| Topic: |
Politics > Politics-USA |
| User: |
"Captain Compassion" |
| Date: |
07 Jul 2004 09:19:05 PM |
| Object: |
Third Quarter Forecast: The Pivot of the War |
Third Quarter Forecast: The Pivot of the War (Long)
STRATFOR ^ | July 07, 2004
The U.S. presidential election will be the dominant issue of the third
quarter. To the extent that the U.S.-jihadist war has become the pivot
of the international system, the presidential election will become the
pivot of the war. The key issue separating U.S. President George W.
Bush and his Democratic opponent, Sen. John Kerry, is this: Bush
carried out a series of military campaigns without considering
Franco-German views; Kerry has made the enlistment of the
Franco-German bloc into the American war effort the centerpiece of his
campaign thus far. Kerry is prepared to reshape the American war
effort to accommodate their views.
Bush's view is that limiting freedom of action is not worth the
benefits of Franco-German support. This is not a trivial matter, but
it is not, in the end, an earthshaking difference in opinions. Kerry
is not prepared to challenge the basic premise of the war. His
argument is that Bush has mishandled the war -- and particularly Iraq
-- and that he, Kerry, is more capable than Bush. That means, from a
global point of view, the outcome of the election is of relatively
little consequence.
The exception to this is in the Islamic world, where Bush's defeat
would be enormously significant. Osama bin Laden has made the argument
that the Islamic world is much more influential than it knows. He
points to the war in Afghanistan and the defeat of the Soviet Union
and its collapse as his major examples. Another is the fall of the
Spanish government after the Madrid bombings. These events validate
both al Qaeda and its view of the world. If Kerry defeats Bush --
regardless of the issues on which the election turns -- the perception
in the Islamic world will be that it was another triumph for Muslims.
There is another viewpoint: Al Qaeda regards Bush as incompetent and
therefore wants him to remain in power. We see no evidence for this
argument, which transfers the view of Bush's domestic opponents to al
Qaeda. From al Qaeda's standpoint, however, one American president is
about the same as another. Its audience is Muslim, and its desire is
to be seen as deciding the fate of Western governments.
Al Qaeda will focus its attention this quarter on doing what it can to
undermine Bush's credibility in the United States. That means using
the Iraqi jihadists to destabilize the new regime in Baghdad to the
extent possible, along with raising tension levels in oil-producing
countries to generate a war premium on the price of oil. This process
was under way in the second quarter, and it will continue. We also
continue to believe al Qaeda wants to carry out a major action in the
United States, but we remain uncertain as to whether it has the
resources to do so -- or if it does, whether U.S. intelligence can
disrupt the attack. The covert dueling continues, with time now
running against al Qaeda.
We also expect the third quarter to be dominated by the redefinition
of U.S.-Iranian relations. The shift in U.S. policy during the April
offensive in Iraq has created a fundamental crisis for Iran -- with
its decade-long goal of a neutral or pro-Iranian government in Baghdad
fading. Late in the second quarter, crises with the United States and
Britain broke into the open. Iran's nuclear program, coupled with the
capture and release of British sailors, drove home the fact that
relationships are deteriorating. We cannot forget the reports out of
Iran of training camps for suicide bombers or renewed interest in
Hezbollah by both Iran and Syria. We strongly suspect that Iran will
be critical for the next few months. The U.S. elections might also
give the Iranians some leverage.
Since this is the third-quarter forecast and the presidential
elections are in the fourth quarter, we are relieved of the
responsibility of calling the election. Nevertheless, we note the fact
that at his worst showing -- in May, following the April rising in
Iraq -- Bush remained at 44 percent in the polls, only 7 percentage
points behind Kerry. That is not a good place to be, but if that is
the level of support Bush has when the situation seems completely out
of hand, we expect a rebound. In our view, Bush is still the likely
winner. His hard-core support is sufficient enough that -- without a
further disaster -- he will never be out of striking distance of
re-election.
But that is speculating on November. For the next quarter, the issue
is whether Bush can avoid major problems in the war -- and whether al
Qaeda can create some for him. The last is the most important
question. We know what they would want to do; we simply do not know if
they can.
