ISA’s latest News and Analysis

September 3, 2013 – Published on International Strategic Analysis ISA’s  Frontpage.

The Vulnerable Arabian Peninsula: … //

… India’s Economic Troubles Continue: … //

… Difficult Days for the BRICS: … //

… Did Assad Go to Far?  

  • The apparent use of chemical weapons in an attack against a rebel stronghold east of the Syrian capital Damascus resulted in hundreds of deaths and could change the direction of the civil war in Syria. While finding the truth in such murky circumstances is always difficult, rebel forces allege that Syrian government forces loyal to President Bashar Assad used chemical weapons against civilian targets, and outside groups have confirmed the use of such weapons. However, the Syrian government denied their use and accused the rebels of either faking the videos of the attack or using the weapons themselves.
  • If the international community reaches an agreement that government forces did in fact use chemical weapons in such a large-scale attack, the pressure on the United States and others to intervene in Syria’s civil war will grow immensely. On one hand, US President Barack Obama has clearly stated that the use of chemical weapons would force the US to intervene in Syria. On the other hand, it is clear that the Obama Administration does not want the US to become caught in the quagmire of Syria’s civil war, both for the difficulties that it poses as well as the fact that governments in the US and other countries are concerned about the presence of extremist groups within Syria’s disparate rebel forces.
  • If Syrian government forces did use chemical weapons in this deadly attack, it is a decision that is hard to understand. For example, the Syrian government must be aware that the United States government does not want to intervene in Syria and without the US’ military might, any international effort to intervene militarily in Syria is unlikely to succeed. Moreover, thanks to the support of Russia, Iran and Hezbollah, Syrian government forces have regained the momentum in many areas of the country, forcing the rebels to go on the defensive in many strategic locations. Finally, this attack took place just as United Nations chemical weapons inspectors were visiting Syria. Now, the Syrian government is facing the real possibility of a large-scale, US-led international intervention that could destroy their hopes of clinging on to power in Syria.

Why Investors are Fleeing Emerging Markets:

  • In recent months, investment growth in emerging markets has slowed dramatically and this has played a key role in the economic slowdowns taking place in many of the world’s leading emerging markets. For example, investors are selling off many of their foreign currency holdings in emerging markets and this has led to the sharp decline in the value of currencies such as the Indian rupee, the Indonesian rupiah and the Brazilian real. In turn, these currency sell-offs are fueling inflationary pressures that are weakening consumer demand in these emerging markets.
  • There are a number of key reasons why investors are no longer so enamored with emerging markets. For one, China has easily been the leading recipient of foreign investment in emerging markets, but as labor costs rise, China is no longer the attractive investment destination that it once was. Second, the availability of cheap money is in decline, and this too is contributing to the fall in investment in more risky emerging markets. Finally, investors are regaining some of their interest in the world’s developed markets, particularly the United States, where the outlook for economic growth is improving following a prolonged downturn.
  • There are many factors that suggest that this trend away from emerging markets will continue over the near-term. First, economic growth levels in key investment destinations such as China, India and Brazil are forecast to remain subdued over the near-term and this will deter foreign investment. Second, investors are leery about investing in countries with large current account and fiscal deficits and this is negatively impacting countries such as India, Indonesia and South Africa. Finally, interest rates are likely to begin to rise in many of the world’s leading developed economies beginning next year and this will increase their attractiveness for investors at the expense of emerging markets.

Egypt Returns to From Where It Started:

  • The recent crackdown on the Muslim Brotherhood and its supporters by Egypt’s armed forces has seemingly brought an end to Egypt’s two-year experiment with democratic reform. The armed forces have stepped in to take the place of Egypt’s democratically-elected Islamist government, the same armed forces that allowed former dictator Hosni Mubarak to rule the country for three decades. This not only has major implications for Egypt’s future, but also for the future of the democratic experiments underway across the region.
  • The brutality used by Egypt’s armed forces in crushing the Muslim Brotherhood indicate that they are now fully committed to taking and maintaining power in Egypt. Moreover, Egypt’s armed forces are preparing steps to ensure that the Muslim Brotherhood is eliminated as a threat to their hold on power. With hundreds of people dead and the leadership of the Muslim Brotherhood in custody, the armed forces now control all levels of power in Egypt. Moreover, by using such brute force to eliminate their rivals, the armed forces have forced moderate political leaders that were opposed to the Muslim Brotherhood to withdraw from the government, unless they too receive the blame for this bloody crackdown.
  • Given Egypt’s significant influence across the Middle East and North Africa, this seizure of power by the armed forces will have major repercussions across the region. First, the armed forces engaged in battles with political opponents in Syria, Yemen, Bahrain and elsewhere will be emboldened to use a greater degree of force to put down opposition to their rule. Second, Islamist groups in power in countries such as Tunisia or Turkey will feel threatened by the crushing of the Muslim Brotherhood by Egypt’s armed forces. Finally, the sectarian divisions that are stifling the expansion of democratic policies and ideals across the region are likely to continue to widen, threatening to unleash even more conflicts and unrest across the Middle East and North Africa.

Mixed Economic Signals from Europe: … //

… (full text for all 7 analysis).

(see also: Welcome to our new blog: politics for the 99%).

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