Europe

During the final quarter of 2023, the world will feel the impact of a global economy in transition as some of its pillars face headwinds and the war in Ukraine lingers.

Quarterly

Global Trends

While China&#39;s economic slowdown will not lead to permanent deflation or lasting economic stagnation, it will weigh on the short- and long-term economic outlook of countries that depend on China as an export destination. China&#39;s post-COVID economic performance has been worse than expected due to the ongoing adjustment in its <a href="/article/chinas-great-economic-rebalancing-part-2-potential-solutions">real estate sector</a> and a weaker than expected recovery in private consumption. During the quarter, Beijing will refrain from administering a large economic stimulus, but will be ready to intervene if concerns about systemic financial or political instability increase. While the Chinese government will remain determined to <a href="/article/how-will-china-tackle-its-mounting-real-estate-woes">shrink the real estate sector</a> and accept lower near-term economic growth, it will also intervene forcefully to prevent the economy from drifting into structural, secular deflation should this become a risk. Lower Chinese economic growth will most strongly affect Australia and New Zealand due to their significant reliance on exports to China and East and Southeast Asian economies. The impact of a Chinese slowdown will be more muted in other parts of the world, especially in North America. Chinese policymakers are fully aware of the risks associated with economic rebalancing and have sufficient instruments to preserve financial stability and avoid deflation. Should they fail to intervene and China experience a major financial crisis, however, the global economy and financial markets would be in for a severe shock given that China accounts for around a fifth of global GDP.

China's Economic Rebalancing Will Not Lead to Persistent Deflation or Stagnation

Splits between global powers will <a href="/article/how-uaes-hosting-will-shape-years-un-climate-summit">undermine Western efforts</a> to produce a strong agreement on phasing out fossil fuels and overall achievements at COP28. But the conference will make some progress on the <a href="/article/cop27-yields-deal-compensate-climate-damages-no-progress-phasing-down-fossil-fuels">loss and damage fund</a>, which will be crucial for developing countries dealing with the fallout from climate change. In recent months, international negotiations on climate-related issues have proved highly contentious in what is likely to be a preview of challenges at the COP28 conference at the end of the year. For example, negotiators at the Bonn Climate Change Conference in June disagreed on the conference&#39;s agenda, delaying decisions on a number of key topics. These include topics crucial for COP28, like an agreement on the political component of the planned Global Stocktake. The stocktake represents the first formal review of how effective existing climate pledges are in reaching goals set by the Paris Agreement. While the stocktake will report that current policies and pledges are insufficient, negotiations on how to increase climate ambition in a coordinated fashion are unlikely to result in concrete action. The stocktake could, however, result in renewed momentum in the West to implement even more ambitious climate strategies and pressure private companies to do the same through informal pressure and regulations. The loss and damage fund agreed to at last year&#39;s summit, which is designed to help developing countries fund the mitigation issues caused by climate change, may advance at the COP28 conference though disagreements over its financing and the scope of what it can fund are likely.&nbsp;

COP28 to Display Global Divergence on Climate Change, Energy Transition

While energy prices will not return to 2022 highs, their evolution will depend on when the heating season in the Northern Hemisphere begins and how low temperatures drop. LNG prices are far below peak prices, with LNG spot prices around $14&nbsp;per MMBtu as of mid-September compared to a record $70 per MMBtu last year. Still, a slight bump in spot prices is likely this winter, as Asian LNG demand remains strong and storage in Asia, particularly in Japan, is low. Nevertheless, relatively low LNG prices going into the winter coupled with European gas storage already having hit its 90% target in August means that a repeat of last year&#39;s extremely high prices is unlikely. This should prevent a significant jump in energy-related inflation in Europe and other parts of the world, though other drivers of inflation will remain. Meanwhile, Saudi Arabia and Russia&#39;s September decision to extend voluntary oil production cuts through the end of the year will likely keep prices above $80 per barrel, with a spike above $100 per barrel possible. Higher oil prices will put more pressure on the G7 to strongly enforce its oil price cap, as it will give Russia more leverage to try to sell at prices higher than the $60 per barrel cap.&nbsp;

The Northern Hemisphere Unlikely to See a Repeat of the 2022 Winter Energy Crisis

Although core inflation remains high in the eurozone and the United States, neither the European Central Bank nor the U.S. Federal Reserve is likely to extend interest rate increases into the fourth quarter. If they do, however, a recession in 2024 will become more likely. Both Europe and the United States have seen a substantial decline in headline inflation, but core inflation remains significantly above inflation targets. Due to signs that higher interest rates are bringing down inflation, neither central bank is likely to <a href="/article/banking-sector-fragility-will-lead-central-banks-ease-monetary-tightening">extend interest rate increases</a> into the fourth quarter. If, however, the Fed or the ECB were to raise interest rates, the risk of overtightening and a more severe economic slowdown in 2024 would increase significantly. Meanwhile, a failure by Congress to pass the budget could lead to a fiscal contraction as early as the fourth quarter; it might also lead to significant spending cuts in 2024. While this would help the Fed avoid raising interest rates, it would also increase the risk of a greater than expected deceleration of economic growth in 2024. Continued high U.S. interest rates would result in difficult financing conditions for emerging, and especially developing, economies. While the end of the Fed&#39;s tightening cycle will alleviate concerns about a significant further tightening of financial conditions, the prospect of interest rates staying higher for longer means that many emerging economies will not regain market access at more favorable rates in the fourth quarter. Countries on the verge of a financial crisis, such as <a href="/article/previewing-argentinas-presidential-primary">Argentina</a>, <a href="/article/opposing-forces-ensure-egypts-economic-reforms-remain-lukewarm">Egypt</a>, <a href="/situation-report/pakistan-early-dissolution-national-assembly-will-delay-elections">Pakistan</a> and <a href="/article/tunisias-response-bread-shortages-bode-ill-its-economic-stability">Tunisia</a>, will remain at high risk of a debt crisis and default.&nbsp;

