Happy—Wait, No—Risky New Year 2016

Happy Risky New Year

If people thought 2015 was bad, 2016 shows no sign of letting on up on risk.  The Middle East, China, Europe, Central Africa, even the United States will all raise serious questions about risk in 2016.

Originally published on LinkedIn Pulse January 7, 2016  

By Brian E. Frydenborg (LinkedInFacebookTwitter @bfry1981) January 7th, 2016 (Altered version posted on Global Risk Insights January 26th)

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AMMAN — The year 2016 will pose a number of major risks for the international community, and many of these risks were already major issues in 2015.  Not only typically high-risk areas like the Middle East and Africa are highlighted, but also China, Europe, and America.  Here are five of the largest ones that will be headlining the news throughout the year.

1.) Middle East Morass

Pat Bagley/Salt Lake Tribune

The greater-Middle East will continue to present a number of challenges to the world in 2016.  While the situation with Iran moving towards de-escalation over nuclear tensions and a lifting of sanctions that could happen as early as January is indeed welcome, there is little else occurring in the region that is reassuring.  The general Sunni-Shiite divide will continue to present problems.  Though ISIS has been gradually pushed back throughout the year and lost some territory in Iraq (including, most recently, Ramadi) and Syria, there is no guarantee that ISIS will not be able to retake what it just lost as the dynamics in its spheres of operations are incredibly complicated.  There is reason to fear that Russia’s recent foray into Syria will continue to bolster Assad’s brutal regime and make things worse for non-ISIS rebels as well as Syrian civilians, all while having at best a minimal effect on ISIS itself; Putin has not shown any indication as of yet that he will be changing what Russia’s military forces are doing there. 

Not much will come out of Turkey’s shooting-down of a Russian military jet that will have larger effects beyond either country, except that both Putin and Erdoğan will be able to use this to bolster their support at home.  With Turkey having long been an example of secular democracy of a sort in the Middle East, the world can only disappointingly expect the recently further empowered Erdoğan to continue his country’s march towards increasingly Islamic and authoritarian single-party rule (he just recently cited Hitler’s Germany as an “effective” political system) as well as conflict escalation with Turkey’s own and the region’s Kurds.  Israeli Prime Minister Benjamin Netanyahu also seems set to continue his country’s slower march to eroding liberal democratic values in favor of more theocratic, Jewish-ethnocentric laws, practices, and regulations while simultaneously provoking Palestinians into higher-levels of violence with increased settlement building and occupation coupled with no serious attempt to engage with Palestinians on a two-state solution.  This, in turn, will eventually provoke more serious military responses from Israel, which will only further empower extremists like Hamas or worse at the expense of the apparently crumbling Palestinian Authority and its president, Mahmoud Abbas, in turn only further empowering Israeli extremists.  As if also reading from a similar card, Egypt’s President Abdel Fattah al-Sisi seems set on pursuing a path of oppression against Islamists which will only see further violence and escalation in an already escalating mini-insurgency of sorts.  Former Iraqi Prime Minister Nuri Kamal al-Maliki was cut in the same vein as these leaders, but thankfully the Obama Administration, Iraqi Shiites, and even Iran all worked together to nudge him aside in favor of the far less sectarian Dr. Haider al-Abadi in 2014.  The retaking of Ramadi—without civilian-casualty-intensive tactics—by Iraq is a significant victory for Abadi’s government, but it remains to be seen if this success is one that can be maintained and to what degree if any Abadi’s situation stabilizes enough for the Iraqi government to make any further gains, let alone prevent fresh losses, though as of now the trends are positive, and Ramadi could be a sign that Obama’s strategy for dealing with ISIS is beginning to pay off; only time will tell and the most difficult fights are yet to come either way. 

