Stratfor’s Global Intelligence: Week of Jan. 18, 2016

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

When the Islamic Revolutionary Guard Corps Navy detained 10 U.S. sailors this week, the footage that emerged from the incident understandably grated on America’s nerves and raised the question in many minds of whether Iran can be trusted to abide by the nuclear agreement. At the same time, this was a valuable test of U.S.-Iranian diplomacy. The U.S. and Iranian foreign ministers worked quickly and effectively together to resolve the incident, underscoring just how far Washington and Tehran have come in normalizing their relationship through the nuclear negotiations. It also provided a useful prism into Iran’s political climate. Ahead of Feb. 26 elections for the Iranian parliament and the Assembly of Experts (the body that will select a new supreme leader), the moderate conservative camp led by Iranian President Hassan Rouhani is facing off against a powerful group of hardliner politicians heavily influenced by the Islamic Revolutionary Guard Corps. While the moderates used the detention of the U.S. sailors to congratulate themselves on guiding Iran toward a more pragmatic foreign policy against the will of the belligerents, the Islamic Revolutionary Guard Corps used the incident to flex its muscles and promote itself as the true defender of the Islamic Republic.

As the race tightens in Iran, Rouhani will be getting another well-timed political boost with the International Atomic Energy Agency’s Jan. 16 report confirming the implementation of the nuclear deal. This was followed by the Western repeal of sanctions. This will provide much-needed relief to Iran while immediately adding another 500,000 barrels per day to the global oil glut and an additional 500,000 barrels per day likely within six months. As the price of oil drags downward, we can expect to see calls from anxious OPEC members like Venezuela for an emergency meeting to coordinate a cut in output. We still believe that a coordinated Saudi-led cut in oil output is unlikely for now as Riyadh and other large Gulf producers have proven willing to make spending cuts and draw down reserves to weather this oil price slump. Tellingly, Emirati Energy Minister Suhail Mohammed Faraj al-Mazroui said this week that the strategy of avoiding a cut in output was working and that this plan still needed another 12 to 18 months to run its course. With the Gulf powers sitting tight, Iran returning to the market and U.S. production flat, the oil market is not going to see relief any time soon.

There has been a quiet but critical uptick in U.S.-Russian contact over these past few days. U.S. President Barack Obama called Russian President Vladimir Putin on Jan. 13. U.S. Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland also held a lengthy meeting with Putin aide Vladislav Surkov in Kaliningrad Jan. 15 and U.S. Secretary of State John Kerry will meet with Russian Foreign Minister Sergei Lavrov in Zurich on Jan. 20. The two key issues on the agenda between Russia and the United States center on Ukraine and Syria. On Ukraine, the stalemate continues and Kiev is too politically tied to make any big moves that would compel significant Russian concessions. Syria, by contrast, is much more dynamic. We can already see a multi-pronged U.S.-led offensive against the Islamic State developing in both Syria and Iraq. For this campaign to be successful, the United States needs Turkey and it needs Russia to stay out of the way. And following the suicide bombing in Istanbul earlier this week, Turkey is very anxious to move ahead with its military plans for northern Syria. It will be up to the United States to try and work out an understanding between Ankara and Moscow to reduce complications on the battlefield. What remains fuzzy for is what the United States can realistically offer Russia at this stage to compel its cooperation in Syria.

Full Articles

The West Lifts Sanctions Against Iran: Now What?

The International Atomic Energy Agency released a report Jan. 16 confirming that Iran has honored its commitments to the nuclear deal it reached with international powers in July. With the announcement comes the prospect of Iran’s return to the international community and, more important for its government, the end of most EU sanctions and several important U.S. sanctions.

In Libya, Political Unity Starts With Oil

The two rival bureaus of Libya’s National Oil Corp., based in Tripoli and Bayda respectively, are squaring off in a dispute that threatens to derail the country’s new unity government before it even takes power. The threat of the Islamic State certainly provides an impetus for both sides of the National Oil Corp. to unite; it is what drove the creation of the U.N.-brokered unity government in the first place. Still, the underlying fractures that have kept Libyan exports intermittent since the fall of Moammar Gadhafi will remain unresolved, and disputes will persist.

France’s State of Fear and Swing to the Right

Two months after the Paris terrorist attacks, French President Francois Hollande is seeking to expand the emergency powers he invoked in November 2015. France’s state of emergency gave the government the authority to search houses without a warrant and restrict the right to peaceful assembly, all without judicial oversight. Hollande is now looking to change the French Constitution to extend the scope of these emergency powers, but his proposed changes also contain a more controversial alteration.

China Takes Bold Steps Toward Military Reform

At the very end of 2015, Beijing introduced the ambitious first wave of Chinese President Xi Jinping’s comprehensive plan for military reform. The changes — which include a more powerful strategic weaponry command, a new ground force headquarters, and an organization called the Strategic Support Force — are the culmination of a decadelong effort to improve the People’s Liberation Army (PLA). The focus is on military capability and overcoming a deep-rooted political intransigence that has stymied the development of China’s armed forces.

Poland: The Vanguard of Central and Eastern Europe

The European Union is fragmenting, and Russia is becoming more active in its former Soviet sphere of influence. In such upheaval, it is no surprise that a string of countries running from the Baltic Sea down the Carpathians to the Black Sea is slowly developing a common interest in countering Moscow while chafing under Western European interference. This is especially true of Poland, which sees itself as the natural leader of Central and Eastern Europe. But uniting these countries, whose agendas often conflict with one another and with Poland’s, will not be easy.

