A general view from the presidential palace in Astana, Kazakhstan. (POOL/AFP/Getty Images)

Forecast

• Low energy prices, flat energy production, a volatile currency and demands from the Kazakh people will hurt the Kazakh economy next year as bankruptcies rise among firms.
• To counter this poor economic outlook, the Kazakh government will begin its most ambitious privatization program in more than two decades in 2016, with the goal of drumming up major foreign investment in strategic companies and assets.
• However, foreign investors will remain wary of the privatization program because of uncertain investment codes and restructuring laws, the government’s limited ability to organize the program, and the business elite’s protectionist measures.

Analysis

Since 2000, Kazakhstan has greatly benefited from and has come to depend on its energy wealth. The country’s energy resources have created a robust economy, with GDP growth averaging 8.4 percent over more than a decade, and provided the government with more than half its revenue. However, the downsides of that dependence became abundantly clear for Astana, as it did for many governments that relied on oil exports, when oil prices plummeted in 2014, leading to a subsequent 4.3 percent decline in Kazakhstan’s GDP. The Central Asian country did not fare better in 2015. The Kazakh government, which had originally forecast a GDP growth of 1.5 percent, revised it downward to 1 percent after the first 10 months of the year. That figure may decrease yet again by the end of the year.

In an attempt to ameliorate its poor economic situation, Astana will promote an enormous privatization program for many Kazakh state firms to rally foreign investment in 2016. But this will not ensure economic stability; in fact, it has not worked in the past. Reticent foreign investors, self-interested business elites, a history of protectionism and a volatile investment environment will all be barriers to the government’s plans to help its struggling economy, creating further economic uncertainty and potentially causing more damaging social unrest in a country already grappling with an unstable Central Asian region.

The Economic Situation

Along with falling oil prices, Kazakh energy production flattened and the nearby Russian economy went into recession, itself the result of dependence on oil exports as well as Moscow’s standoff with the West and its subsequent economic sanctions. Kazakhstan’s industrial sector then contracted by 2.2 percent for the year, and the declining energy sector wracked up a $4 billion budget deficit for the Kazakh government in the first nine months of 2015, compared with a $6 billion surplus in the same period in 2014. The government had already slashed its 2015 budget by 10 percent in February. The revision in spending was accompanied by the re-pegging of the state budget at $50 per barrel of oil, down from the initial $80 per barrel. The government also revised its ambitious plan to raise oil production every year by 3-6 percent to reach 2 million barrels per day by 2019 — a plan initially set for 2015. Meanwhile, some elements of the Kazakh government are forecasting flat oil production through the next four years.

Astana intended to counter its current economic hardships with increased foreign investment. In April, Kazakh President Nursultan Nazarbayev brought back former Prime Minister Karim Massimov, a pro-investment leader with friendly business relations in the east, Russia and the West, for this very purpose. Massimov launched an “Invest in Kazakhstan” program, lobbying parties around the world. However, there has been little return for the premier’s efforts. In fact, foreign direct investment has fallen by half from 2014 to 2015, according to initial estimates by the National Bank of Kazakhstan.

An additional problem this year was the government’s initial refusal to devalue its currency, the tenge, alongside the depreciating Russian ruble. Because Russia is one of Kazakhstan’s primary export destinations, the falling value of the ruble made those exports too expensive for Kazakh industry. Combined with the low value of Kazakh oil exports, the country’s cumulative export values fell by nearly half in the first nine months of 2015, dropping from $62.7 billion to $36.4 billion. Kazakhstan’s trade turnover with the members of the Eurasia Union (Russia, Belarus, Armenia and Kyrgyzstan) also fell by 26 percent in the first three quarters of the year. After spending $28 billion to defend the tenge over the course of 18 months, the Kazakh government finally unpegged the tenge from the U.S. dollar, allowing a sharp 40 percent devaluation in August. Unfortunately, slowing industry and exports had already set in, plunging the economy into the volatile predicament it now suffers and will continue to confront in 2016.

The 2016 Outlook

To assuage potential economic damage and the social instability that may come with it, the Kazakh government approved a fairly stringent 2016 budget on Nov. 25, based on an oil price of $40 a barrel — a more conservative estimate than Russia’s federal budget. The government is projecting GDP growth of 2.1 percent but also a volatile and weak tenge because of low oil prices, its interconnectedness with the Russian ruble, and the government’s hesitancy to continue defending the currency.

Concerns that inflation in Kazakhstan will continue to rise in 2016 are growing as well. The government has set a target of 6-8 percent inflation for the coming year, but it surpassed 9.4 percent in 2015. The central bank’s policies and an uncertain economic outlook could lead to increased bankruptcies, according to Stratfor sources. Corporate bankruptcies — something the government has kept quiet — doubled this year, totaling 320 bankrupt companies. Should bankruptcies continue to rise, discontent among the business class, as well as those it employs, could increase, a worrying issue for the government.

Already, many Kazakh firms are trying to either shed bad assets or downsize. State energy firm KazMunaiGas will consolidate its 206 subsidiaries down to 75 companies over the next few years, privatizing at least 51 percent of its oil refineries, natural gas station network and international assets. The company has received $4.7 billion from the government for shares in its Kashagan energy project as well to avoid defaulting on its debts. Also notable, Kazakhstan’s largest sovereign wealth fund, Samruk-Kazyna, announced in early November that it would close down its foreign subsidiaries in early 2016, leaving offices open in only Moscow, London and Beijing. Samruk-Kazyna reportedly has connections to 80 percent of Kazakh firms and financial assets, and the effects of the downsize will ripple throughout the rest of the country’s businesses.

Kazakhstan’s powerful business class has forced the government to choose some socially unpopular policies for the coming year, too. On Nov. 23, the Kazakh government adopted new labor codes that were contested by labor unions across the country — particularly in the energy sector. The new codes will allow firms to reduce the number of workers or their salaries more easily. Unemployment in the energy sector has already risen by 31 percent, and the salaries of most of those still employed have decreased by approximately half. The labor unions in the energy sector have said that if the government does not revise its policies in 2016 they will strike. The government has started to crack down on and detain the leaders and organizers of the unions to disrupt their plans; such protests and crackdowns can quickly get out of hand, as seen in the 2011 Zhanaozen riots. Rising extremism in the region stemming from the conflict in Afghanistan could likewise inflate social instability should the economy continue to suffer.

