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The World in 2018

Dec. 15, 2017 The dysfunction that will characterize the year has a decade’s worth of momentum behind it.

Forecast

|January 24, 2018

Summary

It’s difficult to ignore how dramatically the world has changed since 2008, when the global financial crisis shook the foundations on which the international order was built. The systems that had been in place for a generation have since begun to slowly fall apart. And though they have not yet crumbled entirely, the possibility that they will has forced many countries to imagine a world without them. Some have done so more eagerly than others.

It is little surprise, then, that the past 10 years have been marked by systemic dysfunction, massive shifts in trade processes and radical internal political changes. Change, it seems, has been the one constant. This is the context in which we enter 2018. The dysfunction that will characterize the year has a decade’s worth of momentum behind it. But only in some areas will dysfunction lead to disruption.

One such area is the Middle East. For more than 15 years, Sunni insurgents have been fighting U.S. forces there, and the wars they’ve waged have been the defining trait of the region. That is no longer the case. Now that the Islamic State has been defeated in Iraq and Syria, at least as a “caliphate” with territorial integrity, traditional powers have begun to compete for the space the jihadists have since vacated. Best positioned to win this competition is Iran, which has already begun to change the balance of power in the region.

Europe, meanwhile, is still a mess, struggling as it is with meager economic growth and social unrest. Anti-European Union and anti-immigration parties continue to gain traction in spite of some significant defeats, most notably in France. As these political battles rage on, more important cultural differences will continue to pry nations away from the EU. Poland, in particular, will force policymakers in Brussels to decide what to do with an elected government that chooses not to adhere to EU ideology. Poland and others like it will resist whatever the EU tries to do to bring them to heel.

In China, the appointment of a de facto dictator does not so much solve the country’s problems as it does confirm the threat of their existence. Beijing knows that it needs to fix its financial system, but doing so requires structural reform that will inevitably hurt the economy. Whatever the government does will test the perceived infallibility of President Xi Jinping. Central to its efforts in 2018 will be the One Belt, One Road initiative, which is meant to spur growth, create jobs and bring a semblance of prosperity to the interior as Beijing expands its influence all the way to Europe. (We doubt it will succeed in this regard.) China will continue to creep into the waters to the east, even as it figures out just what to do about North Korea.

In 2017, Russia managed to stave off domestic unrest, thanks in part to some creative fundraising to offset the losses incurred due to low energy prices. In 2018, it will use its strategic reserves to buy even more time – time it desperately needs to try to diversify its economy. It won’t be enough, though, since these kinds of changes take a generation. That won’t stop Russia from acting tough abroad, engaging in activities that are ultimately peripheral to its interests, to inflate its power in the eyes of its people. And it won’t be enough to solve Russia’s economic problems.

United States
Europe
Russia
East Asia
Central Asia
South Asia
Southeast Asia and the South Pacific
Middle East
South America
Africa

United States

The United States is gridlocked, and though some say this is Donald Trump’s fault, the roots of the matter go much deeper – and much further back. The U.S. was socially and politically gridlocked before Trump, and if he left office tomorrow it would still be gridlocked.

The causes of the impasse are irrelevant for our purposes. What matters to us is its impact on U.S. foreign policy. Rhetoric aside, the U.S. has in fact pursued a fairly conventional foreign policy. It still has a cautious, adversarial relationship with Russia; it has not taken radical steps against China; it has not attacked North Korea; it has not left NATO, or NAFTA, or the Middle East. We expect some changes in 2018, but nothing beyond the normal limits on U.S. action.

In 2018, the most important action the United States will undertake will be to define what its international interests are and to develop strategies to pursue them. America is powerful, but it can’t be everywhere all the time. Given the paralysis in Washington, policymakers won’t get far.

