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The Geopolitical Week Ahead (September 3-10, 2018)

Summer is now over and this week is proving that the next few months are likely to be very busy and quite impactful on the geopolitical front. The Presidents of Russia and Turkey meet with the President of Iran to discuss the future of Syria – while the rest of the Middle East watches very closely what comes of the discussions. Chinese President Xi hosts the China-Africa Investment Forum and then travels to North Korea to meet with the Kim Jong-un to discuss the future of security on the Korean Peninsula. The US and India hold a stategic forum to discuss mutual security issues and the Japanese Crown Prince visits France. Here is what we are watching around the world this week:

Presidents Putin, Erdogan, and Rouhani meet in Iran Iranian President Rouhani will host Turkish President Erdogan and Russian

President Putin in Tabriz September 7 to discuss the conflict in Syria. Turkey, Russia, and Iran are the guarantors of the Astana Process, which mediated the Syrian ceasefire in 2016. Erdogan is likely to ask Putin and Rouhani to give Ankara time to separate “moderate” rebel forces from jihadist elements (including the Al Qaeda-linked Hayat Tahrir al Sham) before the Assad regime offensive on the largest remaining opposition stronghold in Idlib begins. Russia has reportedly told Turkey that it must cooperate with the offensive (against groups with which it is not aligned) or leave Idlib by September.

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The Geopolitical Week Ahead

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The Syrian government – supported by Russia and Iran – has used the Astana ceasefire to concentrate regime forces and methodically defeat or force the surrender of rebel forces in the deal’s four “de-escalation zones”. Turkey – a key backer of some opposition groups – has complained but done little to counter these efforts in southern Syria. Idlib, however, holds a significant number of Turkish-backed groups and borders the zone occupied by Turkish-controlled “Euphrates Shield” forces in northern Syria, which is of strategic value to Ankara as a buffer against the Syrian Kurdish YPG (seen by Turkey as a terrorist organization). Erdogan fears that the regime’s recapture of Idlib could lead Assad to push against the borders of that zone.

Erdogan is also wary of the massive refugee crisis that a full-scale offensive in Idlib

could cause, which would further strain Turkish resources (the country currently accommodates roughly 3.5 million Syrian refugees). Idlib province hosts roughly 3 million people, and the UN estimates that a large-scale Syrian offensive “has the potential to create a humanitarian emergency at a scale not yet seen”.

Ankara’s refusal to comply with US sanctions on Iran and to continue to import

Iranian energy and other products gives Turkey some leverage with Tehran. However, it enters talks with Russia and Iran in a weakened position following Erdogan’s dispute with President Trump over the detention of US pastor Andrew Brunson, and the sharp devaluation of the Turkish lira in the face of US sanctions and the threat of US penalties against Turkey’s Halkbank.

Japanese Crown Prince Naruhito visits France In his first official visit, Japanese Crown Prince Naruhito will visit France

September 7-15, where he is expected to meet French President Macron and commemorate 160 years of diplomatic relations. He will visit a silk textile museum in Lyon before attending the Japonismes 2018 cultural show in Paris. The Crown Prince’s itinerary includes stops at a winery in Santenay and scientific research facilities in Grenoble. After Emperor Akihito abdicates on April 30, 2019, Crown Prince Naruhito will succeed him as next emperor of Japan.

Chinese President Xi Jinping meets North Korean leader Kim Jong-un President Xi Jinping will travel to Pyongyang September 9 to meet leader Kim Jong-

un and participate in North Korea’s 70th anniversary. The trip carries significant symbolism as a Chinese president hasn’t visited Pyongyang since Hu Jintao’s trip in 2005, and it is the first time Kim hosts a head of state in the capital. Relations between North Korea and China (the DPRK’s closest ally) deteriorated after Kim took power, and as a result of China’s support for UN sanctions, but they have recently begun to improve.

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The visit continues a pattern wherein Xi and Kim meet before – and sometimes after – summits involving the DPRK (please see chart outlining Kim’s meetings with Chinese, South Korean and American leaders in 2018). The agenda is likely to focus on negotiations with the US, economic assistance, and South Korean President Moon Jae-in’s upcoming trip to Pyongyang. Relations between North and South Korea have warmed under Moon, with the two leaders agreeing in June to resume family reunions for those separated during the Korean War. Seoul has also pushed for greater economic integration between the two Koreas, including railroad connections and joint industrial complexes. It is estimated such undertakings could be worth $62.4 billion over the next 30 years. Japan is also considering $10 billion in economic aid to North Korea to normalize relations, although security issues and the fate of Japanese citizens abducted by North Korea in the 1970s and 1980s stand in the way of that effort.