Astana’s Privatization Plan

To retain economic stability, gain cash for businesses and relieve pressure on the government’s coffers next year, the Kazakh government is planning to launch its most ambitious privatization plan since the country’s independence from the Soviet Union. The government plans to cut state ownership in 60 of the country’s largest firms and thousands of smaller companies and assets, many with stakes held by the government through Samruk-Kazyna.

The scheme envisions auctioning off the small companies to the highest bidder, but the large strategic firms will sell an equity stake to particular foreign investors before an initial public offering listing in Astana. Shares or stakes are reportedly up for grabs in energy firm KazMunaiGas, Kazakhtelecom, railway company Kazakhstan Temir Zholy, nuclear holding company Kazatomprom, Samruk Energy, mining companies Eurasian Resources Group and Kazzinc, Air Astana, Astana International Airport and Aktau Port. The Kazakh government allegedly circulated a list of 60 companies among foreign investors this fall, including during Nazarbayev’s visits to London, Paris and Doha. The list was meant to test investors’ reactions and is not finalized, according to a Stratfor source.

Of course, the Kazakh government has attempted privatization schemes before with no success. In 2013, the government launched a program called the “People’s IPO,” which would have auctioned off shares in 10 of the largest firms to Kazakh citizens. The government’s goal was to raise cash for the firms while tying the Kazakh people into the major government enterprises. But the first two IPOs were opened without any real interest from the Kazakh people, who lacked the financial capability to take advantage of the scheme. Eventually, the rest of the program was scrapped.

Moreover, if Massimov’s attempts to appeal to foreign investors are any indication, the latest privatization program could also see wariness from foreign investors. The Kazakh government is continually changing investment laws, having amended them five times in 2011, 39 times in 2012 and 270 times between 2014 and 2015, making the investment climate highly uncertain. Kazakhstan hopes investors will look more positively on the country after it joins the World Trade Organization in mid-December, but Astana has applied to the WTO for exemptions in several categories that involve how foreign firms operate in the country. Such fluctuating policies will only reinforce foreign investors’ reticence.

Another issue for investors is the debt big state firms carry because of social obligations dictated by the state and the government’s oversight over any possible restructurings. Stratfor sources are worried that the government will not be able to organize the country’s stock exchange in time to hold initial public offerings next year, which would explain why the list has not been officially publicized or finalized.

Finally, there is also concern that some of Kazakhstan’s elite may push back on privatizing any asset that supports their position, power base or finances. The country’s business elite have some powerful brokers in the president’s family, such as his son-in-law, Timur Kulibayev. They have repeatedly protected their interests over those of the Kazakh people, government and foreign investors, forming yet another barrier to the government’s plans to help its struggling economy.

This article is extracted from a Stratfor Report

Forecast

• The Suwalki Gap, which connects Eastern Europe to the Baltic states, is unlikely to become a heavily militarized area in the Russia-NATO standoff like the Fulda Gap was during the Cold War.
• However, the land connection will be critical to deterring potential Russian actions in the Baltics.
• Russia will continue to reinforce its military positions in Kaliningrad, just as it will try to reinforce Belarus, but any effort to bridge the area between the two by capturing the Suwalki Gap will be too costly to attempt.

Analysis

Russia and NATO, already in a standoff in the former Soviet Union because of events in Ukraine, are in the process of developing their military strategies in Eastern Europe and the Baltics. The commanding general of U.S. Army Europe, Lt. Gen. Ben Hodges, recently highlighted a small area in northeastern Poland, increasingly referred to as the Suwalki Gap, as one of the most vital locations in the buildup of military forces on the European continent. Besides connecting Eastern European NATO members with the Baltic states, the gap also sits between the small Russian exclave of Kaliningrad and Russia’s ally Belarus. According to these military leaders, the area would be a ripe target for Russian forces to capture in the event of war to connect Kaliningrad to Belarus. Similarly, it would be a critical area for NATO forces to defend to maintain the connection between Eastern Europe and the Baltic states.

But although the Suwalki Gap is an important location for any responsible war planner to consider, comparing it to one of the most important locations on the Iron Curtain during the Cold War — the Fulda Gap — is ill advised. Ultimately, a military buildup in the region and the greater likelihood of conflict that would come with it would be too costly for either Russia or NATO to execute, making it unlikely to occur.

The Reason for Gaps

During the Cold War, central Germany’s Fulda Gap was identified as one of the most likely routes Soviet armored units would use to invade Western Europe in the event of war. The route had some historical relevance: The U.S. military had used it to invade Germany during World War II, as had Napoleon’s armies before it. The area offered a path running from Soviet East Germany, behind the Iron Curtain, to crossings over the Rhine River. A successful assault through this corridor would have enabled Soviet and Warsaw Pact allied forces to strike quickly and decisively into West Germany and beyond. Consequently, it became one of the most watched and heavily defended areas by the Soviet Union and NATO.

The same thinking is being applied to the Suwalki Gap in light of the current standoff between Russia and the West. However, its location relative to Russian and NATO positions make it distinct from the Fulda Gap. Rather than providing a corridor through which Russian forces could rapidly mobilize and invade NATO members, the Suwalki Gap is an existing land connection between NATO members that could be threatened under specific scenarios. The thin strip of land, roughly 65 kilometers (40 miles) wide, is understandably important in any theoretical NATO defense of the Baltic states. The Baltic states alone would not be able to fend off a Russian invasion. Moreover, Russia has strong capabilities to interdict NATO movement in the Baltic Sea, making a secure land corridor for NATO forces useful.

However, any real military offensive into the Suwalki Gap to isolate the Baltic states from the rest of NATO would result in a military response beyond the gap that would certainly instigate a more serious conflict, one that would likely make holding the area irrelevant. The reason that the Suwalki region even exists as a “gap” is because of the Russian forces in Kaliningrad and their assumed ability to move freely through Belarus. But other locations, such as Kaliningrad’s naval facilities and the Russian forces concentrated there, would likely be a more strategic location to hold than the Suwalki Gap. The small, detached Russian territory may be difficult to defend, but it is a useful staging point and naval base for operations against NATO, making it both a liability and a position worth holding.