The most important question they will need to answer is what the U.S. should do about North Korea. Granted, it’s difficult to predict what will happen in North Korea, as the shortcomings of our 2017 forecast show. The United States’ handling of North Korea stopped making geopolitical sense many years ago. From a geopolitical perspective, the U.S. shouldn’t care what North Korea does – the country has no real strategic significance. Still, the United States, despite its threats, will not take decisive military action against North Korea. It may undertake a limited strike if it thinks it has the technological capabilities to destroy Pyongyang’s nuclear program, but that is the most Washington will venture to risk. If it must, the U.S. will accept North Korea as a nuclear power. It will set about reassuring its treaty allies in the region, particularly South Korea and Japan, that U.S. security commitments are ironclad and that a North Korean attack on either country would trigger a harsh U.S. military response.

The more important long-term issue is the diminishing of U.S. power throughout the Asia-Pacific region, which we will deal with at length in the Asia section of our forecast.

As for the tense relationships the U.S. has in the rest of the world, political gridlock in Washington will enforce caution. The main issue between the U.S. and Russia – Ukraine – has been solved, or at least set aside. The conflict there is frozen, and neither side has the appetite to change that. But to move forward, the U.S. would have to ease sanctions on Russia, and part of that process depends on Congress. Given the ongoing investigation into Russian interference in the U.S. presidential election, it is very unlikely that sanctions will be reduced, which appears to leave U.S.-Russian relations suspended for now.

There are significant issues between the U.S. and China on trade and monetary policy that were postponed as the U.S. tried to induce China to intercede in the North Korea crisis. Talks on these issues will resume in 2018, and they’re too important to the U.S. for Washington to let whatever happens in North Korea disrupt them again.

NAFTA negotiations are ongoing, but the probability of the trade deal ending and tariffs being restored is extremely low. All parties need the relationship. In the U.S., too many states benefit from trade with Mexico or Canada. Mexico is the top export market for California and Texas, which means the two largest congressional delegations are opposed to ending NAFTA. Regardless of what the president wants, the deadlock holds.


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The one unknown for 2018 is whether there will be a recession. Not since World War II has the U.S. gone longer than a decade without a recession. It is therefore likely that the U.S. will have one by 2019, possibly even by late 2018. Whenever it comes, this recession will have global implications and will shake the already tenuous political situation inside the United States. The lower and middle classes in the U.S. have not yet recovered from 2008. As their voices get angrier and louder, Washington will have to focus more of its attention inward.

Europe

The problems Europe has dealt with for the past 10 years – problems that were not so much created by the 2008 financial crisis but exposed by it – will continue to intensify in 2018. Virtually no country will be left untouched by the rising social, political, cultural and economic tensions throughout the Continent. But under this continued instability will lurk a perhaps more troubling development: Germany, concerned with the EU’s disintegration and anxious about the economic calamity it could portend, is going to have to work harder to keep the bloc together.

Europe’s economy is recovering, but it is recovering slowly and unsteadily. And though it will continue to grow in 2018, it will not grow by enough to solve Europe’s problems. There has been a decade of economic dysfunction in Europe, and an increase in gross domestic product of 1 percent or 2 percent cannot repair the damage.

More important, Europe’s problem is no longer primarily its economy – it is a crisis of trust. The European middle and lower classes have lost faith in the elite’s ability to effectively manage the economy and to understand the cultural tensions that have emerged. Large segments of the population will be disaffected by economic inequality, and there will be little the EU can do about it.

The elite have come to see the middle and lower classes as a threat to their interests and ideological principles. There is no common understanding in Europe of how to instill trust once broken. Nations are not divided by their philosophies for managing EU institutions; they are divided by their different political, economic and cultural interests.


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We will therefore continue to see political parties challenge the establishment. We will also continue to see friction between nations. Tensions between Poland and Germany exemplify this trend. Polish voters have elected a right-wing government that is challenging the liberal ideology embraced by Germany. This is as much a cultural issue as it is a political one. Poland does not believe it should have to sacrifice its national identity to be part of the bloc. Neither does it believe that Germany should be the one making the rules and calling the shots in the EU. For all the nationalist overtones, the issue is about who gets to make the rules that govern all.

