The Week That Was
Trump Returns the Modi Bear Hug With a New Afghan Strategy
U.S. President Donald Trump finally announced his administration's plans for managing the United States' longest running war. Deliberately vague on the details, harsh on Pakistan and sweet on India, Trump showed deference to his generals on a strategy that is quite simply designed to prevent Afghanistan from sliding deeper under Taliban control, but lacks the diplomatic legs to advance a political resolution. While it will do little to bring closure to the war, the U.S. strategy is great news for New Delhi. As Trump brandishes a stick at Pakistan, India will try to advance talks on its defense wish list with the United States and encourage Washington to diplomatically isolate Pakistan. The evolution of a strategic trilateral alliance among the United States, Japan and India will be especially important to monitor in the months ahead as India's competition with China escalates and as Pakistan deepens its reliance on Beijing to manage growing pressure from the United States.
A Shifting Balance of Power in the Caribbean Basin
A quiet but critical trend is emerging in the greater Caribbean. Venezuela's crisis and inability to sustain its Petrocaribe oil subsidy plan, Mexico's growing friction with the United States and its compulsion to make itself strategically attractive to its northern neighbor, and Brazil's internal distractions are pushing Mexico into staking out a more prominent role in the Caribbean Basin. It was revealed this week that the Mexican finance and foreign ministries are considering a plan to begin replacing shipments of oil and fuel to Petrocaribe client states and Cuba. Given the priority Mexico City has given to boosting Pemex's financial health amid declining production, we'll be watching for details on how the Mexican government intends to cover the costs for these shipments and to what degree the Mexican government can use this strategy to wean Cuba away from Venezuela to improve its standing with the Trump administration.
U.S. Pushing Venezuela Toward Debt Default
In the strongest punitive move to date against Venezuela, the White House directed the Treasury Department to ban U.S. persons and companies engaging in financial transactions for new debt with a maturity longer than 90 days with Venezuelan state energy company Petroleos de Venezuela (PDVSA) and longer than 30 days from the Venezuelan government. Even though PDVSA can still legally make payments to creditors in the United States on some debt already issued, U.S. persons and companies cannot transact in new PDVSA debt. This is going to complicate the company's ability to fund operations moving forward. Notably, the sanctions left PDVSA's U.S. subsidiary Citgo — which refines oil shipped from Venezuela and markets fuel in the United States — untouched. As economic pressures on Venezuela intensify in the coming months, divisions within the military (particularly among low- to mid-ranking officers) remain critical to monitor for a potential coup.
Iran and Saudi Arabia Trying to Play Nice (Sort of)
Iran and Saudi Arabia are again putting out diplomatic feelers for an easing of tensions with reports this week that they will exchange diplomats to inspect their embassies and consulates. We're also hearing rumors of Saudi Crown Prince Mohammed bin Salman contemplating another reshuffle to replace veteran foreign minister Adel al-Jubeir with the crown prince's younger brother, Khaled bin Salman (the 28-year-old prince who is currently serving as the Saudi Ambassador to the United States), as he works to further consolidate power. We'll be watching for further signs of a relative warming of relations between Riyadh and Tehran as both sides try to manage their priorities, but make no mistake: The Gulf giants are competing as intensely as ever across the region, with Riyadh now even making notable inroads on Iran's turf in Iraq.
Macron Runs a Knife Through Central Europe
French President Emmanuel Macron met with the leaders of Austria, the Czech Republic, Slovakia, Romania and Bulgaria this week. While the official goal of the meetings was France's push to redesign a European Union system that allows nationals from Eastern Europe to work in Western Europe at low salaries, the meetings are also part of a French strategy to communicate its plans for EU reform. Notably, Macron did not meet with Polish and Hungarian leaders while encouraging the Czech Republic, Slovakia and Slovenia to remain closely linked with the "core" countries in the European Union. The line was thus split between the cooperative and uncooperative Central European countries, as Warsaw and Budapest have tense relations with Brussels. The prospect of isolation is particularly worrisome for Poland, whose national security strategy is based on having as many international alliances as possible to deter a potential Russian aggression.
Quote of the Week
"We are not nation-building again. We are killing terrorists … We will no longer use American military might to construct democracies in faraway lands, or try to rebuild other countries in our own image. Those days are now over. Instead, we will work with allies and partners to protect our shared interests … This principled realism will guide our decisions moving forward."
- U.S. President Donald Trump
Over the last decade, various political and economic crises have waylaid the European Union in its pursuit of continental integration. And no sooner had the problems subsided than elections this year in the Netherlands, France and Germany diverted the bloc's attention once more, further postponing discussions of its future. As Europe's electoral season nears its end, though, conditions on the Continent have become more conducive to reform, and some of the most powerful nations in the bloc are ready to get together and get to work. To that end, leaders from Germany, France, Italy and Spain are set to meet in Paris on Aug. 28 to broach several topics related to reform. But though they all agree on the need for change, they have different ideas about how to achieve it.
