The Weekly Rundown: Italy's Government Crisis, India's Gamble in Kashmir and the Aftermath of Mass Shootings

10 MINS READAug 10, 2019 | 18:31 GMT
Matteo Salvini, Italy's Interior minister and deputy prime minister, greets supporters in Policoro, Italy, on Aug. 10, 2019.

Matteo Salvini, Italy's Interior minister and deputy prime minister, greets supporters in Policoro, Italy, on Aug. 10. Italy's government is hanging by a thread after Salvini's League party walked away from its governing coalition partner and called for an early election.


Read this week's review of the world's most pressing geopolitical events and insight into what the coming week will bring....

On the Record

Those who waste time only want to save their own seat. For some, their own seat first, but for us, Italy comes first. ... No screw ups, No technocratic governments, No palace games. The Italy of yes does not wait. Let the people speak!

Matteo Salvini, League party leader and Italian deputy prime minister, on Twitter

On Our Radar

Whatever Happened to a Quiet August in Europe? Italy's government is hanging by a thread after the right-wing League party asked for a general election, effectively ditching a coalition with the anti-establishment Five Star Movement party. The League wants an early election while it's still polling at 40 percent, but the decision to dissolve Parliament and call a snap election is in the hands of President Sergio Mattarella. If talks to form a new coalition fail, Mattarella will call for a vote, which would come in October at the earliest. This is right around the time that Brussels and Rome will be bickering again over Italy's budget, sending more jitters through financial markets.

Meanwhile, we're trying our best to get into the head of British Prime Minister Boris Johnson to see if he seriously intends to schedule an election right after the Oct. 31 deadline to force a hard Brexit. It's hard to see how Johnson successfully dodges the economic and political backlash of such a constitutionally dubious move in an election, but the Labour Party may not be willing to test whether he's bluffing. We're watching for any serious signs of a national unity government getting cobbled together to pass a confidence motion against Johnson in September so that a general election takes place before Oct. 31.

Modi Remakes Kashmir. In a historic decision upending seven decades of policy, Indian Prime Minister Narendra Modi's government stripped Jammu and Kashmir of its autonomous status and split the restive Himalayan state into two territories. It's probably not a coincidence that New Delhi made the move when Pakistan is in a deep economic crisis and when the International Monetary Fund will be monitoring closely any big budget diversions to boost military spending. India is also likely betting that the United States will be too distracted to make a serious attempt at mediating the conflict. Pakistan's move to halt trade with India will have a negligible effect, but there have been rumors suggesting Islamabad could delay an impending peace deal in Afghanistan unless Washington intervenes. It will be especially important to watch for developments on the security front. This includes heightened cross-border fire across the Line of Control, as well as insurgent attacks that could provoke India to inflict punitive measures against Pakistan, forcing a retaliation and bringing the nuclear archrivals closer to a wider conflict over their competing claims over Kashmir.

A Glimmer of U.S.-Chinese Security Cooperation? Even as U.S.-China trade tensions are on the rise again, Beijing made a highly conditional but notable statement suggesting that it could cooperate with the United States in securing the Persian Gulf. The Chinese ambassador to the United Arab Emirates said Beijing is considering deploying naval escorts for its commercial ships in the Persian Gulf and is studying the U.S. proposal for Operational Sentinel (even U.S. allies in Europe and Japan have been reluctant to sign on to the U.S.-led maritime security plan for fear of getting dragged into a messy conflict with Iran). Given China's heavy reliance on Mideast energy flows, Beijing has its own interest in expanding its security presence in the Persian Gulf. But if China actually joins the U.S.-led plan instead of going its own way, it could create a window for both sides to ease tensions when their great power competition is escalating in practically every domain.

Saudi Arabia's Oil Dilemma. Oil markets had another rough week on fears of a global recession catalyzed by the U.S.-China trade war, with the price of Brent crude oil bottoming out at below $57 per barrel. All eyes are now on Saudi Arabia, for whom there are no good options. Organizing another round of production cuts to keep inventories from rising in 2020 will be difficult: The 2017 oil production cuts are still in effect. And many OPEC producers will argue that production cuts will only subsidize U.S. shale producers since most tight oil production in the United States is still economical at $50 a barrel. Saudi Arabia could do a deeper, unilateral cut, but the kingdom was already planning to cut production by about 600,000 barrels per day more than its original commitment. We're watching closely for any signs of Russian willingness to coordinate with Riyadh. Meanwhile, Saudi Arabian Crown Prince Mohammed bin Salman is still trying to move ahead with plans for a Saudi Arabian Oil Co. initial public offering. But a sustained drop in oil prices is only going to create more internal pushback to his seemingly unrealistic goal of getting a $2 trillion valuation.

Where Do Venezuelan Sanctions Go From Here? The United States has banned U.S. entities from dealing with the Venezuelan government and its state-owned firms like the national oil company Petroleos de Venezuela. The United States also opened the door to secondary sanctions on foreign companies working with Venezuelan entities on the Treasury Department's sanctions lists. The question is, will the United States enforce the secondary sanctions and will it be enough to deter Chinese and Russian companies from deepening investment in Venezuela's oil sector? There's still room for the United States to tighten secondary sanctions by banning all investment into Venezuela's energy sector and by placing financial sanctions on the country's oil exports, similar to what it has on Iran. Another sanctions escalation is likely to come around Oct. 25 when a waiver could expire for Chevron and other U.S. partners to continue operating in Venezuela.

