Analysis selection for JCC January 2021

Myanmar’s coup 4 Feb 2021 - Country Risk | Strategic Report

A statement on Myanmar’s military (Tatmadaw)-owned channel, Myawaddy TV, on 1 February announced that the Tatmadaw had declared a state of emergency for one year and that all authority would now be vested in Commander-in-Chief Min Aung Hlaing. National media have reported that, since 3 February, the Tatmadaw have begun to release several detained members of the national parliament and regional leaders. An unspecified number of senior National League for Democracy (NLD) party leaders, including State Counsellor Aung San Suu Kyi (the country’s de facto leader) and President Win Myint, were still in detention.

• The Tatmadaw’s actions probably reflect its intent to reverse the increasing consolidation of power under the civilian government. The Tatmadaw’s 1 February statement justified the coup by alleging voter irregularities in Myanmar’s November 2020 general election. In November, the Aung San Suu Kyi-led NLD won more seats than its 2015 total (396 of 476 seats), whereas the main opposition Union Solidarity and Development Party (USDP) – which is aligned with the Tatmadaw – won fewer seats than its 2015 total (33 of 476).

• The Tatmadaw probably interpreted this as growing support for a fuller democratic transition led by Aung San Suu Kyi – as well as reduced public support for stalling further amendments to the 2008 constitution. The constitution reserved 25% of parliamentary seats for the military and gave it control over the ministries of home, border affairs, and defence. In March 2020, Aung San Suu Kyi’s government in its first term unsuccessfully attempted to reduce the Tatmadaw’s powers as defined in the constitution. The Tatmadaw has effectively reinforced the constitution by appointing Vice President Myint Swe (a former Tatmadaw general) as acting president (following Win Myint’s detention), who announced a state of emergency of one year and allowed the military to seize control. The military had issued statements during the preceding week threatening a coup, citing voting irregularities in Myanmar’s November 2020 general election. It reiterated its allegations of fraud as justification for its current action.

• Myanmar’s parliament is now suspended, with the Tatmadaw appointing a new State Administrative Council. Between 1 February (when the new parliament was scheduled to commence) and 3 February, the Tatmadaw finalised a new 11-member State Administrative Council, nine of whom are Tatmadaw generals. The Tatmadaw’s control over all legislative, executive, and judicial authority will likely continue until a new civil-military arrangement is negotiated, given that a return to civilian rule per the November election results is now unlikely. The Tatmadaw will most likely negotiate a timeline for fresh elections, allowing for increased military oversight of electoral conduct. On 3 February, local media reported that Aung San Suu Kyi had been charged with violations of the Import-Export Law, and President Win Myint with violations of the National Disaster Management Act – both carrying three-year prison terms, if convicted. The Tatmadaw is likely to

Confidential | Copyright © 2021 IHS Markit Ltd Analysis selection for JCC - January 2021

make the release of these leaders contingent on probable guarantees to not participate in fresh elections. More covertly, the negotiations will likely involve guarantees from a future NLD leadership, probably not including Aung San Suu Kyi, that it will not amend the 2008 constitution unless such action is intended to broaden the Tatmadaw’s powers.

• Strong civilian support for Aung San Suu Kyi will probably result in anti-coup protests, with a forceful military response likely in the event of large-scale opposition. The results of the November 2020 election indicated a high level of civilian support for Aung San Suu Kyi and for the country’s democratic transition, which has been ongoing since the constitution was introduced. At the time of writing, medical staff from about 100 hospitals across 40 towns had commenced a civil disobedience movement, involving no-shows at work, to protest the coup. The movement also included teachers and students from universities in Yangon and Mandalay. Internet services are reportedly still disrupted across major cities, and on 3 February, access to Facebook was blocked. When these services resume – and the Tatmadaw issues further statements about Aung San Suu Kyi’s detention and prospects for a new election – hundreds of NLD supporters are likely to protest against the coup, mostly only in Yangon, with the limited numbers indicating fear of the military’s response. In anticipation of this, several Tatmadaw trucks carrying personnel have been patrolling Yangon’s streets and have barricaded the city hall, according to credible social media reports. If the NLD’s calls for nationwide protests are heeded and protests grow in size to several thousand, the Tatmadaw’s response will very likely include tear gas and the use of live fire targeting protesters. The response would also be very likely to include thousands of Tatmadaw supporters carrying out counter-protests in Yangon in support of the coup, as already seen on 1 February.