If Germany allows Poland to win, it will have abandoned one of the cornerstones of the EU – a universal liberal ideology, without which the EU will not be able to exist. And if the EU does not exist, then Germany certainly can’t control its institutions, which have enriched Berlin and given it disproportionate influence over Europe. The German government can’t push Poland too far; doing so would imperil the EU and thus the free trade zones Germany’s prosperity depends on. But so too could ignoring Polish threats to the established order. Germany will continue to alienate Poland without taking decisive action. The pressure on Poland will stoke anti-German sentiments in nations that are historically ambivalent toward Germany.

This is merely one example of the problems that are now endemic in the EU. Other countries will clash as well, and no one country will be able to speak for the whole. France cannot speak for Western Europe any more than Poland can speak for Eastern Europe. The precise nature of the political spats that will break out is unpredictable, in the same way that election results are unpredictable. What we can say is that our forecast for Europe is one of continuity: National and regional movements will continue to erode the social, political and economic systems in Europe.

A U.S. recession in 2018 would catalyze this process. It would inevitably affect German exports and thus endanger Europe’s fragile economic recovery. The United States is the largest purchaser of German goods, and a recession would result in decreased demand for those goods. This in turn would cause German imports from the rest of Europe to decline, setting off a chain reaction, resulting in rising unemployment and fueling the forces that are already corroding Europe.


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Russia

Russia is difficult to categorize. Continental in size, it is at once a European power and an Asian power, with interests spanning from the borders of Japan to the Balkans. In 2017, Russia was weak, thanks in part to low energy prices. But in Russia, weakness breeds aggression, aggression creates enemies, and so today Russia has more security interests than it can manage.

That would explain why Russia is so active on the world stage. But it belies how focused the government in Moscow is on domestic issues, especially as oil prices remain so low. Russia may have averted a major social crisis in 2017 – oil prices rose some, and Moscow found creative ways to raise money – but that doesn’t mean its problems have disappeared. If anything, it underscores just how resilient its problems are. If Russia is to diversify its economy to rely less exclusively on oil and natural gas, it will need time and stability. In the mind of President Vladimir Putin, the need for stability will require his continued stewardship of the affairs of the state. It will also require Russia to continue to pretend to be a great power, lest it lose face among its citizens.


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Russia has been somewhat isolated from the rest of the world since 2014, when it responded to the Ukrainian revolution by annexing Crimea and supporting uprisings in eastern Ukraine – thus incurring Western sanctions. The country, therefore, is a convenient scapegoat for populists and nationalists of the West who blame the countries’ problems not on domestic structural issues but on far-flung foreign conspiracies. Russia cannot afford to be isolated any longer. It has almost spent all the money in its Reserve Fund, and it must begin the process of economic transformation now if it is to have a chance of taking root. Put simply, Russia needs to rejoin the world. It is open to compromises as long as the compromises don’t make Russia appear weak. Appearances are more important than ever for Russia as it manages difficult times at home.

Righting the economy is made more difficult by its challenges abroad. At the moment, Russia is surrounded by enemies. 2018, therefore, will be spent trying to play these enemies off one another, occupying them with ancillary problems that divert their attention from Russia. China and the U.S. provide good examples. Despite its shared interests with the United States in the Middle East, Russia remains at odds with Washington over Ukraine, although they made significant progress on the issue in 2017. Russia is also suspicious of China – wary of expanding Chinese influence in Central Asia, China’s One Belt, One Road initiative, and China’s potential long-term ambitions to retake lands the Russian Empire pried loose from the Chinese in the 19th century. It’s unclear just what Russia can do in North Korea, but as Moscow has recently shown, it will use whatever leverage it has there to drive a wedge between Beijing and Washington.

It will behave similarly in the Middle East. The destruction of the Islamic State’s short-lived caliphate has complicated Russian designs in the region. Much has been made of Russia’s alliance with Iran, but this is more a marriage of convenience than a real alliance. Russia will continue to maintain relations with all major powers in the Middle East, regardless of ideology, because Russia is primarily interested in limiting an increasingly strong and independent Turkey, especially as it sets its sights on the Balkans and the Caucasus. Above all else, Russia will be opportunistic and pragmatic.

