‘Blue Gold’ Will Be Turkey’s Key To The ‘Dry Crescent’

Next year will mark a full century since the Ottoman Empire lost control of the areas now known as Syria and Iraq. Now Turkey is pursuing an increasingly nationalistic and assertive foreign policy that’s being called ‘Neo-Ottomanism’. Ironically, water is the geopolitical asset that gives Turkey influence over the area historically referred to as the Fertile Crescent.

The Tigris and Euphrates rise in the Anti-Taurus mountains of Eastern Turkey, giving Turkey effective control of the water resources of Syria and Iraq. In an age of growing population and climate change, water is truly becoming ‘blue gold’.

Contentious dam construction

Turkish dam construction has long been contentious.  Since 1975, Turkish dams have cut the volume of water reaching Iraq by 80% and Syria by 40%. Conflict has almost spilled over on many occasions. In 1990, conflict brewed when both Syria and Iraq believed that Turkey had deliberately cut off their water supplies as both noted a simultaneous, serious decline in water flow. The situation was only diverted by Iraq’s invasion of Kuwait. NATO has a conflict scenario in which Iraq and Syria simultaneously attack Turkey, while the UN ‘Uppsala Model’ includes a scenario in which Iraq and Turkey are brought to the brink of war over water.

Political instability, foreign interference and the Kurdish independence movement in Syria and Iraq present challenges and opportunities which are likely to drive Turkey to weaponize water to extend its political influence. In the summer of 2014, Erdoğan ordered the water in the Euphrates to be held back, reducing water levels in Lake Assad, which supplied IS-held Raqqa. The disappearance of credible opposition in Iraq and Syria with the appearance of IS has given Erdogan greater freedom to extend control of water through the South-Eastern Anatolia dam project (GAP).  While GAP’s main purpose is hydroelectric power and economic growth, Turkey is aware of its geopolitical value. TheIlisu hydro-dam, the latest of the 22 planned dams in GAP, will straddle the Tigris just 30 miles north of the Syrian border. The water from these rivers is not just vital for Iraq and Syria’s food and water, it is also important for their economies. Prior to the rise of ISIS, Iraq’s oil industry required 1.8 billion cubic metres of water to function. Once GAP is completed, it is estimated that half the water from the Tigris and Euphrates may never leave Turkey.

Weaponising water

Turkey’s control of water resources can be instrumentalised to thwart or hinder Kurdish independence.  Iraq Kurdistan relies on 6 major rivers for over 75% of its water, three of which originate in Turkey, and the other two which flow from Iran; also hostile to a Kurdish state.  If Turkey were to limit water supplies to Iraqi Kurdistan, it would hamstring the Kurdish oil industry, central to Kurdish politico-economic autonomy.  It would also generate food and water shortages.  The water dynamics in the region provide a new perspective on the hardline attitude Turkey has taken towards domestic Kurds.  Eastern Turkey holds many of Turkey’s 15 million Kurds, but controlling the region’s watershed is crucial to maintain Turkish territorial integrity and generate influence in the region.

In the future, Turkey’s control of water will become an increasingly potent lever.  Population growth, climate change, and poor management are making water a scarce resource.  According to the UN, by 2050, Iraq’s, Syria’s, and Turkey’s populations are expected to grow by 130%, 89%, and 22% respectively.  A conservative estimate is that over the coming years climate change will reduce rainfall by 20% and massively increase evaporation, halving the amount of water available per person in the Middle East.  Of course, the effects of climate change will be greater in some places; predicted weather patterns could result in the desertification of over half of Syria.  Unsustainable water management, particularly digging illegal wells in Syria, have also decreased groundwater resources in the region, adding unnecessary strain.

A need for sustainable management

The growing centrality of water and the political fragility of Iraq and Syria have given Turkey the agency to expand its influence in the region.  It is certainly exploiting this opportunity. Yet, this combination of factors also means Turkey’s influence is likely to sustain if peace returns. This could generate political friction and spark further economic and political instability, something the region certainly does not need. A lasting political resolution to the instability in Iraq and Syria should incorporate sustainable management of the region’s water economy.

 

Ben Abbs is an Analyst at Global Risk Insights. As originally appears at: https://globalriskinsights.com/2017/12/turkey-water-influence/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Terrorism Risks Rising In Malaysia As Islamic State Militants Return

With the demise of Islamic State in Iraq and Syria and the fall of Marawi in the Philippines, how will Malaysia handle the prospect of returning fighters?

Malaysia’s Deputy Home Minister Nur Jazlan Mohamed recently expressed concerns over the threat of returning militants from the Middle East and the Philippines. The fall of Marawi, following the deaths of the insurgency’s two most senior commanders, came days after the Syrian city of Raqqa was recaptured by a US-backed coalition of Arab and Kurdish fighters.

Several hundred Malaysians have travelled to the Islamic State since 2013. In a new development, around thirty joined forces with the pro-IS Maute group in Marawi earlier this year. This article examines Malaysia’s capacity to handle the return of some of its fighters. Although coordinated IS-led attacks remain unlikely, the government will take a tough stance in order to mitigate the threat of localised terror cells and ‘lone wolf’ violence.

Will Malaysia be targeted?

The almost simultaneous losses of Raqqa and Marawi, cities of similar size, will force IS to shift to more guerrilla-based tactics. Aside from significant loss of manpower, Raqqa’s loss will yield a mass of information about IS’ strategies and personnel. IS’ de facto capital, Raqqa had generated millions of dollars in oil revenues annually; consequently, funding for its Southeast Asian operatives will be drastically cut. There is always the possibility that wealthy Arab donors will re-inject ISIS with cash. According to one estimate, $40 million was raised this way over the past two years. If so, IS will be able to regroup, re-arm and re-strategise.

IS’ Malaysia operations suffered a heavy blow this year with the death of ‘Malaysia leader’ Muhammad Wanndy Mohamed Jedi, in Syria, at the hands of a drone strike. Wanndy was a commander of Khatibah Nusantara, the joint Indonesian-Malaysian wing of IS. He had threatened to ‘wreak havoc’ in Malaysia, despite frustrating his superiors for failing to do so. Bahrun Naim, the man behind the 2016 Jakarta attack, has allegedly taken Wanndy’s place, and will be looking to fulfil Wanndy’s failed mission objective. The time to attack is ripe, given Malaysia’s approaching elections, which will provide a useful government distraction.

After the death of Filipino Isnilon Hapilon, leader of the regional militant organisation Abu Sayyaf Group (ASG) and IS’ apparent ‘emir’ in Southeast Asia, several Malaysians had been rumoured to assume his title. They were Mohammad Amin Baco, Muhammad Joraimee Awang Raimee and Mahmud Ahmad. Baco and Raimee are skilled in bomb-making and experienced in combat, with Baco heading one of three IS Philippines divisions, Jund al-Tawhid. Meanwhile, Ahmad, a 38-year-old former Islamic Studies lecturer from Universiti Malaya, on Malaysia’s most-wanted list since 2014, adept at fundraising and well-connected, had acted as chief recruiter for the Marawi siege.

However, evidence suggests that chauvinist attitudes are likely to prevent these Malaysians from becoming regional leader. Instead, a Filipino is preferred for the post, with ASG cell leader Furuji Indama the most likely candidate. Indama led a bloody conflict with ASG last year in the Basilan jungle; the Philippines will likely continue to provide his primary battleground. Moreover, regional militant groups like the pro-IS Bangsamoro Islamic Freedom Fighters (BIFF) have generally been less successful infiltrating Malaysia. Militants have poor military capability and lack of support among local people in Sabah

A new generation

Regardless of whether Malaysia is an official ‘target’, returning fighters will inspire a new wave of young and impressionable recruits and provide the foundation for a new network of terror cells. Successful returnees will be battle-hardened, with military training and deep knowledge of IS’ tactical operations.

While the known militant groups in Malaysia are now defunct, pro-IS sleeper cells remain a threat, particularly in Sabah (although past reports have been unsubstantiated). Counterterrorism units will face challenges in locating these cells. Verifying their existence is problematic given the growing problem of distinguishing between actual accounts and ‘fake news’ on social media

Fighters who slip through the security net carry the latent threat of ‘lone wolf’ and suicide attacks. For security authorities, single figures are much harder to track, thus thwart. Admittedly, lone wolves are usually frustrated amateurs who have not been able to join up with their comrades in Iraq and Syria. But last year’s grenade attack in Kuala Lumpur, organised by Muhammad Wanndy, was also relatively minimal and poorly planned. Nevertheless, one successful attack in the capital or another tourist hotspot risks mass casualties.

Malaysia’s response

Malaysian security officials will not be complacent. Along with Indonesia and the Philippines, Malaysia is already making sustained efforts to increase border security in the porous Sulu region, Malaysia’s long-time Achilles heel. Other border areas need tightening, like the Sungai Golok which separates the southern Thailand province of Narathiwat from Kelantan, north Malaysia. In the past, this area has been exploited by pro-IS weapons-smuggling groups.

