Ones to Watch, 14 January 2019

Americas: Disruptive shortages amid crackdown on fuel theft to continue across Mexico

Sectors: all
Key Risks: fuel shortages; disruptive unrest; fuel theft

In Mexico, disruptive fuel shortages are expected to continue across the country as the government of President Andres Manuel Lopez Obrador (AMLO) cracks down on fuel theft with a strategy that has forced the closure of pipelines and subsequent changes to the distribution dynamics while the hot spot areas where most of the theft takes place are brought under control. AMLO has stated that normal supply would resume soon, yet adding he could not specify a date. Mexico City, Coahuila, Guanajuato, Michoacan, Aguascalientes, Jalisco, Queretaro, Hidalgo, San Luis Potosi and Mexico states have reported shortages, which have started affecting other industries and caused some food prices to rise due to transport difficulties. Violent protests have been reported in some gas stations, and further similar incidents will remain likely as long as normal supply is not restored.

Asia-Pacific: Huawei sales executive arrested in Poland

Sectors: telecommunications
Key Risks: business operations; sanctions

Reports emerged on 11 January that a sales director of China’s telecommunication giant Huawei, known as ‘Weijing Wang’ or ‘Stanislaw Wang’, was arrested by Polish security services in Warsaw. A Polish former senior intelligence agent, ‘Piotr D’, was also arrested. The two are accused of spying against Poland for China. The Warsaw arrests come amid increasing security concerns in Europe over Huawei technology being used to spy on Western governments. Huawei rapidly moved to dismiss Wang from his post in an attempt to distance itself from the case. Poland’s Ministry of International Affairs called for the EU and NATO to jointly consider whether to exclude Huawei from their markets following the arrest. Regardless of Huawei’s involvement in the case, the arrest will likely impact the company’s Europe operations. Poland is Huawei’s headquarters for central and eastern Europe and the Nordic region.

Eurasia: Mixed messaging on Uzbek banking sector as TBC enters but Akmalov leaves jail

Sectors: banking
Key Risks: economic development; banking diversification

On 11 January TBC Bank, the second largest bank in Georgia, announced plans to enter the Uzbek banking sector. It will be the second foreign bank to enter the market amid a series of sweeping economic reforms; Kazakhstan’s Halyk Bank did so in September 2018. However, just two days prior local media reported that the ex-deputy chairman of the Central Bank of Uzbekistan, Alisher Akmalov, was released in December 2018. Before his arrest, Akmalov was known as the ‘gray cardinal’ of the banking system, which was ravaged by ludicrous exchange rate policies during his tenure that were seen as keeping foreign exchange in the hands of the elite. Officials avoided commenting on the present status of charges against Akmalov. His prosecution was a sign that President Shavkat Mirziyoyev was serious about cleaning up the banking sector. His release may undermine that.

Europe: Crucial week ahead for Brexit; Greek government faces no-confidence vote

Sectors: all
Key Risks: political instability; trade frustration; civil unrest; regulatory uncertainty

The upcoming week will prove crucial for the UK’s efforts to leave the EU. A group of backbench MPs are reportedly planning an attempt to take control of the next Brexit steps if Prime Minister Theresa May’s EU Withdrawal Agreement is rejected by Parliament on 15 January, as is all but guaranteed. Opposition Labour Party leader Jeremy Corbyn said he would seek a no-confidence vote soon thereafter. Developments in Brussels are more reassuring, with reports that the EU prepares to unilaterally offer a Brexit extension. However, it is unclear how this would be possible beyond the end of May when the EU is due to hold elections for the European Parliament in which Britain cannot take part as it cannot legally remain a member. Meanwhile, Greek Prime Minister Alexis Tsipras is expected to narrowly survive a 16 January confidence vote despite the Independent Greeks leaving the coalition, though this is by no means guaranteed.

MENA: US threatens sanctions against Turkey over planned operation against US Kurdish allies

Sectors: all
Key Risks: sanctions

US President Donald Trump threatened to ‘devastate’ Turkey’s economy should Ankara progress with a planned attack on US-backed Kurdish fighters in Syria in a tweet which also announced the beginning of US withdrawal from Syria. Further reports have come that more commando units and armored vehicles have arrived to supplement the current Turkish presence in the province of Hatay on the Syrian border. Ankara fiercely criticised the comment. Sanctions imposed by the US against two Turkish ministers alongside tariffs on aluminium exports helped fuel a major lira decline in 2018. Ankara is not likely to capitulate to US pressure immediately and will continue announcing plans for the offensive, but will likely find reasons to delay or reduce operations to prevent sanctions.

Sub-Saharan Africa: High risk of post-election unrest in the DRC

Sectors: all
Key Risks: political instability; civil unrest; political violence

In the Democratic Republic of Congo, tensions remain high following opposition candidate Felix Tshisekedi’s surprise victory in the 30 December presidential election. Differing results from a separate vote tally by the Catholic Church have fuelled rumours of a backroom deal between Tshisekedi and incumbent Joseph Kabila. Tshisekedi’s rival Martin Fayulu, whom pre-election polls had seen in the lead, has vowed to challenge the outcome in court. Regional and international reactions have further undermined the legitimacy of Tshisekedi’s win, with the Southern African Development Community urging a recount. Whether the electoral commission will heed the calls is doubtful, given that it is seen as close to the ruling party. At least four people have died in protests over the results since 10 January. The risk of violence and instability will remain heightened at least for the coming weeks.