TAG President Jack Devine’s Spring 2019 Intelligence Report includes his current assessment of the 2020 U.S. presidential campaign, North Korea, trade with China, the situation in Venezuela, the new government in Mexico, elections in Ukraine, and continuing troubles for Saudi Arabia.
Mueller Report and Democrats’ 2020 Hopes
Special Counsel Robert Mueller’s definitive conclusion that there was no “collusion” between the Trump Campaign and the Russian government in the 2016 presidential election has put wind back in President Trump’s political sails and rattled many of his opponents. However, Attorney General Bob Barr’s write-up of the Mueller report won’t end the assault on Trump’s past financial dealings. On the contrary, investigations will continue in the Democrat-controlled House and at the federal and state level-most importantly in New York, D.C., and Virginia. While these efforts are unlikely to produce tangible results during Trump’s term in office, these inquiries will play a key part in many candidates’ narratives during the 2020 Presidential campaign.
There is a growing concern in some Democratic quarters that the continuing investigation and the party’s seeming lurch to the left might backfire and extend Trump’s tenure in office. The 2020 election will likely be closer than most political observers realize, and much political and economic turmoil surely lies ahead. Moreover, if history is any gauge, a potentially destabilizing international crisis might well appear on the landscape. Venezuela, North Korea, Iran, and Ukraine would be good bets. How these crises are handled will greatly affect the ultimate outcome of the election as well.
One aspect of the Mueller investigation which is not getting sufficient attention is how aggressive Russian intelligence was during the 2016 campaign in a deliberate effort to undermine our democratic system. Additionally, Russia has become intent on trying to block our interests around the globe, for example in Ukraine, Venezuela, and Syria. There is no sign that this will change in the near to mid-term, making a return to Cold War dynamics increasingly likely, particularly given Putin’s old KGB mentality.
North Korea Negotiation in Trouble
After President Trump cut short his summit with Kim Jong-un in Vietnam, the North Koreans doubled down on both their aggressive rhetoric and their nuclear development program. Trump’s response has been somewhat unclear at least to the public eye. He reportedly towed a very hard line in Vietnam when he called for a full dismantlement of North Korea’s nuclear infrastructure, chemical and biological warfare program, and related dual-use capabilities as well as its ballistic missiles, launchers, and associated facilities. Trump then surprisingly attempted to cancel a new round of sanctions by the U.S. Treasury Department. It is quite possible his hard line in Vietnam inspired a behind the scenes move by the North Koreans to reopen negotiations. Time will tell if anything fruitful comes from it. Trump and South Korean President Moon Jae-in will meet at the White House next week to recalibrate.
China Trade and 5G Competition
Ahead of the next leg of trade negotiations this week, both China and the U.S. have sought to soften their starting positions signaling that both sides hope to reach some kind of trade deal, which would put a welcome end to the greatest tensions and damaging tariffs of this trade war (even if it would still not resolve some longstanding issues). However, the U.S.’s effort to block the Chinese dominance of 5G infrastructure in Western democracies on the basis of key national and regional security concerns has met with surprising resistance from traditional European allies. While some might see a disturbing European pivot toward China, especially with Italy’s embrace of China’s Belt and Road Initiative, recent statements from the European Union suggest that Europe still sees China as a strategic rival with its restrictions to market access, its human rights abuses, and its rule of law.
Venezuela Sinks Further
Venezuela continues to sink into further chaos and decline. President Nicolás Maduro hangs on to power with the backing of the country’s military high command as well as financial support from Russia and China. Simultaneously, opposition leader and head of the National Assembly, Juan Guaidó, continues to proclaim himself as the legitimate interim president of Venezuela. More than 50 countries including the United States now recognize Guaidó, even as he has thus far been unable to oust Maduro.
The Trump administration is looking to turn up the heat on Maduro, including issuing additional sanctions. Administration officials have also said “all options are on the table.” Judging by President Trump’s recent comparison of Venezuelan socialism to the policy positions of Democrats in the US Congress, he can be expected to keep the heat on Maduro which also will play well to a domestic audience.
Mexico under AMLO
Clouds seem to be forming over Mexico’s economy. There was the threat of a U.S.-Mexico border shutdown by President Trump and the recent cut in Mexico’s economic outlook for 2019. Since Mexican President Andrés Manuel López Obrador (aka AMLO) was elected in July 2018, Mexico’s economy has slowed. Oil production fell 6.9 percent last year, leading the rating agencies to downgrade PEMEX in January.
Many thought AMLO might be more pragmatic when he gave his blessing to the re-negotiated NAFTA 2.0 deal last fall. However, he is at heart a leftist and nationalist who is skeptical of corporate interests. He threw out the $13 billion airport project, and recently announced an end to oil joint ventures between private companies and the state-owned PEMEX-a hallmark of Mexico’s 2013 energy reforms.
At the border, AMLO will need to demonstrate that he’s doing more to address the migrant crisis. He should take President Trump’s threats seriously even as the US president has now backed off his original threat to close the border, saying instead that he would give Mexico a year to stem the flow of drugs and migrants. In this year, AMLO has a tough balancing act to perform: he will need to handle the issue with diplomatic finesse to avoid damaging the U.S.-Mexico relationship or further eroding Mexico’s overall economic forecast, while at the same time maintaining his image and base of support at home.
Comedian for Ukraine’s Masses
The first round of Ukraine’s presidential election provided much intrigue. The March 31 contest traditionally would’ve been between President Petro Poroshenko and former president Yulia Tymoshenko. Instead comedian, Volodymyr Zelenskiy, catapulted in the polls winning a large enough vote share to be considered the favorite in the April 21 second round. Like many around the world, Ukrainians appear to be so disillusioned by establishment politicians that they may put their hopes on Zelenskiy, a political novice whose TV character becomes Ukraine’s president by accident. Following the polls, Poroshenko appealed to young voters, touting his anti-Russian stance and promising to “listen” to their concerns. We should expect the Kremlin will attempt to influence the final election outcome in support of Zelenskiy. Putin may mount a disinformation campaign, tamper with the mechanics of the election, amplify military aggression as he did in the Sea of Azov last year, or recruit intelligence sources close to Zelenskiy.
Cloudy Skies Remain for Saudi Arabia
The international bond market’s warm reception to Saudi Arabia’s Aramco bond prospectus suggests that their $10 billion bond offering will be successful. We learned that the company is cash rich and hugely profitable with $111 billion of profit in 2018. For the Saudis, this is a welcome response given the extensive fallout from the murder of Jamal Khashoggi. Nonetheless, Saudi Arabia is not yet back in the good graces of the international community. The highly anticipated Aramco IPO has been indefinitely postponed, its Public Investment Fund embarrassingly saw the return of $400 million from Endeavour talent agency, and even the bond offering is far more modest than the $70 billion initially planned. On the political front, the situation for Riyadh remains suboptimal. Though the Trump Administration hasn’t leaned heavily on the Saudis, the US Congress is using its influence to sanction Saudi Crown Prince Mohammad Bin Salman (MBS). Furthermore, MBS’s strategic challenges remain, with less leverage and goodwill from the international community to resolve them, especially his ever unpopular war in Yemen.
