Middle East | Senegal

In Global Guardian's monthly Risk Barometer, our Intelligence Team highlights current global hotspots with the potential to impact your business operations and travel. Read below for analysis on the threats we are closely monitoring this month and click here to subscribe for regular intelligence updates.

Middle East Conflagration

On 02 February 2024, the United States (U.S.) conducted a significant retaliatory operation against Iranian-backed militias across Syria and Iraq following the 28 January 2024 drone assault on the Tower 22 base in northern Jordan, which killed three U.S. soldiers and injured over three dozen. On 07 February, two senior Kataib Hezbollah officers, believed to be responsible for the Tower 22 attack, were killed in a U.S. airstrike. While there appears to be a mutual reluctance in both Washington and Tehran to further escalate, without any realistic off-ramps, the situation in the Middle East is primed to deteriorate.

The strike targeted over 85 Islamic Revolutionary Guards Corps Quds Force (IRGC-QF) and Iranian-backed militia sites across Iraq and Syria. Targets included command and control centers, intelligence operations, arms storage, and logistics chains for munitions. Reports indicate that in advance of America’s strike, many IRGC-QF leaders in Syria departed back to Iran. While the strikes were limited in effect, Iran itself announced zero casualties, signaling that it does not seek to escalate. Since 07 October, U.S. forces have been attacked in Iraq and Syria on over 170 occasions, resulting in around 150 casualties of varying severity.

Meanwhile, the situation in the Red Sea has not improved since the onset of the U.S.-led Operation Prosperity Guardian on 18 December 2023. Over 53 merchant vessels have been attacked by the Houthis via missiles, unmanned vehicles, and gunboats, along with attempted and successful hijackings. On 31 January 2024, the USS Gravely shot down a Houthi anti-ship cruise missile at a very close range of a mile (1.6 km) with its close-in weapon system after the missiles eluded the naval task force’s other defense systems. This near-miss exemplifies the escalation risks present in the current status quo.

The Israel-Hamas conflict is ongoing, as Hamas’ responses to Israel’s ceasefire proposals are non-starters. Israel claims to have eliminated 17/24 of Hamas’ combat battalions with much of its remaining forces situated in Rafah, along the Egypt-Gaza border. Operations in Rafah will be the next phase of the war and will likely lead to escalatory steps by members of the Iranian “Axis of Resistance” to delay Israel from achieving its military objectives. To the north, Israel and Hezbollah continue to trade blows as time runs out on a diplomatic solution to create a buffer zone between the belligerents. With over 80,000 Israelis and tens of thousands of Lebanese displaced due to the fire exchanges, the current situation is unsustainable.

• Global Guardian recommends against non-essential travel to Iraq.
• Firms with travelers going to and from Israel, or the Gulf states should build contingency plans for an escalation of hostilities.
• So long as the Israel-Hamas War continues, Iranian-backed forces in the region will continue their attacks on U.S. forces and international shipping in the Red Sea.
• A high intensity conflict between Israel and Hezbollah in Lebanon is becoming more and more likely.

Analysis

The U.S. retaliation was highly performative, after telegraphing its moves and providing five days of lead time for Iran to relocate its important assets to safety. The strikes aimed to reestablish deterrence without prompting a wider conflict. And while the U.S. succeeded in temporarily preventing the onset of a higher intensity regional conflict, deterrence has not been restored. Operation Prosperity Guardian has failed to protect the Red Sea shipping lane and U.S. forces continue to face daily attacks in Iraq and Syria. Absent of utilizing ground forces, the Houthis will continue to be able to target shipping.

So far, it seems as though the current U.S. administration is doing everything possible to prevent a broader war in the midst of an election cycle, an objective well understood by the Iranians. To this end, the U.S., through a combination of diplomacy and behind the scenes pressure, is attempting to prevent a more open conflict between Israel and Hezbollah, halt, end, or limit the war in Gaza; push Saudi normalization with Israel; keep the sea lanes open; and maintain a military presence in hostile Syria and Iraq. The Biden administration is locked in a no-win situation. None of its goals appear to be achievable at present, which may lead to a policy shift as the election campaign ramps up. Addressing Iran’s nuclear program, and forcibly pushing back on its regional proxies, will be left for the next administration.  

Escalation Triggers

• Additional U.S. service members are killed in action, or a naval vessel is successfully struck
• U.S. attacks Iranian spy ships in the Red Sea (MV Saviz or MV Behshad)
• Houthis sink a merchant vessel or destroy undersea cables in the Red Sea
• Iran sinks an oil tanker transiting the Hormuz Strait
• U.S. kills a high ranking IRGC officer in Iraq or Syria
• U.S. attacks targets on Iranian soil
• Hezbollah-Israel conflict reaches full-scale war
• U.S. embassy in Iraq is besieged

De-Escalation Paths

• Israel-Hamas Ceasefire
• Israel-Lebanon buffer zone agreement

Looking Forward

Without direct control over most of the escalation or de-escalation paths, the U.S. has little ability to influence the outcomes on the ground making the status quo precarious. The only winner from the current situation is Iran, who will continue to work towards its two goals of ousting the U.S. from the region and actively fighting Israel with its proxies. It is clear that Iran does not seek to engage directly with the U.S., but it is satisfied with gradually upping the ante. Every missile, drone, or rocket attack is an intrinsic success, as the Axis of Resistance has a larger stockpile of offensive munitions than the U.S. has interceptors that are far more costly and slow to produce. The probability of regional escalation increases every day, as every attack on U.S. assets or merchant ships carries the potential of hitting its mark as did the 02 February attack. Following the October 7^th Massacre, Israel is unlikely to make any large concessions that jeopardize its security, and Hamas’ leaders, while they are still safe underground, are hoping that Israel will be pressured to cease its campaign so it can claim victory.

