Risk Analysis 2.0

Welcome to the Weekend !!

Join us as we explore the events of the week in regional and global politics, uncovering the inner workings of the international political, diplomatic, economic, and strategic system and looking ahead to what lies in store for all of us.

Pakistan:? Pakistan is currently facing economic challenges amidst growing political instability and concerns about national security, particularly with the looming terrorism threat. The economic situation is expected to be extremely difficult in the coming days as the central bank's liquid foreign exchange reserves are projected to drop below the critical threshold of $2 billion.

This is worrisome because Pakistan has upcoming obligations to repay significant debts of $3.7 billion and make interest payments of $400 million within the next two months. The total external loan-related obligations amount to $4.1 billion, while the current reserves of the State Bank of Pakistan stand at only $4.4 billion. This indicates a precarious financial situation where the outflow of dollars exceeds the available reserves by a narrow margin.

The negotiations regarding Pakistan's IMF program are still in the doldrums due to the IMF's dissatisfaction with Pakistan's commitment to reform and its ability to secure the necessary funds for external financing needs. As a result, bilateral partners are hesitant to provide support, creating an unclear outcome, especially with new elections expected in October.?

At this point, Islamabad is left with one viable option: securing fresh loans and seeking extensions on existing foreign debts to stay afloat and avoid formal default. However, this can only happen if the IMF program is revived. Given the current environment, there are more favorable alternatives than debt restructuring.

Whichever path is chosen, addressing the underlying issue of political instability is crucial and represents a significant challenge that needs to be overcome.

Terrorism: Terrorism is on the rise in the region. Pakistan is battling with a fresh wave of growing insurgency in its border region, especially in Balochistan. Last week we discussed the rise of terrorism and the operation happening in the province. The recent incident in Balochistan's Zhob district resulted in the unfortunate death of one person and injuries to four others. The police have classified it as a suicide attack on the convoy of Sirajul Haq, the leader of Jamaat-e-Islami (JI). This highlights the ongoing security challenges faced by Pakistan, particularly the rise in terrorist threats.

Security forces in Balochistan faced an attack on one of their posts in the Zarghoon area. While defending themselves, a terrorist was killed, but unfortunately, three soldiers also lost their lives as martyrs. This incident further underscores the seriousness of the terrorism problem in the region.?

The increasing threats of terrorism pose significant challenges for Pakistan. It not only endangers the lives of innocent civilians but also disrupts the social fabric and stability of the country.

Dealing with these challenges requires a comprehensive approach that combines effective law enforcement, intelligence gathering, and counter-terrorism strategies.

Afghanistan: The appointment of Mullah Abdul Kabir this week as the new caretaker Prime Minister of Afghanistan has sparked intense discussion and media scrutiny. Mullah Abdul Kabir's background reveals a? trajectory and rises within the Taliban ranks.

Kabir previously served as the leader of the Taliban's Peshawar Shura and held the position of Governor of Nangarhar province from 1996 to 2001. His nomination to the leadership council by Mullah Omar himself underscores the recognition of his capabilities and leadership qualities.? His jihadist and tribal background, coupled with his adept negotiation skills, are widely regarded as ideal attributes for his current role.

Mullah Kabir played a pivotal role in the finalization of the Doha agreement, further emphasizing his influence and diplomatic contributions within the Taliban leadership.? As Mullah Abdul Kabir assumes the position of caretaker Prime Minister, it is anticipated that his background and experiences will shape his approach to governance and decision-making.

While media reports may initially cast doubt on his strength as a leader, it is crucial to analyze the broader context of his appointment, his role in pivotal negotiations, his ability to navigate complex tribal settings, and overall Taliban as a group and its internal dynamics.

These factors provide a more nuanced understanding of his potential as the new prime minister and suggest that Mullah Abdul Kabir's leadership may prove influential in Afghanistan's evolving political landscape.

Pakistan- Iran Border Market: This week Prime Minister Shahbaz Sharif and Iranian President Ibrahim Raisi jointly inaugurated the Mand-Pishin border market, marking the beginning of a collaboration between Pakistan and Iran to establish six similar markets. These markets aim to facilitate trade between the two countries, significantly benefiting the local population.

Establishing these markets will ensure a consistent supply of essential goods and alleviate price pressures. The inauguration of a 200 MW power project in Gwadar further strengthens the bilateral ties between Pakistan and Iran.

Both countries also discussed joint border control measures to enhance security and cooperation.? These developments signify the positive trajectory of Pakistan-Iran relations and the government's commitment to promoting economic growth and welfare in Balochistan. Establishing border markets will boost trade, improve access to essential goods, and stimulate economic activity in the region.

China Central Asia Summit: ?Chinese President Xi Jinping this week unveiled an ambitious plan aimed at driving the development of Central Asia. This move signifies China's growing leadership role in a region that has historically been within Russia's sphere of influence. China has expressed its willingness to collaborate with countries in Central Asia, including Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, to align development strategies and promote modernization across the region.

By actively engaging in Central Asia's development, China has positioned itself as a key player in the competition for political influence and access to energy resources in this resource-rich area. Russia's involvement in the Ukraine conflict and the withdrawal of U.S. forces from Afghanistan has created openings that China is quick to capitalize on.

The five former Soviet republics in Central Asia offer China alternative trade routes for transporting essential commodities such as fuel, food, and other goods in case of disruptions in other regions. China has committed to providing a substantial amount of financing support and grants totaling 26 billion yuan ($3.8 billion) to Central Asian countries.

