Home > Publications > Political and security risk updates > The weekly briefing, 2 August 2016: United Kingdom begins to feel negative economic consequences of Brexit decision, al-Nusra Front changes name and splits from al-Qaeda, Thailand’s ruling junta cracking down on dissent ahead of constitutional referendum

The weekly briefing, 2 August 2016: United Kingdom begins to feel negative economic consequences of Brexit decision, al-Nusra Front changes name and splits from al-Qaeda, Thailand’s ruling junta cracking down on dissent ahead of constitutional referendum

by Kirsten Winterman, Erin Decker and Matthew Clarke

Briefing

Africa: UN Security Council backs deployment of 228 UN police officers to Burundi; Tunisian MPs vote out country’s prime minister just 18 months after his appointment.

Americas: US federal law enforcement officials confirm computer systems used by Hillary Clinton’s campaign were hacked in attack seemingly from Russia’s state intelligence services; Mexico’s National Association of Mayors request that country’s interior ministry draft and implement special security protocol following recent murders of two mayors.

Asia-Pacific: Nepal’s prime minister resigns after his party’s main coalition partner withdraws its support; Thailand’s ruling junta cracking down on dissent ahead of scheduled constitutional referendum that could strengthen its authority.

Europe: One of Italy’s largest banks sees simulation capital fall into negative figures during European stress test; United Kingdom begins to feel negative economic consequences of decision by small majority of British voters to leave European Union.

Middle East: Al-Nusra Front in Syria changes name and splits from al-Qaeda; Houthi rebels in Yemen reject UN-brokered peace deal that called for them to cede power.

Polar regions: Russian Navy plans to add armed icebreakers to Northern fleet.

Burundi

On 29 July, the UN Security Council backed a French-drafted resolution for the deployment of 228 UN police officers to Burundi in an effort to calm the unrest and human rights abuses that have been occurring since the country’s president, Pierre Nkurunziza, declared that he would run for a third term in the 2015 elections. The United Nation’s decision led to protests in the Burundi capital, Bujumbura, on 30 July. The UN still requires approval from Burundi’s government to send the force, and it is possible that the full complement will be rejected after earlier warnings that only 50 officers would be accepted. It is likely that while the force will be able to monitor the human rights situation, they will not have much impact on the violence.

Tunisia

As expected, Tunisian MPs voted out the country’s prime minister, Habib Essid, just 18 months after his appointment in a vote of no confidence on 30 July. A total of 118 MPs voted against Essid, with just three MPs voting for him to remain and 27 abstaining from the vote. Opponents have criticised Essid for failing to to address Tunisia’s economic and security problems. Essid had been under pressure since June, when the Tunisian president, Beji Caid Essebsi, called for a new unity government to carry out necessary reforms and address social unrest. The vote is significant, as it is the first time a prime minister has been removed by a vote of no confidence in Tunisia. Negotiations for a new government began on 1 August, but it is possible that it will take months to complete the process, exacerbating the political situation in the country.

United States

US federal law enforcement officials confirmed on 29 July that computer systems used by the campaign of US Democratic Party’s presidential candidate, Hillary Clinton, were hacked in an attack that appears to have come from Russia’s state intelligence services. It was also revealed that the Democratic Congressional Campaign Committee, the fundraising arm for Democratic congressional representatives, had its systems compromised as well. The latest attacks come after the disclosure last month that the Democratic National Committee’s computer system had been infiltrated by a Russian hacker believed to be connected to the Main Intelligence Agency (GRU), Russia’s military intelligence service. WikiLeaks last week released approximately 20,000 committee emails from the June breach, many of them embarrassing to Democratic officials, which led to the resignation of the committee’s leader, Congresswoman Debbie Wasserman Schultz. There is speculation surrounding the motives for the attacks, which some Democrats are saying is evidence of Russia attempting to interfere in the US presidential election and influence the outcome in favour of the Republican nominee, Donald Trump, though there is little evidence for this claim. It is more likely that the attacks are part of the cyber-espionage which takes place on a fairly routine basis between the United States and Russia. Relations between the two countries are already at their lowest point since the end of the Cold War, and these latest revelations of state-sponsored cyber-attacks on the part of Russia are likely to further damage the relationship.

