Iraq's Neighbours Threatened By ISIS' Success

BMI View: Both Jordan and Saudi Arabia face increased security threats following the rapid deterioration of Iraq's political situation. Although we do not expect a direct military conflict between radical jihadist group ISIS and Iraq's neighbours, the ongoing regional turmoil raises the likelihood of border instability and domestic terrorist attacks.

The rapid progress in Iraq of insurgents spearheaded by the radical jihadist group the Islamic State of Iraq and the Levant (ISIS) presents a substantial security threat to adjacent states, notably Saudi Arabia and Jordan. While we do not anticipate a direct military conflict between ISIS and Iraq's neighbours, the continuation of the fighting will disrupt regional trade and raises the likelihood of border instability and domestic terrorist attacks. Taking these risks into account, we have revised down our proprietary short-term political risk ratings to 72.5 out of 100 for Saudi Arabia and 58.8 for Jordan - compared to 75.0 and 60.4 previously.

Our baseline view is that the political crisis in Iraq will continue over the coming years, following the rapid takeover by ISIS and other Sunni militants of the country's west and north. While ISIS and its allies are highly unlikely to take over the heavily protected and largely Shi'a south, we believe that Baghdad will lack the means to retake the rest of the country anytime soon (see 'Rising Risk Of State Collapse - Scenarios Assessed', June 23). Sunni tribesmen aligned with ISIS allegedly took control on June 23 of the only legal border crossing between Iraq and Jordan - a development that, if confirmed, would leave the Iraqi army with no operational presence along the country's entire western frontier. Two key crossings between Iraq and Syria have also been captured, allowing ISIS to easily move their forces and equipment across the two countries.

Capture Of Border Crossing Poses New Risks
Iraq - Regional Map

BMI View: Both Jordan and Saudi Arabia face increased security threats following the rapid deterioration of Iraq's political situation. Although we do not expect a direct military conflict between radical jihadist group ISIS and Iraq's neighbours, the ongoing regional turmoil raises the likelihood of border instability and domestic terrorist attacks.

The rapid progress in Iraq of insurgents spearheaded by the radical jihadist group the Islamic State of Iraq and the Levant (ISIS) presents a substantial security threat to adjacent states, notably Saudi Arabia and Jordan. While we do not anticipate a direct military conflict between ISIS and Iraq's neighbours, the continuation of the fighting will disrupt regional trade and raises the likelihood of border instability and domestic terrorist attacks. Taking these risks into account, we have revised down our proprietary short-term political risk ratings to 72.5 out of 100 for Saudi Arabia and 58.8 for Jordan - compared to 75.0 and 60.4 previously.

Capture Of Border Crossing Poses New Risks
Iraq - Regional Map

Our baseline view is that the political crisis in Iraq will continue over the coming years, following the rapid takeover by ISIS and other Sunni militants of the country's west and north. While ISIS and its allies are highly unlikely to take over the heavily protected and largely Shi'a south, we believe that Baghdad will lack the means to retake the rest of the country anytime soon (see 'Rising Risk Of State Collapse - Scenarios Assessed', June 23). Sunni tribesmen aligned with ISIS allegedly took control on June 23 of the only legal border crossing between Iraq and Jordan - a development that, if confirmed, would leave the Iraqi army with no operational presence along the country's entire western frontier. Two key crossings between Iraq and Syria have also been captured, allowing ISIS to easily move their forces and equipment across the two countries.

IRAQ - LONG-TERM SCENARIOS
Scenario Time Frame Likelihood Overview
Fragile Federal State 3-10 years 50% The Sunni insurgency is defeated following a civil war, resulting in a fragile federal solution along sectarian lines.
State Break-Up 3-10 years 40% An extended civil war leads to the partition of the country along sectarian lines.
National Reconciliation 1-10 years 10% A weakening of sectarian tensions leads to the gradual stabilisation of the country.
Source: BMI

Jordan: Iraqi Crisis Adds Further Risks

We believe that conditions along the 180km Iraqi-Jordanian border will remain relatively stable for the time being. Jordan has already moved to shore up its border defences, redeploying army units including tanks and rocket launchers. The Jordanian armed forces are well-equipped, US-trained, and much more cohesive than the Iraqi army; these factors should leave them capable of deterring any external attack from militants in Iraq. The United States is likely to further leverage its support to the Jordanian government, a key regional ally. US President Barack Obama highlighted the threat posed by ISIS to Jordan, in an interview aired on June 22.

