Risks to Watch in 2019: Q3 Update
July 18, 2019Major Q2 events included the release of the Mueller report, a U.S.-China trade ceasefire, near-conflict between the United States and Iran, and the threat of a trade war with Mexico over migration. In each case, the worst outcome was avoided in the immediate term, while the underlying risk was unresolved, delayed, or further complicated.
Heading into the second half of 2019, these are the near and mid-term risks to monitor.
1. Q3: clearer but not better.
2. U.S.-Iran: the war no one wants.
3. Clash within civilizations: rural-urban divides.
4. The other environmental crisis: biodiversity.
5. Deeply fake news.
1. Q3: clearer but not better.
- U.S.-Iran: The United States and Iran were nearly pulled into a war that no one wants. Iran may again lash out recklessly against the pain of U.S. sanctions, while the United States and Europe remain deeply divided on a response to diffuse tensions (detailed analysis below).
- Brexit: Complete failure to pass any Brexit package led to Theresa May’s resignation, with her likely successors fighting over who can exit the European Union in the least responsible manner come October. Adding insult to self-injury, The U.S.-UK spat over derisive leaked cables from the British ambassador to Washington and his subsequent resignation, forced by President Trump’s comments on the matter, brought into public view real decline in the special relationship.
- U.S.-China: With a “ceasefire” in place, U.S.-China trade talks are restarting under conditions of low trust and low expectations. Washington and Beijing are heading toward either a band-aid deal or another breakdown in talks, with new tariffs potentially hitting a growing list of consumer goods by late Q3/early Q4.
- U.S.-North Korea Four months after the failed Hanoi summit, Donald Trump became the first U.S. president to set foot inside North Korea. Negotiators on both sides have yet to catch up with the photo op, and a return to U.S.-North Korea incrementalism and small deals is likeliest.
- Developed Markets: The European Central Bank (ECB) has returned to stimulus policies, and the U.S. Federal Reserve Bank (Fed) has its finger on the trigger for a rate cut, promising a lift through the end of the year. Of course, this reduces options headed into 2020 should the global economy continue in its lackluster performance or an economic shock manifest.
- Emerging Markets: The effects of trade conflict and slower growth in China are becoming more apparent in economic data from Indonesia to India, and political risks are rising across key markets (Mexico, Turkey, Thailand, and Brazil to name a few).
2. U.S.-Iran: the war no one wants.
- Continuously tightening U.S. sanctions on Iran without effective diplomatic engagement have created a crisis without apparent solution.
- Having gone to the brink and back, the potential for conflict remains with increased U.S. force presence and posture in the region and an increasingly frustrated Iranian regime that’s already proven it’s willing to take highly escalatory steps in threat and use of force in an effort to gain negotiating leverage.
- The United States is dangerously alone on the issue. The rift between the United States and Europe on Iran policy makes a bad situation worse, and U.S. regional allies are content to let the United States bear the risk alone as the situation deteriorates.
In the past month, Iran shot down an unarmed high-altitude U.S. surveillance drone (almost certainly in international airspace), conducted a spate of attacks using irregular forces against commercial targets including airports, shipping, and oil production infrastructure, and further threatened shipping along major oil routes through the Strait of Hormuz. It is no coincidence that these attacks followed the end of U.S. oil waivers (sanctions exemptions) for those importing crude from Iran, along with another round of U.S. sanctions targeting Iran’s metals industry. Sanctions are working too well, but Iran and the United States have found no diplomatic footing on which to restart talks. President Trump has publicly offered to sit down with Iran with no preconditions, but it’s clear that Ayatollah Khamenei feels different.
The cyber dimension of this conflict is less well reported but significant. U.S. cyber firms CrowdStrike and FireEye have confirmed an uptick in Iranian targeting of U.S. government and private company infrastructure over the past several months. The New York Times reported that the United States conducted offensive cyber operations against multiple Iranian government targets, including disabling Iranian computer systems used to control rocket and missile launchers. And not to be lost in the nonstop news cycle, the United States very nearly retaliated against Iranian targets with air and missile strikes, but for what President Trump personally recounted as a dramatic decision to call off the strike at the last minute over casualty concerns.
