2016: A Year of Living Dangerously

Well, it only took China and Saudi Arabia 48 hours to remove the “happy” from new years for 2016!  As Saudi Arabia was executing 47 on January 2nd, the Chinese stock market was tanking sending financial shock waves into an already unsettled world.  Wanting to extend its “best wishes” for the new year, North Korea tested what it falsely claimed to be a hydrogen bomb, while China flew a military aircraft to Fiery Reef in the disputed Spratly Islands in the South China Sea as Iran released video footage of its second underground missile depot in seeming violation of its nuclear agreement with the United States.  These events in the first week of the New Year make predicting that 2016 will be dangerously tumultuous unnecessary.

Economic trouble in China will have the most immediate impact on the average American in terms of access to consumer goods and their IRAs’ bottom line with the Dow Jones average down over 900 points in the first week of trading.  The Chinese stock market sell off was precipitated by  the release of the Caixin/Markit Purchasing Managers’ Index which showed that China’s manufacturing sector contracting for the 10th-straight month in December. The continued weakness in this private survey, contrasted with robust official numbers for industrial output, indicates that the overall economy is expanding only in the low single digits. China’s economy is also struggling with demands for higher wages, accommodating an aging population, and shifting to a new growth model based on raising internal consumption of goods and services produced.  Equally as disturbing, imports (a good indication of both manufacturing and consumption trends) fell 8.7 percent in November in dollar terms, for a record 13 straight months of decline. Exports that month were off 6.8 percent, the fifth-straight month in negative territory. This litany of economic challenges means China is headed into a serious recession that will likely result in the Chinese people questioning whether the Chinese Communist Party is governing in their best interests.  Economic woes may well cause Xi Jinping and the leadership of the Chinese Communist Party to turn to a “wag the dog” strategy appealing to Chinese nationalism against “foreign devils” asserting sovereignty claims in the East and South China Seas.  Such a nationalist approach and/or China being seen as the cause of weakness in the American economy, will only encourage those running for President to take a more confrontational stance towards China.

Not helping the Chinese stock market recover are increasing tensions on the Korean Peninsula.  North Korea’s claims to have conducted on January 6th an underground detonation of a hydrogen bomb, which has not been confirmed and is viewed as unlikely, has increased the pressure on both China and the United States to restrain Kim Jong Un’s brinkmanship.  North Korea’s “boy leader” apparently sees the US’ inability to control the Hermit Kingdom’s behavior with sanctions and isolation as pushing China to insure the security of North Korea or risk South Korean and US forces conducting military operations/occupation nearer the Chinese frontier.  Besides a B-52 fly over, Washington and Seoul are already engaged in discussions about the US bringing more “strategic assets” to South Korea. This last atomic test has also brought Japan, South Korea, and the United States closer together diplomatically and militarily, causing China to feel more isolated if not threatened.  Beyond pushing China to be more protective of North Korea’s security, it probably wouldn’t surprise too many if Tehran was actually funding part of Pyongyang’s nuclear program as a hedge while Iran’s nuclear program is on hold to get economic sanctions lifted.

Saudi Arabia’s execution of 47 shocked the American people with its ISIS-like brutality and infuriated Iran because among those executed was the well-known Shiite cleric Nemer al Nemer.  “It looks like an extremely irrational and ill-considered decision to do this,” said Christopher Davidson, a professor of Middle East politics at Durham University in Britain. “In my view, it speaks more about the local dynamics in Saudi Arabia itself that are shifting steadily away from the ruling family’s control.”  The House of Saud, however, was motivated by at least three reasons for going forward with this controversial execution of a large number of internal dissidents.

  • Declining oil prices means that the Saudi government will need to cut back on subsidies for housing, education, medical care, jobs, and gasoline that ordinary Saudi citizens have come to expect. The mass execution of dissidents on January 2nd demonstrates the absolute power the royal family holds and will use against those who question it rule let alone oppose it.
  • These executions play to Saudi Arabia’s ultraconservative Sunnis, who support the monarchy as ISIS inspires young Saudis to see the royal family as not protecting fundamental Muslim beliefs. As confrontation with Iran becomes more manifest, conservative Saudis are also increasingly seeing the Kingdom’s 10% to 15% Shiite minority population as a “fifth column.”
  • The executions signal that Saudi Arabia’s tolerance for Tehran’s Shiite meddling in the Arab world has reached its limit. Resisting Iranian military involvement in Syria, Iraq, and Yemen’s civil wars is costing Saudi Arabia billions of dollars and, as oil revenues decline, is forcing the royal family to spend sovereign wealth fund money. This will create dissention within the royal family and may eventually threaten the kingdom’s internal stability.  More ominously, the Saudi leadership feels abandoned as the US seeks an accommodation with Iran.

The animosity between Saudi Arabia and Iran is now out in the open, exposing the civil wars in Syria, Iraq, and Yemen as proxy conflicts between the dominant Sunni and Shia theocracies for the soul of Islam.  As a secular nation, this is a holy war the US does not understand and would be ill advised to take sides in as this would preclude the next administration in Washington from serving as an honest broker to prevent a bloody regional war that could involve outside powers.

A deep economic recession in China, a growing North Korean nuclear arsenal, and an open conflict between Saudi Arabia and Iran are each disruptive in their own unique ways, but what they share in common is the potential to impact regional and global events in significantly and unpredictably.  Not yet a month into the new year, 2016 is showing that already this will be a year of “living dangerously” for the national security community.

That’s what I think; what do you think?

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