A Turbulent Year Ahead

In his annual forecast for the year ahead, James M. Lindsay, CFR’s Director of Studies, says 2015 is shaping up as a turbulent year. The conflicts of the past year, from Ukraine to the Middle East, will likely spill over into the new year, he says, and the economic problems in Europe, Japan, and China cannot be ignored. He warns that in the United Kingdom’s 2015 elections, a separatist party may gain strength to split the UK from the European Union. The decision by the United States and Cuba to restore diplomatic relations offers hope after a half-century of chill, but a lifting of the U.S. trade embargo is unlikely in the short term, Lindsay says.

Displaced people from the minority Yazidi sect flee ISIS in Sinjar, August 10, 2014. (Photo: Rodi Said/Courtesy Reuters)

President Obama has two more years in office, but like his predecessor, President George W. Bush in 2006, he’s lost control of Congress to the opposition. What’s the outlook?

From the vantage point of the White House, 2015 is shaping up as a turbulent year. Several of the conflicts that erupted in 2014 will continue into 2015: the separatist movement in Ukraine, the rise of the Islamic State in Iraq and Syria, and tensions between Israelis and Palestinians, particularly in Jerusalem, to name the most obvious. Then there are the flashpoints that could always erupt if events move in the wrong direction: the South China Sea, North Korea, and India and Pakistan.

At the same time, economic storm clouds are gathering: Europe and Japan are teetering on the edge of recession; the problem of sovereign debt risk has returned to Europe, raising questions anew about the future of the European Union; growth in China has slowed, creating new domestic stresses for Beijing to manage; and Russia, Venezuela, and Nigeria and other major oil producers are being tested by low oil prices. The one bright spot in the global economy is the United States. The question there is whether Washington can sustain economic growth in the face of strong headwinds from the rest of the world economy and from uncertainty about how a Congress under Republican control will work with a Democratic president.

Let’s talk a bit about Russia, because at one time there was a feeling that Vladimir Putin and the United States could get along. Is it time for another U.S.-Russia summit? What do you think can be done?

U.S.-Russia relations are the worst that they’ve been since the end of the Cold War. As you note, over the past two decades there have been periodic bouts of optimism about what the United States and Russia could accomplish together. We saw that optimism at the beginning of the George W. Bush administration, and we saw it in the beginning of the Obama administration with the so-called reset. It is important to note that on a number of issues the United States and Russia have cooperated and continue to cooperate, most notably on the shipment of materiel to Afghanistan, the so-called Northern Distribution Network, and on curtailing Iran’s nuclear program. But right now, in good part because of Ukraine, U.S.-Russian tensions are high, and we are not likely to see a rapprochement any time soon.

A fundamental difference exists over the status of countries on the Russian periphery. Mr. Putin has made it very clear that Russia does not want countries like Ukraine moving closer to the West, and it is hard to see him backing off what he has portrayed as a vital interest to the future of Russia. At the same time, many Americans are likely to conclude that the United States has the upper hand in this struggle. The economic sanctions the United States and Europe have imposed are beginning to bite, and the crash in oil prices is putting even more pressure on the Russians. So the likely calculation in the United States and in many capitals in Europe is that this will force Mr. Putin to be less confrontational on Ukraine. I’m not persuaded that will be the case.

On the nuclear negotiations with the Iranians, there was another postponement of the deadline and again there’s a slight optimism on both sides that we can resolve this issue. Do you think we’ll get a deal?

The Iranian issue has been kicked down the road. The new deadline is July 1, 2015. Both sides have said publicly that they are making progress. But that’s to be expected. The justification for a postponement is that there’s something here to keep going. You wouldn’t expect either side to say it is keeping talks going but there’s no real point in doing so. We’re not going to find out whether there’s a deal to be made until we get to the deadline. Negotiators generally don’t make critical concessions until they don’t have any other choice. The great unknown in these negotiations is whether or not the Iranian negotiators can persuade the hardline elements in Iran’s government to accept the concessions and restraints the P5+1 are asking of Tehran. On the U.S. side the talks could be complicated by movement on Capitol Hill to impose tougher sanctions on the Iranians. So that’s a wildcard in all of this.

As the year draws to a close, the United States and Cuba have agreed to resume diplomatic relations that had been frozen since 1961 following a prisoner exchange. What does this mean?

First, the resumption of diplomatic relations attests to the singular power of the presidency. President Obama may have seen Democrats lose control of Congress, but presidents, when it comes to foreign policy, remain central because of their constitutional powers, here the power to recognize another government. It’s a power Congress cannot nullify.

Second, as significant as the resumption of diplomatic relations is, and it is quite significant, we remain a long way from normal relations with Cuba. The trade embargo that has been in place for a half century will continue. Here is where Congress becomes critical: Although President Obama has some flexibility to relax the sanctions, lifting them entirely will require Congress to pass a law wiping them off the books. That is not likely to happen anytime soon. Indeed, it likely won’t happen until members of Congress see significant movement by the Cuban government on human rights and other issues. Havana doesn’t look poised to do that just yet. So we are at the beginning of remaking U.S.-Cuban relations, not the end.

