Magazine article Risk Management

The Top Political Risks of 2008: An Axis of Instability

Magazine article Risk Management

The Top Political Risks of 2008: An Axis of Instability

Article excerpt

The political risk consultancy Eurasia Group recently released its report of the top political risks facing global markets and regional investors in 2008. This in-depth analysis, which can be read in full on Eurasia's website, predicts a turbulent year as these key issues develop and potentially lead to wider global instability:

1. The United States

"For the first rime in my career as a political scientist, the U.S. is a serious (indeed, the serious) macro risk factor," writes Eurasia Group's president Ian Bremmer. Given its waning influence abroad, ineffective diplomacy in Iran/North Korea, war in Iraq and a global shift away from the dollar, some believe the United States lacks the political capital to lay the foundation for long-term growth in the global economy. And with popular American sentiment trending away from international trade agreements and multilateral economic policies, this could spark a greater isolationism that would impact all global markets.

2. Iran

Though the threat of a U.S. military strike was alleviated significantly after last year's intelligence report revealed a cessation of Tehran's nuclear program. the chances for diplomacy have faded too. This could push an emboldened Iran to greater provocation. increasing tension throughout the region. Add in the threat of an Israeli military strike, Tehran's continued support for Hamas and Hezbollah. and the possibility of revitalized nuclear ambitions, and Iran represents the "single greatest problematic factor for regional stability" and the "principal macro issue for continued high global oil prices.

3. Iraq

Though the 2007 troop surge successful reduced casualties across the board in Iraq, it is ultimately a temporary gain and domestic support for the war remains at its lowest levels. Eventually, troop withdrawal will likely lead to greater fragmentation of the country and wider Sunni/Shia conflict, engendering greater Middle Eastern instability.

4. Terrorism

Adding to concerns of greater terrorist activity in Iraq, Pakistan and Afghanistan in the near-term, some experts fear a small- to mid-sized attack in the United States surrounding the November election. Hezbollah and other "al Qaeda affiliate" groups also may have regained the resources necessary to create "limited, cross-border skirmishes" with Israel, in addition to the other terrorist threats that persist throughout Europe. …

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