Make no mistake, Iran was a problem actor before the hard pivot in U.S. strategy under the current administration, and the United States has struggled since the Carter presidency to effectively respond to malign Iranian activities. The JCPOA developed under the Obama administration constrained the worst outcome of a nuclear weapons program and perhaps forestalled an Iranian war with Israel, but it did little to temper Iran’s involvement in civil conflicts in Lebanon, Syria, Iraq, Yemen, and elsewhere; yet it undeniably provided a floor to Iranian actions that has since fallen away.
For the United States, the greatest risk stemming from Iran may ultimately be that it has pulled the United States back into intractable Middle East conflicts despite stated intention by Presidents Obama and Trump to rebalance attention to the Indo-Pacific region. Over recent months the United States has moved major military forces and shifted its attention back to the Middle East to deal with Iran. Despite a tremendous mismatch in conventional forces (Iran’s are third-tier, at best), Iran has a remarkable ability to impose cost on its enemies through sophisticated unconventional forces and tactics (as outlined in this report by my colleague Seth Jones, and this report by colleagues Kathleen Hicks, Alice Hunt Friend, and other CSIS scholars).
The situation continues to escalate with new U.S. sanctions on Iranian proxies, and Iran’s military apoplectic about the British seizure in Gibraltar of a tanker carrying Iranian crude destined for Syria (more from my CSIS colleague Frank Verrastro here). More worrisome, Iran has now flagrantly violated the JCPOA increased low-enriched uranium stockpiles beyond the allowed 300kg allowed under the agreement (more from my CSIS colleague Eric Brewer here). Iran is far from dashing for the bomb, but the signal is clear enough that it is ready to toss the painstakingly negotiated JCPOA and all of the layers of inspection and verification that go along with it. Europeans now are both admonishing Iran for its behavior while struggling to bring Iran back into the JCPOA with sanctions relief. Tehran, for its part, has lost patience and pronounced as too little too late the Europe-led effort to build a non-banking alternative to effectively circumvent U.S. sanctions and grant some relief.
3. Clash within civilizations: rural-urban divides.
- The shift of national populations to cities and accelerating economic competitiveness of cities versus rural areas is creating political tensions in countries around the world.
- Within democracies including the United States, United Kingdom, Italy, and Poland, populist political parties are exploiting the “politics of resentment” of rural voters.
- An urban-led populism is growing in response, setting up for an ongoing “clash within civilizations” likely to be accelerated by technology trends exacerbating rural-urban divides.
The United States is the world’s most compelling case study of these dynamics. According to analysis of Moody’s Analytics data by Brookings Institution scholars Mark Muro and Sifan Liu, Donald Trump won 2,584 of 3,056 counties (85 percent of all U.S. counties), though these counties contributed just 36 percent of total U.S. GDP. Hillary Clinton, in contrast, won just 472 of 3,056 U.S. counties (15 percent), which contributed 64 percent of total U.S. GDP. The reason for this imbalance is simple: the counties that Clinton won were both more economically productive and significantly more populous. In a recent report on the issue of the U.S.-urban divide Will Wilkinson of the Niskanen Center concludes, “Democrats have become the party of the multicultural city, Republicans the party of the monocultural exurbs and country—the party of relatively urbanization-resistant white people.” Put another way, the less dense the U.S. county, the more Republican it trends. And on average the less dense the U.S. county, the less economically productive it is.
Similar trends can be found in other democracies. The Brexit leave vote in the United Kingdom was carried by rural voters, while cities voted to remain. The rise of Italy’s populist League and 5-Start Movement parties has been driven by rural voters. Poland’s Law and Justice Party likewise finds its base among a non-urban constituency.
The geography of urban wealth concentration in these countries follows that of the United States, along with a general attitude among rural voters that has been referred to as the “politics of resentment” (see the eponymous work of Katherine Cramer, along with this article from Gerry Stoker). This view holds, largely, that life was better in the past, that immigration erodes economic opportunity and national identity, and that corrupt elites clustered and aligned in state and national capitals prevent those in rural areas from getting their due.
And the outlook for this dynamic is bleak—likely acceleration of trends and sentiments at play. Automation technologies will, in the next decade, disproportionately affect non-college-educated workers across economies, and these workers will remain most concentrated in rural areas. Their piece of the national economic pie and opportunities to find any employment at all will likely shrink. Take, for example, the pending arrival of autonomous freight trucking, which will arrive at scale over the next decade. Today, truck driving is the single most common vocation in the United States. In the overall U.S. economy, recent analysis by the McKinsey Global Institute finds that absent major efforts to revitalize communities and retrain workers, trends could “widen existing disparities between high-growth cities and struggling rural areas, and between high-wage workers and everyone else.”