Let’s hop around the world now. You mentioned Europe and the European economy.

When you look across Europe you see countries with high unemployment rates, especially high youth unemployment rates, after pursuing austerity policies for the last four or five years. The promise of austerity policies has always been that belt tightening today will lead to better days tomorrow. So far that promise hasn’t been fulfilled. As a result, we’ve seen growing public discontent across Europe. Some of that discontent surfaced in last May’s European parliamentary elections in which a variety of nationalist, populist, and Euro-skeptic parties did well. If Europe fails to restart its economic engines, that sentiment, and specifically the Euro-skeptic sentiment, will grow. One thing to watch in 2015 is the British parliamentary elections in May. The Conservative Party that now governs the UK in a coalition government is being challenged by UKIP, which is pushing for the UK to leave the EU. The outcome of that election could create some very interesting dynamics in the UK that would feed back into this question about the future of Europe.

There was some concern about whether relations with China were getting worse or better. I gather that the president’s meetings with President Xi Jinping were not so bad. What is your feeling on that?

U.S.-Chinese relations have been marked by both cooperation and hostility; that’s not going to change. Both countries view the other as both an opportunity and a danger. Right now, because potential flashpoints like the East China Sea and the South China Sea have not flared up, Washington-Beijing relations are going reasonably smoothly. Beijing has a lot of problems at home that it has to deal with. President Xi is trying to consolidate power. He’s also trying to transform the Chinese economy, but he’s trying to do it at a time when the economy is growing. The Chinese know that they have to move from being an export economy to an economy that is driven by internal consumption and demand, but that’s a very hard transition to make, particularly quickly. All of this is significant because the promise the Chinese Communist Party has made to the Chinese people over the last several decades has been "We will be in charge and we will deliver benefits to you." If President Xi finds it harder to fulfill his end of the bargain, you can expect increased social tensions in China. So Beijing has an awful lot on its plate.

All of this highlights one of the big background factors to keep in mind in 2015: How does what happens in the global economy reverberate back home in China? The Chinese have recently gotten one piece of good news: much lower oil prices. Think of this like a tax cut. You now have more money to spend and invest. That’s the good news. But again there are lots of other challenges that China and other countries face.

The United States is now pretty much out of Afghanistan, but it’s back in Iraq and there’s a lot of talk whether there should be more troops in Iraq fighting ISIS. How do you see this working out?

Neither Afghanistan nor Iraq is off the U.S. agenda. The United States will continue to be involved in Afghanistan and the training of Afghan forces, and the future of Afghanistan remains in question. We don’t yet know how well the Afghan government will do as it tries to stand on its own two feet, even if it has a helping hand from Washington. There is a great concern that we will see resurgence in Taliban activity, which could have perilous consequences for the government in Kabul. In terms of Iraq, President Obama campaigned back in 2008 on leaving Iraq. He kept his promise; U.S. combat troops were gone at the end of 2011. But while we wanted to leave, Iraq in many ways hasn’t let go of us.

The president now faces a very tough set of challenges: He cares about what’s happening in Iraq, particularly the potential long-term threat posed by the Islamic State, but by the same token, he’s reluctant to fully commit American combat troops. As a result, we’re relying on a combination of military advisors and airstrikes to degrade and destroy ISIS’s capability. It’s not obvious that that strategy is paying off quickly. This is where another aspect of the administration’s strategy, trying to get our friends and allies in the region to do more, becomes critical. Of course, one of the interesting things about the Iraq issue is the role that Iran is playing in confronting ISIS. Effectively the United States and Iran are tacit allies in the battle against ISIS.

The administration has spent almost its entire term in office trying to get an Israeli-Palestinian agreement. Do you think they’ll still be at it, trying to get an agreement?

Yes. Secretary of State John Kerry has made it clear that after the Israeli elections in March of 2015, he intends to work with the new Israeli prime minister, whether it is Prime Minister Netanyahu or someone else, to move forward in trying to craft a peace deal between the Israelis and the Palestinians. A challenge we have in terms of handicapping that effort is we’re not sure what the next Israeli government is going to look like or who the prime minster will be. Even if Secretary Kerry gets a government that is willing to work with him on a peace deal, it’s not at all clear, to borrow the phrase that Richard N. Haass, president of CFR, taught me: The issue is ripe for settlement. To enact a deal, both sides have to be willing to make the concessions necessary to get the deal done. The backdrop to any future negotiation will be the significant ongoing tensions between Israelis and Palestinians, particularly in Jerusalem. We’ve recently seen a number of incidents that have led to a loss of life, which has further fueled anger on both sides.