The United States and China will reach a deal on trade issues, likely at a summit between Presidents Donald Trump and Xi Jinping. As part of the agreement, China will promise to purchase more U.S. goods, such as agricultural products and energy, and alter its stance on certain structural economic issues like technology transfers, intellectual property rights and service sector liberalization. But as always, the devil is in the details: China will try to bend the terms of any deals it signs, while Washington will not trust Beijing to abide by any agreement. Enforcement mechanisms will also spark heated debate. The United States retains the ability to immediately reimpose tariffs on China if the latter fails to attain specific milestones, or the United States could choose to lift certain tariffs only if Beijing fulfills certain promises. Ultimately, though, China and the United States are likely to disagree on the interpretation of any deal almost as soon as the ink is dry — for this reason, at least some tariffs will likely remain in place throughout the quarter.

In the end, the United States' overall squeeze on China will endure as it fashions other tools beyond mere tariffs. As the United States and China enter a technological cold war, the United States will continue to scrutinize China's tech sector with quick-fire Justice Department investigations into alleged technology theft by Chinese companies and intelligence officers, while also targeting Chinese tech firms such as Huawei. Washington is unlikely to impose a wide-ranging export ban on the tech giant, although it is slowly developing export controls on emerging U.S. technologies. At the same time, the United States will closely screen Chinese researchers and companies working with American universities and research institutes. The White House, meanwhile, will also move to directly support increased U.S. research and development in the tech sector.

Because the fallout from the Sino-American competition will be global, the rest of the world will endeavor to chart a course between the world's two largest economies. The United States will try to convince its allies to take active measures to counter China, but that strategy's effectiveness will be hit-or-miss as China attempts to drive a wedge between the United States and its alliance network. The United States will lean on its global partners to prevent the integration of equipment produced by Huawei Technologies into their 5G networks as the emerging technology sets a new mobile telecommunications standard. Although Washington will lobby hard to portray the company as a cybersecurity risk — threatening, in the process, to cease sharing intelligence with countries that use Huawei equipment — the United States will encounter difficulties in persuading allies to reject Huawei entirely, as evidenced by the United Kingdom's recent conclusion that the company does not pose a major risk.

While the United Kingdom, Germany and other European countries may not totally accede to the United States' wishes, European powers do recognize that China's economic and technological rise represents a threat, particularly as Beijing's ascendence has started to erode their own international competitiveness. With China and the United States locked in their own race to develop and field new technologies, Europe must provide a better foundation for its companies to compete. 

France and Germany have proposed new antitrust rules to facilitate the creation of "European champions" that can compete with global American and Chinese conglomerates. Progress will be stalled, though, until the conclusion of European elections this quarter. The debate will continue, regardless, as France and Germany struggle to convince other EU member states, especially in Eastern Europe. (Some countries are less amenable to changes in EU competition laws and/or are willing to do business with China thanks to Beijing's trade and investment overtures.) In the meantime, France, Germany and other European countries will back domestic programs to boost competitiveness in strategic sectors, amping up research and development initiatives and related incentive programs.

Europe and the United States will implement mechanisms to counter China for their own reasons, but two key U.S. allies — Japan and South Korea — have remained on the sidelines. Because the two countries have deep economic ties with China, both harbor concerns about Chinese retaliation in the event they follow Washington's lead on opposing Beijing. Accordingly, Tokyo and Seoul find themselves in an uncomfortable position: They must appease the United States on security yet avoid alienating China when it comes to economics. Given that quandary, Japan and South Korea are likely to remain on the fence in the second quarter of 2019.

At long last, it's decision time for the United States on whether to apply tariffs on auto imports. U.S. President Donald Trump has until May 18 to decide, and though he is likely to move forward on some tariffs, he won't apply them on all imports. Instead, the United States is likely to hand out initial exemptions to Japan and the European Union — including the United Kingdom — as the U.S. seeks to negotiate trade deals with both. Canada, Mexico and South Korea are also likely to receive exemptions. Whatever the case, the European Union and Japan will ultimately need to offer the United States significant concessions because any exemptions might only be temporary. 

Japan has an easier path to avoiding auto tariffs than the European Union. When it comes to talks, the United States will demand increased access to Japan's agricultural markets, as well as certain quotas on its auto exports. The pair, however, already did most of the legwork on many issues as part of the Trans-Pacific Partnership negotiations. For the European Union, it's a different story. As we noted in our 2019 Annual Forecast, Brussels and Washington are clearly not on the same page regarding the purview of their trade talks. At present, the biggest bone of contention is agricultural goods — Washington wants to include them in an agreement despite the bloc's objections. Though Brussels and Washington will not resolve their core disagreement, their differences will not necessarily be enough to scuttle talks this quarter. The United States and Europe could very well reach an accord on less contentious issues related to nontariff barriers.

As a whole, the global economy is in store for some turbulence this quarter, particularly in two places: Europe and China. On the Continent, Germany and Italy — two of the eurozone's three largest economies — have slashed growth estimates in recent months. This is particularly concerning for Rome, where slow growth will compound the problems of a weak banking sector and high public debt burden. A hard Brexit, meanwhile, could foment other troubles for the European Union, though it appears that Prime Minister Theresa May will ask Brussels for an extension to negotiate a new Brexit deal, thereby preventing another crisis in the bloc — at least in the quarter ahead.

