quarterly forecasts

2017 Third-Quarter Forecast

93 MINS READJun 26, 2017 | 13:54 GMT
The United States will maintain its security alliances abroad, but it will also generate enough uncertainty to drive its partners toward unilateral action in managing their own neighborhoods.
(Getty Images/Stratfor)


Tempering Trump Policy: Ongoing federal investigations and intensifying budget battles with Congress will make for another distracting quarter for U.S. President Donald Trump. But these disruptions won't mitigate the rhetoric of White House ideologues, or broader speculation that the United States is retreating from the global stage. The reality of the superpower's role in global governance, of course, is far more complicated. Meanwhile, the administration's more extreme policy initiatives, particularly on matters of trade and climate, will be tempered at the federal, corporate, state and local levels. And though the United States will maintain its security alliances abroad, it will also generate enough uncertainty to drive its partners toward unilateral action in managing their own neighborhoods.

Sparks Fly in the Middle East: Qatar's standoff with Saudi Arabia and the United Arab Emirates will persist throughout the quarter amid intensifying battles among regional powers' proxies across the region. More visible competition within the Gulf Cooperation Council and growing distrust between Turkey and its Gulf neighbors will reveal the weaknesses of the White House's strategy to conform to Riyadh's increasingly assertive foreign policy in an attempt to manage the region. The risk of clashes among great powers is also on the rise in eastern Syria: As Iran works to create a land bridge from Tehran to Damascus and the Mediterranean coast, Syrian loyalists and U.S.-backed rebels are racing toward the Iraqi border, all while Russia uses the Syrian battlefield to jockey with the United States for influence.

A Stressed but Stable Oil Market: As Saudi Arabia's young Crown Prince Mohammed bin Salman continues to amass power, much of his focus will stay fixed on preparing for the initial public offering of Saudi Aramco in 2018. Part of that plan entails preserving a deal on production cuts among major oil producers in hopes of keeping prices stable amid climbing output in the United States, Libya, Nigeria and Kazakhstan. Compliance with the agreement will hold through the quarter, but it will slip toward the end of the year as signatories begin to craft their exit strategies.

Dancing Around the North Korean Crisis: The limits to China's cooperation in sanctions against North Korea will become clearer as trade talks between Beijing and Washington head for a rough patch. Pyongyang's nuclear and weapons tests will continue to fuel friction in the region, though they will not increase the chances of U.S. military action this quarter unless the North Korean regime can demonstrate a credible long-range missile capability — an achievement that is probably still at least a year away.

Europe Buys Time While Russia Airs Its Dirty Laundry:  A likely electoral win for Germany's moderate forces and early reform successes in France will reinvigorate calls to take advantage of the prevailing calm on the Continent to revamp the European Union. Doing so, however, will expose the many fault lines festering in Europe as each camp proposes a different vision for integration. And with a wary West on guard against Russian cyberwarfare and propaganda campaigns, there will be little room for substantive negotiation between Washington and Moscow this quarter. At the same time, a burgeoning protest movement will keep the Kremlin's hands full at home.


Global Trends

11 MINS READJun 26, 2017 | 13:53 GMT
Those hoping to fill the United States' shoes in leading the world still have their own existential threats to contend with at home.

Those hoping to fill the United States' shoes in leading the world still have their own existential threats to contend with at home.

section Highlights
  • The enduring constraints on the White House -- and on those trying to supplant the United States as the world's leading superpower -- will matter far more than rhetoric in shaping global governance.
  • Mixed messages from the U.S. administration won't result in Washington abandoning its traditional allies, but they will spur more unilateral action by U.S. partners in the Middle East, Europe and Asia.
  • Despite its vocal support for protectionism, the White House will pursue a more moderate trade policy in practice.
  • Major oil producers beyond the United States will comply with their agreed-upon production cuts for at least the third quarter, though upticks in output in the United States, Libya, Nigeria and Kazakhstan will keep a cap on oil prices.
  • The world's biggest central banks will keep their monetary policies loose as expectations of global reflation diminish.

The U.S. Exits Stage Left?

When world leaders gather in Germany for the approaching G-20 summit, they will no doubt make a slew of assertions — some alarmist, others justified — about a U.S. retreat from the global stage. Talk of leaders like German Chancellor Angela Merkel, French President Emmanuel Macron and Chinese President Xi Jinping stepping in to fill the void and uphold global governance on major issues such as free trade, climate change and security can be expected. But there is an underlying reality to that narrative that should be kept in mind.

Simply put, those hoping to fill the United States' shoes in leading the world still have their own existential threats to contend with at home. Germany and France are buying valuable time with their electorates to try to repair the European Union and make an example of the United Kingdom's departure, but the bloc's members still have vastly different visions of what European integration should look like and how nationalism might fit in. China, meanwhile, is not a globalist power with a model of governance to offer the world; it is a fiercely nationalist power with global clout, caught between the compulsion to operate as a market economy and the imperative to centralize political power under the ruling Communist Party. None of these countries come close to matching the U.S. military footprint or the country's ability to shoulder the burden that comes with superpower status.

Perhaps more important, though, is the fact that the United States may not be as able to relinquish its role in the world as it seems. U.S. corporations, interest groups, states and cities will all temper the moves made by the federal government, particularly on climate and trade matters.

Troubled, but Unbroken, Alliances

Washington's attempt to rebalance its priorities and compel others to help manage conflict is hardly new. But U.S. President Donald Trump's administration stands ready to brazenly challenge the conventional wisdom on the United States' role and responsibilities as a superpower. Whether driven by fear or opportunity, the shift in U.S. rhetoric alone will force Washington's allies and adversaries alike to adjust their behavior accordingly.

And the consequences will be clear in the Middle East this quarter. The White House's effort to whittle down its interests there to neutralizing radical Islamism and containing Iran has indirectly shattered its vision of propping up a Saudi-led "Arab NATO" to manage the region. Instead, Washington's heavy endorsement of Riyadh's agenda during the second quarter helped to spawn a spat within the Gulf Cooperation Council that laid bare the enduring fault lines among Sunni states amid intensifying wars by proxy in the region. The United States will not have the luxury of choosing sides in the dispute. Rather, it will have to balance and grapple with the divides crisscrossing the Gulf and the wider Middle East, all while keeping its fragile nuclear deal with Iran in place.

The United States' European allies have misgivings over its security commitments on the Continent as well. But despite their concern, and despite ongoing federal investigations into the White House's interactions with Russia, Washington will not forsake NATO. At the end of the day, the United States has an imperative to uphold the Western security alliance and contain Russia — a goal that will make itself known in Congress' pursuit of additional sanctions against Moscow, and in the maintenance of Washington's existing security commitments in Europe. Russia nonetheless will do its best to play off the discord in the West while playing to France's ambitions of charting an independent foreign policy course. In the meantime, Poland, Ukraine and the Baltic states will take what assurances they can get from the United States as they try to assume a more assertive approach toward Moscow.

U.S. partners in the Asia-Pacific will also be working to process mixed messages from the White House. The United States will maintain its military posture in the region amid a steadily growing threat in North Korea and China's persistent efforts to keep Washington out of its backyard. But vulnerable states caught in the middle of their contest will do what they can to balance between U.S. guns and Chinese butter in order to safeguard their own interests. Those in a position of greater strength, such as South Korea and Japan, will look for more autonomy in providing for their own security as they lessen their dependence on the United States.

Rhetoric and Reality in Trade

One source of nations' alarm and confusion in reading the intentions of the Trump administration are divisions within the White House itself. And given the ongoing struggle between the ideologues and professionals surrounding the president in crafting policy, the gap between aim and capability will stretch wide. Washington's trade policy is a case in point.

Trump and more ideological members of his team will continue to espouse an aggressive protectionist agenda that zeros in on countries with which the United States has large trade deficits. As we emphasized at the start of the second quarter, this doesn't mean Washington will abandon trade deals like the North American Free Trade Agreement, where the United States is already closely intertwined with its neighbors' economies, or destroy the global trade regime governed by the World Trade Organization (WTO). Instead it will rely on existing mechanisms to tighten trade restrictions in certain sectors. The process of renegotiating NAFTA, which will commence this quarter, will even take on a more moderate tone that emphasizes modernizing — rather than overturning — the agreement.

The United States' trade dialogue with China, on the other hand, is heading toward a rougher patch. By mid-July, the two countries' 100-day period for talks will end, and Beijing will have made some minor concessions to Washington, granting U.S. firms market access in select sectors. But as they tackle stickier issues that involve China's state-run corporations and heavy industries that the United States is already more stringently regulating, Beijing will try to leverage its cooperation against North Korea to mitigate the pressure building on it in trade.

Over the next few months, China will be only one of several countries closely monitoring the Trump administration's protectionist bent in the steel and aluminum sectors, where the White House has a little more leeway to protect industries under duress from imports. The findings of several trade reviews the executive branch has ordered will soon clarify the limits of the president's powers in trade — particularly the ability to cut down on steel and aluminum imports for the purpose of protecting national security, a tactic that could prove a slippery slope if other countries respond to such moves in kind. The farther the White House proceeds down this path, the more it will encounter hard barriers to its proposed actions. The Trump administration will be constrained in trying to unilaterally impose sweeping protectionist measures on a bilateral basis; the WTO, the U.S. International Trade Commission, the possibility of legal challenges and pushback from states and interest groups will each act as a significant check on the White House's trade policy.

The same will not be true of Germany, whose ideological battle with the United States will once again be in the international spotlight this quarter. Though some countries have found creative ways to temper the White House's trade ire (for example, by emphasizing their investments in the United States) Berlin will not get a pass from Washington. Instead, Merkel and Trump will square off at the G-20 summit in early July over the merits and dangers of open markets, even if little of substance comes from their rhetoric. After all, Germany's trade policy is not formulated in a vacuum; it is conducted through the European Commission, and there is little the United States can do to stop German companies from selling cars within its borders. While Germany advocates free trade on the G-20 stage, an embattled United Kingdom will quietly work to stay in the United States' good graces, a new French government will brace itself for rising popular demand to protect its own industries, and a determined China will keep prodding an apprehensive Europe to recognize it as a market economy in the WTO.

The G-20 summit will serve as a snapshot of the dysfunction currently afflicting globe trade negotiations. Over the past year, China and Germany have tried to ensure that investment facilitation is the next item that the WTO approves at its December ministerial meeting in Buenos Aires. But the divisions among the world's countries will be made clear at the conference, underscoring the unlikelihood of this milestone being reached within the desired time frame.

Still, just because the United States may give the cold shoulder to free trade doesn't mean other states' trade initiatives will stall. In the coming quarter, the European Union and Japan will reach a political deal on the free trade agreement they have been negotiating since 2013. Overcoming this roadblock won't be the end of the road, of course; more sensitive details about investment and data flows still need to be hammered out before a final agreement can be struck, and new EU rules requiring such deals to be ratified by regional parliaments could make it more difficult to reach a consensus on investment.

The remaining members of the Trans-Pacific Partnership (TPP) will likewise work to salvage their pact in the wake of the United States' withdrawal in January. Countries with advanced economies such as Japan, Australia and New Zealand will be the driving force behind the talks, while their developing peers, Vietnam and Malaysia, may prove more reluctant. The group's intent is to design a menu of options by November for pushing the deal forward. But New Zealand's Sept. 23 elections could sap some of the initiative's momentum if the opposition Labour and New Zealand First parties — which stand against the TPP's current format — enter government.

Oil Producers Stick Together, For Now

Meanwhile, the world's major oil producers will continue to comply with their agreement to extend production cuts until March 31, 2018. But that doesn't mean high oil prices are in the offing. In fact, oil prices have fallen since the deal was implemented in January. U.S. output will continue its rapid climb, and by the end of the third quarter, the country could have added another 200,000 to 300,000 barrels per day, bringing total U.S. production close to 9.5 million bpd. The downward pressure these added supplies will put on oil prices will be reinforced by strong production growth in Libya and Nigeria, which combined could add on roughly the same amount of output as the United States. So far, rising U.S. production has capped Brent crude, the international price benchmark for sweet light crude, at $45 to $55 a barrel this year, a ceiling that is unlikely to change in the months ahead.