This is all a charade, of course. Russia needs money, economic development and time to modernize its military, and its moves on the world stage will be about securing all three. Russia will not be strong enough to secure its interests through force. It will intervene selectively where it must, but intervention will never be Russia’s first choice. Its goal is to stifle competition and keep would-be intruders out of its domain.

East Asia

In East Asia, 2017 played out mostly as expected. A dictatorship was declared in China, one with grand plans for the next phase of Chinese development. Japan, now questioning the value of a U.S. security guarantee, began to assume a greater leadership role in the region. And for all prognostications to the contrary, the situation in North Korea went largely unchanged.

North Korea

In fact, the North Korea crisis typifies the most important trend in East Asia in 2018: the limits of U.S. power. This has been a long time coming. Despite its formidable military and economic power, the United States is not omnipotent. It has been trying to lean on and develop new strategic partnerships around the world to manage its interests. In Asia, the U.S. has sought to rely on its traditional partners: Japan, South Korea, the Philippines and Australia. In 2018, the U.S. will continue to rely on its allies and will look to enhance cooperation with India as well.

This kind of balance-of-power strategy always sounds good in theory but is difficult to execute. It is only as reliable as the allies themselves. If they cannot or will not eliminate threats on their own, then what good is having allies in the first place? Enter North Korea.

The government in Pyongyang continued to develop its nuclear weapons program. It will soon be able to strike the U.S. mainland – if it is not able to already. Pyongyang has backed Washington into a corner. The U.S. does not want North Korea to have nuclear weapons, but neither does it want to launch the full-scale invasion that would be required to disarm it.


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The cold logic of geopolitics dictates that the U.S. will not attack North Korea. The U.S. would recognize North Korea’s pursuit of nuclear weapons as defensive, not offensive. The U.S. would know that North Korea would not use its nuclear weapons because using them would trigger a counterattack and thus ensure its own demise. The U.S. would assemble a coalition of partners to isolate and manage North Korea while creating a nuclear deterrent just strong enough to persuade Pyongyang to never use the weapons it has spent so long pursuing.

But the North Korea crisis does not strictly abide by the cold logic of geopolitics. Fearing that a nuclear North Korea would undermine its credibility at home and among its allies, the Trump administration has vowed to halt Pyongyang’s program. Despite the political capital Trump has invested in this issue, the U.S. will enter 2018 just as politically incoherent as it was throughout 2017. It is therefore unclear whether Trump would have enough support to authorize a military strike against North Korea if he really wanted to.

So while an attack against North Korea seems unlikely, it cannot be ruled out entirely. But if war did break out, it would not, for all the death and destruction it would bring, enhance the U.S. position in East Asia or allay the concerns of its allies. If the U.S. allows North Korea to acquire nuclear weapons, it will inspire doubt among its allies, emboldening China to poach U.S. allies and push for territorial expansion with impunity. If the U.S. initiates a limited strike, then South Korea would bear the brunt of the counterattack and, in doing so, call into question Washington’s ability to protect its allies. If the U.S. launches a full-scale invasion, it will get bogged down in a war it cannot win.

In other words, there is only so much the U.S. can do. The North Korea crisis is notoriously difficult to predict, but in this context, the status quo is the most likely outcome.

China vs. Japan

If the U.S. is unable to shape East Asia to its liking, preoccupied as it is with its domestic problems, then something will have to replace it as the center of gravity. That something will be the coming conflict between China and Japan.

Until the 19th century, China and Japan were relatively similar, geopolitically speaking. Both were governed by insular regimes, uninterested in the outside world and incapable of projecting power beyond their immediate spheres of influence. When the West forcibly opened the countries up to free trade, their paths diverged. Western intervention in China set off the collapse of the Qing Dynasty and ushered in decades of rebellions and civil wars. Western intervention in Japan, however, turned the country into a military and economic powerhouse almost overnight. Until its defeat in World War II, Japan dominated East Asia with brute force, motivated largely by its need to acquire the resources necessary to sustain its economy – resources that Japan still depends on even today.

