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Watch List Findings: June 17, 2017

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  • Last updated: June 16
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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 15

Australia-China: As the U.S. obsesses over potential Russian cyberattacks on the U.S. election systems, several reports have appeared in recent weeks about increased Chinese influence and activity in Australia. These claims warrant closer scrutiny.

  • Finding: Concerns go back to August 2016, when Australian Broadcasting Corp. reported that businesses with Chinese connections were the largest source of foreign-linked donations from 2013 to 2015. During this time, these businesses contributed more than $5.5 million to major Australian political parties. The 99-year lease of a major Australian electricity distributor to a Chinese interest and the potential sale of a major cattle empire also grabbed the attention of the Australian national security service. There is also concern over Chinese money that funds Australian universities and media companies. The concern among universities lies with Chinese-backed institutions that promote bilateral ties and with the potential military applications of joint research projects between Australian and Chinese universities. As for the media, major Australian media groups like Sky News Australia and ABC closely collaborate with Chinese media, including state-run CCTV. This renewed media campaign coincides with Australian Prime Minister Malcolm Turnbull’s comments at a security summit in Singapore warning of a risk of coercion as China’s power rises. It also comes shortly after news that the Labor Party stopped accepting donations from two prominent Chinese-Australian businessmen.

Items from June 14

China: On June 10, several hundred people in Shanghai protested a new local regulation meant to curb housing purchases. Fewer purchases means fewer sales, and many people who had tied money up in construction projects now fear that they will be unable to liquidate their investments. As a result of the protests, some concessions were given to people who purchased certain types of residential property in Shanghai. The Communist Party is attempting to restrain housing prices and has implemented area-specific controls around the country, such as higher down payment requirements. Over the past several months, housing prices have begun to decline in some top-tier cities, including Beijing. We need to watch to see if these protests remain contained or if they spread to other cities as the central government continues its campaign to halt housing price inflation.

  • Finding: The regulations involved rezoning a number of dual-use homes – that is, homes that were zoned for both residential and commercial purposes – to be commercial only. These were certainly halfway measures: The Shanghai city government will now let people who bought dual-use homes move in. But they will not let them resell the properties as residential properties, which was the protesters’ main contention, since they feel they are now locked into these residential properties zoned for commercial use without a clear way to exit.

Singapore: Singaporean Prime Minister Lee Hsien Loong, the son of the city-state’s founding father, has come under heavy criticism from his siblings in a rare display of political drama. Real shifts in Singapore’s power landscape are uncommon, and its institutions and meritocratic political culture are seen as having matured enough that stability is not dependent on whether the founding family remains in power. Nonetheless, Singapore’s geopolitical relevance is derived from its role as a facilitator of regional trade, finance flows and Western-led security initiatives – a centrality derived in part from a level of political and policy certainty unmatched in the region. The links between Singapore’s assumed political stability and broader geopolitical relevance could be tested if substantive political competition takes root – particularly at a time when the city-state’s competitive advantages are under pressure by, for example, Chinese infrastructure investments in Malaysia and the growing potential for disruptions in the South China Sea. We need to look for signs of deeper splits beneath Singapore’s superficial stability.

  • Finding: The dispute is not fading as quickly as the prime minister would like, with his siblings endeavoring to keep it in the public spotlight. But whether the issue triggers deeper splits in the Singaporean political class – and whether it undermines the levers of Singapore’s outsized geopolitical influence – will become apparent only over the much longer term.

Items from June 13

European Union: On June 13, the European Commission proposed new regulations meant to increase control over clearinghouses — which act as middlemen for certain financial transactions — that deal in euros in EU and non-EU countries. These regulations reportedly could lead to London’s losing the right to host euro clearinghouses, a substantial part of the city’s financial sector. We need to consider the wider implications of the new regulations, since London is a key part of the global financial market.

Philippines: After reports that U.S. intelligence forces have intervened in the conflict in the city of Marawi, Philippine President Rodrigo Duterte and Vice President Leni Robredo made conflicting statements regarding U.S. involvement. Duterte said he was not aware of the U.S. involvement, whereas Robredo thanked the U.S. for its assistance. This could be an indication that elements within the Philippine government are increasingly at odds. We will continue to watch for signs of dissent against Duterte’s administration, including international cooperation that does not appear to be sanctioned by the executive.