Despite the wrench that increasing U.S. output has thrown in other producers' plans to try to nudge oil prices back up, their deal to slash production will not be jeopardized this quarter. Nor will Qatar's dispute with the Gulf Cooperation Council cause the agreement to fall apart; at only 30,000 bpd, Qatar's contribution to the production cuts is small, and Doha has already promised to uphold its end of the bargain. As a result, overall compliance with the deal will likely stay steady through the quarter as OPEC (led by Gulf producers) accounts for nearly 100 percent of the cuts and non-OPEC states lag behind. Beyond the quarter, however, it is unclear how long producers will hold firm. It is possible that they will reach their goal of reducing global oil inventories to the five-year norm by the end of the current agreement, even as U.S. output rises. But the closer producers get to achieving their objective, the more likely countries that are under considerable financial pressure, such as Venezuela and Iraq, will break ranks and cheat. Major producers like Russia, moreover, are already trying to plan a more orderly exit strategy for themselves beyond the quarter's end.

Central Banks Loosen Their Monetary Policies

As China's producer price inflation continues to fall, so, too, will the outlook for global reflation. This will be accentuated by a shift in U.S. policy away from expectations of a sweeping tax reform — which has been increasingly watered down and now likely won't come before the end of the year — and toward trade, where uncertainty persists. The resulting retreat of the rising inflation that appeared in the developed world at the start of the year will alleviate some of the pressure on central banks to tighten their monetary policies. In the United States, the pace of interest rate hikes will slow, while across the Atlantic and Pacific, the European Central Bank and Bank of Japan will face less pressure to end their quantitative easing programs. A recent split in the United Kingdom's Monetary Policy Committee, moreover, showed a growing desire to raise interest rates and stave off inflation, despite the blow those moves could deal to an economy already stumbling amid the uncertainty surrounding a new minority government and signs of a dropoff in consumer activity. That the committee may boost interest rates in the next few months anyway, however, cannot be ruled out





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 — 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.
13 MINS READJun 26, 2017 | 13:52 GMT
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

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

section Highlights
  • The U.S. government will implement the more protectionist policies in President Donald Trump's trade agenda, starting with negotiations to revise the North American Free Trade Agreement.
  • A dissident faction in the Venezuelan government will challenge President Nicolas Maduro, who could lose the military's support in the face of mounting protester casualties and the threat of sanctions from the United States.
  • In Brazil, political parties will start choosing candidates to run in the 2018 presidential race, though the country's wide-ranging corruption investigation will limit their options.
  • The Colombian government will prioritize passing the remaining laws necessary for its peace deal with the Revolutionary Armed Forces of Colombia (FARC), and criminal groups will encroach on the remote but lucrative territory that the rebel group abandoned during their demobilization.
See more on this Region

The White House Reviews Its Options

In the second quarter, the White House began a series of internal reviews on issues related to trade. U.S. President Donald Trump's administration conducted investigations on bilateral trade deficits and strategic sectors in the U.S. economy. Washington launched its 100-day action plan on trade with China, a period that will end July 16. And perhaps most important, the White House formally notified Congress that it would begin a renegotiation of the North American Free Trade Agreement. During the third quarter, the United States will follow up on these initiatives and begin implementing measures on the president's trade agenda.

The White House, for example, may move to protect the U.S. steel and aluminum sectors. Trump signed a pair of executive orders in the second quarter ordering investigations, set to wrap up as early as the end of June, into whether imports of the metals jeopardize national security. If the inquiries find that they do, then the Trump administration would likely restrict imports in those industries with quotas or tariffs. The White House could also try to pressure other countries to adopt voluntary export restrictions, if only informally — World Trade Organization rules prohibit the measures. Either way, the results of the investigation could bode ill for major U.S. steel suppliers, such as Brazil. Some suppliers, like Canada, are likely to gain exemptions of some sort.

In addition, new sectors, products and countries may come under Washington's scrutiny in the third quarter. The Trump administration has been keen on protecting the United States' heavy industries, automotive manufacturing and its high-end technology industry. If the president launches investigations into these sectors, they would probably adhere to the same pattern that the steel and aluminum inquiries followed. The White House has at its disposal few tools it can use to act quickly on trade issues, and the ones it does have — such as the national security review — require in-depth examinations. Even if the United States kicks off another review in the third quarter, for instance into semiconductor imports, the results probably wouldn't be back until the end of the year.

Negotiations on NAFTA Begin

By far, the U.S. government's biggest trade priority in the next few months will be NAFTA. The United States, Mexico and Canada will likely enter formal negotiations over the agreement in the second half of the quarter, though the talks would not conclude until next year at the earliest. Washington's priorities for the negotiations will be twofold. Its first objective will be to modernize NAFTA, borrowing heavily from the Trans-Pacific Partnership to introduce stronger intellectual property rights, provisions on digital trade, and stricter, more enforceable labor and environmental regulations. Its second goal will be to remedy those aspects of the trade deal that the White House believes are unfair to the country and its workforce. To that end, Washington will advocate raising rules-of-origin requirements for goods included in NAFTA and renegotiating the agreement's anti-dumping and countervailing subsidy duties dispute mechanism. The Trump administration walked back from its most controversial negotiating targets, including a safeguard measure to restore tariffs quickly and steps to "level the playing field on tax treatment," when it notified Congress in May of its intention to reopen discussions on NAFTA. But it did so in part to mollify U.S. lawmakers. Once the White House begins a new round of negotiations with Canada and Mexico, some of its more divisive proposals will likely resurface, albeit in a more moderate form.

Canada and Mexico will strive to keep the changes to the agreement as minor as possible. Neither Mexico City nor Ottawa opposes Washington's calls to update the agreement for the 21st century. Still, both governments will do their best to limit the fallout of the White House's protectionist proposals on their economies. Canada's main task will be working to keep the trade disputes between Washington and Mexico City from hurting its own trade with the United States. After all, the Trump administration has already vindicated Canada for its trade surplus with the United States, since the imbalance is due entirely to energy trade. Mexico, on the other hand, has its work cut out for it to keep NAFTA intact. The United States argues that Mexico is the country that has benefited the most from the deal, at the expense of its other two signatories. To prevent upheaval in its economy, Mexico City will pursue trade deals elsewhere as it continues lobbying U.S. stakeholders at the state and local level to speak out against Washington's most aggressive protectionist measures. It will likely also cede to some of the less damaging U.S. demands, such as calls for higher rules-of-origin requirements, but drawing the line at re-erecting trade barriers.  

For Mexico, the stakes of the NAFTA overhaul are high, not just economically but also politically. The negotiations probably won't have an immediate effect on the country's politics, but they will last into the next presidential campaign season and will probably become a hot-button issue in the runup to the vote in 2018. The pressure the United States will put on Mexico during the talks may even help populist candidate Andres Manuel Lopez Obrador's bid for the presidency (though, if elected, he would likely take a negotiating stance similar to that of the current president). In the meantime, Mexico City will continue its discussions with Brazil and Argentina over expanding existing trade agreements to include agricultural exports such as soy, beef, pork and corn. The threat of further increasing its imports of South American agricultural goods will give Mexico leverage in NAFTA negotiations, especially if the U.S. withdrawal from the pact makes Brazilian and Argentine products more competitive than those of their U.S. counterparts. 

Congress Squares the Trump Agenda With Budget Reality

Beyond trade, much of the U.S. government's attention this quarter will be focused on passing the necessary appropriations bills before the new fiscal year starts Oct. 1. The White House will stick to its proposal for deep funding cuts to the Department of State and the U.S. Agency for International Development and seek allocations for building a wall along the Mexican border. In fact, the administration will press Congress during budget negotiations for $1.6 billion in funding to construct scores of kilometers of the new border wall and to fortify existing barriers to illegal immigration. The funds would further contribute to the downturn in unlawful migration across the southern U.S. border if appropriated as the White House requests. In Congress, though, the pushback has already begun. Lawmakers on both sides of the aisle oppose most of the proposed spending cuts and are likely to ignore large swaths of the White House budget proposal.

The U.S. Senate, meanwhile, is racing against a self-imposed deadline — the July 4 recess — for passing a health care bill. Between the appropriations and health care legislation, Congress won't have much time to discuss other initiatives this quarter. (The House of Representatives will be in session just 25 days over the next three months, while the Senate will convene for 32 days.) Nevertheless, the White House could move forward with its plan to unveil an expanded tax plan. Its proposed nationwide infrastructure buildout, by contrast, probably won't make much progress this quarter. Instead, the Trump administration will release new details about the project or issue additional executive orders with the goal of making infrastructure more attractive to private investors. Measures such as tolling restrictions will be among the executive branch's first targets in that endeavor.

Venezuela's Unraveling

Whatever challenges the U.S. administration will face in the third quarter, however, the Venezuelan government's problems easily top them. The political foundation of President Nicolas Maduro's administration will steadily crumble throughout the quarter. And though frequent, violent protests continue in the streets, the real threat to the government will come from within. A growing rift in the ruling United Socialist Party of Venezuela (PSUV) will pit Maduro and a group of party elites, such as Vice President Tareck El Aissami and influential power broker Diosdado Cabello, against a faction trying to oust the president. The insurgent element's members see few benefits in maintaining their support for Maduro's administration, which is up against low public approval, an increasingly disloyal military and the threat of sanctions on its oil sector from the United States. As the PSUV's grip on Venezuela weakens, party officials will try to safeguard their own futures — even if that means defying the president's attempts to cling to power.

The renegades, including former Cabinet ministers, retired military officers, current and former law enforcement officials, and Attorney General Luisa Ortega, will ramp up the pressure on Maduro and his allies this quarter in an attempt to stall their efforts to amend the constitution. Because some of Ortega's camp still hold sway in the government and armed forces, Maduro will not be able to remove them from power easily. If the president moves forward with rewriting the constitution to stay in office, Ortega's allies will take action against the government, possibly by attempting criminal investigations against its members and their supporters in the military and law enforcement.

As the confrontation unfolds, the most important official to watch will be Defense Minister Gen. Vladimir Padrino Lopez. So far, Padrino Lopez has stood by the Maduro government, likely because the administration's survival is in the best economic and personal interests of the Venezuelan military. But that could change. Heavier casualties among protesters or harsher sanctions from the United States could force the defense minister to reconsider his position, opening a wider split among the security forces that Maduro relies on to defend his government. Even if the brewing political dispute doesn't come to a head in the third quarter, the risk to Maduro's government will keep growing as his popularity sinks and the armed forces' allegiances falter.

Despite the upheaval in Venezuela, Cuba will draw closer to its longtime ally in the third quarter in the wake of the U.S. decision to tighten sanctions on Havana. Restrictions on transactions with Cuban military enterprises will likely reduce the number of U.S. travelers heading to the island nation under the loosened travel regulations that former President Barack Obama had instated. Now that a closer economic relationship with the United States is off the table, at least for the time being, Cuba will try to stabilize its ailing patron, Venezuela, by providing security assistance. Havana will keep deploying troops to the country to help Caracas contain unrest and monitor civilian and military dissidents.

Operation Car Wash Cleans Up

Venezuela's southern neighbor Brazil is grappling with political problems of its own stemming from Operation Car Wash, a multiyear corruption investigation. The country's Supreme Court will continue its corruption investigation of President Michel Temer, who was recently acquitted of electoral misconduct by the Brazilian Supreme Electoral Tribunal. A ruling in the case isn't imminent, and Temer's congressional coalition will largely hold together for now. The president could start losing his political allies, however, if a new scandal engulfs him. In that case, Temer may have trouble passing some of his proposed economic and fiscal reforms, including legislation to cut costs in Brazil's pension system and to streamline the country's complex labor laws. (The latter measures are likely to make more headway in the third quarter, since amending the pension laws would require the approval of three-fifths of lawmakers in each house of Congress.)

Operation Car Wash will also complicate preparations for Brazil's next presidential election, slated for October 2018. To reduce the risk of scandals emerging during and after the campaign, political parties will try to pick candidates who have managed to stay out of the investigation. The process won't be easy, considering the number of mainstream politicians caught up in the dragnet. Former President Luiz Inacio Lula da Silva of the opposition Workers' Party, for example, is the subject of several open criminal investigations, though he is still a popular figure nationwide. Da Silva's party has nominated him as its candidate, and so long as he avoids a conviction on corruption charges, he may well win the presidency next year. But by taking office, da Silva could keep the corruption inquiries alive and, in turn, subject Brazil's political system to further instability.

Compared with those of Brazil, Argentina's president and legislature are in for a relatively quiet few months. President Mauricio Macri will focus mainly on the congressional elections scheduled for early in the fourth quarter, since their outcome will in large part determine whether he can pass legislation to advance his agenda. Former President Cristina Fernandez de Kirchner's new party will work to Macri's advantage in some districts by splitting the vote among four coalitions.

