Young Diplomats

Summary

A pair of attacks threatens to damage ties that India and Pakistan only recently repaired. On Jan. 2, armed militants donning Indian military uniforms stormed an air force base in the Indian city of Pathankot, near the country’s border with Pakistan. A second wave of militants then infiltrated the base, ostensibly to distract authorities as the first group targeted high-value assets, including helicopters, missiles and the base’s ammunition depot. Fourteen people died in the assaults, including all six militants. Then on Jan. 4, about 922 kilometers (573 miles) away, three militants assaulted the Indian Consulate in the northern Afghan city of Mazar-e-Sharif. A 25-hour gunfight ensued, during which all of the assailants were killed. These seemingly unrelated events appear to be connected by Afzal Guru, a deceased Pakistani militant whose name was mentioned in Pathankot, according to a hostage, and whose name was written in blood on a wall in Mazar-e-Sharif.

In years past, this type of episode would have been followed by statements of denial, denunciations and contempt. But now, New Delhi and Islamabad are exercising restraint, replacing their accusations with calls for cooperation and affirmations of good faith. In light of their turbulent pasts, this restraint suggests that an attempt to substantially shift the bilateral relationship is underway.

Analysis

It is not difficult to undermine ties between India and Pakistan: Their enmity for each other runs deep, and the two nuclear powers have fought three wars since partition in 1947. For this reason, small militant groups have been able to shake the two countries’ relationship time and again. When members of Laskhar-e-Taiba and Jaish-e-Mohammed, two Islamist militant groups based in Pakistan, attacked the Indian parliament building in New Delhi in 2001, New Delhi and Islamabad mobilized for war, moving a combined one million soldiers to the border. (The troops withdrew in October 2002.) When Lashkar-e-Taiba famously attacked Mumbai, India, it ended the notable progress New Delhi and Islamabad had made in their negotiations over Kashmir. And when, in July 2015, militants attacked a bus in Gurdaspur, India, Pakistan canceled high-level talks just two weeks after Indian Prime Minister Narendra Modi met Pakistani Prime Minister Nawaz Sharif on the sidelines of the Shanghai Cooperation Organization summit in Russia.

The attacks in 2016 similarly call into question the future of Indian-Pakistani cooperation. Indian Foreign Minister Subrahmanyam Jaishankar and Pakistani Foreign Minister Aizaz Ahmad Chaudhry were supposed to meet in Islamabad on Jan. 15 to discuss joint cooperation in Afghanistan and enhanced bilateral dialogue. But on Jan. 14, they officially decided to postpone the talks until an unspecified date in the near future.

Patterns Change

However, this pattern seems to be changing. In fact, the recent attacks may not provoke the reaction the perpetrators probably hoped to. Modi has personally invested a lot of political capital into rehabilitating India’s relationship with Pakistan — something he will not throw away easily. One of his biggest reasons for reviving the bilateral dialogue has been to address, pre-empt and prevent precisely this kind of attack. Modi also needs to show that he is improving Indian foreign policy, especially given the economic and legislative problems at home.

Pakistan’s reaction has also changed. Islamabad sees the value in cooperating with New Delhi; after 15 years of fighting, violence from Afghanistan threatens to spill over into Pakistan at any time. But such cooperation will be challenging, in part because of the competition between Pakistan’s civilian and military leaders. While the military does not have a constitutional mandate to govern, it has ruled the country four times since its independence. (It was only in 1999 that army chief Gen. Pervez Musharraf ousted Sharif in a coup.) Sharif comes from Pakistan’s business elite and wants to enhance ties with India to improve the nation’s economy. However, he has found it difficult to achieve this goal because of the overwhelming institutional power of the army, which still sees India as an existential threat.

It is little wonder, then, that India has often accused Pakistan’s Inter-Services Intelligence, or ISI, of using Jaish-e-Mohammed and other militant groups as proxies to undermine India — an allegation Pakistan roundly rejects. The powerful military intelligence organization is strongly influenced by the Pakistani army and therefore remains largely outside of the control of Islamabad’s civilian leaders. But ISI’s intentions are difficult to read, and it is possible that it may not be trying to directly undermine relations with India. Although ISI likely has had a hand in supporting militants, the intelligence service’s ability to control such attacks is probably limited. The ISI itself is highly fractured and contains numerous rogue factions — any of which could choose to unilaterally support a militant group without consent from the core. In 2008, some intelligence reports even indicated that then-ISI chief Gen. Ahmed Shuja Pasha was surprised by the scale of the Mumbai attacks and perhaps by the attack itself. Publicly, the intelligence organization announced its intention to cooperate with India in the investigation into the incident at Pathankot.

Strength and Sincerity

There are unconfirmed reports that Pakistan has arrested Jaish-e-Mohammed founder Maulana Masood Azhar, a move that would clearly signal a desire to cooperate with India. New Delhi alleges that Azhar was directly involved in planning the attacks based on records traced to a cell phone found at the scene in Pathankot. India arrested Azhar in 1994 but released him five years later in response to the demands of Indian Airlines Flight 814 hijackers. He reappeared in January 2014 in the Pakistan-controlled portion of Kashmir, where he gave a speech to a crowd of 10,000 people at Muzaffarabad College in favor of targeting India in attacks, echoing his earlier calls for assembling 500,000 mujahideen to wage war against India. Azhar reportedly operates out of a base in the Pakistani city of Bahawalpur, Punjab province; though he is still at large, some of the members of his group are not so lucky. One high-profile member, who was hanged in 2013, is worth mentioning — his name was Afzal Guru.

Unsurprisingly, India quickly blamed the Pathankot attack on Jaish-e-Mohammad. But, notably, the United Jihad Council, a 13-member Islamist collective founded in 1990 and headquartered in Muzaffarabad, claimed responsibility even quicker. Jaish-e-Mohammad is affiliated with the council. Islamabad allegedly has had ties with United Jihad Council organizations in the past, though these ties appear to have weakened in recent years. Pakistan reportedly disengaged from United Jihad Council groups after the July 2014 launch of the anti-militant Operation Zarb-e-Azb, leading to years of tense relations. In 2012, the group’s leader, Syed Salahuddin, bristled at Pakistan’s efforts to normalize ties with India, especially at its decision to grant India most favored nation status. Salahuddin said his militants were fighting on behalf of Pakistan in Kashmir, warning that if Islamabad halted support, his cadres would turn and attack Pakistan. In 2014, he also criticized Sharif for his friendly relationship with Modi.

The two most recent attacks will test the strength and sincerity of the newest revival of bilateral ties between India and Pakistan, which is crucial to the stability of South Asia. So far, the response from both sides has been measured. Modi has refrained from issuing brash statements against Pakistan, and Sharif has adopted a conciliatory tone and has arrested militants in the districts of Gujranwala, Jhelum and Bahawalpur. Since independence, both nations have paid a high price for refusing to cooperate under similar circumstances, and if the current situation is any indication, they may have decided that they are no longer willing to absorb the cost.

