Four Middle Eastern conflicts are staring among the top 10 ‘hot spots’ – the ‘Top Risk Environments Report determines. The report, produced by IHS Country Risk, explores 10 of the major risk environments of 2016, with their likely impact and key indicators for change.
“Four of the 10 risk hot spots for 2016 are in the Middle East,” said Keerti Rajan, head of political risk analysis at IHS Country Risk. “The new cold war between Saudi Arabia and Iran, the rising threat from the Islamic State, the potential for more protests in Egypt and contract risks in Iran are all risks for businesses operating in the region.”
Short summaries of the major risk environments of 2016 follow.
In addition to a sustained risk of the US unilaterally imposing non-nuclear-related sanctions (for instance, terrorism-related), divergence among Iran’s political factions on the scope and pace of FDI presents high risk of contracts becoming politicised and consequently subject to review and renegotiation.
The Arabian Gulf:
The emergence of Islamic State in Saudi Arabia and a revived terrorist campaign there poses risks of the country being used as a launching pad to expand the group’s activities and recruitment elsewhere in the region, especially in Kuwait and Bahrain.
Syria, Iraq and Yemen:
The proxy conflicts in Iraq, Yemen and Syria are drawing Russia, Iran, Turkey and Saudi Arabia into more direct and overt involvement, raising the risk of limited direct confrontations between these sponsors. With the Saudi air force bombing the Iranian-backed Houthi movement in Yemen, Iran sending IRGC combat units into Iraq and Syria to fight against Turkish and Saudi militia proxies, and Russia bombing Saudi and Turkish Sunni insurgent proxies in Syria, the proxy war in the Middle East is significantly expanding.
Egypt’s military-backed government is consolidating its own power and suppressing political opposition, but ongoing failures to meet security and economic challenges would heighten the risk of protests re-emerging. At the same time, Egypt’s jihadist insurgency poses risks to economic recovery.
The onshore and maritime security environment that has contributed to a reduction in Somali-based piracy since 2012 is changing, with indicators of an increasing risk of piracy in 2016. The pirates that thrived in Somalia between 2005 and 2012 were reliant on the support of regional political leaders who were willing to provide safe havens for hijacked ships to be stored during lengthy ransom negotiations. The two conditions that led regional politicians to provide that support, namely a lack of alternative economic opportunities and a threat to their control of their territory, are currently being recreated in the Galmudug region of central Somalia.
About 60 percent of commercial shipping travelling through this historic piracy zone no longer carry privately contracted armed security personnel (PCASP) on-board due to the costs involved and perception that piracy is not a significant risk. This means that Somali pirates, who still have the technical capabilities, manpower, weaponry and financing networks to organise deep-water hijacks, may soon regain the secure ship-storage locations required to resume operations.
Newly elected president Mauricio Macri faces significant challenges through the first half of 2016, despite expectations of a swift improvement in the business operating environment.
The record-high influx of refugees continues to place the EU under significant strain, with protests, inter-EU political disputes and a revision of Schengen likely in 2016. A heightened risk of terrorist attacks will add to Europe’s challenging outlook. Disruption to ground, rail, and marine cargo in the EU and its neighbouring countries as a direct result of the refugee crisis is likely to continue in 2016, causing delays to cargo and disruption to supply chains.
Nigerian president Muhammadu Buhari faces a daunting series of security and economic challenges in 2016 to match some of the high expectations of him since assuming office in May 2015. Despite President Buhari giving his new security chiefs until December 2015 to finish off Boko Haram, the Islamist militant group has continued to stage regular suicide bombing attacks aimed at causing mass casualties, and the faction, led by Abubakar Shekau, is likely to receive increased support from the Islamic State. The collapse in the oil price means Buhari has greatly reduced resources at his disposal as he attempts to boost fading GDP growth
The landslide victory by opposition pro-democracy leader Aung San Suu Kyi’s National League for Democracy (NLD) in the November 2015 election has placed Myanmar on an unchartered path towards democratic rule, but political stability depends on Suu Kyi’s ability to negotiate her party’s co-existence with the military and the outgoing Union Solidarity and Development Party (USDP).
As public grievances about the government’s inability to maintain public services mount, Russia’s elites will strive to scapegoat prominent policymakers, leading to changes in key influencers and contract reviews and corruption investigations in construction, real estate, and transport among the provinces.