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IHS Global Insight's Top-10 Current Political and Security Risks
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by James Auger
Director of Country Intelligence Products and
IHS Global Insight's team of country analystsReceive Updates Quarterly
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The pace of economic recovery will be the primary preoccupation for investors over the remainder of 2010, but they cannot afford to lose sight of critical political and security risks. Many of these risks stem from lingering social discontent associated with the economic crisis. As fiscal stimulus expires, governments are being forced into austerity measures and painful structural reforms that leave them unable to deliver on unrealistic promises. Leftist governments are most vulnerable given their reluctance to erode welfare states and confront key public sector and union allies. The second key driver of political and security risks in 2010 is al-Qaeda and its affiliates. The central organization may be badly disrupted, but in countries such as Yemen, Pakistan, Iraq, and Afghanistan, extremist networks are challenging the government and pose renewed international threats.
The top-10 key political and security risks to watch:
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Venezuela
Misrule is catching up with Chavez: Venezuelan president Hugo Chávez faces unprecedented headwinds in 2010 as the economy slumps and soaring inflation erodes the purchasing power of his core electorate. Spending to maximise short-term political gains has meant underinvestment in infrastructure and an unprecedented electricity crunch, which could turn into a national crisis if the rainy season fails to replenish hydroelectric dams. Chávez will, nonetheless, cling to power in 2010 with the benefit of continued reckless public spending, military support, and a muzzled and disparate opposition.
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Ukraine
Lurching from Crisis to Crisis: Ukraine has a new president, Viktor Yanukovych, after the bitterly fought 2010 elections, but there is little prospect of the interminable political stand-offs easing. Russia-friendly Yanukovych faces a powerful parliamentary opposition led by former PM Yulia Tymoshenko as well as a continuing economic crisis that could provoke sovereign default. Snap elections are possible, but they remain unlikely to resolve the political stalemate. Under most scenarios progress on necessary austerity and market-oriented reform will be slow, and social discontent will deepen.
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Afghanistan
The Worst is Yet to Come: Political uncertainty and insecurity will likely worsen over 2010. President Hamid Karzai's difficulties forming a cabinet reflect delicate trade-offs to satisfy the international community in return for aid, to reward political backers, and to secure adequate support in parliament. A government will eventually be formed, and a broad strategy and timetable for the engagement of international forces should be agreed upon, but little structural progress is to be expected. If parliamentary elections are held as scheduled in May 2010, they are likely once more to be marred by violence and fraud.
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Haiti
Enduring international support is vital: Risks will remain exceptionally high in earthquake-devastated Haiti during 2010, and there is a strong possibility that the situation could deteriorate further and trigger significant refugee problems in nearby countries and the United States. The country's recovery will depend to a large extent upon the generosity and effectiveness of U.S.-led aid efforts and longer term assistance. If poorly handled, Haitians could turn to ousted populist leader Jean Bertrand Aristide, an outcome the United States is very keen to avoid and one that would set back hopes for the country's economic liberalisation and development.
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Nigeria
North-South divisions loom large over succession intrigue: Ailing President Umaru Yar'Adua's absence from political life has intensified jostling and exacerbated long-standing north-south tensions ahead of the 2011 polls. The assumption of executive powers by Vice-President Goodluck Jonathan may have brought some semblance of stability, but his political manoeuvres are likely to be curtailed by the real power brokers within and without the ruling party. The president's absence will continue to slow parliamentary debate, and the gains made in the Niger Delta will continue to unravel amid the uncertainty at the top. The military is poised in the wings, a latent threat to stability if the political situation deteriorates further.
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Iran
Divided elite under growing internal and external pressures: Having proved its remarkable resilience in the face of brutal oppression, the Iranian opposition will sustain its defiance against the regime. This will continue to undermine the regime's legitimacy and authority and throw its very survival into serious doubt. However, lacking a strong leadership and a clear and united agenda, the opposition challenge is unlikely to muster enough energy and strength to topple the system in 2010.
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China
Rising social discontent threatens more serious instability: Although China has emerged from the financial storm stronger than most, social instability fuelled by corruption, unemployment, land seizures, and rising pollution will remain a primary concern for the government during 2010. While the likelihood of sporadic outbreaks of unrest will remain high as Beijing continues to adopt a hardline approach in Tibet and Xinjiang, these are unlikely to develop into any major threat against the Chinese Communist Party (CCP) during 2010.
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Yemen
Al-Qaeda's resurgence elevates oil exporters' risks: A resurgent al-Qaeda, a full-blown insurgency, and a brewing rebellion in the south will test Yemeni President Abdullah Saleh's grip on power in 2010. Under pressure from the United States after the failed airliner attack of 25 December 2009, the government has declared open war on al-Qaeda in the Arabian Peninsula (AQAP), which had quietly entrenched in the impoverished and increasingly lawless country. New U.S.-backed military operations will stir local resentment and could spark a backlash that could escalate very dangerously for the government. Al-Qaeda's ability to use Yemen as a launching pad is now a key concern for oil exporters elsewhere in the region, particularly in Saudi Arabia.
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Mexico
No Respite in Battle with Drug Cartels: Drug-related violence reached critical levels in Mexico during 2009, and there is little to suggest that the remainder of 2010 will break the trend. In-fighting among competing drug gangs may produce a less bloody equilibrium in the long run, but the government crackdown and vicious retaliations will continue to drive increasing violence in the U.S. border areas and in some western states. Spiraling violence distracts political attention from much-needed reforms to support the economy's cautious recovery.
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Somalia
Piracy remains rife despite international efforts: The scourge of piracy off the Somali coast, which reached epidemic proportions throughout 2008 and 2009, is set to remain a major problem in 2010 and beyond despite the presence of an international naval fleet. The problem has grown steadily during the near-two decades that the country has operated without an effective central government, driving up shipping and insurance costs and impeding aid deliveries. Whilst the international presence has helped reduce the number of successful attacks and forced the pirates farther away from the coast, the problem is merely being contained while the political and security crisis continues.
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