Political risk will top risk agenda in 2016 predicts Eurasia

Eurasia published its Top Risks for 2016 report this week that identified the so-called ‘Hollow Alliance’ between Europe and the US as its number one concern. “The trans-Atlantic partnership is at its weakest point in decades—with global impact on political risk,” stated the firm. “Divisions have been developing under the radar for some time,” states Eurasia. “This year, the United States will turn inward during the highly contentious presidential race, while European leaders are focused mainly on their own political future. This has implications for conflicts globally, and geopolitical tensions emerging over the past year will escalate,” continued the consulting firm. Russia’s intervention in Ukraine and the conflict in Syria will expose US-European divisions, according to Eurasia. “As US and European paths diverge, there will be no more international fireman—and conflicts particularly in the Middle East will be left to rage,” it added.hideThe second biggest risk in 2016 is ‘closed Europe’ according to the firm. “In 2016, divisions in Europe will reach a critical point as a core conflict emerges between Open Europe and Closed Europe—and a combination of inequality, refugees, terrorism, and grassroots political pressures pose an unprecedented challenge to the principles on which the new Europe was founded,” states Eurasia. The firm added that the risk of Brexit is underestimated. Europe’s economics will hold together in 2016, but its broader meaning and its social fabric will not, it added. ISIS and its new friends in countries such as Nigeria and the Philippines will pose a rising problem this year and the international response to its rise is ‘inadequate, misdirected, and at cross purposes,’ states Eurasia. “For 2016, this problem will prove unfixable, and ISIS (and other terrorist organisations) will take advantage of that. The most vulnerable states will remain those with explicit reasons for ISIS to target them (France, Russia, Turkey, Saudi Arabia and the United States), and those with the largest numbers of un-integrated Sunni Muslims (Iraq, Lebanon, Jordan, Egypt and across Europe),” stated the firm. Eurasia agrees with many experts that the Saudi Kingdom faces a growing risk of destabilising discord within the royal family this year. Its increasingly isolated status will lead it to act more aggressively across the Middle East this year, according to the firm. “The threat of intra-royal family strife is on the rise, and a scenario of open conflict, unimaginable prior to King Salman’s January 2015 ascension, has now become entirely realistic. The key source of external Saudi anxiety is Iran, soon to be free of sanctions,” explained Eurasia. The rise of technologists ranks sixth in Eurasia’s risk ranking. It says that a variety of highly influential non-state actors from the world of technology are entering the realm of politics with ‘unprecedented assertiveness’. “These newly politically ambitious technologists are numerous and diverse, with profiles ranging from Silicon Valley corporations to hacker groups and retired tech philanthropists. The political rise of these actors will generate pushback from governments and citizens, generating both policy and market volatility,” predicts Eurasia. Unpredictable leaders is ranked seventh in the list. Eurasia points out that an unusually ‘wide constellation’ of leaders known for their ‘erratic behavior’ such as Russia’s Vladimir Putin and Turkey’s Recep Tayyip Erdogan will make international politics exceptionally volatile this year. Others include Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman and Ukraine’s Petro Poroshenko. Brazil’s President Dilma Rousseff is fighting for her political survival, and the country’s political and economic crisis is set to worsen in 2016, according to Eurasia. The firm says that the battle over Rousseff’s impeachment is unlikely to end the current political stalemate. “Should the president survive, her government won’t gain the political boost necessary to move on the economic reforms needed to tackle the country’s growing fiscal deficit. If Rousseff is ousted, an administration led by Vice President Michel Temer won’t fare much better,” predicts Eurasia. The lack of elections in emerging markets this year will lead to social problems caused by the huge inequality gap created by recent growth, according to Eurasia. “As slower growth and stagnating living standards stoke popular discontent, governance and stability will suffer. By raising popular expectations, the massive income growth that most EMs enjoyed over the past 10 years has created conditions for a rude awakening,” states the firm. Turkey is the 10th big risk for 2016, according to Eurasia. After a decisive victory for his AK party in late 2015, President Erdogan will now push to replace the country’s parliamentary system with a presidential one, states the firm. Eurasia believes the president is unlikely to reach his goal in 2016, but his aggressive electioneering will further damage an already battered Turkish business and investment climate. “On the security front, there is little prospect of an imminent end to PKK violence, and unrelenting US pressure on Ankara to clamp down on the Islamic State will produce only modest results while making Turkey more vulnerable to new attacks by ISIS,” it adds. Eurasia also identified some interesting red herrings to be aware of that are mainly positive. US voters will not elect a president who will close the country to Muslims. China’s economy is not headed for a hard landing, and its politics will remain stable. “Continued strong leadership from Japan's Shinzo Abe, India's Narendra Modi, and especially China's Xi Jinping will keep Asia's three most important players focused on economic reform and longer-term strategy, reducing the risk of conflict in Asia’s geopolitics,” the firm predicts.

Political risk will top risk agenda in 2016 predicts Eurasia

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