These overtures by China, South Korea and even Japan, differ from the hardline US

approach to North Korea. Washington has maintained sanctions on the DPRK’s nuclear and missile programs and in August imposed sanctions on Chinese firms for violating the export ban to North Korea. US intelligence agencies and the International Atomic Energy Agency (IAEA) report North Korea continues to develop its nuclear program despite commitments made at the Singapore summit. Last week President Trump cancelled Secretary of State Pompeo’s visit to Pyongyang citing the lack of progress on denuclearization.

Beijing, however, has been quietly easing its sanctions enforcement, allowing a

greater flow of goods and North Korean laborers across its border, as well as prohibited ship-to-ship transfers of oil. China is North Korea’s largest trading partner, and its enforcement of UN sanctions (which led to a 90% drop of its imports from North Korea in 1H 2018) contributed to bringing North Korea to the table. President Trump has said that the trade war with the US has motivated Xi to cooperate more closely with Kim in order to undermine the US.

Philippines President Duterte visits Israel and Jordan From September 2-8, President Duterte will make the first visit of a Philippines

president to Israel and Jordan:

o Israel (September 2-5): Duterte will meet Prime Minister Netanyahu, President Rivlin, business leaders, and the Filipino community. He is expected to discuss the possibility of relocating the Philippines embassy to Jerusalem and to sign a series of agreements on security, technology, food and agriculture, as well as labor protections for Filipino workers in Israel. The Philippines relies heavily on remittances from its workers abroad, which represent over 10% of its GDP – over a quarter of which comes from the Middle East. But these guest workers oftentimes face serious mistreatment. In February, issues relating to the

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treatment of Filipino migrant workers led Duterte to ban Filipinos from working in Kuwait and begin repatriating those already there, actions that were eventually reversed after the two countries reached a labor agreement in May. Opposition politicians have questioned whether Duterte is going to Israel for medical treatment, but he has denied the rumor.

o Jordan (September 5-8): Duterte will meet King Abdullah II to bolster cooperation, namely on trade, investment, and defense. Despite Duterte calling the outgoing UN High Commissioner for Human Rights Zeid Ra'ad Al Hussein, a Jordanian prince and cousin of King Abdullah, “empty-headed” for his criticism of Duterte’s anti-drug war, Amman still proceeded with providing the Philippines with two Cobra attack helicopters in May. Duterte will also meet business groups and visit the Filipino community to check on their conditions in Jordan. The Philippine embassy in Jordan stated that the country hosts between 26,000 and 28,000 Filipino workers, most of which serve as caregivers.

Duterte will be accompanied by Philippines Environment Secretary Cimatu, who

previously served as the Philippines’ special envoy to the Middle East.

Chinese President Xi Jinping hosts the Forum on China-Africa Cooperation summit President Xi Jinping and South African President Ramaphosa will co-chair the

Forum on China-Africa Cooperation (FOCAC) summit in Beijing September 3-4. The forum and will focus on Chinese investment opportunities in Africa. In particular, the leaders will discuss how the Belt and Road Initiative (BRI) can be aligned with the AU’s Agenda 2063 growth and development plans. The summit is expected to adopt the Beijing Declaration and Beijing Action Plan (2019-2021), which outlines China’s 3-year plan for economic cooperation and investment in Africa. African heads of state, Chairperson Faki of the African Union (AU) Commission, UN Secretary General Guterres, and the leaders of international and regional African organizations will attend.

FOCAC was established in 2000 and is comprised of China, 53 African nations, and the

AU. Two summits have been held, in Beijing (2006) and Johannesburg (2015). During the latter, Xi announced 10 programs to boost cooperation, in areas such as industry, agriculture, infrastructure, environment, trade, poverty, and public health. He also pledged to invest $60 billion in Africa. Reflecting China’s increased commitment to the continent, FOCAC will begin to hold a regular summit every three years. Since 2005, China has invested over $66 billion in Africa, a figure that has accelerated since the BRI was launched in 2013. It has built over 5,000 km of railways and highways, signed memoranda of understanding (MOUs) with nine African countries on BRI construction projects, and is in talks with over 20 more nations across the continent to sign additional MOUs for new BRI projects.

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Chinese investment is generally considered favorably in Africa; according to a 2016 Afrobarometer survey of 36 African nations, 63% of Africans felt China’s influence was “somewhat” or “very” positive. China was ranked as the second-best provider of a development model for Africa, behind the US.

However, some of its projects have provoked popular resentment for being extractive and environmentally damaging. China has also been criticized for bringing its own laborers for many of its projects, leaving only the lowest paid work for locals. BRI projects have

become a burden for some countries as well, creating so-called “debt traps.” At the end of last year, Sri Lanka was forced to provide China with a 99-year lease over its strategic port of Hambantota after it struggled to pay off billions in debt incurred from Chinese BRI loans. Malaysia’s new Prime Minister Mahathir canceled two multibillion-dollar Chinese BRI projects this month, fearing a similar outcome. Djibouti – where Beijing opened its first overseas military base – may soon be forced to sell its Doraleh port to China as payment for BRI projects.

