GPF Annual Forecast

The World in
2018

The World in 2018
Summary 2
The United States 3
Europe 5
Russia 7
East Asia 8
South Asia 13
Central Asia 13
Southeast Asia and the South Pacific 14
Middle East 15
South America 17
Africa 18
Summary
It’s difficult to ignore how dramatically the world
has changed since 2008, when the global finan-
cial crisis shook the foundations on which the
international order was built. The systems that
had been in place for a generation have since
begun to slowly fall apart. And though they have
not yet crumbled entirely, the possibility that they
will has forced many countries to imagine a world
without them. Some have done so more eagerly
than others.
It is little surprise, then, that the past 10 years
have been marked by systemic dysfunction, mas-
sive shifts in trade processes and radical internal
political changes. Change, it seems, has been
the one constant. This is the context in which we
enter 2018. The dysfunction that will character-
ize the year has a decade’s worth of momentum
behind it. But only in some areas will dysfunction
lead to disruption.
One such area is the Middle East. For more than
15 years, Sunni insurgents have been fighting
U.S. forces there, and the wars they’ve waged
have been the defining trait of the region. That is
no longer the case. Now that the Islamic State
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THE WORLD IN 2018
has been defeated in Iraq and Syria, at least as
a “caliphate” with territorial integrity, traditional
powers have begun to compete for the space the
jihadists have since vacated. Best positioned to
win this competition is Iran, which has already be-
gun to change the balance of power in the region.
Europe, meanwhile, is still a mess, struggling as
it is with meager economic growth and social
unrest. Anti-European Union and anti-immigration
parties continue to gain traction in spite of some
significant defeats, most notably in France. As
these political battles rage on, more important
cultural differences will continue to pry nations
away from the EU. Poland, in particular, will force
policymakers in Brussels to decide what to do
with an elected government that chooses not to
adhere to EU ideology. Poland and others like it
will resist whatever the EU tries to do to bring
them to heel.
In China, the appointment of a de facto dictator
does not so much solve the country’s problems
as it does confirm the threat of their existence.
Beijing knows that it needs to fix its financial sys-
tem, but doing so requires structural reform that
will inevitably hurt the economy. Whatever the
government does will test the perceived infallibil-
ity of President Xi Jinping. Central to its efforts
in 2018 will be the One Belt, One Road initiative,
which is meant to spur growth, create jobs and
bring a semblance of prosperity to the interior
as Beijing expands its influence all the way to
Europe. (We doubt it will succeed in this regard.)
China will continue to creep into the waters to the
east, even as it figures out just what to do about
North Korea.
In 2017, Russia managed to stave off domestic
unrest, thanks in part to some creative fundrais-
2 © 2017 Geopolitical Futures

ing to offset the losses incurred due to low ener-
gy prices. In 2018, it will use its strategic reserves
to buy even more time – time it desperately
needs to try to diversify its economy. It won’t be
enough, though, since these kinds of changes
take a generation. That won’t stop Russia from
acting tough abroad, engaging in activities that
are ultimately peripheral to its interests, to inflate
its power in the eyes of its people. And it won’t be
enough to solve Russia’s economic problems.
United States
The United States is gridlocked, and though some
say this is Donald Trump’s fault, the roots of the
matter go much deeper – and much further back.
The U.S. was socially and politically gridlocked
before Trump, and if he left office tomorrow it
would still be gridlocked.
The causes of the impasse are irrelevant for our
purposes. What matters to us is its impact on
U.S. foreign policy. Rhetoric aside, the U.S. has in
fact pursued a fairly conventional foreign policy.
It still has a cautious, adversarial relationship
with Russia; it has not taken radical steps against
China; it has not attacked North Korea; it has not
left NATO, or NAFTA, or the Middle East. We ex-
pect some changes in 2018, but nothing beyond
the normal limits on U.S. action.
In 2018, the most important action the United
States will undertake will be to define what its in-
ternational interests are and to develop strategies
to pursue them. America is powerful, but it can’t
be everywhere all the time. Given the paralysis in
Washington, policymakers won’t get far.
The most important question they will need to
answer is what the U.S. should do about North
Korea. Granted, it’s difficult to predict what will
happen in North Korea, as the shortcomings
of our 2017 forecast show. The United States’
handling of North Korea stopped making geopo-
litical sense many years ago. From a geopolitical
perspective, the U.S. shouldn’t care what North
Korea does – the country has no real strategic
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THE WORLD IN 2018
significance. Still, the United States, despite its
threats, will not take decisive military action
against North Korea. It may undertake a limited
strike if it thinks it has the technological capa-
bilities to destroy Pyongyang’s nuclear program,
but that is the most Washington will venture to
risk. If it must, the U.S. will accept North Korea
as a nuclear power. It will set about reassuring
its treaty allies in the region, particularly South
Korea and Japan, that U.S. security commitments
are ironclad and that a North Korean attack on
either country would trigger a harsh U.S. military
response.
The more important long-term issue is the dimin-
ishing of U.S. power throughout the Asia-Pacific
region, which we will deal with at length in the
Asia section of our forecast.
As for the tense relationships the U.S. has in the
rest of the world, political gridlock in Washington
will enforce caution. The main issue between the
U.S. and Russia – Ukraine – has been solved,
or at least set aside. The conflict there is frozen,
and neither side has the appetite to change that.
But to move forward, the U.S. would have to ease
sanctions on Russia, and part of that process
depends on Congress. Given the ongoing investi-
gation into Russian interference in the U.S. pres-
idential election, it is very unlikely that sanctions
will be reduced, which appears to leave U.S.-Rus-
sian relations suspended for now.
There are significant issues between the U.S. and
China on trade and monetary policy that were
postponed as the U.S. tried to induce China to
intercede in the North Korea crisis. Talks on these
issues will resume in 2018, and they’re too im-
portant to the U.S. for Washington to let whatever
happens in North Korea disrupt them again.
NAFTA negotiations are ongoing, but the prob-
ability of the trade deal ending and tariffs being
restored is extremely low. All parties need the
relationship. In the U.S., too many states benefit
from trade with Mexico or Canada. Mexico is the
top export market for California and Texas, which
3 © 2017 Geopolitical Futures
 THE WORLD IN 2018