The Suwalki Gap, by comparison, is not nearly as vital. Therefore, the area is unlikely to see a NATO buildup similar to the one that occurred at the Fulda Gap during the Cold War, when control of the Fulda Gap and the Rhine River crossings were seen as essential to NATO’s survival in a war with the Warsaw Pact. Capturing the Suwalki Gap would not be a strategic threat to all of NATO; it would be the start of a larger war that would devalue the relevance of the gap itself once the conflict broke out.

Still of Some Importance

Of course, the Suwalki Gap is not useless to NATO members. For the Baltic states, which depend on NATO for their security and to deter Russian aggression, offering viable options for NATO interventions in the Baltics in the event of war is critical, and the Suwalki Gap is the logistical spine of any land deployment from other NATO countries into the Baltics. To some NATO members, the gap also presents a perfect excuse to permanently deploy conventional combat forces to Eastern Europe. By drawing the comparison to the Fulda Gap, Eastern European NATO members want to create a sense of urgency in the region, where they would like to see the United States and other NATO forces forward deployed to reinforce against potential Russian aggression.

For Russia, the sparse logistical connections between the Baltic States and other NATO members provide an opportunity to exploit the area if war breaks out. But benefiting from that opportunity would require an immense military gamble, since the country’s poor economy would make it difficult to finance — let alone win — another, likely global, conflict at a time when operations in eastern Ukraine and Syria are already underway. For these reasons, the Suwalki Gap is unlikely to see a military buildup as the Fulda Gap did, though it may continue to be at the center of logistical exercises, rotations of forces or limited permanent deployments. Eastern European NATO members may also make more vocal demands for greater militarization of the area. But in the end, the Suwalki Gap is much more of an addendum to the Kaliningrad question than it is the new focal point for the permanent conventional deployment of NATO forces.

The leaders of Libya’s rival parliaments met and rejected a U.N. peace deal on Dec. 16, a day before moderates from both sides were expected to sign it, Reuters reported.

The U.N.-brokered deal calls for a unity government and a cease-fire. There has been no immediate announcement on whether the signing would happen anyway. Many groups in libya seriously question the validity of the U.N.-sponsored deal, claiming that  the United Nations is not an  entirely neutral entity.

Since Ghaddafi was killed, the country is now controlled by various factions and warlords. In this Chaos ISIS is emerging and started to controlled entire cities, close to the Shores of Italia.

Summary

Editor’s Note: This is the third installment of an occasional series on China’s transformation that Stratfor will be building upon periodically.

China’s Communist Party is locked in a struggle for political legitimacy. For most of the past three decades, economic growth has buoyed the party and underwritten its promises of full employment and ever-improving material conditions for the majority of Chinese. But that growth is slowing. As the country’s export- and investment-led growth model loses steam, unemployment has risen and living conditions in many parts of China have suffered, exacerbating tensions between provinces and casting doubt on the central government’s competence.

Beijing now has to rapidly expand high-value manufacturing and services industries while fostering the domestic consumption necessary to support these industries in a time of weak demand. If it does not do this quickly enough, China will face social and economic dislocation and the Communist Party will experience a severe crisis of legitimacy that may be insoluble. Many have come to speculate that China may adapt to these domestic and international pressures by transitioning to a quasi-democratic system like many of its Asian neighbors. This outcome would certainly seem likely given the features and challenges of the current government, but it is ultimately unlikely not only because of the Communist Party’s founding ideology but also, and more importantly, because of China’s status and identity as a great power.

Analysis

Stratfor has long emphasized that China’s ruling party is more resilient and its grip on power more durable than may seem to be the case. The resilience is partly rooted in successful Communist Party efforts to improve the quality of the country’s governing institutions and to extend the reach of the domestic security apparatus. It is also bolstered by the less tangible forces of nationalism andentrenched institutional bureaucracy, which bind a nation together and slow the onset of crisis. Government survival is also helped by the relative restraint that major powers have shown amid China’s economic rise and military modernization. The United States, for example, has not pushed aggressively against China’s currency revaluation, moved to constrain China’s maritime expansion or isolated China diplomatically.

Asia’s Managed Transitions

China’s situation, therefore, is one of seeming contradiction: The government is suffering an existential crisis even as its political institutions are more powerful and sophisticated than ever. The uncomfortable mixture of institutional strength and political vulnerability may seem exceptional. The history of modern East Asia, however, is replete with governments that have faced either acute or chronic challenges to their legitimacy at the peak of their effectiveness, including South Korea, Taiwan, Malaysia, Singapore, Indonesia and Myanmar. Some of these challenges were precipitated by economic crisis but just as often they were not. Most relevant for China is that each of these governments began as authoritarian, or nearly so, and ended by embracing freely contested elections that bolstered their legitimacy without undermining their power and influence. All responded with state-managed, carefully orchestrated transitions to democracy as well.

Myanmar is an emblematic — and recent — example of such a transition. From 1962 to 2011, the country was ruled by an authoritarian military government. After a managed transition, the long sidelined National League for Democracy won a resounding victory Nov. 8 in a general election that has been lauded as both free and fair. At the same time, members of the former ruling government not only retain a strong position in parliament, but far more important, continue to exert extensive influence over the country’s business community, civil bureaucracy and military, which remains Myanmar’s single most powerful institution by far. In other words, the former junta’s long-planned concession of elections and apparent defeat do not amount to true power concessions in terms of Myanmar’s long-term trajectory and evolution. In the meantime, the government has managed to garner new respect in the eyes of its own people and the international community, guaranteeing that if its leaders return to office — as they intend — they will command greater legitimacy with the electorate.

Of course, Myanmar’s military junta has followed the lead of governments in South Korea, Taiwan and Malaysia on the eve of their own transitions to electoral democracy. In each case, the entrenched political elite opted to hold elections when confronted by a confluence of declining legitimacy, grassroots political pressures and economic stress. However, these elections were structurally designed to prevent them from undermining the ruling elite’s power within the economy and bureaucracy. In Singapore and Malaysia, the former rulers won the elections and retained formal power. In Taiwan and South Korea, by contrast, the former rulers temporarily lost formal power but retained control of much of the bureaucracy. In Indonesia, the elite of the previous government never regained formal political control but continue to exert extraordinary influence in business, administration and local politics. In all cases, the old government and the elite at its helm preserved their core interests: survival and influence.