A year after the Bank for International Settlements warned that a Chinese banking crisis was likely within three years, many of the flashing red indicators that led to the warning have disappeared. The most recent economic news has been more positive, featuring increased company profits and the reform of state-owned enterprises. In truth, though, such positivity should be met with skepticism. China may have successfully managed to stem its capital outflows and started coping with its huge debt pile, but the underlying problems remain almost as large as before. After the 19th Party Congress in November, China will have to address its issues in earnest. That process is likely to be fraught with risks.
Few issues have influenced recent Colombian politics more than the government's peace deal with the Revolutionary Armed Forces of Colombia (FARC). The agreement the government signed last year with FARC remains controversial and has split the country politically between those who supported President Juan Manuel Santos' peace efforts and those led by former President Alvaro Uribe, who opposed some aspects of the peace accord. But new issues have emerged as Colombians begin to look ahead to the country's presidential election in May 2018. A struggling economy burdened by falling commodity prices, deficits and low growth is combining with a massive influx of migrants from neighboring Venezuela to replace the peace deal as the dominant forces shaping next year's race.
The Week Ahead
BRICS Reunion in Beijing
At the ninth annual Brazil, Russia, India, China and South Africa (BRICS) summit in the Chinese city of Xiamen, Beijing will continue its anti-protectionist ways and promote its Belt and Road Initiative. With China having invited 16 other countries — including Indonesia, Ethiopia, Egypt and Guinea — to the summit, it will be important to watch whether the idea of a membership expansion under the "BRICS-Plus" module gains traction.
Brazil's actions also bear monitoring. President Michel Temer will arrive in China Aug. 31 and hold meetings with Chinese government officials and investors before the summit. Brazil is interested in attracting Chinese investments for its privatization plan that will include the sale of over 50 state-owned enterprises next year. In addition, Temer will seek to attract Chinese investments for the government's infrastructure auction plans. Most of Brazil's major engineering companies are in financial trouble and Brasilia has been trying to get the Chinese to be more involved in infrastructure projects in Brazil.
But despite the cheery rhetoric, all is not well in the bloc. This year's summit is taking place against the backdrop of a tense India-China standoff in the Doklam Plateau that began in mid-June. In fact, Indian Prime Minister Narendra Modi has delayed confirming his attendance. And should Modi make an appearance, it is likely he will use the opportunity to raise the issue of cross-border extremism to get in a dig at Pakistan.
Putin Goes to Hungary
With Europe getting frozen out by Macron, Russia may see an opportunity. Russian President Vladimir Putin will visit Budapest on Aug. 28, where he will meet with Prime Minister Viktor Orban. While Putin will be officially attending a judo championship, the unofficial goal of the visit is to discuss energy. Hungary is worried that the process of EU energy diversification is taking too long, and wants to secure Russian natural gas supplies (including the resurrection of Eastring, an alternative to the controversial South Stream pipeline project). The status of the Paks II nuclear plant project probably will be on the agenda as well, as the project will be partially financed with Russian money.
Russia's Turn to Mediate in the Gulf
Russian Foreign Minister Sergei Lavrov will be visiting the United Arab Emirates, Qatar and Kuwait next week to try his hand at mediating the ongoing GCC-Qatar conflict. Throughout the months-long standoff between Qatar and four other powerful Arab states, Russia has remained neutral. This is not only because Russia has healthy economic relationships with states on both sides of the conflict, but it's also because there is little Russia (or any external state) can do to shake up the intra-GCC standoff. This past week the conflict only deepened as fake social media accounts and exaggerated state-backed news inflated a standoff between Riyadh and Doha over hajj visas for Qataris. The hajj pilgrimage officially begins Aug. 30 and it will be key to see whether Qatar allows the passage of Saudia airlines flights for the sake of Qatari pilgrims.
North Korea Watch
The annual Ulchi Freedom Guardian military exercises between South Korea and the United States will continue next week, concluding Aug. 31. With about a week left in the exercises, North Korea launched three short-range ballistic missiles Aug. 25 and has not rescinded its threat of an "enveloping strike" near Guam with long-range ballistic missiles. Such a strike, however, would be a gamble for North Korea — and would risk inviting the ire of the United States.
Debating EU Reform and Sticking Points on Brexit
The largest players in the European Union — Germany, France, Italy and Spain — will meet in Paris on Aug. 28. On the table will be two very hot topics: migration flows in the Mediterranean and EU reform. Italy wants a more active EU participation in the Mediterranean, more funding and resources for the countries of origin and transit of migrants, and more solidarity from its EU peers to host migrants. The issue of EU reform is even more controversial, as northern and southern members of the eurozone have different views on what should be done. Macron also has planned meetings with Dutch, Greek and Italian leaders to present his views for EU reform.
Brexit negotiations between the European Union and the United Kingdom will resume next week amid a growing disconnect between London and the European Union over what to prioritize and when in these talks. The United Kingdom wants to focus on the future trade relationship, while the European Union wants more immediate commitments on things such as the divorce bill. While Britain said it would honor its financial commitments to the European Union, London and Brussels can't even agree on the methodology to calculate those commitments. The European Union will assess in October whether enough progress has been made to justify the beginning of talks about the future. In the meantime, the United Kingdom is making its own plans, as Prime Minister Theresa May will visit Japan on Aug. 30 to discuss a potential trade agreement.
