Jack Devine’s Fall 2018 Intelligence Report

TAG President Jack Devine’s Fall 2018 Intelligence Report includes his current assessment of the U.S. midterms, Saudi Arabia, China & NAFTA, Russia, Mexico, and Venezuela.

Marching toward the Midterms

Much has happened in this past quarter which will have long term domestic and international implications – a strong economy at home, a Trade War with China, the end of the Iran nuclear deal, an on again off again diplomatic dance with North Korea, a revamped NAFTA, and the further debilitation of ISIS. We now face one of the more fraught congressional midterms in recent memory. What perhaps has most gripped and energized the American electorate as we head to the polls on November 6 is the traumatic congressional hearings relating to the appointment of Supreme Court Justice Kavanaugh, which will cut two ways in the voting booth. Although the prevailing view is that Republicans will hold the Senate and Democrats will take the House, the winds of change likely will alter again in the days ahead. The Khashoggi fiasco, the immigration caravan’s march toward the Rio Grande and this week’s spate of mail bombs are just some of the issues which will unfold in the next eleven days. The outcome will depend on the unpredictable turnout on Election Day. No matter what happens on the 6th, expect the next two years to resemble the drama of the past two years of the Trump era.

Saudi Arabia: The Strategic Impact of the Khashoggi Affair

The most significant development abroad has been the fallout from the disappearance and killing of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul. Crown Prince Mohammed bin Salman (MBS) has taken a hard line in both his “corruption crackdown” that consolidated power domestically, and his stance abroad in Yemen, Qatar and even with Canada. With the full backing of his father King Salman, MBS has not yet been held accountable for his excesses and missteps. However, the Khashoggi affair could be a game-changer. As a result of the steady drip of Turkish President Erdogan’s intelligence disclosures, the Saudis have had to admit that their intelligence operatives killed Khashoggi in an apparent premeditated murder. To stem the growing criticism, MBS may well have to step aside, or at the very least soften his unflinching domestic and international posture, despite his inclinations to the contrary. But, all bets are off since only the King can make this happen, and so far he has not shown an inclination to do so.

The Trump Administration and Congress have their own diplomatic challenge as they try to address congressional, media and public concern without undermining foreign policy priorities in the Middle East or causing oil prices to skyrocket. Erdogan’s deft handling of the situation has strengthened his position domestically and regionally where he is in stiff competition with MBS. Iran might be the biggest short-term beneficiary if the strong ties are frayed between the U.S. and Saudi Arabia. In the short-term, this situation may allow Europe leeway to continue to prop up the Iran nuclear agreement. Expect the Administration’s attention to shift toward Tehran again soon. Read Jack Devine’s article in The Hill, The Saudis’ Dangerous Game of Truth or Dare.

China and NAFTA: Economic Games

China continues to maintain a resolute face in the trade war with the Trump Administration. However, cracks are emerging and it’s unclear how long the Chinese government can withstand the standoff. Hopefully, both sides will find an off-ramp that allows a win for both Trump and Chinese President Xi Jinping. Should that happen, it will be another example of Trump bending the international order to his will on economic issues, which he seems to have accomplished with NATO countries, Japan, Mexico and Canada.

Financial markets, the business community, and proponents of free trade can breathe a sigh of relief with the recent completion of NAFTA 2.0. The revised trilateral deal, rebranded as the “U.S. Mexico Canada Agreement” or USMCA, includes updates related to the digital economy, automobiles, agriculture, and labor unions. While the negotiations at times were acrimonious, the successful outcome is a win for all parties.

Russia: Midterm Meddling and the INF Treaty

Clearly unchastened by 2016 election meddling blowback, Russia appears to be at it again in the midterms, albeit on a seemingly scaled back level. Criminal charges have been filed against Elena A. Khusyaynova, the alleged accountant for “Project Latka,” for once again using thousands of phony social media accounts to plant divisive messages and sow political and social discord ahead of the November mid-terms. This time it is on Trump’s watch. Look for this issue to become more pointed when Trump and Putin meet in Paris next month.

They also will no doubt address the imperiled INF treaty, long a target of NSC Director and Chief Negotiator John Bolton who has grievances about Russian compliance. Trump has taken a very strong stance in threatening to abandon the treaty, possibly a bargaining strategy. It is in both sides’ interest to have a viable INF treaty and is likely to be renegotiated eventually, but not without a lot of push and pull.

Mexico and Venezuela

President-elect Andrés Manuel López Obrador, popularly known as AMLO will take office December 1, five months after being elected with 53% of the vote. With NAFTA negotiations out of the way, AMLO can focus on two of his biggest domestic challenges, security and the economy. Homicide figures set records at above 22,000 in the first eight months of 2018. Improving that number is a heavy lift which requires a broad attack on multiple fronts, but the success of his early presidency will depend on quick progress. Internationally his biggest challenge will be to establish a good relationship with the Trump Administration. He understands the importance of this and will likely move smartly in that direction. That said, no one should underestimate the drag of his leftist coalition.

The Venezuela crisis continues to deepen as average Venezuelans have given up their marches in favor of daily survival. Venezuelan oil production is half what it was just two years ago, and hyperinflation is pushing more and more Venezuelans to the borders seeking refuge in Brazil and Colombia. An estimated 2.6 million Venezuelans have left already. Grocery stores are empty, medicines are scarce, and lines are long for basic supplies. Still, Venezuelan President Nicolás Maduro continues to deny the humanitarian crisis. Despite his reported fears about a possible U.S. military intervention, this outcome is highly unlikely, nor should we expect Maduro to crack under international pressure and step aside any time soon. More likely, Venezuela will continue to crater, while Maduro cozies up to Russia and China for aid and protection.

Fall 2018 Intelligence Report