The Weekly Rundown: If This, Then That for Brexit; More U.S.-China Trade Talks; and Europe's China Dilemma

8 MINS READMar 23, 2019 | 17:38 GMT
Former Kazakh President Nursultan Nazarbayev, top, and Kazakhstan's interim president Kassym-Jomart Tokayev, bottom, attend a joint session of Parliament on March 20, 2019.
(STR/AFP/Getty Images)

Kazakhstan's interim president Kassym-Jomart Tokayev, bottom, and the country's major power factions will have an interest in maintaining policy continuity as long as former President Nursultan Nazarbayev, top, remains alive. Nazarbayev ended his nearly 30-year reign this week as the country's only post-Soviet president.

Stratfor's geopolitical guidance provides insight on what we're watching out for in the week ahead.

On the Record

I think even God's patience snaps eventually.

European Commission President Jean-Claude Juncker on Brexit

On Our Radar

Brexit D-Day Slides. British Prime Minister Theresa May will try for the third time to get her withdrawal agreement approved by Parliament next week. If she can (and that's a huge if considering that the House of Commons has already shot down the agreement twice and no substantive changes have been made to it) then the European Union will give the United Kingdom until May 22 to finalize the withdrawal and leave the bloc. More likely, the vote will fail, and the United Kingdom will then have until April 12 to present a new plan to the European Union. May will have little choice at this point to yield to Parliament to chart a new course through a series of "indicative votes." These could include anything from proposing a soft Brexit on remaining in the customs union and/or single market, holding a second referendum or holding an early election that would be a de facto referendum on Brexit. May's resignation would also become more likely in the event of a third failed vote. A leadership contest within the Conservative Party would take at least two to three weeks to play out, cutting further into the new Brexit deadline for April 12.

As the calamity in London plays out, EU divisions will also be on display. French President Emmanuel Macron, worried that EU leniency with the United Kingdom could set a precedent for Euroskeptic nationalists at home, wants to take a harder line with London, even if that means a hard Brexit. Nonetheless, we expect Germany, Ireland and others to overrule France and buy more time.

U.S.-China Trade Talks, Continued. We'll be watching closely a visit by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing on March 28-29 for signs of progress on a trade deal, especially when it comes to the thorny issue of enforcement. China is naturally resisting a deal that would not only allow the United States to unilaterally snap back sanctions over perceived violations, but also prevent China from retaliating. A compromise, but still deeply flawed, deal could entail the United States incrementally lifting existing sanctions on a timeline tied to specific milestones that China has to fulfill on structural reforms. Even so, there remains the issue of how much access and oversight Beijing will actually provide U.S. authorities to verify compliance.

The U.S. Pushes the Envelope on Taiwan. In another sign of growing U.S.-China frictions over Taiwan, the Trump administration reportedly is giving the green light to fulfill a long-standing Taiwanese request for new F-16 fighter jets. The U.S. Congress, which traditionally has been more hawkish than the executive branch on Taiwan, can be expected to approve the proposal when the deal formalizes. Beijing could go beyond the more typical response of suspending military communications with the United States to spinning up military exercises and deployments around the Taiwan Strait. China might also employ punitive economic measures against Taiwan. Even as China's competition with the United States is escalating on the military front, we expect Beijing to keep the tensions over Taiwan compartmentalized from the trade talks.

Bolsonaro's Battle With Congress. Brazilian President Jair Bolsonaro ran on a campaign to fight graft and appointed the lead prosecutor of the five-year-and-running Lava Jato corruption probe as his justice minister to get the job done. But Bolsonaro's anti-corruption drive is also threatening to derail his legislative agenda. The recent arrest of former Mines and Energy Minister Wellington Moreira Franco alongside former President Michel Temer on corruption charges could spur Franco's son-in-law and speaker of the lower house Rodrigo Maia to slow key legislation on issues like pension reform and security. The threat of rising political friction and gridlock in Congress from this anti-corruption drive will not only risk slowing legislation, but it can also weigh on the Brazilian currency and erode investor confidence in Brazil.

