger" href="/article/nigerias-oil-industry-churns" data-nid="270028" type="Assessments" title="Nigeria's Oil Industry Churns On" data-timestamp="1479461542">oil and natural infrastructure in the Niger Delta</a>&nbsp;will continue to be the target of politically motivated violence in 2017.

Nigeria: Obstacles to Prosperity

<a class="connectedContentTrigger" href="/article/rise-and-fall-somali-state" data-nid="270065" type="Assessments" title="The Rise and Fall of the Somali State" data-timestamp="1481189405">2016 was a trying year</a>&nbsp;for Somalia&#39;s security forces. Militant group al Shabaab came back with a vengeance, putting African Union peacekeepers and Somalia&#39;s nascent army on their back feet. In 2017, the security environment will be even more fragile as AMISOM struggles to maintain its current troop levels, let alone increase them. And its fragility will give al Shabaab even more room to acquire territory and to pressure the international mission. Budget cuts, not to mention the conflict&rsquo;s intractability, have already some AMISOM contributors reconsider their participation. Uganda has even said it would begin to withdraw its troops by December 2017. If AMISOM falls apart, then al Shabaab will flourish.<div>Ethiopia will also de-prioritize its commitment to the African Union Mission in Somalia (AMISOM) in 2017 but for different reasons. In 2016,&nbsp;<a class="connectedContentTrigger" href="/article/muffled-insurrection-ethiopia" data-nid="269822" type="Assessments" title="A Muffled Insurrection in Ethiopia" data-timestamp="1471599014">social unrest against the Tigray minority-dominated regime</a>&nbsp;in Addis Ababa spread from mainly ethnic Oromo areas of the country to ethnic Amhara areas and beyond. In the latter half of the year, protests and skirmishes between armed opposition and government security forces extended to the outskirts of the capital, providing the greatest challenge to Addis Ababa in years. The government reacted by instituting a massive crackdown, including a six-month state of emergency that will continue into 2017.The Ethiopian government will apply heavy-handed security measures to try to contain unrest, but it will be unable to do so among the marginalized ethnic groups in the countryside. There is therefore a possibility for the lightly armed opposition to cohere and upgrade to bigger weapons.The country will continue to suffer from the ongoing drought, though the government will make progress on the Grand Ethiopian Renaissance Dam. With construction proceeding apace, Ethiopia could begin&nbsp;<a class="connectedContentTrigger" href="/article/ethiopia-makes-progress-nile-dam-project" data-nid="269242" type="Assessments" title="Ethiopia Makes Progress on the Nile Dam Project" data-timestamp="1451588518">diverting water from the Nile River into a reservoir</a>&nbsp;as early as 2017. Downstream, Sudan and Egypt will try to defend their own water security by gaining more influence in when, and how quickly, the reservoir is filled.&nbsp;</div>&nbsp;

Security Around the Horn

East Africa is a potential success story on a continent that tells too few of them. Improved economic and transportation supply chains have brought the region closer together, and the countries that constitute it have experienced rapid economic growth. Among the few obstacles to continued growth are the rivalries that plague the region, most notably the one between Kenya and Tanzania. But cultural commonalities, historic ties, shared demographic trends and, most important, an imperative to band together will ultimately prevail, making them more attractive investment destinations.

East Africa is a potential success story on a continent that tells too few of them.

Having already established itself as an emerging producer, East Africa will make more&nbsp;<a class="connectedContentTrigger" href="/article/ugandas-enviable-energy-position" data-nid="269400" type="Assessments" title="Uganda's Enviable Energy Position" data-timestamp="1457439386">progress in the energy field</a>. The Ugandan-Tanzania pipeline, which will be built by France&#39;s Total SA, the United Kingdom&#39;s Tullow Oil, and China National Offshore Oil Co. Ltd., will begin its initial resettlement planning &mdash; an important requirement for Tanzania&#39;s regulatory environment &mdash; in the beginning of 2017.Other key regional infrastructure projects such as the Djibouti-Addis Ababa railway, whose trial service began in October 2016, will have regular service beginning in 2017. The railway, built and bankrolled by China, will significantly reduce the time and cost for shipping Ethiopian goods to Djibouti, which accounts for 90 percent of Ethiopia&#39;s trade. The money saved will come at an opportune time for Ethiopia, struggling as it is with contests to its rule that show no sign of ending in 2017.Less encouraging for the region is the status of the East African Community&rsquo;s Economic Partnership Agreement with the European Union. The agreement, in the works since 2007, would guarantee EAC member states duty-free and quota-free access to the EU&rsquo;s market in exchange for the EAC removing tariffs on over 80 percent of its imports from the European Union by 2033. But the deal has become hostage to the divisions of the East African trading bloc. Eager for the regional deal, the EU has granted the EAC an extension until early February to sign the deal as a bloc. However, persistent concerns of Tanzania over the effects of the EPA on its industrialization policy and its impact on Dar es Salaam&#39;s nascent manufacturing sector will make&nbsp;<a class="connectedContentTrigger" href="/article/east-africa-where-ambition-meets-reality" data-nid="269896" type="Assessments" title="East Africa: Where Ambition Meets Reality" data-timestamp="1474012825">implementation of the trade agreement exceedingly difficult</a>.

2017 ANNUAL FORECAST

Asia-Pacific

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