The Caucasus: A Formidable Barrier to Russian Expansion

Over the past two years, Russia has been busy expanding its road and rail networks southward, through the North Caucasus and down both sides of the Caspian Sea toward Iran. Moscow has many good reasons for its drive south: Iran’s economy is poised to become more influential in the region as international sanctions are lifted, Russian troops in Syria need a reliable land route for supplies, and the Kremlin must confront the growing economic and military cooperation between Turkey, Georgia and Azerbaijan. But pushing all the way to the Iran border is easier said than done, and, in the end, the Caucasus’ obstacles will make it difficult for Moscow to achieve its goal.

Russia’s Response to HIV: Too Little, Too Late?

The Kremlin’s reluctance to address Russia’s HIV epidemic has led to an explosion in the number of new cases. Cultural, political and economic factors have contributed to the spread of the disease in Russia, and although Moscow has said it will spend more money on treatment and prevention, there are few steps the Kremlin will be willing to take to slow the spread of the virus. Even if Russia were to drastically increase funding and education, the epidemic has grown so much that it would still affect Russia’s workforce significantly.

India, Pakistan: This Time, Relations May Withstand Militant Attacks

A pair of attacks threatens to damage ties that India and Pakistan only recently repaired. On Jan. 2, armed militants donning Indian military uniforms stormed an air force base in the Indian city of Pathankot, near the country’s border with Pakistan. A second wave of militants then infiltrated the base, ostensibly to distract authorities as the first group targeted high-value assets, including helicopters, missiles and the base’s ammunition depot. Fourteen people died in the assaults, including all six militants. Then on Jan. 4, about 922 kilometers (573 miles) away, three militants assaulted the Indian Consulate in the northern Afghan city of Mazar-e-Sharif. A 25-hour gunfight ensued, during which all of the assailants were killed. These seemingly unrelated events appear to be connected by Afzal Guru, a deceased Pakistani militant whose name was mentioned in Pathankot, according to a hostage, and whose name was written in blood on a wall in Mazar-e-Sharif.

The Week Ahead

Following her travels to Lithuania, Romania and Bulgaria, U.S. Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland will join U.S. Vice President Joe Biden in Turkey on Jan. 22. Note that these are all countries that are critical to U.S. strategy to counterbalance Russia. Nuland will be discussing a number of energy projects, including interconnector pipelines, liquefied natural gas facilities and nuclear power plants, to facilitate European diversification away from Russia. We will be watching closely to see what message Nuland and Biden bring to the Turks next week following the Lavrov-Kerry dialogue. If the United States can draw Ankara and Moscow to a tactical understanding, that would clear a major obstacle in the fight against Islamic State. This will be the test to see if anything tangible emerges out of this negotiation round between the United States and Russia.

This will be particularly busy week for the Middle East. Qatari Sheikh Tamim bin Hamad al-Thani is in Moscow for talks with Russian President Vladimir Putin. Russia and Qatar are energy competitors and Russia was not happy to see Qatar take advantage of sour Russian-Turkish relations to increase its natural gas sales to Turkey. Still, there is plenty for these two to discuss. First, Russia needs Qatar’s help to bring rebel groups that it sponsors to the negotiating table in Vienna on Jan. 25. Second, the Russian economy is struggling and Moscow is looking for non-Western partners to help its privatization push. Qatar seems to be a natural fit. The year after the head of Qatar’s sovereign wealth fund became an international advisory board member on the Russian Direct Investment Fund in 2013, Qatar invested $2 billion in Russian projects.

Expect more Sunni ire against Iran when the Organization of Islamic Cooperation holds an emergency foreign ministers meeting Jan. 21 in Jeddah to discuss the repercussions of the embassy and consulate attacks in Iran. Convened by Saudi Foreign Minister Adel Al-Jubeir, this meeting follows on the heels of an emergency Gulf Cooperation Council meeting in Riyadh, and an emergency Arab League meeting in Cairo to discuss the same issue. We are hearing rumors that Saudi Arabia may try to garner support to expel Shiite workers from the Gulf states as a punitive measure, but that is a move that will not win the support of Lebanon, which is deeply divided and relies on remittances. Though Saudi Arabia’s allies across the region have promised to protect the kingdom’s territorial integrity, and Egypt, Morocco, Jordan, Kuwait, Qatar, and the UAE have joined the coalition forces in Yemen, Saudi Arabia desperately wants further tangible promises of troops and military support. So far important allies such as Pakistan have been loathe to give such support. Turkey is also hoping to get Arab coalition support for any moves it makes in Syria. The Saudis have been working hard to buy the support of the Egyptians through significant financial aid, but Cairo still seems to be dragging its feet. We will be watching for any shift in that dynamic.

Chinese President Xi Jinping will be making his first trip to the Middle East this week, visiting Saudi Arabia, Egypt and Iran. China will try to promote itself as a regional mediator, but Beijing holds little sway in the region’s proxy wars. China’s chief role in this region is economic. With sanctions lifted, Xi will be advancing discussions on China’s energy investments in Iran and its plans to link Iran by rail into its Belt and Road project. The Xi delegation will also be feeling out Saudi Arabia to see how serious Riyadh is about it privatization efforts while looking for more opportunities to expand its export market and employ Chinese workers through big infrastructure projects overseas.

It will also be a tense start to the week in Europe when Polish President Andrzej Duda will make his first official visit to Brussels, just one day before the European Parliament will debate Poland’s controversial policy shifts under the newly elected conservative Law and Justice party. Warsaw’s standoff with Brussels and Brussels’ inability to shape Poland’s behavior fits into our forecast of a bigger split between east and west as Poland reasserts itself in the region. Poland, like Hungary, does not see much consequence to alienating its western European neighbors. When it comes to the United States, however, both Warsaw and Washington are making a conscious effort to maintain their strategic relationship and not let politics come in between their common efforts to push back on Russia.