Young Diplomats

Forecast

• Mexican organized crime groups will continue to exploit Mexico’s energy industries despite recent government efforts to stop the theft.
• Among Mexico’s various crime groups, organizations in the Tierra Caliente region will increasingly be the primary perpetrators of fuel theft.
• The expansion of Tierra Caliente-based organized crime into territory historically controlled by Tamaulipas-based groups will introduce more security threats to Mexico’s energy sector.

Analysis

Mexico’s energy reforms are opening up its oil and gasoline markets to foreign firms. But any companies entering the country will have to deal with the growing risk of fuel theft, as a mounting number of criminal organizations illegally tap pipelines or intercept trucks carrying finished gasoline. Fuel theft has long existed in Mexico, but whereas it was once a crime committed largely by individuals and small, localized groups, over the past decade it has transformed into a hugely profitable business for drug cartels looking for new sources of income.

With the expansion of organized crime into the business, fuel theft has ballooned. Every year since 2007, more illegal taps siphon hydrocarbon products, primarily diesel and gasoline, from the pipeline network of state-owned Petroleos Mexicanos (Pemex). There were an estimated 3,500 illegal taps on Pemex pipelines between January and August 2015, compared with about 2,300 during the same time period last year and with 1,700 in 2013.

This rise is in part attributable to decentralization in the Mexican drug trade. Whereas the illicit narcotics industry was once dominated by a few immense cartels that controlled numerous franchises throughout the country, now a growing number of smaller, independent groups have arisen, each laying claim to a more limited share of the market. This has not only led to fierce and sometimes violent competition for territory but has also pushed crime groups to diversify their sources of revenue. Along with human trafficking, kidnapping and extortion, fuel theft is another source of income for groups operating in a highly competitive environment. It is also highly profitable: According to the Mexican Association of Gas Station Owners, stolen fuel makes up 30 percent of the 200 million liters of gasoline sold each day in Mexico. And at roughly 6 pesos per stolen liter, organized crime grosses 360 million pesos ($21.7 million) daily in stolen fuel.

The High Cost of Fuel Theft

Illegal tapping of pipelines certainly cuts into corporate profits. In 2014 alone, illegal tapping cost Pemex about $1.16 billion, and that year Pemex announced that it would invest $228 million into improving its ability to detect illegal taps throughout its pipeline system. To deter theft and the purchase of stolen fuel, the company began to implement new measures in February 2015, including phasing out the transportation of finished gasoline through its pipelines. Using unfinished gasoline in vehicles can seriously damage engines. By transporting unmixed gasoline to distribution centers and adding the final additives at the end of the process, Pemex hoped to deter thieves. However, that fuel theft has only increased this year suggests organized crime groups are still finding ways to steal finished fuel.

The entrance of foreign energy firms into Mexico’s energy market will introduce a new variable. The same cartels that currently exploit Pemex infrastructure will likely go after foreign companies as well. The threat will be particularly pronounced for firms that invest in the energy retail market — which Mexico plans to liberalize in 2017 — because organized crime has a substantial stake in the supply of stolen fuel in those markets.

Beyond its economic cost, fuel theft also presents Mexico with a host of security concerns. Theft often leads to corrupt officials, pipeline explosions and leaks and, most significantly, violent conflict over territory. Seeing the potential for huge profits from access to the pipelines, criminal groups frequently clash for control of those areas.

Indeed, the expansion of organized crime into this particular brand of criminal activity is already breeding conflict in the southern states of Veracruz and Tabasco. There, Los Zetas operations became the target of frequent attacks in 2014, likely by a substantial internal rivalry or by a competing major crime group such as Cartel de Jalisco Nueva Generacion or the Velazquez network. Puebla and Gunajuato states have also experienced turf wars. On Aug. 5, the bodies of two men with gunshot wounds were discovered on a ranch near Salamanca, Guanajuato state; authorities believe the killings were linked to fuel theft. Then on Sept. 28, a group of gunmen dressed in military attire killed a fuel thief in Tepeaca, Puebla state, by setting fire to the truck carrying the victim and two others, who survived.

Combating Organized Crime

In 2014, Mexico City stepped up its efforts to fight organized crime, in part to combat security threats to oil and gasoline. Much of Pemex’ infrastructure is located in areas where Tamaulipas-based groups control most of the organized crime. Therefore, groups such as Los Zetas, the Velazquez network, and various Gulf cartel gangs have been responsible for most of the country’s fuel theft in recent years. In May 2014, the military deployed troops to Tamaulipas in response to rising violence in the south of the state and has since had some success capturing or killing crime bosses. In March 2015, troops captured the top leader of Los Zetas, Omar “Z-42” Trevino Morales and several of his colleagues.

But control of the fuel tapping industry may be shifting away from Tamaulipas-based groups, which are suffering from persistent internal rivalries and have lost some territory to groups affiliated with Tierra Caliente-based crime, one of the other major players in Mexico’s illicit drug trafficking industry. If Tierra Caliente-based crime expands its reach, particularly in Veracruz and Tabasco, it will likely take over the fuel theft activities once conducted by Tamaulipas organized crime.

In fact, states seeing the greatest upticks in discovery of illegal taps during 2015 have, with the exception of Tamaulipas state, been those largely dominated by Tierra Caliente crime groups. Guanajuato state, for instance, discovered 555 illegal taps between January and August compared with just 240 during the same period in 2014. In Puebla state, illegal taps more than doubled during the same period. The increase was more moderate, but still striking, in Jalisco state, where the number of recorded illegal taps rose to 362 in 2015 from closer to 200 the previous year. These are all areas dominated by Tierra Caliente-based criminal organizations such as Cartel de Jalisco Nueva Generacion.