MIDDLE EAST
In the third quarter of 2004, three Middle Eastern states -- Iraq,
Iran and Saudi Arabia -- will be the most significant geopolitically.
In each case, the center of gravity is the action of the United
States.
The main event or issue this quarter will involve the governments'
responses to U.S. pressure to rein in al Qaeda in Saudi Arabia, to
desist from creating problems for the United States in Iraq and to
contain Iran's bid to become a regional hegemon. In turn, the actual
outcome will be a function of dealings between Washington and the
three states individually, as well as the action of third parties --
such as al Qaeda militants in Saudi Arabia, jihadists and Iraqi
insurgents in Iraq and the European triumvirate in the case of Iran.
The dynamic in each of the three Gulf states is intimately connected
to the dynamic of the others. For example, if the U.S.-Saudi
relationship deteriorates, Iran's position in the Gulf substantively
will change. If al Qaeda militants in Saudi Arabia heed the call of
Iraqi jihadists and cross the border, the strength of the regime in
Baghdad -- and the U.S. military posture in Iraq -- will be
undermined. If there is a political -- or worse, military -- crisis
involving the United States and Iran, Baghdad and Riyadh will be
called on to support the U.S. position.
Because the connections are diverse and myriad, each regime will be
watching the actions of its neighbors closely -- and looking for means
and opportunity to manipulate the positions of its neighbors in order
to better its own. Meanwhile, Washington will be forced to take into
account the dynamic in each of the three Middle Eastern capitals
before taking action regarding any of them.
This makes for an extremely complex and difficult situation, since
each move and maneuver by any of the players involved -- al Qaeda,
Baathists, the Iraqi government, Iraqi Shia, Iran, the Saudi regime,
the United States -- can have effects across the board. In this
volatile atmosphere, crises can develop and escalate at a frightening
pace. Stratfor does not expect anything as serious as a U.S.-Iranian
war, but does recognize the potential for things to get out of hand --
and quickly.
Iraq
During the third quarter, the United States gradually will withdraw
its forces to military enclaves in western and southwestern Iraq,
although troop levels will not grow or be reduced by more than 10
percent to 15 percent during the third quarter. A natural consequence
of the June 28 transfer of power to the Interim Iraqi Government is
that Iraqi security apparatuses -- police, military and intelligence
-- will be scrambling to fill the void left by U.S. and coalition
forces, whose assistance will become increasingly limited. As a
result, Iraqi forces will deal with routine matters inadequately and
incompetently; they also will have to manage a crisis situation
whenever there is a sudden surge in militant attacks.
During the next few months, Iraq's legal code will be crafted, and a
hectic drive to establish the infrastructure for elections in January
2005 will ensue. The sovereignty of the new Iraqi government likely
will be restricted to domestic affairs -- and even then will be
tempered by the U.S. military presence. There will be no Shiite
uprising on the scale seen in April 2004, but there will be intense
jockeying among the three major groups -- Shia, Sunnis and Kurds -- as
well as posturing for greater influence within the IIG and the
administration that will emerge following January's elections.
Security will remain tenuous. Insurgents, facing mostly Iraqi police
and military forces, will be emboldened to stage increasingly frequent
attacks. Guerrillas will continue to target Iraqi leaders. If they
succeed in assassinating Prime Minister Iyad Allawi, the country could
be thrown into a fit of violence that would exceed the levels of the
April rising. The insurgents will include foreign jihadists as well as
a medley of Sunni Iraqi players -- distinct from those who sought
inclusion in the political process. The interim government will
declare martial law or emergency laws in areas where militant activity
is the most marked.
Guerrillas will respond with increased aggression and confidence -- an
attitude that also might make them more careless. This in turn could
give U.S. forces -- who for the most part will not be involved in
daily security tasks -- more opportunity to gather intelligence.
Given their interest in the state of their fellow Shia and Sunnis in
Iraq, both Iran and Saudi Arabia will be engaged with Baghdad. Iran's
involvement will be quantitatively and qualitatively greater than that
of Saudi Arabia. Tehran will actively support the multiple Iraqi
Shiite factions as they seek to increase their influence over the IIG.
Tehran will use its back channels with Washington toward this end.
