Ones to Watch, 17 September 2018

Americas: Showdown between Peru’s executive and legislative powers to intensify

Sectors: all
Key Risks: governability; policy continuity; political instability

In Peru, President Martin Vizcarra stepped-up pressure on the opposition-controlled Congress to approve four government-backed anti-corruption bills which require a constitutional reform. On 16 September Vizcarra asked for an extraordinary Congress session to take place on 19 September and linked the passage of the bills to a vote of confidence in his cabinet. Should Congress dismiss the bills – and the cabinet – Vizcarra would be constitutionally entitled to dissolve Congress and call for snap legislative elections, given that Congress has already dismissed one cabinet under the current presidential term (2016-2021), before former president Pedro Pablo Kuczynski stepped down and Vizcarra replaced him. Although the showdown between the legislative and the executive power is expected to intensify, Congress appears likely to approve the bills. Nevertheless, governability and political instability risks will persist during Vizcarra’s term.

Asia-Pacific: Proposed US-China trade talks hindered by new tariff threats

Sectors: tech; various
Key Risks: trade war

On 12 September reports emerged that US Treasury Steve Mnuchin invited Chinese Vice Premier Liu He to a new round of trade talks. The invitation was well-received by the Chinese, who have remained open to trade negotiations. However, on 15 September reports emerged that US President Donald Trump is set to impose tariffs on US$200bln of Chinese imports within days. If President Trump goes ahead with the tariffs, Beijing may refuse to participate in the proposed talks. This would mark a significant shift in China’s trade war attitude after months of trying to engage with the US. Policymakers in Beijing appear to be growing increasingly frustrated. Former finance minister Lou Jiwei said that Beijing might even target US companies’ supply chains in export restrictions to the US. A deal on trade is unlikely to materialise any time soon.

Eurasia: Schism in Orthodox church and likely recognition of Kiev Patriarchate

Sectors: all
Key Risks: protests; disputes over religious property; escalation of Ukraine conflict

On 14 September the Russian Orthodox Church froze ties with the Ecumenical Patriarchate of Constantinople, prima inter pares among the Orthodox Churches. The Russian Church said it would no longer acknowledge Constantinople Patriarch Bartholomew I. The move – the most serious schism in Orthodoxy in a millenium – comes as Bartholomew I is expected to approve autocephaly for Ukraine’s Orthodox Church, which the Russian Orthodox Church views as an affront. A backlash in Russia is possible, although the church’s close ties to the state mean fallout will likely be limited to some protests. Recognising the Kiev Patriarchate in Ukraine or enabling a unification of its so-far-unrecognised Orthodox churches will cause tensions in eastern Ukraine and surely be denounced by Russian-backed separatists, who have previously attacked Ukrainian and evangelical priests. Protests could escalate should symbolic properties controlled by Russia’s Orthodox Church are to be transferred to Ukrainian control.

Europe: UK Prime Minister May to meet EU counterparts in Salzburg on 20 September

Sectors: all
Key Risks: trade disruption; political instability

European Union leaders are due to meet with British Prime Minister Theresa May in Salzburg, Austria, on 20 September for a key summit on Brexit. It is unlikely that a final agreement on the post-Brexit transition period, to run from 30 March 2019 until the end of 2020, let alone relations between the UK and EU after Brexit, will be reached at the summit, though further details of the eventual pact will emerge. However, May will be hoping that EU leaders can agree to some concessions to her so-called Chequers proposal for post-Brexit ties. The proposal has divided her Conservative Party, and fallout from the summit could significantly impact the upcoming 30 September Conservative Party conference. It cannot be ruled out that the conference, due to run until 3 October, will result in a leadership challenge to May. There is an increased risk of new elections in the UK as well, which could prompt further uncertainty and political and economic turmoil.

MENA: Iraq breaks parliamentary deadlock

Sectors: all
Key Risks: governability; policy continuity; political instability

Lawmaker Mohammed al-Halbousi was elected as speaker with one deputy from Muqtada al-Sadr’s Saieroon party, marking a substantial step towards establishing a new Iraqi government four months after national elections were held. Parliament was due to elect a speaker and two deputies during its first session on 3 September, but failed. The remaining deputy is yet to be elected – another vote will take place on Sunday, which will give a further indication of the shape of the new government. 90-day formation process will now start, with al-Abadi, the previous prime minister, effectively sidelined. The election of Halbousi and the loss of Abadi comes as a blow to US interests, with Halbousi backed by a pro-Iranian bloc and pro-US Abadi out of power. The first deputy was given to Hassan Karim, put forward by Shi’ah cleric Muqtada al-Sadr, the supposed kingmaker in this new government.

Sub-Saharan Africa: South Sudan peace agreement put to test as rival factions trade accusations

Sectors: all
Key Risks: violent conflict; political instability

On 13 September South Sudan’s President Salva Kiir and his former deputy and leader of the SPLM-IO opposition forces Riek Machar signed a ‘final’ peace deal in Addis Ababa to end five years of fighting. The agreement reinstates Machar as Vice President. The accord was met with significant scepticism after previous ‘permanent’ ceasefire agreements were broken within days of their signing. A series of clashes on 15 September have raised fears the latest accord will prove equally short-lived, with the SPLM-IO accusing government forces of violating the deal when it attacked its positions in Yei River state. While both Machar and Kiir appear to remain committed to the deal for now, the context is arguably even less conducive to a lasting peace than was previously the case. Should the clashes continue, the two leaders might thus find themselves unable to stop a further escalating