A Multi-Faceted Problem

Despite the government’s efforts to quell the practice, fuel theft in Mexico will likely become even more common over the next year. Rivalries between crime groups will continue. And while escalating conflicts between competing cartels are partially a function of decentralization and of fiercer competition generally between independent groups, the primary driver of conflict is the expansion of the Tierra Caliente-based franchise. Wherever Tierra Caliente-based crime expands, fuel theft will likely also increase.

Regardless of which cartel predominates, illegal gasoline siphoning poses a serious challenge to Mexico’s government. Reforms to the energy sector compel Mexico City to protect its infrastructure and to create a safe environment for foreign firms. Military operations alone, while effective, will not be sufficient: The government also needs to root out corruption among employees and state officials working in the energy sector. But a lack of resources will hinder Mexico’s ability to effectively secure its pipelines. With weak public security institutions and a limited number of federal troops, the country will have as much trouble curbing fuel theft as it does alleviating drug trafficking.

Nigeria has been getting a lot of bad press lately, owing largely to the militant Islamist group Boko Haram’s abduction of more than 200 schoolgirls in April, part of a brutal campaign of kidnappings, bombings, and murder. But while these developments certainly merit international concern, they should not be allowed to obscure Nigeria’s recent achievements – or spur the outside world to turn its back on the country.

What is lost in most discussions about Nigeria today is the strong economic record that it has established over the last decade. In fact, a recent year-long study of the country by the McKinsey Global Institute (MGI) showed that, over the next 15 years, Nigeria has the potential to become a major global economy.

With roughly 170 million inhabitants, Nigeria has Africa’s largest population. But it has only recently been acknowledged as having the continent’s largest economy – 26th in the world – following the release of “rebased” data putting GDP at $510 billion last year.

MGI estimates that, in 2013-2030, Nigeria could expand its economy by more than 6% annually, with its GDP exceeding $1.6 trillion – moving it into the global top 20. Moreover, if Nigeria’s leaders work to ensure that growth is inclusive, an estimated 30 million people could escape poverty.

The problem is that Nigeria remains subject to outdated assumptions, which are limiting its prospects, especially among foreign companies and investors. For example, many believe that Nigeria is a petro-economy, wholly at the mercy of the world oil market. But the resources sector accounts for only 14% of GDP – meaning that, while oil production remains a critical source of revenue and exports, the Nigerian economy is far more diverse than many assume.

A related myth is that Nigeria’s economic growth is unstable, with large and unpredictable shifts in performance from year to year. In fact, as Nigeria has diversified its economy and detached public-spending plans from current oil prices (part of a 2004 budget reform), it has become increasingly stable, both economically and fiscally. Indeed, in recent years (2010-13, in “re-based” terms), GDP has grown by a steady 6-7%, owing more to rising productivity than to favourable demographics.

Finally, there is a general misunderstanding about the Nigerian economy’s evolution. Despite widespread poverty and low (though improving) productivity in almost all industries outside of the resources sector, Nigeria has a rapidly growing consumer class that will play an increasingly important role in driving growth.

By 2030, more than 34 million households, with about 160 million people, are likely to be earning more than $7,500 annually, making them aspiring consumers. This implies a potential rise in consumption from $388 billion annually to $1.4 trillion – a prospect that is already attracting investments by multinational consumer-goods producers and retailers.

Nigeria’s prospects are enhanced further by its strategic location, which will enable it to take advantage of booming demand across Africa and other parts of the developing world. Add to that a large and growing population and an entrepreneurial spirit, and the future looks bright.

In order to unleash this potential and ensure that the next decade of growth brings sharp reductions in poverty, Nigeria’s leaders must pursue reforms aimed at increasing productivity, raising incomes, and delivering essential services like health care and education more efficiently.

For example, to increase productivity and incomes in the agricultural sector, the government could pursue land title reform aimed at opening more farmland without deforestation; expand the use of fertilizer and mechanized equipment; and support a shift to more profitable crops. Moreover, improvements in distribution and marketing would allow farmers to keep more of the proceeds from the sale of their crops.

In urban areas, productivity suffers from a high degree of informal employment, sometimes even by major corporations. This keeps too many Nigerians in low-skill, low-paying jobs and deprives the economy of the dynamism that competitive small and medium-size enterprises create. The spate of internet startups that have emerged in Nigeria demonstrates that the skills are there, and tapping Nigeria’s diaspora can augment that talent pool.

To make it easier to do business in Nigeria, the government also will need to streamline processes for registering and running a legal business and, together with aid agencies and the private sector, increase investment in infrastructure. It will also need to intensify its fight against endemic corruption, which represents a tax on all businesses.

Finally, to promote inclusive growth – essential to relieving human suffering and mitigating social and political tensions – Nigeria must improve public service delivery dramatically. The fact that Nigeria lags behind countries that spend comparable amounts on public services proves that it has scope to improve. All that is needed to ensure that assistance – from seed subsidies to immunization – reaches those who need it most, regardless of where they live in the country, is a strong commitment from Nigeria’s leaders to build more effective and transparent government agencies.

Nigerians do not need sympathy or even outrage from the global community. What they need is support and encouragement. Only with stable and inclusive growth can Nigeria escape the clutches of brutal forces like Boko Haram and give its citizens the security and prosperity that they deserve.

Algeria belongs to the locals. Arriving in Algiers’ Houari Boumediene International Airport, it’s readily apparent that the facility wasn’t designed with tourists in mind. Distractions found in other regional airports, such as high-end shopping, restaurants and souvenir kiosks are absent. Loitering isn’t permitted, let alone encouraged.

