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2008 GEOPOLITICAL BRIEFING

Featuring GLOBAL POLITICAL RISKS

By Jonathan Beutler
2008 GEOPOLITICAL BRIEFING

Prepared in December 2007 by Jonathan Beutler
Contact: beutler@ucla.edu or jmbeutler@gmail.com

This report contains a brief synopsis of the geopolitical climate in a small cross-section of regions and
countries in the world. This report is neither comprehensive nor exhaustive. For more information on these
topics, please contact the author. The main purpose of this report is to provide a sample of political risk
analysis. The author is very aware of major political developments in Burma, India, Kenya, South Africa,
Israel, France, the U.S., Australia, and elsewhere; this report is simply a briefing of some of the world’s
hotspots.

Jonathan Beutler has worked and studied in the U.S., Europe, Asia, and South America. He speaks five
languages and has provided analysis and research for such organizations as universities, the U.S.
government, the State of California, and corporations.

© 2007 Los Angeles, California, U.S.A.

This report and all its contents are the intellectual property of Jonathan Beutler. Any
portion of this report may be cited and republished only if and after written permission
has been granted from the author, Jonathan Beutler. For permission to reuse, republish, or
cite this report, please contact Mr. Beutler at beutler@ucla.edu
This report is not intended to provide investing advice, and should not be treated as
persuasive evidence to invest in a particular region or country.

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6 major global political risks of 2008:
1. East Asia: China scapegoat used by American advocates of anti-
2008 will be one of the most important Chinese protectionism.
years in contemporary Chinese history because Chinese industry’s drastic expansion will
of the singular event of the 2008 Summer continue in 2008, while the state and private
Olympics. Beijing and other Chinese cities are firms will seek to acquire assets abroad.
undergoing heavy reforms and redevelopment Chinese diplomacy will most likely focus on
in preparation for the Olympics. the country’s consumption of foreign natural
On the global front, the Chinese resources. Increasingly, Chinese firms are
government is expected to continue its proving to be strong competitors in both
aggressive natural resource diplomacy, domestic and foreign markets.
primarily in Africa, the Middle East, and Latin Despite the remarkable economic growth
America. and infrastructure modernization in China,
An important aspect of regional political there is considerable political risk associated
risk is the inflammatory situation across the with instability throughout many provinces of
Taiwan Strait. Regional players and the United China, where regional Communist Party
States have become increasingly concerned leaders are at odds with national leaders over a
with a strengthening “independence” handful of proposals, reforms, and economic
movement in Taipei. Taiwan’s president, objectives.
Chen Shui-bian has expressed his
government’s desire to apply to the United 2. Africa: Nigeria
Nations as an independent country, which the Despite sectarian strife and several
P.R.C. has warned would provoke a very allegations of human rights violations, this
dangerous situation in the region. China has West African oil-rich nation is enjoying,
declared that such a move on the part of particularly in the telecoms industry. Prospects
Taiwan would only intensify alarm across the for investment in this OPEC-member country
Strait. Taiwan appointed a representative to are generally positive. Thanks to Nigeria's
Hong Kong toward the end of 2007, who is natural oil reserves, the Chinese government
expected to seek better relations with and has courted Nigeria in order to establish closer
support from the city-state, which will place ties between the two.
more tensions on relations with Beijing. As in many developing nations, Nigeria
During 2008, it is expected that Taiwanese continues to be affected by significant
leaders will attempt to draw more global corruption and violence. Some aggressive
attention to their desire for independence. groups within the country have advocated the
Additionally, Hong Kong politicians are disruption of the Nigerian oil industry, and
urging Beijing to allow for a direct sovereign have pursued violence against that industry’s
vote for the Chief Executive of the Hong Kong infrastructures.
S.A.R. Beijing’s relationship with Hong Kong Nigeria’s president, Umaru Yar'Adua, has
is expected to change somewhat during 2008 taken office in 2007, whose election was
as legislators in Hong Kong demand more criticized by international observers who
sovereignty from the Mainland. The recent expressed concerns of electoral fairness.
victory of pro-democracy Anson Chan against Regional stability in Western Africa largely
a Beijing-backed candidate in a legislative depends on Nigeria. If Nigeria suffers a
election in Hong Kong is indicative of general constitutional conflict or other form of political
sentiment in Hong Kong. stability, a larger crisis in that part of Africa
American elections in 2008 are likely to can be expected.
produce further strained relations between
Washington and Beijing. Although relations 3. Central Asia: Pakistan
have improved, most presidential candidates Pakistan’s severe political crisis is one of the
in both major political parties in the U.S. are major dangers facing the world. As one of the
moving toward protectionist rhetoric against greatest political concerns during past years,
China. China’s exported goods have become a

