The Great Game in the Indian Ocean (2012-05-16) The Indian Ocean is quickly emerging as one of the world’s most strategic flashpoints whose importance will help define the global balance of power in the 21st century. On one hand, a great deal of the world’s oil and gas supplies are shipped to markets around the world via the Indian Ocean, making its sea lanes some of the most important in the world. Furthermore, the world’s three leading powers in the 21st century (the United States, China and India), are all vying for control of these sea lanes and the strategic locations that dominate them. As such, the potential for rising tensions between these countries in the Indian Ocean is great. With nearly all of the oil and gas exports from the Persian (Arabian) Gulf being shipped to Asia and other regions via the Indian Ocean, it is critical that those countries dependent upon oil and gas supplies from this region keep the Indian Ocean’s main shipping lanes open. As an increasing percentage of the Gulf’s oil and gas exports headed for China, it is a priority for China to develop the capability to maintain these sea lanes. By expanding its naval forces and by developing a string of ports along the Indian Ocean, China’s presence in the Indian Ocean is expanding rapidly. This trend is deeply disturbing for the two other powers with a major naval presence in the Indian Ocean, the United States and India. While the amount of oil and gas being shipped from the Gulf to the United States is declining, it is nevertheless a vital interest for the United States to maintain a major naval presence in the Indian Ocean in order to ensure that no other power (such as Iran) is able to dominate the Gulf or the Indian Ocean’s vital shipping lanes. Moreover, it remains the dominant naval power in the Indian Ocean, although India hopes to one day be able to establish itself as a leading naval power in the waters off of the Sub-Continent. Furthermore, India remains concerned about the growing Chinese presence in the Indian Ocean and its growing ties with countries such as Pakistan, Sri Lanka and Bangladesh. As Chinese and Indian power rises, the Indian Ocean could be a flashpoint between these two rivals, particularly if China to establish a permanent military presence in the Indian Ocean.

Europe's Economic Stagnation (2012-05-15) Economic growth in the European Union stagnated in the first quarter of 2012, although there were a few positive signs from a handful of European economies in the early part of the year. For the battered economies of Southern Europe, the economic results for the first quarter were as bad as expected as that region’s debt crisis worsened. However, a few Northern European economies were able to avoid a recession in the first quarter thanks to their ability to export to markets outside of Europe. The European Union’s GDP rose by just 0.1% on an annualized basis in the first quarter of 2012, while the Eurozone’s economy registered 0.0% growth during that period. As expected, the debt crisis in Europe resulted in Southern Europe’s leading economies remaining in a recession, with the economies of Greece (-6.2%), Portugal (-2.2%), Cyprus (-1.4%), Italy (-1.3%) and Spain (-0.4%) all contracting in the first period. Moreover, each of these economies faces the prospect of a long, drawn-out period of contraction, while neighboring France is also likely to experience a longer period of stagnation stretching into at least into 2013. Should the debt crisis worsen in the coming weeks, this regional recession could deepen even further, causing major hardships for the population of Southern Europe. While most Northern European countries have also seen their domestic markets weaken over the past year, their economies have been bolstered by their ability to continue exporting to large markets outside of Europe. For example, while economic growth in Germany slowed to 1.2% on an annualized basis in the first quarter of this year, that was a better performance than had been expected thanks to the continued growth of German manufactured exports. For other Northern European economies, the record has been mixed, with those economies that are closely tied to Germany’s manufacturing sector (such as Austria) performing well, but with others (such as the Netherlands) struggling to offset sharp cuts in government spending.

Foreign Investment in Africa (2012-05-09) Foreign investment levels in Africa have risen sharply in recent years, providing a needed boost for many economies in that region. So far, most of this surge in foreign investment has been focused on Africa’s natural resources; with Asia’s large emerging markets, led by China, leading to way. For some countries, this increase in foreign investment is providing real benefits such as major infrastructure improvements and an opportunity to diversify their economies. However, a number of challenges remain for foreign investors in Africa and political instability remains a major hindrance to foreign investment in too many countries in the region. Foreign investment in Africa was reported to have risen by 27% in 2011 to an all-time record of nearly $80 billion. Moreover, foreign investment in Africa is expected to grow at a rapid pace in the years ahead and could reach $150 billion by the year 2015. A number of countries have seen foreign investment levels rise dramatically in recent years, including Zambia, Ghana, Tanzania, Botswana and Cape Verde. It is no coincidence that these countries have some of Africa’s most stable political climates as well as governments that have taken major steps to make it easier for foreign investors to do business in their countries. So far, most foreign investment in Africa remains focused on the region’s natural resources. For example, the recent discoveries of large oil and gas deposits in countries such as Ghana, Uganda and Mozambique has led to the rapid expansion in foreign investment in this sector to countries outside of the region’s traditional oil and gas centers such as Nigeria and Angola. However, too many countries in the region remain plagued by political instability that is hampering their ability to attract foreign investors. Countries such as Congo-Kinshasa, Zimbabwe and South Sudan are all well endowed with natural resources, but their political situation has deterred all but the most determined companies from investing there, holding back the region’s potential economic growth.

French and Greek Elections Rattle Europe (2012-05-07) The victory by the Socialist candidate Francois Hollande in France’s presidential election and the success of political parties opposed to additional austerity measures in Greece’s parliamentary elections, while expected, has nevertheless raised concerns about the European Union’s political cohesiveness. With many of Europe’s leading economies in the grip of a recession, and with the outlook for economic growth in the region remaining poor, these political changes will raise concerns that the economic crisis in southern Europe could continue to worsen. This is due to the fact that the winners of these two elections are opposed to the policies endorsed by the two most powerful players in the European economic crisis, international creditors and the German government. Socialist candidate Francois Hollande won France’s presidential election, defeating incumbent President Nicolas Sarkozy by a narrower-than-expected margin of 51.7% to 48.3%. His calls for more government spending and higher taxes are likely to put him at odds with German Chancellor Angela Merkel and international financial markets and could derail efforts in the Eurozone to find common ground in the effort to end the region’s economic crisis. Meanwhile, Greece’s two main political parties (New Democracy and PASOK) managed to win just 149 of the 300 seats in the Greek parliament, giving a slight majority to parties opposed to additional austerity measures and the other bailout conditions set forth by international creditors. If a new coalition government can’t be formed in Greece, new elections will have to take place, adding to the political uncertainty in that country and across the Eurozone. For Europe, these two elections signal two crucial shifts. First, France’s new president will be the only left-leaning political leader in a larger European Union member state, as Germany, Britain, Italy, Spain and Poland all have center-right governments that favor lower degrees of government control of the economy, lower taxes and greater adherence to fiscal prudence. Second, the elections in France and especially Greece reflect the growing anger at the austerity measures being enacted across much of the Eurozone. This could shift the focus of the efforts to bring an end to the European economic crisis from cutting spending to finding ways of promoting economic growth. However, without a major improvement in the economic competitiveness of southern Europe’s economies, these governments are likely to find it hard to produce the economic growth rates needed to improve Europe’s economic future.