Although Saudi Arabia's goal is to prevent the emergence of a
Shiite-dominated Iraq and an Iran-dominated Persian Gulf, Riyadh will
be less active: To reduce its own internal threats, the government
could try to push increasing numbers of al Qaeda militants toward Iraq
by promoting it as a greener pasture for jihadist activities. Pursuing
this strategy would bring down the wrath of the Bush administration on
Riyadh. In any case, Washington will continue to use Iraq to play off
Iran and Saudi Arabia.
Iran
Two issues will come to the fore during the third quarter for Iran:
One is its national security policy -- for the past decade, a
balance-of-power strategy -- concerning Iraq; the other is its nuclear
program, which has been the target of a recent U.S.-European
diplomatic offensive.
Iran is under intense Western pressure to reshape the prevailing
international dynamics of the nuclear issue. Ideally, the Islamic
republic would want to leverage its dealings with the United States on
Iraq to make gains concerning its nuclear program. However, Tehran
realizes Washington cannot be drawn into such a quid pro quo
settlement.
Tehran will continue to try to exploit the differences between the
United States and Britain on one hand, and continental European states
-- especially France and Germany -- on the other, to avoid punitive
action by Washington. It also will seek to finalize a deal with Russia
about construction of the Bushehr nuclear reactor -- allowing Tehran
to demonstrate good faith on the nuclear issue and to show it enjoys
international confidence where nuclear technology is concerned. To buy
time and maintain the strategic advantage, the clerical regime will
vacillate between allowing inspectors from the International Atomic
Energy Agency to (selectively) examine its facilities and refusing
cooperation.
Iran also will seek leverage through diplomatic and military
activities -- hoping to generate a crisis. Examples are leaking
reports of troop movements along the Iran-Iraq border and fomenting
disputes with neighboring Gulf Cooperation Council member states such
as Kuwait and the United Arab Emirates. More detentions of foreign
sailors are likely, as are boardings of vessels in Iranian waters in
the Persian Gulf. Tehran also might foment unrest among the Shia in
places such as Bahrain, Iraq and Lebanon -- signaling to Washington
that problems are in store if the United States does not return to its
original agreement for a Shiite-dominated Iraq.
Saudi Arabia
Without making any real threats, the United States will push Saudi
Arabia to provide greater security for Western expatriates --
including permission to import Western security teams and allowing
civilians to arm themselves. Riyadh also might bow to calls for a
limited foreign security presence at key energy facilities, such as
Saudi Aramco offices, or to call out elite squads of National Guard
and Pakistani units of the Saudi military to fill the need.
Meanwhile, following the death of leader Abdel-Aziz al-Muqrin, al
Qaeda militants will pause briefly to regroup, with new attacks likely
toward the end of the third quarter and the beginning of the fourth.
Moreover, many expatriates will take vacations during the severely hot
weather of the next two months -- a further reason to delay major
attacks until September.
For its part, the House of Saud will not pursue al Qaeda leaders and
enablers -- such as sheikhs, tribal leaders, merchants and financiers
-- at this stage, but instead will use its amnesty offer to gather
intelligence on operational figures, while appearing to keep pressure
on militants' supporters. Intermittent shootouts between militants and
security forces -- and a few captures -- can be expected this quarter.
Riyadh also will launch a massive public relations campaign,
complementing the lull in militant activity, to drive home the point
with Washington and other Western governments that it is capable of
dealing effectively with militancy. To do this, state-run television
will broadcast news of the surrender of low-ranking militants and
footage of their public confessions.
AL QAEDA
Al Qaeda is not likely to stage an attack against the continental
United States before the presidential elections in November. The
rationale for doing so assumes that al Qaeda would be trying to
achieve what it won with the Madrid bombings in March: the ruling
party voted out of office. Although the group would like similar
results in Washington, its leaders understand the political dynamic in
the United States is different -- so it is not likely to burn assets
in an attack where the chances of political success are low. Al Qaeda
likely has a limited number of resources in North America at this
point, which could be more effectively deployed in an attack that is
unrelated to the presidential elections.
GLOBAL ECONOMY
The dominant factor in the global economy to watch is inflation. At
this point, the core rate (in which energy and food prices are
factored out) remains low: 1.8 percent in the European Union, 1.7
percent in the United States and negative in Japan. But with global
economic growth continuing to flirt with 20-year highs, this is the
quarter when inflation will finally emerge as a factor that
policymakers must take into account.
