Eurasia Group President Ian Bremmer Announces Top Risks in 2009 by Red Herring
Eurasia Group President Ian Bremmer announced the firm’s annual Top Risks in a note to clients today. Top Risks identifies the year’s key geopolitical areas to watch for global investors and market participants. According to Dr. Bremmer, underlying the risks in 2009 are two important structural forces: (1) more state intervention in the global economy and (2) more reactive and poorly coordinated intervention.
Highest on the list of Top Risks is the US Congress. The global impact of the US response to the financial crisis will be far reaching and the Democratic-led Congress, which is cohesive and shares the collective sense that the executive branch overstepped its policymaking authority in recent years, will exert policy leadership with long-lasting consequences for business and the economy.
The following is a summary of Eurasia Group’s Top Risks for 2009. For a copy of the full note by Dr. Bremmer, visit www.eurasiagroup.net.
1 — US financial regulation and the rise of Congress: A stronger Congress is likely to be more assertive in driving the US economic policy agenda, with three broad areas to watch: (1) legislative and regulatory changes in the financial industry; (2) direct government involvement/control over economic enterprises; and (3) fiscal policies meant to spur economic growth. The degree to which political populism plays a role in the response to the financial crisis will have a host of unintended consequences.
2 — South Asia security: The security environment in India, Pakistan, and Afghanistan will deteriorate significantly, and the US and Europe will find themselves more directly involved in conflicts in all three states, with little benefit to show for it by the end of 2009.
3 — Iran/Israel: Iran is expected to have the capacity to develop a nuclear bomb (if it so chooses) by the end of the year. While the likelihood of US strikes against Iran has diminished considerably, 2009 is the critical year for conflict (both direct and through proxies) between Iran and Israel.
4 — Russia: The challenges of the financial crisis are likely to produce increased social unrest in Russia—with nearly zero state tolerance for dissent. Given that the Barack Obama administration will probably not keep quiet during a crackdown in Russia, relations between Russia and the US, as well as Russia’s relations with some European nations, are likely to continue to deteriorate. Russia will be a troublemaker in international affairs, though military intervention in Ukraine or a direct conflict over Georgia, NATO enlargement, and missile defense are unlikely.
5 — Iraq: The Iraqi government will face a series of political tests that will determine its ability to keep the country united and move it toward stability. President Obama will face pressure to fulfill his promise to withdraw US combat troops within 16 months, but he may have to revise his timetable. The looming prospects of US withdrawal, combined with provincial and the parliamentary elections, will expose Iraq to high risks of renewed unrest, while the unresolved dispute over the oil-rich city of Kirkuk will remain a source of long-term volatility.
6 — Venezuela: President Hugo Chavez’s plan for a referendum to reform the constitution and abolish term limits is unlikely to succeed. Faced with defeat, Chavez is likely to take an increasingly authoritarian approach, which will raise social and political turmoil domestically.
7 — Mexico: Rising violence and corruption scandals associated with narco-trafficking will continue to raise questions about the government’s strategy against organized crime. However, growing public concerns will not affect political stability or the government’s increasingly aggressive efforts to weaken the drug cartels.
8 — Ukraine: Direct military conflict with Russia is unlikely, but battles between Prime Minister Yulia Tymoshenko and President Viktor Yushchenko will continue to divide the government and complicate attempts to deal with the country’s economic crisis. Growing unemployment, falling wages, and anger at politicians will increase the risk of social unrest in major cities.
9 — Turkey: The fight between secularists—in the judiciary, military, and industry—and the Islamists in government is becoming a serious obstacle to economic advancement and Ankara’s bid for EU membership.
10 — South Africa: The African National Congress is likely to keep a majority in parliament and Jacob Zuma should prevail as the country’s next president. Uncertainty over the government’s macroeconomic approach, however, may lead to market pessimism, and the outcome of Zuma’s corruption case could pose further challenges.
In addition to Top Risks, Ian Bremmer identified three Red Herrings, which are the issues that Eurasia Group believes will not be sources of geopolitical instability during 2009. These include social unrest in China; political instability in the Persian Gulf; and major global climate change initiatives.
From January 6-16, Eurasia Group will release a series of in-depth outlooks focusing on each of the Top Risks and the Red Herrings. Visit www.eurasiagroup.net for more details.
Eurasia Group is the world’s leading global political risk research and consulting firm. Since 1998, we have helped clients make informed business decisions in countries where understanding the political landscape is critical. Our research analysts are trained social scientists with post-graduate degrees, extensive professional experience, and a diverse range of language capabilities. Headquartered in New York, we also have offices in Washington and London, as well as a vast network of experts around the world.