U.S. and European Monetary Tightening May Be Coming to an End

Eurasia

The end of the main 2023 fighting season will trigger Western talk of a cease-fire, but the war will rage on as direct talks do not materialize. Ukrainian forces will make <a href="/article/ukraines-counteroffensive-appears-imminent-heres-what-watch">minor gains in southern Ukraine</a>, but will not dislodge Russian forces from the critical Crimea land corridor in the Kherson and Zaporizhzhia regions due to Russia&#39;s deep entrenchment. Fighting will remain at high intensity until mid-November, when ammunition rationing, cloudier weather, colder temperatures, reduced foliage and other factors will slow advances. Kyiv&#39;s negotiations with Western partners regarding security guarantees and <a href="/article/bracing-protracted-war-ukraine-updating-our-analysis-one-year">long-term military hardware support</a> commitments will intensify, leading to increased calls from some Western politicians and commentators for Ukraine to enter negotiations with Russia, or at a minimum for Kyiv to provide a more concrete vision of when and under what circumstances the negotiations could begin. Additional peace talks are likely, but will not induce Kyiv or Moscow to enter any direct talks because neither side&#39;s military capabilities are exhausted and an agreement would require unacceptable concessions on both sides. Meanwhile, the naval war in the Black Sea will become more intense as both sides seek to increase economic costs on the other, with Russia continuing to strike Ukrainian port infrastructure and Ukraine likely increasing its strikes on Russian naval vessels. Additionally, Ukraine will step up its efforts to bring the war deeper inside Russia, continuing strikes on Russian airfields as well as industrial targets far from the Ukrainian border to raise the political and economic costs on Russia for continuing the war. The expansion of the conflict deeper into both countries and the Black Sea will increase economic costs on both sides, and apply upward pressure to global commodity prices, but neither side will make fundamental changes to its pursuit of the war by the end of the quarter.&nbsp;

Substantive Talks to End the Ukraine War Remain Elusive 

Russia will maintain domestic stability and prepare to expand its war efforts despite continued military, political and economic pressure. Russia&#39;s preparations for its March 2024 presidential election will accelerate ahead of a final decision in mid-December on an exact date for the vote. The slate of Kremlin-approved participating candidates will also largely be finalized, though President Vladimir Putin&#39;s sham opponents will largely endorse his policies and argue for the war&#39;s continuation and possible expansion in the long term. At the same time, Moscow will likely forgo further mandatory mobilization measures similar to those enacted in September 2022, forcing Moscow to try to find a way to induce Russians into military service without a draft. If the Kremlin does opt for another wave of mandatory mobilization, however, it would likely do so <a href="/article/ukraine-wars-impact-russia-one-year">well ahead of the 2024 vote</a> to minimize political fallout. Russia will also face economic challenges during the quarter, most notably a weak ruble, but rising global oil prices and Russia&#39;s offers of discounts for its oil and refined products will allow the Russian government to avoid more drastic fiscal or monetary intervention measures to continue financing the expansion of its military production industries. In the meantime, Russian relations with China and <a href="/article/what-russia-and-north-korea-stand-gain-arms-deal">North Korea will continue</a> to deepen, including via increased arms deliveries from the latter.&nbsp; &nbsp;

Russia Balances Political, Military and Economic Risks Ahead of 2024 Vote 

Azerbaijan will continue threatening military actions to pressure Armenia in peace deal negotiations, but Azerbaijan&#39;s <a href="/article/whats-next-south-caucasus-after-azerbaijans-seizure-nagorno-karabakh">September seizure of Nagorno-Karabakh</a> will likely prevent the conclusion of a peace settlement. Azerbaijan will continue its military buildup around Armenia&#39;s borders to maintain leverage in bilateral peace talks, in which its position has improved following its seizure of Nagorno-Karabakh. But Baku will forgo large-scale military efforts to seize large parts of Armenia proper because it believes it can achieve its goals at lower cost with smaller-scale military actions and believes that geopolitical conditions are on its side given the scheduled departure of Russian peacekeepers by 2025, which will lessen Armenia&#39;s leverage. Azerbaijan will continue to restrict traffic in and out of Nagorno-Karabakh, including via the Lachin Corridor, as it asserts its sovereignty over its newly regained territories. Armenia&#39;s bilateral relations with Russia will remain strained as Yerevan argues that Moscow and its peacekeepers failed to uphold foundational stipulations of the November 2020 cease-fire that ended the war. Moscow will respond by signaling its acceptance of Azerbaijan&#39;s vision for a peace deal involving the opening of the so-called Zangezur Corridor through southern Armenia linking Azerbaijan with its Naxcivan exclave, and by working more deeply with Turkey and Azerbaijan to divide spheres of influence in the South Caucasus with even less regard for Armenia&#39;s interests. Yerevan will seek to deepen its military and economic cooperation with the West, but new agreements will remain limited, as Armenia remains unprepared for a decisive break from Moscow. Against this backdrop, a peace deal remains improbable in the quarter. &nbsp;

Azerbaijan Increases Pressure on Armenia as Peace Talks Continue to Stall 

Updates regarding Georgia&#39;s EU candidacy bid and Tbilisi&#39;s decision on the country&#39;s first deep-water container port will provide details on the future of Georgia&#39;s geopolitical balancing strategy and domestic stability. The European Union on Oct. 5 will discuss its enlargement policy, including deliberations on granting Georgia candidate status, at the Dec. 14-15 meeting of the European Council. While the European Union will likely use rhetoric about Georgia&#39;s &quot;future in the EU,&quot; Georgia is unlikely to receive the formal candidate status because of insufficient economic, political and institutional reforms and because of internal EU disagreements on the topic. Instead, Georgia will likely get new assurances that it will become an EU candidate once judicial and electoral reforms, among others, are complete. Its likely failure to receive the status will <a href="/article/deep-divisions-set-tone-georgias-geopolitical-future">raise domestic tensions</a> and increase the possibility of mass protests ahead of Georgia&#39;s <a href="/article/georgia-drops-its-foreign-agents-bill-easing-protests-and-western-concerns-now">October 2024 parliamentary elections</a>. Even in the unlikely event that Georgia gains candidate status, it would come with significant conditions, such as the European Union having to deem the 2024 vote free and fair. Still, such a diplomatic victory would bolster the ruling Georgian Dream party&#39;s popularity ahead of the vote. Additionally, the Georgian government will announce the winner during the quarter of a tender to build the country&#39;s first deep-water container port in Anaklia, for which European and Chinese companies are competing. Having Western companies lead the project would improve the government&#39;s standing with the European Union, while the selection of Chinese companies would signal Georgia&#39;s skepticism regarding European integration and its desire to deepen its geopolitical balancing between the West and China in the years ahead.