Summary

The two rival bureaux of Libya’s National Oil Corp., based in Tripoli and Bayda respectively, are squaring off in a dispute that threatens to derail the country’s new unity government before it even takes power. Libya’s government has been split in two since 2014 parliamentary elections, after which the elected House of Representatives was forced to flee Tripoli for the eastern city of Tobruk. It has been fighting with its counterpart, the General National Congress, over oil revenue ever since.

Libya’s National Oil Corp. based in Tripoli (NOC-Tripoli) recently contracted the tanker Nassau Energy to load a cargo of crude oil from the Ras Lanuf oil export terminal, which has been inoperative since December 2014. However, on Jan. 14, the guards at Ras Lanuf, who are loyal to the rival National Oil Corp. in Bayda (NOC-Bayda), turned the ship away citing recent attacks by the Islamic State on the facility. The incident comes less than a month after NOC-Bayda announced that it had signed a memorandum of understanding with the Egyptian General Petroleum Corp. to sell it 2 million barrels of Sarir-Messla crude oil per month. If finalized, the agreement would be the first successful export deal for the Bayda-based oil company, which few countries recognize as legitimate.

Analysis

Managing the rivalry between the two factions of the National Oil Corp. in Tripoli and Bayda will be the first major challenge for the newly formed Government of National Accord, Libya’s U.N.-backed unity government. Either NOC-Tripoli’s attempted loading at Ras Lanuf and NOC-Bayda’s attempted export deal could spark a new standoff between the east and the west, which would mean the mobilization of guards to protect the export terminals. The government will need to find a compromise quickly before the situation escalates. However, this is more easily said than done. Though the unity government may initially succeed in merging the two rival oil companies, specifically by backing NOC-Tripoli and undermining NOC-Bayda to the point of irrelevance, the underlying fragmentation of Libya’s social structure and long-established grievances against Tripoli mean stable exports from Libya’s hydrocarbons sector are a distant prospect.

NOC-Tripoli’s Strategy: Neutrality

Ever since the June 2014 parliamentary elections effectively split the country into rival governments — the internationally-recognized House of Representatives based in the eastern city of Tobruk and the remnants of the General National Congress based in Tripoli — the two sides have been fighting for control over the country’s substantial oil and natural gas revenue.

Initially, the Tobruk government tried to exert control over the three Tripoli-based institutions related to finance: the National Oil Corp., the Libyan Central Bank and the Libyan Investment Authority. It appointed new heads for the entities but had little power to implement its wishes. Instead it eventually opted to create its own rival institutions, even though all three Tripoli-based institutions tried to remain neutral to retain international legitimacy. So far, this has mostly worked. Though the government in Tripoli does exert more control than Tobruk, its writ is limited: The Libyan Central Bank has unilaterally approved or announced the budgets for each of Libya’s institutions. The bank has also rejected the budgets of both rival governments. This stance has allowed NOC-Tripoli to stay at least partially functional amid the political standoff and to yield what little oil and natural gas revenue it can to the central bank’s national system, which pays most civil servants.

Even so, Libya’s oil and natural gas revenue during the recent civil war has been disrupted and there have been long delays in payments, along with other related problems. Since the country’s political problems began at the end of 2014, oil production has stayed below 500,000 barrels per day, and the most recent figures show oil production currently as low as 380,000 barrels per day, over half of which comes from the eastern part of the country.

NOC-Bayda’s Strategy: Circumventing the System

The Tobruk-based government did not try to establish a separate oil company until March 2015, when it had become clear that it could not control the corporate office in Tripoli. Since then, it has sought to undermine NOC-Tripoli by attempting to get foreign companies and tankers to work and register with NOC-Bayda instead. This has included threatening legal action, directly negotiating with international companies and setting up bank accounts abroad to take payments.

With NOC-Bayda, Tobruk has not tried to rebuild a national oil company from the ground up. Instead Bayda acts as the National Oil Corp. with the goal of replacing NOC-Tripoli as the legitimate headquarters of the existing company. In the eyes of Tobruk, it has simply moved the corporate offices across the country. This successor strategy has seen it honor contracts signed prior to March 2015 and reject all contracts that NOC-Tripoli has signed since, the largest of which was an 18-month agreement signed in August 2015 with Glencore. The deal gave Glencore sole rights to the crude exported from the Sarir and Messla oil fields through the eastern Marsa al Hariga export terminal, located on the outskirts of Tobruk. Tobruk and its supporters have also been working to deny the use of ports by NOC-Tripoli.

The signing of Tripoli’s Glencore deal has only made Tobruk more determined to market and export crude oil itself. Not only has it hosted conferences attempting to woo international oil companies, but it has also listed cargoes for sale since the end of October 2015. Companies have been reluctant to do business with the company thus far, but Egypt seems to have stepped in and at least signaled that it is willing, although no final agreement has been signed. (Cairo strongly backs Tobruk military leader Gen. Khalifa Hifter and the Tobruk-based government.) NOC-Bayda claims that it has three additional agreements in place and is negotiating with 40 companies, though most of the companies it has mentioned are small, relatively unknown trading companies based in the Middle East.

The Man Behind the Fight

One of NOC-Bayda’s biggest supporters is the powerful former central commander of the Petroleum Facilities Guard, Ibrahim Jadhran, who has long used his influence at four of Libya’s most important oil export terminals to gain concessions from Tripoli. From August 2013 to April 2014, heblocked the then-unified National Oil Corp. from the major ports in the eastern part of the country and tried to export oil independently of the company. He eventually agreed to reopen the ports, but only after he received concessions from the prime minister at the time, Abdullah al-Thinni, who is now heading the Tobruk parliament. One of al-Thinni’s biggest concessions was to agree to decentralize the National Oil Corp. and move its headquarters from Tripoli to the east. Any success that NOC-Bayda has in independently exporting oil from Libya will help Jadhran accomplish his federalist goal of expanding the National Oil Corp.’s reach into eastern Libya.

Now that NOC-Tripoli is pushing to load oil at the Ras Lanuf terminal, the possibility for conflict between the rival factions of the company is high. Jadhran has already turned away the NOC-Tripoli tanker, citing legitimate security concerns: The terminal was attacked by the Islamic State on Jan. 4, and on Jan. 14 a pipeline leading to it was hit by a blast, likely also the work of the Islamic State. In fact, Jadhran’s cooperation with eastern-based organizations is pragmatic in many ways: He is willing to make concessions to protect against the Islamic State and to counter Hifter, the Tobruk military leader, whom he opposes. Jadhran could eventually cooperate with NOC-Tripoli on oil exports to gain the necessary funds needed to fight the Islamic State until the government is better able to fill this role. However, such cooperation, if it even materializes, would not be enduring, given the incompatibility of Jadhran’s long-term demands for a greater government presence in eastern Libya and western Libya’s demand for strong centralized institutions in Tripoli.

Logistics: Squabbling Over Subsidiaries

Since NOC-Bayda is not trying to build a new company but instead co-opting an existing company, it is working to win the allegiance of the National Oil Corp. subsidiaries and joint ventures that manage operations of Libya’s oil and natural gas fields and infrastructure. These include internationally operated companies, such as Eni’s Mellitah Oil and Gas or Repsol’s Akakus Oil Operations, and others such as Waha Oil Co. or the Arabian Gulf Oil Co. (Agoco), which are National Oil Corp. subsidiaries that operate themselves. (They were formerly joint ventures led by U.S. companies that had to leave because of sanctions, after which the National Oil Corp. allowed the remnants to form their own oil companies.)

