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A Political-Risk Outlook for 2008

By Ian Bremmer

As we begin the year, I'd like to take a look forward at what I consider the most important political risks for the global markets . . . and also the red herrings - the stories that make headlines but are overplayed.

Overall, 2008 will be an increasingly turbulent year for political risk. That's primarily true for two reasons. First, it's an election year in the United States, a moment marked by a rapidly deteriorating American commitment to international norms . . . and to globalization. Second, we'll see significant macro risks in the Middle East, particularly Iran. Both of these risks will grow over the course of the year, creating intensified feelings of instability (but also disaggregation) in the global markets. I'll open with those and then move through the other risks, in descending order - so first the macro, and then the more country-focused. To conclude, I'll move to what I see as the non-risks . . . including a few that might surprise you.

1) United States

The biggest story in this entire forecast is that, for the first time in my career as a political scientist, the United States is a serious (indeed, the serious) macro risk factor. The American electorate is increasingly troubled by a laundry list of signs that the nation's influence is on the wane - the war in Iraq, the rise of China, Washington's inability to denuclearize Iran and North Korea, the global move away from the dollar, energy insecurity/high oil prices, and resurgent sovereign wealth funds shoring up wobbly blue-chip U.S. financial (and other) institutions.

All of these factors, amplified by homeland security worries (broadly defined), create a significant risk that America will scale back its engagement with the world, strengthen barriers to trade and immigration, and renounce its global leadership on a range of international challenges from trade liberalization to international security. International efforts for which U.S. leadership is necessary, like climate change, will remain underdeveloped and leaderless. In short, in 2008 the United States will lack the necessary political will and political capital to provide the public goods that form the foundation of long-term growth in the global economy.

This is a shift of profound importance. The last several years have seen a spike in negative international sentiment toward the United States coupled with American surprise that efforts at exporting democracy haven't always gone over well, or proven successful. The main geopolitical risk in 2008 comes more from a change in domestic U.S. politics that will create greater policy uncertainty, skepticism over the United States' role as the world's policeman and - more troubling for world markets - doubts over the benefits from present trends in the global system.

Some of that change is an election-year phenomenon, including constituency-serving statements from moderate Republicans and Democrats on the stump and, more significantly, the sudden emergence of previously fringe "America first" Republican candidates like Mike Huckabee, R-Ark. and libertarian Ron Paul, R-Texas. A deterioration in consumer confidence in coming months will benefit their campaigns most, pulling the rest of the field in their direction politically. As that occurs, we'll also see protectionist pressures intensify. We can expect an expansion in the mandate of the Committee on Foreign Investment in the United States (CFIUS) that will dissuade a number of would-be foreign investors; increased scrutiny and potential regulation of sovereign wealth funds in U.S. markets; greater scrutiny of free trade pacts (existing and proposed); tougher trade relations with China (as Congress takes the lead on that relationship away from Treasury Secretary Hank Paulson); and intensified debates over homeland security and immigration. All of this will create more inefficiencies in the global marketplace in conducting business with the United States.

But the more important shift in the United States is structural. One national poll (from the Pew Research Center) is particularly instructive. In 2007, 59 percent of Americans considered international trade good for the United States . . . compared to 78 percent five years ago (and 82 percent in Russia and 91 percent in China today). Relatedly, fewer than half of Americans had a positive view of "large companies from other countries" compared with 64 percent of Chinese, also with a comparable swing from previous years. In what has to be the single most troubling development for the global economy in the past 20 years, domestic insecurities are quickly moving the American electorate away from support for the international status quo.

The real question here is not this tendency, which is indisputable, but whether 2008 proves the straw that breaks the camel's back. This coming year is going to be one in which the United States is increasingly inwardly focused. This trend creates political risks that give rise to meaningful market inefficiencies globally. But to what extent will 2008 prove a blip, stimulated by the election year, with the United States returning to business more or less as usual - muddling through with increased multilateralism, but still taking a leadership role on proliferation issues, free trade, the U.S.-China strategic economic dialogue, etc? That depends more on the state of the nation than on who wins the November presidential election. In other words, irrespective of who wins the White House, we could easily see this "muddling through" scenario . . . if there's no war with Iran, American consumers feel reasonably OK about their prospects, and we don't see terrorism of any scale in the United States in the run-up to elections.