China has since bridged the gap between them, and for the first time in centuries, Beijing and Tokyo are both strong – just not quite strong enough to dominate the other. Competition between them is therefore inevitable. In fact, it would have happened sooner had not the U.S. alliance structure after World War II been created to maintain the status quo in the region (of which Japan was an integral part). But now the U.S. is pulling back, looking to see what the return on investment is for the relationships it has put so much into. For the first time since 1945, Japan must consider the possibility that living under the U.S. security umbrella is not enough to guarantee Japanese interests.

Domestically, 2017 was a momentous year for China and Japan. Chinese President Xi Jinping famously became a de facto dictator, but lost amid the fanfare of his installation were the developments in Japan – namely, the decisive electoral victory of Japanese Prime Minister Shinzo Abe and his party. Symbolic though the victory may have been, it was the first of several steps Japan needed to take in order to reclaim total control of its military. Because Japan is so dependent on imports, the best Japanese self-defense means having a good offense. And as Japan assumes more of that mantle, Japanese policy will get more aggressive at every level.

This will bring Japan into direct competition with China. In some cases, it already is. 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. It is trying to resuscitate the Trans-Pacific Partnership without the United States. It is trying through increased investment to buy the loyalty of countries important to China, especially those included in Beijing’s One Belt, One Road project. It is also, notably, spending more money on its military. Though it is unclear what exactly Japan will do, it is clear that Sino-Japanese relations will strain under the weight of Tokyo’s newfound self-reliance.


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Still in Search of Modern China

The extent to which competition results in outright conflict depends on how effectively China can resolve its economic problems. In 2017, China’s top-line economic figures appeared quite impressive, but its performance was composed largely of artificial and empty growth, aimed at buying maximum social stability ahead of Xi’s coronation ceremony at the 19th Party Congress in October. Since the party congress, Xi’s government has attempted to rein in reckless lending and real estate speculation, deleverage overly indebted companies, and curb industrial capacity and pollution. Xi’s moves are all in pursuit of one key goal: a massive redistribution of wealth from the coast to the interior.


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This is a delicate game for Xi. He must spread enough of China’s wealth to the countryside and to poor urban workers so that they feel they have participated in China’s vaunted economic growth, but not so much that he creates opposition to his rule. That is why Xi has imposed a dictatorship – to pull off the changes necessary to maintain social stability while keeping the economy growing, Xi will need as much power as Mao Zedong and Deng Xiaoping, his predecessors and role models. In practical terms, this means Chinese politics are about to go through a phase of intense instability, marked by purges, corruption scandals, competition over who controls the levers of state, and restrictions on all forms of expression. Xi has carried out purges for the past five years, but these were merely a prelude of more to come. As Xi moves forward with his economic policies in 2018, he will create new enemies, and they will have to be removed. No faction of enemies will become strong enough to supplant Xi in 2018 – he is powerful enough to put down potential usurpers – but challenges will arise, and Xi will respond. It will not be enough for Xi to announce new policies. He needs the People’s Liberation Army and China’s vast bureaucracy to carry out his wishes.

This will create a curious dichotomy. China’s persona as a burgeoning power in the South China Sea, and an architect of vast infrastructure meant to solidify Chinese influence in the coming century, is incongruous with its true self – a political regime that will be far more preoccupied with what is going on at home than what can be accomplished abroad.

For decades, China was an engine of economic growth throughout the world. Those days are gone. Instead of encouraging growth for the sake of growth, Beijing will try to implement structural reform without alienating or angering any segment of its population so much that it would question Beijing’s rule. China should be able to manage this relatively well in 2018. Xi is at the height of his power and has the support of the people. But the thing to watch is how effective Xi’s reforms prove to be and how the consequences of his actions limit his plans – if they do at all. 2018 is just the first year of many painful ones to come. It will demand most of Beijing’s time and attention, and even the actions it takes abroad will be in service to its domestic political agenda.

