2015 Year in Risk Review: Risky Business

2015 was a tough year, but not altogether bad…

Originally published on LinkedIn Pulse January 4, 2016  

By Brian E. Frydenborg (LinkedInFacebookTwitter @bfry1981) January 4th, 2016; alternate version published on Global Risk Insights

AMMAN — The year 2015 very much seemed to be, and will likely be remembered as, a year of transition, and not generally for the better, filled with many surprises. Below is a list of topics related to risk that defined the year, with five negative trends and one surprisingly positive one. The list is hardly comprehensive, but it would also be hard to not include any of them in any discussion of the major developments of 2015, even if one argue that others also deserve inclusion/recognition.

1.) The staying power of the Islamic State

YouTube

Perhaps even more shocking that the initial rise and onslaught of the group now known as ISIS (The Islamic State of Iraq and Syria/al-Sham) is their staying power: under not insignificant military pressure from the U.S., Iraq, Syria, several European/NATO states, various rebels groups and nominally Russia (which is targeting mainly non-ISIS groups) and some (minor) action from Arab nations, ISIS has not only survived but thrived. This is the case even as it has lost some of its gains from its peak territorial power (Iraq only just recently—apparently—managed to retake the city of Ramadi from ISIS, which has held it for most of the year, and is not even close to regaining sovereignty in much of Western Iraq, let alone the situation in Syria), so even as ISIS has suffered some setbacks in Iraq and Syria, it has seen its power increase in Libya, Egypt’s Sinai, and elsewhere, and has also demonstrated its global reach as far away as Paris, France, and San Bernardino, California, in the United States. Though the favored political rhetoric involves talk of “eradicating” and “destroying” ISIS, such talk is not only wildly premature, it borders on the farcically ridiculous. The unfortunate truth is that ISIS is here to for the foreseeable future, in one form or another. With the death of Osama bin Laden and his al-Qaeda receding somewhat into the background, the West might have thought that terrorism was not much of a global problem, but a regional one successfully contained in places far away; instead, ISIS has made clear that that terrorism is not fading away, and perhaps its greatest success is to direct the attention of large portions of the population of countries like France and the United States to consider ISIS/terrorism a—or the—major issue they face, whereas before few French or Americans would have prioritized such so highly.

2.) China’s economy comes back down to earth

Agence France-Presse

After decades of remarkably consistent and robust economic growth, the Chinese economic juggernaut has plummeted down from the celestial heavens and had taken on a far more earthly, vulnerable quality. Hitting the lowest officially announced levels since the world economic/financial crisis was in full gear early in 2009, China said its GDP growth rate slowed to 6.9% in 2015’s third quarter, but there is plenty of suspicion surrounding that figure, as some experts and indicators point towards what could actually be a (significantly?) lower number. Furthermore, the overall trend this year thus far has been a significantly downward one compared to 2014 and earlier years. All this affects all manner of global economic indicators, as China’s massive economic engine consumes and outputs many things; global oil prices are but one of the casualties of China’s slowing economy. The Chinese Communist Party (CCP) has been able to fairly easily deal with both labor and political unrest while its economy was doing better, but one thing to watch in 2016 will be how the CCP handles what will surely be growing unrest as the economy in China is expected to continue to slow down. Another thing to watch will be how China’s crisis will further affect the global economy. Finally, how this crisis affects China’s effort to shift from an economy driven on manufacturing exports to a domestic consumer-based economy will also be telling. All-in-all, China and its leadership is looking at a challenging 2016.

3.) The resurgence of refugees

There is something deeply disturbing about the fact that seventy years after the end of WWII, the world is seeing the largest global displacement of human beings from their homes since the end of that conflict which was in absolute terms the most destructive the world has ever seen. At the end of 2014, the number of refugees and internally displaced persons (IDPs: those who fled their homes but did not leave their countries) was nearly sixty million, and that number has only increased this year, so that roughly one out of every 122 people in the world has been forced to flee home. That the international community has been unable—no, to be honest, unwilling—to 1.) stem the tide of increasing refugees and/or 2.) settle existing refugees with any zeal or energy proportionate to the crisis is a testament to the failure of said community to live up to the hopes and dreams that characterized the founding of the United Nations just a few months after the end of WWII. This failure has produced pathetically tragic results. From Jordan to Italy, waves of displaced bring considerable risk and possibility of destabilization. Specifically, the wave of migrants into Europe (particularly from Syria) has been a major catalyst for a number of developments there, which launches into the next main theme of 2015…