And security, not traveller comfort, is the primary concern — echoing both Algeria’s decadeslong mistrust of outside interference in domestic affairs as well as the legacy of the 1991-2002 civil war and subsequent jihadist insurgency. Named after the chairman of the Revolutionary Council and the republic’s second president, the airport serves as a clean and utilitarian transit point, facilitating travel to and within Algeria.

Editor’s Note: This feature was written by a Stratfor analyst on assignment in the Middle East and North Africa

Moving through customs, I found I was the only traveler entering without an Algerian passport and on leaving the airport, I was immediately marked as an outsider by one of the several black market moneychangers that lurk around the exits. (Having arrived on an evening flight from Europe, the official exchange office was closed.) In one of the few conversations in English I had in the country, I was offered dinars, arrangements for a taxi, chauffeur service or hotel. He asked if I had arrived on business, and when I responded in French, the man balked a bit. Our interaction ended with the arrival of a policeman who dismissed the moneychanger with a tilt of the head. Though the practice is technically illegal, the officer then called over a different moneychanger and told me he offered better rates. He then told me to only exchange enough for the taxi ride to my destination in the city. Making the transaction in dollars, not euros, triggered looks of surprise between the moneychanger and the officer. Tourists are rare and Americans, rarer.

The Beating Heart of Algeria

Even seen through the windows of a taxi careening through Algiers’ infamous traffic, the city’s beauty was unmistakable. The route to my apartment avoided the main coastal highway, alternating instead between the Rue Hassiba Ben Bouali (named after a teenage martyr of the revolutionary struggle against the French) and Rue Belouizdad (the former address of author Albert Camus). The core of Algiers, home to about 3.5 million of Algeria’s approximately 40 million people, sprawls across several hills overlooking the eponymous bay. My driver zipped in and out of a dizzying web of streets, pointing out places associated with the French occupation, the revolutionary struggle or a favorite cafe. Making a sudden left, he turned off the boulevard and we reached Alger Centre, at the base of the Escaliers Khemisti near where I would be staying. Whitewashed French-era buildings intermingled with the government offices that dominate this section of the city, where buildings compete for views of the sea.

Driving in at night, most shops were closed, but the city was alive. Cooler temperatures make for pleasant evenings, complimented by Algiers’ steady ocean breezes. Tea vendors and others catered to the throngs of young men standing around, or walking along the many gardens and promenades of the city center. As I would learn in the coming weeks, they were invariably engaged in intense conversations about soccer, preparations for the upcoming Eid al-Adha holiday as well as occasionally about Algeria’s political situation.

One of the many public gardens in central Algiers. (Stratfor)

Walking up the stairs to my apartment, the city’s topography further revealed itself, especially when it came to the more desirable neighborhoods. Everything is up or down hill. The Ottoman, French and post-revolutionary elite scramble for the best vantage points from which to experience the city’s ocean breezes and views of the Mediterranean Sea.

The Double-Edged Sword of Geography

Algeria lies in the heart of North Africa, sharing land borders with the Maghreb states, Libya and much of the Sahel. It is the largest Arab state, followed by Saudi Arabia. The country’s centrality and relative stability present many opportunities for it to serve as a gateway for the international community into North Africa. With abundant natural resources, a strong Francophone tradition, and a large labor force coupled with low wages, Algeria should be a magnet for foreign investors. Despite healthy international interest, the government hesitates to allow too much foreign participation in domestic economic affairs — the question of security remains paramount, especially given the country’s long borders and expansive territory. The apex of the Algerian leadership — a mix of revolutionary-era politicians, military commanders and increasingly a private business class — is often referred to as “le pouvoir,” itself a nod to the country’s long and difficult occupation under French rule. Outsiders often refer to a shadowy and secretive cabal of aging leaders as the concentration of power within the country, but this denies the vibrancy of the Algerian street and the power of the Algerian public.

That perspective is informed by the few anecdotes on Algeria readily available to the Western hemisphere and much of the world. Algeria traditionally has been, and remains, a relatively unknown country flanked by exotic travel destinations. North Africa rocketed to global headlines in the chaotic unrest of 2011’s so-called Arab Spring. Unlike Egypt and Libya, Algeria’s government and long-time president, Abdel Aziz Bouteflika, remained in place, though the impacts of the region’s widespread unrest can still be felt today.

Europe’s  perspective on Algeria  is different. Proximity to North Africa, as well as a long history of back-and-forth conquest, colonialism and human migration has led to an awareness — though not always an understanding — of their southern neighbors. Balanced Western narratives on Algeria are rare; they frequently focus on security or stability issues. Less frequently, one hears discussions of the Arab Spring and its influence on the country, or a convoluted and corrupt democratic system.

Algeria views are one-dimensional, and Algerians engage in political discussions that are surprisingly frank and open. The presence of the security services can be felt everywhere, but there is a conscious and visible attempt by the government to channel public sentiment into allegiance to the state or party structures, not individual leaders. Despite foreign criticisms of President Bouteflika’s continuing tenure, there are few photographs or posters with his photo outside government buildings. The same cannot be said for much of the surrounding region. His image is not omnipresent; his eyes are not pasted across walls to watch over the city. And yet, among many segments of the population he is popular. Even the youth I spoke to — disgruntled as they were over the lack of job opportunities, or critical over the slow pace of reforms — would often ask through a haze of cigarette smoke “do you know anyone else who could do better?”

