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The Top 5 Geopolitical Risks for 2016

Jan 07, 2016

It's been a jarring start to the year, with a spat between Saudi Arabia and Iran and plunging financial markets in China. But the Eurasia Group, the political-risk consultancy I founded and oversee, believes the top risk for 2016 centers on the erosion of a relationship that has been a cornerstone of global stability.

1. THE HOLLOW ALLIANCE

The transatlantic partnership has been the world's most important alliance for nearly 70 years, but it's now weaker and less relevant than at any point in decades. The U.S. no longer plays a decisive role in addressing any of Europe's top priorities. Russia's continuing intervention in Ukraine and the conflict in Syria will expose transatlantic divisions. As U.S. and European paths diverge, there will be no one to play international firefighter--and global conflicts, particularly in the Middle East, will be left to rage.

2. A CLOSED EUROPE

In 2016, a core conflict will emerge between open Europe and closed Europe--and the combination of inequality, refugees, terrorism and grassroots politics will pose an unprecedented challenge to the principles on which the E.U. was founded. Europe's open borders will face particular pressure, while there is a very real risk that Britain could choose to leave the E.U. Europe's economics will hold together in 2016, but its broader meaning and social fabric will not.

3. THE CHINA FOOTPRINT

Never has a country at China's modest level of economic and political development left such a vast footprint. It is the only country of scale today with a real global economic strategy. The recognition in 2016 that China is both the most important and the most uncertain driver of a series of global outcomes will increasingly unnerve other international players who aren't ready for it, don't understand or agree with Chinese priorities and won't know how to respond to the change.

4. ISIS AND "FRIENDS"

The Islamic State of Iraq and Greater Syria is the world's most powerful terrorist organization, with followers and imitators in places from Nigeria to the Philippines. But the international response to its rise has been inadequate, misdirected and at cross-purposes. For 2016, this problem will prove unfixable, and ISIS and other terrorist organizations friendly to its aims will take advantage of that. The most vulnerable states will remain those whom ISIS has explicit reasons to target--France, Russia, Turkey, Saudi Arabia and the U.S.--and those with the largest numbers of unintegrated Sunni Muslims, like Iraq and Lebanon.

5. SAUDI ARABIA'S RIFTS

The Saudi kingdom faces a growing risk of instability this year, and its increasing geopolitical isolation will lead it to act more aggressively across the Middle East--as we have already seen this month. The threat of discord within the Saudi royal family is on the rise, and a scenario of open conflict--unthinkable before King Salman's January 2015 ascension--has become entirely realistic. The key source of external Saudi anxiety is Iran, its regional rival, soon to be free of sanctions. Now that Iran has responded with open hostility to the Saudi execution of a top Shi'ite cleric, we can expect an intensification of their proxy conflicts in Syria, Yemen and elsewhere in the region.

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