Global Political Risks In 2013

Business Monitor International (BMI) has just published its latest quarterly Global Political Outlook, covering the year 2013.

Perhaps the biggest single political risk with major international implications in 2013 is the growing possibility that Israel will launch airstrikes against Iran’s nuclear programme. Israeli Prime Minister Benjamin Netanyahu is likely to be re-elected in January 2013, and could interpret his victory as a ‘mandate for war’. Although Israel may temporarily hold off under US pressure, it may lose patience completely if Iran elects another hardliner as president in June. Israel could conclude that Tehran will not compromise over its atomic programme and that it faces a ‘now or never’ moment to neutralise this perceived threat. Yet, the consequences of action would be substantial, triggering a war in the Persian Gulf. Elsewhere in the Middle East, we are remaining vigilant towards Egypt, amid a highly volatile political environment, and we expect the Assad regime in Syria to collapse in 2013 – although in our view, the civil war will continue, even with Assad out of power. Furthermore, Jordan is seeing greater signs of unrest.

Other major risks include the eurozone crisis, with the big events to watch being the Italian general election in the spring of 2013, and the German election in the autumn. However, in both cases, we do not expect a major departure from the status quo.

In East Asia, we see scope for further tensions between China and Japan over their maritime dispute, especially with new leaders taking office in both countries. Japan, in particular, under new premier Shinzo Abe is likely to adopt a more robust defence policy, and his brand of overt nationalism could further antagonise China and South Korea. As for Korea itself, the outlook is mixed. The incoming Southern president (to be elected on December 19, but likely to be Park Geun-hye) is expected to pursue friendlier relations with the North, but it is far from clear if Pyongyang will reciprocate. Indeed, the North’s leader Kim Jong Un could test his new Southern counterpart with more provocations, which may include a nuclear test.

Turning to Latin America, we see a growing risk of a change of president in Venezuela, due to Hugo Chavez’s illness. His death or resignation would necessitate a new presidential election, which would pit Chavez’s designated successor, Nicolas Maduro, against Henrique Capriles, whom Chavez defeated in October 2012. Regardless of whether Capriles wins, we believe that it would take many years to put Venezuela back on the path of economic orthodoxy after more than a decade of state interventionism. Further south, we believe that Argentina could experience a fresh economic and political crisis, as the authorities may be forced to devalue the peso and come under growing pressure to pay ‘holdout’ bondholders from the 2001 default.

In Africa, Kenya will hold general elections in March 2013, and investors will be watching to see if there is a repeat of the violence seen after the last election. Zimbabwe is also expected to hold elections in 2013, and the scene may be set for long-serving President Robert Mugabe to retire.

The above are just some of the events we discuss in our Global Political Outlook. Among the wild cards we mention are a new conflict between Armenia and Azerbaijan, and cyber warfare. Our Outlook also includes a table of forthcoming elections in all major economies and most minor states, a list of candidates and parties contesting them, and BMI’s expected outcome, where we have a firm view. Our Global Political Outlook is available to subscribers at Business Monitor Online.

Editor’s note: Due to the Christmas and New Year holidays, we are reducing our updates substantially. We wish all our readers a very merry Christmas, and all the best for 2013.