Having the Strength to Endure

Algeria are comfortable in pointing out the challenges facing the republic today: High unemployment, especially among the youth, and the lack of affordable housing are the most common refrains. (A common claim is that Algiers has the most expensive real estate in North Africa.) Several layers of bureaucracy make even simple decisions difficult or time consuming, with bribes needed to facilitate everything from issuing permits to high-level international energy deals. But rarely, if ever, did I hear complaints over the ever-present police and security forces, instead time and again people would say, “Algiers is safe.”

The Algerian government has made significant strides in securing key urban population centers and its borders, especially since the 2013 Ain Amenas attacks. It is easy to forget that the country is still fighting a jihadist insurgency and shares long borders with Tunisia’s unstable western region and Libya. Incongruously, this is a point of pride for many Algerians. National identity is predicated on a few key pillars, the two most salient being the Algerian defeat of the French occupation, and the government’s victory against the jihadists after the civil war. In the six decades since the revolutionary war began, Algeria has experienced several challenges, but has been able to confront them and succeed without outside aid, as Algerians are quick to tell you.

Algeria boasts a long Mediterranean coastline. Architecture, culture, art and cuisine offer much to would-be tourists. For an economy with nearly 40 percent youth unemployment, a weakening currency, and a desire to diversify away from hydrocarbon revenues, a serious push to bring in tourists would seem obvious. But most hotels are expensive and offer poor amenities, and the cash-based economy has poor connectivity to international payment and credit card systems. And as I discovered, dollars are hard to exchange and sometimes refused, so the lesson is to bring euros.

Many Algerians deflect the question of why more foreigners don’t visit Algeria with a litany of different statements — “Morocco and Egypt play up the security situation in Algeria to benefit their own tourist industries,” or “Why would anyone want to come here?” or even “We do have tourists — what are you?”

Algeria has thus far resisted becoming too dependent on foreign visitors, and is unwilling to loosen robust controls along the borders to facilitate movements of travelers that could easily obfuscate the movement of terrorists. Tunisia’s security problems and Morocco’s inability to lead the region (from an Algerian perspective) are attributed up to overdependence on Western tourism, or to an inability to rely on themselves or their own resources. But when pressed further, both citizens and government officials will eventually come to a similar conclusion, that in the Algerian mindset, relying on tourism makes you weak. The lessons of Algeria’s past are that the country’s current challenges will only be solved through Algerian strength.

Bavaria is one of those rare places where the monumental and the austere coexist, where tradition is strong but so is the desire for innovation. It is a place where villagers gather to continue the folk practice of erecting tall wooden poles to dance around them, and also where massive companies such as BMW and Siemens were born. It is a region where a nostalgic king built the most impressive castle in Europe and decorated each room with themes taken from the works of composer Richard Wagner, but it is also a devout Catholic region where frugality is seen as a virtue.

For foreigners, Bavaria is the pinnacle of the German identity — an Alpine wonderland where people wear lederhosen, drink gallons of beer and eat strange dishes. What many do not realize is that Bavaria is just one of Germany’s many federal states, and some of its customs and dialects are alien to many Germans. More important, while Bavaria’s history is deeply intertwined with Germany’s, the region has traditionally fought for its autonomy, if not independence.

Bavaria is making headlines these days as thousands of asylum seekers enter Germany through its southern border. This is raising concerns in the region, because voters and politicians worry about the economic, social and political impact of the constant arrival of foreigners. The Bavarian government recently asked Berlin to toughen its position on refugees, and regional president Horst Seehofer threatened to impose unspecified “self-defense” measures if the German government does not reverse course on immigration. On the surface, these actions might seem surprising, but they are connected to Bavaria’s history and geography.

The Struggle for Self-Governance

Bavaria’s behavior is shaped by its geographic position. To the south, it is protected by the Alps, a natural border with Austria. To the east, it is sheltered by the Bavarian Forest, a less impressive barrier that nevertheless separates it from the Czech Republic. This distinguishes Bavaria from most Central European regions, which have historically been vulnerable to invasion. It also makes Bavaria a coherent political entity that throughout its history has enjoyed different degrees of self-governance. Bavaria’s position in Central Europe have also made it a significant trading center, while two major rivers, the Danube and the Main (which is a part of the Rhine system) connect it with northern and southeastern Europe.

This geography explains Bavaria’s wealth and impressive dynastic continuity. Members of the Wittelsbach family ruled as dukes, electors and kings of Bavaria between 1180 and 1918 — an impressive record that surpasses even that of the Habsburg family in Austria. At different times in history Bavaria became a significant political player in Europe; two members of the Wittelsbach family became Holy Roman Emperors, and others became kings in places as diverse as Norway and Greece.

However, Bavaria’s geography has also put it in the path of larger military forces, and the region was never completely insulated from political developments in Central Europe. Bavaria was first a Merovingian and then a Carolingian vassal state before joining the Holy Roman Empire. When Prussia rose to power in the 18th century, Bavaria was forced to play rivals Prussia and Austria against each other, only to join the German Empire after Austria’s defeat in the Austro-Prussian war. This highlights Bavaria’s main geopolitical imperative: to be part of larger institutional frameworks for protection, while also trying to maintain as much autonomy as possible.

Because of this imperative, Bavaria has traditionally had a complex relationship with its Germanic neighbors. A German-speaking region, Bavaria has a very strong connection with the rest of Germany. The need for protection explains its membership in the German Empire, though it joined only after it was promised that it would control its own army, railways and postal service.

The desire for autonomy explains Bavaria’s decision not to ratify the Constitution of West Germany in 1949, mostly because it felt the law did not give enough powers to the country’s regions. Bavaria only agreed to enforce the German Constitution after the rest of the German regions ratified it. Bavaria’s official name, Free State of Bavaria, is purely symbolic because the German Constitution does not distinguish between states and free states, though the name acknowledges the region’s aspirations for self-rule.