Essentially, what NOC-Bayda is trying to do is negotiate directly with the subsidiaries operating in the east, the most important of which is Agoco, which has been producing between 200,000 and 250,000 barrels per day for much of the last year for export at the Marsa al Hariga terminal in Tobruk. However, Agoco has continued to voice its allegiance to NOC-Tripoli.

Still, we have not seen Tobruk move to shut down the port or force the company to export through NOC-Bayda, for several reasons. First, both the local contingent of guards and Agoco know that NOC-Bayda’s capability is limited and that turning their back on Tripoli would likely mean giving up their salaries, which are paid through the central bank. Second, half of the oil that leaves the terminal is refined domestically and dispersed throughout the country. (The part that is exported is bartered for petroleum product imports.) This means that if Tobruk steps in and blocks it, it will likely need to find another way to secure vital refined products for eastern Libya.

Regardless of whether NOC-Bayda is finally able to finalize the agreement with Egypt over the monthly sale of one cargo (or with any other company for that matter), there will be a showdown of sorts in Marsa al Hariga. The agreement would undermine Glencore’s deal and would also mean that either Agoco has flipped sides and negotiated its own sale to Bayda, or that Tobruk will finally try to exert physical control over the local port. We do know that there is some level of negotiation happening between NOC-Bayda and Agoco, but it is likely that the international community will treat the sale as illicit and could interdict it, as it did two years ago when Jadhran tried to export crude oil via the Morning Glory tanker.

The Unity Government

The creation of a unity government — if it gets widespread backing — would help, at least in the interim, solve some of these problems. Right now, the actual functions of NOC-Tripoli (which remain largely intact) and the theoretical functions of NOC-Bayda overlap: They are fighting for the allegiance of the same subsidiaries. This means that in theory, unifying them should be fairly straightforward.

The threat of the Islamic State certainly provides added impetus for both sides of the National Oil Corp. to unite. It is what drove the creation of the U.N.-brokered government in the first place. Still, the underlying fractures that have kept Libyan exports intermittent since the fall of Moammar Gadhafi will remain unresolved, and disputes will persist. The unity government knows that its only real hope for ensuring political and economic stability is to decentralize and relocate some government functions to the eastern city of Benghazi. However, it is also well aware that such a proposal will not be taken well by western Libya.

The problem is that at the moment the unity government does not have widespread backing and is divided over key issues. This means that in both the Tobruk- and Tripoli-based governments there is a substantial bloc that opposes unifying the two factions of the National Oil Corp. The new government will find it challenging to physically locate itself in Tripoli. Once fully functional, the unity government may not manage to become strong enough to make progress in the country. If the rival governments persist and maintain control of large areas of the country, then they will continue to fight for control of Libya’s energy revenue.

Forecast

• France in 2016 will be characterized by President Francois Hollande’s attempts to cope with a country that is shifting politically to the right while leading a leftist administration.
• In pursuit of the right-wing vote, Hollande will take a hard line on the Middle East and restrict civil liberties at home. However, he will also increase government spending in an attempt to reduce unemployment levels before the 2017 election.
• This will ultimately be an uphill struggle, and the 2017 election will most likely come down to the center-right Republicans and the far-right National Front.

Analysis

Two months after the Paris terrorist attacks, French President Francois Hollande is seeking to expand the emergency powers he invoked in November 2015. France’s state of emergency gave the government the authority to search houses without a warrant and restrict the right to peaceful assembly, all without judicial oversight. Hollande is now looking to change the French Constitution to extend the scope of these emergency powers.

However, his proposed changes also contain a more controversial alteration: They would permit France to strip French nationality from citizens who are found guilty of terrorist offenses. In its earlier forms, this law would have applied only to offenders with dual nationality status, but more recent statements from French ministers imply that it could also apply to French citizens who have just one passport, leaving them stateless. Such a shift would represent a sharp change in direction for France, bringing up painful memories of the denaturalization of Jews in Vichy France during World War II. The proposed change also reflects a major political shift to the right as the country’s 2017 election looms ever closer.

The roots of France’s current relationship with its citizens can be traced back to 1789, when the people rose up en masse to overthrow the French monarchy. The system that emerged from the revolution prized equality and brotherhood above all. These themes have remained important ever since and were enshrined in France’s current constitution, adopted in 1958. Unlike in the United States, where jus soli (right of the soil) grants citizenship to anyone born in the country, the French citizenship rules laid down in 1803 relied upon jus sanguinis (right of the blood). Under this concept, anyone born to a French father (which was ultimately extended to include the mother) is automatically a French citizen. Later in the century, with international tension showing the benefits of a large and conscriptable citizenry, the rule was extended again to include double jus soli, granting citizenship at birth to any child born on French soil with a parent who could claim the same. Citizenship was also open to children born in France to foreign parents, but only upon reaching the age of 18.

France’s relationship with certain segments of its populace took a darker turn in the lead-up to World War II, as hardship caused by the Great Depression led to increasing anti-Semitism and a mistrust of foreigners. The 1940 invasion by Nazi Germany aggravated these sentiments, since the invaders wished to deport to extermination camps any Jews they could find in France. The southern half of the country remained under the nominal control of the French Vichy administration, though it itself was under strict German supervision. The French puppet government was aware that it needed to accede to German wishes if it was ever to attain any kind of autonomy, and it agreed to cooperate in the deportation of foreign Jews in the hope of saving the French Jews. These terms were then pushed further, and the Vichy government agreed to denaturalize Jews who had become French nationals in the years after 1933. In total, over 75,000 of the 340,000 Jews living in France in 1940 were deported during the war, of which 72,500 died in German camps. Partly as a result of these events, France threw itself into the post-war process of setting up the United Nations and helping to solve the problem of the many stateless persons now extant in Europe. France is one of only 64 countries to have signed the 1961 U.N. Convention on the Reduction of Statelessness, and it is one of only eight European countries to have a system in place for dealing with the stateless.

After the war, France experienced a boom in immigration. Like much of the West, it embarked upon a 30-year period of growth as its economy was rebuilt. This growth, and the bloody Algerian independence campaign that culminated in that country’s secession in 1962, led to an influx of immigrants from North Africa. These newcomers were not always welcomed, particularly after the 1970s saw the end of the so-called Trente Glorieuses years and jobs became less abundant. Immigration numbers did not drop, but their composition changed. Before the 1980s, new arrivals were predominantly immigrant workers, but the number of their family members coming across the Mediterranean began to increase. Interethnic tensions rose as many of these North African immigrants found themselves in dead-end suburbs with little hope of social improvement.