• Imminent US-led trade sanctions are now likely, as is greater control by the Tatmadaw over business operations. The US Department of State said on 3 February that it would designate the Tatmadaw’s actions a coup d’état – necessitating a suspension of foreign assistance – with prior statements saying that the United States would retaliate against the Tatmadaw should it fail to reverse its measures. The retaliation will probably include trade sanctions within the one-month outlook, including restrictions against Western companies continuing operations in Myanmar. Targeted travel sanctions by the US are already in place against General Min Aung Hlaing, and will probably be broadened to include more members of the Tatmadaw. The military already has significant influence in business operations. This has now increased further, with Tatmadaw generals leading the ministries of Planning and Finance, Investment and Foreign Economic Relations, and the Central Bank. The Tatmadaw’s dominance of economic policy will probably manifest as contract cancellations affecting projects led by companies in the West, as well as preferential licences and investment agreements with countries that are less critical of the Tatmadaw’s actions, which are likely to include China and Singapore.

Indicators of changing risk environment

Increasing risk

• Statements from the Tatmadaw confirming conviction for Aung San Suu Kyi would increase the impetus for thousands of NLD supporters to protest in Yangon, resulting in a heavy military response involving live fire. • Statements from the Tatmadaw indicating a prolonged state of emergency beyond one year would likely threaten the continuation of foreign investor-led projects. On 2 February, Thailand-based Amata Corporation suspended the USD24-million Yangon Smart City Project, citing the political unrest. • Heavy use of force, including deaths and detentions, at anti-coup protests would likely lead to more active protests beyond Yangon and expedite the timeline of trade sanctions. • The Tatmadaw closed the country’s airspace and assumed control of all airports on 1 February. Prolonged closures leading to loss of tourism footfall would negatively affect Myanmar’s economy.

| 2 Analysis selection for JCC - January 2021

Decreasing risk

• If the UEC declares a re-run of the election in some or all of the 174 contested seats, then this would increase the likelihood of the Tatmadaw releasing at least some prisoners, particularly if they do not oppose the coup upon release. This would also limit the scope of any protests. • If introduced, US-led sanctions not being mirrored by Asia-Pacific countries – including Australia, India, and Japan – would reduce the scope of project cancellations, which in this scenario would probably not affect investments from these countries.

RISK NOTE: Myanmar’s coup incrementally increases risk of military expropriation of aviation assets, increased small-arms exposure to helicopter gunships 2 Feb 2021 - Country Risk | Headline Analysis

Myanmar’s military (Tatmadaw) staged a coup on 1 February, imposing a year-long state of emergency and closing the country’s airspace, prompting an incremental increase in the likelihood of seizure and small arms damage against military helicopter gunships.

• On the day of the coup, Tatmadaw closed the country’s airspace and assumed control of all airports. While there is an elevated likelihood of Tatmadaw confiscating aviation assets directly linked to the civilian government, the risk to foreign-investor or private-sector aviation assets is currently low. Should the US introduce targeted trade sanctions – requiring foreign investors to consider a hastened exit – there will be an elevated risk of the military seizing assets, including aircraft, associated with US-based companies.

• The closure of the country’s airspace is likely to last at least several weeks, with a moderate likelihood that that the military will extend this beyond a month if the salience of the coup does not diminish in international media. Exceptions are likely to be made for aircraft originating from China, Singapore and to a lesser extent Thailand, whose government has referred to the coup as an internal issue.

• Myanmar has active insurgencies in multiple states including Rakhine, Kachin, and Shan. In Rakhine, the military routinely carries out helicopter gunship attacks on ethnic armed groups. With the coup effectively suspending the peace process between these groups and the state, gunship attacks by the military will likely increase, and also be introduced in states like Shan. These attacks usually target only civilian settlements or areas suspected to be insurgent hideouts. The increased deployment would expose military aviation assets more frequently to small-arms attacks when flying at low altitude or grounded.

Farmers’ protest violence in Indian capital likely to split the movement, erode political support to withdraw reforms 27 Jan 2021 - Country Risk | Headline Analysis

Hundreds of thousands of farmers held a planned tractor rally on 26 January – India’s Republic Day – from multiple protest sites on the borders of Delhi into the capital, to demand the repeal of three agriculture sector laws passed in September 2020. Some unions forcefully entered Red Fort, a historical monument in south Delhi, triggering a strong police response and negative media coverage. The protesters were dispersed by the end of the day, with several unions having regrouped at Delhi’s borders.