NAFTA TRADE, 2016

EXPORTS IN BILLION USD
REST OF WORLD

403.0
389.0

CANADA

296.5
10.4
5.8 265.9

2,249.7
MEXICO 302.9 U.S.
373.9
231.0

REST
OF 387.1 REST
WORLD 1,453.2 OF
WORLD

Design inspired by Cameron Tulk, Canadian International Council

Data source: International Trade Centre
Map of Canada source: Single Color by FreeVectorMaps.com © 2017 Geopolitical Futures

means the two largest congressional delegations
are opposed to ending NAFTA. Regardless of
what the president wants, the deadlock holds.
The one unknown for 2018 is whether there will
be a recession. Not since World War II has the
U.S. gone longer than a decade without a reces-
sion. It is therefore likely that the U.S. will have
one by 2019, possibly even by late 2018. When-
ever it comes, this recession will have global
implications and will shake the already tenuous
political situation inside the United States. The
lower and middle classes in the U.S. have not yet
recovered from 2008. As their voices get angrier
and louder, Washington will have to focus more of
its attention inward.

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Europe
The problems Europe has dealt with for the past
10 years – problems that were not so much
created by the 2008 financial crisis but exposed
by it – will continue to intensify in 2018. Virtually
no country will be left untouched by the rising
social, political, cultural and economic tensions
throughout the Continent. But under this contin-
ued instability will lurk a perhaps more troubling
development: Germany, concerned with the EU’s
disintegration and anxious about the economic
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THE WORLD IN 2018
calamity it could portend, is going to have to work
harder to keep the bloc together.
Europe’s economy is recovering, but it is recover-
ing slowly and unsteadily. And though it will con-
tinue to grow in 2018, it will not grow by enough
to solve Europe’s problems. There has been a de-
cade of economic dysfunction in Europe, and an
increase in gross domestic product of 1 percent
or 2 percent cannot repair the damage.
More important, Europe’s problem is no longer
primarily its economy – it is a crisis of trust. The
European middle and lower classes have lost
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 THE WORLD IN 2018

faith in the elite’s ability to effectively manage the
economy and to understand the cultural tensions
that have emerged. Large segments of the popu-
lation will be disaffected by economic inequality,
and there will be little the EU can do about it.
The elite have come to see the middle and lower
classes as a threat to their interests and ideolog-
ical principles. There is no common understand-
ing in Europe of how to instill trust once broken.
Nations are not divided by their philosophies for
managing EU institutions; they are divided by
their different political, economic and cultural
interests.
We will therefore continue to see political parties
challenge the establishment. We will also con-
tinue to see friction between nations. Tensions
between Poland and Germany exemplify this
trend. Polish voters have elected a right-wing
government that is challenging the liberal ide-
ology embraced by Germany. This is as much a
cultural issue as it is a political one. Poland does
not believe it should have to sacrifice its national
identity to be part of the bloc. Neither does it be-
lieve that Germany should be the one making the
rules and calling the shots in the EU. For all the
nationalist overtones, the issue is about who gets
to make the rules that govern all.
If Germany allows Poland to win, it will have
abandoned one of the cornerstones of the EU – a
universal liberal ideology, without which the EU
will not be able to exist. And if the EU does not
exist, then Germany certainly can’t control its
institutions, which have enriched Berlin and given
it disproportionate influence over Europe. The
German government can’t push Poland too far;

