Key Political Issue Key Economic Issue North American Review South American Review

1. Key Political Issue Key Economic Issue North American Review South American Review West European Review Central and East European Review Middle East and North African Review Sub-Saharan African Review Central and South Asian Review East Asia and Pacific Review Statistics in Focus Contents: The ISA Global Update Issue #362 12th of January 2011 Published by ISA (International Strategic Analysis) www.isa-world.com

2. Key Political Issue: Russian Influence in Ukraine and Belarus Summary – Over the past year, Russia has made great strides in regaining much of its lost influence in Ukraine and Belarus, the two countries in Russia’s Near-Abroad that it considers the most important areas of the former Soviet Union in terms of Russian power. This is in contrast to the situation in most other areas of the former Soviet Union, where Russia has lost much of its former influence. As a result, Moscow is hopeful that it can gradually re-assert its control over a core region consisting of Russia, Ukraine and Belarus, enhancing Russian power and influence, particularly in Europe. • Russia’s Gains: • Russia’s most significant victory in its efforts to regain lost influence in the non-Russian regions of the former Soviet Union was won last year when Viktor Yanukovych was elected as the new president of Ukraine. • His pro-Russian policies and his crackdown on Ukraine’s pro-West political opposition has enable Moscow to regain significant amounts of political and economic influence over Ukraine, even if President Yanukovych has blocked some of Russia’s most blatant attempts at reasserting its control. • Meanwhile, the recent election in Belarus highlighted that country’s government’s continued dependence on Russian goodwill, both political and economic. • Greater Russia: • It is becoming clearer that the Russian government no longer sees the complete reunification of the former Soviet Union as a realistic prospect. • Instead, Moscow is now aiming for the creation of a Greater Russia that would include Russia, Ukraine and Belarus. • Such a Greater Russia would be home to more than 190 million people and would be the largest country in the world in terms of area. • Moreover, a Greater Russia consisting of these three countries would have a much greater level of influence in Europe and would share a very long border with the European Union. • What to Watch For: • Many people living in eastern and southern areas of Ukraine are in favor of annexation by Russia, while such a development would be bitterly opposed by most Ukrainians in northern and western areas of the country.

3. Key Economic Issue: A Critical Year for the Euro Summary - 2011 is likely to prove to be a critical year for the future of the European common currency, the euro. With two Eurozone members (Greece and Ireland) already needing international aid to rescue them from their huge debts and deficits, the once-powerful euro has been battered by investors in recent months. Moreover, a number of other Eurozone members are also facing severe debt and deficit problems and this could result in much larger aid packages being needed to rescue these economies. As a result, the euro is likely to weaken in the months ahead, something that should be welcomed by most European economies. • Background: • Having soared in the years prior to the 2008 global financial crisis, the euro proved to be ill-equipped to deal with a much less stable global economy and this has led to the crisis that the European common currency is now facing. • This is due to the fact that the currency is used by widely divergent economies, ranging from export-driven Germany to the stagnant economies of Southern Europe. • These weaker southern economies, as well as a few high-spending Northern European economies, have triggered this currency crisis in the Eurozone, as investors are concerned that their poor economic outlooks and high debt and deficit levels are a recipe for default. • A Weaker Euro: • 2011 is sure to prove to be a critical year for the euro. • First, a number of countries such as Portugal, Belgium and Spain may also be forced to accept an international bail-out of their debt-laden economies and this may prove too much for some European countries to accept, particularly Germany. • If Germany loses too much confidence in the euro, the currency is sure to depreciate sharply as Germany was the country that was the most responsible for the strength of the euro prior to the financial crisis. • However, a weaker euro is most likely the leading catalyst for future growth in the Eurozone as that region is ever-more dependent upon exports for its economic growth. • What to Watch For: • Portugal is next in line for needing an international bail-out of its economy.

4. Regional Overview: North America Regional Summary: A young shooter shot and killed six people in Arizona, while attempting to assassinate a US Congresswoman. The United States’ unemployment rate fell in December 2010, but new job creation levels remained very weak. • US Congresswoman Shot: • A Democratic member of the United States House of Representatives, Gabrielle Giffords of Arizona, was shot in the head and severely wounded by a young gunman in Tucson, Arizona last weekend. • In addition, six other people were killed in this shooting spree, including a federal judge and a nine-year-old girl, prompting a re-assessment of the highly-charged political climate in the US at present, • The gunman, 22-year-old Jared Loughner, was captured by onlookers immediately after the shooting, while police searched for an alleged accomplice. • US Unemployment Rate Falls: • The United States’ unemployment rate fell sharply to 9.4% in December 2010, its largest monthly decline since 1998. • However, this fall in the unemployment was due in part to the large number of jobless people in the US that abandoned their search for a new job in late 2010. • During the previous month, only 103,000 new jobs were created in the United States, a much lower figure than had been expected. • Meanwhile, while the US economy is forecast to growth at a relatively healthy pace in 2011, this growth rate is unlikely to be high enough to significantly reduce the unemployment rate in the US this year. • A Look Ahead: • Key Issues or Events: • The US Congress will suspend all activities this week as a result of the shooting of Representative Giffords. • Elections This Week: • The run-off vote in Haiti’s presidential election between Mirlande Manigat and Jude Celestin will take place this weekend.