Generally, there is a strong likelihood that returning fighters will be caught and detained under relevant laws, as over 260 have been since 2013. The police’s special branch anti-terrorism unit closely tracks national terror suspects, and collaborates with other regional and global agencies. Safe in this knowledge, Malaysian fighters will not likely seek to return home in vast numbers. Most will stay on and continue to fight, or join other countries struggling with Islamic insurgencies like Myanmar or Thailand. Unlike Malaysia, many other places will also provide these fighters with refuge.

In July this year, thousands of undocumented migrant workers were arrested, in one of Malaysia’s biggest crackdowns in years. That month also witnessed ‘Operation Joker’, in which 400 terror suspects were arrested and their backgrounds checked against Special Branch’s Lookup database and Interpol’s Foreign Terrorist Fighter Database. More operations on this scale, across major towns and cities, are likely in the future. Despite Malaysia’s stringent enforcement of immigrant background checks, one key weak link is the use of sophisticated fake identity cards by terrorists.

Successful security efforts – so far

Although deemed excessive by opposition and human rights groups, thus far these efforts have prevented a major attack on Malaysian soil. Since April 2014, counterterrorism units have successfully disbanded the majority of Khatibah Nusantara’s Kuala Lumpur cell. Special Branch Counterterrorism Division Head, Ayob Khan Mydin Pitchay, is consequently wanted dead by IS central command; an important obstacle to a successful Malaysia attack.

Measures have been taken to starve the terrorists’ funding networks, through the closure of informal remittance channels, although risks from money laundering remain. More also needs to be done on social media, which continues to undermine central intelligence efforts. Although authorities have terminated a number of pro-IS websites, digital recruitment via Twitter and Whatsapp remains a large threat. Authorities the world over have faced resistance from Whatsapp in getting past its encrypted messaging service.

Despite IS’ limited success in Malaysia and the robust capabilities of national counterterrorism forces, the country remains vulnerable to an attack. Although it remains unlikely that IS will attack Malaysia in the near future, the threats from lone wolf attacks and digital recruitment will keep counterterrorism authorities busy. Overall, despite attracting criticism, Malaysia’s efforts have achieved their purpose. But the next 6-12 months will certainly test this theory.

 

Alexander Macleod is a doctoral researcher at Newcastle University with a focus on Southeast Asian politics and geography. Article as appears on Global Risk Insights: https://globalriskinsights.com/2017/12/islamic-state-militants-malaysia-terrorism/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

What Mnangagwa Needs To Deliver To Resurrect Zimbabwe’s Economy

As Zimbabwe’s new president Emmerson Mnangagwa sets the country on what many hope will be a new economic course, he will need to focus on reforming two key sectors, agriculture and mining, if he is to generate the revenues and attract the foreign investment necessary for a sustained recovery.

Mnangagwa’s turn as president comes as the country faces seemingly insurmountable problems, with over 90% of the workforce unemployed, an acute shortage of foreign currency, a fiscal deficit hovering at around 12-15 % of GDP, and debts of about $9 billion. Mnangagwa’s first order of business must be to repair relations with international lenders and restore confidence amongst overseas investors.

A long-time ally of former leader Robert Mugabe, Mnangagwa cannot escape a degree of responsibility for the mismanagement that has devastated what was once one of Africa’s brightest economic prospects. Now, though, Mnangagwa appears ready to make a break with some of the flawed policies of the past.

Yet while recognising the importance of agriculture and mining in turning around the country’s moribund economy, he has given mixed signals over two issues that are widely seen as constraining these principal drivers of growth.

While Mnangagwa is opposed to reversing Mugabe’s ruinous land reform programme in the 2000s – which saw the appropriation of over 4,000 white-owned commercial farms – he has pledged to compensate farmers for the land they lost and seems prepared to allow them to play a significant role in reviving agriculture.

A similar compromise is evident in his stance towards Mugabe’s indigenisation and economic empowerment policy that put a break on international investment, especially in the mining sector that generates half the country’s export earnings. He is planning a partial repeal of the legislation which requires foreign-owned businesses to transfer 51% of their shareholding to Zimbabweans – with some mine operations still subject to its provisions. It will be instructive to see how much opposition there is to any adjustment of this contentious piece of legislation.

Agriculture has experienced a slight recovery of late thanks to a major subsidy programme, but the country continues to suffer from the consequences of land reform, under which confiscated white farms were transferred to black Zimbabweans lacking agricultural expertise and funds. Crop production subsequently collapsed, the country becoming a net importer of maize – one of its main staples – until recently.

Government intervention in mining severely affected the sector. Diamond production fell by more than two thirds last year after it was nationalised, while in the summer platinum and chrome miners were ordered to surrender 80% of their export earnings – up from 50% – to help tackle shortages of foreign currency.

Following the appropriation of their land, many white farmers left for neighbouring countries and beyond, but in recent years some have returned at the invitation of black farm owners to form joint partnerships, serving as managers or consultants on farms they arguably still own. Some are also involved in financing small-scale farmers producing tobacco, which has emerged as a big foreign currency earner.

A Reuters investigative report in September – which drew on interviews with diplomats, local politicians and Zimbabwean intelligence reports – revealed that Mnangagwa, then vice-president, was not only planning to compensate white farmers should he come to power but also reintegrate them, without specifying how this would be done.

Mnangagwa’s apparent willingness to allow white farmers to play a bigger role is an acknowledgment that their commercial and technical acumen could help restore Zimbabwe to its former status as Africa’s breadbasket. Their increased involvement would help buttress Mnangagwa’s own, albeit controversial, efforts to revive production of staples. His so-called Command Agriculture programme contributed in part to record volumes of maize output – 2.2 million tonnes – this year, the highest for two decades.

Under the programme, begun in 2016 and aimed at medium-sized farms, the government provided farmers seed, fertiliser, tractors and fuel to plough and plant an agreed number of hectares, with input costs deducted from the sale price of the crop. But there have been implementation problems, such as delays in the delivery of inputs, and the IMF recently warned that the funding model could deepen the budget deficit. Yet Mnangagwa is determined to persevere with the programme, with plans to expand it to include soya and livestock. Meanwhile, another bid to help farmers by enabling their leases to be used as collateral to borrow from banks has reportedly run into trouble, as some lenders have concerns about the extent to which the leases can stand as security for their loans.

As well as giving more thought to how farmers can better access capital, Mnangagwa will also need to improve agricultural productivity. To this end, a Land Commission, set up last year to improve accountability and transparency in the sector, is to undertake periodic land audits, which will identify idle and under-utilised land.

Mnangagwa’s so far limited agricultural reforms mirror his approach to mining, where he has excluded key sectors from his relaxation of the indigenisation law. It will continue to apply to foreign-owned companies mining diamond and platinum, while the rest of the economy will be free of the protectionist measure.

Zimbabwe’s mineral wealth is potentially huge, but international mining operators need to be incentivised. In recent years, Mugabe’s interventions and allegations of corruption have severely undermined confidence in the sector. Moreover, few Zimbabweans have benefited from revenues generated. In 2011, Bloomberg reported that the then Finance Minister Tendai Biti said as much as $15 billion of revenue had been lost through the looting of diamonds, accusing the ruling Zanu-PF elite of “prospering from the stones”.

When Mugabe nationalised the diamond mines last year, he blamed mining companies for billions of dollars of missing revenue – although just how the funds were lost without the government’s knowledge is hard to explain given that it jointly owned the operators, some commentators point out. Mnangagwa clearly needs to make the industry more transparent and accountable, something opposition parties have long called for.

At his inauguration, Mnangagwa said job creation would be a top priority. Getting agriculture and mining fit for purpose is essential to achieving this goal. It is too early to say whether he has the political will or energy to undertake far-reaching reforms in these sectors. It looks like they will be fairly modest at first, but after being poorly maintained for decades there is now at least hope that the twin engines of the economy may begin to perform at something like their true potential.

 

Adrian Stones is a Director of Alaco, a London-based business intelligence consultancy.

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Catch-22 In The South China Sea: China’s Provocations And ASEAN’s Impotence

Despite upcoming talks, Manila’s deferential stance to Beijing, and wider ASEAN disunity, mean no end in sight for China’s island-building in the South China Sea. Yet those islands will destroy the coral reefs they are built on, and the very fish stocks China wants to control in the first place.

China’s provocations and ASEAN’s impotence

Chinese and Filipino diplomats are still deciding when and where to pick up talks on the South China Sea in 2018, but in terms of substance, the two sides are already on the same page. Li Keqiang of China and Rodrigo Duterte of the Philippines spent the 31st ASEAN summit in October jointly insisting a “code of conduct” could stabilise tensions in the South China Sea – but failed to mask the lack of real progress.