Jordan and Lebanon have done a surprisingly good job of holding togetherunder the enormous pressures refugees have been exerting on their state systems, but there is no guarantee 2016 will not produce a tipping point or points for either or both of these smaller states.  Meanwhile, Saudi Arabia and its coalition seem capable only of mismanagement in their Yemen war, where they have been careless in inflicting civilian casualties, while Libya, too, remains problematic and is now having to deal with a growing ISIS presence in its territory.  And refugees keep pouring not only into places like Jordan, Lebanon, and Turkey, but also, now, into Europe.  Which brings the reader to the next big risk issue for 2016…

2.) Big tests for Europe’s Union

Sean Gallup/Getty Images

While talk of the European Union’s demise is incredibly premature, 2016 opens with the EU facing several challenging trends, and its response to them could well define it for years, perhaps decades.  The welfare-state system as it now exists has shown itself to be unsustainable and there are more than a few ailing economies that present problems for the whole Union, Greece, of course, being the worst but not the only economic thorn in the EU’s side. 

Just these economic problems alone would be an enormous challenge, but, unfortunately for the EU, it is also facing several other crises.  The influx of refugees into Europe, including many Syrians, comes at the worst possible time.  Before this new wave of refugees, Europe was already seeing a rightward tilt politically speaking; a smattering of terrorist incidents in 2015, which peaked with the spectacular attacks in Paris this November, have only naturally added a large dousing of fuel to the right’s fire of anti-immigrant demagoguery.  Unsurprisingly, the tinder of anti-immigrant sentiment and fears of terrorism have created quite the pyre for rightists to illuminate themselves attractively to European voters, and all over Europe right-wing parties are gaining significant power or are even coming to lead governments.  This is making it exceedingly difficult for the European Union to come up with any sort of a coherent policy on refugee migrants, and when leaders and governments try to accept more refugees, the political cost is a zero-sum one that penalizes them and rewards the right-wing parties with more public support (and this from the continent that has been the banner carrier for liberal values for some time). 

If all this was not enough, voters in key EU economic trouble spots like Greece, Spain, and Portugal seem to be rejecting the EU’s economic prescriptions and a degree of political chaos is ensuing.  If the EU cannot collectively create and enforce policies on major issues like refugees and the economy, and if its efforts to do so are soundly rejected by voters in key EU nations, 2016 will likely raise serious questions about what the EU actually is and what it wants to be in the future.  However, political chaos is hardly limited to the eastern side of the Atlantic Ocean…

3.) America’s semi-chaotic election year

REUTERS/Lucy Nicholson

Between Europe and America, Democratic systems are hardly playing their A-game these days.  The rise of Donald Trump and the more unhinged wing of the Republican Party supporting the likes of him and obstructionist (and demonstrable charlatan) Ted Cruz (a first-time senator largely responsible for the 2013 government shutdown who has caused much political chaos and has no serious legislative accomplishments under his belt), as well as Dr. Ben Carson (a medical doctor with no relevant political experience or expertise), have made this political race the most unpredictable in recent memory.  Many accuse Trump of being racist and bigoted, but a more astute observer would look at similar politicians in Europe and see that he is playing a very smart game, leveraging Americans’ inflated fears about both terrorism and immigration to channel populist angst and ride that wave for all it is worth.  Sadly, this is as American as apple pie; even President Franklin Delano Roosevelt, a champion of liberal values and the architect of victory over both the depression and the Axis powers in WWII, interned well over 100,000 residents and citizens of Japanese descent; Trump even cited this action of FDR’s as a precedent. 

Such outside the system wild-cards like Trump, Cruz, and Carson looking more and more likely to become the Republican Party’s nominee for the president of the world’s oldest and most powerful democracy is hardly a reassuring thing for the rest of the world.  Many Americans seem to have always naturally had a disdain for the political class throughout American history, but this election cycle may see the most dramatic materialization of this trend in American history.  Though likely Democratic nominee Hillary Clinton seems quite likely to defeat such a challenge, nothing is certain in American politics these days, and the unraveling of one of America’s two political parties cannot be shrugged off; even if Clinton were to win, America’s two-party system does not function when both parties are roughly the same size and one is not interested in governing (just ask Barack Obama).  What this means for the global economy and for international relations is one huge question mark of political risk.