Colombian Peace Process

For Colombia's government, meanwhile, the priority of the third quarter will be passing the remaining legislation necessary to enable the Revolutionary Armed Forces of Colombia (FARC) to demobilize. Time is of the essence in this initiative because the country's legislature will adjourn for a three-month recess at the end of the fourth quarter. By the time Congress reconvenes in March 2018, legislators will be more concerned with their campaigns for re-election than with enacting laws. Congress will move to introduce and approve important bills related to the peace deal — such as measures creating amnesty courts and allowing the FARC to participate in politics — in the third and fourth quarters. The government will rely on its majority in both houses of the legislature to prevent opposition lawmakers in the Democratic Center party or Conservative Party of Colombia from holding up the process with requests to amend the bills.

Most FARC rebels across Colombia will surrender their weapons to the government in the coming months in keeping with the peace process. But as they do, parts of rural Colombia will become more appealing to other criminal groups such as the Popular Liberation Army, the National Liberation Army and the Gaitanista Self-Defense Forces (also known as Clan del Golfo). These organizations will pick up where the FARC left off, spurring violence as they begin extorting locals or fighting among themselves for control of the territories Colombia's most enduring insurgent group vacated under the peace deal.

Apart from militancy, Colombia will also experience a wave of local referendums in the third quarter. Local governments and activists across the country have pushed to hold votes on the future of extractive operations, citing environmental concerns, since 2016, when a Constitutional Court ruling granted municipalities greater authority over mining activities within their limits. One such referendum has already halted work on a gold mine in Tolima department, and two more (of a total 44) will take place this quarter. Residents of Pijao, in Quindio department, will vote whether to approve or ban mining in their municipality July 9. That same day, local authorities in Arbelaez, Cundinamarca department, will hold a referendum on oil exploration. If voters opt against mining in their areas, private companies will likely have to curb their extraction activities there, and other localities will probably move to hold votes of their own. Should the referendums keep proliferating, however, the Colombian government eventually will take steps to limit their effects, either by outlawing them outright or by deploying security forces to protect the lucrative industries targeted by the votes.


Middle East and North Africa

The Middle East and North Africa is the world'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 — Saudi Arabia and Egypt are the current Arab powers — and their competition for influence over the region's weaker states makes the Middle East and North Africa an arena of violence and instability.

17 MINS READJun 26, 2017 | 13:49 GMT
The Middle East and North Africa encompasses the Arabian Peninsula, the mountains of Iran, the plains of Turkey, the deserts of the Levant, the lands north of the Sahara and all coasts in between.

The 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.

section Highlights
  • The battle brewing between Qatar and some members of the Gulf Cooperation Council will expose both the flaws in Washington's strategy of relying on a Saudi-led alliance to manage regional conflicts and the widening rift between Turkey and its Gulf neighbors.
  • Meanwhile, conflict will escalate between Saudi and Iranian proxies on battlegrounds scattered from the Gulf to the Levant.
  • Iranian-backed forces will also face a heightened risk of clashing with U.S.-allied forces in Syria as they race to reach the Iraqi border amid the Islamic State's slow retreat.
  • Iran and Turkey, though competing heavily for influence in northern Iraq, will both work to counter the momentum building behind a Kurdish independence referendum.
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A Spat Among Allies Engulfs the Middle East

As the second quarter comes to an end, Qatar's dispute with a handful of its peers in the Gulf Cooperation Council (GCC) has captivated the rest of the international community. But their differences will go unresolved in the next quarter as the spat lays bare the enduring fault lines within the counterterrorism alliance that the United States — and the GCC's de facto leader, Saudi Arabia — had hoped would manage the Middle East's many conflicts. As the kingdom tries to assert its authority among its fellow Gulf states by subduing Doha's independent streak, Qatar will fight to keep the unique foreign policy niche it has carved for itself beyond the edges of Saudi Arabia's shadow.

The United States' role in the region will do much to shape the standoff's outcome. On one hand, Saudi Arabia and its ally, the United Arab Emirates, have confidence in the White House's support of their agenda to contain the activities of political and militant Islamists as well as Iran. On the other, the U.S. military has a deep and lasting footprint in Qatar that it will not allow the recent diplomatic row to erase. So, as long as both sides can count on Washington's backing, they can afford to remain steadfast in their positions, underscoring the futility of the White House's attempts to form members of the discordant GCC into an "Arab NATO" capable of managing Iran and neutralizing the jihadist threat.

Turkey, which shares Qatar's support for Islamist groups across the region, will stand by its side in its quarrel with the GCC. In doing so, it will reveal the deep rift between Sunni powers that view Islamists as an existential threat and those that see such groups as an integral segment of Middle Eastern society. For Ankara, the timing of the tiff couldn't be better: After all, it offers Turkey a means of extending its influence in the Gulf as its quiet rivalry with Iran intensifies in Syria and Iraq.

Ankara's more visible confrontation with its Sunni peers, however, will spur Saudi Arabia and the United Arab Emirates to ramp up their own involvement in the Syrian and Iraqi conflicts in hopes of balancing against Turkey and Iran. And as Qatar turns to Turkey, Iran and Russia for diplomatic and logistical assistance in its dispute with the GCC, Saudi Arabia will become even more convinced of the need to hold a hard line on Doha.

The commercial and diplomatic consequences of the feud will continue to be felt in the third quarter as well. Because Qatar relies on the United Arab Emirates' position as a regional transshipment hub, supply chains that include products shipped over land or by air from Qatar, such as helium, face the risk of severe disruption while the squabble persists. Trade of oil and liquefied natural gas will be less affected, since Qatar owns dedicated facilities for direct export and has the ability to adapt to regional port restrictions (albeit at a steeper cost) on oil and LNG shipments. But Qatar will see its financial sector shaken, thanks to the industry's heavy reliance on connections to banking sectors throughout the GCC, especially in the United Arab Emirates. The blow dealt to Qatar Airways by a ban on the use of Saudi, Emirati and Bahraini airspace will also add to the pressure building on Doha to capitulate to the bloc's probable demands.

Chief among those demands are moderating coverage by media outlets like Al Jazeera, severing ties to Islamist groups, and aligning Doha's foreign policy with Riyadh's. Qatar will likely take steps to address the first two items, restraining some independent news organizations while mitigating the presence of Islamist groups within its borders, as it has already discreetly begun doing. But Saudi Arabia and the United Arab Emirates may go a step further, requiring that Qatar pull back from its relationship with Iran, expel prominent Islamists and limit its military cooperation with Turkey — a partnership that has unsettled Saudi Arabia in its quest to become the region's leading Sunni power. Doha, of course, does not intend to yield swiftly to any of these demands, which it claims are unfounded. (Not to mention the fact that ties with Iran and Islamist groups are critical to Qatar's economic and foreign policy agendas.) And though external parties such as the United States and Turkey will try to broker a resolution to the conflict, Saudi Arabia and the United Arab Emirates will work to keep mediation within the GCC family, centering negotiations in Kuwait and Oman.

Two Longtime Rivals Battle by Proxy

As Saudi Arabia uses the White House's backing to try to prop up its leadership role in the region, tension between the kingdom and Iran will grow. The dangers of escalation in their rivalry have already been made clear in battlegrounds across the Middle East this quarter. Iran's ability to equip regional proxies, such as the Houthi rebels that the Saudi-led coalition is fighting in Yemen, continues to cause concern in the kingdom. The same is true of Tehran's influence over local actors in unstable areas nearby, such as Saudi Arabia's Eastern Province and Bahrain, where the Iranian government has offered verbal support for Shiite separatist movements and where Saudi and Bahraini security forces are struggling to identify and arrest militant cells. Riyadh's ongoing security operations in al-Awamiyah's Masoura district, moreover, offer Shiite insurgents in the area a chance to attack Saudi forces. Consequently, the kingdom will remain deeply suspicious of Iran, watching carefully for any attempt by Tehran to stoke unrest in majority-Shiite portions of the Arabian Peninsula — and using its fears as justification to step up its own support for militants targeting Iranian interests.

This blame game will only intensify in the third quarter. Over the past few months, Tehran has leveled unprecedented accusations against Saudi Arabia of fomenting instability within Iran's borders. (For instance, Tehran claimed Riyadh and Washington were involved in the Islamic State's June 7 attacks on the Iranian capital.) The Iranian government will continue to point the finger at Saudi Arabia for any threats to Iranian stability that arise, regardless of whether any evidence exists to support its allegations. The claims being thrown back and forth could lead to an uptick in raids against militant groups that may, in turn, spur further unrest. Hotspots to monitor for signs of this volatile spiral include places Iran has already targeted in counterterrorism raids, such as its northwestern Kurdish regions bordering Iraq; areas in the country's south with large Sunni populations; and the restive southeastern province of Sistan-Baluchistan. In fact, Iran already claims to have proof of Saudi meddling among local militant communities in these regions.

The clash of the two titans will play out on political battlefields as well. As the second quarter came to a close, Lebanese lawmakers approved a new electoral law and extended parliament's term to May 20, 2018. The legislation reduces the number of electoral districts in the country from 26 to 15, a move that concerns Lebanon's smaller parties and demographic groups. Over the next few months, lawmakers will hash out the details of holding parliamentary elections, and Druze, Christian and Sunni leaders will work to ensure that their voices are not lost among the country's Shiite majority. Perhaps the most important consequence of the new bill, however, is that it will limit the ability of any external actor — including Iran and Saudi Arabia — to force its agenda on the Lebanese government.

Of course, Saudi Arabia has not forgotten the challenges it faces at home amid its struggle for dominance in the Middle East at large. In the coming months, Riyadh is expected to announce the location of its highly anticipated initial public offering of the Saudi Arabian Oil Co., as well as the results of an ongoing review of the country's oil reserves. Newly annointed Crown Prince Mohammed bin Salman, for one, has championed the IPO effort.

Having just jumped ahead in the kingdom's line of succession, sidelining former Crown Prince Mohammed bin Nayef in the process, bin Salman has a fresh mandate to double down on his aggressive approach toward Iran and economic reform. The new crown prince now also has the power to exercise greater influence over Saudi Arabia's national security, and he will waste no time in holding Iran responsible for threats to it. Bin Salman will no doubt use his newfound clout to try to cajole the region's Sunni powers into following Saudi Arabia's lead and standing united against Iran. Despite his best efforts, though, countries like Qatar, Lebanon and Egypt will work to avoid being dragged into Riyadh's escalating confrontation with Tehran. Balancing between the two, however, will not be so easy for countries with sizable Shiite and Sunni populations and positive relationships with both powers, such as Pakistan and Iraq.

Iran's Hard-Liners Hem In the President

Much to the relief of its Saudi ally, the United States will keep sanctions in place against Iran's ballistic missile program this quarter while continuing to target individuals and companies linked to the Islamic Revolutionary Guard Corps (IRGC). Both Washington and Tehran will strive to keep the Joint Comprehensive Plan of Action (JCPOA) in place, but the lasting friction between the two will narrow Iranian President Hassan Rouhani's policy options. In the wake of the Islamic State's twin attacks in Tehran on June 7, the IRGC will seize the opportunity to secure more resources and expand its activities overseas. Though recently re-elected,  Rouhani will have a tough time using his renewed mandate to reduce the group's writ, a goal he has tried to pursue before. As a result, the president will not be able to moderate Iran's communications with Saudi Arabia or the United States.

This isn't necessarily unusual for Iran; the country's second-term presidents historically have had trouble asserting their agendas and keeping the IRGC and its hard-line political allies in line. As Rouhani strives to make good on his campaign promises of social and economic reform, the gap between him and the rest of the Iranian government (which is appointed rather than elected) will doubtless widen, and the barriers to reform posed by the IRGC may prove insurmountable.

The Syrian Civil War

Across Iran's western border, the Islamic State has suffered crippling defeats in Iraq and Syria. But the loss of territory in the group's core areas of operation has not eliminated its ability to inspire attacks elsewhere in the world. The Islamic State threat is ever-evolving, as seen with its initial attack in Tehran last quarter. One possible outcome of the incident, however, may be to draw Iran deeper into the fight against the Islamic State in Syria. Tehran's forces, already pushing east in Syria toward Islamic State positions near the Iraqi border, risk coming into conflict with the U.S. troops deployed there.