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Pakistan is saturated with corruption, Russia is rich in assets, and has opened for
instability, and violence. international investment.
Although Pakistan, a nuclear-armed Russian politics was increasingly
country, has strengthened ties with India and scrutinized in 2007 because of allegations that
the United States, it remains a primary concern the year’s presidential election was biased and
for regional and potentially global stability. undemocratic. Putin has declared that he will
Pakistan is home to a number of extremist seek to have influence in the national
groups, and many in the U.S. and the West government by becoming Prime Minister,
accuse the Musharraf regime of incompetence when Dmitry Medvedev assumes the Russian
in fighting extremism and correcting presidency.
instability. 2008 will be an important year in post-
Recent turmoil in Pakistan has brought Soviet Russia because the transition from Putin
awareness to the fragile situation in Pakistan. to Medvedev, with the continuing presence of
The former political leader Benazir Bhutto had Putin in the government is reminiscent of
returned from exile in 2007 to her country Soviet-era fraternity politics. During 2008 it is
expecting to run for national office. Then in likely that Putin will in fact become Prime
late December 2007 she was assassinated, thus Minister and exercise extensive influence in
ending her mission to reform and modernize Russia’s politics, and especially in its foreign
Pakistan. Her death is expected to result in policy.
further disarray in a country where stability is Russia, in 2008, will seek to assert a more
already scarce. The aftermath of this event is influential role in global affairs, primarily in
potentially dangerous, and the country’s the Middle East, and reinforcing its military
nuclear weapons are cause for great concern of infrastructure and presence.
neighboring countries in particular.
President Musharraf has removed his 5. The Middle East: Turkey
military uniform and become the nation’s Investment opportunities in Turkey are
civilian president, and has lifted the state of abundant. Turkey occupies a very strategic
emergency hold on the government. However, location: a gateway from the West to the
he is expected to return the country to martial Middle East and Eurasia. However, the
law if chaos reigns in early 2008. During this country is at a pivotal point in its modern
time of political uncertainty, regional stability history, in which it must prove its stability
is at stake. through current challenges.
Pakistan is the only nuclear-armed country Instability is most prevalent in the eastern
in the Muslim world, and some of its regions and southeastern regions of the country. In
are dominated by anti-Western political these parts public education is not as widely
radicals. The instability issue in Pakistan is offered as in other sections of the country.
particularly serious because it is within the Also, police brutality in Turkey has become a
realm of possibility that nuclear arms could highlighted problem in large cities.
eventually fall under the control of radical The Turkish government during the end of
adversaries. 2007 launched military action in northern Iraq,
Within Pakistan’s borders there may attacking strategic targets among the Kurdish
continue to fester hateful groups of anti- group PKK, deemed a terrorist organization by
Western radicals. In 2008, they will continue to Turkey and the U.S.
seek influence in the operations of the regional Turkish entry to the European Union is
and national governments in the country. even less likely now because Nicolas Sarkozy
2008 will be an important and pivotal year has assumed the French presidency. Turkish
in Pakistan’s history, because of a relatively membership in the EU will be a much debated
weak military head of government, political topic in 2008, and will draw more attention to
instability, and a large arsenal of nuclear this country that straddles two continents.
weapons. Turkish society is confronted by the
struggle between secularism and religious
4. Eurasia: Russia fundamentalism. Turkey has stood as an
Russia’s president Vladimir Putin has been example that an Islamic country can become
named TIME magazine’s Person of the Year in democratic and modernized.
2007.