The best-case scenario involves Israel claiming a military victory much sooner than expected and ceasing intensive operations, which in turn, could lead to regional deconfliction measures. An end to the fighting in Gaza would remove the legitimacy from the current posture of Iran and its proxies.

The worst-case scenario involves a full-scale war between Israel and Hezbollah which would lead to extreme levels of destruction in Lebanon and Israel and would see even more lethal attacks on U.S. forces in the region. Alternatively, a more gradual path to open regional conflict could start with another lethal attack on U.S. assets which prompts a more robust American response that kills high ranking IRGC assets. This tit-for-tat scenario would require one party to lose face to deescalate, a challenge in the best of times let alone an election year.

Constitutional Crisis in Senegal

On 03 February 2024, Senegalese President Macky Sall postponed presidential elections slated for later this month prompting the country’s first constitutional crisis since gaining its independence from France. The election is now slated for December 2024, effectively extending Sall’s time in office into early 2025. Sall’s move — touted by the opposition as a constitutional coup d’etat — has sparked unrest and cast doubts on the stability of West Africa’s most robust democracy.

Current Situation

Hundreds of protesters took to the streets in Dakar and other cities throughout Senegal in opposition to the electoral delay on 03 February 2024. Protesters gathered in front of the parliament building before being dispersed by gendarmes using tear gas. The government has severely restricted mobile internet access and shut down at least one television channel for its coverage of the protests.

Previous protests involved the use of live fire by security forces, and at least 56 people have been killed in political unrest since 2021. In July of 2023 widespread unrest led to substantial property damage, economic disruptions, and dozens of fatalities. This bout of protests is not likely to reach the same level as those of July.

The Senegal’s Doctor’s Union has announced a forty-eight-hour strike (excluding emergency procedures) starting 05 February 2024. More strikes, possibly affecting transportation and other essential services, may be announced in the coming days. While the immediate possibility of large-scale unrest has abated for now, the latent friction between the ruling and opposition factions leaves the door open for future conflagrations.

• Global Guardian recommends avoiding non-essential travel to Senegal at this time.
• We recommend using pre-travel intelligence and monitoring for any travel to Senegal.
• Avoid all protests and concentrations of security forces. Anticipate heightened security and associated disruptions at all official sites throughout the capital.
• We recommend low-profile secure transportation with security personnel for any essential travel to or within Senegal.
• Firms with personnel traveling to Senegal should contingency plan for evacuation in case of medical emergencies or a deterioration of the security situation.

Analysis

Senegal’s democracy, traditionally a bastion of stability in a region plagued by military coups, has suffered a series of blows as incumbent president Macky Sall approaches the end of his legal tenure. The election delay — only passed after opposition parliamentarians were forcibly expelled from the national assembly — is just the latest in a series of antidemocratic moves. Despite flirting with the idea, Sall has ruled out running for an unconstitutional third term. Instead, Sall’s party Alliance Pour La Republique (APR), has placed its hopes in the candidacy of current prime minister Amadou Ba. APR has made every effort to secure Ba’s path to the presidency — despite his poor polling — through a judicial campaign aimed at disqualifying the opposition.

Sall, president since 2012, represents the Dakar establishment. He is opposed by a large constituency of primarily young and unemployed Senegalese citizens who feel they have been excluded from economic opportunity and view the establishment as corrupt and too close to France. The main opposition figure, Ousmane Sonko of the PASTEF party, has secured a large and enthusiastic following amongst Senegal’s youth for his outspoken anti-corruption, anti-imperialist, and anti-establishment rhetoric. Sonko was barred from running in the now-delayed election on charges of defamation and is currently in prison serving a six-month term for charges of inciting violence against the state. Despite its dissolution amidst deadly unrest last July, Sonko’s party PASTEF has militated for the election of Bassirou Diomaye Faye. Faye is also incarcerated, but his candidacy was approved by the electoral commission. If the election were held as scheduled, polling suggests that Faye could have won in the first round.

A loss by Macky Sall’s establishment coalition would open Sall and his coterie to investigation and prosecution for several charges ranging from corruption to abuse of office. If the opposition gains power over the executive and judiciary, these charges would almost certainly result in convictions. Sall’s move to delay the election makes sense, in this context, as a way to buy time and maneuver into a more favorable electoral landscape. The delay also extends his final term in office by nearly a year.

Implications

The less-than-transparent political maneuvering of the incumbent party, weaponization of the justice system against political opponents, utilization of internet and media blackouts, and heavy-handed crackdown on public opposition by force paint a picture of a democracy in regress. Senegal has never had a military coup, but on its present trajectory the possibility of a departure from its celebrated democratic tradition looms on the horizon. Even if Senegal does not go down the same road as its neighbors Burkina Faso, Mali, and Niger, the loss of its democratic credibility is a blow to stability throughout the region. Senegal has been a major pillar of the Economic Community of West African States (ECOWAS) a regional bloc that has sought to restrain the trend towards military coups. ECOWAS has called on Senegal to return to the original election timeline.