4.) Asian economic woes

Reuters/VOA

The slowing of the Chinese economic juggernaut to its lowest officially announced growth since early 2009 was a big surprise in 2015; perhaps less surprising was Japan coming very close to entering a recession in the third quarter of this year (only escaping this label after revised numbers were released), struggling with an ageing population and low birthrate.  How the two economic giants of East Asia (and two largest economies in the world after the U.S.) tackle their economic challenges—or fail to do so—will be big narratives for the year 2016.  While nothing catastrophic is expected to happen in terms of Japan, if there is little good news coming out of that nation in 2016, that will not help the rest of the world deal with its economic funk.  China, though, is of larger concern: if things were to get dramatically worse, the Chinese Communist Party (CCP), which has already had a difficult time dealing with public unrest from democracy-oriented mass protests in Hong Kong to worker dissatisfaction to Muslim Uighur unrest in Xinjiang will have a tough time keeping order with a Chinese public that has grown to be bolder and more frequent in voicing dissatisfaction with the government over the past few years.  There have already been tremendous ripple effects from China’s economic downturn, not the least of which is contributing to the falling price of oil since China’s enormous demand for that energy source has weakened along with its economy, but if China’s stability were to even remotely become an issue, investors and markets around the world would react far more negatively than they already have.  CCP officials have done a fine job of transitioning China from the anarchy of the Cultural Revolution in the 1970s to the wild success of its economy over the past few decades, so there is some reason to hope for a competent response; at the same time, that this is happening at all suggests CCP leaders are not so sure about how to manage this crisis, and it remains to be seen if 2016 will see the situation improve or become even worse.  And, of course, there are the concerns over the how various territorial disputes with other Asian nations and with Taiwan could factor into a politically less stable environment….

2016 has already started off very badly for China; just today, China halted stock trading for the day (for the second time this week!) as Chinese stocks fell more than 7% in just 29 minutes.

5.) Recipe for conflict in Africa’s Great Lakes region

REUTERS/Jean Pierre Aime Harerimana

If Rwanda’s internal ethnic problems served as a catalyst for the series of conflicts known as Africa’s World War (the deadliest conflict in the world since WWII and one that is still ongoing), current problems that are spiraling rapidly out of control in Burundi threaten to plunge the region into conflict again.  In Rwanda in 1994, that country’s Tutsi minority was almost wiped out in a genocide carried out by the majority Hutus.  The government that came to power in the subsequent revolution led by Paul Kagame was one of Tutsis, and Kagame is still in power now.  He has shown a willingness to aggressively project Rwandan military power outside of his own borders, and the UN even accused his forces of possibly committing a countergenocide against Hutus.  Kagame successfully changed his system be able to keep himself in power after pledging he would step down, something Burundi’s Hutu President Pierre Nkurunziza did by running for, and winning in July, a third term in violation of that country’s constitution.  When protests erupted in Burundi in response, the government began a crackdown that just this December began to look a lot like Tutsis were being targeted.  Burundi’s military is led by both Hutus and Tutsi officers, but recently Tutsi officers have been forming rebel groups and the president has been pushing Tutsi officers out of major positions of power or has sidelined them from more important missions.  Tensions are already rising between Burundi and Rwanda, and if Burundi erupts into civil war, Hutus and Tutsis in Rwanda may find themselves sucked in in one way or another, and the simmering but quieting Congo conflict, involving Hutus and Tutsis in the eastern part of the Democratic Republic of the Congo, could also flare back up as well.  Ethnic conflict and hatred could well embroil this region again if events continue on their current trajectories.

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There are certainly other trends to watch in 2016, but these are very likely to dominate headlines for quite some time in the new year.  Only time will tell if these trends will improve or get worse, but for now, there are appropriately-high degrees of concern and worry about these trends.

Related article: 2015 Year in Risk Review: Risky Business

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