FARC Congress Convenes
The Revolutionary Armed Forces of Colombia (FARC) will hold a congress in Bogota from Aug. 27 to Aug. 31. During the congress, FARC's leaders can be expected to discuss and take decisions about what other leftist political and social movements their political party, tentatively called the Alternative Revolutionary Forces of Colombia, will incorporate. The rebels are in the process of demobilizing at the same time that the government is approving legislation allowing them to receive political amnesty.
Turkey's Growing Role in the Arab-Israeli Dynamic
Early next week Palestinian Authority President Mahmoud Abbas will travel to Turkey to meet with President Recep Tayyip Erdogan, and Jerusalem and Arab-Israeli peace will top the agenda. Abbas' visit follows a rather uneventful trip by a U.S. delegation to the Palestinian Authority and Israel focused on the same issue. Turkey has been making visible signs recently of its interest in backing Palestinian political parties beyond just Hamas in Gaza. Erdogan's trip to Jordan this past week focused on the issue of enduring instability surrounding the Al-Aqsa Mosque compound in Jerusalem. That issue will be on display Aug. 29 when some Israeli Knesset members enter the compound in an effort to test a contentious decision by the Israeli government to allow the entrance of Israelis into the compound.
The following is an internal Stratfor document listing significant meetings and events planned for the next week. Stratfor analysts use this to stay informed of the activities and travel of world leaders and to guide their areas of focus for the week.
- Aug. 28: Russian President Vladimir Putin will visit Hungary by invitation of Prime Minister Viktor Orban to attend the World Judo Championship.
- Aug. 28: The leaders of France, Germany, Italy and Spain will meet with the EU high commissioner for foreign policy and the leaders of Chad, Niger and Libya in Paris to discuss the migration crisis.
- Aug. 28-31: A week of Brexit negotiations will be conducted.
- Aug. 29: Finnish President Sauli Niinisto will visit the United States.
- Aug. 31: Greek Foreign Minister Nikos Kotzias will be in Macedonia.
- Aug. 31: French President Emmanuel Macron is meeting Dutch Prime Minister Mark Rutte.
- Aug. 31: French government to present details of labor reform.
- Aug. 29-30: Members of the Arctic Council (Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States), along with observer states and other representatives, will meet in Sabetta, hosted by Russia's Security Council Chief Nikolai Patrushev.
- Aug. 30-31: Iraq's Oil Minister Jabar al-Luaibi will visit Russia to hold meetings with Russian Energy Minister Alexander Novak and the head of the independent oil firm, Lukoil, Vagit Alekperov.
- Sept. 1: Deadline for the United States to expel 755 embassy and diplomatic employees in Russia.
- Aug. 30 to Sept. 1: Japan will host British Prime Minister Theresa May.
- Aug. 31: U.S.-South Korean Ulchi Freedom Guardian joint military exercises will conclude.
- Aug. 31: China's big four lenders — Bank of China, China Construction Bank, Bank of China and Agricultural Bank of China — will post results for the first half of 2017.
- Aug 31-Sept 5: Brazilian President Michel Temer will travel to China where he will meet with Chinese authorities ahead of the BRICS meeting.
- Sept. 2: Vietnam will celebrate its 72nd National Day.
- Sept. 3-5: China will host the 2017 BRICS Summit in Xiamen, Fujian, with both Chinese President Xi Jinping and Indian Prime Minister Narendra Modi attending.
- Aug. 29: India's Supreme Court will review a case concerning Article 35A of the constitution, which defines the contentious issue of land ownership in Jammu and Kashmir
- Sept. 3: The Sri Lankan military will kick off Cormorant Strike, a three-week annual military exercise with observers from India and China attending.
Middle East/North Africa
- Aug. 27-30: Russian Foreign Minister Sergei Lavrov will visit Kuwait, the United Arab Emirates and Qatar to focus on the current crisis in Doha's relations in the Gulf.
- Aug. 28: Palestinian Authority President Mahmoud Abbas to visit Turkey, discuss Al-Aqsa Mosque and relations.
- Aug. 29: Test entry for Israeli Knesset members into Al-Aqsa compound; counterprotests by Palestinian Authority groups planned.
- Aug. 30 to Sept. 4: The annual Hajj pilgrimage.
- Aug. 30-31: Iraqi Oil Minister Jabar al-Luaibi will visit Russia.
- Sept. 1: Eid al-Adha begins with celebrations and holidays in Muslim countries worldwide.
- Aug. 28-Sept 1: Argentina will present to the United States evidence that it does not subsidize its biodiesel exports.
- Aug 28-31: The Revolutionary Armed Forces of Colombia (FARC) congress will take place.
- Aug 31: Colombia's central bank will meet to decide on interest rates.
- Aug. 29: China's First Deputy Premier of the State Council Zhang Gaoli will conclude an official trip to Namibia started Aug. 26 after visits to Kuwait, Saudi Arabia and Sudan.
- Aug. 30-31: Political opposition parties calling for protests in Lome, Togo.
- Aug. 27-Sept. 1: Potential for Kenyan high court ruling on Aug. 8 presidential election.