In the Asia-Pacific, China's economic slowdown will continue to cast a pall over its major trading partners. For now, Beijing is taking sufficient steps to prevent the United States from imposing more tariffs on exports, but the country's own raft of domestic challenges, such as a fragile banking sector and high levels of corporate debt, will put the brakes on growth.

Over the past year, the United States has shifted its security focus away from counterterrorism efforts in the Middle East and elsewhere and onto emerging threats, particularly from Russia and China. Washington's announcement of imminent troop withdrawals in Afghanistan and Syria fit into this pattern. In our Annual Forecast, we did not anticipate the extent of Trump's desire to reduce his country's presence in both theaters. Although the United States will maintain a presence in both countries, Trump has served notice that he will deliver on his campaign promises by withdrawing troops from Afghanistan and Syria in some form or fashion.

And as we laid out in our 2019 Annual Forecast, the intensification of the great power competition has accelerated the collapse of arms control pacts, as evidenced by the United States' withdrawal from the Intermediate-Range Nuclear Forces (INF) Treaty. The updated U.S. Missile Defense Review has directed the Pentagon's efforts toward missile defense systems that could also counter China and Russia's arsenals. The new arms race among the three will center not only on strategic weapons, including hypersonics, but also artificial intelligence, automation and cyberspace. These are all long-term issues, but the rest of the world will continue to demand that the trio establish global cybersecurity norms this quarter. None of the three, however, are likely to heed the calls, choosing instead to continue developing cyber tools for offensive purposes. 

Another major priority for the United States is its global and regional campaign against Iran. Although European powers have not backed the White House's aggressive strategy, they have begun taking a harder line on Iran, demanding that Tehran make concessions on its regional strategy and ballistic missile program in exchange for Brussels' resistance to Washington's sanctions. That trend will continue this quarter as the United States turns the economic screws on Iran by granting the Islamic republic's oil customers fewer waivers from sanctions in May. For this quarter, however, Iran is unlikely to become more assertive in its nuclear program. 

The decline of the Islamic State militant group in Iraq and Syria has also pushed the center of global jihadist activity toward Africa, ensuring that regional battles against al Shabaab, Islamic State-West Africa Province (ISWAP), Jamaat Nusrat al-Islam wal-Muslimin (JNIM) and other jihadist groups in Africa will be the primary focus of global counterterrorism operations. While the United States will play a significant role in facilitating regional counterterrorism operations in places like Somalia, its gradual shift away from a counterterrorism focus means that other countries, namely France, will be front and center in the fight against Islamist militants. Paris will continue its operations in Mali, Chad and Niger.

For oil producers like Russia and Saudi Arabia, the new reality is continued cooperation. North American oil production is relentlessly rising, and the United States will continue to export crude oil at record levels. Such a shift in the oil market could finally force Moscow and Riyadh to form an alliance on oil production, formalizing a de facto affiliation that has overseen oil supplies since the start of 2017. While this bloc will be able to manage oil prices to a degree, the United States will make a convincing argument to keep production high to prevent any price hikes. The oil price issue will dog Saudi-U.S. relations, which are plummeting amid efforts by the U.S. Congress to reduce cooperation with Riyadh. As a result, the kingdom is looking to improve economic ties with the United States' rivals — China and Russia.

• Spring: Presidents Xi Jinping and Donald Trump are expected to hold a summit regarding a deal on certain China-U.S. trade issues. 
• March 29: Brexit deadline for the United Kingdom.
• April 17-18: Meetings between OPEC and non-OPEC members in Vienna.
• April: Semiannual U.S. Treasury report on currency manipulation due.
• April: Possible timeframe for a partial U.S. withdrawal from Syria.
• May 4: Expiration date for waivers for Iran's oil customers. 
• May 18: Deadline for Trump to make a decision on auto tariffs.
• June 28-29: G-20 Summit in Osaka, Japan.

China Weathers a Trade Storm

This quarter, China has set its sights on convincing the United States to cut a trade deal. Beijing will maintain its offer of increased purchases of U.S. goods and greater market access while making measured structural changes in the realms of forced technology transfers and intellectual property protection. These efforts, however, won't be enough to satisfy the full extent of Washington's demands. Still, Beijing will use Western pressure to spur domestic reforms — particularly when it comes to easing market access restrictions and giving preferential treatment to state-owned enterprises. For example, Beijing will try to fast-track the process to shut down problematic state-owned zombie companies at the local level and cut overcapacity in China's coal and steel industries. The process — which broadly entails trimming economically unproductive capacity from the economy — will last far beyond the quarter because the overall cost to China's slowing economy and effect on the jobs market will weaken Beijing's resolve to enact far-reaching reforms. For more background on Beijing's approach to dealing with the U.S.-China trade dispute, read our latest assessment.