In Global Guardian's monthly Risk Barometer, our Intelligence Team highlights current global hotspots with the potential to impact your business operations and travel. Read below for analysis on the threats we are closely monitoring this month and click here to subscribe for regular intelligence updates.

Taiwanese Elections Could Serve as Major Regional Infliction Point

On 13 January 2024, the Taiwanese are set to elect their President and Parliament for the next four years. The three-way race between the incumbent Democratic Progressive Party (DPP), the Kuomintang (KMT), and Taiwan People’s Party (TPP) is tight with a weak mandate possible. Following the election of President Tsai Ing-wen (DPP) to her first term in 2016, Beijing cut ties and ramped up military intimidation of Taiwan. This election and Beijing’s response to it will largely dictate the tone and tenor of Taiwan Strait tensions and Sino-American relations for the foreseeable future.

While all three candidates – William Lai (DPP), Hou You-yi (KMT), and Ko Wen-je (TPP) – pledge to support the status quo of maintaining Taiwan’s autonomy from China, Beijing views the candidates quite differently. Hou and Ko favor more cross-Strait interaction and economic interdependence, positions that Beijing is likely to reciprocate with less bellicosity and more carrots, while Beijing is antagonistic to the DPP and sees Lai as a “troublemaker” who in 2017 dubbed himself “a pragmatic worker for Taiwanese independence” (a position he has since walked back). With a very difficult path to a parliamentary majority, there is a strong possibility of a divided government ahead — with more cross-Strait turbulence on the horizon.

Recent Events

18 August 2023 – U.S., Republic of Korea, and Taiwan meet in first standalone summit between the three states at Camp David. A big step on way to solidifying an as-of-yet informal anti-Chinese alliance.

19 August 2023 – PLA launches drills around Taiwan following William Lai’s stopover in the U.S.

30 August 2023 – President Biden authorizes weapons transfers to Taiwan under Foreign Military Financing, a program normally used for sovereign states.

23 September 2023 – China announces cross strait integrated development demonstrations zone to promote integrating Taiwan’s outlying islands to the mainland.

07 December 2023 – Taiwan Ministry of Defense (MoD) starts to publicly release information on Chinese surveillance ballons entering Taiwan’s Air Defense Identification Zone. To date, Taiwan has tracked 23 spy balloons over its territory.

22 December 2023 – The 2024 National Defense Authorization Act (NDAA) is signed by President Biden. The 2024 NDAA includes provisions to expedite the fulfillment of previously pledged arms sales to Taiwan.

Following the Taiwanese elections, Global Guardian recommends that clients conduct table-top exercises and scenario planning as the election results may have an outsized impact on topline macroeconomic concerns.

Analysis

China’s policy towards Taiwanese “reunification” has been premised as a carrot and stick approach; whereby, Beijing rewards alignment with economic incentives, more collegial rhetoric and punished non-alignment with economic sanctions, military intimidation, and more bellicose rhetoric. During the last KMT administration (2008-2016), Beijing’s Taiwan strategy was undergirded on buying its way to reunification via investments in property and coaxing legislators into laying the legal groundwork for eventual unification legislation. In this period, Taiwan established direct air and sea links to China and opened Taiwan to Chinese tourists and college students. Conversely, when the DPP rose to power in 2016, relations soured, and Beijing has wielded many sticks, including import bans and tariffs, halting formal bilateral communication, and military action designed to intimidate and signal its ability to blockade the island of Formosa (Taiwan’s main island).

In August 2022, China executed its most extensive live-fire exercises near Taiwan in almost 30 years, showcasing its ability to create a de facto blockade around Taiwan, disturbing maritime and air routes in Taiwan's bustling shipping lanes. Simultaneously, Chinese air and naval intrusions into Taiwan's informal air defense zone have occurred daily since late 2020 and have been increasing in scope and scale ever since.

Looking Forward

The composition of the future Taiwanese government will orient Beijing next moves: carrots or sticks. Depending on the outcome, Tomb Sweeping Day (04 April 2024), and the 20 May 2024 Taiwanese Presidential inauguration speech could serve as flashpoints in the near-term.

• Together, a Lai victory with a DPP parliamentary majority would increase cross-Strait tensions, leaving Beijing few carrots to deploy and many more sticks to compel “reunification.”
• A divided Taiwanese government (president without a parliamentary majority) could lead China to carry out both overt and covert destabilization operations to undermine Taiwan’s democratic system and harm the DPP’s image.
• A Pan-Blue (KMT-TPP) victory could dampen regional tensions and see more bi-lateral engagement.

Myanmar | Guyana

In Global Guardian's monthly Risk Barometer, our Intelligence Team highlights current global hotspots with the potential to impact your business operations and travels. Read below for analysis on the threats we are closely monitoring this month and click here to subscribe for regular intelligence updates.

MyanMar's Civil War Reaches Tipping Point

Myanmar’s Civil War reached a tipping point in October when rebel forces launched a surprise offensive against the military junta, taking key outposts and towns across the country. The success of this new campaign demonstrates both the overstretched nature of the regime’s forces as well as the unprecedented coordination among anti-regime factions. However, the anti-junta alliance is fragile, and raises the specter of the “day after” problem.