| 3 Analysis selection for JCC - January 2021

Significance: Farmers and Delhi police had reached an agreement about the protest route prior to the rally; the resultant violence is therefore likely to split the protest movement going forward. More than 50 farmer unions have been largely unified in their protest action and demands to repeal the laws since November 2020. The mainly negative media coverage of the protests, however, will drive several unions to distance themselves from those they allege deviated from approved routes and entered the Red Fort. This distancing will also be followed by opposition political parties, which have so far exerted pressure on the Indian government via the farmers’ platform: Chief Minister of Punjab Amarinder Singh of the main opposition Congress party issued a statement condemning ‘elements’ who triggered the 26 January violence. A split in the movement will probably change the negotiating dynamic of the unions with the government: over 11 rounds held so far, the government offered to postpone the implementation of the laws by 18 months, but farmers’ unions demanded a repeal. A less unified response will allow the government to retract and offer amendments to the laws, which some unions are likely to acquiesce to. Other unions most insistent on the repeal will instead increase protest action in major Indian states beyond Punjab, Haryana and Uttar Pradesh to include Maharashtra, West Bengal, Kerala, and Karnataka: tens of thousands of farmers in Maharashtra marched from Nashik to Mumbai on 25 January in solidarity with protesters in Delhi; these instances are likely to recur.

Risks: Government instability; Protests and riots; Ground cargo

Sectors or assets affected: All

US-Iran relations 4 Feb 2021 - Country Risk | Strategic Report

Between late January and early February 2021, Iran further ramped up its nuclear, missile, and regional activity. Iran demands that the United States first returns to full compliance with the nuclear agreement, and lifts all Trump-era sanctions, before Iran does likewise.

• Iran is likely to continue advancing nuclear-related measures enshrined in the 2 December 2020 parliamentary bill, with the aim of pressuring the United States back into the nuclear agreement without broadening it. In late January 2020, Parliament Speaker Mohammad-Baqer Qalibaf revealed Iran had produced 17 kg of uranium enriched to 20% in under one month. This is a clear acceleration of a specific clause in the parliamentary bill requiring Iran to amass at least 120 kg of that material annually, or 10 kg each month. According to the bill, Iran must also install and begin feeding, latest by 2 March 2021, at least 1,000 IR-2m centrifuges and 164 IR-6 centrifuges, the latter to rise to 1,000 centrifuges by 2 December 2021. Advanced centrifuges combined with 20% enrichment mean Iran will more quickly obtain the significant quantity required to theoretically fuel one nuclear device – about 250 kg of 20% enriched uranium, if further enriched to 90%. Iran is seeking to increase leverage and generate a sense of crisis by accelerating enrichment so that any negotiations with the US remain on the nuclear issue, and happen quickly. Iran would likely agree to extend the nuclear agreement’s sunset clauses, but without a follow-on agreement addressing ballistic missiles and regional issues, as the US and its regional allies demand.

• The Islamic Revolution Guard Corps (IRGC) is very likely to continue ramping up Iran’s missile capabilities to signal it will not make concessions on this issue. On 1 February, Iran test launched the three-stage Zoljenah space launch vehicle (SLV). SLVs differ from intercontinental ballistic missiles (ICBMs) in that the latter require thermal protection for re-entry, stronger engine thrust in the upper stages to deliver heavy throw-weights along ballistic trajectories, and deployment mobility for survival. However, SLVs and ICBMs still share the same basic technologies, and with more focused work, Iran can still repurpose future SLVs for military ends. Iran’s likely objective in showcasing its SLV capability is to show that it will not

| 4 Analysis selection for JCC - January 2021

compromise on existing ballistic missile capability, but that it may agree to limiting the range of its ballistic missiles to 2,000 km in exchange for the legitimisation of its space programme. If Iran is to enter more substantive negotiations on missiles, it would almost certainly demand a broader regional arms control agreement limiting the advanced arsenals of adversaries like Israel.

• Iran, through its proxies, is likely to increase targeting the more vulnerable among the US’s regional allies, particularly Saudi Arabia, as an alternative to striking the US and especially if renewed negotiations stall. On 23 January, a previously unknown Iraqi militia calling itself Alwiya Al-Wa’ad al-Haqq (“True Promise Brigades”, AWH) claimed responsibility for a ballistic missile fired towards Riyadh, which it said was in response to the Islamic State’s 21 January double suicide bombing in Baghdad. AWH accused Saudi Arabia of backing the Islamic State. AWH is very likely a plausibly deniable cut-out linked to Iran- backed Shia resistance militias such as Kata’ib Hizbullah. Domestically, these militias seek to undermine Iraq- GCC ties, and to target Saudi investments inside Iraq. Regionally, they serve Iran’s aims of pressuring the US by attacking its allies, especially if renewed negotiations stall in the months ahead. More generally, Iran is very unlikely to accept demands that it halt support for regional proxies, since these give Iran additional strategic depth and another key means of deterring its rivals, including Gulf Arab states, Israel, and the US.

