ISA Global Update #572 25 th of February 2015 ISA (International Strategic Analysis) 1 Key Political Issue Key Economic Issue North American Review South

ISA Global Update #572 25th of February 2015

ISA (International Strategic Analysis) 1

• Key Political Issue

• Key Economic Issue

• North American Review

• South American Review

• West European Review

• Central and East European Review

• Middle East and North African Review

• Sub-Saharan African Review

• Central and South Asian Review

• East Asia and Pacific Review

• Statistics in Focus

The ISA Global Update

Issue #572

25th of February 2015

Published by ISA (International Strategic Analysis)

www.isa-world.com

Contents:



Key Political Issue: Libya’s Threat to Global Security

Summary - The deteriorating political and economic situation in Libya poses one of the greatest risks to global security in recent years and, unfortunately, the situation inside Libya appears likely to deteriorate in the weeks and months ahead. As a result, it is becoming imperative that North African and European countries, with the backing of the United States, intervene in order to prevent the situation from becoming even more unstable. This means that the international community will have to choose a side in Libya’s second civil war in four years and provide the military and economic support that the chosen side will need to defeat its rivals and secure control of the entire country. If not, Libya’s internal strife will worsen and Libya will come to resemble Somalia.

Main PlayersAs no side in Libya’s internal conflict possesses the power to overwhelm its rivals at present, the fighting in the country has largely reached a stalemate, with four rival groups jockeying for territory in Libya. •First, the internationally-recognized parliament based in the eastern city of Tobruk, together with its allies, the Zintan Brigades, have lost control of Libya’s capital city, Tripoli, and other strategic areas of the country, but remain a major force in the conflict and still control much of the country’s vital oil industry.•So far, the major rival to the Tobruk government has been the alliance of the New General National Congress, an Islamist group, and the Libya Shield Force, a grouping of fundamentalist Islamic militant groups. This alliance controls Tripoli and most of the key centers in the western half of Libya.•Another force in this conflict is the radical Islamist Ansar al-Sharia militant group that has driven forces aligned with the Tobruk government from Libya’s second city, Benghazi.•Finally, militants claiming allegiance to the Islamic State (IS) have emerged as a growing force in a number of areas of Libya in recent months and now control a few strategic cities along the northern coast of Libya.

Radical Groups Find a HomeAs the stalemate in the conflict in Libya shows no sign of ending, and as new groups with more radical agendas enter the conflict, the threat that the unrest in Libya poses beyond the country’s borders grows exponentially. For Libya’s neighbors, the threat is clear, as militants based in Libya have carried out attacks on targets in Egypt, Tunisia and Algeria in recent months, while they continue to target citizens of these countries currently living in Libya. Furthermore, as the conflict in Libya continues, militant groups such as the Islamic State will use Libya as a base to spread their region-wide insurgency to at-risk countries such as Egypt and Algeria, as well as to the less stable countries to Libya’s south. Finally, as we have seen in recent years, the five-and-a-half-years of conflict in Libya has allowed a steady flow of fighters and weapons to spread throughout North Africa and the Sahel, adding to the level of instability in these regions.

Wider ThreatLibya’s conflict not only poses a threat to its neighbors, but is also one of the leading threats to global security. For example, the unrest in Libya has resulted in a major surge in illegal immigration from Libya to Europe, via the Mediterranean. With militant groups gaining more territory in Libya, many European countries are fearful that this will allow militants to also cross the Mediterranean in order to carry out attacks on targets across Europe. Moreover, radicalized Europeans will find it even easier to join with militant groups in Libya than to join the Islamic State in Syria (as Turkey closes many routes into Syria) and this will allow these radicalized Europeans to not only fight alongside groups such as the Islamic State in Libya, but to be trained to carry out attacks back in Europe.

Pick a SideIn order to prevent the conflict in Libya from carrying on indefinitely, or to allow one or more radical militant groups from seizing control of the entire country, the international community will have to choose sides in Libya’s civil war. The most obvious choice is for the international community to back the government in Tobruk, despite its ties to the former Qaddafi regime. However, it will take a significant economic and military commitment to allow this relatively weak group to retake control of the entire country. So far, no country, with the possible exception of Egypt, appears to have the will to commit such forces. If action is not taken soon, the Tobruk government may also lose control of the country’s main oil producing and shipping centers, a development that would dramatically strengthen the militants and enable them to gain even more territory in Libya and to fund operations around the region, a potentially major setback in the war against radical groups across the region.