The United States, for its part, has its sights trained on the Islamic State. With U.S. support, the Syrian Democratic Forces have begun to advance on the strategic city of Raqqa, one of the jihadist group's last strongholds. But in a new twist, the U.S.-led coalition and its rebel allies have found themselves facing off against the Syrian government, backed by Iran and Russia, in a contest to wrest control of the Islamic State's remaining territory from its weakened grasp. Each of the participants in this race to the Iraqi border is driven by different interests, but their shared desire to seize the same stretch of land will pit them against one another, increasing the risk of clashes this quarter.

To the Syrian government, reaching outposts in the far east and northeast is critical to its ambitions of reclaiming control over the country. But its Iranian patron is far more interested in using the push to build a land bridge stretching from Tehran to Damascus and the Mediterranean Sea — a link that would greatly extend Tehran's reach by solidifying logistics and supply lines and enhancing its ability to project force. Russia, too, is deeply involved in the loyalists' three-pronged push toward the Iraqi border, and as the Syrian government's troops draw nearer, they risk disrupting the operations of rebels in the area.

The presence of U.S. allies in eastern Syria has already complicated the loyalists' drive east, and it will continue to do so in the coming quarter. Nevertheless, Washington's partners likely won't be able to prevent their Russian- and Iranian-backed rivals from reaching the border first, and by the end of the year.

The Battle for Mosul

Another important front in the fight against the Islamic State is winding down as well. The battle for the Iraqi city of Mosul as all but over; Iraqi troops have encircled and nearly cleared the last pocket of militants in the town. Once the task is complete, those forces will be freed up to stabilize other parts of the country, including Tal Afar, Hawija, Diyala and Anbar. They will also turn their attention to recaptured territory that has grown restive, such as Tuz Khormatu and Sinjar. Though the Islamic State has been driven from these places, they are home to diverse populations and political figures who are vying for the right to govern them. So far Iraqi Prime Minister Haider al-Abadi has managed to place the issue on the back burner, but the end of the Mosul operation will revive negotiations over it, as well as the deployment of troops to the contested areas. Conversations on these thorny matters will get heated in the months ahead, exacerbating fissures within the Kurdistan Regional Government (KRG) and between Arbil and Baghdad.

Because the Islamic State has largely fled Iraqi Kurdistan, local political factions have been able to resume their debate over the semi-autonomous region's future. Near the end of the second quarter, Kurdish politicians announced that an independence referendum would be held on Sept. 25. The Kurds' temporary alignment on the issue has spurred concerned powers to try to derail the vote, especially since it will include the oil-rich province of Kirkuk. Baghdad, for example, will likely try to distract Kurdish leaders from the referendum by forcing the KRG to settle its unresolved energy and territorial disputes with the central Iraqi government.

Meanwhile, other countries with sizable Kurdish populations, such as Turkey and Iran, will use Kurdish factions over which they have influence to interject in the referendum plans. A successful bid for independence in Iraqi Kurdistan, after all, would establish a precedent for other Kurdish groups throughout the Middle East, perhaps even inspiring them to push for their own state. And given the constraints on Turkey's actions in Syria, Ankara will be looking for opportunities in Iraq to shape the region's political and security climate after the Mosul operation has ended. Yet by inserting itself in Iraqi Kurdistan, Turkey will strain its relationship with KRG President Massoud Barzani. And all the while, Iran will use its Iraqi and Kurdish allies positioned near Turkish-backed forces to protect its own interests in northern Iraq and spoil Turkey's plans.

Despite this rampant meddling, the Kurdish referendum will not lose its momentum. It will, however, fall prey to infighting among the Kurds' rival factions, resulting either in a vote that Baghdad refuses to recognize or in one that the ruling Kurdistan Democratic Party has no intention of upholding. (In some ways, Barzani has championed the referendum to distract his constituents from the KRG's pressing problems and from his illegal stay in office, rather than to secure independence for his people.)

The Iraqi government in Baghdad will undergo its own political changes as coalitions fortify themselves and their support bases ahead of provincial elections in September. Whether or not the vote is actually held on time, though, depends on parliament's approval of a new electoral law. Should that approval fail to materialize, the provincial voting could be combined with parliamentary elections in the first half of 2018. But even in the event of a delay, jockeying among Iraq's political parties will continue throughout the third quarter as each angles to win as many seats in the legislature as it can. So far, powerful Shiite leader Muqtada al-Sadr is pleased with how the electoral law is shaping up and has begun reaching out to Kurdish and Sunni parties to broaden his popular appeal. If, however, the bill does not pass in its current form, which favors small parties over large ones, al-Sadr may resort to calling crowds of his supporters out into the streets. 

Israel Prepares for a Tense Summer

Across Iraq's western border, Israel has ramped up its activity in Syria. During the second quarter, it launched several airstrikes against arms convoys belonging to Hezbollah, a Lebanese militant group backed by Iran, as they transited southern Syria. The attacks underscore the enduring threat that Syrian and Iranian allies on Israel's northern border pose to its national security.

Israel likewise faces a persistent threat along its southern edge. Israeli officials raised the possibility of a fresh clash with Salafist militants in Gaza after interdicting several small rocket attacks — reportedly conducted by multiple groups — near the border. The lasting (and potentially worsening) feud between Palestinian groups Fatah and Hamas over resources in Gaza may only add fuel to the fire, though neither has the political will to stoke a larger conflict with Israel.

Instead, Hamas has been preoccupied by Qatar's dispute with the GCC, which has threatened the group's operations in Doha. Hamas officials are likely making contingency plans in the event that they are forced to relocate some or all of their activities. Iran may be the solution to the group's problem: After years of frosty relations, Tehran's ties with Hamas have begun to warm, and both have expressed the desire to make sure that trend continues. But Iran is not Hamas' only suitor. Egypt, too, has offered to send electricity supplies to Gaza and relax restrictions at its border crossing with the territory in exchange for security concessions. Hamas will therefore spend the next quarter strategizing how to balance Tehran and Cairo's advances without alienating them both.

The Libyan Civil War

Along a different stretch of the Mediterranean coastline, Libya's three rival governments continue to vie with one another for control of the country. The Government of National Accord (GNA), based in Tripoli and recognized by the United Nations, will work with Khalifa Hifter, field marshal of the Libyan National Army (LNA), and his allies in the eastern House of Representatives to follow the political roadmap they signed earlier this year. (The deal includes a plan to hold elections in the first quarter of 2018.) Deepening divisions within both camps, however, will limit the talks' success, even as Hifter tries to improve his image and soften his stance on the militias supporting the GNA.

Those militias have given the GNA the upper hand in Tripoli since their Misratan adversaries, which are aligned with the General National Congress, retreated last quarter. But the GNA's battle for legitimacy in the strategic city is not won: The Misratan militias are still hovering in certain sections of Tripoli's outskirts. In the meantime, though the LNA will continue to advance to the south and west, Hifter's dearth of ground troops will impede movement beyond the current lines of battle.

The return of stability to much of Libya has enabled the country's oil sector to begin making a slow recovery. Volatility, however, will continue to endanger that revival. In the coming quarter, oil production could drop from its May average of 730,000 barrels per day to as low as 450,000 bpd if one of Libya's many fault lines erupts. That said, an uptick in output (albeit temporary) to between 900,000 and 1,000,000 bpd is also well within the realm of possibility during periods of calm.



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.

13 MINS READJun 26, 2017 | 13:51 GMT
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.

section Highlights
  • EU leaders will discuss several proposals to reform the bloc this quarter, but their diverging views will limit room for concrete action.
  • The approval of France's labor reforms legislation will mark an early political victory for President Emmanuel Macron.
  • The elections in Germany in September will not pose an immediate threat to the eurozone because moderate forces will stay in power. Nevertheless, the country's next government will play a crucial role in determining the currency area's future.
  • Poland's relations with the European Union will remain tense, and Warsaw will look to the United States, as well as its neighbors in Central Europe, for political support.
  • The fragile British government will focus negotiations over the Brexit on three main topics this quarter: citizens' rights, the United Kingdom's contributions to the EU budget and the future of Northern Ireland's border with Ireland.
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European Disintegration

In the first half of the year, general elections kept moderate forces in power in key eurozone countries such as France and the Netherlands. Germany is poised to follow this pattern in the third quarter as it gears up for a national vote in September. EU leaders are relieved that Euroskeptic parties have not been gained enough traction to take over national governments and threaten the bloc's continuity. But several questions remain unanswered. The European Union's members have diverging ideas about what the bloc should look like in the future, though they all agree that it must be reformed. Meanwhile, anti-establishment sentiments — a byproduct of a decade of economic malaise — are still strong across the Continent and will continue to threaten for the European Union with each successive election. Votes in Italy and Austria over the next 12 months will leave the bloc's leaders and institutions little room for complacency.

A Big Summer for Germany and France

The German general election, scheduled for Sept. 24, will not disrupt the European Union. Unlike in France, where nationalist candidate Marine Le Pen had a real shot at winning the presidency, in Germany, the Euroskeptic forces are relatively weak and don't stand much of a chance of reaching power. Though voter exhaustion with the country's two mainstream parties could lead to greater support for smaller parties, the moderate forces will retain power after all the votes have been tallied. Consequently, the German elections will not generate an immediate threat to the European Union's continuity. They will, however, be important to its long-term future. The next government in Berlin will take charge of the single most influential political and economic power in the European Union and will face critical decisions that will shape the bloc's course.

Leading the race are Chancellor Angela Merkel's center-right Christian Democratic Union (CDU) and the center-left Social Democratic Party (SPD). The parties, currently partners in a coalition government, will try to distinguish themselves from the other on issues such as public spending and taxation in the months leading up to the election, complicating federal decision-making in the process. After the vote, the CDU and the SPD's first order of business will be to try to form coalitions with smaller like-minded parties such as the Free Democrats, the Greens and The Left. But if that doesn't work out, they could come together again to form another grand coalition. The far-right Alternative for Germany party will probably enter the German parliament, but it won't make it into the government because other political groups will exclude it from talks over prospective coalitions.

The German government's final composition — which could take weeks to decide — will be crucial for the future of the country and of the European Union as a whole. A center-right alliance at the helm in Berlin would probably be skeptical about implementing risk-sharing measures in the eurozone and cautious about heeding Southern Europe's requests for reform in the currency area. A center-left alliance, on the other hand, would probably entertain the kinds of changes countries such as France, Italy and Spain are calling for. These matters won't come to the fore until the fourth quarter of this year and the early part of 2018, though.

France, too, will have an eventful third quarter. Newly elected President Emmanuel Macron will face his first political battle in the next few months: amending the country's labor laws to make them more flexible. Macron and the Cabinet, led by Prime Minister Edouard Philippe, will invest significant political capital in the reforms, negotiating with unions, employers' associations and lawmakers to pass the measures. Despite the French government's desire to reach a consensus among all interested parties, it won't hesitate to use its comfortable majority in the National Assembly to push the reforms through. Macron, moreover, will try to take advantage of his current popularity and of the fragmentation among labor unions to advance his agenda. Some groups will probably protest, generating temporary disruptions in the French economy and perhaps swaying the government to soften aspects of the reforms. Nevertheless, the new labor legislation will likely pass, and Macron, in turn, will clinch the first victory of his presidency.

The European Union Looks Forward

As domestic politics heat up in France and Germany, the European Union's core members, along with states such as Italy and Spain and EU institutions, will look to the future. EU leaders typically choose the summertime, when national parliaments are in recess, to discuss their big ideas for institutional overhauls. And though the bloc's constituent heads of government will have much to say about how to change the European Union, they won't get much done. Most (if not all) of the proposals will stop at the rhetorical level. France and Germany will make gestures to prove that their alliance is strong and present joint proposals to reform the eurozone. But they won't implement anything. Their mutual interest in preserving their bilateral relations notwithstanding, Germany and France still have differing views on how to reform the eurozone. Furthermore, the government in Berlin will avoid making any significant decisions on the currency area before its general election in September. 

Upheaval in Southern Europe

Elections aren't something Italy has to worry about in the third quarter, since the country's main political parties failed to agree on a new electoral law in June. The parties, however, will keep preparing for a vote either late this year or early next year. Regardless of when the general elections take place, they will present a test for the eurozone. Euroskepticism is alive and well in Italy, which boasts the third-largest economy in the currency area. Heading into the (eventual) vote, the country's pro- and anti-EU forces are evenly matched in their popularity. The prospect of a Euroskeptic administration will do little to assuage fears in and beyond Italy about the health of its troubled banks and the sustainability of its high levels of sovereign debt. And in the meantime, the government in Rome will be weak.