As Germany’s second richest region in terms of GDP, Bavaria has repeatedly questioned the country’s complex transfer system, under which resources are transferred from wealthier to poorer regions in an attempt to secure similar standards of living for all Germans. Bavarian governments have described the system as unfair and criticized regions in eastern Germany for not being fiscally responsible — much as Germany has criticized other eurozone countries such as Greece.

But Bavaria is also very close to a fellow Catholic entity; Austria. Bavaria’s landscape, architecture and language are closely connected with those of Austria, especially in the bordering Tyrol area. When Bavaria joined the German Empire in 1871, Bavarian nationalists were against the idea of being ruled by protestant Prussia and demanded independence. After Germany’s defeat in World War I, some Bavarian nationalists proposed that Bavaria join Austria.

A Laboratory for Extreme Political Ideas

Bavaria has often been a center for new political experiments in Germany. In times of deep social upheaval, this involved embracing extreme positions. In the tumultuous months that followed the collapse of the German Empire after World War I, an independent Bavarian Soviet Republic was proclaimed. With its capital in Munich, the republic’s goal was to establish a communist regime that would be independent from the also recently proclaimed Weimar Republic. The experiment only lasted for only few months and in May 1919 the rebel government was deposed by remaining loyal elements of the German army.

These events contributed to the emergence of Bavaria’s next extremist experiment, Nazism. In the early 1920s, the region was a hotbed of right-wing nationalist opposition to the Weimar Republic, and a natural place for a failed Austrian painter and former soldier to find a receptive audience for his new political ideas.

Munich was both the founding city and the spiritual center of the National Socialists, who held their first meetings in the city’s beer halls. In 1923 Munich was the stage of Adolf Hitler’s first attempt to seize power, in the so-called Beer Hall Putsch. The city had a special place in the Nazi pantheon, and in 1935 Hitler declared it “the capital of the (Nazi) movement.” Interestingly enough, Hitler had to rely on the support from other German regions in his rise to power, as a large segment of the Catholic electorate in Bavaria remained loyal to moderate parties.

Conservative and Slightly Euroskeptical

Bavaria’s political exceptionalism is also represented by the fact it is the only part of Germany where Chancellor Angela Merkel’s conservative Christian Democratic Union is not present. Instead, a sister party, the Christian Social Union, represents Merkel’s party in Bavaria. The two parties are closely connected and form a common faction in the Bundestag, but formally they are separate entities. The Christian Social Union has governed Bavaria uninterrupted since the late 1950s, in another case of impressive political continuity.

The two forces are ideologically close, but the Christian Social Union tends to be more conservative regarding social issues. It is also slightly Euroskeptical and more interested in protecting regional rights. This creates friction every time a Christian Democratic Union federal government moves to the political center or makes decisions on big EU issues.

Christian Social Union lawmakers are not afraid of defending their ideological independence and challenging the central government in Berlin. In August, several Christian Social Union parliamentarians voted against the third Greek bailout, and in October a parliament member from the Bavarian party went so far as to say that Merkel could face a no-confidence vote if she did not change her position on asylum seekers. A core element of the Christian Social Union strategy is to prevent the emergence of any political movements to its right. This involves toughening its own position if it has to. For example, since the beginning of the refugee crisis, Bavarian politicians have demanded that Germany close its southern border and automatically deport migrants who do not qualify for asylum.

Because of its size, the Christian Democratic Union is more influential than its sister party when appointing electoral candidates and proposing policy at the federal level. However, this does not mean the Christian Social Union readily accepts its subordinate role in the alliance. In 2002, former Bavarian president and Christian Social Union leader Edmund Stoiber successfully challenged Christian Democratic Union leader Merkel and became the conservative candidate for the general elections. The strategy did not work in the long run, however, and the alliance lost the 2002 election to the center-left. Merkel would have a rematch only three years later, when she won the election and became German chancellor.

Just as Bavaria is unwilling or unable to sever its ties with Germany, the Christian Social Union is interested in preserving its alliance with the Christian Democratic Union, although it remains willing to challenge the federal government whenever it feels its interests are at stake. This will continue to constrain the administration in Berlin, especially as the European Union’s long list of recurring problems continues expanding.

Bavaria is a fascinating example of a territory that is powerful enough to demand special treatment from its neighbors, but not strong enough to completely control its destiny. As British historian Simon Winder put it, “Bavaria … is one of those strange semi-kingdoms that has throughout its history come close to being a real and independent state but has always been subsumed or subverted.” Because of its proud history and powerful sense of identity, Bavaria will continue to be a strong-willed force in Germany and beyond.

Up to three gunmen stormed the Radisson Blu hotel in Bamako, the capital of Mali, taking as many as 170 occupants hostage Nov. 20. They reportedly entered the hotel using diplomatic license plates – a security oversight likely observed by the attackers. The hotel’s popularity among diplomats and tourists made it a highly desirable target for attack.

The attack comes just days after militants affiliated with the Islamic State staged coordinated attacks in France. It is unclear if the two incidents are related — the Islamic State and the ethnic Tuareg militant groups that dominate in Mali have competing interests – but the Paris attack may well have inspired the raid in Bamako.

French paramilitary forces have been deployed to the scene of attack, and Malian security forces have launched a rapid counterassault to clear the hotel. Dozens of the hotel’s occupants have locked themselves in their rooms, and as many as 80 have fled the building. The militaries of several countries, including France and the United States, are active in Mali and can be expected to support Mali’s security forces.