Market pundits have been screaming for some nine months that inflation
is rising and that rates will need to be adjusted. In the coming
months, they will be correct. But this does not mean that adjustments
will be sharp -- at least not in this quarter. Rates are low not only
because inflation has been tame, but also for political reasons.
Any rate hikes the U.S. Federal Reserve implements would be purely
cosmetic. The independence-minded body is concerned that a broader
tightening of monetary policy could be interpreted as a vote of
support from the Bush administration. In past periods of monetary
tightening, rates have jumped up some 3 percentage points in just over
a year. In the third quarter, the U.S. economy will not require such
dramatic moves; that will come after the elections. Two
quarter-percentage hikes (June 30 was the first) -- with attendant
mention of how subdued inflation remains -- are the most the United
States is likely to see.
In Europe -- where governments have decided to do away completely with
deficit curbs -- rates might rise a bit faster, since long-term
inflation is becoming a real fear. Japan, where deflation is still
entrenched, will leave rates untouched.
That leaves China, which will be the part of the global economy to
watch in the third quarter. There, inflation is rapidly reaching
decade highs. Given the country's bad loan problems, Beijing is doing
everything it can to keep interest rates low; a sudden rise would
force dozens of state-owned enterprises into formal bankruptcy at a
time when Beijing is very conscious of outsiders' attention on the
country's economic stability.
The third quarter is when reaction will start to appear from foreign
companies that have purchased Chinese firms and have begun to look
into their new assets. Since statistical fabrication has reached the
level of an art form in China, we expect stunned reversal of opinion
in some quarters.
At the same time, rising inflation will present Beijing with another
problem: how to convince outsiders that the Chinese really do have
control over their economy. In April, the government did this by
enacting a lending moratorium -- simply shutting down new loans for
several days. Stratfor expects leaders in Beijing to take even more
creative action in this vein in an attempt to dial back breakneck
growth in the coming months.
Such unorthodox methods are more likely to rein in the irrational
exuberance that has held sway over the Chinese economy, and they are
likely to cause problems for Beijing's crisis management officials.
But even if China begins to hemorrhage foreign capital in the third
quarter, we do not expect its economy to fall. China has the
second-largest currency reserves in the world, allowing it to buy its
way out of a lot of problems. The dollar-yuan peg also lends a great
deal of stability -- and, of course, the People's Liberation Army is
quite effective at crowd control.
One real shock for the global economy this quarter could be in the
energy industry, where shortage is a real possibility. Simultaneous
growth in the United States, Europe and Asia -- a rarity in economic
history -- has pushed oil consumption to record highs. Guerrilla
bombing attacks against Iraqi oil infrastructure, which pulled some
1.6 million barrels per day off the market in early June, served as
stark reminders that Western commercial inventories remain low,
supplies strained and prices volatile.
At this point, any other large-scale disruption -- which is possible
in Iraq, Nigeria, Venezuela, Saudi Arabia or even Russia -- could hurl
the world into a supply shortage that would force the governments of
the developed world to tap their emergency supplies to stave off
stratospheric price jumps.
EAST ASIA
Despite growing concerns among international investors, China will
remain a top destination for foreign investment in the third quarter.
It figures too prominently in the growth plans of multinational
corporations for investors to completely pull the plug, and some
companies are acting on faith they can weather economic and political
crisis in the country.
However, China's neighbors already have begun to feel the effects of
investor bearishness. South Korea -- which is heavily exposed to
China's economy -- experienced sudden and dramatic capital flight
after the market jitters that began in the second quarter. The trend
will continue throughout Asia this quarter.
However, the Chinese economy will be only one among several factors
poised to drag down East Asia in 2005. High oil prices and the
prospect of higher U.S. interest rates after the presidential election
also will begin to cast a pall across the region.
Indonesia in particular will be in a tough spot. Presidential
elections took place July 5, and former security chief Susilo Bambang
Yudhoyono is headed for a runoff Sept. 20 with President Megawati
Sukarnoputri or former military chief Gen. Wiranto, the candidate from
the ruling Golkar Party. Following that vote, Jakarta likely will
remain nearly paralyzed for several weeks, while Yudhoyono attempts to
form political alliances among the many factions in the government.
