The World in 2015

Moisés Naím, Thomas Carothers, Marwan Muasher, Lina Khatib, James M. Acton, Jan Techau, Eugene Rumer, Douglas H. Paal, Paul Haenle & Uri Dadush / Carnegie Endowment for International Peace

It was quite a year. The Year in Crisis, 2014, will be remembered for the upheaval that captivated the globe. And it won’t get any easier—the Ukraine conflict, rise of the Islamic State, and the Ebola epidemic aren’t over yet, and new concerns could be lurking just over the horizon.

Carnegie’s global experts assess the world in 2015. What can we expect and what will surprise us? What are the challenges and what are the opportunities?

Is the same level of global turmoil likely in 2015?

Thomas Carothers: Predicting turmoil is a risky business. No analyst writing in late 2013 predicted the turmoil trifecta of the Ukraine crisis, the rise of the Islamic State, and the Ebola epidemic. Yet while these developments were a surprise to most, they did not come out of the blue. All three are rooted in underlying conditions that are likely generators of continued turmoil for the foreseeable future.

The first such condition is the ongoing breakdown in significant parts of the Arab world of state arrangements formed in the first half of the twentieth century as a result of external shocks, like the U.S.-led ouster of Saddam Hussein, and internal shocks, above all the outbreak of massive public protests in numerous countries in 2011. Working out replacements for decayed state arrangements that relied on harsh repression to hold together societies deeply divided along ethnic and religious lines will be uncertain, and conflictive, for years to come.

The second condition is a mode of political leadership in Russia has become dependent on sour nationalism and manufactured crises, subordinating stability and rationality in the country’s geopolitical posture to the imperative of maintaining the leader’s popularity. That negative loop will continue to generate conflict in the countries around Russia.

The third condition is the persistent, devastating weakness of at least fifteen to twenty of Africa’s states, a weakness that makes them vulnerable to any number of disruptive maladies, whether diseases, religious extremism, or political violence.

If we add to this picture a fourth underlying structural condition generative of conflict—the continuing restructuring of the Asian security order to accommodate a rising China—it is not difficult to assume that turmoil will continue in 2015 and beyond. The only uncertainty is exactly what forms it will take and where exactly it will erupt.

Will crises in the Middle East get worse before they get better?

Marwan Muasher: The Arab world is certainly going through a transformational process. And the year 2014 witnessed two major developments in that regard.

On the positive end of the spectrum, Tunisia seems well on its way to consolidating its nascent democracy. The Tunisians have been able to agree on a forward-looking constitution that gives women full rights, upholds the commitment to a peaceful rotation of power, and protects the right to believe or not to believe—all firsts in the Arab world. The recent parliamentary elections also set a new precedent for the region with Islamists coming to and leaving power by the ballot box.

The Tunisians seem to have passed the test of successfully conducting two posttransition elections, a standard sign for a successful transition to democracy. Tunisia seems to have passed the danger threshold and can look forward to bringing back long-term stability and prosperity to the country.  

Where countries adopt a discourse of inclusion, as Tunisia did, 2015 is likely to witness an improvement in the security, economic, and political spheres. But it is difficult to lump the entire Middle East into one category.

On the other end of the spectrum, 2014 witnessed the reemergence of the Islamic State (reincarnated from a predecessor group in Iraq), which grabbed significant territory in both Iraq and Syria and engaged in barbaric and exclusionist discourse against fellow Muslims, Christians, Yazidis, and other communities, as well as foreign individuals. The Islamic State is posing not just a military and terrorist threat to the region and the international community, but also a cultural one. Some are using the group as a rallying point against the establishments—both domestic and foreign—and threatening the region’s cultural and religious diversity.

The situation in Syria and Iraq will likely continue to get worse. It will be a clear sign of what can happen to a country where subnational identities trump national identities and forces insist on an exclusionist, winner-take-all approach. The Islamic State is not likely to be defeated militarily in 2015 without boots on the ground or adequate training of Iraqi forces and moderate Syrian opposition members (although the group’s ability to gain new territory seems to have reached its limit).

The Gulf countries are likely to witness more tension in 2015 if the price of oil continues to hover below $80 per barrel. Efforts by Saudi Arabia and the United Arab Emirates to support Egypt through billions of dollars worth of aid will not be sustainable even with the large financial reserves they have acquired. And if the economic situation continues to deteriorate in Egypt, which has also chosen an exclusionist discourse, tension is likely to rise, and support for President Abdel Fattah el-Sisi will start dropping if Gulf money starts to diminish.

Will the jihadist threat in the Middle East grow in 2015?

Lina Khatib: Jihadism in the Middle East risks becoming routinized in 2015. Extremist groups like the Islamic State are likely to continue to grow in stature, wealth, and membership despite international efforts to contain them.