Georgia's Geopolitical Trajectory Becomes Clearer

Europe&#39;s economy will grow very moderately during the quarter while energy prices will gradually increase alongside demand and remain subject to volatility, but the Continent will avoid any sort of a financial or energy crisis. Europe&#39;s economy during the quarter will be shaped by forces moving in opposite directions. Falling inflation and strong labor markets will continue to support demand, but tight financial conditions, rising energy prices and persistent geopolitical uncertainty will weigh on investment. As a result, growth will remain subdued on the Continent while Germany, Europe&#39;s largest economy, will likely experience another recession. Energy prices will <a href="/article/europes-energy-prospects-ahead-winter-heating-season">gradually rise as the heating season begins</a> and competition from Asian LNG buyers on the global market picks up, and will remain subject to volatility amid very tight supply and demand balances. Still, prices will remain below the levels seen during the 2022-23 winter thanks to ample gas in storage and recent efforts to reduce demand and diversify supply. The risk of conventional or unconventional attacks targeting Europe&#39;s energy infrastructure will persist during the quarter, a tactic Russia will continue to see as a useful way to pressure Europe. Finally, tight financial conditions following a prolonged period of low interest rates in the eurozone will continue to pose short-term financial risks by weighing heavily on European banks&#39; investment portfolios, but generally abundant capital and liquidity buffers should avoid a banking crisis during the quarter.

Low Growth Amid Tight Energy Supplies

The European Union will debate reforming its fiscal rules and electricity market, though divisions between member states could delay progress. Abroad, the bloc will ramp up trade talks with Washington, increase pressure on Kyiv to negotiate with Moscow and continue the process of derisking from China. The European Commission will increase efforts to complete its policy agenda ahead of EU elections in mid-2024, but will face significant constraints. If EU governments fail to reach a deal on <a href="/article/reviewing-eus-proposed-reform-its-debt-and-deficit-rules">new fiscal rules</a> for the bloc, the commission will probably extend existing rules to avoid uncertainty. Negotiations on <a href="/article/look-eus-proposed-electricity-market-reform">electricity market reform</a> will resume, but may continue through 2024, though a delay should not significantly adversely impact power prices during the quarter. Conservative parties in the European Parliament will push back against politically controversial <a href="/article/europe-faces-less-ambitious-environmental-agenda">environmental legislation</a> to gain support ahead of the 2024 EU elections. In the meantime, the European Union will accelerate negotiations with the United States to secure agreements on critical raw materials and for an arrangement on the <a href="/article/eu-us-steel-and-aluminum-negotiations-make-limited-headway">trade of steel and aluminum</a>. If a final agreement on the latter is not achieved by an Oct. 31 deadline, the two parties will likely postpone the deadline to prevent Trump-era tariffs from returning into force. The European Union will continue to support Ukraine financially and militarily, and EU accession talks will continue. Brussels will, however, also increase pressure on Ukraine to engage in talks with Russia, even if no significant deal will be reached in the quarter. Finally, EU-China relations will remain tense despite a potential summit this quarter, as the European Union remains committed to its derisking strategy vis-a-vis China. Italy will announce its intention to exit the Belt and Road Initiative, while Germany is likely to announce policy measures to follow up on its <a href="/article/germany-sets-out-de-risking-its-relations-china">new China strategy</a>. Meanwhile, the United Kingdom may announce export controls on China in line with those imposed by the United States, but smaller in scope and scale.

The European Union Seeks Elusive Reforms

Poland&#39;s general election could prolong Warsaw&#39;s dispute with Brussels and the related freezing of EU funds, while a general election in the Netherlands will likely result in a fragmented parliament and protracted government formation talks. In the most likely scenario, in which Poland&#39;s right-wing alliance remains in power after the <a href="/article/poland-political-tensions-rise-ahead-elections">Oct. 15 general election</a>, its selective challenging of EU decisions will continue, as will the risk of Brussels imposing further freezes on EU funds or imposing new fines on Warsaw. These risks will be particularly high if the ruling Law and Justice party forms a government coalition with far-right parties. If the centrist coalition wins, the new government will seek to de-escalate tensions with Brussels to open the door to billions of euros in stalled EU funds. The Netherlands will spend most of the quarter in electoral mode ahead of its general election Nov. 22, with the government in a caretaker capacity with limited powers. The election will result in a heavily fragmented parliament, which means that forming a coalition government could take weeks. While anti-establishment parties are likely to perform well in the election amid growing voter dissatisfaction with mainstream parties, the nature of the Dutch political system (where multiparty coalitions are needed to pass policy) means that the risk of drastic domestic or foreign policy changes &mdash; especially concerning EU or NATO membership &mdash; is very low even if populist or far-right parties enter the next government.

Poland and the Netherlands Test the Popularity of Nationalist Parties

The United Kingdom may announce limited tax cuts ahead of the 2024 general election, while in France, clashes between the government and opposition parties will reignite amid controversial immigration and budget laws. The United Kingdom&#39;s Autumn Statement in November may contain minor tax cuts in a bid to increase public support for the ruling Conservative Party ahead of a general election in 2024, though a lack of fiscal space will limit the government&#39;s room for maneuver. The United Kingdom will also publish its battery strategy in a bid to keep automakers in the country, while the first-ever global AI summit in October will cast light on the country&#39;s ambitions and capacity to play a leading role in shaping global AI regulations. In France, the government will pass a budget law without parliamentary approval. The budget may include spending cuts and avoid significant tax cuts as the government seeks to reduce public spending, speed up debt reduction and finance costly measures for the rearmament of the country and the green transition. Paris&#39; decision to bypass the National Assembly will again result in <a href="/article/france-ongoing-pension-protests-underscore-risk-recurring-political-instability">protests by left-wing groups and unions</a>, but they will not be as widespread as the protests that followed the approval of pension reform in the spring. The government will also attempt to pass a controversial immigration reform that will likely face opposition from both left- and right-wing parties and that may result in a vote of no-confidence that, though unlikely, may risk a government collapse if the conservative Republican party sides with the opposition.