U.S. IMPORTS FROM GERMANY

PERCENT SECTORS
100 Food
Industrial machinery
(medical equipment)
Other
90
Household goods
Commodities, raw materials
80 and other industrial supplies

Chemical products
70
Pharmaceuticals

60
Automotive industry
50 (non-passenger cars)

40
Automotive industry
(passenger cars)
30

20
Industrial machinery
(non-medical equipment)
10

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: U.S. Census Bureau © 2017 Geopolitical Futures

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doing so would imperil the EU and thus the free
trade zones Germany’s prosperity depends on.
But so too could ignoring Polish threats to the es-
tablished order. Germany will continue to alienate
Poland without taking decisive action. The pres-
sure on Poland will stoke anti-German sentiments
in nations that are historically ambivalent toward
Germany.
This is merely one example of the problems that
are now endemic in the EU. Other countries will
clash as well, and no one country will be able to
speak for the whole. France cannot speak for
Western Europe any more than Poland can speak
for Eastern Europe. The precise nature of the
political spats that will break out is unpredictable,
in the same way that election results are unpre-
dictable. What we can say is that our forecast for
Europe is one of continuity: National and regional
movements will continue to erode the social, po-
litical and economic systems in Europe.
A U.S. recession in 2018 would catalyze this pro-
cess. It would inevitably affect German exports
and thus endanger Europe’s fragile economic
recovery. The United States is the largest pur-
chaser of German goods, and a recession would
result in decreased demand for those goods. This
in turn would cause German imports from the rest
of Europe to decline, setting off a chain reaction,
resulting in rising unemployment and fueling the
forces that are already corroding Europe.
Russia
Russia is difficult to categorize. Continental in
size, it is at once a European power and an Asian
power, with interests spanning from the borders
of Japan to the Balkans. In 2017, Russia was
weak, thanks in part to low energy prices. But in
Russia, weakness breeds aggression, aggression
creates enemies, and so today Russia has more
security interests than it can manage.
That would explain why Russia is so active on the
world stage. But it belies how focused the govern-
ment in Moscow is on domestic issues, especial-
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THE WORLD IN 2018
ly as oil prices remain so low. Russia may have
averted a major social crisis in 2017 – oil prices
rose some, and Moscow found creative ways to
raise money – but that doesn’t mean its problems
have disappeared. If anything, it underscores just
how resilient its problems are. If Russia is to di-
versify its economy to rely less exclusively on oil
and natural gas, it will need time and stability. In
the mind of President Vladimir Putin, the need for
stability will require his continued stewardship of
the affairs of the state. It will also require Russia
to continue to pretend to be a great power, lest it
lose face among its citizens.
Russia has been somewhat isolated from the rest
of the world since 2014, when it responded to
the Ukrainian revolution by annexing Crimea and
supporting uprisings in eastern Ukraine – thus
incurring Western sanctions. The country, there-
fore, is a convenient scapegoat for populists and
nationalists of the West who blame the countries’
problems not on domestic structural issues but
on far-flung foreign conspiracies. Russia cannot
afford to be isolated any longer. It has almost
spent all the money in its Reserve Fund, and it
must begin the process of economic transforma-
tion now if it is to have a chance of taking root.
Put simply, Russia needs to rejoin the world. It is
open to compromises as long as the compromis-
es don’t make Russia appear weak. Appearances
are more important than ever for Russia as it
manages difficult times at home.
Righting the economy is made more difficult by
its challenges abroad. At the moment, Russia is
surrounded by enemies. 2018, therefore, will be
spent trying to play these enemies off one anoth-
er, occupying them with ancillary problems that
divert their attention from Russia. China and the
U.S. provide good examples. Despite its shared
interests with the United States in the Middle
East, Russia remains at odds with Washington
over Ukraine, although they made significant
progress on the issue in 2017. Russia is also
suspicious of China – wary of expanding Chinese
influence in Central Asia, China’s One Belt, One
Road initiative, and China’s potential long-term
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USD PER BARREL
140
120
100
80
60
40
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1946 1960
Sources: www.tradingeconomics.com, NYMAX
https://www.bloomberg.com/quote/CO1:COM
ambitions to retake lands the Russian Empire
pried loose from the Chinese in the 19th century.
It’s unclear just what Russia can do in North Ko-
rea, but as Moscow has recently shown, it will use
whatever leverage it has there to drive a wedge
between Beijing and Washington.
It will behave similarly in the Middle East. The
destruction of the Islamic State’s short-lived
caliphate has complicated Russian designs in the
region. Much has been made of Russia’s alliance
with Iran, but this is more a marriage of conve-
nience than a real alliance. Russia will continue
to maintain relations with all major powers in the
Middle East, regardless of ideology, because Rus-
sia is primarily interested in limiting an increas-
ingly strong and independent Turkey, especially
as it sets its sights on the Balkans and the Cau-
casus. Above all else, Russia will be opportunistic
and pragmatic.
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THE WORLD IN 2018
PRICE OF CRUDE OIL
1974 1988 2002 2017
Graphic redesign by Geopolitical Futures
This is all a charade, of course. Russia needs
money, economic development and time to
modernize its military, and its moves on the world
stage will be about securing all three. Russia
will not be strong enough to secure its interests
through force. It will intervene selectively where it
must, but intervention will never be Russia’s first
choice. Its goal is to stifle competition and keep
would-be intruders out of its domain.
East Asia
In East Asia, 2017 played out mostly as expect-
ed. A dictatorship was declared in China, one
with grand plans for the next phase of Chinese
development. Japan, now questioning the value
of a U.S. security guarantee, began to assume a
greater leadership role in the region. And for all
8 © 2017 Geopolitical Futures

