Pakistan likely to avoid direct involvement in Yemen

Significance The Pakistani armed forces are reportedly already involved in the campaign: some troops have been deployed in Saudi Arabia and a naval ship is stationed off the Yemeni coast. However, Prime Minister Nawaz Sharif's government is facing strong public criticism for jumping into this conflict, and has been forced to seek parliamentary support. Parliament's decision will have serious repercussions for Pakistan's Shia-Sunni dynamic and key regional relations. Impacts Sharif's handling of Riyadh will be key to securing future aid, especially for the energy sector. Islamabad will not wish to alienate Tehran over Yemen, even though Yemen is relatively peripheral to Iranian interests. Pakistan's long-standing security ties with Gulf countries will not be fundamentally altered by its decision on Yemen.

Subject Outlook for Pakistan-Gulf relations. Significance Pakistan's parliament last month voted against joining the Saudi-led military intervention in Yemen. Since then Pakistan's Prime Minister Nawaz Sharif and Chief of Army Staff Raheel Sharif have visited Riyadh to clarify the decision, reassuring Saudi Arabia of Pakistan's support in case of any external aggression against the kingdom. The Yemen intervention has exposed some faultlines in the relationship between the two allies, as well as in Pakistan's ties with other members of the Gulf Cooperation Council (GCC), some of whom -- most notably the United Arab Emirates (UAE) -- described Pakistan's decision as "dangerous and unexpected". Impacts Pakistan will lose leverage in GCC states as the latter opt to provide aid via multilateral, international mechanisms. Islamabad will be reluctant to share nuclear technology with GCC states -- primarily for fear of provoking Washington. China will increasingly become Pakistan's preferred diplomatic and economic partner, despite a degree of mutual suspicion.


Subject Pakistan's ties with Saudi Arabia. Significance Prime Minister Nawaz Sharif visited Saudi Arabia last week -- for the second time in two months. Much attention focused on Pakistan's potential role in the Riyadh-led counterterrorism alliance, with the kingdom looking for a concrete commitment. With Iranian President Hassan Rouhani due in Pakistan at the end of March, Sharif sought to calm Saudi concerns about deepening Pakistan-Iran economic ties. Both relationships are bound to be complex balancing acts. Impacts Pakistan's army is unlikely to send troops for Riyadh's overseas military campaigns for fear of stoking sectarian tensions within Pakistan. An excessively pro-Iran attitude by Sharif's government would annoy Pakistan's military. Sharif will avoid this, in large part to ensure his own administration lasts its full term to mid-2018. Pakistan's reluctance to join Saudi-led military operations will increase Saudi dependence on other Sunni military allies, eg, Egypt, Sudan.


Subject Saudi National Transformation Program. Significance Saudi Arabia recently launched a five-year development plan, the National Transformation Program (NTP), which sets hundreds of quantified targets and initiatives for ministries. The NTP aims to move the country beyond oil dependence and introduce a culture of transparency and accountability into government. Impacts Other Gulf countries will use the NTP to inform their own reform agendas. Its success or failure will be critical in determining the standing of the deputy crown prince. Implementing the NTP at all levels of government will create a boom in consultancy work. Greater government transparency may build pressure for democratisation.


Significance His parliamentary approval only succeeded thanks to abstentions by the Socialist Party (PSOE). He will now form a minority government with the weakest parliamentary support for any prime minister since competitive elections returned to Spain in 1977. Impacts Tax rises, possibly in combination with spending cuts, may trigger a revival of social tensions. In the absence of major policy initiatives, economic growth is likely to slow down in 2017. Rajoy's dependence on PSOE and Citizens collaboration to pass a budget for 2017 by end-November will give them some leverage.


Significance The arbitration concerens the two countries' borders, most notably in the Bay of Piran. Croatian Prime Minister Zoran Milanovic claimed the process had been 'contaminated' by contact between the Slovenian member of the panel and the Slovenian Foreign Ministry's delegate to the court. Slovenia wants the process to continue and accuses Croatia of acting in bad faith and itself contaminating the arbitration process by spying on both the court and Slovenia. The Croatian government maintains parliamentary support was not needed legally; the vote in the Sabor is intended to indicate national solidarity. Impacts Croatia's withdrawal will destabilise the arbitration process and in effect end its work, even if Croatia cannot legally simply pull out. If the process ends, Slovenia will again fail to establish direct access to international waters, after an unratified 2011 deal. Croatia's withdrawal will encourage further border tensions in the region. Antagonising international partners is especially risky for Croatia as its economy is precarious and likely to need assistance.


Subject The outlook for deepening defence links between Japan and Malaysia. Significance Chinese Politburo member Yu Zhengsheng warned visiting Japanese lawmakers on June 29 that the South China Sea maritime disputes have "nothing to do with Japan". This comes amid new developments in South-east Asian governments' efforts to strengthen security cooperation with Japan. Among them is the agreement between Malaysian Prime Minister Najib Razak and Japanese Prime Minister Shinzo Abe on May 25 to elevate bilateral ties to the level of 'Strategic Partnership'. This reflects Malaysia's growing concern over China's actions in the South China Sea, which are increasingly expanding southwards, affecting Malaysian-claimed territorial waters. Malaysian officials on June 9 announced a complaint to China over a Chinese coast guard vessel near Luconia Shoals. Impacts The Philippines's armed forces are less powerful than Malaysia's, implying more scope to develop Japan-Philippines defence ties. Vietnam, and perhaps Indonesia, may be the next ASEAN countries to seek deeper defence ties with Japan. Malaysian criticism of China over the South China Sea could see a more assertive ASEAN over disputed maritime claims.


Significance The Pakistan Muslim League-Nawaz (PML-N)’s five-year term ended on May 31. PML-N President Shehbaz Sharif faces a tough fight to become prime minister, with the main challenge set to come from Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) and further opposition provided by Bilawal Bhutto Zardari’s Pakistan Peoples Party (PPP). Impacts With Khan as prime minister, the military would likely have free rein to pursue an anti-India foreign policy. Khan would step up his criticisms of the war in Afghanistan and likely have a difficult relationship with US President Donald Trump. Pakistan under any government will pursue balanced diplomacy in the Middle East, seeking good ties with both Saudi Arabia and Iran.


Significance The military leadership has seized control of the political process, but has shown little interest in assuming formal power, often demonstrating sympathies with protesters while preserving the constitutional order. Impacts The prime minister and interim president may be pushed to quit as a concession. Elections planned for July 4 may be postponed if unrest grows. The economy may suffer as tourism will decline and foreign investors will hesitate to become involved in an uncertain energy sector.


Significance Manama is seeking multiple means to adjust to the impact of the pandemic, publishing a two-year budget in November that targets a steady decline in the fiscal deficit. Although Bahrain secured improved terms for its most recent bond issue in September, its debt-to-GDP ratio is climbing, to almost 130% this year. Impacts The new premier may incline to a more rigorous approach towards subsidies, benefits and taxation, but is likely to proceed with caution. The death of the veteran prime minister, Khalifa bin Salman Al Khalifa, who was close to key donor Riyadh, could introduce a new variable. Investors’ future interest in Bahraini bonds will depend on their perceptions of Saudi Arabia as an effective guarantor.


Significance Prime Minister Abiy Ahmed has dismissed the possibility of a resort to force, but relations with the Tigray People’s Liberation Front (TPLF) regional government are rapidly unravelling. Impacts In the absence of any major opposition parties, Tigray’s elections will not be genuinely competitive. Tensions with Tigray may undermine cohesion in the armed forces, threatening national stability. Continued confrontations could detract from and delay implementation of a range of broader economic and political reforms.


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