The United Kingdom Passes Mild Tax Cuts While France Again Bypasses Parliament

Asia-Pacific

Beijing will likely avoid a financial crisis, but China&#39;s slow economic recovery will test coalition governments in Asia amid Chinese economic retaliation to U.S. trade restrictions. Beijing&#39;s fiscal firepower and guidance of corporate debt <a href="/article/chinas-great-economic-rebalancing-part-3-considering-failure">restructuring in the real estate sector</a> make a financial crisis and concomitant nationwide social unrest unlikely in this quarter. Still, China&#39;s industrial production and consumer sentiment will recover slowly, driven by lagging Western demand for Chinese exports and household savings tied up in real estate. China&#39;s slow recovery will drag on Asian economies, challenging fragile coalition governments in countries such as <a href="/article/after-months-gridlock-thailand-appoints-new-government">Thailand</a> and <a href="/article/hung-parliament-malaysia-portends-further-instability">Malaysia</a>. At the quinquennial Third Plenum in October, Beijing will revise long-term policy guidance on debt management, technological competition with the West and economic reforms, but bolstering Chinese employment and consumption while avoiding deflation will likely take precedence over reforms through the rest of 2023. Meanwhile, a U.S. Trade Representative review later this year will likely keep most Trump-era <a href="/article/bidens-ban-ai-quantum-and-chip-investments-opens-new-theater-us-china-tech-rivalry">trade restrictions on China</a>, and could prompt Beijing to retaliate economically (via regulatory targeting of U.S. firms, selective product bans or subjective export licensing). Despite China&#39;s economic slowdown, Beijing could conduct military drills around Taiwan toward the end of the quarter if a victory by the pro-sovereignty Democratic Progressive Party presidential candidate seems imminent ahead of Taiwan&#39;s January 2024 elections, posing potential disruptions to shipping traffic. &nbsp;

China's Economy Avoids a Crisis, but Still Weighs on Asian Recoveries

Regardless of who wins New Zealand&#39;s October election, Wellington will prioritize trade with China and slowly deepen military engagement in the Pacific. In Australia, the rising influence of the Greens could result in an acceleration of pro-environment policies. Both <a href="/article/arderns-surprise-exit-unlikely-change-new-zealands-middle-ground-politics">New Zealand&#39;s center-left Labour Party</a> and center-right National Party will primarily focus on expanding agricultural trade ties with China to push economic growth and jobs amid a domestic cost-of-living crisis if they win the election. Both parties will also improve military and police ties with the Pacific Islands to <a href="/article/pacific-islands-emerge-next-theater-great-power-competition">counterbalance China&#39;s security influence</a>, but New Zealand will continue to resist U.S. efforts to expand Western security cooperation in Asia (e.g., via expanded joint exercises and weapons deals) aimed at combating Chinese military threats in the Pacific, especially around Taiwan and in the South China Sea. In Australia, while a snap election is unlikely after the Greens and Prime Minister Anthony Albanese&#39;s Labor Party compromised on a controversial housing bill in September, the Greens&#39; influence on government policy will increase as Labor seeks to fend off a rising conservative opposition. The Greens are likely to push for an acceleration of policies designed <a href="/article/australia-s-energy-crisis-harbinger-things-come">to stave off climate change</a>, including a moratorium on new gas projects and coal mines. The Greens&#39; rising influence could put additional upward pressure on global gas prices, already a concern after brief strikes at Australian LNG facilities in September and amid increasing competition for limited LNG cargoes as the Northern Hemisphere heads into winter.

Elections in New Zealand and the Specter of More Energy Regulation in Australia

Japan&#39;s economic stimulus could enable Tokyo to call a snap election, securing Prime Minister Fumio Kishida&#39;s leadership and perpetuating policies related to wage growth and security cooperation with the West, but escalating risks of Chinese economic retaliation. The Japanese government will introduce another round of economic consumption stimulus in October (following $43 billion of stimulus in April) with the aim of easing cost-of-living concerns and bolstering support for Kishida. The government will also continue its economic policy of wealth redistribution through wage hikes. If support for Kishida rises, he could call a snap election during the quarter to neutralize the increasingly popular opposition Nippon Ishin. Stimulus measures will exacerbate already high inflation, putting more pressure on the Bank of Japan to tighten interest rates. In the meantime, Japan will continue to deepen security cooperation with South Korea and the United States (for example, with an intelligence-sharing pact promised by the end of 2023), risking more <a href="/article/will-japan-sustain-its-economic-restrictions-china">Chinese economic retaliation</a> against Japan in line with recent fish import bans.

Japan's Economic Stimulus to Weigh on Snap Election Prospects

A failure of multilateralism in the South China Sea will raise threat perceptions but also allow regional countries agency to contest China&#39;s claims. With <a href="/article/amid-aseans-inaction-blocks-members-look-external-partners-security">no multilateral solutions</a> to the dispute and <a href="/article/no-deal-sight-south-china-sea-claimants-continue-militarize">militarization accelerating</a>, South China Sea claimant states will increasingly look to other avenues to secure their interests. This will manifest in bilateral, trilateral and minilateral mechanisms that circumvent the often-divided multilateral Association of Southeast Asian Nations. For example, the Philippines and Vietnam will start talks to demarcate their maritime boundary in the South China Sea, though the negotiations will likely extend beyond the quarter. The proliferation of bilateral negotiations to demarcate maritime boundaries will progressively allow claimant states to assert maritime sovereignty under the U.N. Convention on the Law of the Sea. Additionally, the Philippines will build on relationships tangential to its <a href="/article/clarified-us-defense-commitments-rock-boat-south-china-sea">reinvigorated alliance with the United States</a>, such as progress toward a Visiting Forces Agreement with Japan, formally upgrading ties with Australia and joint patrols with India. Vietnam, which <a href="/article/vietnam-tensions-china-make-case-closer-us-ties">upgraded relations with the United States</a> in September, will likely do the same with Singapore, Australia and Indonesia. At the same time, China and Vietnam will expand their existing maritime militias, the Philippines will inaugurate one, and Indonesia will rely on fishermen for surveillance and front-line communications, increasing the risk of accidents but also potentially helping Southeast Asian countries shift the balance of power in their favor by counteracting China&#39;s dominance in this area. These maneuvers will raise China&#39;s threat perception in the region, leading to greater shows of force in the Pacific, such as drills around the Philippines, that in turn raise U.S. and U.S. allies&#39; threat perceptions.&nbsp;