Asia Embraces China's Economic Discomfort

An extended U.S.-China trade truce or easing of tariffs will lessen China's economic pain, albeit only to a limited degree. Stress in China's coastal economic powerhouses — including Guangdong and Zhejiang — liquidity constraints in the private sector and employment challenges will compel Beijing to shift toward pro-growth policies. In the coming months, Beijing will expand credit and government bonds to spur infrastructure spending while introducing more drastic tax cuts that will benefit individuals and the private sector. Although Beijing will refrain from pumping up the real estate market — which could increase the number of people living in mortgage debt, thereby constraining their purchasing power — it may selectively loosen restrictions in small and midsize cities.

Some Southeast Asian economies, such as Vietnam and Malaysia, are positioned to capitalize on the low-end manufacturing opportunities created by the U.S.-China trade war. But weak global demand and the residual strength of China's export sector will drag down these smaller countries. Electronics-driven economies such as Taiwan, South Korea, Japan and Singapore will continue to be hard-hit this quarter, reviving the call for Association of Southeast Asian Nations (ASEAN) countries to diversify away from China in the long run. Meanwhile, Indonesia will struggle to manage increased trade volatility due to its dependence on commodity exports and its current account imbalance. To learn more, have a look at our assessment on the impact of the U.S.-China trade dispute on the wider Asia-Pacific region.

China, Infrastructure and Great Power Politics

Amid the U.S.-led global campaign against Chinese tech companies, such as Huawei, and efforts to counter China's regional territorial claims, Beijing will use its economic and diplomatic leverage to coerce Washington's allies. China has used intimidation to influence Canada, the United Kingdom and Australia in the past. Closer to home, Beijing will play the economic card to encourage Taiwan's supporters to veto Taipei's bid for World Health Assembly observer status and any attempts to apply for membership in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

China's overseas infrastructure projects will encounter local obstructions and increased competition from the United States and its partners. This will not, however, discourage Beijing from redoubling its efforts on the Belt and Road Initiative. In the coming quarter, concerns over enduring financial sustainability will result in a review of the initiative's projects in countries such as Pakistan, Indonesia and the Maldives. An increasing number of countries will try to negotiate better terms, much to Beijing's consternation. Yet, as the Belt and Road Summit in April will show, China's approach is flexible, particularly given its interests in making its state-owned investors more financially prudent in their spending. Read our most recent assessment of China's cat-and-mouse approach to dealing with overseas investment opportunities and challenges.

Progress on North Korea Remains Elusive

Following an abrupt end to the Hanoi summit between the United States and North Korea, the two countries will spend much of the second quarter attempting to tailor expectations and demands. Washington and Pyongyang will both attempt to push the other beyond its current position, but a return to a default stalemate is always likely. Other countries will take a more prominent role in attempting to put the two sides back on track, with China and South Korea — two neighbors that are acutely aware of the stakes — stepping up.

The United States will not fully dismiss sanctions against North Korea, and Pyongyang will not do anything to jeopardize the completion of its nuclear deterrent. Washington will, therefore, prioritize mitigating the perceived nuclear threat to the continental United States. North Korea will focus on sanctions relief to ease its ailing economy and open up prospects for inter-Korean cooperation. But any U.S. sanctions relief will be tethered to direct concessions from North Korea, and even then, the respite will be incremental and provisional in nature. In spite of setbacks, we will not see a return this quarter to the spiraling escalation that typified 2017. Learn more about the next steps in the ongoing U.S.-North Korea dialogue.

• April 17: Indonesian presidential and parliamentary elections.
• April: Second Belt and Road Summit.
• May: U.S. President Donald Trump may pay a state visit to Japan to meet the new emperor, who will assume the throne in April.
• May 18: Last possible date for the U.S. president to make a decision on the Section 232 U.S. national security report on auto tariffs.
• Before May 18: Australian federal elections.
• May: Philippine Senate midterm elections.
• June 28-29: G-20 Summit in Osaka, Japan.

The U.K. and the EU Strive to Avoid a Disorderly Brexit

The British government will try to convince the House of Commons to approve the Brexit agreement it negotiated with the EU and avoid a disorderly exit. Should lawmakers fail to approve a withdrawal agreement by March 29, London will ask the EU for more time, effectively delaying Brexit for a few months. (The exact duration of the delay will be a topic of negotiation, not only within Britain but between the UK and the EU.) This means that disruptions in trade, travel and other areas of EU-UK relations will probably be avoided during the quarter. If the exit from the EU is delayed, the British government will be under pressure from the Commons to change direction and support a softer version of Brexit. Calls for another referendum will grow louder, but this option will remain unlikely as long as the current government stays in power. For more on Brexit, read our assessment of the main scenarios in play.

The EU Chooses a New Parliament

Voters across the European Union will elect new members of the European Parliament between May 23 and May 26. Pro-EU parties will retain control of parliament, but nationalist and Euroskeptic forces will increase their presence in the institution — though they won't be strong enough to block legislation. A more fragmented membership will make it harder for the parliament to pass laws. In the meantime, because of the electoral campaign across the Continent, many EU structural reforms will be postponed. European leaders will debate whether to introduce qualified majority voting, instead of unanimity, on issues such as taxation and foreign policy, but no changes should be expected this quarter. EU governments will also debate plans to introduce a common deposit insurance scheme for European banks, but at a time of divisions between northern and southern member states over financial integration, little progress will be made. 