4.) EU in crisis mode and lurching to the right

Reuters

Though hardly unforeseeable, the refugee flow into Europe has touched off a series of crises that has meant steep challenges to the European Union as a political entity, though, as usual, predictions of the EU’s demise are wildly premature. Apart from the crisis of dealing with some 1,000,000 refugees entering Europe (with the EU only formally settling a startlingly mere 190 of them so far) the refugee influx has invigorated Europe’s far right and helped it to rise to newfound positions of power. In Germany, the EU’s most powerful state, Chancellor Angela Merkel is “under fire” for her liberal refugee policy there and a right-wing party is polling ahead of all others in Sweden, which threatens Sweden’s position as a bastion of liberal immigration policy. The earlier economic crises have laid open rifts within the European polity that were only made wider in 2015, and while some may take a degree of inspiration in the rise of new populist parties in Spain, the political chaos this has fostered must also be acknowledged. Voters there and in Portugal and Greece seemed to reject the collective EU solutions for their economic crises (even after a third massive bailout for Greece!), casting doubt on the ability of the EU to move forward collectively economically. Another election has empowered the far right in Poland, and right-wing parties are performing extremely well in places like Austria and even Denmark. And in the wake of the ISIS attacks in Paris, only a unifying of socialists and conservatives headed off a major victory by France’s main far-right party. Not only in these places, but throughout Europe, the sharp rise of the right is undeniable. Even some leftist European leaders are now flirting with and mimicking, to a degree, those on the far-right. To coin The Economist’s phrase, this is “[t]he march of Europe’s little Trumps,” which brings the reader to the next main development…

5.) Political chaos in the United States

AP Images

In case Americans are not aware of this fact, let it be clear: the rest of the world, from Europe to the Middle East, is paying attention to the American two-party political race just enough to shocked and dismayed at the one-man-phenomenon known as Donald Trump, who has been the Republican front-runner since July and will still be the front-runner going into 2016, something very few political-powers-that-be predicted. Many a punditclaimed that his campaign would implode almost as soon as he entered the race, but yours truly wrote only a few weeks after he had taken the lead that it would be foolish to dismiss Trump too easily or too quickly. The world’s most powerful nation with the most powerful military (one which it has shown it is not afraid to use aggressively) is showing a degree of political chaos and unpredictability not seen in generations. While smart money would be on Hillary Clinton beating Trump or any of the more extremist Republican political candidates who have been doing well in polling of late, one thing is for certain: the world is watching with a degree of fear and horror at what is coming out of the American presidential race, at least on the Republican side, and the political unraveling of the Republican Party in 2015 may yet move global mountains in the not too distant future, for better or for worse.

BONUS: Iran!

While it is too early to make any surefire long-term claims about Iran and its regional proxies, 2015 at the very least will be remembered as a year when Iran made it clear that it would not be sidelined, will be there to defend Shiite leaders and people, and is eager to play a larger role in the greater-Middle East. 2015 saw the U.S. reach out to both Iran and Cuba in ways unprecedented for decades; a big-loser here was non-engagement. Another big loser in the long-run is Sunni extremism: from Yemen and Lebanon to Iraq and Syria, Iran is a force supporting Shiite interests that Sunni leaders are now undoubtedly going to have to reckon with; unlike in many instances before when Sunni leaders avoided politics in the hope that U.S. support or military action would help them crush enemies they should otherwise accommodate or co-opt, America reaching out to Iran and helping to forge a major international nuclear agreement with global powers is a signal that the Sunni world better start getting on the same page; a regional cold war fought with proxy-militias and terrorist groups is fraught with peril for all sides and could turn the whole region into Syria if tensions are not reduced and conflict not mitigated.

For those who are naysayers, it should be pointed out that there is, simply, no better realistic alternative than this agreement and that Iran-sponsored militant Shiite Islam and its accompanying terrorist, militia, and rebel groups have for years not come anywhere close to the (scale of) brutality ofSunni Islamist extremist groups like ISIS, its al-Qaeda in Iraq precursor, Boko Haram, the Taliban, etc. Hezbollah and the Houthis are not taking sex slaves by the thousands, chopping people’s heads off regularly for internet mass consumption, destroying the world’s great antiquities, or executing civilians and prisoners by thousands. In fact, they seem rather quaint compared with the mass brutality of ISIS and its affiliates. And under Iran’s leadership, Hezbollah has turned from firing its rockets at Israel to firing them at ISIS. In fact, the Iranian military and Hezbollah have put much more of their military might into fighting ISIS than any Sunni-led states surrounding Syria or Iraq have. That is a fact that must be acknowledged, not dismissed. Compared to the Saudi-led Sunni status quo in the region, there are indications that the ascendance of Iran and its Shiite proxies would not only not be worse than, but that such an ascendancy might push the region in some positive, less extreme directions. An Iran eclipsing Saudi Arabia in power and influence, then, may not be a bad thing overall. That in itself says much about the dire depths to which the region has sunk, but it is true nonetheless.

If one wants to contest this, ask this question: would anyone prefer to be captured by ISIS instead of Hezbollah?

*****

Such was the year 2015 that the empowerment of Iran can be seen as a relative positive. As to how 2016 turns out, all of the important trends outlined here will have significant bearing on whether or not there is a more positive feel to 2016.

Honorable mentions: the resilience and growth in power of Russia’s Putin and Turkey’s Erdoğan, despite the fact that they are taking their nationsbackwards and down dangerous paths… democracy in Burma and oh, Canada too! Also, Bibi Netanyahu has been slowly entangling his Israelis—and the Palestinians along with them—into the ditch of conflict and no tow truck is on the horizon, plus security problems in Afghanistan. And, finally, as the world became more dependent on the Internet/mobile devices in 2015, cybersecurity was still lacking for both the private sector and government

Vogue

Vogue

AP     

Happy(yier?) New Year!(?)

Related article: Happy—Wait, No—Risky New Year

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