The National Front, founded in 1972 by military veteran Jean-Marie Le Pen, was a far-right nationalist political party that became increasingly focused on the issue of non-European immigration. On the subject of immigration, mainstream French politics generally broke down along traditional right-left lines. The center-right echoed Le Pen’s views to a somewhat milder degree, looking to clamp down on immigrants when in power, and the center-left Socialists did the opposite, often looking to new bodies as a way to grow the economy. In 1993, it was a center-right administration that introduced the Pasqua laws requiring French residents born of foreign parents to apply for citizenship upon turning 18, whereas previously it was obtained automatically when they came of age. This began to increase the number of stateless people in France. But the changes were short-lived, and a Socialist government repealed them just four years later. As a result, the United Nations estimates that today there are only some 1,200 stateless people in France.

Considering the historical roles of France’s political parties, it is not unusual that the idea of depriving convicted terrorists of their French nationality originated with the National Front, which is now under the stewardship of Marine Le Pen, Jean-Marie’s daughter. It is also not surprising that it was advocated by then-President Nicolas Sarkozy of the center-right Union for a Popular Movement, or that when he put the idea forward in 2010 it was quickly dismissed by the center-left Socialists, whose secretary-general at the time, Hollande, described the idea as inimical to the Republican tradition, while the Socialist mayor of Evry, Manuel Valls, saw it as ineffective and found the entire debate nauseating. What is more surprising is that now, five years later, a Socialist government led by Hollande and Valls should be enthusiastically advocating this move, since it appears to go against not only the principles of their party but also the principles they have themselves espoused. The reason for their shift likely lies in the sharp turn to the right taking place in French politics.

Two main factors are behind the shift: the economy and terrorism. Since the global financial crisis struck in 2008, Europe’s economy has largely been moribund, and 2011-2012 saw further debt crises strike in peripheral countries such as Spain, Portugal and Ireland. More recently, reforms undertaken by those peripheral countries have enabled them to take advantage of improved economic conditions, with cheap oil and loose European Central Bank monetary policies causing Ireland’s estimated 2015 growth to hit 6 percent and Spain’s to hit 3.1 percent.

Meanwhile, both countries have begun to chip away at their massive unemployment rates. By contrast, France — like neighboring Italy, which also failed to reform — saw growth of just 1.2 percent in 2015, while French unemployment has actually been on the rise. This final factor is particularly harmful politically, since Hollande had tied his presidency — and his chances of running again in 2017 — to making progress in reducing unemployment. As a result, Hollande’s personal ratings have dipped to record lows for much of his term. It is a common historical theme that when unemployment is high and people are afraid for their future, nationalist parties succeed at sending the message that immigrants, mainstream parties and foreign organizations such as the European Union are to blame for the country’s problems. These are the types of forces that Hollande is now battling.

Meanwhile, terrorism has been a growing menace. France has suffered various attacks at the hands of homegrown Islamist terrorists — often the children of North African immigrants who, affected by a lack of social mobility, proved susceptible to radicalization. This plays into the anti-immigrant narrative long propounded by the National Front and has made the French population more open to Le Pen’s way of thinking. Thus, when Islamists attacked first the offices of the Charlie Hebdo magazine and then Paris as a whole in 2015, Hollande was driven to adopt policies usually associated with the right wing, such as the restriction of civil liberties and his latest denaturalization move, to defend himself from attacks by the political right. The shift is reflected in the popularity of the denaturalization idea, which has received 85 percent approval ratings among the French public.

But Hollande’s problems do not come solely from outside his party. The original version of the denaturalization change that he put forward in November 2015 involved stripping citizenship only from French citizens with dual nationality, meaning that they would not become stateless as a direct result of the law. This idea met with fierce resistance from within the Socialist Party, which saw it as undermining the basic French tenet of equality before the law by discriminating against the 3.5 million French dual nationals, who would suffer a punishment different from the rest of the population.

The solution to this problem was to also revoke the citizenship of French citizens without dual citizenship. This proposal appears to have allayed the inequality objections of many within the party, but it means that France runs the risk of running afoul of international law, which prohibits the purposeful creation of statelessness. There is also the risk that it will amplify the problem Hollande is notionally trying to solve: Withdrawing nationality from North Africans could send a highly divisive message to other Muslims and foreigners living in France, potentially increasing the likelihood of radicalization. The next step for Hollande will be to pass the constitutional change through Parliament in February or March. To ratify the change, Hollande will need to obtain a three-fifths majority, which is possible considering that the right will likely support a plan that it originally proposed.

Moving into 2016, Hollande will have to tackle the problem of controlling a leftist political party that is trying to stay relevant to a populace that is moving to the right — especially with the next election rapidly approaching. The year will be characterized by his attempts to cope with this dichotomy. He will continue to take a strong position on matters relating to terrorism and foreign policy in the Middle East, where he can strike at terrorists without having to deal with complex domestic issues. At home, he will continue to imitate his right-wing opposition, taking a decidedly un-Socialist approach to matters such as civil liberties in keeping with the national mood.

Where he has the most work to do before 2017, however, is the economy. Increasing laxity from the European Commission and favorable external economic conditions will give the French government greater leeway for spending. Consequently, Hollande will pursue a more familiar Socialist strategy in the economic arena, taking full advantage of conditions by increasing public spending in an attempt to create as much growth and as great a reduction in unemployment as possible before the 2017 election. Despite his intentions, though, Hollande will struggle to escape the basic constraints of his position. The shift to the right is a trend that is also happening in neighboring Germany, which is encountering its own immigration issues, and a broad popular wave of this nature is nearly impossible for a national leader to counter effectively. As a result, when the next election comes around in April 2017, it will most likely be the center-right Republicans and the far-right National Front that will be battling it out for control of the country.

Summary

China is modernizing its military one step at a time, and the focus of the new year appears to be organizational reform and restructuring. An announcement from the Chinese military on Jan. 11 heralded the new configuration of its general staff system. The People’s Liberation Army (PLA) has created a joint staff directly attached to the Central Military Commission (CMC), the highest leadership organization in the military. Chinese President Xi Jinping said the changes are “basically completed” and took a group photo with the 15 senior officers who will lead the new staff departments under the CMC. This suggests that while it may not be entirely functional yet, there has been considerable progress toward getting the revised structure in place. The new arrangement of the military’s general staff helps to address Beijing’s requirement to consolidate Party control over the country and develop a military capable of performing modern joint operations.

Analysis

Previously, the Central Military Commission, with the assistance of a small staff called the Central Military Commission General Office, set policies for the armed forces and exercised supreme command. The task of executing the commission’s edicts fell to the Four General Departments — four separate headquarters that served collectively as the PLA’s joint staff and de facto ground force headquarters. The system was cumbersome and completely dominated by the army. Even more concerning for Beijing, this command structure was resistant to Party leadership and prone to developing political fiefdoms (according to recent state media editorials in favor of military reforms).

The new joint staff directly attached to the Central Military Commission replaces the Four General Departments. The new general staff has 15 functional departments instead — a significant expansion from the domain of the General Office, which is now a single department within the Central Military Commission staff. The original Four General Departments have been assimilated into the framework, and though their portfolios are virtually the same, they most likely will not have the considerable autonomy they once enjoyed.

