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2019 third-quarter forecast

Jun 11, 2019 | 20:40 GMT

9 mins read

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.

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.
(Chris Jackson/Getty Images)

Key Trends for the Quarter

The U.S. Takes Its Iran Spat to the Brink

While doubling down on its strategy of economically crippling Iran through sanctions this quarter, the United States will incrementally strengthen its naval and personnel deployments in the Middle East to deter Tehran and its regional proxies — including Lebanese militant group Hezbollah — from attacking U.S. and allied interests. Iran can retaliate in a number of ways: by ramping up naval harassment in the Persian Gulf, conducting state-level cyber warfare, using its proxies to stage attacks and, potentially, resuming its nuclear program.

A map showing U.S. and Iranian military bases in the Middle East

In May, Tehran announced a 60-day deadline to the remaining signatories of the Joint Comprehensive Plan of Action (JCPOA), demanding that European nations review the existing sanctions package if they wanted to keep Iran within the framework of the nuclear deal. When the deadline expires July 7, Iran will likely violate aspects of the JCPOA, particularly articles regulating the size of Iran's stockpiles of low enrichment uranium and heavy water. Iran will continue to expand the infrastructure needed to quickly return its nuclear program to pre-2015 levels, but in a bid to leave the door open to the European Union, it will move cautiously. For example, Tehran could choose to remain below the nuclear deal's enrichment threshold of 3.67 percent. In the event that Tehran takes more extreme action, such as returning to pre-JCPOA enrichment levels of 20 percent purity, more hawkish elements in the U.S. administration would push for punitive strikes, even though the White House still wants to bring Iran to the negotiating table.

Although a limited strike against Iranian forces or assets is probable this quarter, potential mediators — including Oman, Switzerland, Kuwait and Japan — will work feverishly to establish a channel between Washington and Tehran to avoid military escalation. Contrary to U.S. intent, Iran will not buckle under economic pressure, nor will it engage in broader political negotiations with the Trump White House

A chart showing Iran crude oil exports

In response, U.S. sanctions are likely to increase, potentially encompassing all remaining non-oil exports apart from foodstuffs. The subsequent decline in export revenue will harm Iran's ability to purchase food and humanitarian goods, thereby increasing the possibility of economic turmoil and countrywide unrest, though the Iranian government will crack down on price gouging and media dissent while simultaneously enacting certain private sector reforms. In the end, Iran-EU relations will inevitably deteriorate this quarter because Brussels will fail to provide a sufficient economic safety net for Tehran. As a result, the Islamic republic's diplomatic isolation will increase. 

For more on Iran and the possibility of a military conflict this quarter, read Stratfor's latest assessment. To better understand Iran's economic management priorities through another tough period of sanctions, click here.

Great Power Competition Heats Up in Syria

Given the fractured nature of the Syrian battlefield, the sheer number of foreign military forces operating in and around the country and the general lack of alignment among outside powers, clashes between states — including Syria and outside powers — are probable this quarter. Nevertheless, existing lines of communication and de-escalation will prevent such clashes, intentional or otherwise, from growing into a major state-on-state confrontation. Most likely to be involved in a shooting incident is Turkey, a key security guarantor in rebel-held Idlib in northwest Syria. Turkish troops are likely to clash with Syrian loyalist troops, Russian combat personnel or advisers and/or the Islamic Revolutionary Guard Corps' Quds Force — all of whom want to see Damascus regain total control of Idlib province. Beyond Turkey, which has significant combat power arrayed along the Syrian border, clashes are possible between Israel and Iran, the United States and Iran, and America and Syria.

Firmly established de-escalation channels will help prevent a major military crisis from unfolding around Syria this quarter. 

Because of the inherent risk of escalation in such a conflict, the Syrian government will be forced to suppress its desire to retake Idlib this quarter, especially as Damascus' Russian and Iranian allies advise caution as they wish to avoid military activity that puts Turkish forces in the line of fire. Even then, the potential for U.S. strikes against Syrian forces in retaliation for the use of chemical weapons or Israeli strikes on Iranian positions to prevent further entrenchment and consolidation will remain pervasive. Potential Israeli and U.S. airstrikes that inadvertently harm Russian, Iranian and/or Syrian personnel raise the possibility of state-level escalation, but firmly established diplomatic means of de-escalation will help mitigate any blowback from collateral damage, preventing major military crises from unfolding this quarter. 

A graphic showing the levels of strategic alignment in the Syrian civil war.