Faltering Multilateralism in the South China Sea 

Indonesian President Joko &quot;Jokowi&quot; Widodo will look to cement his legacy ahead of what is likely to be a contentious February election. Indonesia will hold general elections in February 2024, but Jokowi will be ineligible for reelection after a decade in office. Seeking to secure policy continuity, during the fourth quarter Jokowi will choose a successor who will stand a significant chance of winning the presidency because of the outgoing president&#39;s significant popularity. This means <a href="/article/indonesia-gambles-refined-nickel-amid-global-energy-transition">resource nationalism</a> and a policy of processing natural commodities onshore are likely to continue beyond the February election. The Nusantara new capital city project will also likely continue, albeit sluggishly as costs that are increasingly difficult to justify to taxpayers mount, meaning its August 2024 inauguration date is unlikely. Diplomatically, Jokowi will look for new international markets for coal and for the country&#39;s palm oil given an EU ban on the foodstuff, as well as for sources of raw commodities such as lithium necessary to realize <a href="/article/increased-energy-exports-give-indonesia-room-restructure-its-economy">Jokowi&#39;s vision</a> of manufacturing finished products such as EVs and batteries domestically. This means that Jokowi will engage partners in Australia, Africa and likely South America this quarter to actualize the supply chain resiliency necessary to achieve his vision of advancing Indonesian manufacturing up the value chain. Indonesia could, however, find itself in competition with China for lithium mines and other resources in Africa and South America. &nbsp;

Indonesia's Leader Entrenches His Hallmark Policies

Middle East and North Africa

Egypt will launch a modest privatization program as a part of its deal with the IMF, while Tunisia&#39;s insufficient progress in implementing economic reforms makes the disbursement of much-needed IMF funds unlikely. Egypt and Tunisia each reached staff-level agreements with the IMF in 2022 that have since gone nowhere, as Cairo and Tunis have refused to implement unpopular economic reforms demanded by the IMF. Egypt will make some progress in its <a href="/article/opposing-forces-ensure-egypts-economic-reforms-remain-lukewarm">relationship with the IMF</a> during the quarter, however, as a fresh privatization drive will kick off in October with a goal of accruing $5 billion in investment into stakes in 35 different companies to help generate foreign investment. The Gulf Arab states, especially the United Arab Emirates and Saudi Arabia, are the most likely to invest in the stakes, which are in strategic companies like desalination plants and wind energy, and which Cairo hopes will bring in foreign currency without the kind of reform demands the IMF attaches. Egypt&#39;s modest privatization program will help generate goodwill with the IMF that could lead to progress toward the disbursement of the second tranche of Cairo&#39;s financing program. But <a href="/article/tunisias-response-bread-shortages-bode-ill-its-economic-stability">in Tunisia</a>, President Kais Saied&#39;s refusal to introduce any state-owned enterprise reform and subsidy reform means a disbursement of IMF funds is unlikely in the quarter, which will contribute to the country&#39;s severe cost-of-living crisis and increase the risk of sovereign default.&nbsp;

Egypt and Tunisia Struggle to Implement IMF-Mandated Reforms

The risk of a diplomatic, nuclear or ballistic missile crisis between Iran and the West will decrease as Iran seeks to lower tensions with the West following the lifting of U.N. Security Council restrictions on its ballistic missile program. When a set of U.N. sanctions on Iran&#39;s ballistic missile program expires Oct. 18, Iran will hope to avoid a sanctions snapback from the West. Tehran wants to preserve the limited additional freedom the sunset on restrictions will give it to acquire missile technology. Because other sanctions in force, including from the United States, will limit Iran&#39;s ability to significantly develop its missile program &mdash; and in part because Iran has been avoiding escalation in other theaters like the Persian Gulf &mdash; the United States is unlikely to push its European counterparts to snap back restrictions, since a snapback could prompt Iranian retaliation in an escalation Western countries want to avoid. Against this backdrop, Iran will reduce the use of asymmetric tactics like naval harassment or cyberattacks against Western targets, which will slightly decrease tensions. But the United States and Iran are unlikely to agree to anything major <a href="/article/what-make-reports-us-iran-interim-nuclear-deal">in terms of a nuclear agreement</a>, though a recent prisoner swap between Tehran and Washington that will allow Iran to access $6 billion in frozen funds underscores the desire on all sides for reduced tension, helping diminish regional stability.&nbsp;

Iran Seeks to De-escalate Tensions With the West

Israeli-Saudi normalization is unlikely during the quarter, but both sides will keep looking for ways to overcome their respective domestic political constraints to full-scale relations in the next year. Despite U.S. efforts in the quarter, Saudi Arabia and Israel will not see a full-scale breakthrough to normalization as domestic political constraints in the United States, Saudi Arabia and Israel hamper a diplomatic breakthrough. In Saudi Arabia, public demands for <a href="/article/israels-far-right-policies-slow-progress-abraham-accords">Israeli concessions to the Palestinians</a> will run up against a far-right Israeli Knesset unwilling to budge. For its part, Israel will continue to oppose steps to create a civilian nuclear program for Saudi Arabia without stringent safeguards to prevent its development of nuclear weapons. Despite the best efforts of the White House, Congress will remain deeply skeptical of providing new security guarantees for Saudi Arabia in exchange for normalization as the United States re-focuses its global security strategy on Russia and China and away from the Middle East. Despite these obstacles, both Israel and Saudi Arabia remain on a trajectory of slow-moving normalization, which may manifest in more overt ways, such as direct flights from Israel to Saudi Arabia for Israeli Muslims making the Hajj. Separately, the Israeli government&#39;s controversial judicial reform process will continue, potentially altered by rulings from the country&#39;s Supreme Court. The process will spark opposition pushback, protests and even strikes within Israel Defense Forces that could hamper operational readiness and force the United States to rethink aspects of its shift from the region.&nbsp;

Israeli-Saudi Normalization Will Remain Elusive

Wealthy Gulf countries will lean on state spending to further their increasingly overlapping development models while middle-income Gulf countries restrain their spending to maintain fiscal sustainability into the new year. As the development models of the GCC states seek comparative advantages against one another, the United Arab Emirates will <a href="/article/how-uaes-hosting-will-shape-years-un-climate-summit">host the COP28 conference</a> in October as part of its strategy to position itself as a leader in green technologies, and therefore as a destination for climate-related investment and business. COP28 comes after Qatar&#39;s World Cup in 2022 and Saudi Arabia&#39;s push for more entertainment and sports events, all designed to increase their countries&#39; relative tourism, business and investment attractiveness against their Gulf rivals. Major Gulf countries will also write their national budgets for 2024 during the quarter, all of which will be heavily reliant on the price of oil and natural gas. They will do so against the backdrop of a slowing global economy that is hampering the appetite for investment in the GCC and undercutting energy prices, factors cutting into their economic growth forecasts for 2024. For the wealthier countries like Saudi Arabia, Qatar and the United Arab Emirates, 2024 national budgets may be more expansionary in a bid to boost development with state spending, and the ensuing debt will likely prove manageable. For states with fewer resources like Oman and Bahrain, state spending is more likely to be restrained as they try to maintain their positive spending trajectories that have boosted Oman&#39;s credit ratings and have arrested Bahrain&#39;s credit-rating slide. Meanwhile, resource-rich Kuwait&#39;s divided parliament will be mired in debate over how much the emirate should lean on international debtors to support its development plan, with its national budget deferred until the end of its fiscal year in Q2 2024.&nbsp;