On 27 October, the Three Brotherhood Alliance (TBA) – consisting of the Arakan Army, the Myanmar National Democratic Alliance Army, and the Ta’ang National Liberation Army – launched a successful offensive against junta forces in the northern Shan State. The offensive saw the rebels capture several outposts and towns along a key corridor that linked the junta-controlled heartland with China. Since the start of the offensive – dubbed Operation 1027 after its start date – some 224 junta bases and seven towns have been captured. The attacks disrupted Myanmar’s two main trade arteries with China – the Mandalay-Lashi-Muse Road and the Mandalay-Lashio-Chin Shwe Haw Road. Regime control has largely collapsed in the states of Kayah and Rakhine, and the regime’s administrative apparatus withdrew from the states of Kayin and Kachin. Myanmar’s legal trade with Bangladesh, India, and, most critically, China, has been largely halted. The junta now controls less than 50 percent of Myanmar’s territory.

• Global Guardian recommends against all unnecessary travel to Myanmar.
• We recommend for firms with assets or personnel in central and or southern Myanmar to put concrete evacuation plans in place.

Background

The war in Myanmar has been active in some form since the country gained independence from the United Kingdom in 1948, making its civil war the world’s longest running ongoing conflict. In 1962, the Burmese military – the Tatmadaw – seized power and then ran the country as a centralized autocracy for the next forty-eight years. In 2010, the military experimented with political and economic reforms in a bid to retain power and invite international investment. However, Myanmar’s brief foray into democracy abruptly ended in early 2021 when the Tatmadaw launched another coup, arresting then-premier Aung San Suu Kyi and driving much of the democratically elected government into exile.

In March of 2021, pro-democracy protesters took to the streets in opposition to the coup. Police and military forces responded with live fire. Many of the protesters – largely from Myanmar’s Bamar ethnic majority – fled the ensuing political crackdown to seek refuge and training from some of the country’s ethnic paramilitaries. The ensuing clashes between the junta's security forces, the ethnic paramilitaries and the nascent People’s Defense Forces (PDFs) – comprising anti-coup dissidents – quickly escalated into a full-scale civil war. But until last month, the ethnic paramilitaries – which constitute the bulk of Myanmar’s anti-government forces, and which operate largely independently of the government in exile – were reticent to conduct offensive operations outside their own territory.

Looking Forward

The military reacted to the offensive with alarm, publicly declaring that Myanmar is in danger “of coming apart.” The junta has consistently framed itself as the only actor capable of maintaining the integrity of the country in the face of the ethnic factions’ separatist aspirations. This narrative is not unfounded. The ethnic factions and the National Unity Government (NUG) have a history of grievances dating back to the 2010’s when Aung San Suu Kyi defended the genocide of the Rohingya minority. The ethnic factions are wary of any centralized authority and if the NUG fails to develop an acceptable framework of autonomy and federalism, the alliance could break down following the loss of their mutual enemy.

Another critical unknown is Myanmar’s northern neighbor: China. Beijing thus far has been ambivalent towards the conflict. Following the offensive, Beijing made a series of pro-junta moves but it is unlikely that the offensive, more than a year in planning, had come to pass without the knowledge of China’s Ministry of State Security (MSS) intelligence service. Beijing is likely hedging its support for the junta against its interest in retaining its influence in Shan state, safeguarding its Belt and Road Initiative investments, and maintaining its access to northern Myanmar’s oil and gas infrastructure.

Operation 1027’s significance rests primarily in its demonstration of the increased political and military cohesion among the NUG, PDF, and various ethnic factions that currently control more than half the country’s territory. For the first time in the conflict, it appears more likely than not that the junta will not be able to retain control of the important population centers, trade routes, and resources it needs to legitimate its rule. Barring a significant intervention by an outside actor or the fracturing of the anti-junta alliance, the rebels have the momentum necessary to potentially take and hold major cities in Myanmar’s heartland.

On 03 December, Venezuela held a referendum on the proposed statehood for the oil-rich Essequibo region currently governed by neighboring Guyana, raising fears that Caracas is setting the stage for annexation. The Essequibo region is the area between the Essequibo and Orinoco rivers, accounting for around two thirds of Guyana's national territory, one sixth of its population, and is key to Guyana’s vast resource wealth. While it is unclear if the referendum signals a looming invasion, it is clear that Venezuela will leverage its military superiority over neighboring Guyana to advance the regime’s interests, ultimately raising the specter of gray zone warfare in a region where the ExxonMobil-led consortium of oil companies is expected to produce 750 thousand barrels per day by 2026.

Over 95% of voters reportedly supported the proposed acquisition in Venezuela's referendum. The poll posed five questions to citizens, covering the establishment of a new state named Guayana Esequiba, offering its inhabitants Venezuelan citizenship and identity cards, and incorporating this new state into Venezuela's territorial map. The plebiscite was held just days after the International Court of Justice (ICJ) ruled on 01 December that Guyana “administers and exercises control over that area [Essequibo]," and that Venezuela must refrain from altering the status quo. Ahead of the 03 referendum, the Bolivarian (Venezuelan) Armed Forces moved close to the Northern borders with Guyana, mobilizing nearly 500,000 troops according to Brazil, who bolstered its positions in the area bordering the Essequibo region.

• Global Guardian recommends car driver and agent services for all travel to Guyana.
• We also recommend the creation of scenario-based contingency planning for all firms with assets in and/or consistent travel to Guyana.

Context

1814 – Britain acquires Essequibo through a treaty with the Netherlands.