  • Finding: More opposition to Duterte has emerged this week. The Philippine Supreme Court is reviewing petitions questioning Duterte’s implementation of martial law in Marawi. Supreme Court Associate Justice Mariano del Castillo warned that Duterte may attempt to apply the mechanism he used in Mindanao to declare martial law in the rest of the country. A small but vocal group of lawmakers – some of whom are former generals who staged coup attempts under former President Gloria Macapagal Arroyo – has opposed martial law. The Catholic Church and civil society groups have also pushed back. Martial law has been a sensitive subject in the Philippines since former President Ferdinand Marcos imposed it nationwide from 1972 to 1981. The People Power Revolution, which brought down Marcos’ government in 1986, is a central force in Philippine political culture today. Since Marcos’ ouster, martial law has been used only once: for eight days in 2009 after a politically motivated massacre in the province of Maguindanao.

Venezuela: Maj. Gen. Alexis Lopez Ramirez resigned as head of the National Defense Council because he disagrees with President Nicolas Maduro’s call for a constituent National Assembly. His resignation matters because he is part of the military, and a split in the military – where one side supports the opposition – could be one way for the government to fall. We need to watch for any signs of division within the military and for signs that other leaders are following suit.

  • Finding: About a week before Lopez Ramirez’s resignation, 1st Sgt. Giomar Alexander Flores Ortiz took to the internet and asked the armed forces to declare themselves in opposition to Maduro. Also earlier this month, retired Gen. Cliver Alcala Cordones stated that he believes the armed forces will not support Maduro’s constituent assembly. Alcala Cordones is among a growing group of people who want the country to follow the constitution. This group is now becoming public and is looking for supporters. Local military expert Rocio San Miguel, who works for an opposition-affiliated nongovernmental organization, said that right now no one is in complete control of the armed forces and that the government has an internal intelligence unit to monitor the actions of military members.

Items from June 12

North Korea: North Korea is likely to have completed the miniaturization process in its effort to develop a deliverable nuclear weapon, according to Jeffrey Lewis, an expert on North Korea’s weapons program. That would mean that the only remaining obstacle to mounting a miniaturized nuclear warhead to a ballistic missile is ensuring that it is ruggedized, or capable of re-entering the atmosphere without destruction. If this is accurate, Pyongyang is one step closer to posing a large, credible threat that could force Washington to act.

  • Finding: In another piece written for Foreign Affairs, Lewis stated that other nuclear powers had reached a point where they could detonate a compact nuclear warhead after five nuclear tests. North Korea has now completed five nuclear tests, the most recent of which (September 2016) is believed to have had a warhead that could fit atop a ballistic missile. While experts are less certain about the status of North Korea’s ability to fit the warhead onto a re-entry vehicle, Lewis notes that no state that has developed an intercontinental ballistic missile failed to develop a successful re-entry vehicle. And there are signs that North Korea is creeping closer to having an ICBM. In 2016, the KN-08 engine, which is believed to be capable of powering an ICBM, was successfully tested in a controlled environment. It has not yet successfully powered a missile, and it is a liquid-fuel engine, which means it moves slower than other engines and fuels rockets less quickly, leaving it exposed to attack. It’s also thought that North Korea’s Hwasong-12, an intermediate-range ballistic missile, is capable of carrying a warhead that could successfully handle the heat of re-entry (although for a shorter period of time than an ICBM would need to). The Hwasong-12 can cover 3,000 miles (4,800 kilometers) and is therefore capable of hitting Guam.

Russia: Tens of thousands of Russians took to the streets June 12, according to media estimates, after opposition leader Alexei Navalny called for protests. Navalny was arrested prior to the demonstrations for allegedly switching the location of the protests without authorization. We need to compare the size and location of these protests with those in March to determine whether they are growing and whether the government has been effective in controlling them.

