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2018 second-quarter forecast

Mar 9, 2018 | 17:39 GMT

8 mins read

Eurasia

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.
Eurasia connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia.
(YURI KADOBNOV/AFP/Getty Images)
section Highlights
  • As the standoff between Russia and the West drags on, the United States will expand limited sanctions against Moscow, which, in turn, will seek increased investment from partners in the Middle East and Asia-Pacific to cushion the blow.
  • The Kremlin will pursue social and economic reforms at home to try to revive the Russian economy and curb protests, while a political reshuffle and restructuring of the security services will shake up the balance of power in Moscow.
  • Diplomatic discussions between Russia and the West over a U.N. peacekeeping mission to eastern Ukraine will intensify this quarter, but probably will not yield a deployment.
  • The countries of Central Asia will increasingly coordinate with one another -- as well as with Russia and China -- to combat militancy and terrorism in the region.
Eurasia globe
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Moscow Looks to the East

In the second quarter of this year, Russia's shifting foreign policy will be the center of attention in Eurasia. The standoff between Moscow and the West shows no signs of abating, and in response, Russia is becoming increasingly active in the Asia-Pacific and the Middle East. The trend, a marked change in Russian foreign policy, will continue in the coming months, as Russia tries to further insulate itself from the West.

The United States will present the biggest challenge for Moscow this quarter. Arms control treaties between the two powers will continue to deteriorate despite efforts to prevent the collapse of the current bilateral framework through diplomatic negotiations. Each side will accuse the other of violating the Intermediate-Range Nuclear Forces Treaty; the barrage of allegations could lead Russia to intensify its buildup of arms in Europe's borderlands and lead the United States to impose stronger military sanctions on Moscow. At the same time, Washington is all but guaranteed to expand its economic and political sanctions against Russia in the next few months to follow up the "Kremlin Report." The document, released in January, highlighted more than 200 individuals as potential targets for additional sanctions. Barring a major development in the U.S. investigations into Russia's electoral meddling, however, Washington probably will limit the new measures to specific individuals and sectors. Consequently, the measures won't do much to hurt the Russian economy.

Possible Targets of the Oligarch List

Negotiations to dispatch a United Nations peacekeeping force to eastern Ukraine, meanwhile, will pick up steam this quarter. After the March 18 Russian presidential election wraps up, the Kremlin will have more room to compromise over the conflict in Ukraine and will strike a more conciliatory tone with Washington to try to avoid more sanctions. But because Moscow won't agree to cede its strategic position in eastern Ukraine, any agreement the two sides reach over a U.N. deployment in Donbas will be modest in scope and gradual in implementation.

As Russia and the United States lock horns over these issues, Moscow will work to strengthen its economic relationships with other countries instead. The annual St. Petersburg Economic Forum in May will provide an ideal venue for drumming up foreign business. French President Emmanuel Macron will attend the summit, a first for a French leader since the Ukraine conflict erupted in 2014. Macron's trip — which probably will include a stop in Moscow for his first official visit to Russia — could herald a resurgence of French business and investment in the country. Japanese Prime Minister Shinzo Abe, too, will visit Moscow on his travels to the forum, which he will attend with a cadre of Japanese investors and businesspeople. Japan's leaders will set aside Tokyo's enduring dispute with Moscow over control of the Kuril Islands and focus on bolstering their bilateral ties, mainly through investments, to try to check Russia's budding alignment with China, which itself will send a large delegation to the economic forum. Sizable delegations from Saudi Arabia and Qatar will also attend. Negotiations on a host of projects with those states are underway. Among those projects is an expansion of the Power of Siberia natural gas pipeline to China.

Russia's Next Strategic Energy Projects

Russia's Internal Struggle

Russia will have no shortage of pressing domestic issues this quarter. Large but manageable street protests will pop up across the country even after the presidential election, as Russians air their dissatisfaction over corruption and economic trouble. In Russia's population centers, authorities will try to contain the unrest primarily by cracking down on protests and offering concessions.