The trade between China and Central Asia has reached new heights, with a record-breaking $70 billion in two-way trade last year. Kazakhstan, in particular, led the way with $31 billion in trade, highlighting China's efforts to strengthen ties and ensure greater food and energy security.

China has expressed its backing for the construction of a cross-Caspian Sea international transport corridor. This commitment demonstrates China's commitment to enhancing regional connectivity and trade.

China intends to bolster the development of transport hubs for its China-Europe freight train services, solidifying its position as a vital trade partner and promoting economic integration between Europe and Asia.

G7: The ongoing G7 summit in Japan holds immense significance as it brings together not only the G7 countries but also a diverse group of nations, including Indonesia, Australia, the Republic of Korea, Brazil, India, Vietnam, Comoros, and the Cook Islands.

This expanded participation highlights the inclusive nature of the summit and acknowledges the global impact of the issues at hand. Moreover, the presence of influential organizations such as the European Commission, IMF, World Bank, WTO, IEA, and WHO further underscores the summit's relevance and its potential to shape global policies.

Taking place against a backdrop of mounting concerns about the diminishing financial influence of the United States on the global stage and the looming risk of financial default, the G7 summit faces significant challenges. The economic landscape of the United States is at stake, intensifying the need for collective action and strategic decision-making. The discussions and agreements reached during the summit will carry substantial implications for the global economy and financial stability.?

The choice of Hiroshima, Japan, as the venue for the G7 summit carries immense geopolitical implications. As Japan assumes the role of the summit's chair, it provides a unique opportunity for the country to navigate its complex dynamics with China and the ongoing Russia-Ukraine conflict.

Japan finds itself in a delicate position of balancing its stance on critical issues such as territorial disputes, nuclear disarmament, nonproliferation, and regional conflicts. The summit offers Japan a platform to showcase its position on these matters while seeking support from G7 partners who share similar concerns and objectives.?

While a myriad of topics is up for discussion at the G7 summit, two major agendas stand out among the member countries. The rise of China's global influence has drawn considerable attention.

China's increased engagement in the Middle East, Central Asia, and East Asia, along with its promotion of the Belt and Road Initiative, has raised concerns among G7 nations. They are grappling with how to collectively address the implications of China's expanding influence, both economically and geopolitically.

Secondly, the ongoing conflict between Russia and Ukraine remains a pressing concern. With President Zelensky's presence at the summit, the international community is closely watching for discussions on this matter. The G7 countries face the challenge of formulating a united stance in response to Russia's actions and ensuring the security and stability of the region.

Amidst these critical discussions, the G7 summit serves as a platform for member countries to coordinate their efforts, exchange perspectives, and seek common ground. The outcomes of the summit will carry significant weight, providing insights into the collective strategies and actions taken by the G7 countries to address pressing global challenges.

As the world looks towards the G7 summit, the decisions made and the partnerships formed have the potential to shape the trajectory of international relations and have far-reaching implications for the global community.

Syria and Ukraine in Arab League: Syrian President Bashar al-Assad's attendance at the Arab League summit in Saudi Arabia marks a significant shift in regional dynamics. Despite the expulsion of Syria from the group in 2011, Assad received a warm welcome in Jeddah, representing his first visit to a Gulf country since the start of the civil war in 2011.

While the summit may not yield major announcements, the invitation extended to Assad by Riyadh after years of isolation sends a strong message. It challenges the Western narrative. This time around Arab states now have different motivations for pursuing detente with Assad.

For Saudi Arabia, which recently reopened its embassy in Damascus, the rapprochement can be viewed as part of a broader strategy to mend ties with Iran, of which Syria is an important ally. Riyadh's focus on diversifying its economy away from hydrocarbons necessitates de-escalating regional tensions to attract the investments needed for economic transformation. Riyadh aims to address Syria's drug trade, which has had detrimental effects across the Arab world.

Assad's attendance at the COP28 climate summit in Dubai later this year, following an invitation from the United Arab Emirates, holds greater significance. The presence of high-ranking US and European officials at the summit could lead to potentially uncomfortable encounters given the strained relations between Assad and the Western powers.

President Zelensky's unexpected visit to Riyadh for the Arab League summit carries its own significance and objectives. The visit aims to draw attention to the impact of war on the Ukrainian population, emphasizing the devastating consequences that conflict can have on a nation and its people.

The Ukrainian President aims to garner support from the Arab world, particularly given their close ties with Russia. By engaging with Arab leaders and leveraging their influence, Zelensky hopes to gain diplomatic and political support in addressing the ongoing conflict in Ukraine, which has been exacerbated by Russia's involvement.

The outcome of Zelensky's presence at the summit and the extent to which it will yield positive results remain uncertain. The response from Arab leaders and the level of support they offer will determine the effectiveness of this diplomatic endeavor. However, what is evident is the underlying message that war cannot serve as a solution to any conflict. Zelensky's visit underscores the importance of seeking peaceful resolutions and advocating for dialogue rather than resorting to armed confrontation.

In a world grappling with numerous conflicts and regional tensions, the Ukrainian President's efforts to promote the message of peace and the negative consequences of war resonate beyond his own country. The international community, including the Arab League, plays a vital role in advocating for peaceful resolutions and upholding the principles of diplomacy and dialogue.

Thank you for reading!

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*The views expressed in this analysis are Dr. Farhat Asif's own and do not necessarily represent the views of The Diplomatic Insight as a publication and its staff.