Included among the 15 departments are three commissions. The CMC Discipline Inspection Commission is charged with rooting out corruption, a task previously delegated to a commission that was subordinate to the General Political Department. This change puts the discipline commission and the General Political Department on the same organizational level. Then there is the new CMC Politics and Law Commission in charge of judicial and security affairs. Finally, the CMC Science and Technology Commission assumes the duties of a prior commission that had been subordinate to the General Armaments Department.

The Chinese Defense Ministry held a news conference to shed light on the reform, stressing that the commissions are distinct from the other Central Military Commission staff departments. While the immediate differences are unclear, the commission names suggest they could function as branches of higher-level Party organizations, such as the Central Commission for Discipline Inspection and the Central Politics and Law Commission. Furthermore, a Defense Ministry spokesman said the CMC Discipline Inspection Commission would be subject to “dual leadership.”

This somewhat unwieldy principle means that the grouping in question has responsibilities to the body to which it is attached as well as the organization’s counterparts at higher government levels. This particular arrangement might well be appropriate for the other two commissions as well. In effect, there are three powerful organizations working directly under the Central Military Commission that could also report to the central government, which suggests that the Communist Party is reinforcing its control over the military, even as it carries out reforms that give the People’s Liberation Army more operational flexibility and, potentially, the means to streamline its decision-making process.

The key division of labor Beijing wants for the military is a joint staff under the Central Military Commission that sets overall policies and does the strategic planning. This then feeds into service headquarters that focus on force development — similar to what the U.S. military calls the “organize, train, equip” mission — instead of direct command. And then there are the joint military regions, which will be fully empowered to conduct integrated, synchronized operations. The military has already undergone service-level reform with the creation of a ground force headquarters and an upgraded PLA Rocket Force. The creation of the new Central Military Commission general staff is Beijing’s second major reform. The evolution of China’s military regions into effective joint commands is the next logical step in Beijing’s plan to fashion its military into a credible 21st-century force. The focus of the last decade was operational-level modernization, and China now seeks to build on this solid platform.

Analysis

Moscow’s assertive stance since a Turkish fighter downed a Russian Su-24 in late November has started to affect Washington and Ankara’s air operations over Syria. Russian President Vladimir Putin said in a Dec. 17 interview that he sees no prospect of improving ties with Turkey. Putin then dared Turkey to fly over Syrian airspace in the wake of Russian deployments of air defense assets in the country. Earlier Dec. 17, Bloomberg reported leaks from unnamed White House officials indicating that the U.S. Air Force had temporarily halted manned aerial missions inside an area the U.S. military designates “Box 4,” also known as the Azaz corridor, which is west of the Euphrates River along the Turkish border. U.S. and Turkish aircraft had been supporting rebel groups combating the Islamic State in the region. The Pentagon was forced to suspend aerial operations here for all but drones when Russia deployed SA-17 surface-to-air missile systems to the area. These systems are backed up by long-range strategic surface-to-air missile systems based in Latakia province, northwest Syria. Russia also ramped up air operations near the Turkish border, interfering with U.S. and allied support for rebels in the area.

There is a proverb in Afghanistan that goes, “patience is bitter, but it has a sweet fruit.” In the case of the Taliban, the ability to patiently endure a 14-year campaign waged by the most powerful countries on the planet speaks to the group’s tenacity. When the NATO-led International Security Assistance Force (ISAF) began its drawdown in 2014, the Taliban capitalized on the resulting security vacuum. The Islamic fundamentalist movement now claims a greater fraction of Afghanistan’s territory than at any time since the United States launched Operation Enduring Freedom in 2001.

In September, the Taliban briefly captured the northern city of Kunduz, considered by some to be their biggest single victory since the war began. Over the past week, the group used a sizable car bomb as a prelude to an armed assault on the Spanish Embassy in Kabul, made tactical gains against the struggling Afghan National Defense and Security Forces in Helmand province, and launched an assault on a heavily guarded airport compound in Kandahar. The Kandahar attack, spearheaded by suicide bombers, turned into a fierce gun battle that left 50 dead. While no member of ISAF was killed, the Taliban’s fundamental message remains unchanged: The fight will continue.

And yet, as the Taliban make gains, the organization’s long-running fragmentation continues. Two rival Taliban factions clashed Dec. 8 in the village of Zirkoh in western Afghanistan, resulting in more than 50 deaths. The opposing factions included fighters loyal to Mullah Muhammad Rasul, the leader of a breakaway faction, and Mullah Akhtar Mansoor, leader of the mainline Taliban. This comes after the July revelation that the Taliban’s erstwhile leader and founder, Mullah Mohammad Omar, had been dead since 2013. The Islamist organization hastily elected Mansoor, Mullah Omar’s deputy, to replace him. But Mansoor’s selection rankled some commanders who accused him of being an opportunist who hid news of Omar’s death to usher himself into power. Additionally, Mansoor was a controversial choice given his interest in engaging the secular Kabul administration in peace talks, something the group’s hard-line elements consider a betrayal of the Taliban’s foundational mission of installing an Islamic government in Afghanistan.

Internal tensions became so fraught that a gunfight reportedly broke out between Mansoor and a rival commander in November, followed by a series of conflicting reports as to Mansoor’s fate: Some sources said he was uninjured, others claimed he was wounded and a few even announced his death. To quell rumors of his demise, Mansoor released an audiotape in which he assured his followers of his well-being. But doubts persist.

While the Taliban continue their offensive, momentum is building in Kabul to open peace talks. Last week, Afghan President Ashraf Ghani co-hosted the “Heart of Asia” conference with Pakistani Prime Minister Nawaz Sharif in Islamabad. Sharif and Ghani’s announcement to work together in negotiating peace with the Taliban struck a surprising and optimistic tone given the two countries’ complicated and occasionally hostile relationship. But Ghani’s outreach to Pakistan does not come without domestic political costs: Rahmatullah Nabil, Afghanistan’s chief of intelligence, resigned after posting a message on Facebook criticizing Ghani for joining forces with Sharif, whom Nabil lambasted as a supporter of the very militants that he vehemently opposes.

The Challenges to Peace

In light of these developments, a number of obstacles need to be addressed before Afghanistan can attain any kind of peaceful resolution.

First, Mansoor must provide definitive proof of life to further assuage his doubters. Skepticism surrounds the authenticity of the previously released audiotape. The Taliban insisted Mullah Omar was alive after early rumors of his demise, only to later confirm that he was dead. If Mansoor has indeed perished, we can expect another intense battle for succession in which more fighters may defect and join existing groups or simply start their own. This may also enable a more hard-line leader to assume power, further undermining prospects for negotiations. Even under Mullah Omar, the pursuit of a negotiated settlement was problematic. For a potential successor to Mansoor, it could be challenging in the extreme.