1899 – In a three-to-two decision, an international tribunal awards Essequibo to Britain (British Guiana), a ruling never recognized by Venezuela (but Venezuela accepts the boundary in 1905).

1962 – Venezuela claims Essequibo.

2015 – ExxonMobil discovers oil in Essequibo's offshore waters, leading to a legal case between Venezuela and Guyana at the International Court of Justice (ICJ).

2018 – According to an unverified report in Brazilian newspaper O Antagonista, Brazil warns Guyana of a possible Venezuelan invasion based on intelligence that Caracas is contemplating an incursion in Guyana.

2018 – An ExxonMobil ship is harassed by a Venezuelan naval vessel off the coast of Guyana.

2021 – The Venezuelan National Assembly rejects the ICJ ruling that it has the jurisdiction to hear Guyana’s suit against Venezuela over the disputed Essequibo province. President Nicolás Maduro also vows to “reconquer” Essequibo and announced creation of new maritime territory dubbed “strategic zone of national development” in what Guyana claims to be its territorial waters and exclusive economic zone.

2023 – The United States (U.S.) broadly eases sanctions on Venezuela's oil sector in response to a deal reached between the government and opposition parties for the 2024 Venezuelan election.

Analysis

The timing of Caracas’ provocative referendum and rhetoric suggest a threefold rationale. First, with presidential elections set for next year, the referendum is a means of distracting the population on an external issue and drumming up nationalist support. Second, with America’s demand that Maduro release political prisoners and arbitrarily detained Americans, the threat of annexation or mischief at sea gives President Maduro a lever for negotiations with the U.S. Finally, with two ongoing wars – both impacting global energy security – Caracas’ believes that the U.S. is both too overstretched and too sensitive to oil price fluctuations in an election cycle to invest political capital into punishing Venezuela now.

Looking Forward

A military campaign to conquer the entirety of Essequibo would be logistically fraught, as the territory is located within the remote Amazon rain forest and Brazil sits between Venezuela and southern Essequibo. An invasion would also lead to international condemnation and would not automatically result in Venezuela’s ability to develop and exploit Guyana’s hydrocarbons. Thus, it is more likely that Caracas will adopt a gray zone approach, much like its allies in Moscow, Beijing, and Tehran; whereby it uses political and military provocations, short of full-on war to better its bargaining position.

It would be fairly easy for Venezuela to deploy a small contingent of a few hundred soldiers into Guyana to take over a few strategic locations like villages, bridges, or roads. Capturing and controlling territory in Guyana could provide Caracas with leverage, potentially enabling it to negotiate a more favorable political amnesty agreement in return for withdrawing its forces. Additionally, with its new Iranian-made missile boats, the Bolivarian Navy could harass oil exploration vessels in the territorial waters of Guyana much the same way China bullies commercial ships in the South China Sea within its “nine-dash line.” However, given China National Offshore Oil Company’s (CNOOC) 25% stake in the Exxon-led consortium, Venezuela will be constrained in its actions at sea.

Israel & Gaza | MENA | Global

In Global Guardian's monthly Risk Barometer, our Intelligence Team highlights current global hotspots with the potential to impact your business operations and travels. Read below for analysis on the threats we are closely monitoring this month and click here to subscribe for regular intelligence updates.

Implications of the Israel-Hamas Conflict

The crisis in the Holy Land threatens to ignite a global terror wave while Middle Eastern regional stability hangs by a thread. Key regional actors have thus far indicated an aversion to a rapid escalation of the war, but international terror organizations may attempt to seize the media moment by bringing the war to the West. The footage of the 07 October massacre and subsequent bombardment of Gaza has inflamed an already polarized discourse and driven mass social unrest and a sharp rise in antisemitic and Islamophobic hate crimes. Regardless of whether the local conflict between Israel and Iran’s proxies escalates, the world is looking at an elevated threat of terror and socio-political unrest in the short and medium term.

Recommendations:

• Avoid non-essential travel to the MENA region
• Increase caution in and around:
  • Jewish sites of community or worship
  • Israeli consulates, embassies, and other official sites
  • High-value soft targets in major Western cities (Times Square, Champs Elysee, Buckingham Palace)
  • Western, particularly American and British, installations, assets, or symbols in the Middle east and North Africa (American or British universities, schools, hospitals, military bases, and embassies or consulates)
• Avoid demonstrations as they are susceptible to easy-access, low-tech terror tactics (cars, ABVIEDs) in addition to clashes between protesters and counter-protesters as well as security forces
• Israeli, Jewish, and American travelers to Muslim-majority countries should consider secure car and driver for all ground transportation and executive protection agents while traveling in these countries

Local Situation

The 07 October attacks made Israel’s previous “mowing the lawn” strategy – in which it periodically reduces Hamas’ force projection capabilities – unworkable going forward. Israel is now moving towards a more permanent rearrangement of its local security architecture with the principle aim of destroying Hamas as an organization capable of threatening Israel.

Statements and actions taken thus far indicate that Jerusalem intends to reduce Hamas’s capability by killing its leadership, destroying its armament stockpile, and reducing its rank and file through ground and air operations in Gaza. Due to the impossibility of civilian extrication from Gaza, and Hamas’ extensive use of human shields, Israel’s operation in Gaza will likely incur a very high level of civilian casualties. Historically, military-only approaches to counter-insurgency issues are only workable when they operate with a high level of acceptable civilian casualties. Russia, Sri Lanka, and Algeria were all able to effectively destroy insurgencies in the late nineties and early two-thousands (before the age of social media), but at the cost of tens of thousands of civilian deaths. Israeli military planners are aware of this fact and appear to have factored it into their strategy.