This will leave Indonesia among the least-prepared nations if East
Asian fortunes decline in 2005.
On the Korean Peninsula, Seoul will adjust to the worsening signals
from China. Meanwhile, the North Korean nuclear crisis will continue
to simmer, before the six-party talks resume in September. Pyongyang
will use this time to exploit anti-U.S. sentiment in South Korea, the
changing security relationship between Washington and Seoul and the
summer season of labor unrest in order to extract additional economic
and security concessions from South Korea. The odds of at least
moderate success will be high.
EUROPE
Having agreed on a constitution, European leaders will turn their
attention back to their national and collective economies -- which are
in the midst of a rickety recovery.
The most important event in this region during the third quarter will
be the European Central Bank's (ECB) decision to raise interest rates.
The move will be politically unpopular, but the independent ECB is
likely to raise rates sometime this quarter, especially after the U.S.
Federal Reserve did so in late June.
Pressure is growing for such a move. European inflation is rising, oil
prices are likely to remain moderately high and the U.S. dollar is
expected to rise -- drawing investment away from other markets,
including Europe. Moreover, EU members' battle against the Union's
economic stability pact -- which caps their acceptable deficits at 3
percent of GDP -- is likely to intensify, with more deficit spending
in the cards. This will add an additional layer of inflationary
concern that plays into the ECB's decision in favor of a pre-emptive
rate hike.
August would be an excellent time for the move, since most Europeans
take holidays during that fetid month. Any political uproar likely
will be offset by the small size of the rate increase -- probably no
more than half a percentage point in this quarter -- but the move
nevertheless will feed into general concerns that European
institutions are out of touch with the needs of EU members' economies.
Otherwise, most of the third quarter will remain politically quiet.
The European Parliament is expected to confirm Portuguese Prime
Minister Jose Manuel Durao Barroso as European Commission President on
July 21 or 22, and he will spend the next few months deciding on
commissioner appointments.
The Summer Olympics begin Aug. 13. Barring a major militant attack --
which in our view is a slim possibility because of heavy security and
al Qaeda's preference for surprise -- the Games will be uneventful.
Small-time anarchists and radical leftists will try to make their
presence felt and gain publicity, but their effect on security will
remain minimal. That said, with attention riveted on Athens, the Games
could present opportunity for militant groups to launch attacks
elsewhere, such as London or Cairo.
As in the second quarter, European nations will maintain an insular
view of foreign policy -- focusing more on their own capabilities than
on actually putting forward a strong foreign policy agenda. This will
apply particularly to France, which is having to adjust to a new
reality of declining power within the EU -- courtesy of expansion and
the new draft constitution -- and the failure of its short-lived
attempt to work with Germany and the United Kingdom in a "troika."
France has only begun to comprehend that its dream of a European
foreign policy triumvirate -- France, Germany and Britain -- will not
be realized, and that Paris will never be able to make the EU its own.
After examining its failures, France will reassess its position in
international politics and decide what to do next.
France will play a bit part in the U.S. presidential campaigns, while
Bush takes two tracks: He will make overtures to the EU amid attempts
to shift some of the military load in Iraq and Afghanistan, but he
will score political points if and when Paris speaks out as Europe's
loudest dissenter on U.S. policy. Bush is prepared to turn the other
cheek, rhetorically, to any jabs from European leaders. He will avoid
open confrontation that would cause him to appear unreasonable in an
election year -- but he will indulge in subtle digs at the French,
which makes for good politics in the land of freedom fries and freedom
toast.
SOUTH ASIA
Although all three major states of South Asia -- Afghanistan, Pakistan
and India -- are geopolitically significant, the third quarter will
see activity in only the first two. India will remain relatively
quiet, except for moves by the new Congress-led United Progressive
Alliance coalition government to consolidate its hold on power and to
pursue the process of normalization with Pakistan -- an initiative
begun by the BJP-led National Democratic Alliance government.