Sources in Mali have blamed the attack on Ansar Dine, an Islamist militant group headed by a Tuareg leader named Iyad Ag Ghali. The group served as the Malian branch of al Qaeda in the Islamic Maghreb. With the help of al Qaeda, Ansar Dine briefly gained control of nearly all of northern Mali during its insurgency in 2012-2013. France subsequently retook northern Mali in a military intervention, and European and African troops have remained there ever since.

Tuareg militants attack Malian and foreign military and diplomatic personnel in northern Mali intermittently, but attacks in southern Mali are relatively rare. Attacks in Bamako are rarer still. If Ansar Dine is in fact behind the attack, it would be the most prominent and sophisticated by the group.

Al Qaeda in the Islamic Maghreb is known to take hostages to generate income, but this is not the type of hostage situation that would produce ransoms. The intent of this attack was to terrorize, destabilize and promote Tuareg interests and remind the world that al Qaeda is still a force to be reckoned with.

On the evening of Friday, Nov. 13, eight people armed with assault rifles and suicide vests attacked several targets in Paris,France, killing 129 civilians. At least five of the attackers were French nationals and two were Belgians; all eight appear to have been radical Islamists, and the Islamic State has claimed responsibility for the attacks. French President Francois Hollande declared the killings to be an act of war and immediately scaled up France’s military operations, primarily by increasing its airstrikes in Islamic State territory. Taking advantage of a temporary state of emergency, French police have conducted more than 100 raids each night since the attack as they track down suspects.

While the attacks are obviously shocking, they probably will not have the same transformative effect as other major incidents such as 9/11 or the Madrid bombings, which led the states that were targeted to change their strategies. (9/11 prompted the United States to invade Afghanistan and ultimately Iraq, while the Madrid bombings persuaded Spain to withdraw its troops from Iraq.) By comparison, the French attacks, which are more akin to the July 2005 bombings in the United Kingdom, will likely accelerate the strategies France already had for achieving its domestic and foreign interests.

Domestic Concerns

From France’s perspective, the most immediate concern the Paris attacks raise is that French citizens were killed. Any government that fails to protect its citizenry risks being replaced, meaning that officials must work quickly to neutralize the attackers before doing the same for any accomplices who were directly involved. Then the government must try to prevent similar attacks from taking place in the future. The first two of these actions are already well underway, and progress toward the third is evident. Hollande has asked to extend emergency powers for three months, to deploy an extra 5,000 police officers over the course of two years, and to amend the constitution to broaden surveillance powers. By all appearances, France seems to be on the verge of becoming a closely watched state in the coming years — much like the United Kingdom, which has one surveillance camera in place for every 11 Britons.

The Nov. 13 attacks also play into domestic politics, and the government will want to be seen avenging its citizens and punishing the offending party for its actions. This appears to be a large part of the motivation behind Paris’ increased bombings of Islamic State targets overseas. Hollande is the leader of the center-left Socialist Party, which traditionally takes a softer line on social, security and privacy issues and is therefore vulnerable to recriminations from the public that it has not done enough to protect French citizens. Adding to this problem, France has experienced other terrorist attacks this year, most notably in January when gunmen attacked the offices of the Charlie Hebdo newspaper, and people expected the government to have learned from these experiences in addressing security threats.

Regional elections in December will give voters across the country a chance to show their displeasure with the government’s response, making the situation even more urgent for Hollande. The anti-immigration National Front has enjoyed a surge in support in recent years, with party leader Marine Le Pen polling strongly ahead of the 2017 presidential election. For the more moderate voter, there is also the center-right Republicans party headed by former President Nicolas Sarkozy. The former president has long divided public opinion with his tough stance on immigrants and security, which dates back at least to his time as France’s interior minister in the early to mid-2000s.

Implications for France’s European Ties

The Paris attacks have also exacerbated problems that have been brewing in France’s relationship with the rest of Europe. A passport found at the scene of the crime appears to be linked to an immigrant who passed through Greece and up through the Balkans to get to France within the past two months. Doubts have since been raised about the authenticity of the passport, but the damage has been done, and many in France are linking the attacks to immigrant flows. As a result, the Schengen Agreement, which allows free travel across borders within member states, is under serious threat. The immigrant link may or may not prove valid, but an even more damning piece of evidence has arisen against Schengen: the Belgian connection. Belgium has emerged as a key staging point of the attacks, and the perpetrators seem to have done a great deal of their planning in Brussels. Belgium’s connectivity, small size and membership in the Schengen area mean that it is extremely easy to enter several countries from Belgium within a short time. Consequently, many see the Schengen Agreement as a facilitator in the attacks.

The events of Nov. 13 have also altered France’s budgetary situation. In November 2014, France fell afoul of the European Commission for its fiscal laxity, and its 2015 budget wasn’t approved until several months into the year. This time around, the commission has been considerably less strict with its charges for the most part, mainly because of improvements in the overall economic climate, but it is still tasked with maintaining the union’s economic guidelines. Hollande’s Nov. 16 announcement that security concerns trump austerity, and that budgetary requirements will take a back seat since France is at war, cannot have been received well in Brussels, whether true or not.

Aside from the immediate considerations of the commission’s mood, France may still be able to borrow at extremely cheap rates largely because of the European Central Bank’s quantitative easing program, but this will not help its fiscal position. Borrowing to finance France’s heightened spending will layer onto the country’s already high debt levels. As a result, France will become even more firmly enmeshed in the Mediterranean group of eurozone countries with heavy debt burdens, relying on the European Central Bank and the prevailing economic climate to keep interest repayments low. At best, this will increase the chances of friction with Germany, and at worst, it will precipitate a debt crisis.