The current state of affairs already represents a major diplomatic victory for Beijing. The Philippines, host of this year’s ASEAN summit, has effectively abandoned an unequivocal 2016 ruling in its favour from the Permanent Court of Arbitration (PCA) over China’sconstruction of artificial islands in disputed waters.

China rejected the validity of both the ruling and the PCA’s authority, but the Philippines and its ASEAN partners also failed to stand by the decision. Among member states, only Vietnam has come out in direct support of the PCA decision. China already ignores a 2002 declaration of conduct applying to the South China Sea. There is no indication any new code would be more binding.

This is unfortunate, because the PCA ruling addressed some of the most urgent ramifications of China’s actions in the region. It was particularly scathing in regard to environmental violations, stating “China had caused severe harm to the coral reef environment and violated its obligation to preserve and protect fragile ecosystems and the habitat of depleted, threatened, or endangered species.”

The inherent irony of the dispute is that dredging the sea floor to construct artificial islands endangers the very fisheries Beijing seeks to control. China’s own territorial waters are dead zones as a result of overfishing and industrial pollution, one of the main drivers for China’s claims in the South China Sea. Despite this, China marked the end of the summit (and last month’s visit from Donald Trump) by launching its new “magic island-maker” in a clear sign the island-building campaign is far from over.

Not that China is solely responsible. The failure of ASEAN to present a united front puts the resource-rich waters and the millions who rely on their declining fishing stocks for food and employment at risk. By leaving member states to fend for themselves against China, the bloc is undermining its own commitments to support environmental conservation and sustainability as well as international law.

Political concerns trump environmental imperatives

Preserving fish stocks and the ecological balance of the region as a whole requires concerted multilateral action of the sort current tensions render impractical. As early as 1992, scientists were proposing that the Spratley islands be designated as an international ecological marine park. At that point, the islands were not much more than atolls and rocks incapable of sustaining human habitation.

Since then, attempts at preservation have largely been unilateral and confined to respective Exclusive Economic Zones. As of late 2016, the Philippines intended to declare a marine sanctuary and no-fishing zone in the area that it claimed as its own, in spite of competing Chinese claims.

Worse, the destruction is not exclusive to China. Malaysia, Vietnam, the Philippines and even Taiwan have built airstrips and artificial islands on atolls in the South China Sea, destroying coral reefs in the process. Through its “Island Tracker,” the Centre for Strategic and International Studies (CSIS) has attributed ten such reclamation projects and 120 acres of reclaimed land to Vietnam alone – although it does consider Vietnam’s methods less destructive than China’s.

Even so, the overall ecological costs are substantial. Destroying atolls means destroying natural habitats for over 6,000 species of fish. Thanks to overfishing and environmental degradation, fish stocks in the region have plummeted: overall decline since the 1950s falls somewhere between 70% to 95%. In the 1970s, a Filipino fisher could count on an average daily catch of 20kg. Today, that number stands at less than 5kg.

Coral destruction only aggravates the impact of illegal, unreported and unregulated (IUU) fishing, which CSIS calls “a direct and indirect national security threat” in a report released this month with support and collaboration from the Philip Stephenson Foundation.Chinese fishers have to go farther afield to make a living. Accusations of IUU fishing have followed them, not just in the South China Sea but also in West Africa and South America.

These economic concerns could have serious political ramifications. In an era ofincreasing socio-economic inequality, Beijing obviously seeks to sustain its fishers’ livelihoods. The Chinese fishing industry directly employs between 7-9 million Chinese (in and beyond the South China Sea) and contributes as much as $279 billion USD to the national economy on a yearly basis.

ASEAN fishers are just as vulnerable to the threat of unemployment. The South China Sea may be the conduit for $5.3 trillion in annual international trade, but its struggling fisheries also employ at least 3.7 million people across littoral countries. Duterte’s deference to Beijing may partially be a bid to win concessions for Filipino fishers kept away from key fishing grounds by Chinese encroachment. That strategy has secured at least some successes, such as reopening the Scarborough Shoal to Filipino fishing boats.

Ways forward for preservation

With political and diplomatic avenues coming up short, other parts of the globe may offer alternative ideas on how to proceed. In the less geopolitically sensitive Caribbean, governments and international organisations work with non-governmental organisations (NGOs) to identify and implement proactive solutions.

Examples include Dr. Sylvia Earle’s Mission Blue, a project aiming to create a “worldwide network of marine protected areas.” Together with the Philip Stephenson Foundation, Mission Blue president recently hosted a gathering on the Caribbean island of Petit St. Vincent that promoted the goal of making 30% of the world’s oceans “fully protected” by 2030.

The choice of venue is significant, as these and several other NGOs (including CLEAR Caribbean and the Nature Conservancy) are also involved in coral planting there. Thanks to their political neutrality, environmental NGOs may offer a mutually acceptable path to ecological solutions in the South China Sea.

ASEAN and the Philippines have demonstrated their inability to stand by the PCA ruling. Non-state actors could have an easier time fostering initiatives to save coral reefs and the region’s fisheries. If successful, those projects could constitute the first steps to addressing the legal and geopolitical tensions bedeviling ASEAN governments.

 

 

Nicholas Leong is currently a trainee advocate & solicitor for Messrs Lai Mun Onn & Co in Singapore. As originally appears at: https://globalriskinsights.com/2017/12/south-china-sea-environment-fishery/

 

Regardless Of Who Wins Chile’s Elections, Codelco Likely Loses

If Chile’s year-long bull market is anything to go by, conservative candidate Sebastian Piñera is likely to become the country’s next president after the December run-offs. But neither Piñera nor his centre-left rival Alejandro Guillier seem too concerned about state-miner Codelco, whose financial well being could have a ripple effect on the global copper market.

Codelco (1006Z:CI) has consistently posted strong quarters since it began implementing austerity measures during the 2015 copper market dip. Last quarter saw a pre-tax profit of $1.6 billion, an overall improvement of more than three times against the loss posted for the same period last year. Nonetheless, it’s a trend that is hardly sustainable given Codelco’s falling ore grades and aging mines.

The state-miner’s average ore grade has fallen roughly 10% since 2013, meaning Codelco has to process 10% more ore in order to produce the same amount of copper it did five years ago. At a time when declining ore grades are prevalent across the industry, the state-miner has to invest in higher yielding mines to remain profitable.

Codelco, which accounts for around 60% of Chile’s exports, would need around $20 billion to keep output flowing and expand its operations according to internal reports. Codelco has proposed revamping operations at its traditional crown jewels, the El Teniente and Radomiro Tomic mines, as well as resuming interest in investments outside Chile in projects as far away as Mongolia. Can they get it done?

Political Priorities For Codelco

Both runoff candidates, conservative Sebastian Pinera and centre-left Alejandro Guillier have widely differing priorities for the state-mining giant. Piñera, who has shown scepticism over Codelco’s management in the past, has recently told the miner it would have to maximize performance of existing assets and draft a “realistic investment plan”.

During his first administration, Piñera turned to the bond market to finance Codelco, raising the miner’s debt 84% at a time when there were already high market prices for copper. The presidential candidate now promises to reduce public spending and lower the country’s deficit. That would leave Codelco high and dry.

In contrast, Senator Guiller has prioritized relations with the company’s unions, much like the outgoing administration of Michelle Bachelet. Labour actions have hit copper miners hard over the past few years, particularly inside Chile. Melbourne-based BHP Billiton (BHP:AU) saw a 43-day strike in its flagship Escondida mine from February to March, cutan estimated $1 billion off its yearly revenue. Codelco’s Chief Executive Nelson Pizarro freely admits the mining industry is “unpleasant” to most Chileans. Nevertheless, while improving union relations could protect the miner’s bottom line, it would do little to add to production.

Guiller’s plans, however, are likely to be heavily influenced by leftist party Frente Amplio and its strong showing in the November elections. Frente Amplio had previously called for the recapitalization of Codelco in order to finance social spending, leaving little room for mining investments.

Surprisingly, both candidates have vowed to unburden the state-miner of its constitutional mandate to fund the military. The Pinochet-era legislation transfers 10% of Codelco’s export sales (roughly $866 million last year) to the Chilean military. The widely unpopular piece of legislation could free up capital for investments. But the laws successful passage will arguably have more to do with the incumbent legislative assembly than the president.

Fractured Landscape

The success of a left-wing Frente Amplio and other non-coalition parties in the legislative elections has muddied the waters for both runoff candidates. Regardless of who wins, they are unlikely to hold a strong mandate and will be forced to balance their centrist appeal and cater to their bases’ extremes.

Chile’s fragmented congress will force the incumbent president to cross party lines in order to pass any significant legislation. This is particularly troubling for Piñera given that both congress and the senate lean towards the left. Passing his proposed tax reforms will be next to impossible without support from the centre-left. For Guiller, this will likely mean his entire agenda will be pulled to the left by Frente Amplio.