Turkey Struggles to Balance Its Political and Economic Needs

Turkey's ruling Justice and Development Party (AKP) will employ nationalist policies to try to shore up its domestic political legitimacy this quarter as it faces a tough Istanbul mayoral election rerun, even at the cost of straining Ankara's foreign relationships and jeopardizing the country's long-term economic well-being. Residents of Turkey's largest city will be voting with an eye to the country's shaky economy — which is currently marked by a volatile currency, a hefty debt burden and slumping consumption — which will detract from the AKP's appeal. Nonetheless, the AKP will do whatever it takes to eke out a win and intimidate the opposition in the election aftermath. The government's expanded push through the quarter into oil and gas exploration in the Eastern Mediterranean and deepening anti-Kurdish militant operations in Iraq and Syria will help fan the flames of nationalism at home, even if such jingoism alarms Turkey's EU allies.

A map showing maritime disputes in the Eastern Mediterranean

Ahead of a likely summer meeting between U.S. President Donald Trump and Turkish President Recep Tayyip Erdogan, Washington and Ankara are trying to find areas of compromise when it comes to Syria, Turkey's procurement of the Russian S-400 air defense system and Turkish economic ties with Iran. There are a number of potential triggers that will stress the U.S.-Turkey relationship this quarter, including potential U.S. sanctions on natural gas — a critical energy source for Ankara — Turkey's commitment to seeing through the S-400 deal with Russia, the threat of U.S. CAATSA sanctions over the weapons purchase, as well as the Erdogan government's long-term commitment to maintaining a presence in Syria. For more on Turkey's balancing act as a middle power defending its own national interests, read Stratfor's in-depth assessment.

Algeria's Power Brokers Cling to the Status Quo

Algiers will seek new channels for political dialogue with the strident opposition this quarter to appease an emboldened protest movement that is demanding a wholesale political overhaul. Although the military-backed civilian government won't allow political reforms that compromise their power-sharing agreement, there will be legitimate discussions about constitutional amendments and political inclusivity that will start to increase the input civil society organizations can have on government policy over the long term. Following Algerian President Abdel Aziz Bouteflika's sudden resignation in April, the military adopted aspects of the presidency's former powers for itself, including control over the police and intelligence forces. However, persistent civil unrest threatens the security force's ability to keep the peace, thereby limiting the army's willingness to dramatically assume more political powers.

An animated graphic showing the shifting power structures in Algeria.

Meanwhile, Algeria's economy is in desperate need of more prudent economic management, which means that any announcement of populist economic reforms that could satisfy the immediate demands of protesters will only undermine future efforts at real fiscal balancing and growth. And then there is the matter of the interim president's term ending on July 9. With elections postponed indefinitely, Algeria's government will fail to properly address the economic crises simmering throughout the quarter — something that will lead to further protests and unrest without a political resolution in sight.

Israel Experiences Election Deja Vu 

In a bid to survive yet another election with reduced political capital, Israeli Prime Minister Benjamin Netanyahu will take risks and push Israel's political system to its limits to ensure he remains in power. This, in turn, could propagate a conflict between Israel and the militant group Hamas, Israel and Iran, and Israel and Hezbollah. Netanyahu will be forced to find unlikely allies on the radical margins of Israel's political spectrum to ensure electoral victory and maneuver through legal loopholes to minimize the political fallout from his impending corruption hearings. In doing so, he will test the strength of the country's rule of law.

This quarter, Prime Minister Benjamin Netanyahu will test the strength of Israel's rule of law.

Meanwhile, an increasingly hard-line Israeli political establishment will respond to any provocation from Hamas, Hezbollah, Iran and Syria with swift retaliation. Combined with intensifying U.S.-Iran tensions, this perfect political storm increases the risk of a major conflict on Israel's frontiers throughout the quarter. For more on Israel's electoral do-over, read Stratfor's latest assessment.

Additional Forecasts

These Stratfor assessments provide additional insights for the Quarter

Key Dates to Watch

  • June 23: Turkey will rehold mayoral elections in Istanbul.
  • June 25-26: The Bahrain-U.S. economic platform conference for Arab-Israeli peace negotiations will occur.
  • July: The next round of Astana talks among Iran, Turkey and Russia will happen in July. 
  • July: Turkey is expected to receive the S-400 advanced air defense system from Russia.
  • July: U.S. President Donald Trump could visit Turkey. 
  • July 7: Tehran's 60-day deadline to Brussels will expire, heralding the possible restart of Iran's nuclear enrichment activity.
  • July 31: The Pentagon deadline for Turkey to abandon the S-400 deal with Russia will end.
  • Aug. 22: The next regular International Atomic Energy Agency (IAEA) report on Iran is due. 
  • Sept. 17: Israel will hold national elections.

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