Older Problems

But France’s biggest concerns in the wake of the Paris attacks speak to some of the country’s much more deeply-rooted issues. Half of the attackers were Frenchmen. French law prohibits the inclusion of religious affiliation on national censuses, but estimates suggest that around 7.5 percent of France’s population is Muslim, with a great portion of that group of North African extraction. Most of the recent terrorist incidents in France have stemmed from this part of the population, which tends to be poorer and more isolated than other groups.

The roots of this reality trace back to France’s experiences in colonizing Algeria, Tunisia and Morocco in the 19th and early 20th centuries, and then to the messy independence processes these colonies underwent, particularly Algeria’s War of Independence from 1954 to 1962. Bombings, killings and police brutality on both sides of the Mediterranean created enmity between the two populations, which only continued as growing numbers of Algerians emigrated to France. After World War II, France experienced a significant growth spurt in its “Trente Glorieuses” (“Thirty Glorious Years”) and it needed cheap labor — a need North African emigres helped fill.

The newcomers made homes for themselves around France’s industrial centers, including Paris, Lyon and Marseilles, but their high numbers and low wealth, combined with existing antipathies, inhibited their ability to integrate. The country became dotted with pockets of poor, disaffected and mainly Muslim communities that struggled to find gainful employment and break the cycle of poverty in which they found themselves. It is from these communities that the Islamic State appears to have had some success in recruiting, and it is their problems that France must solve if it hopes to prevent the homegrown threats the Paris attacks brought to light.

A Russian Su-24 fighter jet was shot down near the Turkish-Syrian border on Nov. 24. According to a statement issued by the Turkish General Staff, the downed warplane was warned 10 times in five minutes by two intercepting Turkish F-16s while the Su-24 was flying over the town of Yaylidagi in Turkey’s Hatay province.

Turkey’s state-owned Anadolu Agency, citing unnamed officials at the president’s office, also stated that the plane was warned after violating Turkish airspace before being downed in line with Turkey’s rules of engagement. In contrast, the Russian Defense Ministry claims to have “objective monitoring” that proves the aircraft was flying over Syrian territory only, at an altitude of 6,000 meters. The Russians also said the crash was allegedly caused by gunfire from the ground and that preliminary information suggests the two pilots ejected. Local Turkmen rebels are claiming that they have captured the pilots, one of them injured and one in good health. A video with a Free Syrian Army logo shows a group of men walking up to a heavily forested area where a yellow parachute had landed.

A Context of Tensions

Since the early days of the Russian intervention in Syria, Turkey, the United States and other coalition partners have expressed significant concerns about the possibility of this exact scenario. Russian aircraft have increased the intensity of their operations across Syria, targeting both Islamic State and Syrian rebel forces. In some cases, Russian airstrikes have occurred in close proximity to where Turkey, the United States, and France have been carrying out their own air operations against the Islamic State, raising the risk of accidental collision. Turkey has warned Russian warplanes it claims were violating Turkish airspace before, but this would mark the first time Turkish forces have actually shot one down.

Ankara and Moscow have been engaged in military-to-military discussions to de-conflict their operations in Syria and have maintained a close diplomatic relationship. The downing of the Russian aircraft does not portend a direct military escalation between Turkey and Russia. The two sides will likely be able to manage the fallout from the incident through diplomatic means and through additional military contacts to better define their areas of operation.

Turkey’s hope will be that Russia exercises more caution in its operations in Syria to avoid such incidents in the future, especially as Turkey is gearing up to deepen its own military involvement in northern Syria west of the Euphrates River. Indeed, predominantly Turkmen rebels affiliated with the Free Syrian Army and backed by Turkey have had recent successes, such as seizing two Islamic State-held villages near the Turkish border. As Stratfor noted, this is the first step for Turkey, working alongside the United States, to begin flushing out Islamic State militants from the Turkey-Syria border. The operation would entail a heavy air campaign involving Turkish and U.S. fighter jets in northern Syria with the potential for Turkey to reinforce the rebels with ground troops to hold the territory and establish a “safe zone” along the border.

For Turkey to feel comfortable moving forward with such an operation, it would need to establish an understanding with Moscow to ensure Russian aircraft stay out of the way. Russia’s continued flights near Turkish airspace may have been intended to give Ankara pause in its military planning, but the downing of one of its own jets could place more of the onus on Moscow to steer clear of Turkish operations near the border.

A decade ago, Nicaragua’s sluggish economy relied primarily on agricultural exports, including coffee and beef. But during the past 10 years, Nicaragua has cultivated its longest run of political and economic stability since 1979. The country has leveraged its low wages and preferential trade with the United States to attract investment into clothing factories, helping the country’s export revenue quadruple between 2007 and 2014. And high oil prices enabled Venezuela to subsidize Nicaragua’s domestic spending and fuel imports through the Petrocaribe alliance, giving Nicaraguan President Daniel Ortega more leeway in economic planning. Despite occasional bouts of political protest and confrontation between supporters of the government and the opposition, politically motivated violence has been relatively minimal. But with falling global oil prices and the subsequent decline of Venezuelan foreign assistance, Nicaragua’s fortunes could soon change.

A year away from elections, it seems Ortega may still have the strength to rule for another five-year term, but diminishing aid from Venezuela will complicate Nicaragua’s economic planning in the near term and could eventually erode the Sandinista National Liberation Front’s tight control over national politics.

Since the implementation of the Central American Free Trade Agreement in 2005, reduced tariff barriers have given Nicaragua greater access to the U.S. market, and foreign investors have increased their cash flow into Nicaragua accordingly. Nicaraguan clothing exports, largely to the United States, went from less than $2 million in 2005 to around $2.7 billion in 2014. The low cost of doing business in Nicaragua, even relative to other Central American countries, has also contributed to the uptick in investment. The Nicaraguan minimum wage is between $109 and $245 a month — the lowest among its immediate neighbors, which are its biggest regional competitors for low-end manufacturing jobs.

