What follows are the preliminary findings for issues identified in the daily Watch Lists this week. We are only sending findings that we regard as significant or potentially significant to keep this list manageable. We have findings for all the Watch List items. Should you be interested in findings not listed here, please contact us and we will email them to you.

To emphasize, you can contact us if there is an item not included here for which you’d like to see the findings.

Our goal, as always, is to focus on what matters and not on things that don’t.

Items from June 26

Syria: The Syrian army is making large gains in eastern Syria, having advanced 60 miles (100 kilometers) in 48 hours. Approaching from secondary roads, the Syrian army has reached the T-2 pumping station, an Islamic State-held position where roads extending to Deir el-Zour, al-Mayadin and Abu Kamal all meet. We need to know the size of the Syrian army force. We also need to watch for the IS response; if it can’t hold this ground or hit the Syrian army’s supply lines and cripple the assault, then the Syrian army will have a direct line to the Islamic State’s last remaining positions in Syria. This would come somewhat earlier than our model predicted – we didn’t expect IS to face an existential threat to its territorial integrity until early next year. We need a sense of whether events are overtaking our forecasts.

  • Finding: The Syrian army has made no major gains on its southern flank into IS territory since the beginning of the week. It appears that IS has held the immediate vicinity of the T-2 pumping station and its strategically important crossroads. One report said Syrian forces have 50,000 troops on this front, but they are stretched all the way from eastern Homs, past Palmyra, down to this part of the IS heartland. On June 29, IS forces struck an Iraqi outpost next to the Jordan-Iraq border, but so far they have made no attempt to move north from there to cut off the Syrian forces.

Italy: Over the weekend, the European Commission approved Italian government plans to essentially bail out two Italian banks – Banco Popolare di Vicenza and Veneto Banca – by subsidizing their purchase by Intesa Sanpaolo. The Italian government and the EU have come to an understanding on how the Italian government will help these banks in a way that satisfies EU guidelines. These are the second and third Italian banks to reach some kind of bailout agreement. Two of those three banks had some of the highest rates of nonperforming loans in the Italian banking system, which means the weakest links are being targeted. Italy’s banking woes were a major feature of our 2016 forecast, and we believed they would continue to pose a serious problem in 2017, but these developments are positive indicators for the banking system. We are conducting a larger internal review of Italian banks. In the meantime, the mechanics of the deal and the chances it can succeed need to be assessed.

Islamic State: The Islamic State reportedly funneled $600,000 to Philippine militant groups via a Malaysian Islamist. The money was used to procure firearms, food and other supplies for the ongoing attack in Marawi, Philippines. If true, it will be important to determine how that money was funneled. We need to get a sense of the Islamic State’s global operations and how it is able to spend resources to spread instead of investing in the home front.

  • Finding: Philippine officials have made a range of sometimes dubious claims about how the Marawi city siege was funded, and exact details are hard to come by. Given the degree to which jihadists in Mindanao and neighboring countries would be able to access funds from sympathizers and criminal enterprises, it shouldn’t be assumed that funds would be needed from the IS core to pull off this type of show of force. (Businesses connected to the wealthy Maute family in the Philippines and Indonesia are believed to have been a primary source of financing.) Still, the desire to prove itself worthy of funding from the IS core is believed to be one impetus for Abu Sayyaf’s move to join forces with the Maute group and try to establish an IS province in Lanao Del Sur. Most of what is known about potential foreign financing mechanisms is related to personal connections. The Maute family, for example, is known to have had extensive connections to jihadist networks in the Middle East for more than a decade. Meanwhile, the arrival of foreign fighters in Mindanao would presumably open new channels of financing. Understanding these personal connections would shed light on how IS funding might be moving across the globe, but deeper investigation and possibly unattainable intelligence would be needed.

Central Asia: Kyrgyzstan has proposed setting up a joint base with Russia near the border with Tajikistan because of the situation in Afghanistan, according to Kyrgyzstan’s president. He added that Russia was considering the proposal. Are we seeing some of the spillover from Afghanistan into Central Asian states that we have been expecting? It’s a small piece of evidence but a definite indicator that countries in the region are becoming more worried about the possibility of radicalization and foreign fighters moving into their territory.