In this fragmented legislative environment, a repeal of Codelco’s 10% military burden is highly likely to stall. There is already a broad concern the export tithe will not be cut back regardless of the President’s policy initiative. They point towards the influence the Chilean military continues to wield over all branches of government, irrespective of recent corruption scandals. Mining Professor Gustavo Lagos at the Universidad Catolica is among those that sees doubts that the law will ever get overturned: “I’m not very optimistic (…) we’ve been talking about it for 25 years”.

However, if the military funding mandate were to be repealed, there is no certainty Codelco will keep the 10%. It may very well be distributed to any other policy priority outside the miner’s coffers. So far Piñera has been the only candidate to insinuate he might return the money back to Codelco.

Emerging Risks

It’s a mistake to dismiss Chile’s influence in the world’s copper markets or the outcome of the upcoming election. Asian markets are continuing to demand copper due to higher-than-expected GDP growth and forecasts already seeing a bump in the copper market as high as 2% in 2018. Burgeoning industries, in particular green-products, will also rely heavily on the red metals to go into production.

Copper miners are now branching out into previously untapped mineral sources and investing in mines inside politically volatile areas such as the Central African copper belt. Chile’s copper industry is tantamount to an insurance policy against market dips caused by political instability elsewhere.

Chile has been the world’s top copper producer for the last quarter century and will remain a leading player for the near future. Thus, government policy regulating the state-miner will have a tremendous impact on the overall mining environment in the country, and the wider market.

What Would An Israel-Hezbollah Confrontation Look Like?

All eyes are on Israel after President Trump’s recognition of Jerusalem as its capital. But the most immediate risks have deeper origins. Despite heavy losses in the Syrian Civil War, Hezbollah still stands as a formidable military force equipped with an impressive arsenal and hardened by years of fighting. Now that its militants are returning to Southern Lebanon, the probability of a military confrontation with Israel will escalate.

From the ruins of the Syrian conflict, Hezbollah has emerged a victor. The Shia militia’s involvement in the Syrian Civil War dates back to its start; though its involvement escalated sharply after 2013. As a member of the Axis of Resistance along with Iran and Syria, Hezbollah intervened not only to aid its Syrian ally but also – and perhaps more importantly – to secure its interests. Syria is one of Hezbollah’s main suppliers of weapons, funds, and safe havens. The fall of Assad and subsequent rise of a Sunni-dominated regime in Damascus would have seriously threatened Hezbollah’s regional operations.

A Costly Victory?

The six years long war has been quite costly for the Party of God. The war in Syria has claimed between 1700 and 1800 Hezbollah fighters according to an estimate – more than the organization lost in the 18 year-long Israeli occupation of Lebanon. Many of those killed were seasoned fighters and veterans of the Israeli-Lebanese conflict. This level of loss is unprecedented for Hezbollah. The organization has historically been successful in avoiding loss of life, in large part due to the level of specialization of its fighters. The survival of its soldiers has always been a cornerstone of its operations.

Still, the benefits that Hezbollah has gained from the conflict outweigh the losses. Hezbollah’s recruiting machinery has not “run out” of recruits, as a study of the Institute for the Study of War highlighted. Moreover, the frequent rotations have ensured that a large number of fighters ,up to 20.000,have gained considerable fighting experience. Though a generation of fighters was lost, younger, experienced recruits may have already replaced those killed in action.

Regardless of casualties, the intervention’s overall success has significantly boosted the group’s morale. In addition, Hezbollah and the Syrian army have become quite proficient in joint operations, as well as in operational planning and training, making it capable of carrying out sophisticated ground operations alongside allies. This coordination would definitely prove useful in the event of a new regional conflict.

Hezbollah gets an upgrade

Over time, Hezbollah’s alliance with Iran and Syria has given it a steady flow of sophisticated weaponry and technology. Most likely, there is no other non-state actor that is currently able to match the Party of God in this regard. Throughout the Syrian Civil War, Hezbollah has further increased its capabilities despite Israel’s frequent strikes on its supply chain. On top of the hundreds of thousands of missiles that Hezbollah owns, the acquisition of the anti-ship Yakhont missiles and the Russian anti-aircraft system SA-17has been game-changing. These weapon systems give Hezbollah the capability to challenge Israel air and naval superiority, which is something that – with the exception of the attack on the INS Hanit in 2006 – Hezbollah has never been able to do. Being able to compete with Israel in these domains represents a shift in the balance of power with Tel Aviv.

Additionally, the Party of God has been experimenting with new tactics in Syria, such as drone strikes. Weaponizing drones represents a further technological leap for Hezbollah, whose use of drones in the past was confined to reconnaissance.

Hezbollah’s homecoming

The return of Hezbollah fighters en masse will coincide with a strengthened presence of Iran along the Lebanese-Israeli border. Iranian presence among Hezbollah is nothing new, but Hezbollah’s involvement in Syria has only  reinforced Iran’s influence in the organization.

For Israel’s part, Prime Minister Benjamin Netanyahu has already warned that he will not allow Tehran to establish a military presence on Israel’s borders. As such, any potential conflict between Israel and Hezbollah should be seen as an Israeli attempt to counter Iran’s expanding influence in the Middle East. Avigdor Lieberman’s appointment as defense minister is a clear indication that Israel is preparing for war, as some analysts believe. In addition, the Trump administration’s hostile stance towards Iran could embolden Israel to embark on an offensive sooner rather than later, as it would likely enjoy unconditional support from the United States.

What would a conflict look like?

Yet, a military confrontation envisaging a ground invasion of Southern Lebanon would be far more complicated than the  2006 July War. Israel would face a barrage of missiles aimed at their urban centers. Despite their efficacy, Israel’s missile defense systems ‘Iron Dome’, ‘David’s Sling’ and ‘Arrow’ would most likely be unable to withstand the number of rockets that Hezbollah would launch. The economic, political and humanitarian loss Israel would suffer would be immense.

Tel Aviv has stated it will deploy all of its strength from the very beginning if war was to break out on Israel’s northern border. The likely objective of such an offensive would be to wipe out Hezbollah’s missile capabilities before they could be fully deployed. Alternatively, Israel might be tempted to launch a preventive strike in Southern Lebanon. As Major General Amir Eshel claimed, Israel certainly does not lack the capability to do so.

The likelihood of a military confrontation between Tel Aviv and the Shia militia has not been this high since 2006. Whether or not a conflict will break out, 2018 will see tensions rise between Israel on one side, and Hezbollah and Iran on the other. This regional instability is largely due to the growing influence of Iran. Tehran’s desire to emerge as a regional leading power of the Middle East has placed it in a direct confrontation with Israel and Saudi Arabia. The worries about Iran’s regional influence have led to a paradoxical Tel Aviv-Riyadh alliance, which is supported by the new US administration. With the region being pulled into the fold, any potential military confrontation between Israel and Hezbollah could have greater repercussions, depending on Iran and Saudi Arabia’s level of involvement.

 

As originally appears at: https://globalriskinsights.com/2017/12/israel-hezbollah-war-jerusalem/

Rebels Go Mainstream: How FARC’s Political Party Can Influence Colombia’s 2018 Elections

In 2016, Colombia’s government reached an historic, but highly controversial peace agreement with the Revolutionary Armed Forces of Colombia (FARC) paramilitary group, after more than 50 years of violent conflict.

In April of this year, in a highly controversial official part of the peace plan, Colombia’s Congress approved FARC as a political party, granting them 10 seats in Congress.

This component of the deal has sparked outrage amongst many seeking greater punishment for FARC’s crimes. Many Colombians fear the prospect of a former militant group known for kidnappings and other illicit activities attaining legitimate political power, all at a peaceful, but fragile time for Colombia.

Despite Colombia’s history o violence and corruption, the country has succeeded with peaceful democratic transitions of power. It also has stewarded a healthy economy, with GDP growth averaging 4% annually from 2000 to 2015 and healthy inflation at around 3%.

However, the country currently runs a fiscal deficit and the peace plan calls for ambitious workforce reintegration and rural development programs for former FARC soldiers. The cost of these efforts over the next decade is estimated at a daunting $45 billion.  Consequently, Colombia faces conflicting priorities and agendas.

FARC faces a major learning curve as a political party accustomed to violent resistance, now expected to contribute to peaceful governing. It also faces an upward battle for approval since many voters remain angered at its past crimes and skeptical of its intentions.

However, the peace agreement grants the opportunity for FARC to gain more seats in Congress in 2018 and 2022. Colombia will elect a new president in May 2018.

A strong anti-establishment attitude toward the current centrist president, Juan Manuel Santos, means a number of outcomes may result, which could a) inadvertently strengthen FARC’s influence, b) threaten a return to militancy, or c) allow FARC to create gridlock. None of these scenarios appear ideal for a country trying to move forward.