Gulf Countries Adapt Their Spending Priorities in a Challenging Global Economy

South Asia

The Indian government will likely introduce import restrictions and other measures to create jobs ahead of general elections in early 2024, while intercommunal tensions will persist. Ahead of <a href="/article/four-2024-elections-will-shape-second-half-decade">general elections in April-May 2024</a>, India&#39;s governing Bharatiya Janata Party will focus on creating more jobs by adopting long-term policies to increase manufacturing. Through the ongoing Make in India initiative, Prime Minister Narendra Modi will likely impose import restrictions on goods within the technology and defense sector, like laptops and drones, in an effort to develop India&#39;s industrial base. India is likely to announce an electric vehicle policy that would reduce import taxes and incentivize commitment to local manufacturing to create jobs. In this vein, India&#39;s production-linked incentive program will likely prompt foreign technology companies to apply for the ability to manufacture products locally in the face of import restrictions on laptops and electronics. Modi will also boost youth employment opportunities, specifically in the automobile, pharmaceutical, tourism and food processing sectors, but also in government departments. The Bharatiya Janata Party could also push for the implementation of the Uniform Civil Code, which calls for the formulation of a unified law applicable to all religious communities governing marriage, divorce, inheritance and adoption. This will likely polarize voters along religious lines, resulting in increased mobilization of Hindu voters and greater opposition pushback. Implementation could be delayed in the face of ongoing sectarian flare-ups in Manipur and amid criticism that the Uniform Civil Code is a means of targeting minorities ahead of elections.&nbsp;

India to Focus on Job Creation

To curb high food inflation and increasing oil prices, the Indian government will adopt additional <a href="/article/implications-indias-pursuit-protectionist-trade-policies">protectionist economic policies</a> and negotiate import deals. Amid high food inflation triggered by climate change-related crises, the Indian government will likely implement additional export restrictions and bans similar to restrictions imposed on rice and onions in August. In October, the government will implement an additional export ban on sugar, halting shipments for the first time in seven years. Given that India is the largest exporter of sugar, this will likely increase global benchmark prices. Domestically, however, this policy will alleviate high prices and help fulfill local demand. The government may give farmers handouts, as export restrictions will impact their incomes, threatening crucial rural votes Modi needs. To lower domestic prices, India will also negotiate import deals for products such as tomatoes (with Nepal) and wheat (from Russia). In addition, Modi could prolong India&#39;s free grains program, which provides grain subsidies to citizens, up until the general elections. Amid decreased <a href="/article/increasingly-multipolar-world-india-maintains-its-strategic-neutrality">discounts on Russian oil</a>, India&#39;s imports have declined and may result in an end to imports altogether, risking higher oil prices in India. Instead, India will likely become more reliant on Saudi Arabia, which has committed to being a reliable source of crude. In efforts to quell inflation, the government may introduce measures to reduce gasoline and diesel prices ahead of key festivals and elections.&nbsp; &nbsp;

New Delhi to Implement Additional Food Export Restrictions

As general elections approach, the Pakistani military will take a more active role in domestic politics to secure its prolonged influence, while the caretaker government will implement policies to meet IMF requests. In the run-up to the general elections (which have been delayed until early 2024), the Pakistani military is likely to overtly reengage in domestic politics in a bid to influence the selection of the new prime minister and prevent a repetition of what happened under <a href="/article/khans-showdown-military-tests-pakistans-systems-power">former Prime Minister Imran Khan</a>, when the army was sidelined. Against this backdrop, arrests and trials in military courts of supporters of Khan&#39;s Pakistan Tehreek-e-Insaf, as well as cases <a href="/article/pakistans-former-prime-minister-has-been-arrested-again-what-now">against Khan himself</a>, will likely proceed. The delayed elections will likely amplify military influence by granting additional powers to the caretaker government beyond ensuring free and fair elections and the implementation of recently passed laws that grant increased powers to Pakistan&#39;s military intelligence agency. Political parties like the Pakistan People&#39;s Party and Pakistan Muslim League-Nawaz will likely align with the military to boost their electoral chances and weaken Khan. As elections draw closer, however, differences between the PPP and PML-N will intensify as they disagree on policies regarding election timelines and how to handle <a href="/article/where-pakistans-economic-crisis-headed">Pakistan&#39;s ongoing economic crisis</a>. While caretaker governments are usually limited to overseeing elections, recent legislation allows Prime Minister Anwaar-ul-Haq Kakar&#39;s government to make economic policy decisions. This means that the Pakistani government will prioritize economic stabilization and meeting IMF requirements. But meeting IMF bailout requirements will sustain higher inflation, interest rates and taxes in the long run, giving rise to risks of social unrest.&nbsp; &nbsp;

The Pakistani Military Steps up to Preserve Its Influence

Bangladesh will experience high levels of political instability and social unrest as the ruling Awami League and opposition Bangladesh Nationalist Party mobilize ahead of general elections scheduled for January 2024. Continuing allegations that the state is targeting opposition supporters and government critics will drive domestic and international concern about the credibility of general elections. The legitimacy of elections would be damaged even further should the BNP decide not to participate in the election because of insufficient guarantees of transparency. Should the BNP ultimately decide to compete, it would face an uphill battle dethroning the AL, which has been in power for years and has allegedly enhanced its influence over electoral institutions. Both the Awami League and the Bangladesh Nationalist Party are presenting the elections as critical for them and the country&#39;s future, which suggests political tensions will increase significantly during the quarter as each party mobilizes. Persistent <a href="/article/where-are-south-asias-most-vulnerable-economies-headed">economic problems</a>, including elevated food inflation and power cuts, will only heighten risks of domestic instability and unrest. Many countries, particularly the United States, will push for free and fair elections by threatening sanctions or other punitive measures in the event elections are widely perceived as rigged, but these threats alone are unlikely to dissuade Awami League attempts to maintain power. Against this backdrop, the losing party will almost certainly see the elections as illegitimate regardless of the result, keeping political instability and risks of social unrest high surrounding the election period. The probability of a military intervention would rise if the government proves incapable of controlling potential persistent, widespread unrest. Though military intervention could bring near-term stability, it would also exacerbate uncertainty regarding the future of Bangladeshi democracy.&nbsp;

