Ones to Watch, 30 April 2018

Americas: Security continues to deteriorate in Ecuador’s northern border

Sectors: all
Key Risks: terrorism; targeted attacks; kidnapping; extortion

In Ecuador, further security-force operations should be expected in the northern provinces bordering Colombia as the government increases efforts to crackdown and capture members of the Oliver Sinisterra Front, a criminal group made up of former Colombian FARC rebels who refused to accept the November 2016 peace agreement. On 27 April President Lenin Moreno extended the state of emergency in San Lorenzo and Eloy Alfaro in the border province of Esmeraldas, marking the third consecutive extension of the 30-day state of emergency first declared on 27 January following an increase in criminal activity, attacks against the security forces, and kidnappings of Ecuadorian citizens. The risk of further targeted attacks, kidnapping and extortion in the area will persist at least over the coming months.

Asia-Pacific: More high-level diplomacy in Pyongyang as China’s foreign minister visits

Sectors: all
Key Risks: interstate conflict; sanctions

On 2-3 May China’s Foreign Minister Wang Yi will visit Pyongyang between 2-3 May in what is the Chinese government’s most high-level trip to North Korea in 11 years. It comes at a time of immense diplomatic activity from Pyongyang, particularly in the wake of Kim’s visit to Beijing at the end of March and his meeting with South Korea’s President Moon Jae-in on 27 April. While that visit saw the two Koreas agree to move towards formally ending the Korean War, the real test of progress will be when Kim meets US President Donald Trump in the months ahead. As North Korea’s closest thing to an economic partner, China will also play a major role in pushing forward any diplomatic breakthroughs on the Korean peninsula. Kim will likely make more concessions this week, allowing Beijing to present itself as a responsible actor on the international stage.

Eurasia: Deripaska says he is willing to give up control of Rusal and EN+

Sectors:  metals; hydropower
Key Risks: sanctions; non-payment

Russian oligarch Oleg Deripaska is set reduce his stake in London-listed EN+, which in turn effectively holds a controlling stake in aluminum giant Rusal, from 70 per cent to below 50. A buyer has yet to be found, however. The announcement came exactly three weeks after Deripaska, EN+ and Rusal were sanctioned by the US. Five days prior the US Treasury announced sanctions could be lifted on the firms if Deripaska relinquished control, but it has yet to comment. The divestment will take some time and raises questions over who will take over the stake, which will have major implications for whether sanctions remain. However, the key takeaway is that the US Treasury has demonstrated its ability to control the distribution of wealth in Russia itself with the sanctions moves, which could have significant long-term implications for the country.

Europe: US Tariff deadline tomorrow; British political challenges mount

Sectors: metals
Key Risks: tariffs

The EU has said expects the US temporary exemption of the bloc from President Donald Trump’s steel and aluminum tariffs to to be replaced with a permanent and unconditional exemption when the temporary waiver expires 1 May. However, no final agreement has been announced and Brussels has already noted that it is prepared to introduce retaliatory measures. US Commerce Secretary Wilbur Ross indicated that an exemption could be granted if they accepted a quota on such exports.  Meanwhile, the UK government faces mounting political challenges as the Windrush scandal over the deportation of decades-long legal residents –  primarily of African, Caribbean and South Asian descent – claimed its first scalp with Amber Rudd’s resignation as Home Secretary on 29 April. British Growth also slowed to the lowest pace in five years in Q1 2018, to 0.1 per cent. As Brexit approaches in 11 months, these challenges could cause further instability for Prime Minister Theresa May’s minority government.

MENA: Latest possible Israeli airstrikes will raise tensions

Sectors: all
Key Risks: war on land; civil war; political violence; interstate conflict

On 29 April, at least 40 members of Syrian government forces were killed during a series of unclaimed airstrikes around 2230 local time on regime military bases and weapons stores, including the Brigade 47 base on the southern outskirts of Hama city and the Nayrab airbase in Aleppo province. Reports that a number of Iranian-funded volunteers, including many members of a unit of Pakistani nationals, were killed in the airstrikes could not be confirmed. The Israeli Air Force was the likely perpetrator. Syrian state media has claimed the rockets used were deployed from Jordan, although this is likely misinformation. Such tactics are  regularly used to contain the consequences of undefended military action. If confirmed, this is a notable escalation of the Israeli military’s targeting in Syria and increases the baseline risk of confrontation by proxy, although the imminent threat of military action in Israel or Lebanon remains moderate.

Sub-Saharan Africa: Banda hints at return to politics upon return to Malawi

Sectors: all
Key Risks: political instability; civil unrest

On 28 April former president Joyce Banda returned to Malawi, despite facing the threat of arrest over corruption allegations, paving the way for a potential return to politics ahead of the 2019 elections. Banda fled into self-imposed exile in 2014 after losing power in the wake of the so-called ‘cashgate’ corruption scandal in which government officials stole several million dollars. In July 2017 an arrest warrant was issued for Banda, but this year the anti-corruption bureau announced it had no concrete evidence to charge her. Banda’s return came a day after peaceful protests were held in six cities, including Lilongwe and Blantyre, over alleged corruption and poor governance. Protests are rare in Malawi and reflect rising social discontent. Some demonstrators called for President Peter Mutharika’s removal. A day later Banda told her supporters she will hold consultations over a return to politics, setting the stage for hotly contested and divisive elections in 2019.