BISHKEK (TCA) — The Times of Central Asia presents to its readers Stratfor’s Global Intelligence, a weekly review of the most important events that happened in the world — from Europe to Middle East to Russia to Central Asia to Afghanistan to China and the Americas.
The Week That Was
Sniping Over EU Banks
This week saw sniping in the media among the usual suspects, although in unexpected roles. German Finance Minister Wolfgang Schaeuble set the ball rolling last Friday by accusing the European Central Bank of imposing policies that led to the rise of the Euroskeptic party Alternative for Germany. What was strange was the response from Bundesbank President Jens Weidmann who is also normally anti-European Central Bank. Weidmann said that politicians (such as Schaeuble) should keep their noses out of central banking matters. French Finance Minister Michel Sapin then also weighed in to promote the sanctity of central bank independence — ironic given the past records of both the French and German banks.
Looking beyond the war of words, there are real grievances in Germany at the European Central Bank’s ultra-loose monetary policies that Schaeuble was playing into with his criticism. We can expect Alternative for Germany to expand its message beyond the migrant crisis to latch onto growing German discomfort with the European Central Bank’s policies, which will heighten the pressure on Berlin to assert its interests at the eurozone level. We will see in the coming months more such rhetoric, which could result in increased German resistance the next time European Central Bank leadership wants to move interest rates deeper into negative territory.
Fresh North Korean Launches
On Friday, North Korea launched a mobile intermediate-range ballistic missile, although the missile did not complete a successful flight. The projectile was likely a Musudan missile with a range of up to 4,000 kilometers (around 2,500 miles), making it capable of reaching Japan and Guam. Despite the failed launch, the test follows a string of recent alleged achievements by North Korea as part of its nuclear weapons and missile programs.
The actions reinforce the need for South Korea, the United States and Japan to bolster their individual and integrated anti-missile defenses. They may also prompt South Korea to push for the deployment of terminal high altitude area defense (THAAD) systems and calls for an indigenous nuclear weapons program. The political losses by South Korea’s Saenuri Party in this week’s elections dropped it into second place will not jeopardize THAAD but may make a rapprochement with Japan more difficult.
New Protests, Same Cold War Tactics
A creative protest tactic has emerged in Russia ahead of the September legislative elections. Over the past five months, large, professionally made posters with witty critiques of the Kremlin have been popping up in Moscow. The latest one, showing a piece of cheese shaped like Crimea in a rat trap, appeared on Moscow’s Pokrovka street this week. Even though the posters have been quickly taken down they have spread rapidly on social media. The quality of the posters and the professionalism of the messaging makes us wonder whether the activists putting them up benefitting from foreign funding and how that suspicion would affect negotiations between Russia and the West.
The Russian Su-24 fighter jets that buzzed the USS Donald Cook in the Baltic Sea this week were a reminder of the Cold War tactics in play as the standoff between Washington and Moscow continues. Meanwhile, Russia’s leverage in the Syrian conflict is weakening as the cease-fire unravels and as Iranian and Syrian regime forces are trying to retake Aleppo. If Russia cannot demonstrate its ability to manage the level of violence in Syria, its clout with Washington will wane, as will its negotiating position over Ukraine. And though Ukraine did get a new government this week under Prime Minister Volodymyr Groysman (a loyal ally of embattled Ukrainian President Petro Poroshenko) the government is still extremely weak and prone to another collapse this year. This will make progress on the Minsk negotiation very difficult. The most Russia can hope for at this point is for Washington to continue to restrain its military support for Ukraine to keep the dialogue open with Moscow.
Riyadh Reins in the Religious Police
A more subtle but significant development out of Saudi Arabia caught our eye this week. The Saudi Cabinet is trying to rein in the Mutawaa, or religious police. The religious officers are no longer allowed to detain people and must report violators to police or drug squad officers. They were also told to act “kindly and gently” in enforcing Islamic rules.
