2008 GEOPOLITICAL BRIEFING

Featuring GLOBAL POLITICAL RISKS

By Jonathan Beutler
 2008 GEOPOLITICAL BRIEFING

Prepared in December 2007 by Jonathan Beutler

Contact: beutler@ucla.edu or jmbeutler@gmail.com

This report contains a brief synopsis of the geopolitical climate in a small cross-section of regions and
countries in the world. This report is neither comprehensive nor exhaustive. For more information on these
topics, please contact the author. The main purpose of this report is to provide a sample of political risk
analysis. The author is very aware of major political developments in Burma, India, Kenya, South Africa,
Israel, France, the U.S., Australia, and elsewhere; this report is simply a briefing of some of the world’s
hotspots.

Jonathan Beutler has worked and studied in the U.S., Europe, Asia, and South America. He speaks five
languages and has provided analysis and research for such organizations as universities, the U.S.
government, the State of California, and corporations.

© 2007 Los Angeles, California, U.S.A.

This report and all its contents are the intellectual property of Jonathan Beutler. Any
portion of this report may be cited and republished only if and after written permission
has been granted from the author, Jonathan Beutler. For permission to reuse, republish, or
cite this report, please contact Mr. Beutler at beutler@ucla.edu
This report is not intended to provide investing advice, and should not be treated as
persuasive evidence to invest in a particular region or country.