prognostications to the contrary, the situation in
North Korea went largely unchanged.
North Korea
In fact, the North Korea crisis typifies the most
important trend in East Asia in 2018: the limits
of U.S. power. This has been a long time coming.
Despite its formidable military and economic
power, the United States is not omnipotent. It has
been trying to lean on and develop new strate-
gic partnerships around the world to manage
its interests. In Asia, the U.S. has sought to rely
on its traditional partners: Japan, South Korea,
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THE WORLD IN 2018
the Philippines and Australia. In 2018, the U.S.
will continue to rely on its allies and will look to
enhance cooperation with India as well.
This kind of balance-of-power strategy always
sounds good in theory but is difficult to execute.
It is only as reliable as the allies themselves. If
they cannot or will not eliminate threats on their
own, then what good is having allies in the first
place? Enter North Korea.
The government in Pyongyang continued to
develop its nuclear weapons program. It will soon
be able to strike the U.S. mainland – if it is not
9 © 2017 Geopolitical Futures

able to already. Pyongyang has backed Washing-
ton into a corner. The U.S. does not want North
Korea to have nuclear weapons, but neither does
it want to launch the full-scale invasion that
would be required to disarm it.
The cold logic of geopolitics dictates that the U.S.
will not attack North Korea. The U.S. would rec-
ognize North Korea’s pursuit of nuclear weapons
as defensive, not offensive. The U.S. would know
that North Korea would not use its nuclear weap-
ons because using them would trigger a counter-
attack and thus ensure its own demise. The U.S.
would assemble a coalition of partners to isolate
and manage North Korea while creating a nuclear
deterrent just strong enough to persuade Pyong-
yang to never use the weapons it has spent so
long pursuing.
But the North Korea crisis does not strictly abide
by the cold logic of geopolitics. Fearing that a
nuclear North Korea would undermine its cred-
ibility at home and among its allies, the Trump
administration has vowed to halt Pyongyang’s
program. Despite the political capital Trump has
invested in this issue, the U.S. will enter 2018
just as politically incoherent as it was throughout
2017. It is therefore unclear whether Trump would
have enough support to authorize a military strike
against North Korea if he really wanted to.
So while an attack against North Korea seems
unlikely, it cannot be ruled out entirely. But if
war did break out, it would not, for all the death
and destruction it would bring, enhance the U.S.
position in East Asia or allay the concerns of its
allies. If the U.S. allows North Korea to acquire
nuclear weapons, it will inspire doubt among its
allies, emboldening China to poach U.S. allies and
push for territorial expansion with impunity. If the
U.S. initiates a limited strike, then South Korea
would bear the brunt of the counterattack and, in
doing so, call into question Washington’s ability
to protect its allies. If the U.S. launches a full-
scale invasion, it will get bogged down in a war it
cannot win.
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THE WORLD IN 2018
In other words, there is only so much the U.S. can
do. The North Korea crisis is notoriously difficult
to predict, but in this context, the status quo is
the most likely outcome.
China vs. Japan
If the U.S. is unable to shape East Asia to its
liking, preoccupied as it is with its domestic prob-
lems, then something will have to replace it as
the center of gravity. That something will be the
coming conflict between China and Japan.
Until the 19th century, China and Japan were rel-
atively similar, geopolitically speaking. Both were
governed by insular regimes, uninterested in the
outside world and incapable of projecting power
beyond their immediate spheres of influence.
When the West forcibly opened the countries up
to free trade, their paths diverged. Western inter-
vention in China set off the collapse of the Qing
Dynasty and ushered in decades of rebellions
and civil wars. Western intervention in Japan,
however, turned the country into a military and
economic powerhouse almost overnight. Until its
defeat in World War II, Japan dominated East Asia
with brute force, motivated largely by its need to
acquire the resources necessary to sustain its
economy – resources that Japan still depends on
even today.
China has since bridged the gap between them,
and for the first time in centuries, Beijing and
Tokyo are both strong – just not quite strong
enough to dominate the other. Competition
between them is therefore inevitable. In fact, it
would have happened sooner had not the U.S.
alliance structure after World War II been created
to maintain the status quo in the region (of which
Japan was an integral part). But now the U.S. is
pulling back, looking to see what the return on
investment is for the relationships it has put so
much into. For the first time since 1945, Japan
must consider the possibility that living under the
U.S. security umbrella is not enough to guarantee
Japanese interests.
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Domestically, 2017 was a momentous year for
China and Japan. Chinese President Xi Jinping fa-
mously became a de facto dictator, but lost amid
the fanfare of his installation were the develop-
ments in Japan – namely, the decisive electoral
victory of Japanese Prime Minister Shinzo Abe
and his party. Symbolic though the victory may
have been, it was the first of several steps Japan
needed to take in order to reclaim total control of
its military. Because Japan is so dependent on
imports, the best Japanese self-defense means
having a good offense. And as Japan assumes
more of that mantle, Japanese policy will get
more aggressive at every level.
This will bring Japan into direct competition with
China. In some cases, it already is. Japan is play-
ing a critical role in creating an informal alliance
between Japan, India, the U.S. and Australia to
combat Chinese ambitions in the South China
Sea. It is trying to resuscitate the Trans-Pacific
Partnership without the United States. It is trying
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THE WORLD IN 2018
through increased investment to buy the loyalty
of countries important to China, especially those
included in Beijing’s One Belt, One Road project.
It is also, notably, spending more money on its
military. Though it is unclear what exactly Japan
will do, it is clear that Sino-Japanese relations
will strain under the weight of Tokyo’s newfound
self-reliance.
Still in Search of Modern China
The extent to which competition results in out-
right conflict depends on how effectively China
can resolve its economic problems. In 2017,
China’s top-line economic figures appeared quite
impressive, but its performance was composed
largely of artificial and empty growth, aimed at
buying maximum social stability ahead of Xi’s
coronation ceremony at the 19th Party Congress
in October. Since the party congress, Xi’s govern-
ment has attempted to rein in reckless lending
and real estate speculation, deleverage overly
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indebted companies, and curb industrial capacity
and pollution. Xi’s moves are all in pursuit of one
key goal: a massive redistribution of wealth from
the coast to the interior.
This is a delicate game for Xi. He must spread
enough of China’s wealth to the countryside and
to poor urban workers so that they feel they have
participated in China’s vaunted economic growth,
but not so much that he creates opposition to his
rule. That is why Xi has imposed a dictatorship –
to pull off the changes necessary to maintain so-
cial stability while keeping the economy growing,
Xi will need as much power as Mao Zedong and
Deng Xiaoping, his predecessors and role models.
In practical terms, this means Chinese politics
are about to go through a phase of intense in-
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THE WORLD IN 2018
stability, marked by purges, corruption scandals,
competition over who controls the levers of state,