Key Economic Issue: Little Hope for Greece

Summary - Greece’s financial woes have once again dominated the headlines in recent weeks as that country’s financial crisis has re-emerged to threaten to lead to chaos in the Eurozone. While Greece appears to have reached a last-minute deal with its international lenders on a four-month extension of its current bailout program, this has merely provided a short-term fix that will result in this issue resurfacing in the headlines in four months time. Moreover, while Greece has managed to pull out of its six-year recession, its economic struggles are far from over and the fundamentals of the Greek economy remain very poor.

A Short-Term Fix• Once again, Greece was on the brink of defaulting on its debts and being forced to withdraw from the Eurozone, before a last-minute deal was reached by the new left-wing Greek government and Eurozone finance ministers that will extend Greece’s current bailout program by four months (the Greeks had asked for a six-month extension). • In order to reach this deal, Greece’s government had to promise a series of reforms that contradicted their election promises from earlier this year. • Among the reforms that were forced on Greece were a renewed effort to crack down on tax evasion, new programs designed to improve government finances through cost savings, and a focus on reducing the level of corruption in Greece. • Nevertheless, many European governments want Greece to do more and this will lead to more showdowns between the two sides in the coming months over issues such as privatization programs and public sector wages.

A Battered Economy• While the focus has been on Greece’s finances, its economy remains in dire straits. • Last year, Greece managed to record positive economic growth for the first time since 2008. • However, nearly all of this growth was the result of a very strong year for Greece’s tourism industry (which has benefitted from the collapse of North Africa’s tourism industry), the one sector of the Greek economy that has managed to weather the long crisis. • Outside of the tourism sector, the Greek economy remains in shambles, as the country’s manufacturing sector has collapsed and most of its service sector continues to struggle. • In fact, Greek economic output remains 25% lower now than it was in 2008, a result akin to that of the Great Depression in the United States in the early 1930s. • Moreover, Greece’s unemployment rate remains near 26%, despite the fact that so many working-age Greeks have left the country in recent years. With domestic demand certain to remain weak for the foreseeable future, and with a complete lack of products and services to export to faster-growing markets outside of Europe, Greece’s economic future remains bleak, regardless of the result of the current financial crisis.



Regional Overview: North America

Regional Summary:• Islamic militants in Somalia called for their followers to attack shopping malls in the United States, Canada and Britain.• Mexico’s economy grew a little faster in the fourth quarter of last year.

Shopping Center Threat:• Last weekend, the Department of Homeland Security in the United States warned that it was taking a threat made by Somalia’s al-Shabab militant group against shopping malls in the US, Canada and Britain seriously.• A video released recently by the al-Shabab militants called on its followers to carry out attacks on crowded shopping centers in these three countries.• A number of prominent shopping centers were listed by the al-Shabab in their video.• The al-Shabab was responsible for the 2013 attack on a shopping mall in Kenya that left 67 people dead.

A Look Ahead:

Key Issues or Events in the Next Seven Days:• Freezing temperatures are forecast to remain in place in much of the eastern United States and Canada for the next few days.

The Mexican Economy Improves:• Economic growth in Mexico accelerated to 2.6% year-on-year (0.7% quarter-on-quarter) in the fourth quarter of last year, its fastest rate of growth in two years.• As a result, the Mexican economy expanded by 2.1% for the year in 2014, well below its potential.• On the positive side, Mexico’s economy was bolstered by a strong performance by the country’s construction and manufacturing sectors in the fourth quarter of 2014.• However, growth was held back lower oil output that resulted from the sharp fall in oil prices late last year.

Regional Risk Factors to Watch:• The severe winter weather in the United States and Canada in recent weeks may reduce those countries’ economic growth rates in the first quarter of this year, much like the “polar vortex” did in early 2014.



Regional Overview: South America

Regional Summary:• Brazil’s economy is facing a number of serious challenges in early 2015.• The mayor of Caracas was charged with plotting a coup against Venezuela’s government.

Roadblocks for the Brazilian Economy:• A severe drought and a truck drivers strike combined to add to the downwards pressures facing the Brazilian economy, which has struggled to record any growth over the past year.• First, the severe drought in the state of Sao Paulo and neighboring states continued to lead to severe water shortages in the country’s most populous region, while reducing the country’s agricultural output.• Now, a truck drivers strike has led to major roadblocks across the country in recent days, disrupting Brazil’s exports and threatening to further reduce economic growth rates in early 2015.

A Look Ahead:

Key Issues or Events in the Next Seven Days:• More large-scale protests are likely to take place in Caracas and other Venezuelan cities in the coming days.

Coup Charge Against Caracas Mayor:• Last weekend, Antonio Ledezma, the mayor of Venezuela’s capital city, Caracas, was indicted on charges of plotting violence against the government of President Nicolas Maduro.• The mayor was arrested and transferred to a military prison, leading to major protests by his supporters.• Currently, 33 of the 76 mayors in Venezuela that are part of the political opposition are facing trial.• With Venezuela’s economy collapsing, the government of President Nicolas Maduro has stepped up its crackdown on the political opposition as the government’s support is waning.