• With oil exports reportedly rising, and its economy appearing more resilient than expected, Iran’s leadership would likely feel less pressure to acquiesce to add-on US demands. Petroleum minister Bizhan Namdar Zanganeh recently announced a “significant” rise in exports, while TankerTrackers assesses that Iran exported over 1 million barrels per day of both crude and condensates in January 2021 for the fifth month running. Likewise, according to IHS Markit’s January 2021 forecasts, Iran’s economy will likely have contracted by 12% in fiscal year 2020/21 (ending in March 2021), an upward revision compared with the 25% contraction in its June 2020 forecast. In fiscal year 2021/22, IHS Markit currently forecasts Iran’s growth at 12%. If Iran’s leadership believes its economy is sufficiently resistant and resilient, and on track to recovery despite sanctions and the COVID-19 pandemic, hardliners would have more leverage to resist US attempts to pursue a significantly expanded nuclear deal, and certainly any follow-on agreement on ballistic missiles and regional policy.

Indicators of changing risk environment

Increasing risk

• In response to Iran’s escalatory measures, Biden reinforces rather than reviews Trump-era sanctions and “maximum pressure”. • Iran does not just leave the Additional Protocol after the declared 21 February 2021 deadline, but also exceptionally bars visits by IAEA inspectors, leading the US and Israel to plausibly argue in favour of a strike to stop Iran from rushing to acquire a nuclear weapon.

Decreasing risk

• The Biden administration lifts some sanctions to induce Iran back into negotiations, or at least relaxes the implementation of existing sanctions. • The Biden administration allows Iran to access some of its financial assets frozen abroad, or facilitates Iran’s access to a USD5-billion emergency loan it requested from the International Monetary Fund. • The Biden administration permits Boeing to deliver on a standing aircraft contract with Iran.

| 5 Analysis selection for JCC - January 2021

Tunisian Union's growing criticism towards government likely to strengthen protest movement, increasing likelihood of concerted nationwide strikes 4 Feb 2021 - Country Risk | Headline Analysis

The Deputy Secretary General of the Tunisian General Labour Union (UGTT), Sami Tahri, criticised on 2 February the remarks by Minister of Economy Ali Kooli, who stated on 31 January that the government was considering divesting some state-owned enterprises to raise funds.

• Tahri’s comments reflect the growing UGTT concern towards the Tunisian government’s political direction. He also blamed the cabinet for not prioritising tax reforms and the fight against tax evasion and corruption and instead opting for short-term solutions to deal with growing economic problems the country is facing. His comments were echoed on the same day by UGTT Secretary General Nourredine Taboubi, who announced the suspension of the National Dialogue Forum (NDF) given the growing political conflicts between the institutions of the state. The NDF is a UGTT-led initiative planned to start on 6 February and aimed at bringing together all political actors to find common solutions to the ongoing political and economic crisis. Various UGTT leaders also denounced the set of International Monetary Fund (IMF)-backed policies announced by the finance minister – such as yet-to-be finalised plans for restructuring state-owned companies, reducing energy subsidies, and cutting public-sector wages – with one describing it as a ”war on the people that will lead to the explosion of the social situation”.

• The UGTT’s anti-government stance came while the country remains in a situation of effective political paralysis. A ministerial reshuffle announced by Prime Minister Hichem Mechichi on 16 January, replacing 11 out of 25 ministers, to placate the social unrest that has been ongoing nationwide since early January has yet to materialise. The new cabinet obtained a confidence vote in parliament on 26 January. President Kais Saied, however, rejected the reshuffle, stating he would not swear in four ministers that he said were suspected of corruption. According to the Tunisian constitution, the president does not have the power to reject nominees approved by parliament, but the constitution does not provide any timeframe for when the president has to send an invitation to the new ministers for the taking of the oath. Moreover, the government has repeatedly failed to appoint the Constitutional Court, the body tasked with resolving constitutional controversies between the Head of State and the PM.

• The UGTT stance is likely to strengthen and unify the protest moment, which thus far has been largely uncoordinated. Reflecting its new anti-government stance, five UGTT sectorial branches released a statement on 2 February expressing for the first time their open support for the protest movement. IHS Markit has previously identified UGTT support as a key indicator pointing to more widespread popular discontent, potentially forcing the government to step down. Unions are a powerful force in Tunisian politics, particularly the UGTT; with its 900,000 members, it was instrumental in the fall of Zine El Abidine Ben Ali’s government in 2011. This means that social unrest is likely to grow in frequency and co-ordination, with flashpoints from southern traditional hotspots such Gafsa, Kasserine, Tatauoine, and Le Kef to northern urban centres such as Sfax, Tunis, and Bizerte. Protests are likely to be accompanied by co-ordinated and union-led strikes in the textile, transport, energy, and public sector, contributing to the challenging position faced by the Tunisian government in the three-month outlook and increasing the likelihood of its collapse.