But if the current credit/liquidity crisis rocks the real economy; if there's a recession for any other reason; if there's a terrorist attack of any scale pre-elections; if events in Iraq deteriorate, creating demand for imminent U.S. withdrawal (from the sudden collapse of the Iraqi government, a successful large-scale attack inside the Green Zone or against a visiting high-level us delegation, etc) - all of those things would call a halt to election-year agenda-setting on economic reform issues (health care, climate change, tax reform). This would instead lead America toward neo-isolationism, with a prioritized focus on immigration, homeland security and protectionism. That's something I would expect whether there's a Republican or Democratic president.

Right now I'm still an optimist - I'm 70-30 in favor of the more favorable outcome. In other words, the United States proves dicey as an international actor and force for global economic growth in 2008. But after the election of a new president, the U.S. gets back to (more or less) normal. There's then a longer-term shift toward multilateralism - with a growing number of diverse global players demanding a say in the agendas and nature of international initiatives and institutions. This increasingly assertive international behavior from the likes of China, India and the EU - to say nothing of adversaries like Iran and Venezuela - in turn creates additional risk of U.S. backlash, but that's a more gradual process . . . at least for the next administration. But the overall trajectory in my outlook is negative - I would have been 90-10 on the optimistic side six months ago.

2) Iran

Developments in Iran remain one of the most significant risks in the markets for 2008. While the likelihood of U.S. military strikes has decreased following American intelligence reports on the state of play of the Iranian nuclear program - coupled with President George W. Bush's lack of domestic political capital - so too has the likelihood of a diplomatic resolution. This means direct international confrontation, with a considerably emboldened Iranian regime and negotiating stance, aggressively combating international efforts to hem Tehran in.

The baseline scenario is greater tension between Iran and much of the international community (the United States, Europe, Israel and several Arab states - particularly Saudi Arabia - though specifically not Russia or China). This in turn has a host of second-order implications: tensions in Dubai, caught in the middle as Iranian capital is tracked and frozen in local accounts; an arms race in the region, with military exercises and posturing creating greater likelihood of accidental border incidents and policy implications; greater conflict in Iraq between Sunni and Shia, with a Tehran-supported Iraqi central government that looks increasingly out of step with the rest of the region; and Hamas and Hezbollah bolstered by Iran in their efforts to derail moderates in both Palestine and Lebanon.

The real driver for risk here remains the Iranian government, which not only remains committed to the right to enrich uranium on its territory, but which has consistently provoked the international community (again, specifically the West, Israel and several of Iran's Arab neighbors) beyond the nuclear issue. This latter point is more firmly about the Iranian government's desire to consolidate local control than to preserve Iran's broader national interests. But it also poses a direct perceived threat to the Israeli government, which remains convinced that a nuclear Iran is unacceptably dangerous to Israel's national security and sees its primary ally, the United States, in danger of losing its political appetite for supporting the Israelis if push comes to shove. Accordingly, there remains a significant risk of military action in 2008, though considerably reduced from the Bush administration's trajectory in the past year, and more likely from Israel than the United States. In terms of timing, the window of concern is following Iranian elections in March up to U.S. elections in November.

In short, this year Iran will be the single most problematic factor for regional stability in the Middle East and the principal macro issue for continued high global oil prices.

3) Iraq

In 2008, Iraq will show that the United States has for the second time gotten the military decisions right but the politics wrong, with implications not just for Iraq but for the broader Middle East.

When the U.S.-led coalition removed Saddam Hussein from power, Defense Secretary Donald Rumsfeld's strategy of using minimal ground forces, massive air attack, and a lightning-quick drive of heavy armor toward Baghdad led to a six-week war with limited U.S. and Iraqi casualties and the capture/arrest of almost all senior Baathist officials, including Hussein, in relatively short order. Yet the Defense Department also led the charge on nation- and state-building, which rested on misguided efforts to transform the Iraqi central government into a democracy virtually overnight. I've become fond of thinking that in many ways Rumsfeld was one of America's most effective defense secretaries in recent times . . . and by far its worst secretary of state. Unfortunately, he was intent on doing both jobs.