Mexico

Mexico’s National Association of Mayors (ANAC) has requested that the country’s interior ministry draft and implement a special security protocol for all mayors across the country following the recent murders of two mayors. On 23 July, Ambrosio Soto Duarte, the mayor of the Pungarabato municipality in Guerrero state, was killed in a drive-by attack by a group of armed men while travelling in Michoacán state. The same day, Domingo López González, the mayor of San Juan Chamula in Chiapas state, was shot dead by unidentified protesters. The murder of these mayors and other government officials emphasises the threat that the drugs cartels and other organised criminal gangs continue to pose in Mexico, especially in Michoacán and Chiapas states. Mayors and local politicians have increasingly become subject to extortion by criminal groups, which might be seeking anything from contracts for valuable building projects to the right to name local police chiefs. According to the ANAC, 47 mayors have been killed since 2003, and criminal groups are believed to have been behind the majority of the murders. However, given that Mexico has over 2,000 municipalities, it is unlikely that the government will have sufficient resources to implement the proposed security protocols for all of the country’s mayors. The deep-rooted nature of organised crime in Mexico instead makes it likely that assassinations will continue in the country for the foreseeable future, with mayors remaining targets due to the cartels’ desire to control local politics and local politicians and to exploit towns’ resources.

Nepal

Nepal’s prime minister, Khadga Prasad Oli, resigned on 24 July after his party’s main coalition partner, the Communist Party of Nepal-Maoist, led by Pushpa ‘Prachanda’ Kamal Dahal, withdrew its support. A new government was due to be formed by 31 July, but no consensus was reached and the deadline has been extended to 3 August. As of now, Prachanda is the sole candidate for the top post, and it is likely that that he will assume the premiership. Nepal has been marked by frequent changes of government since democratic politics was introduced in the country in 1990, and the latest shake-up is likely to result in further political instability for the near future. However, if Prachanda were to assume the post of prime minister, Nepal’s relations with India would be likely improve, as he has indicated an interest in strengthening ties between the two countries. However, he has stated that he would strive for balanced foreign relations with both India and China, and would not favour one country above the other. This is in contrast to Oli, who had focused more effort on maintaining Nepal’s relationship with China in an effort to reduce the country’s dependence on India, which it relies heavily on with regard to trade and fuel.

Thailand

Thailand’s ruling junta, the National Council for Peace and Order, has been cracking down on dissent ahead of a scheduled 7 August constitutional referendum that could potentially strengthen its authority. Among other reforms, the referendum contains provisions that could allow the junta to retain influence even after it has left office. The junta has been curbing opposition red shirts’ activities in recent weeks by arresting student protesters and other activists as well as restricting public discussion of the referendum. The junta has also been tightening control over the media, suspending the operations of Peace TV, a television channel run by the red shirts, and giving the state telecommunications commission broad authority to suspend or revoke the licences of radio and TV channels deemed to be publishing ‘illegal content’ that could ‘destabilise the country’. However, protests are likely to continue in the run-up to the referendum despite the clampdowns. It is likely that the referendum will be defeated, as public opposition to the junta remains strong. If the referendum is voted down, this would serve to further undermine the junta’s legitimacy and increase opposition calls for the current prime minister, Prayuth Chan-o-cha, to step down.

Italy

There has been another worrying development in the financial crisis developing in Italy after a European stress test saw the simulation capital of one of the country’s largest banks, the Banca Monte dei Paschi di Siena, fall to negative figures. The stress test involved a scenario in which a long-term recession and a commodity market collapse occurred but there were no defaults on sovereign debt. Aimed to test how banks would cope under such circumstances, Banca Monte dei Paschi di Siena’s simulated assets fell to negative €0.9 in capital per €100 assets. In the real world, this situation would lead to a collapse of the bank, which is the oldest surviving bank in the world. The average for European banks was between €2 and €6 in capital, showing banks would survive, albeit only just. It is likely, that without deep structural and monetary changes to the Italian banking sector, a recession in the European market could lead to an Italian financial collapse. As such, it is very likely that financial organisations and governments will seek a way to shore up the banking sector to avoid another 2008-style financial crisis.