5. Regional Overview: South America Regional Summary: Brazil’s finance minister warned of a looming global trade war. Brazil’s largest city was hit by deadly mudslides. • Trade War Warning: • This week, Brazilian Finance Minister Guido Mantega warned that the risk of a global trade war was rising rapidly as a result of efforts by countries such as the United States and China to deliberately weaken their currencies in order to boost their export competitiveness. • In addition, Brazil’s finance minister announced that Brazil would be taking steps to ensure that its currency did not continue to appreciate in the coming months. • In recent months, Brazil has recorded a growing trade deficit with countries such as the United States and China as a result of these exchange rate trends. • Mudslides in Brazil: • Brazil’s (and South America’s) largest city, Sao Paulo, was hit by deadly floods and mudslides this week, killing at least 13 people in that city and other areas of Sao Paulo state. • Most of the fatalities were the result of mudslides that were triggered by the recent heavy rains that have hit this region. • This was the latest in a series of flood-related disasters to have hit Brazil in recent months, with hundreds of people having been killed in these disasters over the past year. • A Look Ahead: • Key Issues or Events: • Venezuela nationalized 200 companies in 2010 and the pace of nationalization is expected to increase this year.

6. Regional Overview: West Europe Regional Summary: The chances that the Portuguese economy would need an international bail-out continued to rise. The Basque separatist group ETA declared a permanent ceasefire. • Portugal at Risk: • As Portugal’s bond yields rose to a record high this week, the speculation mounted that Portugal would be forced to join Greece and Ireland in receiving an international bail-out for its debt-laden economy. • Nevertheless, the Portuguese government continued to insist that it would not need such a bail-out. • While Portugal does not have the high deficit and debt levels of Greece or Ireland (and has not suffered from a burst property price bubble), there are fears that Portugal’s long-term economic outlook is very poor and that it public finances will continue to worsen. • ETA Offers Ceasefire: • Last weekend, the Basque separatist group ETA declared a “permanent” and “verifiable” ceasefire in its terrorist campaign against the Spanish and French governments. • However, this ceasefire offer was rejected by the Spanish government as Spanish security forces continued to carry out operations against suspected ETA operations. • Many analysts viewed the Spanish government’s rejection of ETA’s ceasefire as a sign of ETA’s increasing weakness, as it has been unable to launch large-scale attacks against Spanish government targets in recent years. • A Look Ahead: • Key Issues or Events: • Belgium’s latest efforts to form a new coalition government appear to have failed.

7. Regional Overview: Central and East Europe Regional Summary: Russia’s economic growth failed to meet expectations last year. The Belarusian government launched a crackdown on that country’s political opposition. • Russian Slowdown: • According to initial results from the Russian government, GDP growth in Russia amounted to just 3.8% for the year in 2010, a much lower figure than the government had predicted earlier last year. • This worse-than-expected performance by the Russian economy was due in large part to the impact of the devastating heat wave and drought that severely cut into Russia’s agricultural output last year. • This week, Russian Prime Minister Vladimir Putin vowed that Russia’s total GDP would return to pre-crisis levels before the end of the first half of 2012. • Crackdown in Belarus: • Following last month’s controversial presidential election in Belarus that was “won” decisively by President Alexander Lukashenko, Belarusian security forces launched a crackdown on that country’s political opposition. • In the weeks following the election, seven of the nine candidates who opposed President Lukashenko in the presidential election were arrested by the country’s security forces. • This led to widespread international condemnation of the Belarusian government, although it was improved relations with Russia that emboldened President Lukashenko to launch this political crackdown. • A Look Ahead: • Rising Risk Factor: • Romania may take much longer to pull out of its severe economic downturn than other countries in the region due to the Romanian government’s huge financial difficulties.

8. Regional Overview: Middle East and North Africa Regional Summary: The influential Shiite cleric Moqtada Sadr returned to Iraq after four years of exile in Iran. Large-scale protests led to deadly riots in Tunisia in recent days. • Moqtada Sadr Returns to Iraq: • The conservative Shiite cleric Moqtada Sadr returned to Iraq last week after spending nearly four years in self-imposed exile in Iran. • This followed the agreement last month by his movement to join Iraq’s new unity government, a deal that secured his movement seven ministries and 39 seats in the Iraqi parliament. • In his first speech since returning to Iraq, he called on his supporters to end their violent attacks and to support the new unity government. • He also called on his supporters to not seek revenge for earlier clashes with other groups during the years of turmoil following the US-led invasion of Iraq in 2003. • Rioting in Tunisia: • Violent protests erupted in Tunisia in recent days as thousands of people, primarily younger Tunisians, took to the streets of Tunis and other cities to protest against the high rate of unemployment in that country. • At least 21 people were killed in these protests when protestors clashed with police in Tunis. • Following the worst of these protests, Tunisian President Zine El Abidine Ben Ali ordered all schools and universities in the country to be closed. • Tunisia’s economy has struggled to grow at a fast enough pace in recent years to create enough jobs to meet the needs of the country’s fast-growing population. • A Look Ahead: • Key Issues or Events: • European Union diplomats in Israel have allegedly called for the EU to recognize East Jerusalem as the capital of a Palestinian state.