South Asia

For all its population and resources, India, the most powerful country in South Asia, is fairly inconsequential to global geopolitics. That is beginning to change, thanks in part to the domestic political stability ushered in by Prime Minister Narendra Modi. In 2017, Modi made significant progress toward harmonizing India’s usually incoherent, disjointed domestic body politic, even as he challenged China on territorial issues and advocated greater cooperation with the U.S. and its allies in the Pacific.

India’s domestic consolidations, though, will likely be short-lived. The country is a patchwork of economic inequality, religious variegation and linguistic complexity. Our long-term forecast for India remains in place: India will not be able to overcome these obstacles, and it will remain a powerhouse on the Indian subcontinent incapable of projecting much power beyond its geographic constraints.

Still, the long term is not the short term, and India’s ephemeral phase of internal consolidation will reverberate beyond the subcontinent in 2018. Modi is still in his honeymoon phase, and India will be an important partner in a concerted effort to limit China’s rise. India will continue to improve its navy – and to deploy it to the Pacific for provocative exercises. It will also continue to invest in areas such as Central and Southeast Asia that China hopes to influence through financial investment of its own.

India’s behavior in 2018 will introduce new dynamics to South Asia – even though they won’t necessarily transform it. These dynamics will bind India, so often hived off from Eurasia, to the ebb and flow of global geopolitics.

Central Asia

Historically, Central Asia has been an arena in which greater powers compete for influence and therefore tend to destabilize the region. Things were no different in 2017, and things will be no different in 2018.

Central Asia has been Russia’s backyard for almost a century now. But Russia has weakened, and now outside forces are beginning to act accordingly. China sees the region as central to its new Silk Road plans. India sees it as a place to thwart Chinese ambitions. Jihadists from Afghanistan and the Middle East see it as fertile recruiting ground, a place where poor, disillusioned youths might adopt radical political Islamic ideology.


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These jihadists’ suspicions may be well founded. Economically, the region’s dependence on energy exports and the Russian economy has been crippling. Politically, the governments are attempting to consolidate their power even as economic problems beget social problems.

Kazakhstan, the region’s largest and most important country, will exercise what little power it has to try to create regional cooperation forums through which it can influence the behavior of its neighbors. But the country is led by a 77-year-old dictator who has not named a successor, and despite Kazakhstan’s size and relative power compared with other Central Asian states, it suffers from the same problems as its neighbors – economic dependence and political turmoil.

Put simply, in 2018, Central Asia must confront internal pressures that threaten to tear it apart as outside powers exploit it for their own purposes.

Southeast Asia and the South Pacific

Southeast Asia may not be as unstable as Central Asia, but it is just as helpless in determining its own fate. The region’s countries, therefore, are advancing their interests not by aligning firmly with any one state – such as China or the United States, the current powers of the region – but by playing them off each other. While the U.S. is preoccupied with internal issues, we can expect to see Japan, India and even Australia seek to fill the gap here so as not to let any of the Southeast Asian states fall into China’s orbit.

The major nations of the South Pacific – Australia and New Zealand – will be spared from the region’s machinations, save for China’s domestic economic problems. If China’s president passes some of his more ambitious reforms, he will put heavy pressure on the economy of Australia, which depends greatly on trade with China. This will matter to Australia, of course, but it will not affect the behavior of the world’s powers. Like South America, the South Pacific is on the periphery, a stable corner of an unstable world.

Middle East

In the Middle East, 2018 will be defined by the scramble to fill the hole left by the collapse of the Islamic State. This is, in effect, a return to the pre-IS Middle East. Relationships between countries will shift rapidly, and no alliance or rivalry will be immune to potential change.


