Wednesday, 2 September 2015

Sitrep - 2 Sept, 2015

Iraqi Prime Minister Haider al-Abadi’s proposed government and structural reforms, while institutionally popular, are stirring a growing amount of opposition in the country’s south, some of it violent. The leader wishes to clamp down on corruption and governmental inadequacies in the midst of a crippling internecine war and could be losing control of much of the country.

Iran, implicitly in control of Iraq’s government, understands that a wider success of Mr al-Abadi’s reforms would strengthen his leadership too much, diminishing reliance on Tehran for political support. The Iranians will quietly encourage demonstrations in the Shiite Iraqi south to both undermine support for the reforms and remind Mr al-Abadi where the power truly is.

Further north in Syria this week, two rumours emerged of a Russian plan to increase its military and political support for the embattled regime. Greater numbers of advanced military equipment, and even Russian language speakers, have been recorded in the regime’s core territory fighting rebel and Islamist forces over the past few weeks.

Whether this influx of materiel can bolster the regime relies on the veracity of the second rumour. Sources close to the Russian and Gulf Arab governments have hinted at backroom negotiations between the Syrian regime and selected rebel forces are underway showing some indications of early success.

The two sides reportedly have broadly agreed on a power transition to end the civil war, but will require the backing of more rebel groups for it to be viable. Russia is spending serious political capital on the project, indicating that Moscow thinks these negotiations and extra weapons may be effective to protect its interests in Syria and the al-Assad regime, although only time will tell.

This week will also be important for China as it deals with the ripples of compounding financial and political problems of transitioning to an updated economic model. A series of chemical explosions over the past few weeks highlight the broken nature of Chinese local bureaucracies and their emphasis on growth over regulations and worker safety. While Beijing must tread carefully in prosecuting its anti-corruption campaign, the campaign is extremely important to maintain.

China’s PMI index also dropped into contraction territory over August, indicating the country may have slowed down further than indicated by official figures. The index measured below 50 (49.7), the lowest since 2012. More wild swings in the Chinese stock market are likely, and its housing sector is showing signs of not yet hitting bottom after a partial bubble-burst earlier this year.

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