In Spain, strife between the central government and the regional leadership in Catalonia will escalate during the third quarter. The Catalan government has promised to hold a referendum on the region's independence Oct. 1. But Madrid will not authorize the referendum and will threaten civil servants in Catalonia with legal action if they insist on moving toward secession. Spain's central government hopes that it can apply enough legal, political and economic pressure to stoke discord in the pro-independence camp, forcing it to rethink the referendum or to hold regional elections early. Should the Catalan government decide go through with the independence vote as planned, the Spanish Constitutional Court would declare it illegal, and Madrid would ask security forces to keep the referendum from taking place. Demonstrations in support of independence cannot be ruled out this quarter as the date of the proposed vote approaches, but Catalonia will not declare independence unilaterally before then.

Central Europe's Worries Mount

States in Central Europe will spend the third quarter in a kind of stalemate with EU institutions. Hungary and Poland will continue criticizing the European Union for domestic political gain, but they will stop short of doing anything that could threaten their membership in the bloc. The European Commission, similarly, is unlikely to suspend Poland's voting rights in the bloc, though the two will remain at loggerheads over the rule of law. Brussels understands that it can go only so far in pressuring dissenting member states; introducing sanctions against them, for instance, would only deepen the bloc's divides. Consequently, it will refrain from taking specific punitive action this quarter in its infringement proceedings against Hungary, the Czech Republic and Poland for their refusal to enforce an EU measure to distribute asylum seekers across the Continent.

Still, the Central European states have several causes for concern. For all their complaints about the European Union, countries such as Poland and Hungary have been worried about getting left behind since the bloc discussed a system that would enable different member countries to integrate at different speeds. The prospect of member states in Western Europe moving in their own direction without Central and Eastern Europe threatens to disrupt the Continent's economic, political and security situation. In addition, Poland is concerned that the United States will waver in its commitment to allies in the North Atlantic Treaty Organization under President Donald Trump's administration. Warsaw will stick with its current strategy throughout the third quarter, advocating for a strong NATO presence in the region, maintaining close ties with the United States and working with nearby countries. When Trump visits in early July to attend the Three Seas Summit, Poland will seize the opportunity to champion its strong alliance with the United States. During the meeting of Black Sea, Baltic Sea and Adriatic Sea nations, topics of discussion will include ways to increase security and infrastructure cooperation.

Talking Trade and Russia

Trade and investment will rank high on the European Union's foreign policy agenda this quarter. To cope with uncertainty over the U.S. government's policy priorities, the bloc is trying to diversify its economic relationships. EU officials will hold free trade negotiations in the coming months with prospective partners such as Japan and the Common Market of the South (Mercosur), while continuing their dialogue to increase investment ties with China. A recent ruling from the European Court of Justice will give the European Union a clearer picture of how to handle these proceedings in the future. The decision clarified which aspects of a free trade negotiation the European Commission can manage alone and which ones require a vote among the bloc's members. The agreement with Japan, which has already made significant headway, could reach its final stages during the third quarter. But the other negotiations underway will face more challenges, from disputes with Mercosur over agricultural exports to concerns among EU members about China's treatment of European investors.

At the same time, the German government will keep defending the importance of global trade and open markets. To help with this endeavor, Germany will look for as many allies as it can get and will use the upcoming G-20 summit in Hamburg in July as a forum to push the issue. Berlin, meanwhile, will continue to defend itself against accusations about its large trade surplus and work to persuade the U.S. administration to take a softer stance toward it.

Trade won't be the only topic of discussion among the European Union's members in the third quarter. On July 12, the bloc will hold a summit with the leaders of Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia in an effort to preserve its influence in the Western Balkans and to keep the hope of EU accession alive there. The European Union will likely promise economic and political support for the governments of these countries and ask them to increase their regional cooperation, as well. Europe's interest in the area is part of a strategy to enhance its soft power to keep Russia's own foreign policy ambitions in check. In and beyond the Balkans, relations between Brussels and Moscow will remain tense throughout the third quarter. France's new government is ready to side with Germany to maintain a tough stance on Russia.

Trying to Make a Graceful Brexit

In the United Kingdom, domestic politics will bleed into the country's negotiations to leave the European Union. Prime Minister Theresa May's government is in a tenuous position after the Conservative Party's worse-than-expected electoral performance in general elections in June. The United Kingdom will not change its position on key issues, such as leaving the EU single market and trying to negotiate free trade agreements with multiple countries and blocs. But May's government will be negotiating from a position of relative weakness and won't have much leeway in the talks. The administration's very survival now depends on its alliance with the smaller Democratic Unionist Party (DUP). And because the DUP wants to ensure that Northern Ireland keeps its open border with Ireland, an EU member, after the Brexit, London will face greater pressure to make a deal with Brussels. May's administration may have to go back on its campaign promise that "no deal is better than a bad deal."

During the third quarter, Brussels and London will work to reach an agreement that would preserve the rights of British citizens currently living in the European Union as well as those of EU citizens currently living in the United Kingdom. Debate over the matter will probably center on the date when EU citizens arriving in the United Kingdom and British citizens traveling to the European Union will no longer qualify for residence rights. (In any case, the decision probably will not threaten the status of people already living in the United Kingdom or European Union.) Negotiations to keep the border between Ireland and Northern Ireland free of controls will be more complicated, likely stretching beyond the third quarter. But the most controversial issue under discussion during the next few months will be the United Kingdom's financial contributions to the EU budget. The size of the divorce bill will spark intense debate between the two sides of the Brexit negotiations.

Migration Season Gets Underway

The tumult in the European Union will not deter migrants from trying to reach the bloc, however. During the summer, weather conditions in the Mediterranean Sea will be optimal for people making the voyage. The bloc will take several steps to try to curb the influx of economic migrants and asylum seekers. To begin with, border controls will remain in place around the main transit and destination countries. States may additionally roll out tougher policies on illegal immigration, including measures to increase deportations and to reduce benefits for migrants, to discourage people from trying to enter their borders. Finally, the European Union will try to work with migrants' countries of origin, along with the states they pass through, to sever migration routes — likely to little avail.

Italy will probably be the main entry point for economic migrants bound for the European Union, a position that could cause problems between Rome and its fellow governments in the bloc. Leaders in Italy will call for solidarity from its EU peers, appealing to member states to accept some of the migrants, but their requests will meet with tepid responses from a few nations, rather than yielding a redistribution plan. Surrounding countries may even try to close their borders with Italy to prevent migrants from crossing over. Considering that Austria has a general election coming up in the autumn, Vienna could become a particularly vocal critic.

As the summer sets in, the European Union will also try to make sure that its immigration agreement with Turkey withstands the warmer months. Brussels will likely assure Ankara that it will keep delivering the funds included in the agreement and may even revisit negotiations to expand the bloc's customs union agreement with Turkey. But the European Union is not yet ready to honor key promises, such as visa waivers for Turkish citizens, that are unpopular among voters on the Continent.



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.

14 MINS READJun 26, 2017 | 13:52 GMT
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.

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.

section Highlights
  • Ahead of a leadership transition at the start of the fourth quarter, infighting within the Chinese Communist Party will reach a fever pitch, complicating Beijing's efforts to preserve stability and political coherence.
  • North Korea will continue to regularly conduct missile tests in spite of the sanctions building against it, giving the United States an opportunity to pressure China on other fronts such as trade, the South China Sea and issues surrounding Taiwan.
  • The United States will keep its security commitments in the region, complicating China's attempts to seek conciliation with members of the Association of Southeast Asian Nations (ASEAN).
  • ASEAN states will work to forge coalitions among themselves and with regional actors in hopes of balancing against the power looming on their doorstep.
See more on this Region

China in Transition

In the Asia-Pacific, all eyes will be on China this quarter as the country's leaders prepare for the 19th Party Congress. Over the past three months, Beijing has made sure to prioritize economic and political stability over risky, if necessary, reform. To this end, Chinese President Xi Jinping has quietly backtracked on some of his more controversial economic initiatives; coupled with the United States' decision to ease up on its protectionist stance toward China, the move has given his administration some room to maneuver at home.

As Xi works to consolidate power beneath him, the approaching party congress will present both opportunities and threats to the leader. After all, the meeting will bring reshuffles throughout the ruling party, including in the Politburo Standing Committee — the party's top leadership circle and country's most important decision-making body. As the window closes for China's deeply intertwined political networks to cement their positions and defend themselves from an ongoing crackdown on corruption, intraparty competition will intensify.

The Communist Party's highest-ranking leaders will try to find consensus among themselves, and Xi's scheme to secure a lengthy stay in power will most likely proceed as planned. But changes in position and action against those at the top of the organization will continue to expose the internal rivalries and discord beneath Xi's anti-corruption campaign and political brinksmanship. Perhaps the most visible example of this is a probe into major financial conglomerates that is slowly encroaching on many of the country's entrenched power networks as Beijing seeks to re-establish control over the firms. Meanwhile, further revelations of misdeeds by anti-corruption chief Wang Qishan could result in his sidelining at the party congress — and in pushback to Xi's drive against corruption that could complicate his primary means of amassing power.

The pressing need to ensure a smooth leadership transition will make the ruling party far less tolerant of any action that threatens the nation's stability. Beijing will doubtless deploy preemptive measures aimed at preserving order and control while it continues to prioritize societal calm over economic reform. The government's most important objective will be to keep employment levels steady as it consolidates and restructures heavy industries such as coal and steel. At the same time, it will look to curb borrowing among highly leveraged companies in hopes of weaning the economy off investment-driven growth funded on credit. Though Beijing will continue to try to contain the risks associated with mounting debt, some companies — particularly those in heavy industry and construction — will be unable to avoid default, threatening jobs in the process.

At the same time, tight credit and local policies intended to discourage speculation will put pressure on China's already slowing real estate sector. Some companies in the construction industry will be squeezed particularly hard this quarter as they struggle to pay off maturing bonds. Consequently, real-estate companies that have ridden the credit boom of the past two years, especially those in third- and fourth-tier cities, may well find it increasingly difficult to pay their debts. (This quarter, the real estate sector owes 56 percent, or $5.1 billion, of its total $9.1 billion in bonds maturing this year.) Though Beijing may allow some companies in the private sector to default, it will do what it can to prevent a wider collapse of the real estate industry, pulling back on painful reforms and extending government credit and tax incentives in an effort to insulate the economy somewhat. But its attempts to restructure China's "zombie" corporations and address industrial overcapacity will have more success in some regions than others, and any tougher economic measures will have to wait until the party congress is over.

Some of the biggest threats to China's economy — and by extension, political stability — do not come from within, though. Toward the end of the quarter, the United States will have more opportunity (and perhaps greater incentive, given North Korea's persistent provocations) to take punitive action against China in the trade realm. The 100-day trade resolution that U.S. President Donald Trump struck with Xi in April will come to an end in mid-July, likely culminating in concessions by China on some uncontroversial issues, such as market access for U.S. beef, liquefied natural gas and financial services. But the Trump administration has many policy tools at its disposal to try to shrink the United States' $347 billion trade deficit with China, including the national security restrictions on key sectors and the proportional responses to trade abuses permitted by U.S. law.

Should Washington enact sweeping protectionist measures against China, it could throw a wrench in Beijing's plans for economic restructuring. Aware of this, the United States will use threats of such action to bring China to the negotiating table on other, more sensitive issues. Beijing, in turn, will seek to mitigate Washington's threats by emphasizing Sino-U.S. cooperation on North Korea — a matter both governments have now explicitly tied to trade — even though Pyongyang's continued belligerence could give Washington ammunition against Beijing on other security initiatives in Taiwan and the South China Sea.

Of course, neither the United States nor China will neglect other trade opportunities as they arise. Beijing, for its part, will continue its economic outreach across the Asia-Pacific by promoting its Regional Comprehensive Economic Partnership (RCEP) and Xi's signature Belt and Road Initiative, whose biggest projects will make steady progress in the months ahead. Chinese lobbying in Europe, moreover, has begun to bear fruit as the European Union weighs the option of granting market economy status to China. (The country's nationalist trade agenda and the perception of unfair investment and trade practices by Beijing, however, have caused concern among the bloc's core powers, making further progress on this front unlikely.) Meanwhile, in keeping with the Trump administration's strategy, the United States will take incremental steps toward striking a free trade deal with Japan and possibly revisiting trade ties with South Korea as Washington reviews its trade deficits.