Indicators of changing risk environment

Increasing risk

• A parliamentary block of opposition leftist parties emerges in parliament, which provides political support for the UGTT and calls for the cabinet to step down. • President Saied continues to reject the government reshuffle and starts advocating for the dissolution of parliament.

| 6 Analysis selection for JCC - January 2021

Decreasing risk

• The UGTT proposes a new format for the National Political Dialogue or proposes a new government of national unity. • The new cabinet eventually swears in and open a dialogue with the UGTT on new economic and political measures.

Baghdad IEDs indicate Islamic State's greater freedom of movement, increasing risks to urban centres in central, northern Iraq 22 Jan 2021 - Country Risk | Headline Analysis

On 21 January, a suicide bomber detonated his explosives in central Baghdad’s Tayaran Square; another bomber detonated a second device shortly afterwards, killing 32 and injuring over 100. Prior to this latest attack, the last suicide improvised explosive device (IED) attack in the capital occurred in July 2019 in which three people were killed while the last major attack, in which 35 were killed, took place in January 2018. Islamic State claimed responsibility for the latest and prior suicide attacks.

Significance: The attack in Baghdad follows heightened Islamic State activity across north-central Iraq and al-Anbar province, targeting Iraqi Security Forces, utilities and energy infrastructure. The expansion of targets and movement south is as a result of the persistent security vacuum along the border of northern Iraq and the Kurdistan Region given delays in establishing joint ISF-Peshmerga security patrols, and a reduction in joint Coalition-ISF patrols. In the year ahead, Islamic State is likely to gain opportunities to further expand its operations outside its stronghold in northeastern Iraq given the multiple security challenges the government is facing in the form of ongoing protests in southern Iraq, an insurgency being waged by multiple, newly emerging armed groups against both remaining US and Iraqi assets and individuals, in addition to infighting among political factions and their respective armed wings ahead of elections in late 2021. Within Sunni provinces, Islamic State will exploit local grievances stemming from delayed reconstruction projects and the ongoing presence of Iran-aligned Popular Mobilisation Units (PMUs) in order to boost recruitment. Progressing from hit-and-run attacks and ambushes targeting security personnel, Islamic State is likely to make further attempts at mass casualty attacks in public spaces within towns and cities within predominantly Sunni provinces. PMUs will respond to Islamic State attacks by repeating calls for the cancellation of all contracts with Saudi Arabia and GCC states while potentially bolstering their presence in Sunni areas.

Risks: Terrorism

Sectors or assets affected: Defence and security forces; Property

New Lebanese cabinet is unlikely before 2022, raising protest risks and threats to the banking sector 27 Jan 2021 - Country Risk | Headline Analysis

The absence of progress towards cabinet formation after the inauguration of Joe Biden as President of the United States indicates that cabinet formation in Lebanon faces a longer than expected delay, probably extending until late 2022.

| 7 Analysis selection for JCC - January 2021

• A new cabinet is unlikely to be formed before 2022. Caretaker Prime Minister Hassan Diab resigned on 10 August 2020, following the 4 August Beirut explosion. Saad Hariri of the predominantly Sunni Future Movement was designated Prime Minister on 22 October 2020, but has yet to form a cabinet. The country’s political splits are unresolved and appear likely to persist. Hariri has been in conflict with President Michel Aoun, and Aoun’s son-in-law Gebran Bassil, who leads the predominantly Christian Free Patriotic Movement (FPM). Their disagreements are partly personal, but largely due to attempts by Hariri to sideline and weaken the FPM to obstruct Bassil’s own aspirations to the presidency. Previously, there was local speculation that the cabinet would be delayed until Joe Biden’s inauguration as US president. However, the lack of progress in cabinet formation, with no tangible developments or movements since Biden’s inauguration indicates that the delay will be considerably longer, with Hariri likely to wait until Aoun’s term expires on 31 October 2022.

