From the Forecast: “Tehran must … move quickly to secure its objectives – to become the leading power in the Persian Gulf, and then to dominate the Arab world from the gulf to the Mediterranean. This will be Iran’s challenge in 2018.”

Update: If the demise of the Islamic State was the center of gravity in our 2017 forecast for the Middle East, the Iranian attempt to fill the power vacuum left in the group’s wake was the center of gravity in our 2018 forecast for the world’s most frenetic region. Iran has had a difficult year, capped off by the reimposition of U.S. sanctions targeting its oil sector. The U.S. has granted temporary waivers to many of Iran’s top energy importers to try to stave off a spike in oil prices. But as oil prices drop and it becomes clear that the market is oversupplied even with Iran on the sidelines, the incentive for U.S. leniency will soon pass as well.

Overall, it has been a mixed year in Iran and for this forecast. The Iranian economy seemed poised for meltdown at several points, and domestic politics seethed with such dissent that the government’s survival became a legitimate concern. We did not anticipate the level of discontent in Iran, nor did we fully appreciate that Iranian expansionism in the Middle East would exacerbate its domestic economic problems to the point that the Islamic republic’s foreign adventures in places like Syria would become as much a target for protesters as the U.S. and Israel historically have been.

Throughout the Middle East, too, Iran’s actions have had ripple effects. Iran-backed Shiite militias and their former leaders have gained substantial influence with the government in Baghdad, as Tehran tries to replicate in Iraq the success it has had in Lebanon with its proxy Hezbollah. Iran also has established bases throughout Syria and, together with Hezbollah, has stabilized the position of Bashar Assad, a stalwart ally. It has provoked Israel to launch multiple attacks in Syria and provided Hezbollah with technology and weapons to increase its potency should a war with Israel break out. All the while, Iran has continued to look for friends in the gulf, weakening Saudi Arabia in its own backyard.

Each of these dynamics, from Iran’s struggling economy to its expanding reach in the region, has been in play in recent weeks. For every report of a truckers’ strike or teachers’ protest against the mullahs, there are stories of Iran finding ways to evade sanctions by, for example, creating a new banking mechanism with China. Iraqi Shiite militias now receive the same salaries as Iraqi soldiers – which means Iran’s strategy to embed itself in Iraqi state structures is proceeding apace. Meanwhile, Iran remains defiant of the U.S. and, despite Israeli warnings, continues to press its positions in Syria and Lebanon. Iran faces many challenges, but it has not pulled back from its regional ambitions in any meaningful way, and that makes this particular forecast, while imperfect, a success.

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From the Forecast: “[South America] as a whole will remain stable relative to other regions of the world.”

Update: A rare appearance for South America in the forecast tracker and, unfortunately, not a salutary one. The big story, of course, is in Brazil, where a former military officer with a penchant for making controversial statements has claimed the country’s top office. President-elect Jair Bolsonaro has promised to pass business-friendly reforms, tackle such contentious issues as pensions, and even shift Brazil’s foreign policy by aligning with Washington and supporting Israel, a rarity for a South American government.

Brazil, however, isn’t the only country in the region experiencing a tumultuous year. In 2018, Argentina’s economy has arguably performed the worst of all the major countries in the world – though Turkey and Iran are also strong contenders. And as Venezuela continues its slow economic demise, millions of refugees have fled to nearby countries such as Colombia and Brazil, forcing these nations to start taking the migrant situation more seriously and residents to put political pressure on their governments to deal with the problem.

In previous years, South America largely remained in a bubble, distant from the global system and tied to broader developments mainly through commodity price fluctuations and the attendant effects on domestic politics. The bubble now appears to have burst. The populist politics that have swept much of the world are active in South America, too, as are issues over immigration and free trade. Events in the region remain less kinetic and more isolated than developments in Eurasia, but it would be a mistake to confuse South America’s unique way of doing business with stability in 2018. In terms of politics, economics and security, the region has been shaken up considerably. This may be a sign of things to come in the years ahead. But for now, at least, we can say that this year’s forecast on South America is trending downward.

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From the Forecast: “India will be an important partner in a concerted effort to limit China’s rise.”

Update: In the last installment of the forecast tracker, we addressed the mixed performance of our projection for increasing competition between Japan and China in East Asia. This week, we check in on India’s moves to limit Chinese power in both its near-abroad and Asia as a whole. Like Japan, India has maintained pragmatic relations with China – which may somewhat distort evaluation of this forecast in the short term. Whether in the Maldives, Sri Lanka or even Nepal, the obvious competition between China and India for political influence has thus far been mostly benign. Aside from the occasional border spat, the two sides continue to have a productive and communicative relationship. Indian Prime Minister Narendra Modi and Chinese President Xi Jinping, for example, have met three times already this year.

That bends the grade of this forecast downward, but our view of the long-term trajectory remains the same. India views China’s growing influence as a potential threat to its strategic independence and is seeking allies and improving its capabilities to become a more substantial counterweight to Beijing. The Quad alliance – a budding regional grouping of India, Australia, Japan and the U.S. – is meeting this week for only the third time, and New Delhi continues to participate in its nascent activities with both interest and caution. Outside this framework, though, India is developing meaningful military ties with each of the group’s members, as well as with key Southeast Asian states that would play pivotal roles in any future attempt to contain China. Relations with the U.S. have been somewhat strained by India’s decision to keep importing oil from Iran and buying weapons from Russia, but they remain strong overall. (Washington, however, did express some frustration this month that India wasn’t moving quickly enough on military cooperation.)

In recent weeks, we have had internal debates over whether India is domestically coherent and strong enough to push back against China – the mixed moves toward Beijing might indicate internal ambivalence rather than a concerted effort to profit from and contain China’s rise. For now, the forecast that India will play a more active role in blocking China remains broadly on track as we approach the year’s finish line.

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