A Managed Succession in Kazakhstan. The resignation of Nursultan Nazarbayev formally ended his nearly 30-year reign as Kazakhstan's only post-Soviet president. Despite his resignation, Nazarbayev will remain the ultimate arbiter of power to manage his succession. The country's major power factions — including Nazarbayev's family members; the energy, business and security elite; and acting president and potential successor Kassym-Jomart Tokayev – have an interest in maintaining policy continuity as long as Nazarbayev remains alive. Kazakhstan's energy policies and strong relationships with both Russia and China are likely to remain intact. However, given the unprecedented transfer of power and persistent economic challenges in the country, we'll be watching closely for any bumps along the road, whether in terms of political infighting behind the scenes or protests on the streets, in what is likely to be a long and drawn out succession process.

Post-Coup Politics in Thailand. Thai voters will go to the polls on March 24 for the first time since a 2014 military coup put a pause on civilian rule. A decade-and-a-half of political chaos had left the kingdom's status as a key Southeast Asian manufacturing hub in question. The junta has since managed to get the economy somewhat back on track and has launched ambitious infrastructure initiatives in partnership with China, Japan and others. Thailand is now poised to benefit from the movement of manufacturing out of China amid that country's economic slowdown, but the potential revival of political unrest could also undermine its economic recovery. A carefully crafted system of constitutional limits on the government and deference to the upcoming royal coronation in May could help mitigate some of the political infighting, but it's time to start paying more attention again to political risk in Thailand overall.

On Our Minds

China Exposes Europe's Contradictions. Two illustrative meetings reveal Europe's pressing dilemma of how to deal with China. Chinese President Xi Jinping's trip to Italy to officially recruit the first G-7 country to its Belt and Road Initiative showed how Beijing has been able to take advantage of Europe's more economically vulnerable states to chip away at the European periphery and find inroads for investment. But when Xi arrives in France on March 24, he will find that French President Emmanuel Macron has invited German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker to take part in the visit for discussions. This is a clear attempt by the two largest European powers, France and Germany, to present a united EU front to discuss critical issues like investment reciprocity and trade issues. The European Union is also moving toward setting up an oversight mechanism to at least raise a red flag on foreign investments in sensitive infrastructure and industry. EU member states like Greece, Italy and Hungary that seek to deepen their economic ties with China can still benefit from Brussels demanding better trade and investment terms from Beijing overall, but they will draw the line at any pan-European effort to give Brussels an actual veto on investments within their own borders.

The Golan Precedent. In a sudden tweet, President Donald Trump upended decades of U.S. policy. While once the champion of the post-World War II order that made military conquest of territory unacceptable, Trump on March 21 said the United States would back Israel's annexation of the Golan Heights, a piece of Syria captured for strategic purposes during the 1967 Six-Day War. That raises the question of just how much the old rules still apply. States with a claim to a neighbor's real estate can more readily consider the risk of war to adjust borders, while those already embroiled in territorial disputes, like Russia in Crimea, may well point to America's Golan decision as an ex post facto justification. Though the decision changes little facts on the ground in the Golan Heights, the ripple effects of the precedent will be felt for years to come.

An Indian Comeback in the Periphery? With an eye on China, India's quest to uphold its dominance in South Asia received a boost in two strategically significant island nations. In the Maldives, Foreign Minister Abdulla Shahid underscored his country's India-first policy. This marks a dramatic shift in tone when compared to the worsening state of relations during last year's state of emergency under former President Yameen Abdul Gayoom. And in Sri Lanka, the government announced the biggest foreign investment in its history, a $3.85 billion oil refinery deal involving an Indian firm holding a majority stake (though confusion persists over Oman's involvement as an investment partner). In the era of China's Belt and Road Initiative — the Maldives and Sri Lanka are both signatories — India will struggle to maintain a dominant position in its own backyard as smaller countries balance between Beijing and New Delhi. But that reality will only heighten the need for India to clinch further investments and shape friendly relations in a neighborhood increasingly in flux.

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On Our Calendar

In the coming week, Thailand holds nationwide elections, Chinese President Xi Jinping visits France and a new round of U.S.-China trade talks begins. For more, see our Geopolitical Calendar.

Join the Discussion

Does Qatar have valid regional security and environmental concerns with the nuclear power plant being built by the United Arab Emirates, or does Qatar have other motives for asking the International Atomic Energy Agency to intervene in its dispute with its neighbor?

The United States reportedly has warned Brazil that using 5G equipment from Huawei, the Chinese telecommunications giant, will impair its national security. Will Brazil heed Washington's advice?

Visit The Daily Round-Up to join more discussions with Stratfor members.

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