Weekly Forecast Monitor: Nov. 14, 2024

Summary 

The Russia/Ukraine conflict trended toward military escalation and diplomatic de-escalation scenarios as Russia made preparations for a major counterattack against Ukrainian forces in Kursk and Ukraine conducted a large-scale drone strike against Moscow. The United States opened a missile defense base in Poland, and The Washington Post reported that President-elect Donald Trump had a phone call with Russian President Vladimir Putin, a report the Kremlin denied. Russia’s ambassador to the U.N. said Moscow was open to U.S.-initiated negotiations to end the war in Ukraine under Trump, while some European officials are reportedly open to Ukrainian territorial concessions to Russia in exchange for security guarantees.

Forecast indicators 

Military escalation scenario 

• Russia has assembled a contingent of 50,000 Russian and North Korean soldiers to participate in a counteroffensive to reclaim territory captured by Ukraine in Russia’s Kursk region.
• The United States and Poland opened a missile defense base in the northern Polish town of Redzikowo. The Kremlin promised an equal response but did not provide details.
• Ukrainian drones struck targets in Russia, including in Moscow. A separate attack targeted a munitions production facility south of the city.
• Russia carried out strikes against cities throughout Ukraine, including the first combined missile and drone attack against Kyiv since the summer.
• Moldovan officials said police have discovered three downed Russian drones in Moldovan territory and theorized they likely strayed into Moldovan airspace during attacks against southern Ukrainian cities.

Hybrid escalation scenario 

• An unnamed Ukrainian security official claimed its operatives in Crimea planted a bomb that killed a senior Russian naval officer who had previously ordered missile strikes against Ukrainian cities, including one targeting civilians. Russian authorities confirmed that an improvised explosive device killed a serviceman but did not name him.
• Russia linked its national Mir payment system with Iran’s Shetab system to bypass U.S. sanctions.
• The government of Niger said it is interested in investments from Russian companies into its uranium and natural resource production following the suspension of activities by French companies.

Diplomatic de-escalation scenario 

• Russia’s ambassador to the U.N. said Moscow was open to negotiating an end to the war in Ukraine if initiated by Trump.
• The Washington Post reported that some European countries are open to Ukrainian territorial concessions to Russia in exchange for security guarantees.
• Finnish President Alexander Stubb cautioned that Trump’s intentions to end the Russia/Ukraine war need to be taken seriously.
• The Washington Post, citing unnamed sources, reported that Trump cautioned Putin in a telephone conversation not to escalate further in Ukraine. The Kremlin has denied that a call took place.

Summary

Conflicts in the Middle East trended toward military escalation and diplomatic de-escalation scenarios as Israel continued operations in Gaza and Lebanon and al-Houthi rebels carried out attacks against Israel and maritime vessels off the coast of Yemen. Israeli Finance Minister Bezalel Smotrich called for the annexation of the West Bank, and Iran expressed a willingness to negotiate over its nuclear program and to keep open lines of communication with the United States. Israeli aides have reported that a cease-fire deal with Lebanon could be reached in January as a “gift” to President-elect Donald Trump.

Forecast indicators 

Military escalation scenario 

• Israeli airstrikes in Beirut and across southern Lebanon killed dozens. At least six Israeli soldiers were killed in ground operations against Hezbollah.
• Smotrich is advocating for Israel to annex the West Bank in 2025, following Trump’s re-election and the nomination of former Arkansas Gov. Mike Huckabee as the next U.S. ambassador to Israel.
• Despite Israel’s failure to make significant improvements to humanitarian aid access in Gaza, the United States will not follow through on its threat to curtail lethal aid.
• U.S. airstrikes targeted Iran-backed militia groups in Syria following attacks against U.S. forces there. The strikes in the city of al-Bukamal near the Syrian-Iraqi border, killed at least five militants.
• Al-Houthi militants launched drone and missile attacks against U.S. navy ships near the Bab al-Mandeb after the U.S. and U.K. conducted joint airstrikes against Houthi targets in Yemen. Israeli air defense intercepted a missile fired from Yemen into central Israel.

Hybrid escalation scenario 

• Iranian Minister of Petroleum Mohsen Paknejad expressed confidence in Iran’s ability to continue oil exports in anticipation of Trump returning to the “maximum pressure” policies of his first administration.
• Iran and Russia linked their national payment systems, allowing Russian and Iranian citizens to access ATMs and the ability to make financial transactions in their national currency in either country. The move deepens cooperation on sanction evasion between the two countries.

Diplomatic de-escalation scenario 

• The Washington Post reported that a cease-fire deal between Israel and Lebanon could be reached in January as a “gift” to Trump, according to Israeli aides.
• Iranian Foreign Minister Abbas Araghchi has said that communication channels with the United States “still exist” following Trump’s election. He expressed willingness to negotiate over Iran’s nuclear program.
• Israeli Defense Minister Israel Katz has publicly ruled out the possibility of an imminent cease-fire with Hezbollah. Katz expressed optimism that Israel would achieve its war objectives in Lebanon, citing recent tactical successes.
• Officials from the Qatari Ministry of Foreign Affairs informed Israel and Hamas that they will suspend their mediation efforts over Gaza until both sides display “seriousness” in negotiations.

Summary

Tensions in the Indo-Pacific trended toward hybrid and military escalation scenarios as China outlined new maritime baselines around the contested Scarborough Shoal with the Philippines. China unveiled its new J-35A fighter aircraft and new drone systems at the Zhuhai airshow in Guangdong. South Korea is reconsidering sending lethal aid to Ukraine after President-elect Donald Trump’s victory. The U.K. and Japan are set to establish new dialogues to counter potential economic ramifications from future U.S. tariffs.