and restrictions on all forms of expression. Xi
has carried out purges for the past five years, but
these were merely a prelude of more to come. As
Xi moves forward with his economic policies in
2018, he will create new enemies, and they will
have to be removed. No faction of enemies will
become strong enough to supplant Xi in 2018
– he is powerful enough to put down potential
usurpers – but challenges will arise, and Xi will
respond. It will not be enough for Xi to announce
new policies. He needs the People’s Liberation
Army and China’s vast bureaucracy to carry out
his wishes.
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This will create a curious dichotomy. China’s
persona as a burgeoning power in the South
China Sea, and an architect of vast infrastructure
meant to solidify Chinese influence in the com-
ing century, is incongruous with its true self – a
political regime that will be far more preoccupied
with what is going on at home than what can be
accomplished abroad.
For decades, China was an engine of economic
growth throughout the world. Those days are
gone. Instead of encouraging growth for the sake
of growth, Beijing will try to implement struc-
tural reform without alienating or angering any
segment of its population so much that it would
question Beijing’s rule. China should be able to
manage this relatively well in 2018. Xi is at the
height of his power and has the support of the
people. But the thing to watch is how effective
Xi’s reforms prove to be and how the consequenc-
es of his actions limit his plans – if they do at all.
2018 is just the first year of many painful ones to
come. It will demand most of Beijing’s time and
attention, and even the actions it takes abroad
will be in service to its domestic political agenda.
South Asia
For all its population and resources, India, the
most powerful country in South Asia, is fairly
inconsequential to global geopolitics. That is
beginning to change, thanks in part to the domes-
tic political stability ushered in by Prime Minister
Narendra Modi. In 2017, Modi made significant
progress toward harmonizing India’s usually
incoherent, disjointed domestic body politic, even
as he challenged China on territorial issues and
advocated greater cooperation with the U.S. and
its allies in the Pacific.
India’s domestic consolidations, though, will
likely be short-lived. The country is a patchwork
of economic inequality, religious variegation and
linguistic complexity. Our long-term forecast for
India remains in place: India will not be able to
overcome these obstacles, and it will remain a
powerhouse on the Indian subcontinent incapa-
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THE WORLD IN 2018
ble of projecting much power beyond its geo-
graphic constraints.
Still, the long term is not the short term, and
India’s ephemeral phase of internal consolidation
will reverberate beyond the subcontinent in 2018.
Modi is still in his honeymoon phase, and India
will be an important partner in a concerted effort
to limit China’s rise. India will continue to im-
prove its navy – and to deploy it to the Pacific for
provocative exercises. It will also continue to in-
vest in areas such as Central and Southeast Asia
that China hopes to influence through financial
investment of its own.
India’s behavior in 2018 will introduce new dy-
namics to South Asia – even though they won’t
necessarily transform it. These dynamics will
bind India, so often hived off from Eurasia, to the
ebb and flow of global geopolitics.
Central Asia
Historically, Central Asia has been an arena in
which greater powers compete for influence and
therefore tend to destabilize the region. Things
were no different in 2017, and things will be no
different in 2018.
Central Asia has been Russia’s backyard for
almost a century now. But Russia has weakened,
and now outside forces are beginning to act
accordingly. China sees the region as central to
its new Silk Road plans. India sees it as a place to
thwart Chinese ambitions. Jihadists from Afghan-
istan and the Middle East see it as fertile recruit-
ing ground, a place where poor, disillusioned
youths might adopt radical political Islamic
ideology.
These jihadists’ suspicions may be well founded.
Economically, the region’s dependence on energy
exports and the Russian economy has been crip-
pling. Politically, the governments are attempting
to consolidate their power even as economic
problems beget social problems.
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Kazakhstan, the region’s largest and most im-
portant country, will exercise what little power it
has to try to create regional cooperation forums
through which it can influence the behavior of its
neighbors. But the country is led by a 77-year-old
dictator who has not named a successor, and de-
spite Kazakhstan’s size and relative power com-
pared with other Central Asian states, it suffers
from the same problems as its neighbors – eco-
nomic dependence and political turmoil.
Put simply, in 2018, Central Asia must confront
internal pressures that threaten to tear it apart as
outside powers exploit it for their own purposes.
Southeast Asia and the South Pacific
Southeast Asia may not be as unstable as Central
Asia, but it is just as helpless in determining its
own fate. The region’s countries, therefore, are
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THE WORLD IN 2018
advancing their interests not by aligning firmly
with any one state – such as China or the United
States, the current powers of the region – but
by playing them off each other. While the U.S. is
preoccupied with internal issues, we can expect
to see Japan, India and even Australia seek to fill
the gap here so as not to let any of the Southeast
Asian states fall into China’s orbit.
The major nations of the South Pacific – Austra-
lia and New Zealand – will be spared from the
region’s machinations, save for China’s domestic
economic problems. If China’s president passes
some of his more ambitious reforms, he will put
heavy pressure on the economy of Australia,
which depends greatly on trade with China. This
will matter to Australia, of course, but it will not
affect the behavior of the world’s powers. Like
South America, the South Pacific is on the periph-
ery, a stable corner of an unstable world.
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Middle East
In the Middle East, 2018 will be defined by the
scramble to fill the hole left by the collapse of the
Islamic State. This is, in effect, a return to the pre-
IS Middle East. Relationships between countries
will shift rapidly, and no alliance or rivalry will be
immune to potential change.
At the middle of it all stands Iran, which is best
positioned to capitalize on the Islamic State’s
fall and thus a serious contender to become
the premier power of the Middle East. Iran has
significant influence in the Iraqi army and in the
Shiite militias in Iraq. In Syria, the regime is still
standing, in no small part because of Iranian
assistance. Tehran also has influence in Leba-
non through Hezbollah. In Yemen, the Houthis,
pro-Iranian rebels, have survived attacks by Saudi
and other Arab air forces and retained enough
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THE WORLD IN 2018
strength to keep Saudi Arabia bogged down in
the Yemeni civil war.
At this point, the rest of the countries of the Mid-
dle East are unsure how serious a threat Iran is to
their interests. They’re in no position to organize
a resistance to its expansion, either. Tehran must
therefore move quickly to secure its objectives
– to become the leading power in the Persian
Gulf, and then to dominate the Arab world from
the gulf to the Mediterranean. This will be Iran’s
challenge in 2018.
The immediate question is how the Saudis, the
Arab counterweight to Iran since the fall of Sadd-
am Hussein, will respond. Saudi Arabia is mired
in a political crisis. It started with the fall of oil
prices but has reached a point that even a recov-
ery wouldn’t put a stop to it. The dip has made it
abundantly clear to Riyadh that its control over
oil prices is not what it was during OPEC’s hey-
day and that it has no choice but to transform its
15 © 2017 Geopolitical Futures