Inspired by the Islamic State, jihadist groups in Syria have been disseminating graphic violence as a way to gain notoriety, funds, and fighters. Other groups across the Middle East have begun to adopt this model, sparking a trend that can be expected to continue in the year ahead.

Growing jihadism will necessitate a transformation in groups such as the Islamic State, which is likely to shift from a centralized state-like structure into a franchise similar to al-Qaeda’s network. This growth will further pit the two groups and their respective allies in the region against one another as they begin to compete for resources and influence.

A key strength of the Islamic State, however, is its strict hierarchical, centralized structure. While becoming a network may mean an increasing geographical reach for the organization, transforming into a franchise will mean losing full control over the actions of its members. Although this may weaken the organization itself, more autonomy for splinter groups translates into escalated, unpredictable jihadist activity beyond Syria and Iraq.

Jihadism will therefore continue to be a major threat to stability in the Middle East. This will be the case not only in areas of conflict like Iraq, Libya, and Syria, but also in countries where jihadists seek to disrupt the status quo like Egypt, Algeria, and Tunisia and where the rule of law is weak like Yemen and Lebanon. Enduring grievances, weak security sectors, and bad governance are likely to further fuel the spread of jihadism.

What are the major nuclear proliferation concerns in 2015?

James M. Acton: Iran and North Korea are likely to remain the principal proliferation concerns in 2015.

Iran and its six interlocutors (China, France, Germany, Russia, the United Kingdom, and the United States) have been trying to negotiate a long-term agreement over Iran’s nuclear program since they reached an interim deal in late 2013. So far they have been unsuccessful and extended the interim deal twice—most recently until July 2015.

Reaching a final deal will be a challenge because the sides remain far apart on a number of issues, and domestic politics constrains their ability to compromise. If the negotiations process should break down, Iran is likely to resume enriching uranium to higher levels, escalating the crisis, although it’s unlikely to actually build a nuclear weapon in 2015.

There are currently no constraints on North Korea’s nuclear weapons program—nor are there likely to be in 2015. Pyongyang restarted its plutonium-production reactor in 2013 (which had been mothballed under a now-defunct disarmament agreement) and is believed to be producing weapons-grade uranium. It last conducted a nuclear test in February 2013 and an intercontinental ballistic missile test (under the guise of a satellite launch) in December 2012. It would come as no surprise if North Korea tested one or both technologies again in 2015.

Looking more widely, a number of states—like Egypt, Saudi Arabia, Turkey, Japan, and South Korea—face pressures, including from a tough security environment and domestic politics, that could induce them to initiate nuclear weapons programs. While all these states are subject to International Atomic Energy Agency inspections, neither Egypt nor Saudi Arabia have accepted an enhanced set of safeguards known as the Additional Protocol. All of this creates concern that at some point in the future—whether in 2015 or afterward—a new proliferation crisis could erupt.

Can Europe develop a stronger foreign policy in the year ahead?

Jan Techau: On all fronts, 2015 promises to be one of heightened drama in the European Union.

In foreign policy, Russia-Ukraine is the toughest issue. The EU, wittingly or unwittingly, has decided that its only chance to win the geopolitical tussle over its Eastern neighborhood is to make the reforms of Petro Poroshenko’s government in Ukraine a success. In order to do so, it needs to play geopolitics at the highest level over a protracted period of time, with all 28 members on board, with large sums of money at the ready, and against the declared will of the Kremlin.

This is a tall order. The good news is that so far, EU unity holds. But nobody knows for how long, and whether the surprisingly firm leadership of Germany’s Angela Merkel will be enough to keep the EU in the game.

The second big issue is the Transatlantic Trade and Investment Partnership (TTIP). 2015 will be the crucial year for the negotiations of this once-in-a-lifetime opportunity. The EU Commission is strongly supportive, but not all member states are equally enthralled, and anti-TTIP activists have already scored important public relations victories.

The third one is Turkey, where 2014 witnessed a rapid deterioration of relations over an increasingly worrisome political agenda pursued by Turkish President Recep Tayyip Erdoğan. Turkish EU membership has become a very, very distant option, and the question is whether the EU can find a smart combination of realpolitik and critical engagement with a country that is of utmost strategic importance.

Internally, the EU’s central problems will be an overall weak economy and a possible return of troubles with the common currency. On both counts, the key to reform lies with the member states, but the political appetite for real reform is small. Already, this combination is eating away political legitimacy both at home (see France) and at the EU level. And on top of all this, the UK faces a most unpredictable general election in May 2015 that could easily lead to a further deterioration of the country’s attachment to the EU.