2018 Presidential election scenarios

President Santos won the Nobel Peace Prize for his efforts, but only around half of Colombians support the peace agreement and about a quarter of Colombians approve of his performance. He is ineligible for a third term and his center-right party, the Social Party of National Unity, which built a strong moderate coalition in Congress, has frayed.

These circumstances indicate a desire for change and inclination by voters for a more populist platform. Consequently, a wide-open presidential race with 53 candidates has been created. A win by either side could strengthen or antagonize FARC and its far-left platform.

Left-Wing victory

The presidential race currently has three major progressive contenders: Humberto de la Calle, Juan Manuel Galan, and Gustavo Petro. Each has stated his commitment to the peace agreement.

Under this scenario, FARC as a political party should stay relatively quiet, considering that a left-wing administration will most likely follow through with heavy spending on rural development and workforce reintegration programs. However, a leftist administration may not implement the critical fiscal reforms many outside observers deem necessary to maintain Colombia’s credit rating and foreign direct investment.

Meaning in the longer-term, Colombia could fail to sustain rural economic development, ultimately threatening FARC’s faith in the government and willingness to compromise.

Right-Wing victory

Former President Alvaro Uribe vehemently opposed the peace deal and led a public campaign to resist its implementation. The right-wing presidential candidate, Ivan Duque, of the Centro Democratico party, is widely seen as Uribe’s chosen candidate.

Duque would unlikely terminate the peace deal, but politicians on the right have stated their intent to alter components of the deal such as amnesty for FARC soldiers involved in drug trafficking. These actions, combined with the likelihood that a right-wing administration will prioritize fiscal reforms, may antagonize FARC and play into their socioeconomic grievances, giving them a bigger microphone.

Threats from slow-moving reintegration

Under either scenario, many Colombians will continue to aggressively oppose FARC’s new rights as many feel that more ex-FARC soldiers should be prosecuted for their crimes. If ex-FARC soldiers are systematically murdered or attacked this could create renewed violent conflict, but also could give FARC a platform to blame this on government incompetence or claim collusion.

Additionally, under any administration, reintegration programs could continue to move slowly, leaving many ex-FARC unemployed. Lucrative black market activities remain in the rural areas they have now vacated. If programs appear insufficient or disorganized, FARC soldiers could return to activities familiar to them.

Regional dynamics

Colombia is one of seven countries in Latin America that will elect a new president during the next 12 months. At a time where much of the region has shifted to a center-right government, widespread frustration with corruption and slow economic growth has sparked a re emergence of populism. Neighboring Venezuela will remain socialist for the foreseeable future. If major powers such as Colombia, Mexico, and Brazil also shift left this could make FARC’s agenda slightly less radical.

Even if Latin America does not shift left, the massive turnover of leadership creates the potential for political polarization. Additionally, the average voter turnout rates vary greatly.

South American countries had an average turnout in the mid-70s, but Colombia now averages only 43%. Considering the crossroads at which Colombia finds itself, this number should be concerning.

If FARC leaders succeed at generating even 5-10% more support than anticipated, this could create just enough influence by FARC in Colombia’s congress to stall the progress of critical policies.

Domestic and international stakeholders seeking guidance on how FARC’s arrival as a political party will affect Colombia as a market and political allies should watch closely for voter turnout levels, the margin of victory for the next president, and his success in building a governing coalition to stave off gridlock.

The wave of elections in Latin America in 2018 could shift regional alliances, including trade deals. How the Colombian Congress balances granting legitimacy to FARC, while also containing its ability to create chaos, will be an important factor in Colombia’s growth or stagnation.

 

Samuel Schofield is a Contributing Analyst at Global Risk Insights. As originally appears at: https://globalriskinsights.com/2017/12/farc-official-party-in-colombia/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

How Market-Friendly Are Brazil’s 6 Presidential Candidates?

Brazil’s resilience has been put to the test in the last couple of years. The country has faced its worst economic recession, the impeachment of President Dilma Rousseff, and corruption accusations against its current president, Michel Temer. The 2018 presidential election is set to be the “election of hope” for the people of the country, but so far the race is wide open. GRI’s Lorena Valente gives a rundown of the candidates and their views on the economy.

2018 election outlook

The first round of the presidential elections will take place on 7 October 2018 and a potential run-off would occur on 28 October 2018. All 513 Chamber of Deputies congressmen and 54 out of 81 senators will also be elected in 2018.

In a country with mandatory voting, a polarized electorate, and well-known figures and outsiders running for president, the results are still unpredictable. If the economy maintains low inflation, low interest rates, and higher employment, then a more market friendly and pragmatic candidate may win.

The two key factors influencing the outcome will be whether moderate voters are able to unify behind one name, and if Lula will be able to run.

On 30 October, the pollster Ibope released its latest numbers for the 2018 presidential elections, even though not all candidates are yet official. Leading the polls is former president Lula with 35% of the voting intention, followed by Jair Bolsonaro 13%, Marina Silva 8%, Geraldo Alckmin 5%, Luciano Huck 5%, Joao Doria 4%, and Henrique Meirelles at an impressive 0%.

This in turn yields a couple of scenarios. The first, a run-off between Lula and Bolsonaro, would yield unpredictable results. In a second scenario without Lula, Bolsonaro and Silva would tie with 15%, followed by Huck 8%, Alckmin 7%, Doria 5%, and Meirelles with 1%.

Candidate profiles

With the election less than a year away, the market is starting to express its preference for candidates Henrique Meirelles, Joao Doria, and Geraldo Alckmin. If any of these three is elected, the stock market is expected to rise and the currency to remain stable. Conversely, if Lula is elected, 96% of investors polled by XP Investments believe the stock market will fall sharply and 98% bet on the devaluation of the real.  Even Bolsonaro is currently polling at decent levels with the market, proving that at this point, anyone is better than Lula.

Luiz Inacio “Lula” da Silva, 71 (Car Wash)

Party:  Worker’s Party (PT – left)

Profile: The former president of Brazil ruled under the good old days of a commodity boom and inherited the positive impact of President Fernando Cardoso’s policies. He would later make Dilma Rousseff his successor. While he was able to lift many out of poverty during his two terms, he is largely blamed for Brazil’s economic recession, given his uncontrolled spending.  On 12 July 2017, Lula was sentenced to nearly 10 years in prison for passive corruption and money laundering – he is also a defendant on six other ongoing cases.  It is still uncertain if he will be able to run due to legal restrictions. If Lula’s sentencing is confirmed by the TRF4 before 15 August 2018  – the day parties register their candidates – he would technically not be able to run under the Clean Slate Law. However, there are still enough unknowns that Lula’s candidacy can’t be ruled out: there may be changes to the Clean Slate Law; the Judiciary could alter the rules around sending to prison individuals who are condemned by two courts; and the TRF4 judges may not resolve the case in time. Meanwhile, Lula is in full campaigning mode, rallying big crowds and threatening to “defeat neoliberalism”.

Economic views: Lula has a history of increasing the role of the state. During his presidency he focused on creating social programs, such as Bolsa Familia, however, his uncontrolled spending accelerated a fiscal imbalance that later caused Brazil to lose its investment grade.

Market friendliness rating: 2 out of 5 (with 5 being the most market friendly)

Marina Silva, 59 (Third Time’s a Charm)

Party: Rede Sustainability (Rede – center left)

Profile: The former Worker’s Party senator, and Minister of Environment under Lula, finished third place in both the 2010 and 2014 presidential elections under a “green platform”. While she did well in previous elections, many believe she lacks durability in the political sphere. Due to size of her party she is likely to have very little TV and Radio campaign time, which may hurt her visibility. Silva has not yet announced her candidacy but there is speculation that to improve her chances, former president of the Supreme Court, Joaquim Barbosa, could join her ticket as vice president.

Economic views: Silva has previously run on platforms where the environment and sustainability are the priority – believing that the economy should bend to favor those policies. She has been vocal about being against the pension reform that many see as fundamental for balancing the country’s budget.

Market friendliness rating: 2.5 out of 5

Jair Bolsonaro, 62 (Brazil’s Donald Trump)

Party: Social Christian Party (PSC – right)

Profile: The congressman that has served in congress for 27 years released his candidacy through the PSC but is expected to switch to Patriot (PEN – right) by March 2018. Bolsonaro is known for extremist opinions on guns and God, public security, hardline law and order, and adoration toward the military dictatorship (1964-1985).  He was captain of the Armed Forces during the 1964 revolution. Recently, he was accused of making sexist comments to a congresswoman.

Economic views: Bolsonaro has publicly expressed that he is not knowledgeable on economic issues. Nevertheless, since starting his presidential pursuit he has said that he favors a liberal economy with little intervention from the state and an independent central bank. He will likely rely on whoever is chosen to join his economic team.