On 03 November Hezbollah leader Hassan Nasrallah announced that Hezbollah would not escalate its attacks on Israel but would continue to engage in tit-for-tat exchanges across the border to tie down and demoralize Israeli troops. The announcement assuaged fears of immediate escalation but came with an ambiguous red line. If Hamas appears to be near defeat, Nasrallah intimated, Hezbollah will utilize a greater portion of its substantial munitions supply and ground forces. In addition to tens of thousands of well-trained and well-armed fighters, Hezbollah possesses a sophisticated arsenal of approximately 150,000 rockets, missiles, and drones. Some of these are long-range, precise, guided weapons with the ability to hit specific sensitive targets deep in Israeli territory.

Both Hezbollah and Israel remember the 2006 war in which Israel was unable to dislodge Hezbollah from southern Lebanon, but not before inflicting serious damage. Hezbollah is likely content to pin down Israeli forces in the north without instigating a more total conflict. Nasrallah likely views the threat of escalation as more politically valuable than escalation itself and he may be wary of reducing Hezbollah’s capabilities in Lebanon in service of Hamas’s capabilities in the Gaza Strip. As of 03 November, Israeli forces had bifurcated the Gaza Strip in an encirclement of Gaza City where urban fighting intensified over the weekend. The past month of airstrikes have turned the outermost parts of the Gaza City to rubble, which as we have observed in Bakhmut, is a near ideal defensive environment for small unit tactics. However, unlike the defenders of Bakhmut, Hamas has had more than a decade to construct a network of tunnels and defensive positions. Israeli forces will likely sustain high casualty rates in attritional house to house fighting and tunnel clearing. So long as Hamas is able to inflict losses on Israeli forces, Hezbollah has an incentive to stay on the sidelines.

Hezbollah action is not, however, the only path to escalation. The Houthis in Yemen, independently of Hezbollah, have joined the war as a cobelligerent of Hamas by launching missile attacks on southern Israel and in doing so adding pressure to limited and critical Israeli air defense capacities. Other Arab and Muslim countries and non-state actors could follow suit depending on their domestic political situations and exposure to retaliatory strikes.

The United States (U.S.) and United Kingdom (UK) amongst other Western powers have voiced unequivocal support for Israel’s anti-Hamas campaign despite muted calls for a ceasefire. The U.S. and its partners have also deployed military resources and warships to the area in a move to deter Hezbollah and Iran from widening the war. While the presence of two American aircraft carriers gives the U.S. the option to respond with significant force to an expansion of the conflict, they also present major targets for a range of actors. Iran and Hezbollah have highly sophisticated weapons systems and could have as-of-yet unknown military capabilities that may pose a threat to the naval task force. American casualties would substantially widen the conflict.

As more American forces are mobilized to and within the region, Iranian backed forces have stepped up their attacks. There are more than 40,000 American troops stationed throughout the region including 2,500 in Iraq and 900 in Syria which have come under attack dozens of times since the outbreak of the war. In addition to the potential for direct attacks on servicemen, the strong military and political support the United States has offered Israel makes the U.S., its interests, and its citizens attractive targets for anti-Israeli forces that cannot reach Israel. In Iraq, the U.S. has closed its embassy and consulate in addition to evacuating non-essential staff due to specific threats from local Iran-backed militias such as Ashab al-Kahf and Kataib Hezbollah.

Hamas has issued a call for "Friday of al-Aqsa Flood" protests after Friday prayers tomorrow in Hebron, Bethlehem, Ramallah, al-Bireh, Nablus, Tulkarim, Tubas, Salfit, Jenin, and Qalqilya. Their likely goal is to rile up residents in hopes they clash with Israeli police, leading to casualties or fatalities furthering their narrative and to gain support from the broader Muslim world. Additionally, the former head of Hamas, Khaled Meshaal called for protests across the Muslim world on Friday in support of the Palestinians and for the peoples of neighboring countries to join the fight against Israel.

There are elevated concerns over potential for unrest and violence across the Middle East, North Africa, and major cities across the West following Friday prayers. Israeli and U.S. diplomatic outposts could be targeted, as well as synagogues and Jewish community centers. In the U.S., the FBI and local police departments, including the NYPD, have not indicated any specific threats but are advising vigilance as they continue to monitor the situation and prepare accordingly.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. 

Sector Snapshot: Agriculture

Sectors Impacted Upstream: Fertilizer, farming equipment

Sectors Impacted Downstream: Food processing, food retailing, textiles

A Taiwan Strait Crisis would prompt severe and simultaneous shocks to both supply and demand in the agriculture sector. Over time, upstream substitutions could be found but the potential loss of the world's largest consumer of agricultural goods would radically alter the nature of the international food market and prompt a major shift in livestock and crop production. Highly developed nations can be expected to adapt more quickly but underdeveloped nations in the Global South can be expected to confront dire food insecurity.