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At the middle of it all stands Iran, which is best positioned to capitalize on the Islamic State’s fall and thus a serious contender to become the premier power of the Middle East. Iran has significant influence in the Iraqi army and in the Shiite militias in Iraq. In Syria, the regime is still standing, in no small part because of Iranian assistance. Tehran also has influence in Lebanon through Hezbollah. In Yemen, the Houthis, pro-Iranian rebels, have survived attacks by Saudi and other Arab air forces and retained enough strength to keep Saudi Arabia bogged down in the Yemeni civil war.

At this point, the rest of the countries of the Middle East are unsure how serious a threat Iran is to their interests. They’re in no position to organize a resistance to its expansion, either. Tehran must therefore 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.

The immediate question is how the Saudis, the Arab counterweight to Iran since the fall of Saddam Hussein, will respond. 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.

The task of containing Iran will thus fall to Turkey and Israel, the region’s major non-Arab powers. Both have a similar problem: They’re uncomfortable with the growth of Iranian power, but they’re also worried about the fragmentation of the Arab world and the rise of terrorist groups. They have neither the desire nor the means for an extended military conflict with Iran in all three areas of the proxy war – Syria, Yemen and Lebanon – in which it has substantial influence, and tackling just one area doesn’t solve the problem.


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The Turks will try not to rock the boat. Turkey and Iran share an interest in halting the spread of Kurdish separatism, and both have issues with Russia and the U.S., the major foreign powers active in the region. Their interests will diverge in Syria. The Turks will work to ensure that the Iranians don’t come to dominate Syria and that Bashar Assad doesn’t reunite the country. But 2018 will not be the year Turkey, for all its concern, confronts Iran. Israel, meanwhile, will maintain its hostile rhetoric toward Iran, but it will not find a stable basis for dealing with Iran in 2018. It will, however, enhance cooperation with Turkey. The two countries will be drawn together by the fact that they share a problem, if not a solution.

Then there are the two most influential outsiders: Russia and the United States. Russia has historically been an adversary of both Iran and Turkey. In the short term, Iran’s expansion complements Russia’s desire to create an anti-American coalition in the Middle East. But at the same time, Moscow will be wary of the threat a more powerful Iran would pose to Russian interests in the Caucasus, and so it will take steps to curb Iranian influence. Russia-Turkey relations will continue to be up-and-down. The two are ultimately adversaries, but neither is ready for a conflict, and they have some interests in common. Pragmatism will govern their relations in 2018.

The U.S. has two interests in the region. One is to ensure that Sunni jihadist groups stay relatively powerless. The other is to prevent any country in the region from controlling the entire region. Threats aside, Washington will try to minimize the use of direct military force in pursuit of these aims.

This leaves the U.S. in a tough spot. On the one hand, Iran will probably be more successful at suppressing Sunni jihadists than the U.S. has been. On the other hand, in the long run, a consolidated Middle East under Iranian control would evolve in unexpected and dangerous ways, all of them almost certainly hostile to American interests. Therefore, U.S. policy is likely to focus on encouraging Turkey and Israel to work together while providing as much assistance to them as possible, all while looking for reliable partners in the divided Sunni Arab world.

South America

South America is an isolated continent. The primary way countries in the region interact with the rest of the world is through trade. But most of the countries here have little impact on global affairs and are somewhat unaffected by events outside of the continent. A notable exception is Venezuela, with which both Russia and China have close relations. Their relationship serves two purposes: to strengthen their weak positions in the Western Hemisphere and to challenge the United States closer to home. But try as they might, neither Russia nor China can project much power in this part of the world. China has strengthened ties through investment and financing, but Beijing’s real intent with these initiatives has been to fuel its domestic economy rather than to project power. Russia, despite maintaining close political and trade ties with some countries in the region, is unable to play a critical role here.

The U.S. will politely ignore their limited efforts. It keeps a watchful eye on the region but currently has a hands-off approach toward South America as long as it does not threaten basic U.S. interests.

In terms of the region’s internal affairs, there are several political processes that will drive events in 2018. The most politically volatile country is Venezuela. Sanctions against Venezuelan officials and the state oil company will put more pressure on the government. But unless the opposition can stay united – a tough task to say the least – it will be unable to bring down President Nicolas Maduro. The opposition showed some signs of unity at various points in 2017, but by the end of the year it was fractured once again. Suffice it to say, Venezuela will remain in an interminable state of paralysis.