Market friendliness rating: 3 out of 5

Geraldo Alckmin, 64 (Brazil’s Hillary Clinton)

Party: Brazilian Social Democracy Party (PSDB – center right)

Profile: The current governor of Sao Paulo represents the establishment and is very well liked in his state; however, he is not well known in the rest of Brazil and lacks charisma. In 2006 he lost to Lula in the presidential election by a landslide. Alckmin has been able to improve security in the state of Sao Paulo dramatically since taking office. His party is currently divided between him and his colleague, Joao Doria (below) on who should run under the PSDB ticket. A nomination from the PSDB is likely to come by early January. The intention of vote toward Alckmin and Doria is probably interchangeable – if one doesn’t run, the votes for the other should transfer.

Economic views: Alckmin has proven himself as a great administrator of the richest state in Brazil – Sao Paulo accounts for around 33% of Brazil’s GDP. In 2006, he ran under a platform that emphasized a balanced budget and encouraged initiatives to foster small and medium enterprises to boost economic growth.

Market friendliness rating: 4 out of 5

 

Joao Doria, 60 (The Market’s Best Friend)

Party: Brazilian Social Democracy Party (PSDB – center right)

Profile: The current mayor of Sao Paulo is a successful businessman and millionaire that has marketed himself as the voice “anti-Lula”.  His years in the private sector have led him to favor business friendly policies and reforms.  So far, he has sworn loyalty to Geraldo Alckmin, who he claims is his political Godfather, and says he will not run for president. However, Doria has been seen in talks with other parties in case he doesn’t get the PSDB nomination, particularly the Democratas (DEM – center right).

Economic views: Doria has expressed his support for little state intervention to increase efficiency. In Sao Paulo, he has set up an expansive privatization plan that also encourages concessions and public private partnerships. He has also set up presentations to foreign companies in order to emphasize all the good opportunities for private investment in the city.

Market friendliness rating: 4.5 out of 5

 

Henrique Meirelles, 71 (The Man Behind Brazil’s Recovery)

Party: Social Democratic Party (PSD – center)

Profile: The current minister of Finance and former president of Brazil’s central bank is the voice behind Brazil’s economic recovery and is highly in favor of pension reform to start the effort to fiscal balance. Meirelles is well established in the private sector as the former global president of BankBoston. Right now Meirelles has not officially launched his candidacy and has claimed that his focus in on recovering the Brazilian economy while he is still minister of Finance. If the economy continues to go well he has a good chance, however, his support for an unpopular pension reform may deter people from voting on him. He has expressed that he would be honored to receive a presidential nomination from his party.

Economic views: Throughout his career he has demonstrated the pillars of economic liberalism. Meirelles favors an independent central bank, balanced budget, privatizations, efficiency, and has worked relentlessly toward controlling inflation. Additionally, he fully supports the reduction and simplification of taxes as well as pension reform.

Market friendliness rating: 5 out of 5

Footnote: The surprise candidate

Luciano Huck, a TV presenter and businessman, has started to market himself as dedicated to transform the country. Even though he has not announced his candidacy, he is in talks with the DEM and the Popular Socialist Party (PPS – center left). He is well known for his liberal economic and social views and is liked by people who want something new.

 

Lorena Valente is an Analyst at Global Risk Insights. As originally appears at: http://globalriskinsights.com/2017/11/brazil-presidential-candidates-economy/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Why The US Must Shift Focus From Mexico To Central America To Combat Migration And Drug Flows

During the presidential campaign and throughout the first year of his administration, US President Donald Trump has repeatedly pushed for tougher enforcement of the United States’ southern border to curb illegal immigration and illicit drug flows from Mexico.

It is on Mexico’s southern border with Central America, however, that many of the current issues originate. Ironically, Trump’s harsh rhetoric and proposed cuts to international aid could inadvertently amplify these problems.

The US southern border

For decades the US experienced high volumes of illegal immigration from Mexico, largely due to economic hardship in Mexico and inadequate and inconsistent enforcement by the US. However, in recent years the net immigration from Mexico to the US has all but disappeared, and more Mexicans are in fact migrating within Mexico.

This trend began well before President Trump came to office. Pew estimated that from 2009 to 2014, one million Mexicans left the US and 870,000 arrived. Some of the changes stem from an improving economy and job market in Mexico, as well as improved border enforcement by both Mexico and the US. In the past year, undoubtedly, some have also been deterred by Trump’s threats of increased deportations.

The largest source of illegal immigration at the US southern border now comes from Central American immigrants, specifically from the Golden Triangle, or Guatemala, Honduras and El Salvador. These countries have not witnessed the same degree of economic growth as Mexico and high levels of corruption, poverty, and exposure to drug-related violence induce many to leave.

Many Americans remember the surge in 2014 of unaccompanied children from this region seeking entrance to the United States. Mexico deported around 140,000 people in 2016, approximately 96 percent of whom originated from the Northern Triangle countries.

When it comes to drugs, Mexican drug cartels remain the largest foreign suppliers of heroin, and methamphetamines to the US, according to the U.S. Drug Enforcement Administration (DEA). Mexican cartels have also become leading producers of Fentanyl, a powerful synthetic. Cocaine largely originates from Bolivia, Colombia, and Peru, but the DEA estimates that 93-94% of Colombian cocaine comes to the US via the Mexico/Central America land corridor.

Consequently, the need for drug cartels to move high volumes through this vast corridor has created significant employment opportunities in poor, Central American communities, but also widespread violence, which prompts many to flee north.

Efforts to improve southern border patrol

Recognizing the threats posed from Central America, in recent years, the US and Mexico have enacted joint efforts to strengthen enforcement of both the US and Mexico southern borders.  The US views this border as the first line of defense against illegal immigration and drug trafficking into the US and sees a role in filling the gaps that Mexico lacks the capacity to handle on its own that ultimately affect the American border.

In an effort to curb immigration from unaccompanied minors from Central America, in 2016 the US Congress approved $750 million to support the Obama administration’sNorthern Triangle Alliance for Prosperity Plan, which doubled assistance to Central America from 2014 levels.

On the security and law enforcement side, in 2007, the US and Mexico launched theMérida Initiative, a partnership aimed at disrupting organized crime, institutionalizing reforms that support rule of law and human rights, and creating secure and modernized  borders.  To date, the US Congress has appropriated $2.5 billion to the initiative.

Additionally, the US Department of State’s Bureau of International Narcotics and Law Enforcement (INL) and the US Department of Defense have worked to enhance Mexico’s police and border patrol agencies, in part by funding a $75 million telecommunications project to improve secure communications between Mexican agencies working in eight southern states.

INL has also implemented programs with the US Customs and Border Protection (CBP) and US Immigration and Customs Enforcement (ICE) to strengthen law enforcement institutions and train Mexican police and military units to improve drug seizures in the southern border zone.

Risks of neglecting Mexico’s southern border

Unfortunately, the Trump administration’s adversarial posture toward Mexico could actually endanger the ability to combat migration and drug flows into the United States, even with increased enforcement in the north.  Andres Manuel Lopez Obrador (AMLO), a leftist populist candidate for Mexico’s 2018 presidential elections, has recently taken the lead in polls by running as the anti-Trump.

AMLO has expressed strongly pro-immigration views, mainly in support of Mexicans residing in the US and fearing, but also in terms of welcoming more migrants from Central America into Mexico. In response to Trump’s initial DACA policy announced in September, AMLO responded, “in Mexico, the doors are open.”

Any continuation of hostile rhetoric from Trump could further strengthen AMLO’s accelerating support for the presidency in 2018. Additionally, the difficulties of the current NAFTA renegotiations and Donald Trump’s threats to exit the agreement altogether have even caused Mexico’s current political leadership to state that they wouldreconsider cooperation with the United States on security and migration issues if the US chooses to exit NAFTA.

Additionally, while the Trump administration has ramped up immigration enforcement and proposed additional security measures at the US southern border, it has also proposed sweeping cuts to international aid programs that will hinder Mexico’s ability to sustain its achievements in enforcing its southern border with Central America. As of this summer, the Trump administration still proposed a 39% reduction in support for Central America in fiscal year 2018.

Conclusion

Overall, effective deterrence of illegal drugs and immigrants entering the US will require some combination of enhanced enforcement at the US southern border, as well as aid to Mexico to effectively police its own southern border.

Mexico and the US remain strong partners in commerce and security, but any efforts by one or both sides to further antagonize political disagreements or by the US to cut transnational partnerships could severely jeopardize both countries’ abilities to achieve their shared problems in this arena.

 

Samuel Schofield is a Contributing Analyst at Global Risk Insights. As originally appears at: http://globalriskinsights.com/2017/11/mexicos-southern-border-immigration-consequences/

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Will Egypt’s Economic Recovery Stall Under Yet Another ‘State Of Emergency’?

