On the Record
Changing the government or presidents cannot be done through WhatsApp or Facebook. It can be done only through elections.
Sudanese President Omar al Bashir
On Our Radar
As Expected, the U.S. Pauses INF. U.S. Secretary of State Mike Pompeo announced on Feb. 1 that the United States would suspend its obligations under the Intermediate-Range Nuclear Forces Treaty (INF), effective Feb 2. The U.S. plans to withdraw from the INF in six months if Russia does not return to compliance. Washington signaled its intention to leave the INF last year, and Pompeo's announcement was an expected but significant conclusion to arms control talks that had offered no progress. Russia followed suit on Feb. 2, saying it also would suspend its involvement in the INF. An intensification of ongoing military buildups by both the United States and Russia, particularly along the European borderlands, will likely follow.
Strange Bedfellows in Afghanistan. As the United States negotiates an agreement with the Taliban to end the 17-year conflict in Afghanistan, Russia — which was at war in Afghanistan during the 1980s — is seeking the role of peacemaker. On Feb. 5, Moscow will host talks featuring Taliban representatives and prominent Afghan politicians. Of course, the absence of the Afghan government from the meeting, which the Taliban refuse to talk to, will limit any breakthroughs. Still, the meeting points to how regional actors, including China, Pakistan, India and Iran, will position themselves to maximize their leverage in an eventual postwar government in Kabul.
Huawei in the Crosshairs. The world's largest telecommunications company had another bad week as the United States, and crucially, the European Union, placed China's Huawei in its crosshairs. The United States laid down the gauntlet with 23 indictments on technology theft and fraud related to Iranian sanctions; at the same time, the United States officially requested extradition of the company's chief financial officer from Canada. How far the United States will pressure Huawei is not clear, but sanctions violations and technology theft could result in banning U.S. suppliers — which Huawei dearly needs — from selling to it. The European Union, citing security concerns, is also considering banning Huawei equipment from being used in next-generation telecommunications networks like 5G. The European Union and the United States are increasingly concerned that Huawei will let Beijing use its equipment installed abroad to spy.
High Note on Trade Talks. The week ended with the United States and China striking an upbeat tone after two days of trade negotiations in Washington. With U.S. President Donald Trump hailing the talks as a success and hinting he may meet soon with Chinese President Xi Jinping, the likelihood of a de-escalatory path between the world's two largest economies increases. Still, details of negotiations on core issues — such as China's forced technology transfer and subsidies to strategic industries — are far from clear. Moving forward, we are watching for an official announcement of a Trump-Xi meeting, which would offer a key signpost that a deal is likely.
Kim and Trump to Meet Again? The United States will soon announce the timing and venue for the next Trump-Kim Jong Un summit — rumored to come in late February and to be held in Da Nang, Vietnam. Stephen Biegun, the U.S. special representative for North Korea, will fly to South Korea on Feb. 3 to hammer out details with his North Korean counterpart, laying the groundwork for concessions from both sides meant to spur progress toward denuclearization. Washington is pushing for a full declaration of Pyongyang's weapons program, and is suggesting that North Korea will dismantle its plutonium reprocessing and uranium enrichment programs. North Korea's main focus is on peeling back U.S. and international sanctions — something the United States has long demurred on. The space between the desires of the two nations will make an actual resolution difficult.
Quest for an Agreeable Brexit. The British House of Commons has spoken, telling Prime Minister Theresa May to go back to Brussels and negotiate an exit agreement that does not include the Irish backstop, the controversial plan to keep the border between Northern Ireland and the Republic of Ireland open no matter what. The problem is that the European Union is adamant that the backstop cannot be renegotiated, which reduces May's chances of obtaining meaningful concessions. As the March 29 Brexit deadline approaches, we expect the pressure on May's government to delay Britain's EU exit to increase.
Sanctions Noose Tightens on Venezuela. On Jan. 28, the U.S. Treasury Department hit Venezuela's state energy company with heavy sanctions. The new sanctions bar U.S. companies from doing business with Petroleos de Venezuela (PDVSA) and will dissuade some foreign companies from doing business with PDVSA. Sanctions choke off the Venezuelan government's only real source of revenue. To mitigate the pressure, the government of President Nicolas Maduro will try to redirect shipments of crude oil to buyers in Asia and Russia. This will take time and Caracas will have to sell its oil at a steep discount, sharply reducing the company's cash flow and affecting production. Meanwhile, Venezuela's opposition is continuing its efforts to persuade the country's armed forces to turn on Maduro and usher in an opposition-controlled government.
South Africa's Bloated Public Sector. High public wages and corporate debt remain large factors for South Africa's budget and financial predicament. President Cyril Ramaphosa's government has tried to boost the efficiency of the public sector, but is running into a brick wall of trade unions that oppose layoffs. Amid the Ramaphosa administration's push to overhaul the public sector, Eskom, the national electricity company, presents the biggest risk to the South African economy, given fears of sagging power generation. It was announced this week that the government might consider splitting Eskom into three state-owned entities. At the same time, the Congress of South African Trade Unions — South Africa's giant trade union federation — called a nationwide strike on Feb. 13. South Africa's struggles will weigh heavily on the country's economy in the years ahead, and in the short term are likely to further alienate union members ahead of 2019 general elections.
On Our Minds
Europe's Balancing Act. Southern European governments are about to face a dilemma. On one hand, some of the largest economies in the eurozone, like Italy, are starting to show signs of a slowdown. On the other, people are taking to the streets to demand higher wages and to abolish some controversial austerity measures from the height of the financial crisis. Trade unions and some of the "yellow vests" will take to the streets in Paris on Feb. 5 to demand a higher minimum wage, while Spanish unions will protest in Madrid on Feb. 8 to demand the elimination of some of the most controversial elements of the 2013 labor reform. Southern European leaders will struggle to find a balance between populations that want higher living standards and slowing domestic economies.
Forty Years Gone: Iran's Islamic Revolution. Iran is celebrating the 40th anniversary of Ayatollah Ruholla Khomeini's return from exile. This week, Iran received good news as France, Germany and the United Kingdom officially set up their special purpose vehicle to get around U.S. sanctions and facilitate trade with Iran. This is part of a multipronged strategy where the European Union offers Iran carrots to stay in the nuclear deal while upping pressure against Iran's ballistic missile program. However, Iran's week of anniversary celebrations always includes showcasing its domestically developed missile technology – the country displayed a new cruise missile on Feb. 2 — and Tehran could be planning a ballistic missile or space launch test as a show of strength. Europe's reaction will be important to watch, as the United States leans heavily on the European Union to ratchet up sanctions on all of Iran's activities.
One Step of Many. After nine months of wrangling, Lebanon finally has a government — but it's far from out of the woods. Not only must a deeply divided parliament pass contentious energy sector laws, including laws to establish a sovereign wealth fund to equitably distribute the country's energy windfall and develop on-shore energy, but Hezbollah now has unprecedented influence in the Health Ministry, a potent source of patronage and funds for the group. The ministry is also a potential rationale for the United States to change its current strategy in Lebanon (supporting the government while carefully applying sanctions). There also are growing economic and fiscal problems to address, as Lebanon's debt-to-GDP ratio is the third largest in the world. Lebanon is highly dependent on Western aid to weather these challenges, but aid is tied to reforms unfavorable to the way Hezbollah does business.
In Case You Missed It
On Our Calendar
In the coming week, El Salvador holds a presidential election, Russia hosts Afghan peace talks, and China, North and South Korea, and Vietnam celebrate the Lunar New Year. For more, see our Geopolitical Calendar.
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