Afghanistan
Seeking to strengthen its hold on power, the government of Afghan
President Hamid Karzai will spend the first two months of the third
quarter preparing for the elections scheduled for September. First,
Karzai will be courting and forging deals with ethnic, tribal, local
and regional power brokers -- including "willing" members of the
ousted Taliban movement -- to enhance his chances for re-election and
to ensure that the vote will be held with minimal disruption. Second,
the government will seek greater involvement by foreign troops in
containing Taliban and other jihadist militants who oppose Kabul and
the presence of U.S.-led coalition troops in the country, and who seek
to derail the ongoing political process. Finally, the government will
be working with the United Nations to register voters and set up
polling infrastructure and processes.
Pakistan
During the next quarter, Pakistani President Gen. Pervez Musharraf
will focus on three issues. First, he will continue efforts to
consolidate his hold on power in the run-up to a fourth-quarter
decision -- one way or the other -- on whether to retire his uniform
and assume the role of a civilian president. He will try to do this by
installing Finance Minister Shaukat Aziz, in the place of interim
Prime Minister Chaudhry Shujaat Hussain, although more Cabinet
reshuffles likely will result. Stratfor also expects at least one more
reshuffling of the top military brass as two of Musharraf's immediate
subordinates, Vice Chief of the Army Staff Gen. Yusuf Khan and
Chairman of the Joint Chiefs of Staff Committee Gen. Mohammed Aziz
Khan, retire.
Second, he will continue to pursue al Qaeda and allied militant
organizations within Pakistan and throughout the four provinces and
tribal areas; and third, he will move ahead with the well-calibrated
peace process with India.
These three issues will lead to tense moments in the third quarter
with opposition parties -- particularly the moderate Islamist
Mutahiddah Majlis-i-Amal (MMA) alliance. However, no dramatic
showdowns are likely until the fourth quarter or early 2005 -- and
these are most likely if Musharraf decides to remain as military chief
beyond the Dec. 31 deadline.
FORMER SOVIET UNION
President Vladimir Putin will remain firmly in charge of a stable
Russia this quarter. There will be no loud purge of Putin's opponents
within the intelligence community -- only a quiet purge, with
continued appointments for the president's pro-U.S. loyalists to key
positions. Rank-and-file members will continue to oppose what they see
as Putin's surrender to Washington on political, security and economic
issues -- forming the basis for plots and other types of active
opposition to Putin that will emerge next year.
Oil major Yukos likely will gain new owners this quarter. The company
probably will be saved from bankruptcy, but the new owners and
management -- unlike owner Mikhail Khodorkovsky, the jailed oligarch
-- no longer will represent a political challenge to the Russian
president. This turn of events will affect other major companies
headed by oligarchs, who soon could be seen obediently doing Putin's
bidding.
More market reforms are in store for Russia during the third quarter
-- leading to further impoverishment but no major protests. Oil will
help keep Russian macroeconomic indicators in the black.
Meanwhile, Putin will drift closer to the United States, though still
occasionally critical of some U.S. policies for internal and non-U.S.
consumption. That will worsen Russia's relations with Europe and
China. However, betting on Bush's re-election in November, Putin will
aid his U.S. counterpart domestically -- perhaps through diplomatic
measures or by issuing more statements about Russian intelligence that
support Bush's stance on Iraq, Afghanistan and other issues.
In the rest of the FSU, gains are likely for pro-American parties in
government and opposition stances, while pro-Russian parties will lose
traction. Although some violence is possible, the internal struggles
of FSU countries will be conducted mainly in the political rather than
the military realm. One potential hot spot, however, is South Ossetia,
a breakaway region of Georgia that is populated by an ethnic minority.
The conflict could be prompted by the Georgian government's attempts
to recover the territory -- following its success in Ajara and
encouraged by U.S. support. If conflict does flare up, it would be
prolonged, with no clear winner this quarter.
New attacks by Islamist militants are possible in Uzbekistan and some
other parts of Central Asia this quarter.
LATIN AMERICA
Popular referendums in Venezuela and Bolivia will be the most salient
developments in Latin America in the third quarter.
Venezuelan President Hugo Chavez will confront a presidential recall
referendum Aug. 15. All recent voter surveys indicate that more than
two-thirds of Venezuelans would vote for Chavez to resign, paving the
way for new general elections. However, a similar percentage of voters
also reject the return of traditional leaders and political parties
that ruled Venezuela before Chavez was elected in December 1998.