The Saudi government has a delicate relationship with the religious establishment and has given the religious police a broad mandate in the past to enforce Islamic law. This has been a grievance of many Saudi citizens who want more social freedom. The government’s moves to restrict the powers of the Mutawaa reveals that the Saudi royals are growing more concerned about the potential for social unrest and are doing what they can to try to mitigate that risk while also trying to undergo painful economic adjustments. At the same time, the religious establishment is critical to the Saudi government’s ability to keep jihadism contained in the kingdom. It will be important to watch whether Riyadh can effectively manage this delicate balance.
Argentina Clears the Final Hurdle
And Argentina’s comeback continues. An April 13 ruling by a United States appeals court gave the Argentine government the go-ahead to repay bondholders and begin issuing new debt abroad. The court ruling marked the last legal obstacle Argentina had to overcome to return to international capital markets. Now, Argentina is preparing a $15 billion debt sale to pay holdout bondholders as part of the agreement that allows Argentina to overcome its debt troubles and once again begin borrowing abroad.
Full Articles
A Chance for Change in Brazil’s Scandal
For the past two years, Brazil has been mired in the costliest corruption scandal ever uncovered in a democracy. Evidence surfaced in 2014 that contractors in Brazil had formed an alliance to overbid on projects for government-owned energy company Petroleo Brasileiro (Petrobras). Contractors pocketed the extra cash and bribed politicians and Petrobras executives to keep quiet. The scandal was so blatant and implicated such prominent political figures that it shocked Brazil, a country accustomed to high-level corruption. And now the odds that Brazil’s president, Dilma Rousseff, will survive the fallout are looking slimmer and slimmer.
The Political Ebb and Flow of the Mekong River
The Mekong River of mainland Southeast Asia provides water in six different countries for agriculture, trade and millions of people. But the Mekong region is in a severe drought, in part because of El Nino weather patterns. As stress on diminishing water resources increases, it will be difficult for Southeast Asia, already geographically and ethnically fractured, to foster cooperation. Yet the drought also carries opportunity for the overarching competitions in the region. Beijing is moving overland, expanding its economic trade routes and supply lines. The Mekong River is one aspect of this broader strategy. And amid a drought, China could use its influence over the control and release of water to gain concessions in other regional battles.
Factoring U.S. Strategy Into China’s Future
Stratfor has recently observed that, with China’s economic rise, it now has an imperative to secure key trade routes and to protect its overseas resources and markets from foreign interdiction. This adds to the three imperatives that have historically defined the country’s geopolitics: the maintenance of a united Han China, control of the country’s buffer regions and the protection of China’s coastline. Although this emerging priority does not dictate China’s attitude toward its neighbors or the United States, it nonetheless introduces an underlying compulsion that in the years to come will reshape the costs and benefits of different courses of action, thus changing China’s decision-making process.
In Iran, Economic Reforms Hit a Hard Line
With the nuclear deal between Iran and the West firmly in place, a struggle for economic power and influence in Iran is intensifying between the country’s political factions. The debate is over how much Iran should open its economy to the West and how the resulting gains should be distributed. Iranian President Hassan Rouhani hopes to move forward with his ambitious economic reform goals, largely based upon economic re-engagement with the world, including the West. But a dramatic shift in Iran’s economy could undermine the economic strength and domestic power of the hard-line conservatives that benefited while Iran was under strict sanctions. And much like previous attempts to liberalize the Iranian economy, these opponents will slow Rouhani’s plans to protect their own economic interests.
In Iraqi Kurdistan, Momentum Builds for an Iranian Pipeline
For years, Iraqi Kurdistan and Iran have been in talks to construct a pipeline that would transport Kurdish oil to the Iranian market. Until now, the negotiations have lagged as the Kurdistan Regional Government (KRG) instead focused on developing an oil export route through Turkey. But new momentum may be building in favor of the Iranian option, particularly as Kurdish coffers run low and Tehran maneuvers to minimize Ankara’s influence. If finalized, the new pipeline would bring the KRG one step closer to the financial independence it seeks.