What all of these transitions have in common is that none of the governments absolutely needed to democratize when they did. This is true of China as well. These governments held immense strength compared to other domestic political parties and likely could have endured for years without change. Their embrace of elections was not reactive, but strategic. Elections staved off threats to government stability or to the safety of the elite while bolstering the elite’s long-term chances at retaining de facto control — or eventually control in name. In international terms, these governments ensured the goodwill of the United States and the many benefits of Western support.

Conceding from Strength

What about China? The potential for China’s Communist Party to follow these examples and concede to elections from a position of strength is an essential question for the future of East Asia. China possesses all the features noted above of a government on the verge of a state-managed transition to democracy. These include a strong, well-established party with a proven track record and deep pockets but a persistent problem securing the full support of the population.

A democratic China does not seem unlikely and a managed transition would solve some of Beijing’s problems. Regular elections would offer a release for the suppressed social pressures that are difficult for China’s leaders to measure much less mitigate. Clear electoral victory would help ease Communist Party leaders’ constant fear of losing the “mandate of heaven” by quantifying the level of support that the Party enjoys at any given time. Planning for economic, security and social policy would also function differently in a democratic China, as would the management of tensions between Beijing and the provinces or between local governments themselves. Internationally, democracy would bolster China’s strategic interests, whether in Africa or Southeast Asia or North America. It would also improve China’s negotiating position with the United States, perhaps paving the way for China to accede to groupings such as the Trans-Pacific Partnership.

But it is its very position in the international community that prevents the Communist Party from conceding to a democratic system — a system intimately tied with the U.S.-led world order. If democracy ever comes to China, it will be once the Communist Party government has been thoroughly delegitimized through profound and sustained crisis or defeat in war. This is because of the simple fact that China, unlike Myanmar or South Korea, is a great power. With this status, Beijing sees itself as having the potential to challenge dominant U.S. power in the world system, whereas other powers are by definition secondary to the world system and must react.

The Communist Party, the entity that has elevated China to great power status, has staked its legitimacy on realizing the country’s potential to fundamentally reshape the international balance of power. This requires economic growth and good governance, but is not reducible to them. The gambit has become more pronounced and explicit in the last few years, as slowing economic growth has spurred a shift to increasing nationalism. The party’s claim to legitimacy and to being China’s rightful redeemer after a “century of humiliation” has been central to the Communist Party’s self-conception from the start. And like all rising great powers before it, China’s self-conception has become inseparable from its relationship with the system’s sole superpower, the United States. Earlier rising powers, such as the Soviet Union, understood themselves to be locked in a struggle for world supremacy with the United States. It is not ideological hatred of democracy that animates the Communist Party’s rejection of elections but the need to lay out a different path from Washington and to present China as an independent and equal pole of geopolitical power.

As growth slows and security needs mount, the Communist Party’s stance will serve to bolster popular support — nationalism feeds on external threats. In the longer run, however, it will make governing China and meeting the ever-rising expectations of its people far more difficult. To bet one’s legitimacy on nationalist aspirations is risky, especially when fulfilling those aspirations requires confronting an international order crafted by a state as powerful as the United States. Whatever the outcome, the Communist Party’s unwillingness to follow the path of other East Asian democracies and to accept the subordination to a U.S.-led order will make China perhaps less predictable to its counterparts and competitors in the coming years, but it will also make it far more interesting to watch.

An introduction: Palmer Kain is a pragmatic politician and an overseas United States military veteran. He spent three years studying in Israel, specializing in International Affairs and Conflict Resolution. He is currently running for the California State Senate. YoungDiplomats’ David Allouche asked him a few questions about the New Movement he has created among the Republicans, specifically in the state of California.

Kain explained to YoungDiplomats why the Republican Party needs to change and in which domains.

He declared that there is a strong need to reform American Foreign Policy, especially the relationship with Israel.

The new shift in California politics signals a change. A change that the world needs to be aware of. The California Republican Party, while respecting all views of our members has made a choice, to continue to be the party where all are welcome. The Republican Party in California has once again committed to a pragmatic, harmonizing, and focused view towards the ideals of inclusion, civic debate, and solid foreign policy. Gone are the archaic views that have hobbled the Republican Party in the past for minority groups in United States’ electoral politics, gone are the days of being out of step with the nation.

Question 1 – Young Diplomats: Can you tell me more about the International Relations, what do you intend to change, compared to the Old Republican Party, not only concerning immigration to the US but more broadly what do you think should change in the US Foreign Policy?

Palmer Kain’s Response: “From an international relations standpoint, it is imperative that the Republican Party change its course. For decades the Republican National Party has been seen by international and domestic policy people as the party of old white people, who are so deeply conservative that they are out of step with the nation and the world.”

“The one issue that this is most apparent is in relation to the issue of immigration. The same people of our party that have in the past been afraid to touch the issue of immigration, or if they have it has had racist overtones.  Here in California we have continued our decades long work to coalesce with our neighbors from Latin America and other countries, as we are a border state. There is an old saying in American politics, “as goes California, so goes the nation.” This was true in the era of the civil rights movement, the counter culture revolution of the 1960s. But since those heady days California has stagnated. The California Republican Party is the only state party in the nation to have reformed with a centrist viewpoint its party platform.”

“It is now time for the national Republican leadership to remember that Lincoln was not a conservative, he was a pragmatic reformer. President Lincoln once said ” Republicans are for the dollar and the man, but if there is a conflict between the two, the man comes first. In other words, the citizen and their well-being was more important than a profit motive. A far cry from the Republican Party of today.  There is a phenomenon in American domestic politics that needs to be said to introduce my next point.”

“In America there is something called the National Mommy-Daddy Syndrome. If the American people want a strong father figure that will keep them safe, they vote Republican. If the nation needs a mother, and matzo ball soup to feel better about themselves, they vote Democratic. Not since President Franklin Roosevelt can the Democrats point to a national daddy figure president.”