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6 major global political risks of 2008:
1. East Asia: China
2008 will be one of the most important
years in contemporary Chinese history because
of the singular event of the 2008 Summer
Olympics. Beijing and other Chinese cities are
undergoing heavy reforms and redevelopment
in preparation for the Olympics.
On the global front, the Chinese
government is expected to continue its
aggressive natural resource diplomacy,
primarily in Africa, the Middle East, and Latin
America.
An important aspect of regional political
risk is the inflammatory situation across the
Taiwan Strait. Regional players and the United
States have become increasingly concerned
with a strengthening “independence”
movement in Taipei. Taiwan’s president,
Chen Shui-bian has expressed his
government’s desire to apply to the United
Nations as an independent country, which the
P.R.C. has warned would provoke a very
dangerous situation in the region. China has
declared that such a move on the part of
Taiwan would only intensify alarm across the
Strait. Taiwan appointed a representative to
Hong Kong toward the end of 2007, who is
expected to seek better relations with and
support from the city-state, which will place
more tensions on relations with Beijing.
During 2008, it is expected that Taiwanese
leaders will attempt to draw more global
attention to their desire for independence.
Additionally, Hong Kong politicians are
urging Beijing to allow for a direct sovereign
vote for the Chief Executive of the Hong Kong
S.A.R. Beijing’s relationship with Hong Kong
is expected to change somewhat during 2008
as legislators in Hong Kong demand more
sovereignty from the Mainland. The recent
victory of pro-democracy Anson Chan against
a Beijing-backed candidate in a legislative
election in Hong Kong is indicative of general
sentiment in Hong Kong.
American elections in 2008 are likely to
produce further strained relations between
Washington and Beijing. Although relations
have improved, most presidential candidates
in both major political parties in the U.S. are
moving toward protectionist rhetoric against
China. China’s exported goods have become a
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scapegoat used by American advocates of anti-
Chinese protectionism.
Chinese industry’s drastic expansion will
continue in 2008, while the state and private
firms will seek to acquire assets abroad.
Chinese diplomacy will most likely focus on
the country’s consumption of foreign natural
resources. Increasingly, Chinese firms are
proving to be strong competitors in both
domestic and foreign markets.
Despite the remarkable economic growth
and infrastructure modernization in China,
there is considerable political risk associated
with instability throughout many provinces of
China, where regional Communist Party
leaders are at odds with national leaders over a
handful of proposals, reforms, and economic
objectives.
2. Africa: Nigeria
Despite sectarian strife and several
allegations of human rights violations, this
West African oil-rich nation is enjoying,
particularly in the telecoms industry. Prospects
for investment in this OPEC-member country
are generally positive. Thanks to Nigeria's
natural oil reserves, the Chinese government
has courted Nigeria in order to establish closer
ties between the two.
As in many developing nations, Nigeria
continues to be affected by significant
corruption and violence. Some aggressive
groups within the country have advocated the
disruption of the Nigerian oil industry, and
have pursued violence against that industry’s
infrastructures.
Nigeria’s president, Umaru Yar'Adua, has
taken office in 2007, whose election was
criticized by international observers who
expressed concerns of electoral fairness.
Regional stability in Western Africa largely
depends on Nigeria. If Nigeria suffers a
constitutional conflict or other form of political
stability, a larger crisis in that part of Africa
can be expected.
3. Central Asia: Pakistan
Pakistan’s severe political crisis is one of the
major dangers facing the world. As one of the
greatest political concerns during past years,
Pakistan is saturated with corruption,
instability, and violence.
Although Pakistan, a nuclear-armed
country, has strengthened ties with India and
the United States, it remains a primary concern
for regional and potentially global stability.
Pakistan is home to a number of extremist
groups, and many in the U.S. and the West
accuse the Musharraf regime of incompetence
in fighting extremism and correcting
instability.
Recent turmoil in Pakistan has brought
awareness to the fragile situation in Pakistan.
The former political leader Benazir Bhutto had
returned from exile in 2007 to her country
expecting to run for national office. Then in
late December 2007 she was assassinated, thus
ending her mission to reform and modernize
Pakistan. Her death is expected to result in
further disarray in a country where stability is
already scarce. The aftermath of this event is
potentially dangerous, and the country’s
nuclear weapons are cause for great concern of
neighboring countries in particular.
President Musharraf has removed his
military uniform and become the nation’s
civilian president, and has lifted the state of
emergency hold on the government. However,
he is expected to return the country to martial
law if chaos reigns in early 2008. During this
time of political uncertainty, regional stability
is at stake.
Pakistan is the only nuclear-armed country
in the Muslim world, and some of its regions
are dominated by anti-Western political
radicals. The instability issue in Pakistan is
particularly serious because it is within the
realm of possibility that nuclear arms could
eventually fall under the control of radical
adversaries.
Within Pakistan’s borders there may
continue to fester hateful groups of anti-
Western radicals. In 2008, they will continue to
seek influence in the operations of the regional
and national governments in the country.
2008 will be an important and pivotal year
in Pakistan’s history, because of a relatively
weak military head of government, political
instability, and a large arsenal of nuclear
weapons.
4. Eurasia: Russia
Russia’s president Vladimir Putin has been
named TIME magazine’s Person of the Year in
2007.
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Russia is rich in assets, and has opened for
international investment.
Russian politics was increasingly
scrutinized in 2007 because of allegations that