Coping With a Nuclear North Korea

Not to be left out, North Korea proved in the second quarter that it, too, is still a central driver of the changing geopolitical dynamics in the region. Over the past few months, Pyongyang has made visible strides in its nuclear and missile programs, triggering a rare moment of rapprochement between the United States and China as Washington dubbed Beijing's cooperation crucial to reining in its bellicose neighbor. The Korean Peninsula will continue to provide a measure of common ground for the two larger powers — and simultaneously test how long their nascent detente can last.

North Korea, however, will forge ahead with its nuclear and missile programs according to a schedule dictated by technical requirements, despite the threat of new sanctions and deepening international isolation. But barring the demonstration of a credible long-range missile capability — something that is likely still a year away — the United States probably won't deviate from its current policy course on North Korea. Instead it will stick to slapping new sanctions on Pyongyang, further isolating it internationally, and increasing its military presence in and around the Korean Peninsula.

The United States will also enlist China's aid, willing or not, in keeping North Korea in check. In the steady drumbeat of Pyongyang's rhetorical provocations and nuclear tests, Washington will find plenty of opportunities to gradually ramp up pressure on China in other areas, including trade, maritime disputes and the issues surrounding Taiwan. (The United States, for instance, could introduce secondary sanctions against Chinese entities that trade with North Korea.) China, concerned about its own stability above all else, will cooperate with the United States to the extent that it can, perhaps even abiding by measures such as a temporary cutoff in oil supplies in the event that Pyongyang conducts another nuclear test.

But Beijing will remain wary of any attempt by Washington to elevate its relationship with Taipei ahead of the 19th Party Congress. China has already used its diplomatic heft to ensure that smaller countries sever their ties to Taiwan, a strategy it will maintain in the coming quarter. But as Taipei turns to Washington for security assurances, perhaps in the form of substantial arms deals — for example, the transfer of F-35 aircraft — the United States' relationship with China would be dealt a serious blow, possibly even prompting Beijing to cease its cooperation with Washington against Pyongyang while taking aggressive economic and military action against Taipei.

Barring a breakdown in Sino-U.S. ties, however, China will work with the United States to rein in North Korea. Yet at the same time it will take care not to jeopardize the stability of the government in Pyongyang. In this way, Russia's economic outreach to North Korea and the rise of a new government in South Korea, which has taken a softer stance toward the North, will suit China's interests well. To ensure that the latter's position does not harden over time, Beijing will seek to improve its relationship with Seoul — something South Korea's recent decision to suspend the deployment of a Terminal High-Altitude Area Defense system will certainly make room for.

Meanwhile, the emerging alliance among the United States, South Korea and Japan will endure as Seoul and Tokyo (albeit reluctant partners) communicate and cooperate with each other to some degree. It will not, however, function as the robust trilateral framework Washington would like it to be. For one, the South Korean administration's stance on North Korea will present challenges to the United States' strategy in dealing with Pyongyang. For another, questions persist regarding Washington's commitment to its friends in the Asia-Pacific. Nevertheless, the mounting threat emanating from the North will prevent South Korea from backing away from its relationship with Japan amid controversy over a contentious deal on "comfort women" struck in 2015. In fact, South Korean President Moon Jae In is scheduled to meet with Japanese Prime Minister Shinzo Abe on the sidelines of the G-20 summit in early July.

Asia-Pacific: Among Great Powers

China, too, will concentrate on reshaping its relationships in the region. In the second quarter, Stratfor's forecast that Beijing would sustain its carrot-and-stick approach to influencing the behavior of other claimants in the South China Sea proved accurate. In much the same way, China will continue extending offers of conciliation while maintaining its massive military buildup and coercive tactics in the coming quarter.

In recent months, China and the Association of Southeast Asian Nations (ASEAN) have ostensibly made progress toward settling a common code of conduct in the South China Sea, talks that will almost certainly continue in the months ahead. Beijing will use the long-delayed agreement as an incentive to keep ASEAN states like Vietnam from trying to draw external powers into the maritime dispute. But enduring divisions within the bloc, competing strategies among claimants and relentless military assertiveness by China will limit just how far negotiations can progress this quarter.

Beijing's other ambitions in the South China Sea will be difficult to realize as well. U.S. freedom of navigation patrols that began in the waters during the second quarter will continue at a steady clip. And though the United States lately has been distracted by North Korea, its attention is slowly turning back to the rest of the region as the White House's Asia-Pacific policy begins to take shape. Washington will start to re-engage with its Southeast Asian allies and partners ahead of Trump's visit to the region in November, when he will attend the U.S.-ASEAN and East Asia summits in the Philippines, as well as the Asia-Pacific Economic Cooperation summit in Vietnam. This effort will entail a combination of diplomatic and defense cooperation, enabling countries like Vietnam to keep using U.S. ties as a counterweight to Chinese influence in the face of Beijing's overtures. However, the lasting perception of U.S. inattention will also encourage ASEAN states to align with neighbors that share their interests. For instance, closer defense and maritime cooperation can be expected among Japan, India, Australia and Vietnam.

All of these moves will take place during the high season for fishing, a time when the disputed waters will be crowded and the risk of skirmishes will be high. Clashes between fishing vessels would further strain relations between their countries of origin, and should the Philippines and China be dragged into a dispute, their newfound partnership would be put to the test. Either way, Manila will continue to look inward this quarter as Philippine President Rodrigo Duterte grapples with security issues in the restive southern province of Mindanao, which have led to renewed counterterrorism cooperation between the Philippines and the United States. Additionally, disputes between China and Vietnam over energy exploration could increase the chances for tension.

In its ongoing bid to counterbalance China and boost its own role in regional security, Japan will make an effort to keep reaching out to ASEAN states this quarter. As Beijing's Belt and Road Initiative proceeds apace in South Asia — much to the chagrin of India — Tokyo and New Delhi will work together to offset China's growing clout. One way they will do this is by enhancing their maritime and defense cooperation with each other and throughout the region, in addition to joining economic development projects in and beyond the Asia-Pacific.

On the whole, Asian leaders will try to sustain the now-flagging momentum behind free trade. Regional states engaged in talks on the Trans-Pacific Partnership (TPP) will work to salvage the pact in the wake of the United States' withdrawal from it. New Zealand and Japan have ratified the deal, something signatories can build on to solidify an alternative. New Zealand's general elections in September, however, could still derail its involvement in the trade agreement if either the Labour Party or the New Zealand First movement gain electoral ground.

China will not wait for the deal to stumble again before pushing its own alternative, the Regional Comprehensive Economic Partnership. Though Singapore will throw its weight behind the China-led pact in hopes of expediting the talks, India will remain hesitant to sign onto it, given the agreement's emphasis on tariffs instead of the services that drive its economy. Japan, hesitant to forge closer links with China, will hang back from the bloc as well, opting instead to try to revitalize the TPP.

For the most part, changes in Southeast Asian states' diplomatic relationships will be more pronounced than shifts in their domestic politics this quarter. In Thailand, the junta will keep tightening its grip on power as the yearlong political hiatus triggered by the king's death comes to an end. And as the country prepares to hold elections in 2018, its deeply rooted political divides will start to resurface — as will violence perpetrated by Muslim insurgents in the restive south. Meanwhile, the Cambodian government will move to shore up support following recent communal elections. The Malaysian administration of Prime Minister Najib Razak will do the same ahead of approaching elections after weathering a tumultuous corruption scandal by appealing to the public's support of political Islam. But none of these developments will have a marked impact on regional politics.

A Japanese Awakening

Japanese politics, on the other hand, may. In the past few months, Japanese Prime Minister Shinzo Abe has used the political capital gained amid mounting tension with North Korea to push through landmark legislation allowing the emperor to abdicate the throne. Abe will try to build on this success in the next quarter by advancing his ambitious reform agenda, including a framework for constitutional change, in the hopes of securing its approval by the end of the year. Though the Tokyo First movement will challenge Abe's party in the Japanese capital's municipal elections on July 2, the ruling Liberal Democratic Party will not see a similar challenge at the national level for some time.

Meanwhile, Abe will take any North Korean posturing as justification to allow the Japanese Self-Defense Forces to exercise their newfound powers, granted in a historic security law passed in 2015. In doing so, he will test the waters for his plan to normalize the country's military when the National Diet resumes session in the next few months.



Eurasia is the world’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’s farthest reaches — a strategy meant to insulate it from outside powers. But this strategy necessarily creates conflict throughout Russia’s borderlands, putting Eurasia a near constant state of instability.

9 MINS READJun 26, 2017 | 13:51 GMT
Eurasia connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia.

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

section Highlights
  • Tensions between Russia and the West will continue to run high this quarter as the European Union keeps its sanctions against Moscow in place and the United States considers adding more.
  • The enduring standoff will increase the risk of flare-ups in hot spots scattered throughout the European borderlands, including the Baltics, Ukraine and Transdniestria.
  • As its ties with the West remain strained, Russia will shift its focus to the east -- particularly China -- in search of financial reprieve and geopolitical leverage.
  • Meanwhile, Russia will use increasing instability in Central Asia to step up its security cooperation efforts in the region.
  • As problems add up beyond its borders, Russia will come under mounting pressure at home in the face of a swelling protest movement that coincides with critical gubernatorial elections.
See more on this Region

Echoes of the Cold War

The ongoing rivalry between Russia and the West will once again take center stage in Eurasia this quarter. In the first half of the year, Stratfor's forecast that a change in the U.S. administration and persistent political instability in Europe would not be enough to end a contest with such deep geopolitical roots proved true. Though U.S. President Donald Trump campaigned on the promise of improving ties with Moscow, Congress has stubbornly resisted his attempts to make good on that pledge. Lawmakers' wariness, as well as a handful of investigations into the Trump administration's ties to the Kremlin, will continue to undermine any reconciliation between the United States and Russia in the months ahead. Across the pond, French President Emmanuel Macron's defeat of the Russia-friendly Marine Le Pen will ensure that the Franco-German alliance remains intact — and with it, the contours of Europe's own standoff with Russia.

By all appearances, then, tensions between Russia and the West are here to stay for at least another quarter. Neither Europe nor the United States will ease up on Russia by lifting sanctions; in fact, Washington may even increase pressure on Moscow by targeting Russian individuals and companies with new punitive measures. The U.S. Senate has already floated several new sanctions proposals, citing Russia's meddling in cyberspace, support for Syrian President Bashar al Assad and aggression in Ukraine. Of course, this isn't to say that communication between Washington and Moscow will grind to a halt; talks on key issues such as the Syrian civil war, the Ukrainian conflict and the North Korean nuclear program still will be held, and Trump will likely have his first official meeting with Russian President Vladimir Putin on the sidelines of the G-20's July summit in Hamburg. But while some tactical progress on arms control or the deconfliction of the Syrian battlefield may be made, the two rivals are unlikely to take any meaningful strategic strides on these issues this quarter.

With little reason to expect concessions or sanctions relief from the West, Russia will likely ramp up its own campaign to frustrate the plans of U.S. and EU leaders. German general elections in September will present another opportunity for Moscow to meddle in European politics. But without a popular Euroskeptic candidate and with greater scrutiny on Russian hacking and disinformation tactics, the Kremlin will have limited room to maneuver in this round of voting. In fact, a more concerted international effort to counter Russian cyberwarfare and propaganda throughout Europe could emerge this quarter, perhaps even at the level of the European Union and NATO.

The Fight for Russia’s Borderlands

Another important battleground between the Russia and the West in the coming months will be the European borderlands, which are home to several potential flashpoints. Chief among them is Ukraine, whose ongoing conflict could intensify this quarter. Since the European Union has elected to keep sanctions against Russia in place, Moscow has few incentives to compromise with Western leaders pushing for a cease-fire in Ukraine. Instead, the Kremlin may escalate its operations in Donbas, even if they are likely to be limited to tactical moves rather than substantial land grabs. Meanwhile, the strategic gulf between Ukraine, on one side, and Russia, Donetsk and Luhansk on the other will continue to widen as Kiev tries to counter Russian propaganda by banning Russian social media, television and internet sites, and as a lasting blockade of Donbas pushes Ukraine to further diversify its economy and energy supplies.

