Editor’s Note: Before diving into this latest edition of the Forecast Tracker, a brief word about some changes we have recently made. In the past, each forecast review was accompanied by two graphics – one zoomed-out picture of how the forecast has done over the entire year and one zoomed-in picture of how it’s done over the past two weeks. Each chart generated an overall trend line, and both of those trend lines reflected the forecast’s performance over the full year. This time, we’ve generated a new trend line for the zoomed-in portion of the forecast, while omitting the year’s overall trend line. As you’ll see below, this method is effective because it allows us to show how dynamic our forecasts are, and how everything can seem to be going in one direction, only to veer off because of a particular development – hopefully one we foresaw at the start of the year. As always, we appreciate your feedback as we continue to tweak this offering to make it more valuable to subscribers.


From the Forecast: Saudi Arabia is mired in a political crisis. It started with the fall of oil prices but has reached a point that even a recovery wouldn’t put a stop to it. The dip has made it abundantly clear to Riyadh that its control over oil prices is not what it was during OPEC’s heyday and that it has no choice but to transform its economy. Change, though, is anathema to those who benefit from the status quo, and serious political instability will follow. Dealing with Iran amid ambitious reconstruction plans and a political crisis will be more than Saudi Arabia can handle. It will seek out allies, but its traditional partners – the United States, Israel and the United Kingdom – aren’t eager to team up with the Saudis on this issue.”

Update: In the Sept. 7 installment of the Forecast Tracker, the Kingdom of Saudi Arabia played a leading role, not because of anything that had happened, but rather because of what hadn’t happened. At the beginning of the year, we expected the myriad challenges facing the country, including low oil prices and jihadist threats, to overwhelm the kingdom’s ability to set effective foreign policy for the region that would wind down the war in Yemen, push back against Iranian influence and increase the strength of a Saudi-led Arab regional coalition. We also expected that traditional Saudi allies like the United States wouldn’t be willing to go along with Riyadh’s more ambitious plans.

For much of this year, that forecast seemed to be trending off track. Enter one Jamal Khashoggi. It’s not polite to speak ill of the dead, and it is now all but certain that Khashoggi is no longer among the living. But sometimes the truth is more important than decorum. Before becoming a media darling of the West, Khashoggi was a Saudi journalist who had ties to Osama bin Laden and al-Qaida and who, for a long stretch of time between journalism jobs, worked for Saudi intelligence. He also comes from an old and powerful Saudi family that traded in military weapons, and while the sins of an uncle shouldn’t be foisted off on a nephew, all men are, on some level, prisoners of their upbringing.

It says something about the fickleness of human beings that Saudi Arabia’s destructive war in Yemen and Crown Prince Mohammed bin Salman’s crackdown on his fellow princes and their wealth generated little more than apathy and punchlines in Western media but that Khashoggi’s disappearance has galvanized significant anti-Saudi feelings around the world. Most important among the kingdom’s newfound critics are the United States, where even conservative lawmakers are calling for Salman’s head, and Turkey, which is understandably upset that Riyadh would do its dirty work on Turkish soil. In that sense, our forecasting abilities were limited. Based on Saudi Arabia’s position in the Middle East and the tactics it was using to secure its interests, we expected significant blowback against it. We just didn’t realize it would take a case like Khashoggi’s to light the match.

But the match has indeed been lit. The pressing matter now will be the future of the kingdom, and specifically of its crown prince. Once a Western media darling himself for his desire to bring Saudi Arabia into the 21st century (and his purported aims to liberalize the country), Salman is now facing scrutiny on the world stage, and his image has been tarnished. Until now, no faction inside Saudi Arabia has meaningfully challenged his centralization of power. But there are many potential factions that could do so, chief among them the clerical establishment and the military. If the Saudi crown prince cannot rehabilitate his international reputation, these factions may at last have the opportunity they’ve been waiting for to strike back against the young Salman.

Then again, the Khashoggi storm may pass without much fanfare or action once Saudi Arabia produces an explanation for his death. Media cycles these days treat consumers like they have short attention spans. Even so, this story is about much more now than Khashoggi or MbS. This is about the future of Saudi Arabia. It’s a future that factions in the kingdom – some reformist, some traditionalist – are contesting, a future that depends on the continued steadfast support of an outside patron, a role that for many decades now has been played by the United States. That it is even being discussed openly in the U.S. that the alliance with Saudi Arabia may have outlived its usefulness is a sign of how dire the situation has become and reflects the kinds of issues we expected to dominate this year for Riyadh. The watershed has come later than we thought and in a form we didn’t expect, but it’s here now and Saudi Arabia has limited tools at its disposal to deal with it.

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From the Forecast: Japan is playing a critical role in creating an informal alliance between Japan, India, the U.S. and Australia to combat Chinese ambitions in the South China Sea.”

Update: Turning now to Southeast Asia, we check in on our forecast that Japan, India, Australia and the United States would grow closer as they tried to block China’s expanding influence in the region. (We would be remiss if we did not mention that our forecast for the year missed the level of anti-China activity that would unfold in the South Pacific – for more on that, click here.) This group of powers is still operating under the unfortunate nickname “the Quad,” and while 2018 has not brought any meaningful steps to define how its members will work together or to lay out the specifics of their relationship, each of the four countries has been very active, not just in laying the groundwork for increased cooperation among themselves but also in reaching out to states in Southeast Asia where China’s influence could eventually threaten the balance of power.

Japan and Australia, for instance, both wrapped up military exercises with the Philippines, a country of immense strategic importance to China, and one that seemed to be tilting toward Beijing during the first years of Rodrigo Duterte’s presidency. Japan and India, meanwhile, have reached out to Vietnam, whose prime minister publicly proclaimed his country’s desire for Japan to play a prominent role in the South China Sea. We also note that the Indian navy diverted three ships to offer humanitarian assistance to Indonesia during the recent tsunami – a seemingly innocuous gesture, but exactly the sort of thing that can help to build trust and interoperability between two countries. Like the Philippines, Indonesia is of immense strategic importance because of its location on major maritime trading routes.

It’s not all positive news, though. U.S.-India relations have tightened considerably – but not so much that New Delhi is willing to go along with Washington’s oil sanctions against Iran, or to refrain from purchasing S-400 missiles from Russia (a move for which the United States punished China with sanctions recently). And despite the myriad meetings between some of the Quad’s main players – like the meeting of the foreign and defense ministers of Australia and Japan on Oct. 10, which paved the way for Japanese Prime Minister Shinzo Abe’s visit to Australia next month, or the recent meeting between Indian and Australian officials to discuss their strategic relationship – there has not yet been a move to codify the group’s cooperation or more publicly signal its overall intent. The most that has happened is the Quad held a second meeting since its revival, on the sidelines of an Association of Southeast Asian Nations summit in Singapore in June.

That may be simply because higher-profile activities would serve only to threaten China, or it may have more to do with the fact that the four powerful countries of the Quad need no formal alliance to jointly pursue their interest in limiting China in Southeast Asia. Attempting to make a formal alliance out of an informal collaborative relationship may do more harm than good. But then, our forecast did not promise a formalization of the Quad in 2018, but merely more engagement with Asian nations and among the group’s members as a counterbalance to China. Aside from the occasional hiccup in U.S.-India ties, which explains the recent downward trend in the forecast’s performance, we believe overall that the forecast remains on target.

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