• Losses at the banking sector are likely to increase further, raising non-payment risk. The government's financial sector restructuring plan estimated a devaluation to LBP3,500 per USD in May 2020. However, the parallel market exchange rate is reportedly near LBP8,800 per USD. According to IHS Markit calculations, a devaluation to the parallel market rate could lead to banking sector recapitalisation costs of 50% of GDP, essentially making all banks in the country technically insolvent. Banking-sector losses associated with the central bank restructuring and sovereign debt renegotiations are likely to drive ultimate restructuring costs significantly higher. A reform plan to address the financial sector’s acute problems and agreements subsequently to provide IMF aid are unlikely to be approved until a new cabinet is formed. Meanwhile, losses in the banking sector are likely to increase, significantly raising the risk of non-payment for imports of key basic goods and fuel. The 2021 budget, which is currently being reviewed for approval, anticipates that the Banque du Liban (BDL, Lebanese Central Bank) would continue making payments throughout 2021, however, this appears highly unrealistic.

• Unrest is likely to intensify across Lebanon, especially in Beirut, Tripoli, Sidon, and the Western Bekaa. The combination of the extending political vacuum and deteriorating living standards, along with deep- rooted sectarian divisions, is likely to exacerbate unrest, especially in poorer Sunni areas. These include Tariq Jdeedeh and Corniche al-Mazraa in Beirut, Taalbaya, Taanayel and others in the Western Bekaa, the Beirut – South Lebanon highway, Sidon, as well as Tripoli and surrounding areas. Unrest will likely involve road closures with burning tires and rubbish containers and fighting with security forces using tear gas and batons, but not lethal force. Furthermore, as living standards deteriorate, the risk of crime targeting expatriates and wealthy locals will increase, including mugging, burglary, kidnapping and attacks on property.

Indicators of changing risk environment

Increasing risk

• Security forces use lethal force, killing protesters and triggering wider unrest. • The BDL stops subsidising fuel imports for electricity generation, leading to power outages that trigger greater unrest. • Protesters break into prisons and release Islamist detainees, indicating growing unrest and terrorism risks.

Decreasing risk

• Hariri and Bassil meet with Hizbullah mediating, indicating stronger efforts to form a new cabinet. • Iran and the US revive the JCPOA, and the US pressures its Lebanese allies to reduce escalation against Hizbullah, facilitating cabinet formation.

| 8 Analysis selection for JCC - January 2021

Renewed Houthi push to expand territory under its control in Yemen increases risk of Hodeidah ceasefire collapsing 21 Jan 2021 - Country Risk | Headline Analysis

The United Nations mission in Yemen released a statement on 20 January calling for an immediate ceasefire after heavy fighting broke out between Houthi militants and Yemen government forces in eastern and southern Hodeidah, on the Yemeni Red Sea coastline. The armed confrontation in the southern areas of Hodeidah, particularly around Hays and al-Durayhimi, was reported as some of the most intense fighting since a localised ceasefire was signed between the warring sides in Stockholm (Sweden) in December 2018. According to Yemeni forces, at least 95 Houthis and 20 Yemeni troops were killed in the fighting, which included the use of artillery, mortars, tanks, and weaponised drones. Chair of the UN Redeployment Coordination Committee Lieutenant General Abhijit Guha said that the new Houthi offensive in the area was contrary to the obligations of the parties to the ceasefire. The recent escalation is part of the Houthis’ ongoing attempt to expand the territory under their control, with large offensives also being waged in Ma’rib, al-Jawf, and Taiz.

Significance: The Houthis are accelerating their military operations as they see a window of opportunity following the formation of the new Yemeni government that now includes southern separatists, which will likely enable Saudi Arabia to unite separatists and government forces in their common fight against the movement. By attacking southern Hodeidah, the Houthi strategy is likely to cut off the Saudi-led coalition’s supply lines from the south into the port city, while capturing Ma’rib would nearly complete the Houthis’ control over northern Yemen and provide the movement with much needed revenues from the province’s gas and oil fields. Further Houthi advances into Hodeidah, however, would likely formalise the collapse of the ceasefire agreement and would increase the likelihood of the Saudi-led coalition resuming its offensive to take control of the port city, causing severe disruption to port and shipping. A possible agreement by both sides to face-to- face talks on a specific date would at least temporarily reduce the likelihood of a government offensive.

Risks: Civil war

Sectors or assets affected: All

Azeri-Turkmen MoU reduces maritime harassment risks in Caspian Sea, improving prospects for construction of trans-Caspian gas pipeline 26 Jan 2021 - Country Risk | Headline Analysis

The ministers of foreign affairs of Azerbaijan and Turkmenistan signed a memorandum of understanding (MoU) to jointly develop the newly renamed Dostlug (Friendship) offshore oilfield in Caspian Sea on 21 January. Turkmenistan’s foreign ministry hosted the signing ceremony, which was accompanied by an online teleconference between the two presidents. This marks the end of almost 30 years of disagreements between the two countries over the Kyapaz (Azeri toponymic designation)/Serdar (Turkmen toponymic designation) offshore oilfield located in the disputed maritime border area. In a symbolic gesture of goodwill on both sides, the Serdar/Kyapaz oilfield, which is estimated to hold 60–70 million tonnes of oil, has been renamed Dostlug. The representative of State Oil Company of Azerbaijan Republic (SOCAR) Ibragim Akhmedov hailed the MoU as opening a new chapter in energy relations with Turkmenistan, while noting that there were a number of questions of technical and commercial nature related to the future development of the oilfield that still need to be resolved.