Zapad, a set of joint military exercises between Russia and Belarus set for Sept. 14-20, will also bear watching. The event, which historically has simulated invasions of Poland and the Baltics, could feature the largest showing of Russian troops in years, and Baltic leaders have warned that Moscow may leave a permanent force behind in Belarus when the drills are concluded. Though that would be unlikely, given the Belarusian government's own political constraints at home, Russia could boost its military assets in the country and keep extra troops in Kaliningrad and western Russia long after the exercises have ended. In the meantime, the Baltic states will redouble their own efforts at security collaboration — both with the United States and NATO, as well as with Poland and Ukraine — spurring military buildups throughout the region.

The simmering tension could come to a head in any one of the breakaway territories in the former Soviet periphery. For instance, Moldova and Ukraine have begun to institute joint border controls on the latter's edge with Transdniestria. The disputed region's leaders have staunchly protested the move and have threatened to enlist the aid of Russian security forces. Though Moscow is unlikely to militarily intervene in the spat, it could work with Transdniestrian leaders to put pressure on the governments in Chisinau and Kiev through other means, including military exercises, cyberattacks and disinformation campaigns. Persistent friction between Armenia and Azerbaijan over Nagorno-Karabakh could likewise worsen in the coming months, especially as Azerbaijan's economy comes under increasing strain. Still, a more serious military conflict between the two is unlikely.

A map showing breakaway territories in the former Soviet Union

Russia's Internal Struggle

As pressure builds on Russia from the outside, the nation's internal politics will heat up. The Russian economy has been given a small reprieve in the stabilization of oil prices and the value of the ruble, the return of foreign direct investment, and booms in certain sectors such as agriculture. All of these factors have given the country room to slowly pull itself out of recession. Meanwhile, Western sanctions have had only a minimal impact on the Russian economy and will continue to be bearable as long as they do not expand to include the Kremlin's finances or entire industries. But despite these signs of promise, the recovery has affected the population unevenly: The middle and lower classes are still hurting financially; poverty is on the rise; and many regional governments are strapped for cash.

Against this backdrop, a burgeoning protest movement has taken root across Russia. Large, nationwide protests broke out on June 12, revealing just how thin the public's patience has worn with the country's political and economic status quo — especially among Russian youths. Thus deep-seated dissatisfaction with corruption among the ruling elite, a stagnant political system and deteriorating economic conditions for the average citizen have pulled the many disparate factions arrayed against the Kremlin a little closer together.

Determined to keep its grip on power, the Kremlin will continue to crack down on the demonstrations. It has numerous means of doing so, including the arrest of opposition leaders, the passage of stringent laws against protests and counters to the budding online movements calling young Russians to act. Among the opposition and ruling officials alike, all eyes will be fixed on gubernatorial elections slated for September, in which 17 governorships will be up for grabs. Moscow is growing concerned that its steadily strengthening adversaries — from traditional groups like the Communist Party to independent movements like Alexei Navalny's Party for Progress — will be voted into prominent positions. In hopes of avoiding this scenario, the Kremlin will do what it can to influence election outcomes through electoral tinkering, propaganda campaigns, and the intimidation of candidates and activists.

Meanwhile, the power struggle among Kremlin elites will intensify as they scramble for influence and assets. One of this struggle's most important facets — the competition among the country's security services — for the most part will continue to play out behind the scenes as Putin bolsters his own National Guard, challenging the dominance of the Federal Security Service. The two will vie for high-profile portfolios, including a lead role in cracking down on protests, sway among loyalists who win the regional elections, and control over Russia's cyber and disinformation units. Other stakeholders, such as the military and Interior Ministry, will eventually choose sides in the contest, though likely only after a clear winner emerges.

Moscow Looks to the East

As problems pile up at home and in the West, Russia will increasingly shift its gaze to the East in search of economic relief and leverage against its adversaries. Moscow and Beijing will hold a string of high-level meetings this quarter, with Chinese President Xi Jinping set to visit the Russian capital in July and the Kremlin hosting the Far East Economic Forum in September. Both will provide opportunities for Moscow to secure more investment from Beijing into Russia's energy, transportation, banking and agricultural sectors.

Military ties between the two countries will doubtless strengthen as well. Russia and China have proposed increasing their security cooperation this year, which could consist of greater sharing of intelligence and joint exercises in volatile areas such as Central Asia, the South China Sea and the wider Asia-Pacific region. Moscow may even try to draw Beijing into talks on North Korea, an issue the Kremlin hopes to leverage against the United States. Lingering mistrust between Beijing and Moscow, however, will limit their ability to work together on the matter.

Instability in Central Asia

China won't be the only country with which Russia will try to deepen its defense relationship this quarter. Central Asian instability, stemming from stubborn economic weakness, political upheaval and burgeoning militancies, will remain a central concern for Eurasia in the months ahead. Kazakhstan will be forced to contend with protests and the possibility of militant attacks as its efforts to restructure the country's banking system threaten to worsen unrest and strain government coffers. Across its southern border, Kyrgyzstan will experience an uptick in demonstrations and insecurity ahead of its presidential race in October, while Turkmenistan — normally one of the region's most stable states — will see its trademark calm shaken by worsening socio-economic conditions, including high levels of unemployment and subsidy cuts.

Russia will take advantage of these realities to bolster its partnerships in Central Asia — particularly with countries lining the borders of Afghanistan, where the Taliban and Islamic State are growing more active. Moscow may even send its troops to man Tajikistan's long and porous border with its war-torn southern neighbor, or funnel more weapons and assets to the area, even as it maintains diplomatic contacts with (and possible support for) the Taliban. Russia's moves will come alongside the United States' own efforts to boost its military presence in Afghanistan in hopes of slowing the Taliban's gains. And all the while, China will steadily increase its own economic and security cooperation with Central Asia and Afghanistan, ensuring that the region remains at the heart of the competition for influence among the world's great powers.


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’s great population centers. India is the region’s dominant country, home to the world’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’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.

8 MINS READJun 26, 2017 | 13:48 GMT
Everything that informs geopolitics can be found in South Asia: challenging demographics, geographic diversity, and contentious, ill-defined borders.

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

section Highlights
  • India likely will manage to implement only part of the critical Goods and Services Tax in the third quarter because of disagreements between the federal and state governments as well as onboarding challenges for businesses across the country.
  • Social and economic disruptions caused by Prime Minister Narendra Modi's nationwide ban on cattle sales will give the opposition a pretext to keep the government from passing labor reform legislation during the Parliament's monsoon session.
  • Modi will continue pursuing a diverse foreign policy this quarter, visiting Israel, hosting Japanese Prime Minister Shinzo Abe and dispatching forces to participate in the Malabar naval exercises.
  • Fighting in Afghanistan will intensify as the United States sends more troops to bolster the Afghan National Security Forces in their war against the Taliban.
  • Pakistan will try to subvert Zakir Musa's Hizbul Mujahideen breakaway faction to prevent an anti-Pakistani transnational jihadist movement from taking root in the disputed territory of Kashmir.
See more on this Region

Realizing India's Tax Reforms

After three years in office, Indian Prime Minister Narendra Modi has centralized power enough to give his Bharatiya Janata Party (BJP) the leeway to pursue long-awaited reforms. Modi's administration achieved a victory on that front in the first quarter, when Parliament passed the Goods and Services Tax bill. But the task of introducing the changes prescribed in the law still lies ahead of the prime minister and ruling party. While India will likely manage to implement, at least in part, the sweeping tax reform by the government's July 1 deadline, lingering disagreements between state leaders and their national counterparts in New Delhi over tax classification will frustrate progress. In fact, the states of West Bengal and Tamil Nadu, two of the strongest objectors to the tax scheme, resisted adopting local versions of the legislation until recently. Their success putting the laws into practice will serve as a test case for the overall efficacy of the measures in India. In addition, complications bringing the businesses in India's vast informal economy into compliance with the laws, as well as obstacles to getting the plan's information technology infrastructure system up and running, will hold up the implementation process.

In part because of the fitful progress of the tax reform, India's business climate is unlikely to improve in the third quarter as the central government hoped it would. India's $2 trillion economy will keep struggling to attract foreign investment into its manufacturing sector, the focus of Modi's "Make in India" initiative. Of course, in a democracy of nearly 1.3 billion people, change is a gradual process, and the tax reform package, even if only partially implemented, marks a landmark achievement for India. The measures' implementation marks the first of many steps toward unifying the country's fragmented economy, boosting interstate trade, streamlining supply chains and increasing gross domestic product growth.

Hindu Nationalism: The Path to Power

But the fight over tax reform isn't the only political battle the Modi administration will face this quarter. Backlash will continue over the next few months over the government's latest Hindu nationalist measure, a nationwide ban on the sale of cattle for slaughter. Along the way, protests and strikes will erupt among meat industry workers across the country, including in Uttar Pradesh, India's most populous — and, by extension, most politically significant — state. The measure serves two immediate purposes, at once showing Modi's core support base that the ruling party is advancing the tenets of Hindu nationalism through its policies and distracting from persistently low rates of job growth. And in the longer term, the administration hopes that playing to the Hindu nationalist vote will help the BJP win future state elections and realize its goal of winning a majority in the legislature's upper house. Achieving a majority in both chambers of Parliament would ease the way for further reforms.

For now, however, the cattle ban could impede the Modi administration's progress. The controversial law will likely prompt the opposition to undermine the BJP's agenda during Parliament's monsoon session in July. As a result, Modi could run into problems over proposed legislation aimed at creating jobs, including a labor reform bill the BJP is considering. Still, the government, focused as it is on tax reform, is saving its political capital for addressing the disruptions that will inevitably arise from the tax reform laws.

India Looks Beyond the Neighborhood

Modi's foreign policy priorities in the third quarter are no less ambitious than his domestic political goals. The prime minister has a busy few months ahead of him, but three diplomatic engagements in particular reflect New Delhi's quest to assume a more prominent role on the international stage. In July, Modi will become the first Indian prime minister to visit Israel, thereby broadening his country's ties in the Middle East beyond the Gulf Cooperation Council's member states. Defense will be a key focus of this inaugural visit, and Modi will likely sign deals to manufacture arms for Israel, currently India's third-largest defense supplier, in support of the "Make in India" campaign.

The same month, India will showcase its burgeoning military ties with Japan when the two countries join the United States for the annual Malabar naval exercises in the Bay of Bengal. India's government is increasingly wary of China's plans under the Belt and Road Initiative to build up ports throughout South Asia, including in Sri Lanka, Pakistan and Bangladesh, and expand its navy's reach. The Malabar exercises will help New Delhi extend its military influence in the Indian Ocean to counter Beijing. India has also been deepening its economic cooperation with Japan for similar reasons. When Japanese Prime Minister Shinzo Abe visits New Delhi in September, he and Modi will likely sign agreements over the "Freedom Corridor," a joint initiative widely considered India's answer to the Belt and Road. The project aims to take advantage of India's large diaspora in Africa to help the country increase its sway there.

India, Pakistan and Kashmir: 70 Years of Independence

Closer to home, India will ring in 70 years of independence from Great Britain in the third quarter on Aug. 15, a day after Pakistan commemorates the 70th anniversary of its own independence. Despite the common milestone, the South Asian countries' bitter rivalry endures, and its most visible manifestation — the dispute in Kashmir — will figure prominently in the third quarter. Pakistan will try to subvert the breakaway faction of Hizbul Mujahideen that formed under Zakir Musa's guidance to stop transnational jihadism from suffusing the Kashmir conflict. Were Musa's faction to gain enough ground, it could change the decadeslong insurgency in the country's northeast by empowering anti-Pakistani jihadists in the area. Islamabad is trying to avoid an escalation in the contested region this summer to focus on operations against militant groups in the Federally Administered Tribal Areas (FATA) and Balochistan along the western border with Afghanistan. 

Even so, the Pakistani government probably won't make much progress in the third quarter toward merging the FATA with nearby Khyber-Pakhtunkhwa province. Prime Minister Nawaz Sharif is reluctant to push the initiative — intended to pacify the tribal areas, the epicenter of militant activity in the region — for fear of alienating the Jamiat Ulema-i-Islam Fazl party, which opposes it. Sharif needs support from the group, an important ally of his Pakistan Muslim League-Nawaz party, as he begins laying the groundwork for his re-election campaign next year. As part of this process, the prime minister will also prioritize energy projects in Punjab and Sindh, Pakistan's most electorally consequential provinces, under the China-Pakistan Economic Corridor (CPEC). Seeing the projects through will enable Sharif to make good on a key campaign promise to put Pakistan on the path toward resolving its acute electricity shortages and boosting growth. (At the same time, because of the emphasis on Sindh and Punjab, the western section of the CPEC project won't make much progress this quarter, ensuring that tensions will persist between the country's core and outlying provinces such as Balochistan and Khyber-Pakhtunkhwa.