Finally, after new EU leaders have arrived in the EU Commission, the European Council, and the External Action Service, the institutional power geometry will need some time before it can operate smoothly.

In light of all of the above, the EU certainly can’t afford for this transition period to last too long.

Is the volatile situation in Ukraine likely to continue?

Eugene Rumer: 2015 promises to be another difficult year for Ukraine. The country passed several important milestones in 2014—the presidential and parliamentary elections and a fragile ceasefire in the east. Assuming the latter holds—and all bets are off if it doesn’t and the conflict resumes and spills deeper into Ukraine—the new government is facing many of the same challenges its predecessors had stumbled on many times before.

The economy is the problem. It is projected to contract by 7 percent or more this year. The hryvnia lost nearly half its value in 2014. Central bank currency reserves are below $10 billion—the lowest in a decade. The government is struggling to pay its bills, and absent an infusion of cash, the prospect of a default is all too real.

Earlier in 2014, the IMF predicted that Ukraine would need an additional $19 billion in financing to make it through 2015. But it is not clear where that money can come from. There is little appetite in Europe to pour more money into Ukraine as the continent struggles to reenergize its own economic growth. The United States is not offering to help either. The bill making its way through the U.S. Congress promises some security and technical assistance, but no cash to help Ukraine make ends meet.  

It is a no-win situation for the new government. The reforms promise to be painful and unpopular, and the government needs cash to soften the blow to the public and the economy. But the only source of that cash is the IMF, and its loans are tied to a program of reforms that the government has yet to tackle.

And while the majority of the new parliament is purportedly in favor of reform, factional politics threatens its cohesion and leave President Poroshenko’s government in a highly precarious position. With Prime Minister Arseniy Yatsenyuk as Poroshenko’s leading rival, the world could very well see a replay of the aftermath of the 2004 Orange Revolution, when having won at the polls, the reformist coalition fell apart, torn by internal rivalries. Hopefully, the new generation of Ukrainian leaders remembers what happened a decade ago.

What is the risk of conflict in Asia? Are there particular hot spots to worry about?

Douglas H. Paal: There are multiple friction points in Asia, mostly involving territorial conflicts of long standing. All the governments involved, and the United States as the longtime guarantor of peace and stability in the region, want these frictions to be kept as low as possible or necessary. But with many actors involved, with varying levels of sophistication and capability, the potential for conflicts to erupt through accidents or misperception is undeniable.

Just in the past year we saw elevated tensions in China’s relations with Japan, Vietnam, India, and the Philippines. Taiwan’s relations with the mainland have been calm for the past six years, but recent and upcoming elections are tilting the landscape back toward rising tension. North Korea remains an unpredictable wild card, much more unpredictable under the youthful, inexperienced leader Kim Jong-un than under his predecessors, his grandfather and father.

China, whose growth, increasing military capacity, and potential to try to revise the international environment are the main drivers of structural change, remains too opaque about its long-term intentions for its neighbors to be comfortable. Demands are rising for their own efforts and closer relations with Washington to counterbalance Beijing. This in itself can be a source of dangerous developments.

There are very tentative signs that Beijing may be turning more inward now and in the months ahead, lowering tensions with its neighbors while doing so, but the underlying structural change continues. Washington’s dysfunction and the Obama administration’s unsteady stewardship of foreign policy further complicate the situation.

How will China pursue relations with its neighbors in the year ahead?

Paul Haenle: Since rising to power two years ago, President Xi Jinping has made improving relations with China’s neighbors a top priority. The objective is closely tied to Xi’s “China Dream” to realize the nation’s rejuvenation.

Convening a major conference on peripheral diplomacy in October 2013, Xi outlined a strategy to employ the “ace” in China’s deck—economic power, including abundant foreign reserves—to convince bordering nations that China’s continued rise is not threatening and will bring them important benefits. By orchestrating a shift from absorbing huge amounts of foreign investment to exporting Chinese capital, Xi is aiming to enhance China’s influence and leadership in the region and create a stable environment to pursue domestic objectives.

While Beijing basked in the APEC spotlight last month, the most consequential outcomes for attentive neighbors came outside of the leaders’ summit. Xi unveiled a $40 billion Silk Road Fund shortly after twenty Asian nations joined China to launch the Asian Infrastructure Investment Bank. Chinese leaders assert that the new China-led banks are open, inclusive, and will integrate into the existing international system and abide by the same roles. To be sure, they will give China more influence and facilitate the use of its foreign reserves, the export of its technologies, and the internationalization of the renminbi.

China’s neighbors will welcome Chinese investments in regional development and connectivity. But Xi acknowledged in his recent speech to the Australian parliament that anxieties remain over how China will use its growing power and influence.