As of 2016, China is now Africa’s largest trading partner and investor by dollar amount, though it lags behind the US and France in terms of number of FDI projects.

US Secretary of State Pompeo travels to Pakistan Secretary of State Pompeo will visit Pakistan en route to India September 5 to meet

newly-elected Prime Minister Imran Khan and discuss US policy in the region. Pakistan’s longstanding but increasingly fragile alliance with the US has been threatened as never before by Islamabad’s refusal to rein in the Haqqani network and other militants who target US and NATO forces in Afghanistan. In an effort to compel action against the Pakistan-based terrorists, the Trump administration has slashed military aid and threatened sanctions; for its part, Pakistan continues to deny it is harboring terrorists and has deepened its ties with China, its “all-weather” ally.

Khan – traditionally a vocal critic of the US – is seeking more “balanced” bilateral ties

in his first meeting with a senior foreign official. In addition to counterterrorism issues and the peace process in Afghanistan, Pompeo and Khan are likely to discuss a potential Pakistani bailout request to the IMF of up to $12 billion (if it proceeds, it would be the country’s 13th IMF program since the late 1980s). Pakistan is suffering from a sharp depreciation of the rupee, a widening trade deficit, and rising inflation. To finance infrastructure projects, the government is committed to the $62 billion China-Pakistan Economic Corridor that depends on Chinese loans; Pakistani governments have also borrowed an additional $5 billion from Chinese banks over the last year to stabilize the rupee and bolster sagging reserves. In late July, Pompeo warned the IMF against allowing Islamabad to direct any future bailout funds toward payments to Chinese creditors.

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US and India hold 2+2 strategic dialogue After his trip to Pakistan, Pompeo will join Defense Secretary Mattis in New Delhi

September 6-7 for the inaugural “2+2” strategic dialogue with counterparts Swaraj and Sitharaman. The 2+2 dialogue – agreed to during Prime Minister Modi’s trip to the US last year – aims to strengthen diplomatic and defense cooperation between the US and India and replaces the Strategic and Commercial Dialogue held between commerce and foreign ministers during the Obama years. The announced agenda will focus on “operationalizing India’s status as a major defense partner” and drafting a common vision to address security challenges. Chief amongst these are how to understand and respond to China, a common approach SE Asia (especially maritime) issues, promoting a political settlement in Afghanistan.

The initial 2+2’s biggest challenges will be brokering an agreement on India’s defense

trade with Russia (which violates US sanctions under the recently passed CAATSA legislation) and its oil trade with Iran. In recognition of India’s lingering dependence on Russian arms, Swaraj and Sitharaman will push for a waiver of CAATSA sanction so India can purchase the Russian S-400 missile system; a face-saving agreement is likely whereby the US side will promise to closely examine a waiver while India will push back the purchase until after next year’s scheduled parliamentary elections. The US side will not be as forthcoming on Iranian oil imports. India is Iran’s second largest crude market after China and, as was the case with pre-JCPOA sanctions, Indian refiners are likely to quietly turn to other suppliers after energy sanctions are imposed in November.

The four officials are also expected to sign enabling agreements that deepen security

cooperation by safeguarding communications, technology, and information. They will also expand the scope of military exercises and augment the dialogue with other senior level meetings. Over the past decade, US defense sales to India have shot up from a nominal amount to roughly $18 billion.

Discussions will also include trade, including the US designation of strategic trade

authorization tier 1 status to India, which lifts some restrictions on trade and tech cooperation. While bilateral trade increased from $114.2 billion in 2016 to $126 billion in 2017 (a rise of 10.4%), US companies continue to be concerned about Indian IP violations and the country’s still troublesome restrictions on foreign investment. Lastly, officials hope to build on joint development assistance in third countries, such as partnerships in Africa to provide peacekeeping training and health-related services.

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Airplane Reading

The Cook Political Report, “Getting to Know White Voters” The Cook Political Report compares exit polling to Pew polling to fact check some of the narratives about support for President Trump amongst white voters.

McKinsey, “A decade after the global financial crisis: What has (and hasn’t)

changed?” McKinsey looks at the progress of the global economy after the 2008/09 financial crisis, which is marred by the resurgence of debt-driven growth and the rise of new economic warning signs.

Foreign Policy, “U.S. to Canada: Deal or No Deal?”

As the US, Canada, and Mexico near a deal on a new NAFTA agreement, Foreign Policy lays out the different possible outcomes of the negotiations.

The Atlantic, “ISIS Never Went Away in Iraq”

The Atlantic describes how ISIS is still active in Iraq, not as an occupying force but as a destabilizing insurgency that threatens to keep Iraq from rebuilding its economy.

Foreign Policy, “India Is Getting Cold Feet About Trump’s America”

Foreign Policy discusses how India has reacted to the Trump administration’s tough foreign policy stance by nurturing regional relationships and reducing its reliance on the US.

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