A Tense Election Season in Bangladesh

Americas

Argentina&#39;s economy will deteriorate further in the quarter amid a chaotic presidential transition, resulting in very high inflation, rising social unrest and unresolved negotiations with the IMF that will severely weaken the business climate in the country. Argentina will hold presidential and legislative elections in October, with a potential presidential runoff in November. The country&#39;s economic environment will continue to deteriorate ahead of the election amid pervasively high inflation, insufficient central bank reserves and major policy uncertainty. If libertarian Javier Milei or conservative Patricia Bullrich wins the presidency, their conservative economic policy proposals will likely provoke protests in major cities by activists and unions. Should <a href="/article/far-right-candidate-takes-lead-argentinas-presidential-race">Milei win the first round</a> outright or appear to be a clear winner in the second round, the prospect of his presidency might slow new investment into the country, potentially leading to a run on Argentine banks given Milei&#39;s support for dollarization as people to exchange their pesos for U.S. dollars for fear of less favorable exchange rates. Against the backdrop of a <a href="/article/argentina-braces-more-economic-pain">chaotic political and economic environment</a>, the current government and its presidential candidate, Economy Minister Sergio Massa, are likely to miss IMF targets, as Buenos Aires will refrain from introducing any structural reforms during the electoral campaign. In the likely event that the incumbent Peronist administration loses the presidential election, Buenos Aires will virtually abandon any negotiations with the IMF, leaving the issue to the next government, which will take over in early December.&nbsp;

Volatile General Elections Threaten Argentina's Economy

A reform of Brazil&#39;s tax code will likely simplify tax collection and <a href="/article/mexico-and-brazil-what-lies-ahead-latin-americas-largest-economies">increase investment opportunities</a> in the long run. Brazil&#39;s parliament will debate and possibly approve reforms simplifying the country&#39;s tax code (among other things, by consolidating 6,000 different laws) over the course of the quarter. The streamlining of the tax system will make it easier for households and businesses to understand and comply with the system, while also easing barriers for companies to start up in Brazil. The impact of these reforms, however, will not become evident during the quarter. Separately, the Brazilian government will pressure the National Congress to ratify a tax on offshore funds owned by Brazilians unveiled by the executive branch in August and to close a loophole that allows large companies to pay low taxes on shareholder payouts. Both plans are part of a broader strategy to increase state revenue, reduce Brazil&#39;s primary budget deficit and advance President Luiz Inacio <a href="/article/brazils-economic-outlook-under-lula">Lula da Silva&#39;s left-wing agenda</a> to increase taxation on the rich. The executive branch will, however, face significant resistance from conservative lawmakers, so these reforms may not pass during the quarter.&nbsp; &nbsp;

Major Tax Reform in Brazil as Lula Seeks to Tax the Rich

If Chilean voters reject a new constitution in a December referendum as they did in 2022, the government will not insist on another reform, ending years of uncertainty about the country&#39;s legal environment. According to media leaks, the commission currently working on a <a href="/article/chileans-task-right-wing-parties-draft-their-next-constitution">proposed new constitution</a> will include controversial clauses such as limiting the right to strike, allowing those convicted of dictatorship-related crimes to serve their sentences at home and outlawing abortion in some circumstances. Polling suggests that Chileans will reject the new constitutional text in a Dec. 17 referendum, and Chilean President Gabriel Boric&#39;s government has signaled that it would not seek a third constitutional rewrite process if voters in fact reject a proposed charter for <a href="/article/chile-rejection-new-constitution-wont-put-issue-rest">the second time since 2022</a>. This means that the country&#39;s current business-friendly Constitution would remain in place, ending years of uncertainty about the future of Chile&#39;s fundamental law. The preservation of the current Constitution would be particularly beneficial for investors in Chile&#39;s extractive industries, as it permits a significant private presence in the sector. &nbsp;

Voter Apathy Plagues Chile Ahead of Vote on New Constitution

Local elections and a campaign finance scandal threaten the Colombian government&#39;s reform package. The Colombian government will struggle during the quarter to implement a package of reforms (including pensions and labor law reform) amid a volatile political environment. Colombian President Gustavo Petro&#39;s Pacto Historico coalition does not control a majority of seats in either of the two chambers of Colombia&#39;s Congress, forcing the government to rely on other political parties (most notably the center-left Liberal Party) to pass legislation. But Petro&#39;s ongoing <a href="/article/campaign-finance-scandal-threatens-colombias-president">campaign financing scandals</a> threaten to break this fragile congressional coalition, as many lawmakers will likely be wary of supporting policies proposed by the president for fear of appearing aligned with corrupt actors. Meanwhile, regional elections are scheduled for Oct. 29 to elect 32 governors , departmental assemblies and 1,102 mayors. As the country&#39;s political parties vie for influence at the local level, they will be less likely to support Petro&#39;s reform package. Failure to implement the pensions and labor reforms would be good for Colombian businesses, as the proposed changes would result in increased costs for them. &nbsp;

Colombia's Petro Struggles to Passing Policy Ahead of October Local Elections

If the populist candidate wins Ecuador&#39;s presidential election, it will result in heightened financial risks because of her expansive fiscal policy proposals. Populist left-wing candidate Luisa Gonzalez and businessman Daniel Noboa advanced to <a href="/article/ecuador-braces-high-stakes-election">Ecuador&#39;s Oct. 15 presidential runoff</a> after receiving 33% and 24% of the vote in the first round, respectively. Should Gonzalez become president, her proposals to expand social welfare programs and security spending using about $2.5 billion from Ecuador&#39;s $6.9 billion foreign currency reserves could reduce the country&#39;s ability to meet its foreign currency-denominated debt commitments. This uncertainty could make investors wary of the Ecuadorian market, causing Ecuador&#39;s debt to trade at less favorable levels. Noboa&#39;s campaign has centered on job creation, tax incentives for new businesses and prison terms for those guilty of significant tax evasion. This means a Noboa win would almost certainly be beneficial for the country&#39;s business climate in that he would be unlikely to pursue nationalizations. Even if he does win, however, he might prove unable to pass his policies due to a lack of legislative support, becoming an ineffective leader facing frequent protest activity.&nbsp;