Building Bridges Between Egypt and Saudi Arabia
During Saudi King Salman’s first official visit to Cairo recently, he and Egyptian President Abdel Fattah al-Sisi announced their intent to revive the often-discussed plans to build a bridge that would create a direct link between their countries. While the bridge plans are somewhat nebulous, the two leaders also signed off on a more concrete accord, an agreement that redraws the maritime boundary between the two nations to return control over two strategic islands situated at the entrance to the Gulf of Aqaba, Tiran and Sanafir, to Saudi Arabia. If the bridge is ever built, it could prove a mixed blessing for both states; the island transfer, on the other hand, has created political outrage in Egypt.
Turkey’s Militants Get More Organized
Turkey’s biggest Kurdish militant group is looking to expand, and it might turn to Russia for help. The Kurdistan Workers’ Party, better known by its Kurdish acronym, PKK, has established an umbrella organization for the country’s leftist militancies in an effort to broaden its own capabilities and extend its support base beyond the pro-Kurd community. Because Russia has a long history of using Turkey’s militant groups — especially the PKK — to promote its own interests in the region, there is little doubt that Moscow will seize the opportunity to ratchet up the pressure against Ankara.
The Week Ahead
Nothing Big in Doha
We will not be holding our breath for any big shifts out of the Doha meeting among major oil producing nations. Iran is determined to continue increasing production to surpass pre-sanctions levels and will not take part in a freeze. Even if an agreement is reached to freeze production, it would be at January 2016 levels, which saw record output from Saudi Arabia, Russia and Iraq. OPEC production as a whole has in fact been rising over the past three months. The fact remains that the global oil supply and demand imbalance is estimated at 2-3 million barrels per day. Expect a sharp sell off in oil if no credible agreement is made. Only an agreement to cut production, led by Saudi Arabia, will provide material support to oil prices, and that is not happening any time soon.
NATO-Russia Meeting
NATO and Russia will hold its first NATO-Russia Council meeting April 20. This is the first such meeting between the two since June 2014, when NATO suspended participation over the annexation of Crimea. Ukraine will top the agenda for the meeting, although NATO said other issues may be discussed. The meeting is just at a representative level but the resumption of talks could soon lead to higher-level discussions. The two sides are resuming talks just months before the NATO Summit, in which many eastern European states are pushing for a firmer NATO presence to counter Russia. The meeting comes as Washington and Moscow seem to have had more productive (or at least less hostile) talks in recent weeks. Now that Ukraine has formed a government, pressure may grow on Kiev to start implementing its side of the Minsk Accords, but a number of big roadblocks remain.
Israel and Russia Discuss Iran
Israeli Prime Minister Benjamin Netanyahu will travel to Moscow on Thursday to meet with Russian President Vladimir Putin. Israel is greatly unnerved by Russian military cooperation with Iran and Hezbollah in Syria, but understands the importance of maintaining a close dialogue with Moscow to try and find common ground on the limits to Russia’s involvement in the Middle East. These are the types of meetings that should make Iran, Syria and Hezbollah quite nervous, as Russia can assuage Israeli concerns by sharing intelligence on sensitive matters, such as details on weapons transfers, locations and potential targets. Israel will also hold out the potential for boosting military cooperation with countries sensitive to Russia’s interests, like Ukraine, as it bargains with Moscow.
Obama in the Gulf
The United States will have another chance to try and reassure its Gulf allies when President Barack Obama and Defense Secretary Ashton Carter are in Riyadh from April 20 to April 21 to meet counterparts in the Gulf Cooperation Council. Obama will first meet directly with Saudi King Salman before meeting with other Gulf heads of state the following day. Solutions for better military and counterterrorism cooperation in Syria and Yemen will top the agenda. As Iran-backed forces in Syria attempt another offensive on Aleppo, Saudi Arabia will apply pressure on the United States to provide more sensitive weapons, such as man-portable air defense systems, to the rebels. The U.S. has also long encouraged the Gulf states to bolster their joint ballistic missile defense, and announcements regarding streamlining the sale of implements for terminal high altitude area defence (THAAD) systems or additional defense equipment are to be expected out of this meeting.
