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Watch List: May 15, 2018

Iraq’s elections, Turkey’s reactions, China’s economic indicators

|May 15, 2018

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.

Iraq: The coalition led by Muqtada al-Sadr is set to win Iraq’s parliamentary election. Al-Sadr is a Shiite cleric but says he will form a technocratic, non-partisan government. And though he was supported by Iran during the U.S. occupation, al-Sadr also claims to now have his own Iraqi nationalist agenda independent of Iran. Even if his coalition is as anti-Iran has he claims, Iraqi politics is much too complex to pigeonhole anyone with a fixed position, and indeed al-Sadr has a history of shifting loyalties as necessary. Iran may not like the current outcome, but it beats having a power vacuum in Baghdad that could be filled with Sunni extremists. Even more distressing for Iran is an unconfirmed report from a Jordanian news agency saying al-Sadr is receiving support from the Saudis. Meanwhile, Qasem Soleimani, the head of the Islamic Revolutionary Guard Corps’ elite Quds force and a notorious manipulator of the government in Baghdad, is headed to Iraq to meet with other Shiite parties. What is al-Sadr’s next move? What is Iran’s?

Syria: The United States has opened a new base in the eastern province of Deir el-Zour, according to Iranian media. If true, it wouldn’t be especially surprising, considering the U.S. has been wading in slightly deeper in the north in recent months. Still, let’s figure out if it’s true, and if it is, let’s determine what Washington’s goals are for opening it.

Turkey, Israel: Turkey has declared three days of national mourning in response to the killing of dozens of Palestinian protesters in Gaza by Israeli forces May 14. Ankara also recalled its ambassadors to the U.S. and Israel for consultations and called for an emergency Organization of Islamic Cooperation meeting. In our 2018 forecast, we said Turkey and Israel would boost cooperation, with support from the U.S. Is there any reason to believe Turkey’s behavior is anything more than just posturing?

China: China posted a series of poor economic indicators on May 15. Fixed-asset investment decelerated to its slowest rate in nearly two decades, retail sales hit a four-month low, and home sales dropped. Industrial output, however, rose 7 percent. This new data comes a day after reports that bond defaults among private firms in China have risen by more than 33 percent since the beginning of the year, plus another report showing that Chinese commercial banks posted their first increase in their nonperforming loan ratio in more than a year. Also on May 14, an adviser to the government said the financial risk threatening the Chinese economy is larger than indicated by official figures. We expected the Chinese economy to slow somewhat this year as deleveraging efforts kicked in, and trade tensions with the U.S. presumably haven’t helped. China posts mixed data routinely to no major ill effect, but in the current climate, we need to find out if Beijing will ease off its plans to reform – something it might do if this marks the beginning of a major economic slowdown.

Poland: European Commission Vice President Frans Timmermans said Brussels will take the next step in Article 7 enforcement proceedings if Poland does not make sufficient progress in conforming with EU rules by the end of June. This may prove to be an inopportune time for Poland, which has predicted a slowdown in exports. What does Poland need to do to satisfy the EU? Is Warsaw prepared to do it? Also, how bad is the slowdown?

Mexico: Mexico has been grappling with a wave of political violence since campaigning for the upcoming elections began last September. So far, a staggering 84 political candidates, sitting office-holders, a party leader and several of their family members have been killed. This is bad, of course, but will it affect the outcome of the election either way?

Russia: Russian air defense systems in Syria apparently performed poorly during the latest wave of Israeli air strikes. Israel released video showing a Russian-made Pantsir-S1 missile defense system taking a direct hit during last week’s strikes. Moscow exports such systems all over the world. It’s worth examining how good they really are.

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