Even still, waning assistance from Venezuela could threaten the continuance of this economic success story. Though Venezuelan aid to Nicaragua is a small portion of Venezuela’s total foreign aid, declining oil revenue has forced Caracas to make some cuts. At its height in 2012, Venezuelan aid to Nicaragua totaled $728.7 million — less than 1 percent of Venezuela’s reported oil export income for that year. But because Venezuela’s oil revenue was cut nearly in half this year and because Caracas is concentrated on making foreign debt payments and investments into the oil sector, Venezuela has cut some of its aid abroad. In Nicaragua’s case, aid in the first half of 2015 declined 23 percent from the year before, totaling some $193 million. Nicaragua depends on Venezuelan aid to augment public spending, and if assistance continues to fall, Nicaragua stands to lose a key source of political patronage.

Venezuela’s heavy subsidization of Nicaraguan public finances guaranteed some measure of financial stability throughout Ortega’s presidency. Direct loans from Venezuela’s state-owned oil firm, Petroleos de Venezuela, not only cushioned the blow of rapidly rising oil prices in the late 2000s but also helped Nicaragua fund food imports and subsidize public transport fares. Although the subsidies are only a small part of PDVSA’s total operating revenue, the aid given in 2014 represented about 32 percent of Nicaragua’s total budgeted income for 2015. And if Ortega’s government fails to fund socially sensitive programs such as public transport, on which it spent $16.5 million in the first half of 2015, it risks losing political support in the long run.

Still, the near term looks relatively benign for the ruling Sandinista National Liberation Front. The party has slightly more than a year until the next general election, slated for November 2016, and it faces a divided and politically weak opposition. The only coherent opposition bloc is composed of the leftist Sandinista Renewal Movement and the more centrist Independent Liberal Party. The coalition commands less than 30 votes in congress, compared to the Sandinista National Liberation Front’s 61. With only a year until the election, voters might not feel the effects of reduced subsidies before re-electing Ortega. However, if he serves another five-year term, Ortega may have to enact greater fiscal discipline if Venezuela’s patronage continues to decline. So far, Ortega’s popularity has depended on his support of programs that benefit the voters, and an erosion of that public assistance would complicate his ability to govern in the long term.

Overall, the pace of the decline in aid will greatly influence how the next presidential term plays out. A sharp drop in assistance, combined with a drop in Petrocaribe subsidies, could lead to a quick reining in of public spending — something that would almost certainly harm the next government’s approval rating and could contribute to popular unrest. But luckily for Nicaragua, its relatively small size means that Venezuela can likely fund it for some time. Moreover, barring major political upheaval in Venezuela, Caracas’ aid to Nicaragua is more likely to decline slowly than to collapse suddenly.

Analysis

Dacian Ciolos replaced Victor Ponta as the prime minister of Romania on Nov. 17. And though his ascension may seem like the result of a Romanian political system in chaos, in fact it is the result of Romania’s foreign policy goals, U.S. and EU strategic interests in the region, and a general exasperation among Romanian voters, fed up as they are with the malfeasance of their traditional political parties. Ultimately, it will be these factors that compel the new prime minister to follow the same foreign policy as his predecessor.  

Ponta resigned Nov. 4 after Romanians took to the streets to protest the country’s pervasive corruption. For months, Ponta had been accused of a variety of wrongdoings, and allegations that corruption led to a nightclub fire in late October was the last straw for the already troubled politician.

Romania’s fight against corruption received support from abroad. The United States considers Bucharest a critical ally in the former Soviet periphery, and it believes it will be less receptive to Russian influence if it is politically stable, more transparent and more attractive for foreign investment. Accordingly, the United States has worked closely with Romania to strengthen the National Anti-Corruption Directorate. In recent months the institution removed several high-level officials and stripped some politicians of their immunity.

And it appears as though Ciolos wants to reciprocate the West’s desires for alliance. Indeed, Ciolos’ Cabinet, which is composed mostly of technocrats and officials who are friendly toward the West, shows that the new government wants to preserve its relations with the White House, NATO and the European Union. Ciolos himself is a former EU Commissioner, and he was selected by President Klaus Iohannis – well known for his advocacy of U.S.-Romania relations – after the legislature failed to make its own submissions. Notably, his Cabinet includes former members of the European Parliament, ambassadors to Western countries and businessmen. Together, the list of new leaders shows Bucharest’s clear intent to remain aligned with the West, which in turn will likely support the new government.

But none of this makes Ciolos’ new job any easier. His administration has ambitious plans to reform the country’s electoral system, make public administration more efficient, reform education and health care systems, support Moldova’s EU accession plans, and strengthen Romania’s role in the European Union. As expected, the government also proposed to reinforce its alliance with the United States and NATO.

Some of these goals could prove difficult to achieve. Despite Ponta’s resignation, the composition of the legislature has not changed. Ciolos’ government is supported by an unusual coalition, which comprises elements from Ponta’s center-left and its rivals among the center-right. Naturally, the policy priorities of these parties differ dramatically, and those differences will be more pronounced in the run-up to general elections in December 2016, during which parties will differentiate themselves to secure votes.

Ciolos’ appointment exemplifies how Romanian interests — its international affairs, its domestic social and political agenda — interact. Romanian politics may appear to be chaotic, but these impersonal geopolitical forces will continue to shape the country’s behavior despite electoral cycles and political conflicts.