“The foreign policy that we currently have in the United States is one based on ideas, not action. To understand this one must remember the simple difference between Republicans and Democrats. Democrats feel that the way to solve issues is through larger government, Republicans believe in smaller government, with this important difference of letting the people choose how they lead their lives”

“This translates into foreign policy in the following way: Democrats inherently think that because they come from a place where ideas are good enough that world leaders will treat them with peer-to-peer courtesy. Republicans on the other hand are pragmatic, and see the world for what it is, a complex, and sometimes dangerous place. The current course of our foreign policy reminds me of the days of President Woodrow Wilson (the only American president to hold a PhD) and his wish to create the League of Nations, the pre-cursor to the modern United Nations.”

“At a time when the world was embroiled in the First World War, this president, who came from academia, was not able to convince Congress or our overseas allies of turning from war to peace. President Obama is facing the same conundrum. A Congress that is not interested, and a world on the brink of larger chaos, is not the time for ideas, but action.”

“As a private citizen who has lived on three continents I am committed to dialogue, and compromise, but there is a limit to everything. It is my opinion that we need to support our allies, especially Israel, in the Middle East to ensure ISIS does not succeed. We need to support our allies in Ukraine against Russian aggression. Further, we cannot let situations like Benghazi go unanswered, for it leads the enemies of democracy to believe that there will be no consequences to traditional acts of war.”

Question 2 – Young Diplomats: Concerning current US policy, what do you think about the recent Israel-American Relations? How does your new movement consider Israel and the peace process with the Palestinians?

Palmer Kain’s Response: “As a pragmatic Republican coming from a liberal state I am one of a minority that fiercely supports Israel. Our current foreign policy response to Israel, the Palestinian Authority, and related groups has gone from bad to worse. On the part of the PM of Israel, his perceived disruption with US internal politics has not won him many supporters in the United States. On the other hand, President Obama has not been able to get the PM of Israel back to the negotiating table successfully.”

Question 3 – Young Diplomats: What places and what titles do you hold in the CaGOP?

Palmer Kain’s Response: “David, I hold a several titles in the California Republican Party (CRP). I am a delegate with voting authority. I am a member of the Veteran’s Affairs Committee. And also a member of the Platform Drafting Committee, who authored a significant piece of the platform, the Veteran’s affairs section. I am also the Republican candidate for the 17th California state senate district in 2016. ”

Question 4 – Young Diplomats: In a Nutshell, why do you Palmer Kain, think that your movement is better than the old one? What other thoughts would you like to share with our audience?

Palmer Kain’s Response: “The new shift in California politics signals a change. A change that the world needs to be aware of. The California Republican Party while respecting all views of our members has made a choice, to continue to be the party where all are welcome. We in California have once again committed to a pragmatic, harmonizing, and focused view towards our ideals of inclusion, civic debate, and solid foreign policy. Gone are the archaic views that have hobbled our party in the past for minority groups in U.S. electoral politics, gone are the days of being out of step with the nation.”

Here are some of Palmer Kain’s additional thoughts:

Reforming the Republicans Party from Within – TO WIN!

“The Republicans have, for a long time, been a party that did not adapt to the demographical and sociological changes in America. Their positions on immigration and pro-firearms lobby, coupled with a disastrous Cold-War oriented Foreign Policy have always sounded faded.”

“The lack of support among the population has been translated to a double digit loss in the last two presidential elections and a very low score in polls. Indeed, the candidates presented by the Democratic party were far more popular and more ethnically diverse than those of the Republican party, which stick to its old-school policy of old-rich White Anglo Saxon Protestant (WASP) representatives. John McCain and Mitt Romney were bested in the elections and achieved very low poll score among ethnic minorities such as the African–Americans and the Latino communities.”

“Thus, the Republican Party seriously needs a reform.”

“This Reform movement got its start in late 2013, to instigate a deep change in the Party. I am deeply committed to creatinh change from within the Republican Party.”

“Until now the response by Republicans has been largely conservative. Like taking a self-defensive stance. But now we have an all-inclusive platform that embraces the controversial issue of marriage equality, a revised education plan for California public schools (which I helped to create), new stances on the environment, agriculture (we provide the nation with 70% of its produce), and an issue that Republicans have historically resisted; immigration, we changed the immigration plank to be more respectful of the immigrants coming to California legally, while dealing strongly with those seeking to come here without authority.”.

Change in Foreign Policy

“From an international relations standpoint it is imperative that the Republican Party change its course. For decades the Republican National Party has been seen by the international and domestic policy people as the party of old white people, who were, so deeply conservative that they were out of step with the nation and the world.”

Real Immigration Reform

“The one issue that this is most apparent is in relation to the issue of immigration, especially the issues of legal versus illegal immigration! The same people of our party that have in the past been afraid to touch the issue of immigration, or if they have it has had racist overtones. I have chosen to distance myself from the divisive declarations of Donald Trump concerning immigration, especially illegal immigration.”

“Here in California we have continued our decades long work to coalesce with our neighbors from Latin America and other countries, as we are a border state. There is an old saying in American politics, “as goes California, so goes the nation.” This was true in the era of the civil rights movement, the counter culture revolution of the 1960’s; but since those heady days California has stagnated. The California Republican Party is the only state party in the nation to have reformed with a centrist viewpoint its party platform. It is now time for the national Republican leadership to remember that Lincoln was not a conservative, he was a pragmatic reformer. President Lincoln once said “Republicans are for the dollar and the man, but if there is a conflict between the two, the man comes first. In other words, the citizen and their well-being was more important than a profit motive. A far cry from the Republican Party of today.”

The Republican Party’s Strong Relationship with Israel

Concerning the Special American Relationship with Israel, Kain has chosen to advocate for a more pragmatic policy.

“As a Republican coming from a liberal state, I am one of a minority that fiercely supports Israel. Our current foreign policy response to Israel, the Palestinian Authority, and related groups has gone from bad to worse. On the part of the PM of Israel and his perceived disruption with US internal politics has not won him many supporters in the U.S. On the other hand, President Obama has not been able to get the PM of Israel back to the negotiating table successfully. I am also the Republican candidate for the 17th California state senate district in 2016.”

Why is it that Jewish-American voters predominantly support the Democratic party?