United Kingdom

Six weeks after a small majority of British voters voted to leave the European Union, the United Kingdom is starting to feel the negative economic consequences of the unexpected decision. Many companies are beginning to report large numbers of jobs cuts, particularly in construction and manufacturing. Bank lending to businesses is predicted to fall by a total of 3.8% over the next three years instead of the rise that was expected as recovery got under way after the 2008 financial crisis. HSBC and RBS are expected to report falls in profits for the first half of the year. There are signs that the pension market is suffering: Goldman Sachs’ basket of pension funds belonging to international companies, which is heavily invested in the international pensions market, has fallen 9% since 23 June. UK economic growth figures fell from an expected 2.6% this year and 2.3% next year to 1.9% this year and 0.4% next year. And UK government bonds are down. In the short term, it is very likely that the UK economy will continue to be dampened by the vote to leave the EU. The long-term outlook depends on the Brexit negotiations and the success or not of reaching new trade deals. Either way, the United Kingdom is likely in for a period of considerable economic instability.

Syria

The violent Syrian jihadist group Jabhat al-Nusra (al-Nusra Front) announced its split from al-Qaeda on 29 July. In the first-ever recorded message from the group’s leader, Abu Mohammed al-Julani, he stated that the decision was intended to remove the pretext used by Russia and the United States to bomb Syrians. The new name of the group will be Jabhat Fateh al-Sham (Front for the Conquest of the Levant) and ‘will have no links whatsoever with foreign parties’. Al-Qaeda’s leader, Ayman al-Zawahiri, has said that he supports the decision. The United States has responded that it still views the organisation as a terrorist group despite the announcement. It is likely that the split from al-Qaeda is part of an effort by Jabhat Fateh al-Sham to form closer links with other violent jihadist groups in Syria, though it is too early to predict the full consequences of the split.

Yemen

UN-brokered peace talks on Yemen halted on 1 August following the Houthi rebel’s rejection of a proposed peace deal. The draft agreement urged the rebels to withdraw from the Yemeni capital, Sana’a, as well as Taiz and Hodeida, and stated that the withdrawal would lead to a political dialogue 45 days after the rebel withdrawal. The draft had been accepted buy the Yemeni government in exile, but government officials formally left the talks in Kuwait following the Houthi rejection. The Yemeni foreign minister, Abdel-Malek al-Mekhlafi, has said that the move does not represent the collapse of the talks; however, it is likely that the current impasse will remain for the foreseeable future.

Arctic

The Russian Navy’s Northern Fleet is being reinforced. The newest additions come in the form of three Project 21180 multi-purpose icebreakers, which will supplement the four icebreakers ordered in 2015. The vessels will be armed, and will resupply military outposts and escort other military ships through the arctic waters – allowing conventional Russian Navy vessels to operate to a greater extent in the region. The armed icebreakers are a partial counter to the perceived threat from US Navy ships in the region armed with Tomahawk cruise missiles that are capable of reaching most of mainland Russia. In addition to reinforcing its Northern Fleet, Russia has nearly completed two new administrative compounds on the islands of Kotelny Island and Alexandra Land. A continued build-up of both US and Russian forces in the Arctic can be expected, particularly as melting sea ice opens up new transit routes and access to new oil and gas fields; however, the two powers are unlikely to engage in direct military confrontation.

Prepared by Kirsten Winterman, Erin Decker and Matthew Clarke.

These weekly briefings are offered free of charge to nonprofits and concerned citizens. Governments and corporations using our political and security risk updates are asked to make a donation to Open Briefing.