That much is history. But in 2008, this dynamic is unfolding again. Following a strongly criticized Bush decision to ignore the bipartisan (and exhaustively vetted) Baker-Hamilton plan and press ahead with a troop surge, it's turned out that the American generals indeed knew what they were doing. More than 150,000 well-trained American troops, tens of thousands of well-paid mercenaries, the support of many tribal leaders (particularly in the north), billions of dollars of reconstruction aid, and a revamped counterinsurgency strategy on the ground have markedly improved security in much of the country. The troop surge has led radical Shiite cleric and militia leader Moqtadr al Sadr to stay on the sidelines - not risking confrontation with U.S. military power - and seriously degraded al-Qaida in Iraq's capacity for attacks. All of this has meant fewer casualties - U.S. military, Iraqi military and Iraqi civilian.

But politically, the United States has actually lost ground. This is clearest in Baghdad, where Washington has all but lost its influence on Prime Minister Nouri al-Maliki's administration - a stunning political fact given the extraordinary amount of cash and military support still funneled by the U.S. government into the country. This change became clear following Baghdad's refusal to attend the Annapolis conference on the Middle East, despite direct lobbying by President Bush and Secretary of State Condoleezza Rice, or to sign up for the American pact with Iraq's Sunni tribal leaders to fight al-Qaida. The greatest political influence on Baghdad is presently Iran - a factor that will likely grow over time as Iraqi political actors await the withdrawal of American military forces and Washington loses the political will to provide economic support.

Which means that the military gains - though real and important - are temporary and cannot continue with a significant reduction in the American troop presence. U.S. domestic opposition to the war remains at its highest levels, and as the U.S. scales down its presence, the likelihood that the insurgency will grow precipitously is great. Sadr will stay on the sidelines until it's safe to come out - but no longer. Ultimately, all this will likely produce a fragmentation of the country and a proxy war between Saudi-supported Sunni and Iranian-supported Shia, with the Kurds eventually going their own way. This makes Iraq increasingly less of a mess domestically but more a factor for regional instability throughout the Middle East. This will become increasingly evident in 2008.

4) Terrorism

Beyond developments in the United States and the Middle East, terrorism is a more serious macro risk this year. That's true despite the headway made in Iraq - which has been significant. But terrorism there has been almost completely a local issue. That's not the case in either Pakistan or Afghanistan, where local counterterrorism efforts have grown far more challenging - and the international community has lost the most ground. Those factors aren't going to improve anytime soon (see Pakistan below). This makes the broader terrorist threat merit higher concern worldwide.

Most worrying is a pre-election attack in the United States. The U.S. Department of Homeland Security raised its threat warning over the summer, not based on direct intelligence on a suspected attack in the works (the previous modus operandi), but rather because of concerns over increasing terrorist capacity and chatter over a change in strategy to accept smaller attacks in the United States - given increased al-Qaida resources and the long time since a successful attack has been perpetrated. It's impossible to put a useful quantified prediction on these sorts of concerns, but all of those factors make the likelihood of a small to medium-scale U.S. attack in 2008 higher than at any other point since 9/11.

Beyond the threat from al-Qaida and its loose network of "affiliates," the risk from Hezbollah with implications beyond limited cross-border skirmishes with Israel (and internal instability for Lebanon) is also growing as its military capacity increases. American and European intelligence estimates now rate Hezbollah's military and technological prowess as a greater threat than al-Qaida's. This couples uneasily with Israel's recent announcement that Hezbollah now has access to ballistic missiles that can hit Tel Aviv. This development raises the danger of a broader war between Lebanon and Israel that could draw in other countries - most notably Syria and Iran.

Finally, thinking globally, it's hard not to mention the growing potential of a terrorist incident involving a non-nuclear radiological explosive device - the "dirty bomb." Concerns are raised by both intelligence on efforts of would-be terrorists to get their hands on strontium-90 and cesium-137 (mostly from the former Soviet republics) and the serious political instability in Pakistan (though the enriched uranium available there would be less viable as an effective non-nuclear weapon). One thing I'd like to know to help vet my concern: There's still no public information on whether the Glasgow and London doctors planning terrorist attacks this past year ever attempted to get their hands on radiological material.

5) Pakistan/Afghanistan

Following the Dec. 27 assassination of prime ministerial aspirant Benazir Bhutto, long-hoped-for prospects of an orderly broadening of political control beyond President Pervez Musharraf is off the table. In short, Pakistan is in an even more serious political mess than usual. Despite a several-week delay, national elections are still likely to take place, though in an environment of significant violence. But even with the continued loyalty of the military, a fragmented opposition, and unfettered aid from the United States, Musharraf's future is uncertain. In particular, the success of Islamic militants in queering Pakistan's political trajectory makes his position increasingly untenable. If I had to make a call, I'd say he's won't last the year.