Another strategy the Kremlin may use to stifle the protests in the long run is to co-opt opposition leaders by offering them advisory or other posts in the government. Figures such as Alexei Navalny, one of Russian President Vladimir Putin's most outspoken and dogged critics, are unlikely to fall for this ploy. Moscow may have better luck, however, using the tactic to keep opposition parties like Yabloko and the Communist Party — which stand to gain ground in future local and legislative elections — under its thumb.

In the meantime, the Russian government will work on rolling out social and economic reforms to address some of the public's concerns. The Kremlin has expedited plans to raise the minimum wage this quarter, moving the initiative's start date from May to March. But making good on the promise will require subsidizing regional and state-run business budgets through the rest of the year. Between pledges like this one, efforts to prop up struggling banks and the upcoming soccer World Cup, which Russia will host in June and July, the Kremlin's finances will be tight this quarter. Still, Moscow will try to move forward with fiscal reforms and infrastructure improvements that will benefit the country down the road. In addition, it will consider launching a campaign against corruption, an issue galvanizing Russians across party lines.

The prospective anti-corruption effort, in fact, may serve as the pretext for a reshuffle in the Russian government and security services this year. To ensure the continuing longevity of his nearly 20-year rule, Putin is turning his attentions to political and security reforms. These initiatives could include changes in the makeup and division of powers among various clans and security services. The Federal Security Service and National Guard, for example, will firm up their respective investigative authorities this year, a process that will shift the balance of power between them. As the Kremlin rolls out these changes, Russia's political elite — primarily government officials, oligarchs and members of Putin's inner circle — will be all the more on edge waiting for the United States to slap them with sanctions. Putin's administration will do what it can, though, to shield the country's wealthiest and most influential from financial harm in a bid to maintain their loyalty.

Dissent Brews in Ukraine and Azerbaijan

Like Russia, Ukraine will face an array of domestic political challenges in the second quarter. The government in Kiev is slated to adopt legislation to establish an independent anti-corruption court in the country by May. After repeatedly putting off the bill, which could put key government officials in the line of fire, the administration can no longer avoid enacting the measure, lest its inaction provoke protests or jeopardize the International Monetary Fund's financial assistance. (Regardless, the bill won't take effect until sometime after this quarter.)

Leaders in Azerbaijan, too, are facing a rocky few months. In April, the country will hold presidential elections, which longtime President Ilham Aliyev decided in February to move up by six months. Aliyev will almost certainly emerge from the next vote victorious, but protests could break out in the run-up to and aftermath of the election in response to unpopular economic measures, such as a possible currency devaluation. Either way, Azerbaijan will stay on the same foreign policy course, juggling its relationships with Russia, Turkey and Iran while also working to pressure and isolate neighboring Armenia over the Nagorno-Karabakh dispute.

Nagorno-Karabakh Region and Area Districts

Political Strides and Struggles in Central Asia

The quarter will be no less trying for the governments of Central Asia. The five countries that make up the region will contend with political, economic and security problems in the coming months, thanks to domestic dissent, the residual effects of low energy prices and the threat of militant attacks. In Turkmenistan in particular, a frail economy could bring more intense food shortages, subsidy reductions and price hikes on staple goods such as flour and gasoline. The country's socio-economic factors, like those of its neighbors, will spark demonstrations that will test, but not necessarily threaten, the national government.

Notwithstanding their struggles, states such as Kazakhstan and Uzbekistan will make some important political strides this quarter. Kazakh President Nursultan Nazarbayev will move forward with his gradual succession process. In anticipation of his eventual departure from office, Nazarbayev will delegate more powers to members of his Cabinet and family while also strengthening state institutions like the National Security Committee. Across the southern border in Uzbekistan, President Shavkat Mirziyoyev will redouble his efforts at economic and security reforms, having consolidated his power in the first quarter of the year. Mirziyoyev will forge ahead with the measures to encourage investment and tourism in his country — an initiative that is also driving him to mend fences with neighboring Kyrgyzstan and Tajikistan over issues such as border demarcation and water management.

The Shanghai Cooperation Organization

Similarly, Central Asian states will work together more closely this quarter to contain militancy and terrorism, with support from Russia and China, which will boost their security presence in the region. Together, these countries will fortify military bases and conduct more joint exercises, counterterrorism training and diplomatic consultations under the auspices of the Shanghai Cooperation Organization.

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