Forecast indicators 

Military escalation scenario 

• Beijing posted coordinates delimiting the contested Scarborough Shoal and setting new maritime baselines from the island in response to legislation passed last week by the Philippines. China subsequently held sea and air combat drills in the area.
• China unveiled its newest multirole stealth fighter aircraft, the J-35A, as well as new drone and anti-drone weapons systems at the China International Aviation and Aerospace Exhibition in Guangdong.
• Russian state weapons exporter Rosoboronexport signed deals at the Guangdong exhibition, for the first time agreeing to sell Russia’s Su-57 stealth fighter jets to other countries.
• The U.S. Navy took part in the “Freedom Edge” trilateral exercises with its Japanese and South Korean counterparts, led by the USS George Washington carrier strike group, in the last iteration of such exercises before the change in U.S. administration.
• China’s People’s Liberation Army’s Eastern Theater Command designated several temporary no-sail zones along China’s southeastern coast to conduct live-fire drills.
• The Philippines agreed to the acquisition of 49 new ships, starting in 2027, from France and Japan to bolster the capabilities of its coast guard.
• South Korea’s joint chiefs of staff warned ships and aircraft in the Yellow Sea of possible GPS interference due to North Korean GPS jamming drills in the area Nov. 8-9.
• Taiwan’s Ministry of National Defense tracked 68 Chinese aircraft and 30 naval vessels around the island this week, with 35 aircraft crossing the Taiwan Strait median line.

Hybrid escalation scenario 

• U.S. officials warned of multiple network and telecommunications intrusions perpetrated by Chinese state-sponsored hacking groups with the goal of stealing caller information and compromising telecommunications between government officials.
• Beijing advisers and international risk analysts commented that China has prepared “powerful countermeasures” against U.S. companies in the event of a trade war with the Trump administration.
• A Chinese state-sponsored hacking group launched a cyberattack against Tibetan websites belonging to the Tibet Post and Gyudmed Tantric University in a reconnaissance operation designed to gain access to individuals’ data who visit the websites.
• Chinese electric vehicle maker BYD stated it would expand its sales in the European market despite the recent tariff imposition from the EU and that it is seeking to enter the South Korean market by next year.
• Chinese President Xi Jinping is set to inaugurate a port in Peru, which is expected to attract upwards of $3 billion in investments, ahead of the upcoming Asia-Pacific Economic Cooperation forum, which outgoing President Joe Biden will attend for the last time. Analysts point to the inauguration as a signpost of the U.S.’s declining influence in the region.

Diplomatic de-escalation scenario 

• South Korea is reconsidering sending weapons to Ukraine following Trump’s election, as the country first wants to first ascertain what the global response will be toward the conflict before committing to lethal aid.
• Japan and the U.K. are reportedly set to establish an economic “two-plus-two” dialogue between each country’s trade and foreign ministers in anticipation of possible tariffs by the Trump administration.
• Xi met with his Indonesian counterpart Prabowo Subianto to sign a number of deals on renewed bilateral partnership on water conservation, maritime resources, and mining.
• Newly appointed Nepalese Prime Minister K.P. Sharma Oli is set to go to Beijing in his first official visit abroad, a departure from the usual first foreign tour taking place in New Delhi, signaling Nepal’s intent to build closer ties with China.

United States

• President-elect Donald Trump has nominated several members of his new government, including U.S. Sen. Marco Rubio (R-Florida) as secretary of state, U.S. Rep. Michael Waltz (R-Florida) as national security advisor, Fox News host Pete Hegseth as secretary of defense, and former Immigration and Customs Enforcement director Tom Homan as head of U.S. national borders. Trump also nominated Elon Musk and ex-Republican presidential candidate Vivek Ramaswamy to head the new Department of Government Efficiency, as well as U.S. Rep. Matt Gaetz (R-Florida) for attorney general.
• The Republican Party has retained control of the House of Representatives.
• Significance: The House victory secures the Republican Party’s control across all branches of government, making it easier for the incoming Trump administration to pass the legislation it wants.

Venezuela

• Opposition presidential candidate Edmundo González Urrutia traveled to Brussels to meet with Josep Borrell, the EU High Representative for Foreign Affairs and Security Policy, to thank the EU for its support and recognition.
• A pipeline operated by the state-owned oil company Petróleos de Venezuela, S.A. in Monagas state exploded, injuring five people. This is the fifth major accident at a PDVSA facility this year, with at least 30 people injured in total.
• Significance: González has established a rapport with the European Union, which could help ensure that he is inaugurated in January. Failing PDVSA infrastructure reflects the state of Venezuela’s economy, which has faced ongoing challenges.

South Africa

• To address growing debt owed to utility boards in South Africa, the National Treasury will withhold equitable share allocations for municipalities that do not repay their debts to water boards. All South African municipalities are entitled to an equitable share of nationally raised revenue, with each allocation per municipality determined in the national budget process. This comes at a time when two major water boards, Vaal Central and Magalies, face bankruptcy within the next year due to unpaid municipal debt. Municipalities across the country owe water boards 22 billion rand ($1.2 billion).
• Significance: Municipal nonpayment hinders the ability of the seven South African water boards to maintain and renew water infrastructure. Maintenance of faulty water infrastructure that causes leaks and water losses is crucial at a time when the country is confronting a major water crisis. While the threat to withhold allocations from non-paying municipalities will likely reduce debt, pointing to signs of economic stabilization, efforts to address debt and the water crisis would benefit more significantly from involvement of the private sector.