Second, the structure of the Taliban has changed over the past decade, and the organization is no longer a unified, coherent entity. The Taliban implicitly acknowledged this Dec. 15, releasing a 15-page fatwa calling for unity among the fighting factions. The fatwa pointed out that there is no justification for infighting under Sharia, and it warned that anyone who launches an attack would be considered a murderer and those being attacked would be considered the oppressed. Though the Islamic movement retains core elements, divided as they are, it no longer exercises the type of centralized control that defined its organizational structure during the 1990s. A variety of other non-traditional fighters have entered and diluted its ranks, including ordinary Afghans disillusioned with the poor state of the economy and a lack of governance. Therefore, peacemakers face the problem of bringing warring factions to the negotiating table — factions that do not exercise complete authority over an increasingly decentralized movement. Agreeing to negotiate with Kabul itself has become a divisive issue for the Taliban. If Kabul negotiates with any faction, the move will embolden others, something the Islamic State will try to exploit in its campaign to penetrate South Asia.

Third, the “Heart of Asia” conference notwithstanding, Pakistan and Afghanistan’s relationship — the strengthening of which is a precondition to peace — is marred by a legacy of suspicion and mistrust. Kabul has long accused Islamabad of creating, harboring and dispatching the Taliban as a means to meddle in Afghanistan’s affairs, all in support of Pakistan’s objective of achieving strategic depth in its western neighbor to sustain a potential land war with India. Pakistan has countered this narrative by claiming that Pakistanis have suffered enormous loss of life at the hands of extremists, including the Taliban. Islamabad also asserts that Pakistan is host to 1.5 million Afghan refugees, and that the country has launched a robust and legitimate campaign aimed at uprooting militancy. Still, Pakistan admits that it can influence the Taliban, hence the reason Ghani is reaching out to Sharif. And while the two leaders’ resolve to work together is encouraging, the departure of a high-level Afghan official such as Nabil illustrates the difficulties facing Ghani in consolidating support within his government to work with Pakistan. Interactions between the two countries will likely vacillate as they try to navigate the deep-seated tensions that have defined their relationship for so long.

The final obstacle is the Taliban and their need to agree to enter peace talks. Though commanders holding a so-called moderate position, such as Mansoor, have broached the subject of negotiating with Kabul, their standpoint is based on the precondition that all foreign troops withdraw from Afghanistan. Washington recently confirmed that about 10,000 troops will stay in Afghanistan through 2016 (dropping to 5,500 in 2017), while NATO recently confirmed that its troops will remain in Afghanistan until 2020, thereby complicating prospects for peace. Indeed, commenting on the Taliban’s advancing gains following the drawdown of U.S. troops, Taliban spokesman Zabiullah Mujahid posted on Twitter: “The mujahideen are making rapid military gains, capturing territory and destroying enemy centers. Expecting us to surrender and come for talks is foolishness.”

In addition to negotiating with a divided Taliban and mending ties with Pakistan, Ghani faces the problem of improving governance. In a 2014 report, he identified collusive procurement practices, the weak rule of law and abuse of the legal system, and arbitrary regulations that incentivize bribery as the three drivers of corruption in Afghanistan. Addressing the governance challenge is important because it is a major factor that has enabled the Taliban’s revival as a political force. The group has successfully exploited public frustration over government corruption, dysfunction and ineptitude. Given the intractability of these issues, the Taliban will continue to fill the governance and security void by offering policing, protection and courts, among other services traditionally provided by the state, thereby sustaining their presence.

Sharif and Ghani’s meeting was a good sign, but the legacy of mistrust that defines their fragile relationship will hamper the path to progress. Thus, as disunity afflicts both the Taliban and Kabul, the prospects for bringing peace to Afghanistan, a country ravaged by a continuous state of war since 1978, remain dim.

My work on the use of poetry as a recruiting tool is discussed in a recent article in The Guardian. Here is an excerpt:

“Poetry may be a potent tool in recruiting militant jihadis, a new study by Oxford academic Elisabeth Kendall has found.

In Yemen’s al-Qaida and Poetry as a Weapon of Jihad, published in a new book, Twenty-First Century Jihad, she writes: “The power of poetry to move Arab listeners and readers emotionally, to infiltrate the psyche and to create an aura of tradition, authenticity and legitimacy around the ideologies it enshrines make it a perfect weapon for militant jihadist causes.”

Osama bin Laden composed an ode to the destruction of the USS Cole in 2000, which he recited at his son’s wedding, and a second example of his verse was discovered in an abandoned safe house in Kabul, having been distributed among trainee jihadis as an exhortation to fight.

“In the quest to understand the hearts and minds of those who practise militant jihad,” Kendall writes, “neglecting to interrogate the poetry that speaks to both would seem a fundamental oversight.”

Poetry is woven into life’s fabric for 300 million people in the Arabic-speaking world: in 2010 the language was spoken by around 4.5% of the world’s population and was the world’s fifth most-spoken language, after Mandarin, English, Spanish and Hindi. A reality TV programme, Millions Poet, broadcast from Abu Dhabi across the Arab region, has been dubbed Poetry Idol by commentators because it fills a similar role to Pop Idol in the west: the show gets more viewers in the UAE than the country’s national sport – football – and contestants are judged on the qualities of their poetry and their performance. The winner can leave with more than a million dollars.

Kendall’s research is based partly on data collected in conversation with 2,000 people in the sparsely populated but geographically huge Mahra region. Interviewees were asked about the significance of poetry in their lives, as part of a wider socio-economic survey conducted by the Mahra Youth Unity Organisation, an independent non-governmental body.

“The survey was conducted in December 2012 by local fieldworkers, men and women, face to face, to capture illiterate respondents of both genders. A startling 74% of respondents believed that poetry was either ‘important’ or ‘very important’ in their culture today,” she writes.

“Poetry was found to be very slightly more important among the desert tribes than along the more sedentary coast, among those in the poorest economic group and among those who carry a gun (a result that was not explained simply by any greater prevalence of guns in desert locations). Surprisingly perhaps, the presence of a television and level of education made no discernible impact, and the importance of poetry was only very weakly correlated to increased age. Finally, poetry was found to be more important among men (82%) than women (69%). This is not surprising, since it is the men who mainly recite at formal gatherings.”

COMMENTS

The July 11 escape of the notorious Sinaloa crime boss, Joaquin “El Chapo” Guzman Loera, from a maximum-security prison in Mexico has drawn considerable Mexican and international media attention. While the brazen and elaborate nature of the escape will add to the lore already surrounding Guzman, the escape itself carries little significance for organized crime in Mexico — though it will place a momentary strain on coordination between U.S. and Mexican law enforcement. The forces that drive the evolution of organized crime and their impact on society in Mexico are simply greater than any single crime boss.

Analysis

Mexico’s geography enabled drug traffickers like Guzman to operate on a global scale. As international law enforcement effectively dismantled the powerful Colombian cartels and stymied their maritime trafficking routes through the Caribbean in the 1980s and 1990s, Mexico became the lynchpin of new smuggling routes into the United States. This evolution took place just as the Mexican criminal networks that trafficked drugs broke down into smaller groups. Though crime bosses like Guzman rose in stature relative to others, all organized crime groups in Mexico are the result of a systematic decentralization in cartel structure that continues today.