Indeed, despite a handshake between Xi and Japan’s Shinzo Abe in Beijing and cooling of tensions with Vietnam, China appears to be building an island to host its first airstrip on a reef in the disputed Spratly Islands, dragging its feet on the conclusion of a code of conduct for the South China Sea, and refusing to participate in the Philippines’ attempt to secure international arbitration over disputed claims. Countries worry that bit by bit a rising China is changing the status quo.

In the year ahead, China will continue to try to use its ace to extend the China Dream to all Asia-Pacific nations. Yet, in issues involving sovereignty and territorial integrity, Beijing can be expected to be no less determined. And China’s bid for greater influence will make it increasingly difficult for the United States and China to advance stable and cooperative relations. Try as it may, China may find that money alone can’t buy a more welcoming periphery.

Will the global economy struggle in 2015?

Uri Dadush: Yes, 2015 is likely to be a difficult year.

Six years after the outbreak of the financial crisis, with unemployment still high across most of the advanced countries, and many developing countries in trouble, the global economy is likely to grow well below its long-term growth rate in 2015. It will be closer to 2.5 percent than the 3 percent it has registered over the last twenty-five years. While some parts of the developing world will see a significant increase in living standards, unemployment in advanced countries will decline at a glacial pace.

Even in the recovering U.S. economy—one of the bright spots—there is no sign of a break in the trend toward higher inequality, so the vast majority of families will see only a small improvement in their take-home pay. But a strong dollar and lower gasoline prices will help keep a lid on U.S. prices in 2015, so many struggling American families will see a small improvement in their real purchasing power—the first in a long time.

China’s prospects are the eternal question mark, but still, Chinese growth over the last year of over 7 percent has provided considerable momentum to global aggregate demand.  

Continued rapid growth in large parts of the developing world (China, India, Indonesia, and sub-Saharan Africa), recovery in the United States and the United Kingdom, loose monetary policies, smaller cuts in government spending, and falling oil prices are the engines that will propel the global economy forward in 2015. These engines are powerful enough to ensure that we will steer well clear of another global recession.

However, strong headwinds will slow progress. The eurozone and its closely integrated trading partners to the east and south, which together easily constitute the world’s largest trading block, is still a long way from emerging from its sovereign debt crisis. The crisis in Ukraine and a looming Russian recession as the country reels from the effect of collapsing oil prices, sanctions, and capital flight technically only have a small effect on European demand, but their implications for business confidence, especially in Germany, should not be underestimated. The effect of a sales tax hike appears to have had a devastating effect on the Japanese economy, which has lapsed into recession.

Last but not least, the impulse coming from many emerging markets has slowed, and some of them—such as Turkey, Brazil, and South Africa—remain exposed to a sudden stop in international capital flows in the event of policy errors or if, as expected, American policy interest rates are raised.     

What will surprise us in 2015?

Moisés Naím: One of the main surprises of 2015 will be that three of the most disruptive events of 2014 will lose their potency. The Ebola epidemic, the Islamic State’s ascent, and the Russian president’s belligerence will still be with us in 2015, but they will not be as important as they were in 2014.

Sadly, Ebola will continue to claim lives. So far, however, the worst predictions have not come true. The World Health Organization warned that the Ebola virus in West Africa could see 10,000 new cases a week by December, and the Centers for Disease Control and Prevention estimated a worst-case scenario of 1.4 million new cases by January 2015 and hundreds of thousands of casualties. In reality, the death toll is approaching 7,000, and the total number of cases is near 18,000 as of early December 2014. Ebola may not abate, but it does not seem likely that it will become a global pandemic.

Something similar will happen with the Islamic State. It will continue to operate in Syria and Iraq with some success, and individuals and cells directed or inspired by the group will still find targets to attack in other countries. But the financing, leadership, mobility, arms capabilities, and general military capacity of the Islamic State will be diminished. Its future will not be as successful as its brief past.

In 2015 Putin’s weaknesses will be more destabilizing than his strengths. Like the Islamic State, Putin has stimulated hitherto unimaginable alliances of nations bent on curbing his geopolitical misdeeds. The decisions of the Russian president have isolated his country and gravely damaged its already frail economy.

The drop in oil prices, the massive capital flight from Russia, and severe economic sanctions will surely limit Putin’s options. The danger, of course, is that this may lead him to pick fights abroad to distract from Russia’s domestic woes.

If the main disruptions of 2014 aren’t going to dominate the agenda in 2015, what will? I don’t know.

But I suspect that some of the surprises will have one of three origins. One, a cyberattack of unprecedented magnitude and consequences. Two, a catastrophic climate disaster with more fatalities and material losses than any we have seen before. Or three, the instability of oil-exporting countries as a consequence of the fall in crude prices.