Mistrust of urban elites and their associated political parties by rural voters is only likely to grow under these conditions. Meanwhile, urban dwellers are themselves becoming increasingly polarized and susceptible to a reactionary populism of their own as they perceive a “tyranny of the minority” when it comes to rural voters. This is creating an urban class increasingly resentful of rural voters’ values impinging on their own, which is in turn pushing their preferred political parties to the fringe. Call it a clash of civilizations, but within them.
4. The other environmental crisis: biodiversity.
- A recent major international assessment finds that more than one million plant and animal species globally are on the verge of extinction in what is already among the six largest mass-extinction events in Earth’s 4.5-billion-year history.
- Human-caused changes to the environment over the past 50 years are driving systems-wide stresses that risk the vast wealth and value generated by nature for humans (in the tens of trillions of dollars annually), as well as jeopardizing basic needs such as water and food security.
- The implications of the biodiversity crisis are particularly alarming for the future of human health, as nearly 70 percent of all drugs on the market today originated from or were inspired by natural sources, which are fast disappearing from potential for future use.
A recent assessment by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) finds that human-caused change in nature over the past 50 years is unprecedented and that declines are occurring worldwide in 14 of 18 key measures of value, which nature creates for human well-being. Massive global alterations have been driven by a doubling of the human population over the past 50 years, a tenfold increase of global trade (and with it, unprecedented movement of invasive species), and rapidly increasing demand for energy and materials driving carbon emissions and climate change. Among the million species on the verge of extinction are 40 percent of all amphibian species, 33 percent of marine mammals, as much as 99 percent of coral reefs, and 10 percent of insects (notably among them, pollinators—vital to global food production).
Biodiversity is vital to the resilience and stability of ecosystems. The greater the number of competing species, the more quickly an ecosystem can respond to shocks like extreme weather. On the flip side, given the interconnectivity of ecosystems, the loss of several species can send shockwaves through the food web, destabilizing the greater system and leading to a decrease in bioproductivity with implications for economic outputs such as food production.
Biologists are increasingly concerned that the Earth may soon reach a tipping point where species extinctions push entire ecosystems to collapse, altering the planet in ways we may not expect, and putting at risk ecosystem services humans depend on the planet to provide. Delicate balances that took millions—sometimes hundreds of millions or billions—of years to develop are being rapidly undone. The costs will not only amount to the interruption of current global value chains in food and agriculture, human settlement, and health and wellness but foregone opportunity at the moment of a revolution in biotechnology and genomics where nature could yield even greater value for humans. For example, cancer researchers are increasing the study of large mammals—elephants and whales—to understand how it is these animals are so much more resistant to cancer than smaller mammals despite having so many more cells. But as these large species are under the greatest pressure amidst the ongoing biodiversity crisis, we may lose them before unlocking their secrets to cancer immunity.
Today, 70 percent of drugs in the market originated in or were inspired by natural sources. Humanity can’t easily invent or manufacture new, complex biochemicals, so once a species disappears, its natural compounds that evolved over millennia disappear with them.
The UN Food and Agriculture Organization estimates that global food production must increase food production by 70 percent by 2050 to meet global demand. To ensure food security, protecting agricultural genetic diversity is essential, as biodiversity loss is a significant and growing risk to the global food supply. According to the UN, 75 percent of the global food supply relies on 12 plants and five animal species. Of the 250,000 edible plant species, humanity relies on just three—rice, maize, and wheat—for 60 percent of consumed calories and proteins. Consider that the Irish Potato Famine was facilitated in part due to agricultural overreliance on a single strain of potato, which was vulnerable to Phytophthora infestans mold. This case isn’t necessarily that alarmist, either; a push factor in the ongoing migration crisis from Central America has been a widespread fungal infection of Arabica coffee beans that has affected at least 70 percent of the region’s farms and caused the loss of 1.7 million jobs.
China will host the UN framework convention on biodiversity gathering in Kunming in 2020, where attendees will seek an updated global framework to deal with the threat. Conservation groups will push for more protected areas globally and better measures of progress or decline.