Regional Risk Factors to Watch:• Brazil’s drought could have an impact on the agricultural sectors of many other countries in the region as demand for their products rises.



Regional Overview: West Europe

Regional Summary:• The outlook for the Eurozone economy in 2015 is mixed.• France’s reform-minded prime minister faced a revolt from more left-leaning members of his party.

The Outlook for the Eurozone Economy:• While Germany’s surprisingly high rate of economic growth in the fourth quarter of last year enable the Eurozone to perform a little better than expected in late 2014, the outlook for the Eurozone in 2015 is mixed.• On the positive side, a weak euro, low oil prices and strong export demand in the United States will allow countries such as Germany to maintain a decent level of economic growth this year.• On the other hand, weak domestic demand levels in many Eurozone countries and a lack of serious economic reforms in France and Italy will prevent the Eurozone’s economy from accelerating too much.

A Look Ahead:

Key Elections in the Next Seven Days:• Parliamentary elections will take place in the tiny country of Andorra this weekend.

Socialist Split in France:• Last week, France’s Socialist Prime Minister Manuel Valls forced through a series of economic reforms without the approval of the French parliament after more left-leaning Socialist members of parliament refused to back the government’s reform proposals.• Prime Minister Valls used a little-used constitutional provision to force the passage of a series of labor reforms that economists have argued that France needs to boost its declining economic competitiveness.• Afterwards, Prime Minister Valls survived a no-confidence vote in the parliament.

Regional Risk Factors to Watch:• Deflationary pressures will worsen in many areas of the Eurozone in the coming months.



Regional Overview: Central and East Europe

Regional Summary:• The situation in eastern Ukraine stabilized slightly in recent days.• Greece submitted its new reform proposals to its international lenders.

Fragile Ceasefire Takes Hold in Ukraine:• There were an increasing number of signs that the recent ceasefire between pro-Russian militants and Ukrainian government forces was beginning to take hold after a period of heavy fighting along the front.• In recent days, the two sides have exchanged prisoners and pro-Russian militants have pulled many of their heavy weapons back from the front line.• Earlier, Ukrainian forces withdrew from the pocket around the strategic town of Debaltseve, having suffered a major defeat at the hands of the militants in the days after the ceasefire deal was reached.

A Look Ahead:

Key Elections in the Next Seven Days:• Parliamentary elections will take place this weekend in Estonia.

Greece’s Reform Proposals:• This week, the Greek government submitted its list of reform proposals to its international lenders in a bid to reach a new deal on the latest bailout for the beleaguered Greek government.• Among the reforms proposed by the government of Prime Minister Alexis Tsipras are new measures to combat tax evasion in Greece and to reduce smuggling.• These proposals were approved by Eurozone financial ministers later this week and this will allow Greece to secure a four-month loan extension.

Regional Risk Factors to Watch:• The United States and Britain have threatened to impose harsh new sanctions against Russia if the ceasefire in eastern Ukraine collapses.



Regional Overview: Middle East and North Africa

Regional Summary:• Violence continued to intensify across much of Libya.• Heavy fighting continued in Syria and Iraq in recent days.

Flashpoint Libya:• The political situation in Libya continued to deteriorate in recent days as fighting between rival factions continued across much of the country and as an affiliate of the Islamic State (IS) militant group continued to expand its presence in that country.• This week, Libya’s internationally-recognized parliament suspended its participation in United Nations-brokered talks aimed at bringing peace to that country.• Last week, Islamic State militants carried out a suicide bombing in eastern Libya that killed 40 people.

A Look Ahead:

Key Issues or Events in the Next Seven Days:• Iraqi government forces and Kurdish militants are preparing a large military force to retake the northern Iraqi city of Mosul from Islamic State (IS) militants this spring.

The Wars in Syria and Iraq:• Heavy fighting continued in Syria and Iraq as the level of violence remained very high in both countries. • In Syria, government forces continued their efforts to encircle the key northern city of Aleppo, dealing a major blow to more moderate rebel forces in that country.• In northeastern Syria, Islamic State militants kidnapped 90 Assyrian Christians from a number of villages.• In neighboring Iraq, Islamic State militants carried out a series of bomb attacks in and around Baghdad in recent days, resulting in dozens of deaths.

Regional Risk Factors to Watch:• FIFA announced that the 2022 World Cup in Qatar will take place in November and December, leading to a major clash with most of football’s (soccer’s) leading clubs.