economy. Change, though, is anathema to those
who benefit from the status quo, and serious po-
litical instability will follow. Dealing with Iran amid
ambitious reconstruction plans and a political
crisis will be more than Saudi Arabia can handle.
It will seek out allies, but its traditional partners –
the United States, Israel and the United Kingdom
– aren’t eager to team up with the Saudis on this
issue.
The task of containing Iran will thus fall to Turkey
and Israel, the region’s major non-Arab powers.
Both have a similar problem: They’re uncomfort-
able with the growth of Iranian power, but they’re
also worried about the fragmentation of the Arab
world and the rise of terrorist groups. They have
neither the desire nor the means for an extended
military conflict with Iran in all three areas of the
proxy war – Syria, Yemen and Lebanon – in which
it has substantial influence, and tackling just one
area doesn’t solve the problem.
The Turks will try not to rock the boat. Turkey
and Iran share an interest in halting the spread of
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THE WORLD IN 2018
Kurdish separatism, and both have issues with
Russia and the U.S., the major foreign powers
active in the region. Their interests will diverge
in Syria. The Turks will work to ensure that the
Iranians don’t come to dominate Syria and that
Bashar Assad doesn’t reunite the country. But
2018 will not be the year Turkey, for all its con-
cern, confronts Iran. Israel, meanwhile, will main-
tain its hostile rhetoric toward Iran, but it will not
find a stable basis for dealing with Iran in 2018.
It will, however, enhance cooperation with Turkey.
The two countries will be drawn together by the
fact that they share a problem, if not a solution.
Then there are the two most influential outsiders:
Russia and the United States. Russia has histor-
ically been an adversary of both Iran and Turkey.
In the short term, Iran’s expansion complements
Russia’s desire to create an anti-American coa-
lition in the Middle East. But at the same time,
Moscow will be wary of the threat a more pow-
erful Iran would pose to Russian interests in the
Caucasus, and so it will take steps to curb Iranian
influence. Russia-Turkey relations will continue
© 2017 Geopolitical Futures