However, the main challenges to Jordan's stability are internal, in our view. ISIS' success in Iraq aggravates the existing security and economic risks stemming from Jordan's exposure to the Syrian civil war (see 'Exposed To Syria For The Long Haul', June 4). Persistent regional instability, while not posing an existential threat to the Jordanian monarchy, will continue to weigh down on Jordan's economic outlook. Although we expect Jordanian economic activity to pick up from 2015 onward, growth in the tourism sector (Jordan's largest employer) is set to stay below potential. The country's export performance will also remain lacklustre, given the disruptions to Iraqi trade - which now accounts for 18% of total Jordanian exports, after rapid growth in recent years. While we forecast Jordanian real GDP growth to accelerate to 4.1% in 2015 from 3.3% in 2014, risks to our outlook are now firmly to the downside.

Loss Of Iraq's West Set To Impact Trade
Jordan - Exports To Iraq, JODmn

Jordanian security officials have expressed concern over the presence of 'sleeper cells' in the Kingdom - hidden in the vast population of refugees - that could carry out attacks against sensitive assets if needed. While attention had previously focused on pro-Syrian groups and Syrian intelligence operatives, Amman fears that ISIS activists could use the same tactic. Between 800 and 2000 Jordanian nationals reportedly serve under the ranks of ISIS, although exact numbers are difficult to substantiate.

The Kingdom fears that jihadists fighting in Syria or Iraq could eventually turn their focus to Jordan, as was the case in 2005 - when simultaneous suicide bombings by al-Qaeda-affiliated Iraqi militants killed 60 people in Amman, at the height of the Iraq War. These concerns are heightened by the ambiguity of ISIS' aims; the organisation desires the formation of an Islamic "caliphate" covering Iraq and Syria, but also (by some accounts) Jordan and Lebanon. Moreover, with the regional security crisis set to continue over the coming quarters, we expect to see no progress in Jordan's already-languid process of political liberalisation.

Saudi Arabia: More Pain Than Gains

In geopolitical terms, ISIS' rapid advance across Iraq presents some opportunities to Saudi Arabia. Under Iraqi Prime Minister Nouri al-Maliki's Shi'a-led central government, Iraq has drawn closer to Iran (Saudi Arabia's long-standing regional rival) while maintaining frosty relations with the six countries of the Gulf Cooperation Council. Saudi Arabia and Iraq have engaged in a war of words since ISIS' assault, with Maliki accusing the Kingdom of backing the militants. On June 16, Riyadh blamed the Iraqi crisis on Maliki, alleging that years of "sectarian and exclusionary policies" by his government had played a part.

Maliki's authority is now under threat, with other Iraqi political leaders and the US government pressuring him to form a unity government representing Sunnis and Kurds as well as Shi'as (calls that he rejected on June 25). Riyadh would likely treat Maliki's departure as a victory, particularly if it leads to an empowerment of Iraq's Sunni minority. Moreover, the crisis is set to draw in Iran's special forces and regional Shi'a militias such as Lebanon's Hezbollah, straining their capabilities.

Iraq's Neighbours On The Edge
MENA - Political Risk Ratings (out of 100)

Yet on balance, Iraq's troubled situation adds more difficulties than gains for Saudi Arabia. Riyadh is acutely aware that any advances by jihadist groups ultimately threaten the Kingdom itself. Thousands of Saudis joined previous conflicts in Bosnia, Chechnya, Afghanistan and Iraq, before eventually returning home as radicalised veterans and moving against the regime. Since the start of 2014, Saudi Arabia has shown a growing willingness to tackle the issue, with Prince Mohammed bin Nayef - the Minister of Interior and known for his focus on counter-terrorism - assuming control of the Syria brief in April. ISIS itself was formally designated as a terrorist organisation in March, outlawing financial support to the group by Saudi nationals.

More problems could arise. Any attack on Jordan would indirectly impact Saudi Arabia, which regards Amman as an important buffer state. In our baseline scenario, although the formal unity of the country will be maintained, levels of violence will remain elevated for several years, and the governance of the north will remain a major problem - hardly a situation advantageous to Riyadh. Moreover, while we expect Maliki to be forced to resign, Tehran would likely veto any replacement that doesn't take Iran's interests into consideration, bringing no major gain to Saudi Arabia. In a worst case scenario, the Iraqi Shi'as could fracture - throwing the south of the country into disarray and bringing the conflict right at Saudi Arabia's borders.

Read the full article

This article is tagged to:
Sector: Country Risk
Geography: Middle East, Iraq, Jordan, Saudi Arabia
×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.