Regional Overview: Sub-Saharan Africa

Regional Summary:• A ceasefire deal was reached in Mali.• South Africa’s economic growth rate exceeded expectations in the fourth quarter of 2014.

Ceasefire in Mali:• Last week, the government of Mali signed a ceasefire deal with six militant groups based in the northern part of that country that have waged an insurgency against the government in recent years.• The deal was signed during talks that took place over the past two weeks in neighboring Algeria.• French and African Union troops intervened in the conflict in Mali in 2013 when it appeared that northern rebels were on the brink of seizing control of the entire country.• This new deal was welcomed, but ominously, none of the militant groups agreed to be disarmed.

A Look Ahead:

Key Elections in the Next Seven Days:• Parliamentary elections will take place this week in Lesotho, just six months after an attempted coup led to a major political crisis in that country.

The South African Economy Beats Forecasts:• While South Africa’s economy only expanded by 1.3% on a year-on-year basis in the fourth quarter of last year, the 4.1% annualized quarter-on-quarter GDP growth rate was well ahead of expectations.• Growth in South Africa was driven by a surge in manufacturing output in the final months of 2014.• For the entire year in 2014, the South African economy expanded by just 1.5%, its lowest rate of annual growth in five years.• Looking ahead, growth is forecast to accelerate in 2015, driven by a recovery in the country’s mining sector.

Regional Risk Factors to Watch:• Government forces in Congo-Kinshasa are launching a new offensive against Hutu rebels from neighboring Rwanda.



Regional Overview: Central and South Asia

Regional Summary:• More than 700 people have died in a swine flu outbreak in India over the past two months.• India’s ruling BJP party will be a part of Kashmir regional government for the first time.

Swine Flu Outbreak in India:• An outbreak of the deadly H1N1 strain of swine flu continued to spread across India in recent weeks and the number of new cases of swine flu is rising at an increasing pace.• Since the outbreak began in December 2014, there have been more than 700 deaths from swine flu in India.• Moreover, the number of new cases of swine flu in India more than doubled over the past week and there are now more than 11,000 known cases of swine flu in that country.• The H1N1 strain of swine flu was first discovered in Mexico in 2009 and has since spread around the world.

A Look Ahead:

Key Elections in the Next Seven Days:• Parliamentary elections will take place this weekend in Tajikistan.

Kashmir Coalition Deal:• This week, a coalition government was formed in the Indian-administered part of the disputed territory of Kashmir, two months after regional elections there resulted in no single party emerging as a winner.• For the first time, India’s ruling Hindu nationalist BJP party will be part of a coalition government in Kashmir.• Indian Prime Minister Narendra Modi, the leader of the BJP, campaigned extensively last year in Kashmir. • The BJP will form a regional government with the People’s Democratic Party (PDP), a party that has long been a dominant player in Kashmiri politics.

Regional Risk Factors to Watch:• Nepal’s political situation remains tense and could result in a renewed conflict in that country.



Regional Overview: East Asia and Pacific

Regional Summary:• India’s prime minister visited a region that is also claimed by China, leading to a dispute between the two countries.• Australia plans to change its citizenship laws in order to prevent potential terrorist attacks.

China-India Border Rift:• This week, Indian Prime Minister Narendra Modi paid an official visit to the Indian region of Arunachal Pradesh, a region that is also claimed by China.• Afterwards, the Chinese government lodged an official protest against Prime Minister Modi’s visit, as it claims the entire territory for China, calling it South Tibet.• The two countries fought a border war in 1962, during which China occupied much of this disputed territory.• Prime Minister Modi is scheduled to visit China in May 2015.

A Look Ahead:

Key Issues or Events in the Next Seven Days:• The United States and South Korea will hold joint military drills next week, something likely to draw the ire of North Korea.

Australia’s War on Internal Terror:• This week, Australian Prime Minister Tony Abbott announced plans to significantly strengthen its citizenship laws in order to prevent potential terrorists from settling in Australia. • In addition, the prime minister called for new laws that would suspend or revoke the Australian citizenship of dual nationals that are involved in terrorist activities.• Australia has become a leading target of many international terrorist organizations, in part as a result of its participation in the recent wars in Iraq and Afghanistan and its current role in the war against the Islamic State.

Regional Risk Factors to Watch:• Scientists have warned that the spread of a drug-resistant strain of malaria in Southeast Asia is a major global health threat and could soon spread to India.



Statistics in Focus: Central America’s Divergent Economic Performance

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Source: ISA Economic Forecasts

Documents

ISA Global Update #572 25 th of February 2015 ISA (International Strategic Analysis) 1 Key Political Issue Key Economic Issue North American Review South