the year’s presidential election was biased and
undemocratic. Putin has declared that he will
seek to have influence in the national
government by becoming Prime Minister,
when Dmitry Medvedev assumes the Russian
presidency.
2008 will be an important year in post-
Soviet Russia because the transition from Putin
to Medvedev, with the continuing presence of
Putin in the government is reminiscent of
Soviet-era fraternity politics. During 2008 it is
likely that Putin will in fact become Prime
Minister and exercise extensive influence in
Russia’s politics, and especially in its foreign
policy.
Russia, in 2008, will seek to assert a more
influential role in global affairs, primarily in
the Middle East, and reinforcing its military
infrastructure and presence.
5. The Middle East: Turkey
Investment opportunities in Turkey are
abundant. Turkey occupies a very strategic
location: a gateway from the West to the
Middle East and Eurasia. However, the
country is at a pivotal point in its modern
history, in which it must prove its stability
through current challenges.
Instability is most prevalent in the eastern
and southeastern regions of the country. In
these parts public education is not as widely
offered as in other sections of the country.
Also, police brutality in Turkey has become a
highlighted problem in large cities.
The Turkish government during the end of
2007 launched military action in northern Iraq,
attacking strategic targets among the Kurdish
group PKK, deemed a terrorist organization by
Turkey and the U.S.
Turkish entry to the European Union is
even less likely now because Nicolas Sarkozy
has assumed the French presidency. Turkish
membership in the EU will be a much debated
topic in 2008, and will draw more attention to
this country that straddles two continents.
Turkish society is confronted by the
struggle between secularism and religious
fundamentalism. Turkey has stood as an
example that an Islamic country can become
democratic and modernized.
 On a sweeter note, Godiva Chocolatier was
sold to the Turkish firm Yildiz Holding for
US$850 million in December 2007.
6. Latin America: Venezuela
The risky situation in Caracas is likely the
most significant threat to regional stability in
the Americas. President Hugo Chávez suffered
a significant electoral loss in 2007 when voters
rejected his proposals, including one that
would have allowed him to remain in power
indefinitely.
Chávez has threatened to punish European
firms and investors in his country –
particularly Spanish companies – due to a
diplomatic rift between Caracas and Spanish
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delegates that widened at the 2007 Ibero-
American Summit in Santiago de Chile.
Venezuela’s relationship with most
governments in Western Europe has cooled as
well.
Additionally, the anti-American president
has stated that his country may decide to cut
off petroleum supplies to the United States.
Until recently this has been seen as very
unlikely because of the heavy American
consumption of Venezuelan oil. But now this
seems more possible as Venezuela warms up
to leadership in China, Russia, and the Middle
East, potentially establishing strong oil
purchasing ties.
4 countries to watch in 2008:
1. Latin America: Brazil
2008 looks like a spectacular year for Brazil.
Many have recently commented that the “B”
from “BRIC” should be dropped. I beg to
differ. Brazil is progressive and on the move.
The stars are aligned to bring Brazil further
economic growth, widespread prosperity, and
investment opportunities. Brazil has long been
a leader in alternative fuels, and 2008 will
mean that more than ever these commodities
will be important to the country’s growth and
regional influence. Additionally, the Brazilian
petroleum company, Petrobras, discovered
massive deposits of petroleum off the coast of
Rio de Janeiro, which will most likely position
Brazil as an even more important regional
player in petropolitics, perhaps
counterbalancing the influence of oil-rich
Venezuela. Brazil is now seen as the principal
driver of growth, development, and
democratization in South America.
Brazilian president Luiz Inácio Lula da Silva
(Lula) has initiated a widespread campaign
against corrupt acts and behaviors that have
penetrated all levels of the country’s
government. Additionally, it is expected that
the federal government in Brazil will enact
major tax code reforms during 2008. This will
greatly enhance the country’s investment
grade.
growth in Spain has outpaced most other
members of the European Union. President
Zapatero has overseen many significant and
globally renowned changes in Spain. Spain is a
country to watch because of its favorable
business climate and steady economic growth.
Forecasts by international observers indicate a
continuation of steady growth, despite
obstacles in the housing market. Recently, the
country’s Mediterranean coast was slammed
with a series of construction scandals, and a
dip in vacation housing demand. This housing
slump is being corrected, and the
4. Southeast Asia: Thailand
Thailand has recently endured a very volatile
political climate. The Thai Prime Minister,
Thaksin, was exiled as a military coup took
over government operations in 2006. But in late
2007, Thaksin’s partisans and supporters in the
People Power Party (PPP) were widely favored
and returned to national control. Thaksin is
expected to return to his country in early 2008,
but will most likely not seek national elected
office.
In 2008, many beneficial reforms are expected
to take place in Thailand. The new government
is likely to implement measures to strengthen
democracy in the country and increase political
stability.

2. East Asia: South Korea

With the recent election of a conservative
government in Seoul, less protectionist
measures can be expected in 2008. This is seen
as an encouraging step toward finalizing the
Free Trade Agreement with the United States.
The fast-paced development and
modernization in South Korea has led to a
more intensified Western interest in Korea.
New technological hubs have been built in
Incheon (near Seoul), where the country’s new
state-of-the-art international airport is located.
As a regional leader in hi-tech innovation,
Korea’s favorable political climate makes the
country a particularly exciting place for
business and investment.

3. Europe: Spain
Spain has been called one of this decade’s
engines of European growth. The economic

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