to be up-and-down. The two are ultimately adver-
saries, but neither is ready for a conflict, and they
have some interests in common. Pragmatism will
govern their relations in 2018.
The U.S. has two interests in the region. One is to
ensure that Sunni jihadist groups stay relatively
powerless. The other is to prevent any country
in the region from controlling the entire region.
Threats aside, Washington will try to minimize
the use of direct military force in pursuit of these
aims.
This leaves the U.S. in a tough spot. On the one
hand, Iran will probably be more successful at
suppressing Sunni jihadists than the U.S. has
been. On the other hand, in the long run, a consol-
idated Middle East under Iranian control would
evolve in unexpected and dangerous ways, all of
them almost certainly hostile to American inter-
ests. Therefore, U.S. policy is likely to focus on
encouraging Turkey and Israel to work together
while providing as much assistance to them as
possible, all while looking for reliable partners in
the divided Sunni Arab world.
South America
South America is an isolated continent. The pri-
mary way countries in the region interact with the
rest of the world is through trade. But most of the
countries here have little impact on global affairs
and are somewhat unaffected by events outside
of the continent. A notable exception is Venezue-
la, with which both Russia and China have close
relations. Their relationship serves two purposes:
to strengthen their weak positions in the Western
Hemisphere and to challenge the United States
closer to home. But try as they might, neither
Russia nor China can project much power in this
part of the world. China has strengthened ties
through investment and financing, but Beijing’s
real intent with these initiatives has been to fuel
its domestic economy rather than to project
power. Russia, despite maintaining close political
and trade ties with some countries in the region,
is unable to play a critical role here.
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THE WORLD IN 2018
The U.S. will politely ignore their limited efforts. It
keeps a watchful eye on the region but currently
has a hands-off approach toward South America
as long as it does not threaten basic U.S. inter-
ests.
In terms of the region’s internal affairs, there are
several political processes that will drive events
in 2018. The most politically volatile country is
Venezuela. Sanctions against Venezuelan of-
ficials and the state oil company will put more
pressure on the government. But unless the op-
position can stay united – a tough task to say the
least – it will be unable to bring down President
Nicolas Maduro. The opposition showed some
signs of unity at various points in 2017, but by
the end of the year it was fractured once again.
Suffice it to say, Venezuela will remain in an inter-
minable state of paralysis.
Elsewhere, Brazil will hold presidential elections
in October that will provide the country an op-
portunity to break from a political crisis that has
plagued it for years. In Argentina, the government
received a strong political mandate following the
October 2017 legislative elections. It will capital-
ize on this and work to push through structural
reforms in sensitive areas such as subsidies, em-
ployment, taxes and provincial funding. In May,
Colombia will hold presidential elections that will
serve as a litmus test for the peace deal reached
with the Revolutionary Armed Forces of Colombia
in 2016. As part of the deal, the FARC established
its own political party and gained the right to
participate in the elections. The public response
to the FARC’s involvement in the formal political
process will be an indicator of how far the coun-
try has come in the peace process.
None of these political events will change how
countries in South America interact with each
other or the rest of the world. Mexico will contin-
ue to try to forge relationships in South America,
which could lead it to play a leading role in the
region in the future. This could be one way that
South America will become more connected to
global geopolitics in the long term.
17 © 2017 Geopolitical Futures