Significance: The Dostlug MoU mitigates the risks of disruption involving harassment of ships involved in the oil and gas sector in that part of the Caspian Sea. It should be recalled that in 2008, Azerbaijan’s Coast Guard

| 9 Analysis selection for JCC - January 2021

twice chased away vessels belonging to foreign companies (Malaysia’s Petronas and Canada’s Buried Hill) operating in Turkmenistan that were trying to carry out exploratory activities in the Serdar/Kyapaz disputed maritime border area. This resulted in Turkmenistan shelving plans to develop the Dostlug (formerly Serdar/Kyapaz) oilfield. The agreement also removes one of the obstacles to the proposed construction of the trans-Caspian gas pipeline (TCP) project, which would deliver gas from Turkmenistan to Azerbaijan via the Caspian Sea shelf. Still, other hurdles for TCP remain, especially with regard to objections from Iran and Russia, which are likely to be channelled via loopholes in the 2018 convention on the legal status of the Caspian Sea. Further indicators of reduced maritime risks would include elaboration of specific plans for development of Dostlug by SOCAR and Türkmennebit (Turkmenistan’s state oil company) and the commencement of specific works, including additional exploratory activities and construction of platforms for offshore drilling.

Risks: Marine; Interstate war

Sectors or assets affected: Oil and gas

Violent protests likely to disrupt cargo in Republic of the Congo if incumbent wins presidential election 2 Feb 2021 - Country Risk | Headline Analysis

The Pan-African Union for Social Democracy (UPADS), the only opposition party with parliamentary representation, announced on 30 January that it would boycott the Republic of the Congo’s presidential election to be held on 21 March. The runner-up in the 2016 presidential election, Parfait Kolélas, announced on 1 February that he would stand against the incumbent, President Denis Sassou-Nguesso, who is 77 years old and has been in power for 36 years. Recent elections have not been held fairly and the opposition has virtually no prospect of winning. Restrictions on assembly imposed because of the coronavirus disease 2019 (COVID-19) pandemic have been used by Sassou-Nguesso to prevent opposition gatherings. Under pressure from protests, in September 2020, the government lifted the night curfew everywhere except in capital Brazzaville and Pointe-Noire. There has been increasing non-compliance with these restrictions, leading to violent confrontations between youth and the police in Brazzaville on 31 December. The Republic of the Congo’s economic crisis, the economic slowdown in neighbouring the Democratic Republic of the Congo (DRC), and COVID-19 restrictions have significantly reduced informal trade between Brazzaville and DRC capital Kinshasa, contributing to widespread discontent in Brazzaville. Separately, on 27 January 2021, the army and the ninja militia exchanged gunfire in the Pool region for the first reported time since the militia signed a peace treaty with the government in 2017.

Significance: The boycott by UPADS as well as Kolélas’s candidacy and the prolonged COVID-19 restrictions mean that the election will be hotly contested, and Sassou-Nguesso’s almost certain victory will be disputed. Violent protests are likely to disrupt cargo for up to a week after the results are announced, especially in Brazzaville. Similar protests are likely in the opposition strongholds of Niari and the Bouenza region, which has already suffered from the reduction in trade with bordering DRC. In the Pool region, small- arms attacks on security forces, trains, and trucks travelling between Pointe-Noire and Brazzaville are probable. An IHS Markit source has reported that President Sassou-Nguesso has been honouring cash payments to his top generals and has limited salaries arrears in the security forces, in a bid to ensure their loyalty. The security forces are likely to contain any violent protests, including resort to tear gas and live ammunition, posing death and injury risks to bystanders, as well as to protesters. Renewed support for Kolélas by Pastor Ntumi of the ninja movement would indicate a particularly high probability of violent unrest in the Pool region.

| 10 Analysis selection for JCC - January 2021

Future EU-UK relations 21 Jan 2021 - Country Risk | Strategic Report

Following extended negotiations on future relations, the European Union and the United Kingdom approved a last-minute agreement just before the post-Brexit transition period ended on 31 December 2020. The deal, which is mainly focused on trade in goods, constitutes a first step in formally reorganising long-term EU-UK relations after the UK ended more than 40 years of EU membership in response to a 2016 referendum.