Short-Term Impact – Highly Adverse

• China is the world’s largest producer of nitrogenic fertilizers, a major producer of farming equipment, and a key component of the global food processing supply chain. Two of the world’s other biggest fertilizer and food producers — Ukraine and Russia — are producing and exporting under capacity due to the war and sanctions. The loss of Chinese inputs to food production would raise costs for both farmers and consumers across the board.
• The loss of access to the Chinese market would lower revenues for Western, particularly American, farmers precisely at a time of increased costs for fertilizer and farming equipment — a double-sided shock to both supply and demand.
• The Global South would see increased food costs, exacerbating its current food insecurity challenge.

Medium to Long-Term Impact – Medium Adverse

• Other producers may be able to capitalize on the gap left by China in the global fertilizer market. Certain regions could see limited reshoring of the food processing industry.
• The potential for disruption in both the Chinese, as well as Russian and Ukrainian, components of the global food supply chain could lead to hunger in multiple regions throughout the Global South already contending with chronic food insecurity.
• Farmers will likely substitute livestock and crop types for more profitable use of arable land depending on market forces and subsidies.
• Depending on policy reactions, it is possible that the international food market is substantially de-globalized through a reorientation towards regional markets.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index.

Sector Snapshot: Energy

Sectors Impacted Upstream: Hydrocarbons, coal

Sectors Impacted Downstream: Electrical, metallurgy, chemicals, consumer goods, clothing and textiles, construction, food processing, automotive, manufacturing

A Taiwan Strait Crisis would prompt a massive energy shock in the short term and would irrevocably alter the energy market. Seabourne imports from the Middle East to China, Japan, and South Korea — three of the five top global energy importers — constitute over half of the total global oil trade. The sea lanes through which the energy is transported would be contested in the event of a conflict.

Short-Term Impact: Moderately Adverse

• A Taiwan Strait Crisis would prompt an unprecedented global energy shock.
  • Major international crises trigger energy price shocks as the geopolitical instability and uncertainty of the situation are factored into the market. 
• Seabourne energy delivery to East Asia, and China specifically would be disrupted.
  • China, Japan, and South Korea are three of the world’s top five oil importers, constituting around half of the global oil trade. These nations are also major importers of LNG and coal.
  • Delivery of Middle Eastern oil and gas in the midst of a conflict at sea would be complicated, even if price shocks and sanctions are left out of the equation. If China engages in a blockade of Taiwan, shipping oil to China, Taiwan, Japan, South Korea, and even the Philippines through the affected area may prove uninsurable to the point of non-profitability.

Medium to Long-Term Impact: Nuetral

• A military conflict in the Taiwan Strait could irrevocably alter global energy markets.
  • Western sanctions and the United States’ naval control over the Malacca Strait could disrupt China's oil imports. China will likely need to rely on Russia to secure its energy supply.
  • With China replacing Europe’s demand for Russian oil and gas and Russia replacing the Middle East’s supply of oil and gas for China, China and Russia could form a de-facto regional energy market with different market dynamics and little external oversight.
  • The existence of a parallel oil market with different prices would create an extremely lucrative space for smuggling and arbitrage.
• Depending on how long a conflict lasts, insurance costs for transporting oil to East Asia from the Middle East could rise precipitously. Taking a more circuitous route that avoids the Strait would also increase transportation costs.
• Should the Taiwan Strait remain uninsurable, North American (and Australian) energy exports to Japan and South Korea could become more attractive.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. 

Sector Snapshot: Consumer Goods

Sectors Impacted Upstream: Raw materials (fabric, wood, metals, precious metals), and semifinished goods (textiles, furniture components, plastics, electronics)

Sectors Impacted Downstream: Retail, ecommerce, transportation and logistics

A decoupling with China would cause a major shock to the consumer goods sector hitting supply and demand and opening firms up to a number of legal, regulatory, and supply chain risks. The long-term impact of a Taiwan Strait Crisis largely depends on the policy response of the world’s major economies,  but major opportunities would exist for firms who enter markets previously dominated by Chinese manufacturers.

Short-Term Impact: HIghly Adverse

• Firms operating in China will likely face intense legal, regulatory, and logistical pressure to reshore or “friendshore” their production to other countries. There would likely be high up-front capital costs involved in relocating production and rebuilding institutional knowledge.
• Firms selling in the Chinese market would be impacted by sinking demand.
  • China’s unemployment problem — and overall economic rut — will be exacerbated by a Taiwan Strait Crisis, leading to a massive decrease in discretionary spending. China’s youth are both reliant on the medium-skill manufacturing jobs that would be lost and are the largest buyers of foreign consumer goods.
• Firms that rely on China for both production and consumption — such as cosmetics, over-the-counter medications, and packaged food products — may find themselves squeezed between increased production and capital costs and decreasing revenues simultaneously.

Medium to Long-Term Impact: Moderately Adverse

• The long-term impact largely depends on the policy response of the world’s major economies, particularly concerning sanctions and continued decoupling. It is possible — if sanctions and decoupling are maintained — that the situation never returns to the status quo ante-conflagration.
• No country has the infrastructure, labor pool, and middle-class growth at the scale necessary to replace China’s role in maintaining the availability of cheap consumer goods and demand for middle-range and luxury products.
• A long-term decoupling of the Chinese and global economies would result in a long-term elevation of the price equilibrium for most consumer goods.
• The permanent price elevation could allow firms to profitably enter markets previously cornered by Chinese manufacturers.
  • Certain Chinese-made consumer products may not face direct sanctions, but through supply chain disruptions, domestic and non-Chinese foreign consumer goods may become newly competitive.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. 

