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Dispatch: 2011 Annual Forecast

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Video Transcript: 

Vice President of Strategic Intelligence Rodger Baker previews STRATFOR's in-depth 2011 Annual Forecast by focusing on China, Russia and the United States.

Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy.

2011 is a year of postponement, a year of preparation. Major countries are looking forward to elections and government changes in 2012, and that's already starting to affect the way in which they act this year. At STRATFOR we normally don't pay too much attention to elections; we don't see government change as fundamentally changing the issues that drive nations, that shape and constrain nations. However, in the shorter term the politics do have a strong impact on the way in which countries respond to these external pressures.

Three of the major powers are facing leadership changes or elections in 2012: China, Russia and the United States. China continues to face the fallout from the global economic crisis. One of the things that that highlighted was not the strength of the Chinese economy but the weakness of their system. In China, the economic realities are starting to catch up to the gilded dream. The Chinese have had to replace much of their export-based economy with government-run infrastructure development and investment. This is causing massive expenditures, and it has also highlighted the difficulty for the Chinese to make the transition from an economy based on exports to an economy based on consumption.

The anticipated leadership change that begins in 2012, however, leaves the Chinese acting extremely cautious this year. They are unwilling to make any strong changes or adjustments or to try any major experimentation. Their whole goal is to maintain stability. The more conservative and cautious the approach, the less likely China is to address the fundamentals that underlie their economic weaknesses.

In Russia, the internal preparation for elections may have less meaning, in that Vladimir Putin is firmly in charge. Certainly, there is going to be some competition amongst the various elite, particularly over access to the investment drive and to the modernization, but it seems things are held together internally. Over the past few years, Russia's behavior has been more confrontational with Europe and with the United States as it re-solidified its role in the near abroad in the former Soviet Union. The Russians feel more secure in that role for the most part, and their behavior this year is likely to be more cooperative.

The exception to this is going to be in the Baltics. In this area, the Russians have the least stability to re-solidify their influence over these countries, and Russian interaction in the Baltics is going to raise concerns with Germany, Poland, and maybe even Sweden. In this area, we are going to see the most activity.

The United States still sits at the center of the global system. And the United States, for the past decade, has been tied down in Iraq and Afghanistan in its focus on the Middle East. This has given the United States less freedom to engage in its strategic interests elsewhere. The United States is slated to remove combat troops from Iraq in 2011, but doing so would open up Iraq to political domination by its neighbor Iran, which in turn would be the establishment of a single dominant power in the Persian Gulf region. This is something from a geopolitical point of view the United States really cannot accept. However, if the United States chooses not to drawdown or not to completely withdraw its troops, Iran has a lever of its own. Iran can instigate greater guerilla activity in Iraq, and just as the United States is nearing the presidential campaign, U.S. casualties in Iraq will be increasing. From a political point of view, this is untenable.

Given a choice, the United States is ultimately going to choose the geopolitical over the political. We don't expect to see the United States fully withdraw combat troops from Iraq within the year. If the United States ultimately intends to get out of Iraq and free itself up to be able to deal with rising strategic issues elsewhere in the world, it is going to need to engage Iran, and this year we expect to see — even if behind the scenes — that engagement increase.

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