Elsewhere, Brazil will hold presidential elections in October that will provide the country an opportunity to break from a political crisis that has plagued it for years. In Argentina, the government received a strong political mandate following the October 2017 legislative elections. It will capitalize on this and work to push through structural reforms in sensitive areas such as subsidies, employment, taxes and provincial funding. In May, Colombia will hold presidential elections that will serve as a litmus test for the peace deal reached with the Revolutionary Armed Forces of Colombia in 2016. As part of the deal, the FARC established its own political party and gained the right to participate in the elections. The public response to the FARC’s involvement in the formal political process will be an indicator of how far the country has come in the peace process.

None of these political events will change how countries in South America interact with each other or the rest of the world. Mexico will continue to try to forge relationships in South America, which could lead it to play a leading role in the region in the future. This could be one way that South America will become more connected to global geopolitics in the long term.

But in 2018, South America will see more of the same. There may be internal volatility in some countries, but the continent as a whole will remain stable relative to other regions of the world.

Africa

We end our 2018 Forecast with Africa, a continent that is so big and so diverse that it nearly defies generalization, for each of its constituent regions interact differently with the rest of the world, and the rest of the world interacts differently with its constituent regions.

The Sahel, the northernmost region of sub-Saharan Africa, a swath of land that spans nearly the entire width of the continent, will garner the most attention in 2018. It is a hotbed of jihadism and thus a major security concern of the United States and Europe, neither of which has the wherewithal to significantly enhance their security presence in the region. And why would they want to? They don’t need to expend that much energy to achieve their objectives there: preventing major networks from forming or, if formed, preventing them from spreading to areas more important to their long-term interests. To that end, they will more closely police migrant flows to Europe and place more security responsibility on indigenous forces – something that will have little practical effect.


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Subtle but more important developments, meanwhile, will take place in and around the Horn of Africa, which includes Somalia, Ethiopia, Djibouti and Eritrea. Its location elevates its importance over other African regions. It abuts the Bab-el-Mandeb Strait, which links the Gulf of Aden to the Red Sea, which, in turn, leads directly to the Suez Canal. It’s a heavily traversed maritime route for goods from Europe to eastern markets, and a notable amount of oil passes through the Red Sea. The region also serves as a good base from which outside powers can project power into the Middle East.

The Horn of Africa has thus become coveted real estate for aspiring powers such as Iran, China, Turkey and India, and it retains every bit of its importance for more established powers like the United States, Russia and Europe. The competition for this prize will intensify in 2018 as Iran, China, India and the U.S., which have been only modestly interested in the area heretofore, dedicate more resources toward military, trade and political ties there. Across the Gulf of Aden are interested parties of the Gulf Cooperation Council, which in recent years have made overtures to the region, but their leader, Saudi Arabia, is losing power to Iran – a rising country that will have the opportunity this year to project more power in the region.

As China continues to pursue its String of Pearls initiative – an infrastructure project meant to provide ports for trade and military resupply across the Indian Ocean – it will likewise continue to develop its military and commercial presence around the Horn. India, too, has made its own plans to gain more control of its surrounding seas, and as its naval power grows it will start to consider waters farther from its shores, such as those off the coast of the Horn of Africa, part of its domain.

The U.S. has a strong military presence in Djibouti, a strategic base of operations for military activity throughout the region. Outside the Sahel and the Horn of Africa, though, few African countries will affect the state of the world. A notable exception is South Africa, a country that has all the trappings of a world power but is too beset by political and ethnic rivalries to be anything greater than the sum of its parts. Preparations for elections in 2019 will only aggravate tensions, making it more difficult for South Africa to attract the foreign investment it needs to stimulate economic growth. We expect protests to take place intermittently – as they tend to do in an economically stagnant country with profound social divisions – but they are unlikely to upset the status quo.