Sector Snapshot: Mining

Sectors Impacted Upstream: Equipment manufacturers, energy, and transportation

Sectors Impacted Downstream: Metals, green energy, heavy industry, construction, and electronics

A decoupling with China would result in a supply shock in commodities that China imports, extracts, and refines. In the long term, higher prices and opportunities to expand domestic and African operations may arise.

Short-Term Impact: Moderately Adverse

• Companies that are engaged in joint ventures with Chinese firms will have to navigate a narrow path to avoid the legal consequences of sanctions and the economic consequences of divestment.
• A rapid decoupling would result in an immediate, extreme supply shock in commodities that China extracts and refines. China’s market dominance in rare earths mining and processing cannot be quickly substituted.
  • China is the world’s largest producer of more than 20 different metals and minerals, including zinc, gold, aluminum, lead, and most significantly, rare earths.
• Companies engaged in the mining of cobalt and lithium would likely see sustained price increases for those elements. The price increase for inputs such as mining equipment from China would not match or negate the increase in revenue from lost Chinese competition.  
• Firms with logistical or other services that could be offered to mining companies in Central and East Africa may be able to capitalize on the increased access Western companies may gain to important mineral deposits concentrated in these areas.  
• Companies engaged in the production or sale of consumer electronics, batteries (including electric vehicles) and green energy generation will be hurt in the short term by the decreased supply of precursor components and materials.
  • China conducts roughly 63% of all rare earth mining, 85% of rare earth processing, and 92% of rare earth magnet production.
  • Rare earths and their derivatives are critical in the production of semiconductors, small magnets, and other necessary components for batteries, smartphones, electronic controllers, communications equipment, etc.
  • China manufactures 80% of the world’s solar PVs.

Medium to Long-Term Impact: Neutral

• Chinese capital and logistical constraints and challenges may open the door for Western companies to expand in the African market.
• This shock could result in Western governments loosening environmental regulations to allow for more domestic mining operations.
•  Opportunities exist for companies to capitalize on potential Chinese exits from certain competitive metal markets.
• Decoupling could create sticky higher prices for rare earth metals.
  • The current affordability of these minerals and their downstream products rests on an effort by the Chinese state to capture the market. Prices will approach a new higher equilibrium in a decoupled environment.
• Commodities like copper, zinc, and nickel will see price fluctuations, as both supply and demand dynamics will be altered.
  • The new equilibrium price for these metals will depend largely on future trade, regulatory and environmental policy responses, and China’s ability to evade sanctions.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index.

Sector Snapshot: Advanced Manufacturing

Sectors Impacted Upstream: Raw materials, software, energy, semiconductors, metallurgy, chemicals

Sectors Impacted Downstream: Aerospace, construction, transportation and logistics, automotive, medical, electronics

A decoupling with China would cause a major shock to the advanced manufacturing sector impacting supply chains, market size, and open up firms to a number of thorny legal, compliance, and possibly expropriation risks. China’s near monopoly on the primary stages of the semiconductor value chain could create catastrophic disruption to the production and supply of microchips,  photovoltaic solar panels, and batteries.

Short-Term Impact: HIghly Adverse

• Advanced manufacturers would be faced with diminished access to the Chinese market due to a combination of export controls, reciprocal Chinese sanctions, and logistical disruptions in the Taiwan Strait and South China Sea.
• Firms producing strategically valuable or dual use products in China — including semiconductors, complex machine parts, or certain chemicals — would likely be forced to divest from China or face legal sanctions directly.
  • These firms would also have to increase spending on compliance to minimize the legal risks associated with export controls and sanctions.
  • Firms engaged in the production of goods that contain sanctioned components could also face supply chain risks due to sanctions.
• Companies with assets in China may face expropriation risks.
• Manufacturers with production outside of China would likely see increased costs for Chinese-supplied components and raw materials. The procurement of these inputs could become extremely challenging.
  • Most personal electronics use components and materials produced and processed in China. While some of the raw materials, such as cobalt and lithium, are produced abroad, Chinese capital, labor, and technology are highly involved in their extraction.
  • Other raw materials, including rare earths, are largely extracted and processed in China.
  • Chipmakers, firms in the green energy sector, as well as electric vehicle manufacturers, would be highly affected by the increased costs of many of these materials.

Medium to Long-Term Impact: Moderately Adverse

• This sector may see increased costs and tighter margins in the long term.
  
  • The profitability of advanced manufacturing in developed economies has been driven in part by several macroeconomic trends dependent on Chinese growth and integration into the world economy. A hard decoupling would slow, end, or reverse some of these trends.
  • China subsidized the development of strategic upstream sectors like rare earths processing for market capture. The economies of scale that China added to the supply chain reduced costs for both Chinese and Western firms downstream.
  • However, the extent of cost increases for firms is largely dependent on future governmental policy on subsidies and trade.
• In some cases, the loss of access to Chinese markets by foreign firms may be partially offset by reduced competition from Chinese-subsidized competitors.
  
  • As China often prioritizes revenue over profit in its state-owned companies, Chinese companies can operate at price levels that foreign companies cannot. The electric vehicle market is a prime example. With strict reciprocal sanctions and trade restrictions in place, the loss of access to Chinese customers by foreign automakers may be offset — to a degree — by the removal of Chinese automakers from certain foreign markets.