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Watch List: March 7, 2018

An awkward position for Seoul, a natural expansion for Turkey, a status check of Indonesia

  • Last updated: March 7
  • Total word count: 864 words

The items listed below represent potential emerging issues that our analysts are tracking. These can be long term or short term, but will be updated daily. If an item on our Watch List becomes critical, we will email you a full analysis explaining its significance.

Each Saturday, we will follow up our daily Watch List for each week with our conclusions on these issues.

North Korea: Unsurprisingly, the accounts of the landmark meeting between Kim Jong Un and South Korean envoys differ markedly north and south of the DMZ. North Korean state media did not confirm any of the breakthroughs being touted by Seoul – namely, that Kim expressed a willingness to give up his nuclear program if North Korea’s security could be guaranteed, that Pyongyang understood South Korea’s need to continue joint drills with the U.S., and that the Kim regime would refrain from additional nuclear or ballistic tests while talks with the U.S. were ongoing. A separate report goes so far as to say that a resumption of U.S.-South Korean joint drills would derail the progress that has recently been made. Though it’s not clear exactly what was said in the meeting, it is clear that the different accounts put Seoul in a tough position as it tries to convince Washington that Pyongyang is sincere in its efforts to de-escalate the crisis. Be on the lookout for anything that confirms or disconfirms North Korea’s sincerity.

Turkey: The Turkish Cooperation and Coordination Agency, which spearheads government assistance to developing countries, has said it will rebuild the Jowhar off-stream storage reservoir in Somalia, which is expected to improve irrigation for local farmers. Turkey’s ambassador to Somalia also said that Ankara plans to undertake other development projects in Somalia before the end of the year. Turkey’s expansion is central to our forecast, and the Horn of Africa is a natural place for Turkey to expand. Let’s get the details of the projects in question. Let’s also bear in mind the greater competition in this region. Though Somalia itself may welcome foreign money, other interested parties may not.

India: India’s banking system may soon have an additional $3 billion worth of non-performing assets. The recent fraud case involving Punjab National Bank will add approximately $2 billion to NPAs, since central bank rules require banks to write off the entire loan amount once fraud is reported. An additional $1.2 billion of NPAs are expected to come from other banks this year. If India is going to use financial investments to gain influence and counter China in the region, then it’s worth finding out how much the addition of these NPAs hurts its financial sector.

Philippines: Philippine Defense Minister Delfin Lorenzana has said joint ASEAN-China maritime drills, first proposed in 2015, are unlikely to take place this year as planned. Why the delay? Are some countries resisting, or is this just a matter of getting nearly a dozen countries on the same page?

Indonesia: Indonesia wants to reopen discussions over its 1997 treaty with Australia on disputed maritime boundaries. (The treaty was never ratified.) This comes after the government in Canberra finalized a long-stalled deal with East Timor that resolved similar issues. Indonesia’s suspicions of Australian intentions aside, these kinds of bilateral tensions have long hindered more robust defense cooperation between the two countries. (Also there is oil and gas at stake.) This may complicate efforts for the U.S. and its allies to incorporate Indonesia, which occupies a strategically invaluable geographic location at the southern end of the South China Sea and the nexus of the Indian and Pacific oceans, into the loose coalition intended to contain Chinese assertiveness. Let’s check the status of Australian-Indonesian relations.

Kazakhstan: The Kazakh government approved initial plans to set up a state program to counter religious extremism and terrorism. It will allocate $840 million to the program over the next four years. Instability in Central Asia is a given. What is not a given is the specific threats Kazakhstan faces and its willingness to work with other governments to manage them. We need to dig into the plan before we assess how successful it will be.

China: The Chinese Finance Ministry has said the government will offer “diversified financing channels” for One Belt, One Road projects, of which there are more than 100 in nearly as many countries. We have our doubts about OBOR, and our doubts stem primarily from financing. What are the additional channels in question? Given the number of projects, we need to identify which ones have high strategic value for China and look at the funding status for those projects.

Russia, Iran: Russia and Iran are considering creating a joint economic commission. They recently signed memorandums of understanding on Russia’s involvement in the Iran-India-Pakistan gas pipeline, financing and investing in Iranian mines and industry sector, joint research for the development of Caspian Sea resources and the transit of goods among Iran, Russia and Kazakhstan. In addition, Russian gas companies Gazprom, Rosneft, Gazprom Neft, Zarubezhneft, Tatneft and Lukoil may sign contracts to develop oil fields. Iran and Russia’s interests only sometimes overlap. Where do they overlap this time?