After the elections for the European Parliament, European governments will start negotiations to appoint the new members of the European Commission, a process that will extend beyond the quarter. While the parliamentary elections should primarily be about Continental issues, internal political considerations will affect how countries vote. This means that the election results will have domestic repercussions in countries including France, Italy and Germany. For more on the national and international impact of the European Parliament elections, read our latest assessment.

Germany and France Propose New Competition Rules

Germany and France will push to amend EU industrial regulations to better compete with the United States and China. The countries' proposals will include allowing mergers between large European companies in strategic sectors and introducing stronger protection against takeovers from non-EU companies, as well as enabling greater state participation in struggling companies. Berlin and Paris will lobby countries across the bloc to win support for their proposals. No significant changes in EU regulation, however, should be expected until the new members of the European Parliament and the European Commission are appointed later in the year. Read more about Germany and France's motivations.

EU-U.S. Trade Negotiations Continue Apace

Negotiations over a free trade agreement between the European Union and the United States will dominate the quarter, but discrepancies about its content — and particularly EU reluctance to include agricultural products — will make it hard for Washington and Brussels to reach a deal. Washington will keep its threat of introducing higher tariffs on EU cars alive, but this will not be enough to change Brussels' negotiating position. Should the White House increase tariffs on European cars, the European Union will retaliate with countermeasures affecting imports from the United States in a way designed to affect the domestic political base of U.S. President Donald Trump. In spite of these disputes, room will remain for some degree of cooperation between the European Union and the United States on issues such as China's trade and investment strategy or Iran's missile program. Read our assessment on EU-U.S. negotiations for more details.

France Takes Another Shot at Reform

Paris will push ahead with its reform agenda this quarter but must contend with a dissatisfied electorate that is increasingly willing to express its ire. The French government will, therefore, slow down the pace of reform and scale back some of its plans, including unpopular proposals to tighten the eligibility criteria for unemployment benefits while reducing monthly payments. 

Reforms to the way that public sector workers are hired and paid will also be up for consideration this quarter, but large dismissals of public sector workers are unlikely. Should social unrest continue to build, French President Emmanuel Macron could take more extreme political measures, such as instigating a government reshuffle. Even more radical decisions — such as putting planned reforms to a referendum vote or holding an early legislative election — would be considered only as a last resort because of the risky and unforeseeable consequences such moves entail. For more on France's domestic problems, read our latest assessment.

• March 21-22: Spring European Council.
• March 29: Official Brexit date.
• April 28: Spain will hold an early general election.
• May 9: The European Union will hold a summit in Romania to discuss the future of the bloc.
• May 23-26: Elections for the European Parliament.
• May 26: Federal and regional elections in Belgium, regional elections in 13 Spanish regions and in four German states.
• June 20-21: Summer European Council.

In Venezuela, the Walls Close in on Maduro

During the second quarter, extensive sanctions levied by Washington and rising opposition protests will drive a crucial negotiation in Venezuela. The sanctions will starve Venezuela of oil income it needs for imports. Opposition protests will grow, swaying more low-ranking soldiers to oppose the government — and eventually threaten it. This pressure will drive Venezuelan military commanders and politicians to discuss the terms of a Venezuelan political transition with the opposition and the Trump administration. But the negotiations will stall and eventually fail unless a significant number of officers controlling military units are reassured they will not face arrest or extradition to the United States. It is important to note, however, that even if the support of the armed forces for President Nicolas Maduro cannot be swayed, a foreign military intervention is highly unlikely. The best-case scenario for Venezuela is a relatively seamless transition of power to a more business-friendly government. 

However, a quick change of government is far from certain. Even with talk of amnesty, military commanders turning against Maduro is an inherently risky proposition. Any attempted coup could easily degenerate into a violent conflict between factions within the armed forces. Such a confrontation would damage Venezuela's physical infrastructure, complicating the country's economic recovery. A post-Maduro Venezuela will tout extensive opportunities in its energy sector, in dire need of oil revenue to rebuild its economy. But the country will remain a precarious place for energy companies to do business, especially considering that the armed forces will maintain extensive oversight of the energy sector and government as part of any bargain with the opposition. Companies investing in Venezuela will have to manage inherent local corruption as officials prioritize lining their own pockets over ensuring economic stability. For more about the opposition's push to unseat Maduro, read our latest assessment on Venezuela.

Mexico's New President Raises Investment Risk

In the second quarter, Mexico's new administration could approve constitutional reforms to hold more legally binding referendums, providing more opportunities for the electorate to vote on national and local matters. President Andres Manuel Lopez Obrador will tighten his grip over the country's energy regulators by appointing new officials to lead them. This move will narrow opportunities for foreign energy investment for the remainder of Lopez Obrador's term. Even if the president cannot find the votes in Congress for constitutional reform on referendums, he will still hold impromptu votes on individual investments that displease local communities. Over the coming months and years, foreign investments in oil, gas and even real estate will face greater risk of falling victim to regulatory decisions or a sudden referendum.

