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Terror Attacks Hit Five-Year Worldwide Low

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There is some good news for international travelers: Terror attacks and casualties continue to decline worldwide. New information released by the U.S. State Department last week found that there has been a 23% drop in attacks from 2016 to 2017 and a 27.1% drop in victims killed in the same one-year period.

According to Statista, the number of incidents dropped to 8,584 and deaths to 18,753. Seventy percent of those fatalities were concentrated in five war-torn countries: Afghanistan, Iraq, Nigeria, Somalia and Syria.

Statista reported:

President Trump is doubling down on this tough stance, which is part of a wider pivot happening across the State Department [and] the Bureau moving away from a decades-long focus on fighting foreign extremist groups to concentrating on state adversaries.

The focus on Iran echoes sentiments from the State Department, which last week published a report warning of Iran’s illegal and destructive activities:

In addition to its support of proxies and terrorist groups abroad, Iran also harbors terrorists within its own borders, thereby facilitating their activities. Iran continues to allow Al Qaeda operatives to reside in Iran, where they have been able to move money and fighters to South Asia and Syria.

The Risks of Oil-Producing Countries

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Understanding the unique risks of oil-producing countries is not easy.

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From political to economic to security risks, there are many and they are far-reaching.

I was lucky enough to participate in a webinar yesterday on this very topic. Leading the presentation was Fareed Mohamedi, partner and head of markets and country strategies for PFC Energy and Raad Alkadiri, partner and head of PFC Energy.

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The webinar was thought-provoking and insightful, offering a glimpse into the oil production of such countries as Iraq, Iran, Russia and Brazil.

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Picture 21

Iraq, according to the U.S. Energy Information Administration, holds more than 112 billion barrels of oil — the world’s second largest proven reserve — and also contains 110 trillion cubic feet of natural gas, and is a focal point for regional and international security issues. Mohamedi and Alkidiri see this oil-rich country as a ongoing risk.

Picture 22

The presenters also focused on OPEC constraints on oil production and the eventual quota applied to Iraq, stating that “OPEC may be able to live with maximum Iraqi production of 6 mmb/d by 2017 assuming relatively benign supply/demand fundamentals, but the risks are all on the downside.”

But let’s not leave out Iraq’s neighbor and fellow oil-rich country, Iran. According to PFC Energy, the country’s oil production forecast looks something like this:

Picture 23

But this excessive production doesn’t come without some consequences. Iran faces severe natural decline rates from its reservoirs, forcing Iran to rely heavily on proven undeveloped reserves (PUDs). However, the country’s unstable investment climate is a downside risk for PUD development. And as the webinar stated, “Iran’s production struggles will continue, or even worsen in the future due to geological constraints, lack of domestic technical capacity and the impact of sanctions on investment.”

U.S. dependency on foreign oil may decrease as the Obama administration opens up even more water for exploratory drilling. But, as we have seen recently with the Deepwater Horizon, that too comes with extreme risks.

To view an archived version of the webinar click the following link:
http://www.talkpoint.com/viewer/starthere.asp?Pres=130886
Password: pfcglobalrisk

Top 10 Risks for 2010

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shutterstock_U.S.-china

Well, according to Eurasia Group, the number one risk for 2010 is U.S.-China relations.

In their annual “Top Risks” report, the firm’s president, Ian Bremmer, and head of research, David Gordon, announced their top risks today, which states that “2010 is likely to be much more turbulent geopolitically than 2009, when the world was preoccupied with coping with the global financial crisis, but saw no big geopolitical crisis.”

  1. U.S.-China relations — The firm sees the relationship between these two powerhouses deteriorating significantly due to China’s reluctance to take more of a leadership role, as was seen during the Copenhagen climate conference. Other issues affecting the relationship include Beijing’s economic partnership with the U.
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    S., the resulting higher tariffs on Chinese exports, differences in cap and trade beliefs and issues involving cyber-security, among others.

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  2. Iran — Eurasia Group points to Iran as the biggest “purely geopolitical risk in 2010.” The report focuses on the country’s struggling government, its nuclear program and its reaction to ensuing sanctions. “The Iranian regime looks increasingly like a cornered, wounded animal,” the report states. “In 2010, it’s likely to act like one.
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    “

  3. European fiscal divergence — It seems the fiscal challenges in Greece, Ireland, Spain, Portugal and Italy have created a massive area of financial risk in Europe. Eastern Europe faces escalating risks as well, especially if European Central Bank liquidity measures are curtailed.
  4. U.S. financial regulation — Eurasia Group feels 2010 will prove to be a more difficult year for Obama than 2009. The firm points to unemployment remaining high, very challenging financial regulatory reform and mid-term elections affecting this reform. “Both the Americans and Europeans are aware of the risk of driving the financial industry into the ground with too much (or too drastic) regulation or taxation,” the report states. “But as reform becomes an election-year domestic battleground, the need to serve political interests will be increasingly at odds with the need to create an efficient framework for regulatory reform.”
  5. Japan — Japan has had to endure sweeping political change and the new Democratic Party of Japan’s (DPJ) efforts to “limit the influence of bureaucrats and industrialists” has created an atmosphere of higher policy risk. Other concerns regard the uncertainty of the DPJ and the party’s less favorable disposition toward the business community, which is likely to harm financial confidence, further affecting economic woes.

The remainder of their top 10 list can be viewed here. It’s interesting to note the “red herrings” section listed at the bottom, which includes information on Iraq, the Persian Gulf, Russia, the dollar and New York and London.

People Power

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At the moment, a substantial amount of public outcry, including riots and mass demonstrations, are being reported throughout Iran as supporters of presidential candidate Mir Hossein Mousavi have taken to the streets, protesting the outcome of that country’s recent presidential election. The official announcement from the Iranian government that President Mahmoud Ahmadinejad won the election in a landslide immediately threw up a number of red flags indicating possible voter fraud.

From a distance, the situation looks pretty unsavory, with riot police beating down protesters, foreign journalists getting hassled by interior security agents, and even reports that the BBC Persia satellite link is being jammed from somewhere within Iran itself. All of this points to a regime that clearly has a stake in keeping a lid on things, which one must assume could include a questionable electoral outcome. Why else employ such heavy security?

While the Western world in particular raises questions over this situation, the business implications of the election pose a less headline-worthy but potentially more serious impact. Iran is currently OPEC’s second-largest petroleum producer and, as such, remains heavily dependent on world oil prices.

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Fluctuation in price per barrel has taken a heavy toll on Iran, which supports its internal economy through heavy public spending.

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According to the Coface Handbook of Country Risk 2009, Iran experiences inflation in excess of 25%, thanks in part to poor governance and the long-term impact of international sanctions against the country. It is that very inflation, among other things, that has driven so much discontent within the country. And it seems likely that if the current election results stand as is, or if Iran’s recently announced probe into them proves to be nothing more than a charade, additional sanctions could follow.

What will happen when one of the world’s leading oil producers is put under even greater international economic pressure? What will happen when its own economy worsens? What will happen when an entire generation of citizens no longer fear the state’s ability to keep the peace? It all adds up to a most unusual display of instability in a country that holds the keys to a great deal of economic power. As we saw during the last two years of oil fluctuation, weird things can happen when the price of oil goes off the rails.

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And what’s happening in Iran is looking more and more like a train wreck.