Renewing Indonesian Resource Nationalism? Indonesian President Joko "Jokowi" Widodo may reimpose a full ban on the export of unprocessed nickel ore ahead of the current 2022 deadline. Indonesia is the world's largest mined nickel exporter, accounting for 8 percent of the global total. Throughout his presidency, Jokowi has worked to curb Indonesia's reliance on unprocessed mineral and energy exports. This resource nationalist push aims to move Indonesia up the value chain by compelling the buildout of smelting and refining capacity. In 2014, Jokowi banned nickel and bauxite exports but issued a partial reprieve in 2017 for companies that pledged to build smelting operations. Although the ban had already managed to incentivize investments in processing, the 2017 exemption was partly meant to shore up ailing state-owned mining company PT Aneka Tambang amid bids to take over foreign-operated mining projects. With big takeovers clinched, Indonesia is now again moving to reprioritize domestic processing. There is another driver here: Indonesia is moving to build out electric vehicle manufacturing. Nickel is a key component in electric vehicles and there are industry concerns about supply deficits emerging in the next few years. In Indonesia, Chinese companies are already building battery plants and a buildout by an international consortium including Tesla, Daimler and Volkswagen is also rumored to be in the works.

On Our Minds

The Mass Shooting Reality. The three recent mass shootings in Gilroy, California; El Paso, Texas; and Dayton, Ohio, serve to highlight the reality that while the overall homicide rate in the United States is about half what it was four decades ago, the number of mass public attacks is at least 10 times what it was during the 1980s. Perhaps the most alarming facet of these attacks is that they occur in schools, houses of worship, workplaces and entertainment venues — places most of us have generally considered safe. It's natural to feel scared and even helpless in this climate, but we have also seen a great number of attacks that have been thwarted by people reporting suspicious behavior. In fact, just this week, a grandmother in Lubbock, Texas, averted an attack by warning police of her grandson's plans. "See something, say something" may sound trite to some, but it saves lives.

The Price of Economic Punitiveness. In the past several days alone, we've seen China threaten counter-sanctions against India if it blocks Huawei from its 5G market, ban Hong Kong-based airline Cathay Pacific and impose a tourism ban on Taiwan. Any day now, Beijing may publish its "unreliable entity" list, which could blacklist firms like FedEx and electronics manufacturer Flex. There are plenty of examples of China wielding its economic heft to try to coerce or punish other nations and companies that challenge Beijing's interests, but it doesn't always work out that well for Beijing. For example, when China imposed sanctions on South Korea over Seoul's move to deploy an American anti-ballistic missile defense system, it did nothing to shift Seoul's decision and Beijing eventually had to back off. And even as China is economically squeezing Taiwan with a tourism ban ahead of its January 2020 presidential election, similar pressure tactics in 2015 ended up backfiring and helped bring a pro-independence candidate to power. This raises a question of how Beijing will respond to a recent announcement by U.S. Secretary of Defense Mark Esper that the United States intends to deploy ground-based, intermediate-range missiles in China's backyard. So far, South Korea and Australia are keeping their distance from the U.S. plan and Japan may, too. But Beijing may have to spin up a fresh blend of carrots and sticks to keep things that way. And when it comes to counter-sanctions on Huawei bans, would Beijing actually follow through with that threat against Australia and Japan, both of which have already sided against Huawei?

Huawei Prepares for the Worst. After months of speculation and rumors, Huawei finally unveiled its new operating system, Harmony OS, this week as it tries to develop alternatives to U.S. software and technology. Huawei plans to use Harmony OS on a wide range of devices, but for now it plans to continue using Google's Android for its smartphone business so long as it can. On that front the White House has a key decision date coming up on Aug. 19 on whether to issue licenses to allow U.S. companies to continue exporting equipment and technology to Huawei — but that decision is now in limbo as U.S.-China trade talks have fallen apart once again. The White House does not want to partially reverse its export ban on Huawei until China buys more U.S. agricultural products, but similarly, China does not want to buy more U.S. agricultural goods until the Huawei export ban is relaxed. Nevertheless, for Chinese tech giants like Huawei the writing is on the wall: Do whatever you possibly can do to prepare for a future with limited access to U.S. technology. For Huawei, developing its own Harmony OS is a significant step in that direction but it now needs developer buy-in to create apps and software if it wants it to be a viable competitor to Western counterparts.

In Case You Missed It

Europe and the U.S. Find Themselves in a 'Transatlantic Stretch' Over Policy

Pakistan Struggles to Make Good on a Golden Opportunity in Balochistan

Why the U.S. Will Struggle to Reduce Its Military Commitments Abroad

On Our Calendar

In the coming week, Guatemala holds a presidential runoff election, Argentines vote in presidential primary elections and Sudanese military and civilian representatives are expected to sign a power-sharing agreement. For more, see our Geopolitical Calendar.

Stratfor Talks

Journalist Zahra Hankir is the editor of Our Women on the Ground: Essays by Arab Women Reporting From the Arab World. Middle East and North Africa analyst Emily Hawthorne recently spoke with Hankir about her first-of-its-kind anthology for the Stratfor podcast.

Visit our podcasts page for more conversations on geopolitics and world affairs with Stratfor's analysts, editors and contributors.

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