Chavez has a chance of winning the referendum if he can persuade
enough voters to stay at home Aug. 15 or else vote to support him. But
even if he loses, a return to power cannot be ruled out; he could seek
re-election in the subsequent general polls and win under Venezuela's
simple-majority, winner-take-all system.
As the referendum process unfolds, Venezuela will be politically
unsettled. But the military is likely to remain in barracks, and there
is little chance that oil exports will be disrupted due to political
tensions -- unless Chavez decides to cut off shipments to the United
States. Though he repeatedly has threatened such a move in recent
months, Stratfor views follow-through as unlikely, since the financial
and political fallout could hurt his government.
In Bolivia, voters will decide in mid-July what to do with their
natural gas reserves, and whether to establish an assembly to draft a
new constitution. The referendum could determine the fate of President
Carlos Mesa's government. Since taking power in October 2003 after a
popular revolt toppled then-President Carlos Gonzalez de Lozada,
former Vice President Mesa has been steering a careful course between
efforts to continue free-market policies and populist demands to
renationalize the oil industry and boot the United States out of the
country.
Whatever the outcome of the Bolivian referendum, it likely will
intensify nationalist passions among indigenous groups, and it could
affect the stability of Mesa's government. It also is likely to
aggravate a long-simmering conflict between highland and lowland
Bolivians. The mainly indigenous highlanders advocate interventionist
and nationalist government policies, while lowland Bolivians are
broadly supportive of free-market policies. The conflict is eating
away at Bolivia's territorial cohesiveness as a nation-state. This
does not mean Bolivia is on the verge of balkanizing, but its
continued difficulties will act as a brake on broader regional efforts
to develop more integrated economies.
Elsewhere in the region, Argentina will continue to slog forward with
debt-restructuring talks. Minor adjustments are possible in terms of
the write-downs proposed by the Argentine government, but in the end
creditors likely will lose about 80 cents on the dollar of their
original investment in Argentine government debt bonds.
AFRICA
The most important trend in Africa over the third quarter will be the
emerging diplomatic partnership between the United States and Libya.
Washington has approached Tripoli in efforts to funnel humanitarian
supplies to the Darfur province of western Sudan.
Though the crisis in Darfur has attracted the international spotlight
only recently, it has been under way since at least early 2003.
Washington's decision to get involved at this point has little to do
with concern about the humanitarian situation in Darfur. Rather, with
its focus on the volatile Gulf region at the moment, the United States
needs North Africa's Arab states to remain stable.
Despite Moammar Gadhafi's political reintegration and the resumption
of U.S.-Libyan relations, Washington must tread carefully where
Tripoli is concerned. Taking a position on the Darfur crisis -- an
issue the United Nations has begged Washington to pay attention to for
months -- gives the Bush administration a chance to develop a working
relationship with Gadhafi. The goal -- if not to secure his long-term
cooperation -- is at least to prevent any chance that he will aid
Islamist militants. At the same time, Washington will be able to
increase the pressure on Khartoum to halt the fighting in Darfur and
lock down a peace deal with southern rebels.
Over the next three months, the United States will likely find other
diplomatic tasks for Gadhafi in Africa. Problems in countries with
limited U.S. interest -- such as the civil wars in the Democratic
Republic of the Congo and Cote d'Ivoire, or troubles in Liberia and
other West African states -- could become a proving ground for
U.S.-Libyan political cooperation.
Copyrights 2004 - Strategic Forecasting, Inc. All rights reserved.
----------------------------------------------------------------------
"Only one ambition is worthy of Islam, to save the world from the
curse of democracy: to teach men that they cannot rule themselves
on the basis of man-made laws. Mankind has strayed from the path of
God, we must return to that path or face certain annihilation."
-- Sheikh Muhammad bin Ibrahim al-Jubair
"Long term commitment in relationships is only necessary because it takes
so damn long to raise children. Marriage may well be some kind of trick
to keep the males around beyond sexual satiation." -- Captain Compassion
"Progress is the increasing control of the environment by life.
--Will Durant
Joseph R. Darancette
res0mp8t@NOSPAMverizon.net
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