5. Deeply fake news.
- The global “fake news” phenomenon is just beginning and already accelerating the erosion of public trust in core institutions in democratic countries.
- New technologies such as “deepfakes” that use artificial intelligence (AI) to quickly create compelling but fictitious written articles, images, audio, and video clips that will magnify the threat.
- The issue is being closely monitored, and solutions including “AI to fight AI” are in development, but the ultimate safeguard is the very difficult task of civic education.
While Russia clearly meddled in the U.S. election by deploying fake news to favor its preferred candidate (referred to as “active measures” in its intelligence doctrine), this was just one part of what special counsel Robert Mueller described in his report as “sweeping and systematic” overall election interference. Russia’s Internet Research Agency and other intelligence assets involved in the fake news operation carried it out with a relatively small budget.
With the results in from Russia’s intelligence operation—from which it has received notably little retribution—chances are good that the 2020 election cycle will see more use of targeted fake news from more adversaries to achieve political ends. In fact, they may be facing off by proxy for their preferred candidate. China, for example, has in recent years stepped up its election interference globally, including in Taiwan and Australia. Certainly, it has a lot at stake in this upcoming U.S. election.
But what most concerns those watching this global uptick in election interference is that fake news has been turbocharged with new automated software that allows the rapid generation of fake print news along with deepfakes: manipulated photos, audio, and video. There is a conceivable not-so-distant future when discerning what is true might be nearly impossible, especially as AI pumps out fake content at scope, scale, and complexity well beyond the ability of platforms to police it. Consider the struggle of platforms to police real content coming from lone extremists, as in the rapid spread of video from the Christchurch (New Zealand) massacre.
Video, audio, and imagery have long been selectively edited in the service of dirty tricks politics, but the need to pull from existing stock and the ability of others to provide fuller context largely limited the overall impact of such activities. What might have happened if a deepfake video was released following the Iranian shootdown of the U.S. drone several weeks ago showing Ayatollah Khamenei issuing a direct threat against U.S. citizens? It’s a question of when not if we see such deployment.
The phenomenon of AI-generated fakes hit home for me personally as I read a recent AP investigative report about a CSIS “colleague.” Katie Jones’ LinkedIn profile identified her as a fellow with the CSIS Russia and Eurasia Program. From that presumed perch, she connected on LinkedIn with a variety of Washington foreign policy power players, including current Trump administration officials. Only Katie has never worked at CSIS. In fact, she doesn’t even exist. Her image on LinkedIn is fake—a generative adversarial network (GAN)-created image—that the AP describes as “a closely cropped portrait of a woman with blue-green eyes, copper-colored hair and an enigmatic smile.” The account of this digital Mona Lisa was almost certainly being used in the service of a hostile foreign spy service for purposes unknown. There are likely hundreds, if not thousands, more such accounts out there on social media—perhaps already lurking in your social networks.
There is no simple or singular way to combat the accelerating fake future of online content. But there is good news in the broad recognition of the challenge in democracies around the world. To provide a concrete example of shining a light on the challenge, my real CSIS colleagues Suzanne Spaulding, Devi Nair, and Arthur Nelson have authored an important report examining how Russia has sought to use fake media and other approaches to undermine faith in the U.S. judicial system. Their hope is that by exposing the threat early on, they can ask tough questions and put into place both resilient and response mechanisms to a gathering threat. The House Intelligence Committee also recently held an open hearing on deepfakes—and if it doesn’t scare you, nothing will.
The good news is that the U.S. government and many foundations and academic research institutions are examining various means that could fight fake news at the scale it is likely to be deployed in the future. On the technical side, the Defense Advanced Research Project Agency’s Media Forensics Program (MediFor) is developing AI solutions to analyze visual media and detect increasingly sophisticated manipulation or fakes—in effecting fighting AI with AI. But implementing such solutions runs immediately into questions of freedom of speech given the potential for misapplication and abuse of automated content filters. And ultimately, the best guard against fake news of any sort is an educated population aware of the threat it is under and committed to examining its own biases and preferences in media consumption. Leadership on that issue, unfortunately, is sorely lacking at the national level.
Sam Brannen leads the Risk and Foresight Group and is a senior fellow in the International Security Program at the Center for Strategic and International Studies in Washington, D.C. The author wishes to thank Stirling Haig and Henry Newton for their research support and contributions to this commentary.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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