“How can a people that have been persecuted down through their history support a political party that not only neglects Israel, the only Hebrew home-state, but that fails to respond to foreign threats not only to wipe Israel and Judaism from existence but are even a very real threat to the United States and the very lives of every American citizen? I fail to see a rational reason.”

“To build the Republican party’s membership and influence, the Republican party, both in California and nationally, must BUILD TRUST! If those of Jewish, Hispanic, or Asian decent, or even legitimate welfare recipients think Republicans don’t trust them they WON’T ELECT Republican candidates! Why empower someone who doesn’t trust them and wants to make changes? People DO NOT LIKE CHANGES! Why else do over 90% of incumbents win? Cycle after cycle? Even after being shown to be ineffective or even corrupt?”

Education – An Opportunity to Create Real Change

“There has long-been a controversy in how to best offer the best educational opportunity to America’s youth. Terms like socioeconomic disadvantage, funding, local versus federal control, discipline and others often get in the way of constructive dialogue. My idea is to take advantage of programs that have been proven to work and expand them; while chopping those which don’t, immediately!”

“I applaud President Obama’s efforts to repeal ‘no child left behind’ and return the decision making back to local control. If politicians in DC and Sacramento could set aside their differences, and quit blaming the other party, we could see some real solutions for the issues Americans face on a daily basis.”

Summary

Over the past few months, a wave of violence has enflamed tensions between Israelis and Palestinians once again. This time, though, it has taken on a new character, and rumors of a third intifada — the “intifada of knives” — abound.

It is hard to know at what point a string of attacks constitutes an intifada, the Arabic word for an awakening or uprising, just as it is difficult to predict just how long the latest surge in violence will last. But what is clear is that an opportunity has emerged for Palestinian leaders looking to shore up their legitimacy and make progress on certain political goals. However, both Hamas and the Palestinian Authority will face several constraints in taking advantage of the events unfolding before them.

Analysis

True to traditional intifada form, the latest spate of attacks was provoked by Israel’s perceived encroachment on the Temple Mount, one of the most religiously significant and politically charged sites in the world. Rumors that the Israeli government plans to change the status quo that bans non-Muslim prayer at the Temple Mount set off the stabbings in September. The Second Intifada began much the same way in 2000, when former Israeli Prime Minister Ariel Sharon visited the holy complex — a move Palestinians considered highly provocative. Tensions surrounding the Temple Mount also exacerbated the First Intifada: In October 1990, the Temple Mount Faithful, a Jewish extremist group that wanted to rebuild King Solomon’s temple where the Al-Aqsa Mosque stands, decided to lay a cornerstone at the compound, sparking the violent Temple Mount riots. The complex stands as a powerful symbol of the deeply entrenched divide between Israelis and Palestinians, and of their decadeslong struggle for control of a finite but priceless piece of land. It is no surprise, then, that it also stands at the center of their conflict today.

Yet the recent flare-up in violence is different from its predecessors in terms of its structure and political ramifications. The First Intifada began when violence erupted among the Palestinian population that Hamas and the Palestine Liberation Organization (PLO) then co-opted and led. Seven years later, Palestinian leaders once again lent cohesion and direction to widespread unrest, this time playing an even greater organizational role in directing the suicide bombings that came to characterize the Second Intifada. In this way, both intifadas had political goals that came from leaders who could negotiate and plan exit strategies.

The same is not true of the “intifada of knives,” which is occurring organically and outside of the Palestinian leaders’ control. In fact, Israel is having difficulty identifying any links between the numerous lone wolf attackers and Hamas or the PLO. The attacks are also difficult for Israeli security forces to detect and prevent, since lone-wolf assailants wielding edged weapons typically leave little to no communication and logistics trail to track. While the attacks have been mostly concentrated in the West Bank and East Jerusalem, a recent stabbing in Tel Aviv could reflect the widening of Palestinian attackers’ target sets in the future. And as security threats mount, leaders on both sides will be weighing their options on how to respond.

The Palestinian Perspective

In the West Bank, the embattled Palestinian Authority is primarily concerned with securing its own stability, longevity and territorial control. The group is already struggling to protect its share of power from Hamas, its main rival for the Palestinians’ support, and for the most part it is only able to do so with the collaboration and help of the Israeli government. However, by benefiting from Israel’s political, economic and security assistance, the Palestinian Authority is now open to attacks against its legitimacy among Palestinians, feeding into the Hamas narrative that the more moderate group refuses to stand up to perceived Israeli tyranny. As a result, the Palestinian Authority’s popularity has dropped in the West Bank as support for Hamas has risen. In September 2014, just after Israel’s Operation Protective Edge in Gaza concluded, The Palestinian Center for Policy and Survey Research found that 61 percent of Palestinians would vote for Hamas leader Ismail Haniyeh if he ran for the Palestinian presidency. A year later, the same organization found that two-thirds of Palestinians wanted Palestinian President Mahmoud Abbas to resign. And student council elections in April, which are seen as predictive of Palestinians’ political leanings, yielded an unexpectedly large victory for Hamas in the West Bank.

Given the Palestinian Authority’s waning support, it might make sense for the group to try to spearhead a third intifada to regain its legitimacy among Palestinians and take back its political market share from Hamas. But then again, such a move would also hasten the demise of the Palestinian Authority’s relationship with Israel — the very ties that have kept it afloat so far.

Hamas, by comparison, has more experience fighting against Israel, particularly in the recent past. However, it does not mean the group is better suited to wage an intifada. The security barriers walling Israel off from Gaza and the West Bank limit Hamas’ ability to funnel weapons and support to attackers on the ground, making it difficult to directly harness and coordinate grassroots attacks inside Israel. Consequently, the group would be largely restricted to providing rhetorical support from afar and supplementing the intifada with rocket launches. And yet even there its capabilities would be limited. Hamas has the ability to resume short-distance rocket launches, but it has been unable to restock its collection of long-range rockets such as the Iranian-made Fajr-5 or the Syrian-made Khaibar-1, which can reach Tel Aviv, Jerusalem and Dimona, since Operation Protective Edge ended. The lack of long-range rockets is due in part to increased Egyptian security at the Gaza-Sinai border, in part to Sudan’s shift away from allowing militants’ weapons to transit its borders, and in part to Israel’s heightened monitoring of maritime weapons smuggling routes.

