Ones to Watch, 5 March 2018

Americas: Targeted violence continues to affect Colombia’s electoral cycle

Sectors: all
Key Risks: targeted attacks; terrorism; political polarisation

In Colombia, targeted political violence is expected to continue to affect the electoral race towards the 11 March legislative elections and the 27 May presidential election. On 2 March leftist presidential candidate Gustavo Petro’s convoy was attacked in Cucuta, Norte de Santander department by protesters who opposed a Petro-led rally in the city. On 4 March at least nine people were injured when a small explosive device went off during a Conservative Party rally in Segovia municipality, Antioquia department. The ELN guerrillas plan to hold a four-day unilateral ceasefire between 9 and 13 March to show ‘respect’ to those participating in the 11 March vote. Nevertheless, political polarisation is expected to continue to lead to the most violent electoral cycle in recent years. Further incidents should be expected ahead of the votes.

Asia-Pacific: National People’s Congress to lay out Xi’s economic vision

Sectors: all
Key Risks: macroeconomic stability

On 5 March China’s parliament, the National People’s Congress, opened for its annual session, with a raft of new key appointments and reform measures to be announced over the course of two weeks. On the first day President Li Keqiang announced a GDP target of 6.5 per cent for 2018, disappointing many China-watchers who had hoped the target would be scrapped altogether. The substance of Li’s speech was very much in line with the messages coming out of the 19th Party Congress in October, with stability and sustainable growth the key watchwords. Of more interest will be the specific policies announced over the remaining 13 days, which will add flesh to the bones of President Xi’s economic vision for his second term. Also of significance will be the appointment of a new People’s Bank of China governor, with Xi’s confidante Liu He the frontrunner.

Eurasia: Russia and Ukraine return to gas battlefield

Sectors:  energy
Key Risks: contract frustration

Russian state-owned gas giant Gazprom announced on 1 March that it would terminate contracts with Ukraine’s Naftogaz after the latter won US$2.5bln following a years-long arbitration dispute. Gazprom Sales to Ukraine have been frozen since 2015 but Ukraine re-imports Russian gas sent to Poland, Slovakia and Hungary. Russian Energy Minister Alexander Novak pledged there would be no immediate threat to Russian gas supplies to the EU, a majority of which are shipped via Ukraine, but there remains a distinct risk the renewed ‘gas war’ will affect downstream gas flows and EU gas prices given Ukraine’s deals to re-import gas, something Gazprom has long opposed.

Europe: German positivity, Italian negativity

Sectors: all
Key Risks: political instability

Voters in Germany’s Social Democratic Party gave European observers a sigh of relief when they strongly voted to back a renewed grand coalition under Chancellor Angela Merkel’s CDU on 4 March. The move will see the de-facto leader of Europe return to her post in a fully-fledged rather than acting capacity. However, later that same day Italian voters presented her with what could become the next EU-wide crisis, a majority for populist parties in the Italian legislature with the Five Star Movement (M5S) and far-right League securing the most and third-most votes, respectively. It is difficult to see how a coalition will be formed in Italy, however, and the equivalent of a centre-right-cum-centre-left grand coalition being agreed there is less likely given the lack of  a realistic parliamentary majority. Early elections cannot be ruled out.

MENA: Muhammad bin Salman begins first official visit abroad

Sectors: banking; finance; energy; construction
Key Risks: contact frustration; market volatility; market confidence

On 4 March, Crown Prince Muhammad bin Salman of Saudi Arabia arrived in Egypt on the first leg of his first official multi-country tour since becoming crown prince. Bin Salman will be out of the kingdom for a month, with his travels including visits to the UK and potentially at least a week each in France and the US later in March. The tour is planned to strengthen weakening relationships with European allies and potentially affirm where the intended listing of national oil company Saudi Aramco may take place. The visit has already produced a US$10bln agreement on joint cooperation for an extension in the south Sinai Peninsula for the NEOM mega-city called the ‘Red Sea Project’. Further plans are likely to include the Jordanian government, with intentions that the cities are joined by bridges across the Red Sea.

Sub-Saharan Africa: Democratic Republic of Congo President to meet mining firms

Sectors: extractives
Key Risks: increased royalties; government intervention

On 6 March Democratic Republic of Congo President Joseph Kabila will meet with senior officials from various mining companies to discuss their opposition to proposed changes to the country’s mining code. Officials from mining companies such as Randgold Resources, Glencore, AngloGold Ashanti and China Molybdenum, among others, will attend the meeting. The changes approved by parliament included the removal of a clause protecting existing license holders from complying with higher royalties and other changes for 10 years. Changes to the law have long been demanded by a population who feel foreign companies have exploited the DRC’s vast reserves of copper, cobalt and other resources. However, moves to increase royalties from between 2 and 3.5 per cent to as high as 10 per cent, as well as new local ownership demands, have spooked investors.