Amidst an economic reform program, Egypt continues to be troubled by a wave of deadly terror attacks. On 12 October President Abdel-Fattah el-Sisi declared yet another state of emergency – aimed at fighting terrorism. In the context of recent attacks, the policy’s effectiveness is in question.

 A series of major attacks

Egypt continues to be plagued by a stream of major terrorist attacks carried out by the Islamic State. Last week, Egyptian security forces conducting a police operation in the western desert fell victim to an attack that killed at least 16 people. A week earlier, a radical Islamist killed a Coptic Christian cleric in the city of Al-Salam, just outside Cairo. Coptic Christians in particular have been frequently targeted by Islamist militants in Egypt. Since December 2016, suicide bombings have claimed more than a hundred victims of Egypt’s Christian minority. Two of this year’s deadliest attacks occurred in Tanta and Alexandria on 9 April, Palm Sunday, killing 45 people.

Following the Palm Sunday attacks, President Abdel-Fattah el-Sisi declared a state of emergency – the first since 2013. After an extension in July, the state of emergency expired at the beginning of October. However, in an effort to confront the dangers of terrorism and its financing and in order to maintain security in all parts of the country, as well as ensuring the protection of public and private property and the livelihoods of citizens, President Sisi announced a new state of emergency on 12 October – effective for three months initially.

State of emergency: the new (old) normal

Since its founding in 1952, Egypt has been under a state of emergency for a total of 53 years. The most prominent instances have included the Suez Crisis, the Six-Day War, and former President Anwar Sadat’s assassination. Following the Egyptian revolution of 2011, the state of emergency was lifted in 2012. Since then it had only been briefly reinstated twice in 2013. But after the attacks in April of this year, President el-Sisi stated that “a State of Emergency [will be implemented] for three months after legal and constitutional steps are taken.”

These legal and constitutional steps are anchored in Article 154 of the country’s 2014 constitution. They stipulate that duration of each state of emergency is limited to three months and needs to be approved by the House of Representatives. In principle it can then only be renewed once. However, a new state of emergency can be requested under certain circumstances, and this is the tactic el-Sisi used in mid-October.

The latest state of emergency is linked to a significant increase of government intervention: in addition to expanded police powers, surveillance operations can also be increased. Worryingly, there is no appeals process for State Security Emergency Court verdicts.

Although the government had already targeted the press and NGOs prior to April 2017, the state of emergency now also allows it to monitor all forms of communication and to impose censorship prior to publication.

Reportedly, some 60,000 people have been imprisoned between 2013 and 2017, while the number of extrajudicial killings increased from 326 in 2015 to 754 in the first half of 2016 alone. The government created a Supreme Court for the Administration of Media, has not yet annulled the anti-protest law and furthermore passed a restrictive NGO bill in 2016.

Yet despite all of these measures, the number of terrorist attacks is not decreasing.

Undermining economic recovery

While the Egyptian government seems unable to substantially thwart the terrorist threat, it directs its increased powers towards political activists and journalists – all against the backdrop of its comprehensive reform program for economic recovery.

This week the International Monetary Fund (IMF) mission will visit Egypt for the second review of the government’s economic reform program, which includes liberalisation of the exchange rate regime, fiscal consolidation, as well as business environment reforms. Although GDP growth saw a decline in FY16 and again the first quarter of 2017, preliminary reports published by the IMF are cautiously positive.

Tourism, as an important income stream, has suffered under the country’s deteriorating security situation. While its share of GDP was 12.8% in 2014, it fell to 7.2% in 2016. It is expected to increase by 1.3% in 2017, but this is only a modest rise relative to where it could be.

Despite positive developments, such as the announcement that Egypt’s St Catharine’s Monastery has been included as an official Roman Catholic Church pilgrimage destination for 2018, an attack on police forces near the monastery earlier in October is likely to deter tourists from visiting.

Egypt’s new state of emergency is meant to provide the government with the necessary tool to fight terrorism and to ensure security in the country. Yet while terrorism wages on, key democratic institutions are being eroded.

Although the country is recovering economically – detailed results will be presented after the upcoming visit of the IMF to Egypt – unstable domestic security will almost certainly have a negative impact on market confidence. Egypt’s economic recovery requires both tourism and FDI.

Recent figures from the IMF and announcements by Egyptian Minister of International Cooperation Sahar Nasr have suggested that FDI may exceed its $10 billion target this year. This will be a key indicator of whether the state of emergency and associated restriction of freedoms have spooked investors.

 

Friederike Andres is an analyst for Global Risk Insights. As originally appears at: http://globalriskinsights.com/2017/11/egypt-economic-recovery-terrorism/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Trump’s Asia Tour: Don’t Expect Any Breakthroughs On North Korea

On 3 November, U.S. President Donald Trump set off on an extensive Asia tour. The twelve-day journey, which was extended following the President’s decision to attend the East Asia summit with leaders of the Pacific Rim, is the longest one in the region made by any sitting U.S. president since George H.W. Bush in 1991. After a first stop in Hawaii, where the President was briefed by the U.S. Pacific Command, he set off for Japan, South Korea, China, Vietnam, and the Philippines. Dominating the agenda is the looming threat from North Korea. Yet Trump’s bellicose posture is likely to be an impediment to any diplomatic breakthroughs.

Trump, the self-proclaimed ultimate dealmaker, once seemed relatively bullish on the prospects of dealing with Kim Jong-Un, calling the North Korean leader “a pretty smart cookie” whom he would be “honored” to meet. Hopes for a high-level diplomatic solution to North Korea’s nuclear quest, however, have repeatedly been squandered. The country’s leadership has defied international condemnation by conducting multiple nuclear and missile tests, and Pyongyang has stepped up its anti-American propaganda.

Just before assuming office, Trump announced that a nuclear North Korea “won’t happen.” While repeatedly deriding the policies of his predecessors, however, his own administration has fumbled to come up with a strategy to counter the Kim regime’s nuclear ambitions.

Steps in the right direction

There have been some successes. Even Trump’s critics will admit that his administration has succeeded in ramping up the economic and diplomatic pressure on North Korea, unilaterally as well as through the United Nations Security Council. In August and September, the Security Council passed resolutions imposing restrictions on North Korean exports of coal, iron, iron ore, lead, lead ore and seafood as well as new measures targeting the country’s primary foreign exchange bank and its ability to rake in receipts from workers posted abroad.

This increased pressure has served two primary purposes. To start with, it has amplified the economic burden on Pyongyang. In the wake of the most recent sanctions, North Korean officials have publicly acknowledged that the measures are causing significant damage to their already tattered economy. Second, the multilateral sanctions are contributing to signal a united stance against North Korea’s nuclear ambitions – especially given the accomplishment of eliciting support from veto-carrying China and Russia on the Security Council. That is no insignificant feat by Nikki Haley, the U.S. envoy to the United Nations.

There have also been some promising, if restrained, signs of diplomatic efforts to deescalate the crisis. For example, Secretary of State Rex Tillerson confirmed that multiple covert channels between Pyongyang and Washington remained open despite the tensions. He also admitted that the United States remained open for dialogue. This indicated some degree of moderation in the volatile climate.

A rhetorical tit for tat

Whatever cautious grounds for optimism these developments represent, they have largely been undermined by the signals from President Trump himself. Trump has steadily escalated his bellicose rhetoric on North Korea and “Little Rocket Man,” the derogatory term he now prefers to use when referring to the North Korean leader. Trump has repeatedly belittled and threatened Kim in public statements and, above all, in his Twitter feed. As a result, the U.S.-DPRK standoff has increasingly turned into a personal dispute between the two countries’ leaders – one with exceptionally high stakes.

In his maiden speech to the United Nations General Assembly, Trump asserted that Kim was on a “suicide mission” and that the United States would not hesitate to “totally destroy” North Korea if it deemed it necessary to do so. With this rhetoric, Trump has signaled a willingness to use military force – not as a regrettable option of last resort, but as a preferred course of action. The unprecedented decision to publicly undermine his own Secretary of State – he claimed on Twitter that Tillerson was “wasting his time trying to negotiate with Little Rocket Man” – helped reinforce this message. It also strengthened the notion that statements on U.S. policy from other American officials and senior diplomats are irrelevant compared to what is posted on the President’s Twitter feed.

The defining challenge to a diplomatic solution to North Korea’s nuclear ambitions is the fact that Kim seems to view a substantial nuclear arsenal as a necessary deterrent against foreign interventions. From this perspective, acquiring nuclear weapons is seen as a means by which to ensure the survival of himself, his regime, and the state of North Korea (probably in that order). It therefore has a certain inevitability and internal momentum, regardless of threats and sanctions emanating from abroad.

Options on the table for North Korea

This reality has restrained the set of options available to the United States and its partners. Military intervention is an alternative, but one which would have devastating and unpredictable consequences. According to reports, the Pentagon has estimated casualties in South Korea during a conventional war at 20,000 per day. Another alternative is to accept a nuclear North Korea and seek instead to contain it. That is a perilous option which few policymakers are likely to support – least of all Trump. Accordingly, both these options are unattractive.