And Hamas, like the Palestinian Authority, has its own competition for power to worry about in Gaza. The Islamic State, along with Palestinian Islamic Jihad and other smaller groups, is challenging Hamas’ authority in the territory, capitalizing on the perception among a sizable Palestinian minority that Hamas’ strategy against Israel is not extreme enough to enact change. The struggle for legitimacy could persuade Hamas to take charge of a third intifada. In October, senior Hamas official Mahmoud al-Zahar said it was necessary to turn the attacks against Israelis into a full-fledged intifada by using guns and explosives. Along the same lines, Haniyeh urged Palestinians to ramp up the intifada through armed resistance. Still, if Hamas were to assume a leadership role in escalating the violence against Israelis, the group could expect Israel to strike at its positions in Gaza — something Hamas is presently ill equipped to recover from.

Israel’s Strategy

For its part, Israel has adopted the strategy of holding Palestinian leaders accountable for things that happen in the territories under their control. The Israeli government rarely distinguishes rockets launched by Hamas from those launched by the Islamic State in Gaza, and it frequently holds the Palestinian Authority responsible for any acts of violence perpetrated by Palestinians from the West Bank. Its methods of doing so often affect the Palestinian population as a whole, including conducting mass arrests, ramping up settlement building and curbing Palestinians’ ability to enter Israeli territory for work. By doing so, though, the Israeli government creates somewhat of a self-fulfilling prophecy by antagonizing more moderate Palestinians.

However, Israel’s defense establishment has recommended the adoption of several conciliatory measures if the violence subsides as well. These include releasing prisoners, giving additional weapons to the PNA and increasing the number of work permits granted to Palestinian laborers. In fact, many Israeli officials are pushing for more serious steps toward reconciliation with the Palestinian Authority to stave off any further official encouragement of a third intifada. Palestinian leaders could well use their position to quell the violence in exchange for significant concessions, thus boosting their image among their constituents. Still, cooperating with Israel often undermines leaders’ legitimacy among Palestinians, and the Palestinian Authority probably would not be able to pull it off successfully. Therefore, it is far more likely that spontaneous violence and mounting tension between Israeli and Palestinian leaders will continue.

Officially, Abbas has not endorsed the string of stabbing attacks that have left 23 Israelis dead since September. But ever mindful of his need to demonstrate strength to his Palestinian constituents and rivals, Abbas has stopped short of condemning the attacks outright. Israelis have perceived his lackluster response as an intentional provocation of further attacks. Consequently, the Israeli government will likely continue to hold Abbas accountable for any further violence, using his purported responsibility as a pretext to avoid making political concessions. This could accelerate the deterioration of the relationship between the Israeli government and the Palestinian Authority, potentially even bringing Abbas’ presidency to an end.

In a reflection of the dismal state of Israeli-Palestinian relations, U.S. Secretary of State John Kerry made no mention of reviving peace talks during his latest trip to the region in late November. Palestinians are increasingly becoming more frustrated and desperate, and many believe the status quo cannot be changed without dramatic action. According to a 2015 Gallup poll, Palestinians are more supportive of an armed struggle against Israel than they have been for at least a decade, and more than two-thirds of the population believes that frictions between Israelis and Palestinians are worsening. The growing frustration that has fed into the latest “intifada of knives” is an opportunity for Palestinian leaders to change the status quo in Israel, but it is unclear whether they will be able to overcome the obstacles in the way of their success.

Analysis

The months-long stalemate between Brazil’s ruling Workers’ Party and the opposition has finally been broken, and President Dilma Rousseff is one step closer to losing her post. On Dec. 2, Eduardo Cunha, the president of Brazil’s lower house of parliament, agreed to put a request for Rousseff’s impeachment to a vote. His decision comes the same day Workers’ Party lawmakers on the House Ethics Committee agreed to move against him by approving the start of a criminal investigation into his supposed criminal activities. Cunha allegedly accepted bribes, both from a financial official and in relation to the ongoing Petroleo Brasileiro scandal.

The committee members’ decision brought an end to what has been a drawn-out stalemate between Cunha and the president. The two leaders’ respective parties, the Democratic Movement Party of Brazil (better known by its Portuguese acronym, PMDB) and the Workers’ Party, have been at odds for months as they have negotiated to avert triggering an impeachment process against Rousseff, who is facing allegations that her administration violated federal fiscal responsibility laws for years. It is unclear exactly why the Workers’ Party finally decided to move forward with the criminal proceedings against Cunha, knowing that he would undoubtedly use his position in the lower house to respond with a move against Rousseff, but it appears that the decision came as a response to the demands of a faction within the ruling party. Whatever the motive, the ethics committee’s actions will lend legislative support to bring criminal charges against Cunha in the future and possibly even strip him of his parliamentary immunity. Cunha’s response may be a last-ditch effort to avoid being expelled from the Chamber of Deputies.

Rousseff, who can be removed from office by a two-thirds vote in the parliament’s lower house, is now facing a very real threat to her hold on power. Still, there are several steps left between Cunha’s latest decision and Rousseff’s actual removal. First, 342 of the 513 lawmakers in the lower house must vote in favor of opening the impeachment process — a feat Cunha will not be able to achieve unless the bulk of the PMDB, the second-largest party in the lower house, swings in favor of the impeachment. But his choice to put the impeachment bid to a vote likely means that at least some members of the PMDB and other parties have thrown their support behind him amid Rousseff’s declining popularity. If Cunha is in fact successful in initiating the impeachment process, then several congressional sessions will still have to be held over the coming months to allow Rousseff to defend herself. Only then could the final impeachment vote take place, clearing the path toward an eventual judgment by the Senate. Brazilian law requires the entire process to be completed within 180 days of its initiation.