Argentina's Government Fears the Return of Populism

Argentine President Mauricio Macri will face an uphill battle this quarter ahead of the October general election. The pro-business Macri will enact austerity measures throughout the remainder of the year. These measures are necessary to access financing from the International Monetary Fund but will alienate some voters. Former President Cristina Fernandez de Kirchner will rise as the most likely challenger to Macri — unless ongoing criminal investigations disqualify her from running. Should Fernandez be barred from the October vote, Macri's chances of winning will rise. For more on Macri's difficult path to a second term, read our assessment on the challenges facing the Argentine leader over the coming year.

Brazil's Trade Reform Push Faces a Tightening Deadline

As the clock ticks down to Argentina's presidential election, South America's two largest economies will move closer to knocking down protectionist trade barriers. Brazil and Argentina will advance negotiations to reduce import tariffs and give each member state of the Common Market of the South (the trade bloc known as Mercosur) the freedom to negotiate and sign free trade agreements on their own. Brazil will attempt to negotiate and approve any trade policy amendments before the new Argentine president — who could well be the protectionist populist Fernandez — takes office in December.

A successful push by Brazil to untie Mercosur states' hands on trade negotiations would expand foreign exporters' trade opportunities with these states in coming years. Though Argentina's government wishes to avoid a trade policy dispute with Brazil, pressure from manufacturing unions may cause it to oppose any tariff reductions. Should that occur, the Brazilian administration will seriously consider threatening a withdrawal from the trade bloc to persuade Argentina to accept its terms. Read our latest assessment for more on the Brazilian push to upend regional trade policy.

• March 29: General licenses provided by the U.S. Treasury Department for U.S. companies to continue doing business with Venezuela's state-owned energy company Petroleos de Venezuela will expire.
• April 28: Petroleos de Venezuela will be cut off from the U.S. financial system.
• April 30: Mexico's Congress will begin its recess and won't convene again until mid-September.

Turkey Takes Advantage of the U.S. Drawdown in Syria

The United States will negotiate the gradual withdrawal of U.S. forces from Syria throughout the second quarter. The resultant power vacuum will aggravate existing competition for influence there among Turkey, Syria, Russia, Iran and Israel. This increases the risk of any one of these states sparking conflict with another. Turkey stands to benefit the most from the U.S. drawdown by expanding its ability to limit the growth of a Syrian Kurdish region in the northeast of the country, but Ankara will still face considerable opposition from other powers seeking to stifle its incursions into Syria.

Israel, meanwhile, will be more assertive in its strategy of striking Iranian assets in Syria that could pose a threat to the Israeli heartland. Syria's pariah status in the Arab world will begin to fade, however, as countries in the region resume trade ties. There are already signs that powerful Arab Gulf states will thaw frozen relations with the very government they opposed through most of the Syrian conflict, viewing rapprochement as a useful counter to Iranian influence in the Arab world. For more on the involvement of Turkey and other key powers in Syria, read our latest update.

Iraq Grapples With Its U.S. Alliance

The U.S.-Iraq security pact will survive increasing domestic Iraqi political pressure this quarter to expel Western forces from the country. The deliberation will mostly play out in Baghdad's increasingly nationalist parliament. Iraqi concerns over the potential resurgence of the Islamic State will help maintain ties with the United States as a security backer for Baghdad, while Washington views its presence in Iraq as critical to its ability to maintain a strong front against Iran and ensure regional stability even after withdrawing from Syria. A perpetually unstable security situation in Iraq also creates opportunities for the Iraqi Kurdish government to work productively on counterterrorism efforts with the federal government in Baghdad, which in turn lays the groundwork for cooperation on long stagnant economic issues between the two governments, such as oil export revenue sharing. For more information, read our latest assessment on the strained U.S.-Iraq relationship. 

Is the Nuclear Deal Still a Good One for Tehran?

The dwindling incentives for Iran to stay within the framework of the Joint Comprehensive Plan of Action (JCPOA) nuclear deal will become clearer than ever this quarter. Payment channels that Tehran set up to conduct transactions for basic goods — including INSTEX, the much-touted European payment mechanism — will fail to deliver the oil trade or investments that Iran needs to shore up its economy. Neither will they bring the security guarantees Tehran desires. A May 4 deadline for Iranian oil purchase waivers from U.S. sanctions will bring about a steeper cut to Iran's oil exports, meaning economic strain and protests in Iran will steadily mount.

Political infighting in Tehran will accelerate this quarter between moderates promoting continued negotiations with the West and hard-liners promoting isolationism, but the moderates will win the argument for now. After all, Iran pulling out of the JCPOA at this juncture — especially if it involves a restart of nuclear activities barred under the terms of the deal — would likely provoke a limited military strike response from the United States or its regional allies such as Israel. But every economic disappointment courtesy of the West gives Iran's hard-liners more leeway to demand that Supreme Leader Ayatollah Ali Khamenei allow them to push back through other means, possibly employing the country's cyberwarfare capability or regional proxy network. For more details on Iran's relationship with the European Union and the United States this quarter, read our latest assessment.

