30 June 2015

Political Risk in the Second Half of 2015

The first half of 2015 proved to be a violent period for many areas of the world, particularly in the Middle East, North Africa and Central Asia.  While some progress was made in partially stabilizing the situation in Ukraine and rolling back the Boko Haram insurgency in Nigeria, few other improvements in the level of global security were achieved in the first six months of this year.  Instead, the political situation in many of the world’s most strategic locations continued to deteriorate, with full-scale wars taking place in at least 13 countries, and with insurgencies and unrest impacting dozens of additional countries.  Looking at the second half of this year, the situation in unlikely to improve and the potential for new conflicts to erupt will remain dangerously high as political risk levels continue to trend upwards. 

For the wars that are currently taking place in Africa, the Middle East and Central Asia, there is little prospect for peace in the coming months.  Despite a US-led air campaign against the Islamic State in Iraq and Syria, this group has managed to retain most of their territory in those two countries, while gaining the allegiance of militant groups in a host of other countries, including Libya and Afghanistan.  Moreover, the Islamic State appears determined to spread their insurgency to the Arabian Peninsula, as evidenced by their recent attacks on Shiite targets in Saudi Arabia and Kuwait.  In Afghanistan, the Taliban insurgency continues to destabilize many areas of that country, while the new Islamic State presence in that country is adding to the violence there.  Finally, Ukraine’s fragile cease fire may not hold much longer as fighting has intensified along many areas of the front line in eastern Ukraine.  Moreover, no party involved in the conflict in Ukraine is completely satisfied with the situation on the ground at present and any of these parties could move to re-ignite a full-scale conflict in that country.

The threat of conflict in the second half of 2015 is not confined to the 13 countries that are currently at war.  For example, the South China Sea remains the world’s most dangerous flashpoint as China has accelerated its efforts to reinforce its claim to more than 90% of that body of water.  This has led to higher tension levels between China on one side and the United States and its Asian allies on the other.  Meanwhile, the civil wars in Syria and Iraq continue to pose a major threat to the rest of the region and could lead to sectarian conflicts in a host of countries, including the oil-rich Gulf States and Turkey.  In Latin America, the threat of war has been replaced by the threat of rampant crime, but the threat of a civil war in Venezuela will rise as that country’s embattled left-wing government attempts to crack down on the country’s right-wing political opposition ahead of this year’s parliamentary elections.  Finally, the threat of large-scale terrorist attacks is on the rise in many areas of the world, particularly in Europe, East Africa and the Middle East and we have already seen evidence of this in each of these regions in recent months.  Altogether, there is little doubt that the level of political risk in the world is on the rise and this risk is increasingly impacting many of the world’s leading powers at a time when these powers are struggling with economic uncertainty and stretched defense resources.