In fact, by the time Guzman was arrested in February 2014, the Sinaloa Cartel was already fragmenting. Groups that operated in areas such as Chihuahua, Sonora, Sinaloa and Baja California states — areas that were once part of El Chapo’s criminal network — were already acting autonomously. Some of them were even fighting one another. The arrest of Guzman and the subsequent capture of some of his lieutenants only accelerated this trend. Now, geographic domains that were controlled by Sinaloa-based crime bosses for decades are now controlled by other groups, including the Cartel de Jalisco Nueva Generacion, which expanded from the Tierra Caliente region, and La Linea, which was once the enforcement group for the Juarez cartel.

Since 2012, Mexican organized crime has become increasingly balkanized amid government efforts to revamp public security institutions, and nationwide levels of organized crime-related violence have gradually diminished. Though having more crime groups means there are more bosses, these leaders have not been able to sustain violent offensives against their rivals and fend off the state as well as their predecessors did. And while waves of extreme violence can still emerge in places like Tamaulipas, they typically weaken as soon as security forces move in — in contrast to past conflicts in places like Juarez, where violence continued to climb despite repeated deployments of federal troops.

As with many aspects of modern banking, the word “bankrupt” has its roots in Renaissance Italy. The original banks were Florentine merchants who would sit in the open street behind benches (bancas in Italian) upon which their money would be stacked. If trading went against them and their capital was reduced to nothing, their bench would be said to be broken, or banca rotta. It is fitting then that, 500 years later, the European country with the most worrying debt problem is Italy.

Analysis

This may be surprising to some, since Italy does not top the tables as worst offender by any of the usual metrics. It does not have the highest levels of debt to gross domestic product in Europe: That dubious honor belongs toGreece, whose debt to GDP ratio rests more than 40 points higher than Italy’s 132 percent. Nor are Italian banks afflicted with the highest quantities of nonperforming loans as a percentage of GDP. Cyprus wins that contest easily; at a staggering 137 percent, it relegates Ireland (23 percent) to a distant second place and far exceeds Italy at 17 percent.

But though Italy is not the worst offender, its size still makes it the most potentially problematic. Italy has the third largest economy in the eurozone after Germany and France, and it is 1.5 times bigger than fourth-ranked Spain. So even without having the highest ratios, in actual numbers Italy has the biggest debt mountain: 2.3 trillion euros (roughly $2.4 trillion) of government debt compared with Greece’s 392 billion euros. Thus the three recent Greek bailouts, though giant in relation to the Greek economy, were just a sliver of the European economy as a whole, and in their wake the eurozone carried on more or less unaffected. The same would not be true of Italy. A bailout would be a massive undertaking that would greatly stretch the union’s finances.

Of course, this is not an altogether new phenomenon. Italy’s debt to GDP ratio has been over 100 percent since the early 1990s, and GDP growth since then has been fairly stagnant. But the fact that Italy’s debt has been large for a long time does not mean it is not dangerous. It was the threat of Italy defaulting that drove much of the market panic during the sovereign debt crisis in 2011 and 2012, when weakness in Europe’s banks had prompted bailouts from their national governments, calling into question the solvency of the governments themselves.

Relief Amid Global Crisis

Europe’s governments did not resolve the debt crisis by directly dealing with Italy’s debt problem. (In 2012, Italy’s debt was still only 123 percent of GDP, 9 points lower than now.) Nonetheless, the policies they put in place helped Italy stabilize its finances. Panicking markets were quieted by European Central Bank President Mario Draghi’s promise to do “whatever it takes” to save the euro — a promise that ultimately led to an ECB bond-buying program that drastically reduces Italy’s debt-servicing costs.

Quantitative easing, then, has temporarily put off one of Italy’s problems: growing government debt. With the ECB buying Italian bonds, interest rates on the government’s debt have fallen from 6 percent in 2012, to 4 percent in 2014 and now down to 1.5 percent as we enter 2016. It has cushioned Italy from market panics, because it now has one large guaranteed buyer of its bonds in any crisis. That, along with the low oil prices that have been largely responsible for an uptick in growth across the Continent, has allowed Italy’s government to spend more freely this year — a welcome state of affairs for Italian Prime Minister Matteo Renzi.

Renzi, who originally came to power not by election but through an intra-party confrontation, has spent much of the last two years attempting to reshape the Italian electoral and governing apparatus so that he first can call an election (by May 2018, but possibly before) that will give him the legitimacy of a popular vote. He can then govern Italy without many of the obstacles and hazards that have hindered his post-war predecessors.

Having undertaken these reforms, Renzi now appears to be intent on winning votes at home. Against the European Commission’s wishes he has pushed through measures popular with middle-class voters such as property tax cuts, and used the migrant crises and Paris attacks to justify even more spending on areas such as security and culture. These policies undermine Italy’s overall fiscal position of course, but quantitative easing hides the effects, while Italy enters 2016 projecting GDP growth of 1.6 percent, which would be its highest rate since 2010.

A Teetering Financial Sector

The more acute danger, then, is to be found not in Italy’s government debt levels but in its banking system. The country’s banking sector has long been weak and, unlike its Irish and Spanish counterparts, it has never experienced the restructuring and recapitalization that would have come with an EU bailout. Thus the underlying issues have been allowed to fester, with nonperforming loans continuing to grow as Italy’s unemployment levels have remained stubbornly high.

Again unlike Spain and Ireland, Italy has not been able to create a government-backed national “bad bank” where it can funnel these bad loans (in Spain and Ireland this happened as part of an EU bailout), which would free Italian banks of their burden. The European Union resisted attempts to create one even in November because of its reluctance to countenance any kind of state financing. Italian banks instead have to try and sell the bad loans on the open market to investors in distressed debt, who buy them at a discount from their original value because of their higher likelihood for default. The problem Italian banks face is that the less healthy the loans, the bigger the discount, and the higher the loss on the banks’ balance sheets from writing down the difference.

There is evidence that the market is interested in buying this Italian debt, but the prices offered are far below those sought by Italian sellers. Thus the process of selling off nonperforming loans has begun, but desperately slowly, with the total amount of impaired loans in the last month only dropping from 200 billion euros to 199 billion euros, having been climbing up until this year. The best hope for speeding up the process is for improving market conditions to make the loans a little safer, and thus worth more to investors. The government can help in this effort as well, since investors are partly reluctant to buy because of Italy’s convoluted insolvency legislation.

But new dangers are also arising, partly as a result of post-2012 measures enacted to break the so-called doom-loop between banks and governments. Along with quantitative easing policies, European policymakers also introduced a change to how EU members will aid their struggling banks, first seen in the restructuring of  Cyprus’ financial sector in 2013. When a bank goes bust, the initial relief capital will no longer be put up by governments (and by extension, taxpayers) but first by the banks’ investors and depositors. The Italian parliament voted the measures through in July 2015, and as of January 2016 the first pain of a bailout will be felt by Italian banks’ shareholders, then by holders of their junior or unprotected bonds, then by those with more than 100,000 euros in their deposit accounts and finally by senior or protected bondholders. A special bailout fund raised with contributions from other Italian banks was also created.