  • Finding: The Afghanistan-Tajikistan border presents the greatest security challenge and most likely location for observing signs of spillover, followed by the Afghanistan-Uzbekistan border. We have yet to see the presence of Taliban or IS fighters in northern Afghanistan translate into attacks in Tajikistan. Tajikistan’s interior minister estimates that 10,000-15,000 militants are active along his country’s border with Afghanistan, particularly in the Afghan province of Kunduz. Central Asian countries are a fertile recruiting ground for extremist fighters, and the threat of members of the population being radicalized already exists.

Items from June 27

Cyberattack: A major ransomware attack has affected computers and businesses across the world and is spreading. Severe damage has been reported in Ukraine, including by the central bank and infrastructure systems. Companies like Russian oil producer Rosneft and Danish shipping and oil group A.P. Moller-Maersk have also been compromised. A researcher at cybersecurity firm Kaspersky Lab has identified the virus as Petrwrap, a ransomware program. We need to find out what is being affected, and where and how fast this is spreading. We also need to know the origins of the virus and if there was a specific target.

  • Finding: The massive ransomware attack turned out to be neither a version of the earlier Petya/Petwrap virus nor a ransomware attack per se. The real goal of the virus was not to extract ransoms from infected users but rather to permanently wipe out as many hard drives as possible on infected networks. This new virus – now referred to as NotPetya or ExPetr – was much more destructive and widely distributed than the WannaCry attack in May (in which North Korea is a suspect). Simply put, this was the largest cyberattack of its kind. The attack was focused on Ukraine and spread from there, though its spread largely tailed off in less than 48 hours. Several infrastructure elements in Ukraine and companies around the world are still recovering. The origin of the virus is still unknown, but since it was highly advanced, a state sponsor is suspected.

India-China: In the midst of U.S. President Donald Trump’s meeting with Indian Prime Minister Narendra Modi, India and China are accusing each other of violating their territorial boundaries near India’s Sikkim region, situated between Nepal and Bhutan. China has claimed that India’s military impeded construction on a road in Chinese territory, while India has claimed that Chinese personnel crossed into its territory. A 10-day standoff ensued, during which time Indian troops reportedly formed a human wall to prevent the advance of Chinese troops, who allegedly destroyed two makeshift Indian army bunkers. Given the extreme terrain of the border, situated in the Himalayas, we do not expect the spat to grow into a significant conflict.

  • Finding: The Doklam (known as Donglong in China) territory, which India accused China of illegally entering, is also claimed by Bhutan. The government of Bhutan issued a demarche to China this week claiming that its territorial sovereignty had been violated. China rejected the claim. China’s Foreign Ministry spokesman, Lu Kang, then threatened on June 29 to escalate the border tension if India did not pull back its troops, who he claimed were violating Chinese territory. The two bunkers that Chinese troops damaged or destroyed (reports disagree) earlier this month are part of an Indian effort to construct a line of fortifications that can house a 90,000-strong Mountain Corps along the Line of Actual Control, its border with China.

Islamic State: A split between online supporters of the Islamic State is reportedly emerging. The split is between ultra-extremist elements and those who occasionally question the group’s actions. Though online debates are not a good measure of the Islamic State’s institutional health, they cannot be dismissed. We need to assess to what extent these debates are representative of internal differences among the IS elite.

  • Finding: The debates seem to be between online supporters of IS and not actual members of the group. Some of these disagreements are likely taking place between supporters of IS and supporters of al-Qaida, which has an interest in taking advantage of the Islamic State’s losses. Still, there are bound to be IS supporters who have become disillusioned with the movement in the wake of its recent territorial losses. IS has a sophisticated psychological operations capability, especially in social media, and it’s possible the group is losing the backing of some of those who represent the group in an official capacity online.

Items from June 28

Philippines: Philippine Secretary of Foreign Affairs Alan Cayetano arrived in China on June 28 for a four-day visit with China’s foreign minister. We know of no prior announcement of this meeting. Why is the Philippine foreign secretary meeting with his Chinese counterpart? Is it just a small part of China’s continued courtship of the Philippines, or is there something Beijing is seeing that it needs to discuss with Manila?