As I mentioned above, that raises a serious concern about the prospects of radiological materials getting in the hands of terrorist organizations - heightening worries over a dirty bomb. But leaving aside the terrorist threat, most of the macro risks from Pakistan aren't what they used to be. While India's more Hindu nationalist BJP party may benefit from the growth of instability in Pakistan, there are no prospects of broader cross-border conflict. (It's worth noting that while Bhutto was generally well-liked in India, she was seen there as an ineffective and weak politician). Pakistan's nuclear weapons are safe. Political chaos won't lead to an explosion in the country but rather to illegitimate military control that creates a modicum of order in the cities, but leaves the border region to tribal leaders and the militants who operate there. As for border security, the fight against terror, keeping the extremists and Taliban down? Not likely. All of this is bad news for Pakistani markets - and really bleak news for Afghani President Hamid Karzai and NATO troops stationed in his country.

6) Russian Foreign Policy

Disruptions in gas supplies to Europe, territorial claims on the North Pole, polonium-laced assassinations, nuclear bombers and more - U.S.-Russian relations are at their lowest point since the Brezhnev era. That's equally true of European-Russian relations. With negligible areas of potentially leavening strategic cooperation on the horizon, there's no reason to expect relations to improve in 2008. And while we should expect little real impact on Russia itself, where the economy will continue to chug along (see below), there's lots of potential second-order problems for the countries on Russia's periphery.

After Iran, Russia is probably the single country in the world most willing to challenge the existing geopolitical order. And while it's not a global player (Russia remains functionally irrelevant in Latin America, Southeast Asia and Africa), Moscow matters decisively throughout the Eurasian landmass. Hence intransigent Russian foreign policy will mean greater second-order risks for conflict on the Russian periphery - in the Balkans, as Russian-supported Serbia strongly opposes Kosovar independence; in Georgia, as prospects of civil war grow with Moscow supporting secessionist-oriented Abkhazia's efforts to become a breakaway republic; and in Ukraine, Belarus, the Baltics, and maybe even some Central Asian states, as Russia uses economic pressure to ensure a preponderance of political and strategic influence in their neighborhood.

7) South Africa

Political uncertainty will grow in 2008 over the battle to succeed President Thabo Mbeki - in large part because of controversy over the new frontrunner, former Deputy President Jacob Zuma, who was elected in December to head the ruling African National Congress Party. Zuma has gained some in terms of reputation, and fears have subsided that he might push the country in a populist direction - given the consensus-based policymaking in the ANC, constraints of the South African budgetary process, and a growing black middle class. But Zuma also remains beholden to his core constituencies - trade unions and the country's Communist Party - which demand strong state intervention in the economy. That means greater regulatory burdens, questions surrounding land redistribution and bigger concerns for state capacity for policy implementation.

Following his victory in ANC elections, Zuma initially struck a conciliatory note, consolidating his support base. But that strategy has limitations, given the legal fight between Zuma and South Africa's judiciary. Now that Zuma has been formally charged with corruption - in what his supporters say was a politically motivated decision - we should expect direct confrontation between the ANC and Zuma's rivals within the Mbeki government, with escalatory potential that could damage the broader cohesiveness of the ANC's ruling alliance. That makes it more likely that South Africa's political left will start to melt away, with labor union support for Zuma. All of this presages a split between party and state, paralyzing the South African government's ability to implement an agenda of economic transformation and to play a proactive international role (so I expect less South African engagement on issues of regional stability like Darfur). It's a no-win situation through elections, and near-term investment implications are negative.

8) Turkey

Turkey is a precarious emerging market this year. It is the mirror opposite of Russia, in that market-relevant political risk in Turkey is largely internal, not geopolitical.

On the latter, there's good reason to believe that Turkey's Kurdish problem in Iraq will remain reasonably stable in the coming year. (2009 is much more dangerous as the U.S. troop withdrawal issue becomes imminent.) Turkish-Kurdish tensions will make headlines, but I don't expect them to have seriously negative economic or political impacts on either side. That's not true looking at Ankara's domestic focus, however.

The real risk emerges from the ongoing battle between Prime Minister Recep Tayyip Erdogan's AK party leadership and Turkey's secularist forces - particularly the military and the industrialists. Erdogan's plan to overhaul the 1982 constitution - and to remove the existing ban on women wearing headscarves in universities - is likely to be a major source of tension. And it's also likely to be a long process, taking at least the full year. All the while there will be next to no progress on the economic reform front, as Turkey's major political actors are distracted by what is essentially perceived as a battle over Turkey's identity.