• The “no tariff, no quota” agreement is a positive indicator for continued close EU-UK relations, but further challenges lie ahead in negotiating mutually acceptable arrangements for the broad array of remaining unresolved issues such as the regulation of financial services. Nevertheless, the EU-UK deal is the largest bilateral trade pact in history and secures beneficial UK access to the EU’s free-trading internal single market comprising around 450 million consumers. There will also be close collaboration on security issues, but the UK has lost real-time access to various crucial EU databases such as the Schengen Information System (SIS). While visa-free travel is guaranteed alongside multiple rights for current residents of each other’s territories, the free movement of people including the automatic right to work, study, and live across the EU has ended. Both sides compromised on issues that had previously proved to be stumbling blocks – notably on fishing rights in UK territorial waters and competition and state aid rules – to reach a limited agreement. The UK succeeded in removing any role for the European Court of Justice (ECJ) in dispute resolutions with EU member states, with both sides agreeing to establish a new arbitration process to resolve disputes. Overall governance of the agreement will fall to an EU-UK Joint Partnership Council, comprising members selected by the two sides. Crucially, the contentious issue of UK financial services’ access to the EU market remains unresolved. The two sides agreed to discuss a memorandum of understanding (MOU) and seek to agree a text by March 2021: however, such a document will not have equivalent legal status to a treaty.

• While business uncertainty regarding goods trade has somewhat decreased, the practical application of new rules and the related emergence of significant non-tariff trade barriers is likely to negatively affect areas such as road cargo. Supply-chain disruption and cargo delays at the UK’s external borders have so far been limited since the end of the post-Brexit transition period. However, the comparatively smooth handling of goods entering and exiting the UK is likely to be largely linked to lower-than-usual transit levels, such as at the crucial Port of Dover. This is at least partly due to stockpiling in the immediate pre- implementation period of the EU-UK deal and the reduction in cargo movement because of coronavirus disease 2019 (COVID-19) virus-related restrictions. However, there remains an elevated risk of cargo delays, particularly affecting perishable goods and just-in-time deliveries. This also affects the UK’s new internal customs border between the region of Northern Ireland – which remains part of the EU’s single market – and the rest of the country.

• Difficulties in adopting the new post-Brexit regulatory and judicial set-up as the COVID-19 virus pandemic continues are likely to be amplified by other UK domestic policy challenges throughout 2021. These include further deteriorating relations between the national-level government and the UK’s devolved regions, in particular Scotland, as well as internal division within the ruling Conservative Party. In addition, the UK government will be looking to carve out a post-Brexit role on the global political stage in line with its concept of establishing a ‘Global Britain’. A key focus will continue to be the repositioning of relations with non-EU countries, including the United States under the new Biden administration, as in many cases the political, economic, and security ties have for decades mostly been closely linked to or managed in their entirety at the EU level. It is likely that Prime Minister Boris Johnson will try to present himself as a core element in shaping international politics, already illustrated by his stance on climate change ahead of the United Nations climate summit scheduled for Glasgow in November 2021.

| 11 Analysis selection for JCC - January 2021

• Despite the continued dual challenge of absorbing the negative economic impacts of Brexit and the pandemic, UK GDP is likely to grow by 3.5% in 2021 and 4.9% in 2022. IHS Markit’s Brexit baseline scenario had anticipated a likely compromise EU-UK deal, rendering any significant changes to this forecast unlikely in the coming months. However, the UK’s newly organised relations with the EU will present some economic costs to the UK, with an example being UK service providers losing unrestricted access to the EU’s single market, which is part of the reason for a comparably cautious 2021 growth forecast.

Indicators of changing risk environment

Increasing risk

• A lack of capacity to swiftly advance EU-UK negotiations on remaining issues such as the financial services MOU because of the current focus on the COVID-19 virus pandemic. • Repeated challenges, including COVID-19 testing for truck drivers, exacerbating delays related to new customs procedures at UK ports. • Further hurdles in the challenging adoption of new customs laws hampering import and export flows, already indicated by food shortages in various supermarkets across Northern Ireland and supply-chain problems affecting the Scottish fishing industry.

Decreasing risk

• An early detailed agreement in 2021 on the functioning of the Joint Partnership Council would increase confidence in dispute resolution mechanisms. • An agreement in early 2021 on a financial services MOU signalling continued frictionless UK access to the EU. • An efficient implementation of COVID-19 vaccination programmes helping to normalise traffic and trade flows across Europe.

© 2021 IHS Markit. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein.

| 12