This makes continued economic pressure a more appealing tactic. While it is possible that sanctions could extract concessions, however, the track record to date is sobering.

Richard Haas has proposed a two-step approach to deal with the crisis, whereby a provisional agreement to halt the development of North Korea’s nuclear and missile programs would be tailed by long-term efforts aimed at dismantling them altogether.

What both these options have in common, however, is that they require tempered diplomacy – albeit backed up with a credible threat of use of force. Trump’s current posture, which has so far mainly managed to provoke his adversary, is an impediment to such an opening.

 

Axel Hellman is an analyst at Global Risk Insights. As originally appears at: http://globalriskinsights.com/2017/11/trumps-asia-tour-north-korea/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

How Iran Is Exporting The Hezbollah Model To Dominate The Middle East

Recent events in the Middle East, including a missile fired from Yemen into Saudi Arabia and the resignation of Lebanon’s Prime Minister Hariri, have increased anxiety concerning the sweeping influence of Iran. The war against the Islamic State has expanded Iranian dominance through Baghdad and Damascus and advancing up to the Mediterranean Sea. Iraq, Syria and Lebanon are the front line in this rising tide of Iranian military and economic power.

Iran’s use of the “Hezbollah model”

Making major inroads into the Middle East benefits Iran most immediately by paving a gateway from the Persian Gulf to the Mediterranean Sea. The route from Tehran to Beirut allows the Islamic Revolutionary Guard Corps (IRGC) and its Quds force to transfer not only weapons and supplies, but also ideology and influence deep into Arab lands. Hezbollah is the critical link in this development. Now, its tried and tested strategy is set to be replicated throughout the region.

Regarded as one of the most formidable fighting forces in the region, with its sophisticated weaponry and answering directly to Tehran, Hezbollah is more like a modern military than a militia. Notorious for its efforts fighting Israel, Iran has also been using Hezbollah’s well-trained forces to secure the Lebanese border with Syria, stem the tide of rebel advances (thus propping up Assad), and train proxy militias in both Syria and Iraq.

Iraq: Rising Shia militias

Hezbollah-like militias have formed across the Middle East, with little concern for international borders, as rapid deployment of these forces has become significantly easier. This phenomenon gained momentum in 2014, when the most senior Shi’a cleric in Iraq – Grand Ayatollah Ali al-Sistani – issued a call to arms to fend off the impendingassault on Baghdad by the so-called Islamic State. The result was the formation of tens of thousands of fighters into Popular Mobilization Units (PMU), many of whom were trained by Iran. These units ultimately integrated into Iraq’s national army under the PMU law, passed in November 2016. Ironically, they are now at odds with Sistani over many key issues – including Iran’s influence, and sending fighters to Syria.

Several of these Shia factions are fiercely loyal to Iran: Asaib Ahl al-Haq, Iraqi Hezbollah, Saraya al-Khorasani and the Badr Organization, to name a few. They often fight side by side (or at least in coordination) with U.S.-trained Iraqi Special Forces. This creates a serious risk of equipment and weapons, paid for by the U.S., ending up with any of the aforementioned militias. And this problem is not unique to Iraq.

The recent advance into Kirkuk by American-trained federal Iraqi forces and PMU units, clashing with American-trained and equipped Peshmerga fighters, epitomizes this dilemma. Does this aid and knowledge, which was originally intended for a small elite group to fight IS, get passed down in the web of Iraqi combat groups, many of whom carry out Tehran’s regional objectives? Meanwhile, the Pentagon has asked Congress for $1.8 billion in the fiscal 2018 budget to train and equip Iraqi and Syrian forces.

Syria: Iran steps in for depleted Syrian army

Meanwhile in Syria, small Hezbollah-like groups have been formed with Iran’s guidance and Hezbollah’s training. Syria’s army was depleted and on the brink of defeat before the interventions of Russia and Iran. As of October 2015, it was estimated to contain 80,000-100,000 soldiers. In response, localized defense units were formed to fill the void, known as National Defense Forces (NDF). This makes the tens of thousands of Iranian-linked fighters arguably more effective than the depleted Syrian army. General H.R. McMaster has said that about 80% of those forces fighting on behalf of the Assad regime are Iranian proxies.

Lebanon: A host of complexities

Coordination issues: Hezbollah calling the shots

Lebanon carries similar complexities as Iraq when dealing with training a national army to combat the so-called Islamic State and al-Qaeda. The Lebanese Armed Forces (LAF) are the world’s fifth largest per capita recipient of U.S. military funding; the U.S. has provided more than $1.4 billion to them since 2005. U.S. specials ops are stationed in Lebanon to assist with critical support, and even though the U.S. supplied the LAF in August 2017 with (amongst other defense articles) Bradley fighting Vehicles, this aid could be in jeopardy. The State Department is proposing drastic cuts to Lebanon in its 2018 foreign aid budget.

As with Iraq, the possibility in the fog of war for U.S. supported troops to engage in combat missions with sanctioned militias poses serious questions. These complexities were on full display in the summer of 2017 when Hezbollah and the LAF coordinated, during their separate campaigns, to clear extremists from the Arsal region. The optics of Hezbollah leading the fight as well as negotiations – with the LAF all but marginalized – proves Hezbollah was ultimately calling the shots. This of course means that Iran is extremely influential in another country crucial to the stability of the region, with U.S. troops also present and carrying out a separate agenda. These fears have been felt before in 2010, when the U.S. and France temporarily suspended aid to the Lebanese army under Israeli pressure , over concerns Hezbollah may use it.

Political and economic challenges in the region 

Politically speaking, while Iran points the finger at the U.S. and Saudi Arabia, Prime Minister Hariri says that Iran’s involvement in Lebanese affairs has forced him to resign out of concerns for his own safety. He also warns of Iran’s control over Syria and Iraq, as well as the destruction Hezbollah has caused in Lebanon, which is setting a dangerous precedent for Iran’s influence, but could also lead to its downfall. The consequences of Hariri’s resignation could be far reaching in terms of political instability in Lebanon and uncertainty regarding next year’s elections.

The war raging across the border in Syria is certainly causing stress in Lebanon. According to government and independent sources, up to 1.5 million Syrians, roughly a quarter of the Lebanese population, have taken refuge in Lebanon since the war erupted in March 2011. According to the World Bank, it is estimated that as a result of the Syrian crisis, some 200,000 additional Lebanese have been pushed into poverty, adding to the erstwhile 1 million poor. An additional 250,000 to 300,000 Lebanese citizens are estimated to have become unemployed, most of them unskilled youth.

Finally, with one of the highest debt-to-GDP ratios in the world, growth battered by six years of war in adjacent Syria and a government struggling to agree on vital reforms, Lebanon’s economy is fragile. Moreover, nearly all Lebanese banks have American correspondent banking relationships that facilitate financial transactions between U.S. exporters and Lebanese importers. Deposits could dwindle if these correspondent banks deem Lebanon too risky and stop clearing dollar transactions. Such concerns stem from whether Hezbollah’s potential use of Lebanon’s banks will fund future attacks as well as provide Iranian institutions access to U.S. markets.

Iran’s sources of leverage

Whether it’s Hezbollah coordinating with the LAF, PMU branches fighting alongside the Iraqi army, or a seemingly Hezbollah/IRGC model to morph the various National Defense Forces (NDF) and foreign militias to supplant the Syrian army, Iran’s clout appears to be growing. The trend to counter these various Iranian supported groups, at least in Iraq and Lebanon, is for the U.S. to train small elite units easily counted on and not held captive by corruption. The number of special ops forces (SOF) in Iraq and Syria has reached 10,000. Both sides now have various small, but highly mobile, elite units scattered across three countries who have separate modus operandi and answer to a range of state actors.

With sanctions easing on Iran, another avenue opens for its influence to penetrate deeper into the Middle East. Iranian goods are pouring into Iraq; they are providing Damascus billions of dollars of credit and signing reconstruction deals over telecommunications, oil and natural gas and agriculture, while Hezbollah carries out Tehran’s plans by laundering money or using their influence in the banking sector toavoid sanctions.  There have been reports of Lebanon’s treasury paying the salaries of Hezbollah-linked Ministers in cash, to bypass the Hezbollah International Financing Prevention Act (HIFPA), which strictly targets the organization’s financial activities worldwide. There are currently two members of Hezbollah in the cabinet.

From all perspectives, Iran is in a position to exert immense influence, via proxies modeled after Hezbollah, throughout the Middle East for years to come.

 

Jesse McDonald is Political Risk Analyst at Global Risk Insights. As originally appears at: http://globalriskinsights.com/2017/11/iran-export-hezbollah-model-influence-middle-east/

 

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.