The new rules may ease the burden on national governments, but they also mean there is a greater risk of bank runs. Depositors with more than 100,000 euros in their accounts now have good reason to withdraw their money from weaker banks at the first sign of trouble, transferring it either to stronger Italian banks or possibly even German ones. There was similar capital flow out of Greece in the midst of the crisis this year. Under the new regulations, a faltering Italian bank may ultimately require a bigger bailout than its shareholders, bondholders and the resolution fund are equipped to provide. And if depositors do see their funds claimed — and if fears of a bank run become real — Italy would have a banking crisis on its hands.

Even if Italy avoids this doomsday scenario, the new bail-in system — the term used to describe when stakeholders’ assets are used to shore up the banks — is already causing headaches. In November the government bailed in the shareholders and junior debt-holders in the resolution of four small banks that had been under the special administration of the Bank of Italy. It exposed another issue: Italian banks have spent much of the last five years selling their own junior bonds to their retail investors as safe products, meaning that the general Italian public is unusually over-exposed to the banks through this channel. Unsurprisingly there has been a stampede by the public to try and sell these bonds, especially following the suicide of a pensioner who had been stung by the bail-in of one of the four banks, and the lack of willing buyers has driven down the bonds’ value.

Consequently, there will now be less appetite for their junior debt, shutting down a useful funding mechanism. For now though, the biggest losers from this situation look to be the retail investors who were persuaded to buy these products. And there will be political repercussions. Renzi has been swift to try and compensate these losers with government money. However, such support will be hard to maintain from January onward, as the new regime includes restrictions against state aid.

Underlying Problems Persist

As of Jan. 1, Italy’s banking sector will be walking a tightrope. Under the new system, the shareholders, the resolution fund and the estimated 71 billion euros in outstanding subordinated debt should be enough to absorb the fallout of a smaller bank running into trouble. But if one of its larger banks, or several of its smaller banks go under, the country may run into severe difficulty. Italian regulators, and Renzi himself, will be hoping for a year with no major scandals like the one that afflicted Italy’s third largest bank, the Banca Monte de Paschi di Siena, in 2013, nor will they want a broader economic shock.

The good news for the Italian government is that, thanks to its free spending and favorable conditions, Italy is on course for timid growth in 2016, helping its businesses, in turn helping its banks reduce their nonperforming loans. In November, Fitch Ratings raised its outlook rating for Italian banks from negative to stable, reflecting this positivity. The next positive step might be consolidation in the Italian banking sector, which has been in store since the parliament passed a new liberalizing law at the start of 2015. Once Italy’s weaker small banks are attached to safer counterparts, there may be less risk of them running into trouble.

Still, even if Italy does get through 2016 without suffering a severe banking crisis, the future is not bright. The short-term factors keeping its spiraling government debt from becoming a major issue — quantitative easing, low oil prices —must come to an end at some point, re-exposing all of these problems. And while the banking sector’s situation may improve if banks can sell off nonperforming loans, these processes are all slow and unwieldy, and it would take an extended period of favorable conditions for the sector to return to anything like good health. Thus Italy’s debt is one of the largest threats facing the eurozone in the coming years, just as it has been since the 2011-2012 crisis first brought it into focus.

The year ended dramatically in Georgia when Prime Minister Irakli Garibashvili announced on Dec. 23 that he was resigning. Garibashvili, who had held the post since Georgian Dream coalition leader Bidzina Ivanishvili voluntarily stepped down in 2013, said that he had fulfilled his duties and it was time for a new prime minister to take the reins. Soon after Garibashvili’s resignation, Giorgi Kvirikashvili, who had previously served as economy minister and foreign minister under the Georgian Dream government, was nominated to fill the post. Kvirikashvili was sworn into office on Dec. 29.

The timing of this surprise reshuffle is significant. After its emergence in 2011, the Georgian Dream coalition rose quickly to overtake the ruling United National Movement (UNM) in parliamentary elections in 2012. The coalition, which was formed by billionaire Ivanishvili to unite several opposition groups, was able to take advantage of corruption scandals and the public’s dissatisfaction with former President Mikhail Saakashvili’s confrontational stance on Russia to end the UNM’s decadelong rule. The following year, Georgian Dream presidential candidate Giorgi Margvelashvili defeated the UNM’s candidate, solidifying the Georgian Dream’s power over the country.

Though the Georgian Dream was popular during its first years in power, its popularity began to decline as Georgia succumbed to the economic slowdown that swept across much of the former Soviet Union after the start of the Ukrainian conflict in early 2014 and that worsened with the financial crisis in Russia. Like most states across the region, Georgia’s currency tumbled along with remittance flows from migrants working in Russia. Meanwhile, the Georgian government was accused of failing to deliver on many of its promised reforms and of using the same antagonistic methods (including issuing an arrest warrant for Saakashvili) that contributed to UNM’s unpopularity.

This dissatisfaction is likely what led the prime minister to step down less than a year before parliamentary elections, which are tentatively set for September or October. Electing Kvirikashvili, who has a strong economic background and is one of the most popular figures in the coalition, is probably a move to re-energize the coalition. And though it is a challenging task for Kvirikashvili, given the sluggish economy, the stakes are relatively low since there is currently no opposition party strong enough to exploit the coalition’s weakness. The latest polls show only 18 percent of the population supports the Georgian Dream, but the UNM is faring even worse at 12 percent. In distant third is the Our Georgia-Free Democrats party with 7 percent. However, more than 30 percent of voters are still undecided, which could make for a dynamic political situation leading up to the polls later this year.

Regardless of electoral outcomes, Georgia can be expected to retain its strong pro-West foreign policy bent. Despite accusations by the UNM that Ivanishvili and the Georgian Dream would shift strategically toward Russia, the current government has largely maintained the Western integration priorities pursued by the previous government, which is evident by its signing of an Association and Free Trade Agreement with the European Union in 2014 and by the opening of a NATO training center near Tbilisi in 2015.

The Georgian Dream has also prioritized eliminating visa requirements for travel between Georgia and the European Union, which is likely to become a reality in mid-2016. Though full EU and NATO membership is currently off the table for Georgia and will likely remain so in 2016, there is no question that the Georgian Dream has maintained a strong orientation toward the West during its time in power.

This has made relations with Russia difficult, but the Georgian Dream has still managed to significantly improve economic ties between Tbilisi and Moscow. Trade ties that had been cut off prior to the 2008 Russo-Georgian War were resumed in 2012, and Georgian goods have not been subject to the same Russian restrictions as Ukrainian goods have been because of Kiev’s pro-West policies. Russian and Georgian officials also opened negotiations to increase natural gas supplies from Russia to Georgia, and they could reach an agreement sometime this year. Still, tension will continue to mount between Tbilisi and Moscow over Georgia’s integration with the West (and particularly with NATO), though not to the point of disrupting all ties — or preventing further economic opening — between the two countries. Rather, Russia will try counter EU influence by implementing similar measures with Georgia, such as its own visa liberalization program.

There is no question that Georgia is in for a dynamic and potentially volatile year politically, but any leadership changes are unlikely to have a significant impact on Tbilisi’s foreign policy. That said, the enduring Russia-West standoff and Georgia’s strategic location within the former Soviet periphery will continue to make the country important for the entire region.