The World Next Year: 2014 Edition

Bob McMahon and I typically use our weekly podcast to discuss major foreign policy issues likely to be in the news in the coming week. In honor of the approaching New Year, we changed things up for this podcast and examined the issues likely to dominate world politics in 2014. We discussed budget battles in the United States; the Iran nuclear talks; domestic discontent bubbling up in countries around the world; fracking and energy security; tensions in the East China Sea; and the race for economic opportunities in the Arctic. Paul Stares, director of CFR’s Center for Preventive Action (CPA), joined our conversation to talk about CPA’s newly released Preventive Priorities Survey, which assesses the likelihood and consequences of potential conflicts in 2014.

[audio: http://www.cfr.org/content/publications/media/editorial/2013/20131219_T…]

The highlights:

• Two thousand thirteen was a rocky budget year in Washington as disagreements between congressional Republicans and Democrats produced a sixteen-day partial government shutdown and a new round of brinksmanship over raising the debt ceiling. The political infighting may have done more than frustrate Americans already turned off by partisan bickering; it may have slowed global economic growth. That, at least, is the conclusion of a report from the Organization for Economic Cooperation and Development. The OECD now forecasts next year’s global growth at 3.6 percent—half a percentage point lower than it forecasted before the partial government shutdown. The Murray-Ryan deal to fund the U.S. government through September 2015 takes the threat of another government shutdown off the table for eighteen months. But it doesn’t mean the end to the bruising battle over tax and spending issues. Democrats and Republicans look poised to fight again this spring over raising the debt ceiling. That fight could spook the markets, add a further drag on the economy, and fix Washington’s focus firmly inward rather than outward toward the rest of the world.
• The interim deal reached between the P5+1 and Iran on the Iranian nuclear program was one of the top foreign policy stories of 2013. The agreement was made possible by the June election of Hassan Rouhani as Iran’s new president and the resulting slight thaw in U.S.-Iranian relations. But the agreement has many critics. Even its supporters are quick to acknowledge it is a stop-gap measure—the P5+1 are relaxing some sanctions on Iran in exchange for a temporary freeze on the Iranian nuclear program. The hope is that during the agreement’s six-month term that the two sides can reach a comprehensive settlement. That could prove difficult to do, however. Rather than toss in the towel, the two sides might decide to extend the interim agreement. It has a clause that permits them to do just that. Hanging over the negotiations on a comprehensive agreement will be new sanctions legislation that the U.S. Congress is almost certain to pass early in 2014.
• Many countries will hold elections in 2014, and voters look disgruntled and discontented. Unemployment is high in most advanced industrialized countries, and voters have yet to see results from years of government belt-tightening. In emerging market countries, sluggish growth has voters angry about income inequality, corruption, and poor or nonexistent government services. Not surprisingly, populism and nationalism are on the rise. Whether incumbents hold onto their seat or challengers ride to office on a wave of voter discontent, the winners of 2014 elections could find it difficult to deliver the solutions that voters want.
• One of the good news stories in 2013 is the continued advance of the North American energy revolution. The advent of hydraulic fracturing, or “fracking,” has enabled drillers to access vast quantities of so-called shale gas and light tight oil, upending what only a few years ago looked to be a gloomy energy future for the United States. The price of natural gas in the United States is now one-third the price in Europe and one-fifth the price in Japan. The lower price helps make energy-intensive industries in the United States more competitive globally. It has also encouraged a massive shift from coal to gas, which has in turn driven the emission of heat-trapping gases in the United States down to levels not seen since the early 1990s. As for oil, the International Energy Agency projects that the United States will overtake Saudi Arabia as the world’s leading producer by 2015. All the oil coming out of the ground in places like the Bakken field in North Dakota doesn’t mean, however, that the United States is suddenly insulated from events in the Persian Gulf. Disruptions there would still have profound consequences for the United States because of their impact on U.S. allies and on the global economy.
• The East China Sea looks like it will be a flashpoint in 2014, especially now that China has declared a so-called air defense identification zone over parts of the sea that Japan calls its own. An intentional escalation in the high stakes stand-off between China and Japan doesn’t look likely. However, an accidental or unintended escalation can’t be ruled out, especially with the Chinese and Japanese militaries operating in close quarters. China and Japan do not have well-developed crisis communications procedures in place, so a small spark could become a big fire. The Obama administration is urging both sides to keep calm and keep talking—and for good reason. A crisis in the East China Sea would put the White House in the difficult position of trying to reassure Tokyo without encouraging it to be reckless and deterring Beijing without triggering a deep freeze in U.S.-Chinese relations.
• The Arctic icecap is melting rapidly, so much so that ships are now beginning to transverse the Arctic Ocean during the summer. If current warming trends continue, commercial shipping through the Arctic will grow, as will attempts to exploit what are thought to be vast reserves of oil, gas, and minerals lying beneath the ocean floor. Those opportunities, and the risks that come with them, have caught the attention of countries with Arctic coastlines and a few others besides. A major issue is which countries have sovereignty over which parts of the ocean. The “race for the Arctic” is a high stakes competition in which normally close countries like the United States and Canada will find themselves with very different views of who should get what.
• Bob’s Figure of the Year is Hassan Rouhani. My Figure of the Year is 2.3 million. Too many audience members to list individually chose Edward Snowden as their Figure of the Year. As always, you’ll have to listen to the podcast to find out why.

Bob and I will be taking a break for the next two weeks. We’ll be back in January. In the meantime, we wish everyone a safe and happy holiday.