  • Finding: There has been nothing to shed light on why the trip was not announced beforehand or why the Philippine Department of Foreign Affairs was initially hesitant to confirm the visit after it was revealed by the Chinese Foreign Ministry. Officially, Cayetano’s talks with his Chinese counterpart, Wang Yi, have focused on the security crisis in Mindanao and potential counterterrorism cooperation between the two countries. Wang touted the Chinese Embassy in Manila’s delivery this week of a modest security assistance package (primarily assault rifles and ammunition) and pledge of around $300,000 to help rebuild Marawi city. On June 29, China’s ambassador to the Philippines also floated joint counterterrorism exercises. Given how the crisis in Mindanao is compelling the Philippines to rely more heavily on the U.S. and its allies, it makes sense for Beijing – which is eager to demonstrate to its neighbors that its regional hegemony would be a boon for regional security – to try to get in on the action. But the modest size of China’s security assistance and still-developing counterterrorism capabilities highlight the limits of its potential role. Presumably, Cayetano and Wang found time to discuss issues Beijing sees as more pressing, such as negotiations over a potential code of conduct in the South China Sea.

Venezuela: Two Venezuelan government institutions were attacked June 27. First, a police helicopter flown by a former police intelligence officer who opposes the president dropped grenades on the Supreme Court building. Second, the National Guard raided several rooms in the National Assembly building. After the National Guard left, armed colectivo members stormed the building and detained several members of the National Assembly and the press for four hours before releasing them. The situation is now under control. Those involved in the helicopter attack, however, mentioned a coalition of military, police and civilian officials who are in search of balance against the “transitory, criminal government.” We need to learn as much as possible about this group, its level of organization and its capabilities.

  • Finding: This is an opaque group whose survival and agenda depend on a degree of secrecy. Two members are Maj. Gen. Alexis Ramirez Lopez and Maj. Gen. Cliver Alcala Cordones, as referenced in our June 14 Findings. Both were loyal Chavistas who have had a falling out with President Nicolas Maduro’s government. Other prominent Chavistas who no longer support the government and could be associated with a group like the one described above include Maj. Gen. Miguel Rodriguez Torres, Maduro’s former interior minister; German Ferrer, United Socialist Party of Venezuela legislator and husband of Prosecutor General Luisa Ortega Diaz; and Supreme Court judges Marisela Godoy and Danilo Mojica Monsalvo.

Items from June 29

Italy: Embattled Italian bank Monte dei Paschi di Siena may be close to a deal to sell its portfolio of bad debt, Reuters reported June 27, citing anonymous sources. Under the provisions of the deal, the bank would sell 26 billion euros’ ($29.7 billion) worth of nonperforming loans for 5.5 billion euros. The debt, in turn, would be securitized and parceled out to different buyers. Junior tranches would be acquired by the privately and publicly funded Atlante 2 fund. Senior debt, which would be guaranteed by the state, would be sold to institutional investors. A small portion of the debt would remain with Monte dei Paschi. The report comes shortly after an agreement reached by the bank and the European Central Bank for a “precautionary recapitalization,” which would keep the bank in a sound financial position by bailing in shareholders and junior bondholders and by using government funds. We need to monitor these developments to see if they challenge our forecast on how difficult it will be for Italy to reduce its debt.

  • Finding: The announcement of a finalized deal was expected by June 28, when Atlante’s exclusivity period with Monte dei Paschi was set to expire. There have been no reports of the deal being finalized, though La Repubblica, an Italian newspaper, reported that an agreement in principle has already been reached. The Italian minister of economy and finances, Pier Carlo Padoan, said June 29 that he expects an agreement to be announced in a couple of days.

Taiwan: The U.S. Senate Armed Services Committee voted to allow U.S. Navy warships to make port calls in Taiwan and allow reciprocal visits at U.S. ports. If ratified by the full Senate and implemented by the White House, the measure would mark a notable break from longstanding U.S. policy toward China and Taiwan. Since the 1970s, the United States has been more hawkish toward Beijing’s “One China” policy. But given all the negotiations between the Trump administration and Beijing, we are trying to determine whether this is more than standard congressional posturing – and whether it has potential to become leverage against Beijing.

  • Finding: This is a longer-term watch item, starting with whether the measure moves toward approval in the full Senate. It’s worth noting that, on June 30, the State Department approved a $1.4 billion arms sale to Taiwan – the first such sale since 2015.