Regardless of its outcome, the latest move toward Rousseff’s impeachment will erode investors’ confidence even further at a critical time for Brazil. The country is attempting to address the fallout of the Petrobras corruption scandal, which made international headlines in 2014, and the mass firings and funding issues that stemmed from the scandal have only added to Brazil’s already complicated economic outlook. The country’s economy, which relies heavily on commodity exports, has slowed amid tumbling global prices, and the government has struggled to figure out how best to revive it while keeping inflation and unemployment levels down. As the impeachment battle drags out, congressional negotiations on budget cuts and outstanding regulatory proposals — including a proposal on the table to amend the pre-salt exploitation regime and a separate one to amend the nation’s mining code — will likely grind to a halt. The risk of anti-government protests will also rise, adding to the embattled president’s growing list of concerns.

Italy will send 450 troops to Iraq to defend the strategic Mosul Dam from Islamic State militants, according to an announcement by Italian Prime Minister Matteo Renzi, AFP reported Dec. 16.

The dam was built by a German-Italian consortium in the 1980s and provides water and power to more than one million people. Trevi, an Italian construction and energy group, has reportedly secured a $2 billion contract to repair the dam.

Any significant damage to the dam could cause major flooding in Mosul, home to nearly two million people and the site of a battle that have been prepared by the principal actors,  between Western-backed Iraqi forces and the Islamic State. Islamic State militants briefly took control of the Mosul Dam in August 2014, and were pushed back by the Kurds.

However they still currently occupy the city of Mosul. This Strategy is made in order to counter the Strategy of ISIS for 2016 which entails taking the control of strategic infrastructure such as Water installations.

Forecast

• A Dec. 6 electoral defeat for the ruling United Socialist Party of Venezuela (PSUV) would widen internal party divisions in 2016.
• The party’s two main faction leaders will continue to strive to maintain party unity after the election to protect their respective positions.
• Those efforts aside, a worsening economic picture in 2016 will make maintaining their positions difficult.

Analysis

The balance of political power in Venezuela is poised for a major change following Dec. 6 legislative elections, when the ruling United Socialist Party of Venezuela (PSUV) and the main opposition Democratic Unity Roundtable will square off over 167 National Assembly seats. In the lead-up to the elections, both parties have sought to portray themselves as unified fronts. In actuality, the PSUV is split into two main factions, one associated with President Nicolas Maduro and the other with Assembly Speaker Diosdado Cabello, and several smaller factions.

The worse the PSUV fares Dec. 6, the faster its fragmentation will likely be, though PSUV-led elites will initially seek to defend their interests by calling for unity. Such appeals for a united front will likely fail as social unrest stemming from increasing economic instability continues through 2016. Major disagreements will emerge over how to manage unrest and maintain influence within the National Bolivarian Armed Forces.

Maduro vs. Cabello

Maduro and Cabello joined the PSUV in the 1990s, when they were early backers of Hugo Chavez’s bid for presidency. The similarities, however, end there and the two leaders come from very different backgrounds.

Maduro began his political career as a union leader in the 1980s. He first became a prominent Chavista when his now wife, Cilia Flores, became Hugo Chavez’s lawyer following an unsuccessful 1992 coup attempt. After Chavez’s imprisonment, Maduro rose to prominence as a pro-Castro Marxist activist demanding Chavez’s release. Meanwhile, Cabello — a former army lieutenant — became known for leading a group of four tanks during the 1992 coup attempt and then for serving time with Chavez until their release in 1994.

In gratitude for their loyalty, Chavez gave Cabello and Maduro important positions within his government. Diosdado served as interior minister and vice president, while Maduro became foreign minister and assembly speaker. Their common affiliation with the PSUV aside, Cabello and Maduro currently represent different wings within Chavismo.

Maduro’s allies largely have civilian backgrounds and belong to the most ideologically radical faction of the PSUV, embracing Raul and Fidel Castro’s influence in the Venezuelan government. According to Stratfor sources in Venezuela, Maduro’s wife, Flores, enjoys the most clout within Maduro’s wing, having had government positions awarded to relatives such as Treasury Secretary Carlos Erick Malpica Flores. Maduro’s other allies hold the defense, finance, food and foreign affairs portfolios. The governor of Aragua state, who is wanted on drug charges in the United States, is also an ally. Most significantly, because Maduro’s wing is the most ideological, he also has the support, via the Ministry of Communes, of radical-left wing militias centered in the western slums of Caracas.

A military background is the main commonality between Cabello’s key allies. At present, he holds more influence over national security and Venezuela’s intelligence apparatus than does Maduro. Cabello wields significant sway over the leadership of the National Bolivarian Armed Forces and the Bolivarian Intelligence Agency and dominates key strategic ministries related to security, governance and industrial development. He is also known to have strong ties with several state governors. To a lesser extent, he has financed some of the Bolivarian militias and the Revolutionary Tupamaro Movement.

Up until now, Maduro and Cabello have refrained from targeting each another. In fact, they have publically supported one another, both speaking out against Drug Enforcement Agency efforts targeting Cabello. Much as each might like to supplant the other, Maduro and Diosdado need to remain united to maintain the immunity from prosecution their control of the National Assembly gives them. Any infighting would undermine the appearance of party unity, threatening their control of the assembly and potentially opening them up to criminal charges were they to leave office.

The Significance of Dec. 6

Cabello’s and Maduro’s efforts to foster unity might not be enough to stem the discontent among PSUV elites who could see a loss Dec. 6 as reason to form their own political parties. Their discontent largely has arisen from increasing product shortages and high economic insecurity. Inflation in Venezuela stands at more than 200 percent while GDP has contracted 10 percent throughout 2015. The economic troubles have manifested in slowing economic activity, with exports and imports dropping dramatically.

How badly the party fractures after Dec. 6 depends upon whether the PSUV loses by a narrow or wide margin. In anticipation of a loss, the PSUV has started to prepare for a turbulent 2016. The Bolivarian Intelligence Agency’s 2016 budget has been sharply increased, with 632 million Bolivars (roughly $99 million pegged at the official exchange rate) allocated versus the 190 million Bolivars in 2015.

If the PSUV loses the National Assembly, in the short-term, party elites will likely try to manage by using their control of the Supreme Court to invalidate opposition legislation. But even so, ongoing economic troubles virtually guarantee increasing social unrest, probably in the form of opposition-led protests. Widespread protests can be expected to deepen divisions within the PSUV. Further divisions will be particularly dangerous for Maduro, who is likely to be the focal point for anti-government protesters’ anger and could wind up facing a presidential recall referendum.