Prospects of a coup in the midst of these tensions are slim, but heavy-handed political interference from the Turkish military is likely. One worrying wildcard on this front -current military commander Yasar Buyukanit's term comes to an end in August, and he's likely to be considerably more hawkish in defending his legacy as his tenure draws to a close.

9) Energy Bottlenecks in Latin America

Moving to the southern hemisphere, regional policymakers' efforts to tackle growing shortfalls in power supply and declining oil and gas production are starting to prove critical to Latin America's prospects for economic growth - and the survival of its incumbents. Insufficient investment in power generation is already producing a power crisis in Argentina, and a number of political leaders across the region (in Brazil, Mexico, Venezuela, Bolivia, Ecuador, Peru, Nicaragua and Honduras) will be at risk in the next few years if they do not begin to bolster investment in power generation or upstream oil and gas production this year.

Every government in the region has been guilty of attracting insufficient investment in either power generation or upstream oil and gas production. But those with more market-friendly macroeconomic policies will respond very differently to these challenges than those characterized by a higher degree of populism or state interventionism. In Brazil, Mexico and Peru, policymakers will likely adjust earlier to shortfalls in oil and gas production and power supply by providing greater opportunities for the private sector. But in Argentina, Ecuador, Venezuela and Nicaragua, the trend will be either a continuation of existing policies or a deepening of state interventionism and resource nationalism, which may postpone problems for consumers in the short run but exacerbate the likelihood for long-term energy crises.

Energy supply bottlenecks will also increasingly restrict the political room for maneuver of America's most vocal critic - Venezuela's Hugo Chavez. He already has far less power than before. He's contending with declining oil production and, following his loss in the constitutional referendum last month, growing domestic political constraints. Chavez has also undermined his external relations on a number of fronts - with Brazil, Colombia and Spain to name just a few. Internationally, he retains good relations with a couple of rogue states that are happy to line up with him on tactical issues (Belarus, Iran) and a few Central American and Caribbean countries thanks to his offer of petroleum at favorable prices. But there is no one with real national security interest in building durable alliances with his government. Still, risks in Venezuela won't really come to a head until 2009, with growing economic imbalances, declining political support, an increasing hardening of the regime and a major electoral test in the shape of a presidential recall referendum in August 2009. Until then, high oil prices should ensure Chavez maintains local control, despite his willingness to consistently overplay his political hand.

* * *

And now, some of the places where political risk isn't going to play in 2008. Starting with the biggest . . .

1) China

There's very little near-term worry about social instability in China, with consensus on stability emerging from the quintennial Party Congress. This is especially true in a year in which Beijing will host the Olympics, with national pride extraordinarily high. This dynamic infuses the Chinese government with burgeoning confidence, making Beijing less willing to listen to arguments it considers unjust and otherwise accept its present position in the world system. All of this will create problems for foreign companies facing well-connected Chinese competitors . . . but not for those looking for growth in the Chinese market.

Without a doubt, there are big, long-term structural concerns here, as the Chinese government does very little to address deeper challenges facing the country. Economic and energy demand growth are causing huge problems for the environment, for example, and China's unfettered expansion is creating major gaps between rich and poor. But none of this will slow down the Chinese in 2008, especially given the huge gains that can still come from building the internal Chinese market. In other words, there's no sense to all the comparisons with India, where economic reforms slow regularly (including this year) as part of election season. So in the near term, China is showing the strong advantages of central control - if anything, Chinese growth this year will surprise on the upside. Longer term, I'm deeply skeptical of the strategy. But longer term isn't 2008 . . . .

2) The Russian Market

Russia may be proving itself an international nuisance, but the country benefits from an exceptionally strong fiscal position. President Vladimir Putin's been consistently over 70 percent approval for years now, and the Kremlin has consolidated control over every relevant mechanism of power to speak of (political parties, media, the judiciary, armed forces and intelligence) in the country.