Ecuador to Hold Its Presidential Runoff

Sub-Saharan Africa

Congo&#39;s ruling party will abuse its control of the government in a bid for a second term, portending voter disenfranchisement and violence in the eastern provinces; if the incumbent wins, policy continuity in regional relations and the mining sector can be expected. Congolese President Felix Tshisekedi will seek reelection Dec. 20 against leading opposition candidates Moise Katumbi and Martin Fayulu, although Fayulu has said he will not run unless the electoral commission makes changes ensuring a free and fair vote. Fayulu has already claimed that the government is carrying out widespread abuses in order to win, including interference in voter rolls, delays in voter registration, suspension of registration in opposition strongholds and violent crackdowns against opposition demonstrations. The ongoing conflict in Congo&#39;s eastern provinces will complicate the election, as ongoing rebel violence will likely prevent millions of people from voting. Given state resources are being used to help his campaign, Tshisekedi will likely win, though an opposition victory cannot be ruled out. A second term for Tshisekedi would likely facilitate continuity regarding matters like r<a href="/article/rwandas-role-congo-s-forever-war">elations with Rwanda</a> (which are poor), cooperation with the East African Community on regional security and mining sector policy. The Tshisekedi administration appears to have slowed its <a href="/article/congos-revenue-dispute-china-threatens-cobalt-copper-exports">renegotiation of mining agreements</a> since taking office in 2019, so an incumbent win would likely maintain the status quo for the sector. If the incumbent were to lose, however, disruptions to the sector would become more likely, though Fayulu would likely take a similarly hard line on Rwanda.&nbsp;

Volatile General Elections in the Democratic Republic of Congo 

Niger&#39;s military government will likely remain in power, risking a security vacuum after potential Western security withdrawals. Myriad constraints to an Economic Community of West African States <a href="/article/how-might-ecowas-military-intervention-take-shape-niger">military intervention</a> &mdash; including financing, logistics and domestic resistance within member states &mdash; mean that Niger&#39;s military junta is unlikely to face an external threat to its power in the next quarter. While a counter-coup cannot be ruled out, the military appears largely unified behind Gen. Abdourahmane Tchiani, solidifying his grip on power. This means the junta&#39;s demands for French troop withdrawal may indeed culminate in the departure of France&#39;s 1,500 soldiers. By contrast, the status of the almost 1,100 U.S. troops in Niger &mdash; which could play a mitigating role amid deteriorating security &mdash; remains an open question. Either way, the departure of the French deployment portends a more permissive environment for jihadist groups operating in the westernmost regions of Niger, Mali and Burkina Faso. The ability of jihadist groups to capitalize on this is uncertain, but even the slight alleviation of pressure on Islamic State Sahel and al Qaeda-affiliated Jamaat Nusrat al-Islam wal-Muslimin could worsen regional security to the extent that regional capitals (like Ouahigouya in Burkina Faso and Mopti in Mali) are overrun. Insecurity and political instability in the Sahel tend to be mutually reinforcing, meaning that expanding jihadism would likely make stable, civilian-led governance in Niger even less likely.&nbsp; &nbsp;

Niger's Junta Will Likely Retain Power as Insecurity Worsens 

Sudan&#39;s civil war is unlikely to end this quarter, meaning refugee flows into neighboring states worsened by potential external interference in Sudan will risk destabilizing the region. Gen. Abdel Fattah al-Burhan, head of the Sudanese Armed Forces, will continue to reject dialogue with the rival paramilitary Rapid Support Forces (RSF) because a total victory is still his primary goal. This combined with the RSF&#39;s demonstrated ability to counter the Sudanese Armed Forces in Darfur and Khartoum and the <a href="https://threatlens.stratfor.com/content/sudan-rsf-gains-and-ethnic-violence-threaten-enduring-civil-war" data-content-type="lens_analysis">expanding nature of the conflict</a> &mdash; more rebels and armed groups are joining in the fighting every month &mdash; means that a continuation of civil war is the most likely scenario through the next quarter. The Russian paramilitary Wagner Group, which has already reportedly supplied the RSF with military materiel, could further bolster the RSF&#39;s capabilities and capacity. While fighting in Khartoum, Omdurman and Bahri will likely maintain their relatively high, albeit intermittent, cadence, clashes in Darfur appear to be escalating as the conflict takes on more of an ethnic dimension. Fighting also continues to expand in other peripheral areas of the country like Blue Nile, Kordofan and South Kordofan states. Fighting in border areas with South Sudan will likely worsen ethnic tensions and territorial disputes and exacerbate shortages of food, water, medical supplies and sanitation services. In Chad, thousands of Sudanese seeking refuge from worsening fighting in the neighboring Darfur region may divert soldiers and resources from other deployments in Sudan, most notably Khartoum&#39;s escalating dispute with rebel groups in the north.&nbsp;

Sudan's Civil War to Exacerbate Regional Insecurity 

Russia&#39;s Wagner Group will likely sustain, and in some cases increase, its presence in African conflict theaters even as it reshapes its organization and management structures. Speculation on the next phase of the Wagner Group after the death of its leader, Yevgeny Prigozhin, ranges from a simple rebranding under another name to more direct involvement in private military contractor operations, including Wagner&#39;s, by the Russian state. While the specifics are uncertain, Russian officials have said that <a href="/article/wagner-groups-new-path-africa">Wagner&#39;s presence in Africa</a> will continue given that Russia&#39;s goals in Wagner&#39;s African theaters &mdash; including the Sahel, the Central African Republic, Libya and Sudan &mdash; remain relatively unchanged: the Kremlin seeks to use relatively low cost strategies to gain influence and disrupt Western relations in resource-rich African countries. This strategy has proved successful in the Sahel, where paramilitary forces support the Malian military and could well intervene in Burkina Faso and Niger. This will serve the strategic Russian interest of undermining French, European and American interests in the region, though it will have the side effect of worsening local governments&#39; responses to expanding jihadism. In the CAR, Wagner&#39;s recently enhanced deployment in Bangui will likely continue to insulate President Faustin-Archange Touadera, and Mali will remain one of Russia&#39;s staunchest African partners. Wagner&#39;s role in Sudan is more opaque, but as fighting drags on and as Wagner looks for opportunities for influence, it may throw more support (weapons, personnel or both) behind the paramilitary Rapid Support Forces, likely prolonging the conflict. Wagner may also seek out new frontiers, such as Chad, Cameroon or the Democratic Republic of the Congo. While Wagner&#39;s next form will likely take months to emerge, its African deployments over the next quarter will hint at Russia&#39;s longer term intentions for its paramilitary deployments.

2023 FOURTH-QUARTER GEOPOLITICAL FORECAST

Europe

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