The West Assesses Its Gulf Arab Connections

Lawmakers in the United States, United Kingdom, France and Germany will intensify their debate over how they support and arm their Arab Gulf allies, especially the assertive Saudi-Emirati axis. This debate could erode Western support for Saudi Arabia's coalition in the Yemen civil war, where humanitarian concerns are increasingly salient political barbs in the United States and Europe. These debates will also touch on the role of Crown Prince Mohammed bin Salman in the government of Saudi Arabia: The strength of his influence will hamper cooperation between the West and the Gulf Cooperation Council (GCC), ranging from nuclear power initiatives to arms sales. To satisfy their economic and military reform drives without relying on the West, Gulf Arab states will increasingly turn to partners with fewer human rights scruples, such as Russia, China, India and Pakistan, for new investment, trade and security agreements. For more on relations between the West and the GCC, our latest assessment explores how the conduct of certain states can affect government policy, or not.

Hamas Takes Aim at a More Determined Israeli Government

On April 9, Israel will hold elections amid rising nationalist sentiment, giving the new government a stronger mandate — with fewer political constraints — to start a war with Hamas militants in the Gaza Strip. Any provocation from Hamas, spurred by its long-deteriorating economy and diminishing foreign aid, will more likely result in potent Israeli military action throughout the quarter. A Gaza conflict, however, will freeze or even reverse Israel's growing diplomatic outreach to the Gulf Arab states. Further, any such conflict will reinforce those critical of U.S. policy toward Israel in the United States, part of a growing trend of lawmakers calling for a reassessment of Washington's close-knit ties with Israel and Israeli-aligned policies in the Middle East. For more on Israel's upcoming elections, read our assessment on how the ballot could shape the country's regional strategy.

Algeria at a Precipice

Algeria's presidential elections in April will highlight a rare moment in the country's history. Political momentum favors incumbent President Abdel Aziz Bouteflika, but an unusual level of opposition is coalescing around the issue of the country's profound economic debility. No matter who wins, the results will show soaring popular frustration with a government that isn't answering the needs of its people, a fact underscored by ongoing political protests scouring the country.

This public discontent could exacerbate domestic instability and force the government to change some of its economic policies. Beyond appeasing the population, if Algeria were to improve its foreign investment and hydrocarbon investment laws, the government could improve its trade transactions with European trade partners. Read more about how Algeria's election will be particularly important to watch this quarter.

• March 31: Turkish municipal elections.
• March 31: Arab League Summit in Tunisia.
• April 9: Israeli national elections.
• April 18: Algerian presidential elections.
• May 4: The United States will decide on extensions for waivers on Iran's oil sanctions.

U.S.-Taliban Negotiations Focus on Conflict Resolution

The United States and the Taliban will spend the quarter negotiating an agreement to end the 17-year war in Afghanistan. Unlike previous failed attempts, however, the talks are unlikely to collapse this time, mainly on account of Washington's stated desire to exit the conflict. Still, in the quarter ahead, the insurgent group won't be able to force the U.S.-led coalition into a complete withdrawal — a major Taliban objective that has long eluded the movement and prevented any meaningful dialogue with the government in Kabul. Even so, countries in the region will prepare for the reality of a total U.S. departure. 

Pakistan is bracing for an influx of refugees across its border with Afghanistan, while China — a country with a vested interest in regional security to safeguard its far-reaching Belt and Road Initiative — will offer to mediate between Kabul and Islamabad. Barring a short-term cease-fire agreement, fighting will continue in Afghanistan because of the practical leverage that taking and holding ground affords the negotiating parties. As Kabul prepares for presidential elections in July, the incumbent, Ashraf Ghani, will seek to create an inclusive negotiating team this quarter to hold potential talks with the Taliban. To learn more about the coming negotiations, read our latest assessment on Afghanistan.

Indian Elections Take Center Stage

Elections will define Indian politics this quarter. Facing a resurgent opposition, the government led by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) will emphasize national security, populism and Hindu nationalism over fiscal consolidation and economic reforms to boost its chances of winning another five-year term in April. Another BJP-led government would ensure continuity of policy, but if the BJP earns only a plurality, it will empower the regional parties on whose support its coalition depends. 

In the unlikely event that a non-BJP coalition — unified solely by its disdain for Modi — takes office, India would return to an unstable era of coalition politics. In such a case, the already-challenging task of passing economic reforms to boost labor-intensive growth in the $2.6 trillion economy will become only more complicated. Until elections conclude, Modi is also unlikely to grant concessions to the United States on greater market access. Trade, therefore, will remain the most contentious aspect of the U.S.-India relationship in the second quarter. For more on the various issues surrounding the upcoming Indian election, read our latest assessment.