9. Regional Overview: Sub-Saharan Africa Regional Summary: South Sudan’s referendum on independence began this week. The winner of Cote d’Ivoire’s divisive presidential election suggested that a unity government could be formed. • South Sudan’s Referendum Starts: • South Sudan’s referendum on independence from Khartoum began this week and will last for seven days. • It is widely expected that voters in South Sudan will vote overwhelming in favor of independence. • For the referendum to be valid, at least 60% of South Sudan’s registered voters will have to take part in the voting. • However, there are lingering fears that the Sudanese government may attempt to block South Sudan’s independence, or to try to seize some oil-rich areas of South Sudan that are adjacent to the border of the rest of Sudan. • The Situation in Cote d’Ivoire: • According to Cote d’Ivoire’s ambassador to the United Nations, the winner of last year’s presidential election in Cote d’Ivoire, Alassane Ouattara, would be willing to form a new unity government in that country if former President Laurent Gbagbo relinquishes his claim to the presidency. • According to the United Nations, more than 200 people have been killed in post-election violence in Cote d’Ivoire. • Supporters of former President Gbagbo rejected the results of last year’s presidential election which was won by Mr. Ouattara, leading to the ongoing standoff in Cote d’Ivoire. • A Look Ahead: • Rising Risk Factor: • The recent unrest in Tunisia is a symptom of that country’s poor economic performance in recent years and the high rate of unemployment among younger Tunisians.

10. Regional Overview: Central and South Asia Regional Summary: The sharp fall of Bangladesh’s main share index led to major protests by investors. Severe flooding hit Sri Lanka in recent days. • Stock Market Crash in Bangladesh: • The recent volatility on Bangladesh’s stock market continued this week when the Dhaka Stock Exchange fell by 9.25% in less than an hour on Monday, prompting large-scale protests by investors. • This volatility followed record gains on the Dhaka Stock Exchange in 2010, with this index rising by 80% last year. • This strong performance in 2010 led to a flood of new investors into Bangladesh’s stock market, many of whom are small-scale investors making their first investments. • With the recent fall in share prices in Bangladesh, investors have grown more concerned and that led to this week’s protests by the country’s investors. • Sri Lanka Flooding: • Severe flooding continued to spread across many areas of central and eastern Sri Lanka in recent days, causing hardships for many people and devastating vast areas of that country’s primary agricultural region. • So far, 16 people have been killed in the flooding, while nearly 200,000 people have been forced from their homes. • These floods are the result of much heavier-than-normal rainfalls that have hit Sri Lanka in recent weeks. • Meanwhile, local officials are concerned that these floods could result in the spread of diseases, particularly dengue fever. • A Look Ahead: • Rising Risk Factor: • New religious clashes have erupted in central Nigeria in recent days.

11. Regional Overview: East Asia and the Pacific Regional Summary: The United States and China held high-level defense talks in Beijing this week. Australia’s devastating floods continued to spread. • US-China Defense Talks: • This week, the United States Secretary of Defense Robert Gates traveled to China to hold talks with Chinese Defense Minister Liang Guanglie and other Chinese defense leaders. • This meeting took place amid rising tensions between the US and China in East Asia, with the US and a number of East Asian countries growing increasingly concerned over China’s efforts to dominate the waters around East Asia. • These talks are aimed to prepare the way for Chinese President Hu Jintao’s visit to the United States next week, where he will hold talks with US President Barack Obama. • Australian Floods Spread: • The devastating floods that have ravaged the Australian state of Queensland over the past month continued to spread in recent days as heavy rains swept across northeastern Australia. • This week, the floods pushed southwards, reaching parts of Australia’s third-largest city, Brisbane, forcing the city government to call of the evacuation of parts of that city. • In addition, flash floods hit many towns around Brisbane, causing a number of deaths and disappearances. • More than 200,000 people across the state of Queensland have been impacted by these floods that have caused billions of dollars worth of damage. • A Look Ahead: • Key Issues or Events: • US Secretary of Defense Robert Gates will travel to Japan following his four-day visit to China.

12. Statistics in Focus: Highest Murder Rates Countries in Central America and northern South America continue to have the highest murder rates in the world. Moreover, most countries in these regions have seen their murder rates continue to climb in recent years.