Ones to Watch, 30 July 2018

Americas: President Vizcarra proposes referendum on reforms to tackle Peruvian corruption

Sectors: all
Key Risks: civil unrest; corruption fallout; political instability

In Peru, President Martin Vizcarra urged the opposition-run Congress to call a referendum on judicial and political reforms aimed at eradicating institutional corruption. The vote would include judicial reforms and a ban on private financing of political campaigns, an end to the re-election of lawmakers and the creation of a second chamber in Congress. Congress cannot be guaranteed to approve Vizcarra’s proposal to call a referendum, which would force the president to collect voters’ signatures for the initiative to move forward. On 27 July thousands took to the streets to protest endemic corruption for the third time since Vizcarra took office in March. The latest corruption scandal within the judiciary will likely continue to stoke unrest and potential for instability as, according to recent polls, most Peruvians disapprove of the political class and the judiciary.

Asia-Pacific: Hun Sen extends 33-year rule in sham elections

Sectors: all
Key Risks: political stability

In Cambodia, Prime Minister Hun Sen’s ruling Cambodian People’s Party (CPP) secured a very predictable victory in contentious national elections on 29 July. The main opposition Cambodia National Rescue Party (CNRP) was dissolved in November. Hun Sen extended his 33 years with the CPP winning 80 per cent of the vote and at least 100 of the 125 seats in the National Assembly. The voter turnout reportedly reached 80.49 per cent compared to 69.61 per cent in 2013 despite the CNRP calling for an election boycott. In rural areas, the CPP used intimidation tactics to force communities to vote, such as threats to cut electricity supplies. However, a high number of invalid ballots in Phnom Penh and other urban areas suggested a silent protest against Hun Sen’s autocratic rule. The elections represent a serious backward step for democracy in Cambodia.

Eurasia: Usmanov first oligarch to repatriate assets amid sanctions and Kremlin pleas

Sectors:  telecommunications; metals
Key Risks: sanctions; frustration of process; CEND

On 27 July Alisher Usmanov completed re-domesticating his company USM Holding, in which fellow MP Andrei Skoch holds a 30 per cent stake through his father Vladimir, becoming the first Russian oligarch to do soa mid continuous pressure from the Kremlin to do so and the rising risk of sanctions. The April sanctioning of Rusal by the US highlighted the risks of foreign listings to Russian companies. USM owns controlling stakes in metals giant Metalloinvest and in mobile phone provider Megafon, and numerous other companies. London-listed Megafon announced its intention to buy back its shares and then de-list or move to a Moscow listing two weeks prior. Usmanov is the first oligarch to have fully re-domesticated his assets. Meanwhile, fellow Russian mobile service provider MTS announced on 27 July that it would take Turkmenistan to the World Bank’s arbitration court, ICSID, after the country effectively forced it out of business last year. The country faces an escalating crisis and forex shortage and the trial could put off any potential further Russian investment.

Europe: Ex-Milosevic lawyer shot; Macedonia moving to finalise referendum date

Sectors: all
Key Risks: political violence; political instability

On 29 July Serbian lawyer Dragoslav Ognjanovic was shot and killed outside his home in Belgrade’s Novi Beograd neighbourhood. Ognjanovic was a lawyer for ex-Yugoslav dictator Slobodan Milosevic at his war trial in the Hague in the early 2000s and also served as a defence attorney in numerous organised crime trials; there has been a slew of assassinations linked to organised crime in the region in recent years. If Ognjanovic’s assassination is tied to Bosniak or Kosovar groups, it could cause tensions to spike and protests to break out. Tensions have been rising between Serbia and Kosovo, though bilateral talks remain ongoing. Meanwhile, Macedonia is expected to hold its referendum on a deal with Greece that would see it recognised as North Macedonia by 30 September, with a vote most likely that day or a week prior. Campaigning will prove fierce and there is a risk it could prompt limited violence.

MENA: Saudi hydrocarbon exports through Bab al-Mandab halted after Huthi attack

Sectors: oil and gas; shipping
Key Risks: oil prices; contract cancellation

On 26 July Saudi Arabia suspended oil shipments through the Bab al-Mandab straits that run between Yemen and Djibouti. The suspension followed two attacks by Iran-backed Huthi rebels on very large crude carriers in the straits. The risk is elevated for Saudi and UAE ships compared to other countries, although Kuwait has also stated that it is considering halting shipping. Around 4.8m bpd of crude and oil produce passed through the strait in 2016, with Saudi, Iraq, Iran and Kuwait using the route to get to the Suez and SUMED pipeline and ship crude west. Of the 4.8m bpd, around 2.8m goes northbound toward Europe, with another 2m sailing from Europe into the Middle East and Asia. If the suspension is long lasting, and there are suggestions that some Saudi ships are already cross the straits again, it could also harm Saudi Arabia’s Yanbu and Rabigh refinery which receive crude supplies through this route. The new Jizan refinery could also be affected.

Sub-Saharan Africa: First post-Mugabe elections in Zimbabwe

Sectors: all
Key Risks: political stability; political violence

On 30 July voters in Zimbabwe are called to the ballot box in the first presidential and parliamentary elections since long-time leader Robert Mugabe was toppled in a military coup in late 2017. The international community is watching closely whether incumbent President Emmerson Mnangagwa delivers on his promise of a fair vote. A credible and peaceful election will be crucial to re-engaging Western partners and attracting foreign investment. This is far from certain, however. Although external election observers were invited to monitor the vote for the first time since 2002, the opposition has complained about the ruling ZANU-PF’s continued influence on the electoral commission and control of state media. On 27 July the UN warned of an increase in voter intimidation in the weeks leading to the election. A poll released by Afrobarometer days before the election suggested that President Mnangagwa’s lead on Nelson Chamisa, the candidate for the opposition Movement for Democratic Change (MDC), had narrowed to a few percentage points, making a second round of voting increasingly likely. If past elections are anything to go by, a runoff greatly increases the risk of major bloodshed. However, even if large-scale violence is avoided this time, Zimbabwe might be headed for increased political instability, given that rifts within ZANU-PF have widened since Mugabe’s overthrowal last year, which saw most of his still numerous allies sidelined by Mnangagwa.