But in 2018, South America will see more of the
same. There may be internal volatility in some
countries, but the continent as a whole will re-
main stable relative to other regions of the world.
Africa
We end our 2018 Forecast with Africa, a continent
that is so big and so diverse that it nearly defies
generalization, for each of its constituent regions
interact differently with the rest of the world, and
the rest of the world interacts differently with its
constituent regions.
The Sahel, the northernmost region of sub-Sa-
haran Africa, a swath of land that spans nearly
the entire width of the continent, will garner the
most attention in 2018. It is a hotbed of jihadism
and thus a major security concern of the Unit-
ed States and Europe, neither of which has the
wherewithal to significantly enhance their secu-
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THE WORLD IN 2018
rity presence in the region. And why would they
want to? They don’t need to expend that much
energy to achieve their objectives there: prevent-
ing major networks from forming or, if formed,
preventing them from spreading to areas more
important to their long-term interests. To that
end, they will more closely police migrant flows
to Europe and place more security responsibility
on indigenous forces – something that will have
little practical effect.
Subtle but more important developments, mean-
while, will take place in and around the Horn of
Africa, which includes Somalia, Ethiopia, Djibouti
and Eritrea. Its location elevates its importance
over other African regions. It abuts the Bab-el-
Mandeb Strait, which links the Gulf of Aden to the
Red Sea, which, in turn, leads directly to the Suez
Canal. It’s a heavily traversed maritime route for
goods from Europe to eastern markets, and a
notable amount of oil passes through the Red
18 © 2017 Geopolitical Futures

Sea. The region also serves as a good base from
which outside powers can project power into the
Middle East.
The Horn of Africa has thus become coveted real
estate for aspiring powers such as Iran, China,
Turkey and India, and it retains every bit of its
importance for more established powers like the
United States, Russia and Europe. The compe-
tition for this prize will intensify in 2018 as Iran,
China, India and the U.S., which have been only
modestly interested in the area heretofore, ded-
icate more resources toward military, trade and
political ties there. Across the Gulf of Aden are
interested parties of the Gulf Cooperation Coun-
cil, which in recent years have made overtures to
the region, but their leader, Saudi Arabia, is losing
power to Iran – a rising country that will have the
opportunity this year to project more power in the
region.
As China continues to pursue its String of Pearls
initiative – an infrastructure project meant to pro-
vide ports for trade and military resupply across
the Indian Ocean – it will likewise continue to
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THE WORLD IN 2018
develop its military and commercial presence
around the Horn. India, too, has made its own
plans to gain more control of its surrounding
seas, and as its naval power grows it will start to
consider waters farther from its shores, such as
those off the coast of the Horn of Africa, part of
its domain.
The U.S. has a strong military presence in Dji-
bouti, a strategic base of operations for military
activity throughout the region. Outside the Sahel
and the Horn of Africa, though, few African coun-
tries will affect the state of the world. A notable
exception is South Africa, a country that has all
the trappings of a world power but is too beset by
political and ethnic rivalries to be anything great-
er than the sum of its parts. Preparations for elec-
tions in 2019 will only aggravate tensions, making
it more difficult for South Africa to attract the
foreign investment it needs to stimulate econom-
ic growth. We expect protests to take place inter-
mittently – as they tend to do in an economically
stagnant country with profound social divisions
– but they are unlikely to upset the status quo.
19 © 2017 Geopolitical Futures
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