More Fighting Means More Troops in Afghanistan

In Afghanistan, the warmer summer months will bring with them a surge in violence. Helmand province will experience some of the fiercest fighting as the Taliban's annual spring offensive swings into full gear in the third quarter. The intensification is one reason why U.S. President Donald Trump, who has delegated greater authority to the Pentagon in prosecuting the war, approved a proposal to send up to 4,000 troops to support the Afghan National Security Forces. (Whether Trump manages to persuade Washington's allies in the North Atlantic Treaty Organization to redouble their own troop commitments to the war in Afghanistan remains to be seen.) The deployment will arrest, if only temporarily, Washington's gradual drawdown from one of the region's two jihadist wars. Nevertheless, the modest increase betrays the United States' intentions. The NATO reinforcements are meant only to compensate for the Afghan National Security Forces' inadequacies and to help them stop Afghanistan's security from deteriorating further. Conflict management is the name of the game, not conflict resolution.

A solution to the 15-year conflict will remain out of reach this quarter, not least of all because of abiding disagreements between Afghanistan and archrival Pakistan. Pakistan has long hosted elements of the Taliban's leadership within its borders in hopes of gaining leverage in Afghanistan once the war finally ends, though the country prioritizes border security during the spring offensive to keep militants out. Kabul, meanwhile, will protest Islamabad's efforts to institutionalize the Durand Line, which the Afghan government disputes, by erecting fencing along the border between the two countries. That means occasional skirmishes between Afghan and Pakistani troops will likely continue this quarter, prompting Islamabad to periodically shut down points along its border with Afghanistan in an effort to coerce Kabul into securing its side.

But just because a resolution is nowhere in sight doesn't mean interested parties will stop trying to settle the conflicts. Russia, for example, is eager to mitigate the threat Afghan militancy poses to Central Asia. Having hosted three rounds of negotiations in December 2016, Moscow will likely return to its role as a participant in future peace talks. Similarly, India and Iran, which are discussing a prospective corridor through Afghanistan to the Chabahar port on the Iranian coast, will again join the negotiations should another round materialize. And China will keep expressing interest in mediating between Afghanistan and Pakistan as it tries to increase its presence in South Asia. Even if these talks take place, however, they won't get very far given the many obstacles that stand in the way of peace in the region


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’s no surprise that it captured the imagination of Europe’s earliest explorers — and that it continues to capture the imagination of current world powers eager to exploit it. And yet despite the region’s diversity, Sub-Saharan African countries have common challenges — transnational terrorism, rapid population growth, endemic poverty and corruption — 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.

9 MINS READJun 26, 2017 | 13:47 GMT
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.

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.

section Highlights
  • Reforms to improve Nigeria's business climate will continue to gain limited traction despite lingering concerns over President Muhammadu Buhari's health.
  • The presidential succession battle within South Africa's ruling African National Congress will heat up as President Jacob Zuma tries to push radical economic reform to energize his support base.
  • Angola's transition process will likely go smoothly. Likewise, in Rwanda, Paul Kagame faces little competition in upcoming elections. But the stalled transitions in Zimbabwe and the Democratic Republic of the Congo, on the other hand, will make little headway.
  • Kenya's presidential election will test the country's progress since the results of the 2007 votes sparked violence, but the risk of conflict will be higher this time than it was in 2013.
  • In July, U.S. President Donald Trump's administration will decide whether to lift select sanctions on the Sudan, a benchmark for the country's revised foreign policy.
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The President's Health Ails Nigeria

The status of Nigerian President Muhammadu Buhari's health, which fueled rumors of a coup during the second quarter, will remain a source of speculation and tension in the third quarter. Buhari's return to the United Kingdom on May 7 for yet another open-ended medical trip undermined assurances from the ruling All Progressives Congress (APC) that all is well with the aging leader. The president has been absent ever since, leaving Vice President Yemi Osinbajo at the helm in Abuja. Unless Buhari's health shows significant signs of improvement over the next few months, calls for his resignation will probably increase. His supporters in northern Nigeria, meanwhile, will urge the president to keep his post to avoid a repeat of 2010, when Goodluck Jonathan assumed power after President Umaru Yaradua went to Saudi Arabia for medical treatment. In the unlikely event that Buhari steps down during the third quarter, Osinbajo would ascend to the presidency, shifting power and patronage southwest to his base in Lagos. The transition, in turn, could drive aggrieved politicians in northern Nigeria to boost their support for militant groups in the region to exact concessions from the new president.

A more plausible scenario for the third quarter is that Buhari's lingering health troubles will put the rest of the APC on edge. Cracks could form in the ruling coalition as politicians vie to run in Buhari's stead in the 2019 elections. Some members may even jump ship and join the People's Democratic Party, the APC's principal rival, if the ruling party's prospects start looking grim enough in the months ahead. With primaries less than 18 months away, the pace of political maneuvering in Buhari's party will pick up in the third quarter.  

The Nigerian economy, on the other hand, will stay at a crawl. Prices for crude oil exports are still stagnant. Attacks on energy infrastructure in the Niger Delta region, moreover, can't be ruled out given the local militant groups' varied agendas, though the government recently announced it would triple its budget to compensate former insurgents seeking amnesty. Despite these problems, however, the news for Nigeria's economy isn't all bad. Earlier in June, Royal Dutch/Shell ended force majeure for oil shipments from the Forcados terminal, giving Nigeria's overall production a boost. And the government, which has continued pursuing economic reforms, albeit slowly, even in Buhari's absence, could make more progress toward retooling regulations on the petroleum industry in the third quarter.

South Africa's Political Battle Heats Up

As the contest to replace Buhari heats up in Nigeria's ruling party, a similar scene will play out in South Africa's African National Congress (ANC) in the third quarter. Politicians in the ANC's upper echelons are jockeying to succeed South African President Jacob Zuma as party head. The competition will become all the more aggressive as the ANC party congress, set for December, draws near. Depending on the event's outcome, Zuma could find himself in a tricky position. If a figure from outside his pro-labor Zulu faction — such as rival Cyril Ramaphosa — assumes the party presidency, for instance, the ANC could recall Zuma from office. Ramaphosa is a leading contender in the race for the party's top post, and he appears to be making inroads even in KwaZulu-Natal, Zuma's traditional stronghold. Still, the president has a reliable support base in the crucial province. And to clinch the title of ANC leader, Ramaphosa would have to beat out an array of formidable competitors, chief among them the president's former wife, Nkosazana Dlamini-Zuma.

In the bruising battle underway in South Africa's ruling party, the slightest move could help set a candidate apart from the rest of the field of contenders. Each rival faction in the party will push for its own style of reform to distinguish its favorite. Jacob Zuma, likewise, will work to enact radical economic policies to rally support for his ex-wife, though other elements in the ANC will try to thwart him. The president will face several more obstacles outside the party, too. On June 22, South Africa's Constitutional Court ruled that secret ballots are permissible during a no-confidence vote. This would give ANC members in parliament cover to vote against him in future no-confidence votes. Nevertheless, while this may slightly increase pressure on Zuma, the ANC is likely in no position to allow its president to fall to opposition motions.

Then, there's the economy. Zuma's calls for radical economic transformation raised concerns over the trajectory of South Africa's policies, prompting credit rating agencies Fitch and Standard and Poor's to downgrade the country to "junk" status in April. But with the party congress on the horizon, Zuma and his allies will have little choice but to keep promising populist economic measures. Growth will remain weak in the third quarter, much as it was during the second. Labor relations, however, will stay mostly calm since many contracts will remain in effect until the end of the year. In addition, a breakthrough was made earlier this month that ended weeks of deadlock in negotiations between unions and Anglo American PLC, Glencore and other firms in the coal sector, where a two-year contract will expire June 30. The parties involved agreed to hold wage talks in a central forum, which prevents unions from competing against one another for better individual deals, thereby likely averting the risk of crippling union strikes.

A Busy Election Season in East and Central Africa

Several countries in central and eastern Africa will prepare for elections this quarter. Voters in Rwanda will likely re-elect President Paul Kagame to another seven-year term Aug. 4. Four days later, Kenya — home to the largest economy in east Africa — will hold its presidential election. The contest will be a rematch of the 2013 race between incumbent President Uhuru Kenyatta and Raila Odinga. It will also serve as a benchmark of the progress the country has made since violence erupted in the wake of the 2007 election, leaving more than 1,000 people dead and hundreds of thousands more displaced. The threat of unrest still looms over the country, where ethnic and tribal affiliations dominate the political discourse and where frustrated young people with access to arms abound. This year, parties across the political spectrum will try to avoid violence. But an apparent lack of preparation, coupled with poorly distributed security forces and the opposition's simmering discontent — which yielded protests (and crackdowns) last summer — will raise the risk of violence in the upcoming vote. If the race tightens in the coming weeks, the potential for a disturbance will increase.

The election's security implications don't stop at Kenya's borders, either. Should Odinga prevail, he could alter the security situation throughout east Africa. The underdog candidate and members of his coalition have previously stated their desire to withdraw the more than 3,600 Kenyan troops deployed to the African Union Mission in Somalia (AMISOM). Although the opposition's timeline is unclear, Kenya's prospective drawdown could inspire other AMISOM partners to follow suit and pull their personnel from Somalia before the country can properly secure itself. Kenyatta, too, would have to deal with the prospect of a withdrawal from AMISOM if he were re-elected in August since Uganda is preparing to remove its troops from Somalia in the fourth quarter.

Longtime Leaders Learn to Let Go

Angola will hold a historic election Aug. 23: For the first time in nearly four decades, President Jose Eduardo dos Santos will not be running. Defense Minister Joao Lourenco will take his place on the ruling People's Movement for the Liberation of Angola (MPLA) party ticket. The transition, designed to emphasize unity and continuity, could hit turbulence in its next phase as the MPLA's various factions try to secure their bases and undercut their rivals after the elections. Lourenco, moreover, could invite backlash from the party should he opt to reverse or alter reforms to the country's state energy giant, Sonangol, including measures to break the company into three firms. The changes are part of an effort by the dos Santos family, who have entrenched themselves in the company (as well as in Angola's sovereign wealth fund), to protect their interests and those of their allies. So far, though, Angola's long-awaited succession is off to a smooth start.

The situation in the Democratic Republic of the Congo is more complicated. President Joseph Kabila and his political alliance are running out of time to hold elections as scheduled this year. The country's voter registration process, slated to wrap up in July, will shed light on whether they intend to follow through with the vote. Delays in the process could offer Kabila an easy excuse to put off what promises to be a difficult transition. A successor who could manage Kabila's fractious alliance and protect his financial interests has yet to emerge. Instability and violence in the regions around Congo's Kasai Central province could also serve as a handy excuse to push elections back to next year.

And Zimbabwe is no closer to a political transition. At 93 years old, President Robert Mugabe is set to run again in next year's election, so long as he lives to see it. Regardless, the bumper harvest projected for the country in the third quarter will offer ordinary citizens some relief in the months ahead and improve social stability while alleviating, however slightly, the financial burden of importing food.

The White House Weighs In on Sudan's Foreign Policy

Finally, the third quarter will test Sudan's initiative to improve its relations with the West, and particularly the United States. U.S. President Donald Trump's administration will decide in July whether to extend the suspension of some sanctions on Sudan that the previous administration lifted in January shortly before leaving power. Keeping the sanctions off Sudan would encourage the country to improve its human rights record, collaborate more with the United States on counterterrorism efforts and resolve its numerous internal conflicts. By the same token, restoring the measures could send the Sudanese government in Khartoum a message that so long as President Omar al Bashir is in power, its options will be limited. (Al Bashir has said he will step down in 2020.) Signs suggest that Trump will opt for limited relief for the northeast African nation despite the domestic political hurdles that remain. His administration has encouraged Khartoum to deepen its cooperation with U.S. intelligence and expand access to aid groups in the country in return. Whatever Washington decides, however, the United States will leave most of its sanctions on Sudan in place for the foreseeable future because of enduring differences between the two countries.

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