China's Belt and Road Hits a Bump in South Asia

China's Belt and Road Initiative will be subject to renegotiation in South Asia as heavy debt burdens prompt various governments to seek better terms. The $62 billion China-Pakistan Economic Corridor (CPEC) may be the most strategically significant branch of the Belt and Road, but as Pakistani Prime Minister Imran Khan contends with a slowing economy, his government will seek opportunities to update contracts and projects to ensure the CPEC doesn't hurt local employment prospects. In the Maldives, President Ibrahim Mohamed Solih will assess the true cost of the Belt and Road projects he inherited from the previous administration, including the construction price tag for the China-Maldives Friendship Bridge. And in Nepal, the government will draft a plan to make good on nine remaining Belt and Road projects after a lack of progress led Beijing to ask Kathmandu to trim its list of 35 projects. Renegotiations notwithstanding, no country in South Asia will withdraw from China's infrastructure initiative because the overall benefits still outweigh the costs. For a perspective on China's approach to the initiative in 2019, read our latest assessment.

Fixing Pakistan's Economy

Resolving Pakistan's macroeconomic crisis will be Khan's main domestic task this quarter. A slowing economy, compounded by Pakistan's limited foreign exchange reserves, will force Islamabad to hunt for external funding. This includes soliciting the assistance of the International Monetary Fund, though negotiations will hinge on politically unpopular austerity measures that Khan's government wishes to implement more gradually than the IMF would like. Because Pakistan's occasionally fractious civil-military balance has remained stable thanks to Khan's cordial relationship with the army, his government will not cut defense spending in spite of a widening budget deficit exacerbated by low revenue generation. High inflation will force the Pakistani central bank to maintain high interest rates, while fiscal constraints will restrict the prime minister's ability to redress the budget deficit. Instead, Khan will focus on anti-corruption issues this quarter to show potential investors that Pakistan is making progress, even if he doesn't tackle the country's economic problems head-on. To learn more about Pakistan's economic limitations, take a look at our recent assessment.

Kashmir Remains a Sticking Point

Though there is a pressing need for dialogue, India and Pakistan will not normalize their relations this quarter in the wake of the military flare-up in Kashmir in February. Reaching out to Pakistan would be politically noxious for India's Modi ahead of April's general elections — in which the BJP will focus on the threat from Pakistan and stake out a tough position on national security to reap electoral gains. Accordingly, relations between the fierce rivals will remain poor but manageable as New Delhi continues efforts to isolate Islamabad diplomatically and exchanges of fire persist across the Line of Control in disputed Kashmir. You can catch up on our latest take on Indo-Pakistani relations here.

• April (expected): Indian general elections.
• April 1: Start of India's new fiscal year.
• April: India's central bank will hold a policy meeting.
• April: The Taliban will launch their annual spring offensive.
• Unscheduled: Chinese President Xi Jinping will visit India.
• Unscheduled: Pakistan will sit down with the International Monetary Fund.
• Unscheduled: The United States and the Taliban continue talks in Doha.

Russia and the U.S. Rattle Sabers

Military competition between the United States and Russia will prevail through the second quarter of 2019. In light of Washington's suspension of the bilateral Intermediate-Range Nuclear Forces (INF) treaty earlier this year, we can expect the renewed development of ground-based missiles that can travel between 500 and 5,500 kilometers. Moscow and Washington will also reinforce their military posture in and along the borders of frontier European countries — entailing increased arms transfers, military exercises and, potentially, troop deployments. The Pentagon will prioritize its efforts in frontline NATO countries such as Poland, the Baltic states and Romania. Russia will reinforce its western regions near the borders with Ukraine and the Baltic countries. As Washington nears a decision on whether to establish a military base in Poland — a Pentagon feasibility assessment is due later in March — Moscow will firmly encourage Belarus to accept a Russian airbase on its soil. Read more about the implications of the breakdown in arms control in our assessment on what the end of the INF treaty means for Europe.

The West Burdens Russia With More Sanctions

In addition to staging military buildups, the United States and the European Union will levy further sanctions against Russia this quarter. Specific individual- and entity-level sanctions should be expected, although the United States could implement broader banking, energy and sovereign debt restrictions. As a result, Russia will proceed with efforts to insulate its economy from Western exposure, including diversifying trade ties and limiting dollar-based transactions. Increased U.S. sanctions will impact the Russian economy, but the Kremlin has the necessary tools to manage the immediate fallout over the quarter. In addition to Russia's economic insulation strategy, Moscow will shore up its cybersecurity framework, imposing tighter controls over network infrastructure and eliminating vulnerabilities. Read more about the outlook for U.S. and EU sanctions against Russia.

Russia's Global Strategy

As a result of Russia's enduring standoff with the West, Moscow will strengthen ties with non-Western countries as part of its global diversification strategy, focusing on opportunities in the Asia-Pacific and Middle East. The Kremlin wishes to improve Russia's dealings with China in the economic and security spheres while maintaining military support for forces loyal to Syrian President Bashar al Assad. In South Asia, Moscow will increase its political mediation efforts in Afghanistan as Washington pursues a military drawdown from the country. Russia will also boost its security presence in Central Asia — particularly in Kyrgyzstan and Tajikistan — as a means of bolstering regional defense capabilities to stem the spillover of militancy. In Latin America, Russia will largely maintain its economic and security support for the administration of Nicolas Maduro as Venezuela's political crisis endures and intensifies, but Moscow will not directly challenge Washington in the unlikely event of a foreign military intervention in the country. In Africa, Russia will pursue deeper security and economic links with the Central African Republic, Sudan, Zimbabwe and others, though it will limit its physical presence in these states. Read Stratfor's latest assessment on Russia's global strategy.