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On a sweeter note, Godiva Chocolatier was delegates that widened at the 2007 Ibero-
sold to the Turkish firm Yildiz Holding for American Summit in Santiago de Chile.
US$850 million in December 2007. Venezuela’s relationship with most
governments in Western Europe has cooled as
6. Latin America: Venezuela well.
The risky situation in Caracas is likely the Additionally, the anti-American president
most significant threat to regional stability in has stated that his country may decide to cut
the Americas. President Hugo Chávez suffered off petroleum supplies to the United States.
a significant electoral loss in 2007 when voters Until recently this has been seen as very
rejected his proposals, including one that unlikely because of the heavy American
would have allowed him to remain in power consumption of Venezuelan oil. But now this
indefinitely. seems more possible as Venezuela warms up
Chávez has threatened to punish European to leadership in China, Russia, and the Middle
firms and investors in his country – East, potentially establishing strong oil
particularly Spanish companies – due to a purchasing ties.
diplomatic rift between Caracas and Spanish

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4 countries to watch in 2008:
1. Latin America: Brazil growth in Spain has outpaced most other
2008 looks like a spectacular year for Brazil. members of the European Union. President
Many have recently commented that the “B” Zapatero has overseen many significant and
from “BRIC” should be dropped. I beg to globally renowned changes in Spain. Spain is a
differ. Brazil is progressive and on the move. country to watch because of its favorable
The stars are aligned to bring Brazil further business climate and steady economic growth.
economic growth, widespread prosperity, and Forecasts by international observers indicate a
investment opportunities. Brazil has long been continuation of steady growth, despite
a leader in alternative fuels, and 2008 will obstacles in the housing market. Recently, the
mean that more than ever these commodities country’s Mediterranean coast was slammed
will be important to the country’s growth and with a series of construction scandals, and a
regional influence. Additionally, the Brazilian dip in vacation housing demand. This housing
petroleum company, Petrobras, discovered slump is being corrected, and the
massive deposits of petroleum off the coast of
Rio de Janeiro, which will most likely position 4. Southeast Asia: Thailand
Brazil as an even more important regional Thailand has recently endured a very volatile
player in petropolitics, perhaps political climate. The Thai Prime Minister,
counterbalancing the influence of oil-rich Thaksin, was exiled as a military coup took
Venezuela. Brazil is now seen as the principal over government operations in 2006. But in late
driver of growth, development, and 2007, Thaksin’s partisans and supporters in the
democratization in South America. People Power Party (PPP) were widely favored
Brazilian president Luiz Inácio Lula da Silva and returned to national control. Thaksin is
(Lula) has initiated a widespread campaign expected to return to his country in early 2008,
against corrupt acts and behaviors that have but will most likely not seek national elected
penetrated all levels of the country’s office.
government. Additionally, it is expected that In 2008, many beneficial reforms are expected
the federal government in Brazil will enact to take place in Thailand. The new government
major tax code reforms during 2008. This will is likely to implement measures to strengthen
greatly enhance the country’s investment democracy in the country and increase political
grade. stability.

2. East Asia: South Korea
With the recent election of a conservative
government in Seoul, less protectionist
measures can be expected in 2008. This is seen
as an encouraging step toward finalizing the
Free Trade Agreement with the United States.
The fast-paced development and
modernization in South Korea has led to a
more intensified Western interest in Korea.
New technological hubs have been built in
Incheon (near Seoul), where the country’s new
state-of-the-art international airport is located.
As a regional leader in hi-tech innovation,
Korea’s favorable political climate makes the
country a particularly exciting place for
business and investment.

3. Europe: Spain
Spain has been called one of this decade’s
engines of European growth. The economic

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