  • Finding: The Russian government appears to have contained the protests. The major cities in which protests took place were Moscow, St. Petersburg and Novosibirsk. About 1,500 people were arrested in Moscow and St. Petersburg as they moved from the original location of the protest to a site set up to celebrate the Russia Day holiday. This suggests that Navalny’s movement is accepted and controlled by the government. But this is not definitive proof, considering protests were banned in the countryside. It’s therefore difficult to tell whether Navalny is truly gaining ground.

The Balkans: The Balkans edition of the Islamic State’s Rumiyah magazine published an article threatening action against Serbs, Croats and the Balkans in general. The article says the group will seek revenge for the Muslims killed in Bosnia and Kosovo. We need to monitor the region for IS expansion. IS attacks could destabilize the region, which is already prone to instability.

  • Finding: The Balkans have been fertile ground for the recruitment and transit of IS fighters, as confirmed by the EU’s annual Terrorism Situation and Trend Report, which was released June 15. Bosnia and Herzegovina has been identified as a particularly attractive location for recruiting new fighters and a haven for returned IS fighters. In response to the Rumiyah article, Serbia’s defense minister said his country was strong enough to defend itself against all threats. Though there have been several reports of recruitment and some reports of arrests of suspected IS associates, there are no reports of major IS attacks.

Azerbaijan: An Azerbaijani man set himself on fire in front of a bank in Baku to protest the difficult conditions for paying back loans. The man was unable to pay off a loan that had considerably increased in value after two devaluations of the local currency, the manat. The economy in Azerbaijan has been deteriorating since 2014. We will be looking for any signs of broader protests in Azerbaijan and government moves to reassure the population.

  • Finding: Azerbaijan has only minimal signs of protests, but this is likely due more to increased security measures than public disinterest. The Ministry of Communications and High Technologies secured a court order in May that allowed it to block media outlets that oppose the government. The last bout of large protests in Azerbaijan came in late 2016; reports of arrests and increased security measures soon followed. The government appears to be maintaining control for now. Notably, government officials recently highlighted macroeconomic stability. They spoke of a stable currency, lower inflation and growth in non-oil sectors. The government is interested in courting private businesses and attracting investment to help mitigate the country’s economic problems. Opposition news agencies, however, report that the general populace is living in poor economic conditions.

Morocco: On June 11, the country’s capital, Rabat, reportedly experienced the largest protest since the 2011 Arab Spring uprising. It was part of ongoing protests calling for improved social conditions and economic opportunities in the country’s northern Rif region. Until now, these demonstrations were limited to Rif. We will be looking for signs that the protests are spreading to other parts of the country and that they could undermine the monarchy or the Islamist-led government that was recently formed after six months of post-election wrangling.

  • Finding: The protests don’t appear to be symptomatic of broader unrest. No one seems to be trying to sustain the movement. Meanwhile, on June 13, a Moroccan court sentenced 25 demonstrators and suspected members of a grassroots protest movement to 18 months in prison. It has also sentenced a man named Nasser Zefzafi, leader of a protest movement called al-Hirak al-Shaabi that has been active in Rif for months. The crackdown shows that the government is unafraid of popular backlash.

Qatar: Saudi Arabia’s efforts at isolating Qatar seem to be floundering. Turkey is openly siding with the Qataris, and Iran has sent food supplies to Doha. Russia is also extending support, and the United States is trying to remain neutral. The Saudi position has weakened to the point that it is now trying to show strength by adding Eritrea and Somaliland, an autonomous region in Somalia, to its coalition. Meanwhile, the Americans and the Kuwaitis are trying to mediate. We will continue to monitor how this issue is affecting dynamics in the Persian Gulf.

  • Finding: Saudi Arabia’s efforts to isolate Qatar do not appear to be making headway. This week, U.S. Secretary of Defense James Mattis signed a $12 billion deal to sell fighter jets to Qatar. The move confirms that Washington is not aligning with Riyadh against Doha. Meanwhile, Kuwait and Turkey – Qatar’s main regional ally – continue to try to mediate an end to the dispute, which has exposed Saudi weakness and damaged the credibility of the Gulf Cooperation Council.