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1. The conflict in the Caucasus: By swiftly intervening in the Georgia-South Ossetia conflict, Moscow seized upon an opportunity to reassert its prowess along its periphery. The West, particularly the United States, is incapable of responding in any meaningful way, and is still trying to make sense of what is happening. Therefore, this is Russia’s chance to redefine the boundaries of the region. Tactically, we must watch carefully to see where the Russians halt their advance — and be watchful for the possibility that they push on to Tbilisi. Strategically, our focus needs to be on the reactions of the former Soviet states, particularly Ukraine, Kazakhstan, Nagorno-Karabakh and the Baltics, all of which are now seeing the Russians in a very different light.
2. Iraq: A lot of noise is coming out of Iraq. The squabbling between Iraqi factions and shifts in alliances we’re seeing now are a reflection of the progress made thus far in higher-level negotiations between the United States and Iran. There are, of course, a number of sticking points holding up the process, including Iran’s nuclear program, the dispute over Kirkuk, etc. But the hardest part is over with. If the United States is now dealing with a recharged Russian threat, it has to seal up Iraq quickly, and that means speeding up the negotiations with Iran. Will Iran view U.S. urgency as an opportunity to make a deal? Or will it be more interested in enticing Russia into strategic weapons sales that could upset the negotiating process?
3. The Olympics: The Beijing Olympics have begun. While Beijing and much of the world will be preoccupied with the event, we need to look past the fanfare and focus on what steps Beijing takes to cope with the Olympics’ aftermath. A big concern for the Chinese is an expected post-Olympics capital outflow in the construction, real estate and tourism industries. What moves will the Chinese make in trade and currency policies? Will they float the yuan more? Will they try to impose restrictions on the movement of capital? Now is the time when the Chinese government will be making moves to prepare itself and the Chinese public for increased economic strain. We need to monitor these policy shifts.
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