It remains unclear exactly how Russia's institutions will look after Putin transitions to the premiership (and any other role he assigns himself) after March elections. But it won't matter - at least not this year. Dmitry Medvedev is virtually certain to be elected president. The "succession" will be effectively managed, with no prospects of opposition or fragmentation. In the Putin/Medvedev administration, technocrats will play a strong role in managing the Russian economy while the Siloviki (security vertical) continues to control it. In other words, expect stability - and don't fall foul of the Kremlin. Initially extremely opaque, those rules of the road are becoming increasingly well understood, and will be more so in the coming administration. So despite all the international worries, Russia post-elections should see the international community - Japan, China, India, the U.S. and Europe - falling over themselves to get into the Russian market.

3) Saudi Arabia

I'd say King Abdullah is the most popular leader in the Arab world today, a singularly extraordinary statement given the nature of the Saudi system. There's very little domestic interest in near-term democratic reform, especially given the strength of the Wahhabis in pushing conservative initiatives on the social front. This reflects a cautious balance on the part of the king that routinely creates bad press - especially in the aftermath of Saudi-related terrorist incidents - but is nonetheless one of the most politically stabilizing factors at play in the kingdom. Terrorism remains a serious concern in Saudi Arabia, but not to regime stability or energy output. Meanwhile, the Saudis are busy opening their economy and building durable infrastructure.

The Saudis are also becoming more of a force for stability internationally - playing a more proactive role, especially in the Arab-Israeli conflict. It's an obvious vacuum as Arab elites throughout the Middle East are concerned about the broader direction of Sunni-Shia conflict, and the succession-skittish Egyptians are ceding their own regional leadership role. I expect we'll see the Saudis play a more stabilizing role on a host of fronts over 2008 - in broader relations with the United States and any post-U.S. election diplomatic plan for Iraq, as well as continuing with a longer-term stabilizing influence (if not one their Arab neighbors always welcome) within OPEC and the Gulf Cooperation Council (GCC).

4) Nigeria

2007 was a difficult transition year for political stability (and energy production) in Nigeria, but the prospects for a lasting peace deal in the Niger Delta look strong for 2008. Umaru Yar'Adua's government has shown itself to be more competent and stronger-willed than generally expected, starting with a meaningful purge of corrupt senior generals out of the military and a reversal of key personal privatizations by former President Olusegun Obasanjo.

That hasn't won Yar'adua many friends, but it has given him more flexibility (as have higher oil prices) to negotiate a more lasting deal with the regional governors and militants in the Niger Delta. Accordingly, 2008 should be a year when Nigeria returns to more routine problems - kidnappings, oil bunkering and endemic corruption - rather than assassinations and wholesale destruction of energy infrastructure. Nigeria's never going to be an easy place to invest, but 2008 should see real upside in energy production.

5) Taiwan

There's going to be all sorts of headline risk around the upcoming Taiwanese elections and the accompanying referendum on joining the United Nations (as the Republic of Taiwan, no less). The Bush administration has come out in strong opposition to the referendum, Washington's most direct slap to the Taiwanese in decades, while China has become considerably more pragmatic about this issue. Beijing is now in a much better position to take the high road - they're in a vastly stronger economic position than the last time these two governments clashed; their military capabilities are considerably bolstered; and their communications with the Bush administration on the issue have been strong.

Post-elections, the Taiwan Straits issue should slip to the background. The Kuomintang (KMT) looks likely to win March elections, and Beijing has recently worked to developed stronger relations with them on economic, political and cultural issues. So while Taiwan may look dicey for the next couple of months, that's about it - and there will be no Taiwan surprise during the Beijing Olympics.

6) North Korea

With letters back and forth between President Bush and Kim Jong-il and cultural exchanges on the horizon, a U.S. sunshine policy is eclipsing the rapidly setting sunshine policy of South Korea. The North Koreans are getting paid and have to do relatively little to keep the aid taps flowing. Despite the fact that Pyongyang has already missed its initial deadlines on dismantling its nuclear program, nobody wants to see the process derailed - not Pyongyang, and least of all the U.S. and China. And Tokyo, increasingly focused on domestic Japanese politics, is likely to sit on the sidelines.

Without question, North Korea represents the world's most problematic precedent for proliferation issues (I'll revise that judgment once Iran goes nuclear), and an unmitigated disaster for North Korea's population. But Pyongyang poses no political risk to the region, and I expect you'll hear very little about it (at least from me) this year.

Ian Bremmer is president of Eurasia Group, a political-risk consultancy and the author of "The J Curve: A New Way to Understand Why Nations Rise and Fall,". He can be reached via e-mail at research@eurasiagroup.net.

(c) Tribune Media Services, Inc.


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