Ukrainian Elections and the Sea of Azov Conflict

Ukraine will hold presidential elections on March 31, which Russia will try to influence with propaganda and disinformation campaigns to foment divisions in the country. However, Moscow will be unsuccessful in swaying the election in its favor. Regardless of who wins, Ukraine's broader Western orientation and integration efforts will remain on course. On the security front, the scene is set for a potential confrontation if Kiev attempts to run a naval convoy from the Sea of Azov to the Black Sea via the Kerch Strait — an event we anticipate this quarter, potentially in the lead-up to Ukrainian elections. Such a move could trigger a confrontation between Russian and Ukrainian vessels and even spread to land-based conflict, stoking the static conflict in eastern Ukraine. Read more about how simmering Ukraine-Russia tensions could take to the seas.

• Mid-March: The Pentagon will review plans for a new U.S. army base in Poland.
• March 31: Ukrainian presidential elections (first round).
• April: Ukrainian presidential elections (second round, if necessary).
• April: A Russian-U.S. commission will meet on the New Strategic Arms Reduction Treaty (START).
• June 6-8: Russia will host the St. Petersburg International Economic Forum.
• June: Russian President Vladimir Putin will visit Japan.
• June: Kyrgyzstan will host a summit of the Shanghai Cooperation Organization.

Africa's Growing Counterterrorism Profile

Africa's prominence will rise as global terrorism's center of gravity shifts, thanks to the tapering of U.S. counterterrorism efforts in Syria and Afghanistan. The eventual suppression of militant groups in the Middle East will make African theaters an appealing destination for foreign fighters and financiers. This shift will put the onus of the global fight against terrorists in the hands of other external actors, notably France, which has taken the burdensome lead in the Sahel and Sahara. Nevertheless, Washington's counterterrorism efforts will endure — particularly in the Horn of Africa — even as U.S. strategy, resources and personnel adjust to contend with the rising great power competition with Russia and China. For more on the shifting dynamics of global counterterrorism, read our latest assessment exploring the changing geography of the fight against jihadism.

South Africa Struggles to Balance Business and Populism

The government's push to revitalize state companies will, however, come up against powerful unions opposing job losses and privatization. If reform efforts fail and the ANC incurs larger-than-anticipated losses, it will open the door to future populism in sub-Saharan Africa's most industrialized economy. The early turnaround efforts of state-owned electricity provider Eskom will be critical to watch over the quarter, because long-term failure will limit South Africa's economy and its ability to project political power beyond its borders. Read our deeper assessment of South Africa's reform struggles.

The Aftermath of Nigeria's Election

As the dust from Nigeria's Feb. 23 election settles, the opposition People's Democratic Party will challenge the election results in the courts. President Muhammadu Buhari's recent suspension of the country's chief justice, viewed by some as a move to neutralize the opposition, only adds fuel to the fire. Should evidence of serious election irregularities emerge, internal competition will intensify, leading to violent demonstrations against the government. Moreover, certain militant groups in the oil-producing Niger Delta — including the Niger Delta Avengers and others — have threatened terrorist activity should Buhari win. While the capabilities of such groups were eroded in recent years by military operations and concessions from Abuja, the potential for new waves of attacks against energy infrastructure cannot be ruled out. For more analysis on Nigeria's recent election, take a look at our assessment exploring what's at stake.

Risks to Peace Between Ethiopia and Eritrea

Normalization between Ethiopia and Eritrea will likely deepen in 2019, but key components of the relationship remain unsettled. Matters including trade, the use of ports and Ethiopia's handing over of the border town Badme will need to be formalized to prevent backsliding in the months ahead. Furthermore, lingering distrust between Eritrea's leadership and the Tigray region of Ethiopia will be a festering problem and important to watch. Poor relations between the two sides could risk flare-ups along the border between Eritrea and the Tigray region that cause ties between Addis Ababa and Asmara to deteriorate, an issue not only for the quarter but the year ahead. For more on the continuity of Ethiopia and Eritrea's peace deal, read our latest assessment. 

In the Congo, the Kabila System Holds Strong

Despite Felix Tshisekedi's rise to the Democratic Republic of the Congo's presidency, the system of former President Joseph Kabila remains firmly in place. This quarter, the new president will struggle to overcome the tightly controlled system he inherited. Kabila's People's Party for Reconstruction and Democracy holds a supermajority in the parliament, the loyalty of the security services and other key levers of power. 

The country's political continuity and its deeply entrenched mining interests mean that Kinshasa will stick with hardball economic measures, such as newly increased taxes against international mining companies that began in 2018. The dynamic between the new president and his behind-the-scenes master, however, will be important to monitor over the quarter and beyond. Simply put, if interests diverge and Tshisekedi steps out of line, he could be ousted by Kabila's allies. For more on the aftermath of the Democratic Republic of the Congo's election, read our latest assessment.

• May 8: South African general elections.
• June 12: New Nigerian president to be sworn in.
• June: Malian legislative elections.