Middle East and North Africa

At the end of 2018, much of the international attention paid to Saudi Arabia was focused around the murder of journalist Jamal Khashoggi. In reaction to the incident, for example, Germany banned weapons sales to the kingdom. But, as Stratfor expected, most of the country's key relationships remain unchanged. Both the United Kingdom and France have pushed Germany to lift the ban and return to the status quo. Most notably, Washington's relationship with Riyadh has remained unchanged, despite congressional calls to the contrary.

When the United States walked away from the Iran nuclear deal in 2018, its European signatories made a commitment to Iran that they would remain participants and work to maintain economic relations. But, as we said in our forecast, Iran has been increasingly disappointed by the limits of what the European Union can offer, which will lead to diplomatic trouble between Iran and the Continental bloc, as well as deepen the economic strain for the Islamic republic that will intensify political turmoil in Tehran. While the United Kingdom, France and Germany registered a special-purpose vehicle to allow for trade in basic goods that bypasses U.S. sanctions, Iran has been displeased with the slow pace of the process and the stringent requirements being attached.

Asia-Pacific

While the United States and China continue negotiations aimed at ending their ongoing trade war, China must also contend with an economic slowdown at home. As we forecast, the government in Beijing has sought to boost domestic consumption, both through tax cuts and additional subsidies.

Additionally, we expected China to ramp up efforts this year to expand "export markets and partners through the Belt and Road Initiative." In the first quarter alone, China has advanced cooperation in the far-reaching infrastructural development plan through various agreements or opening talks with potential investors in Saudi Arabia, Qatar and Italy among others.

Europe

We were correct when we said that Italy would be the source of financial risk within the eurozone in 2019. This quarter, the country officially entered into a recession. When coupled with pension and welfare reforms that will surely impact the country's budget deficit, it is not surprising to see the European Commission speaking out on the country's financial instability.

Europe is trying to carefully balance between courting increased Chinese investment while also protecting European companies and certain strategic sectors from foreign encroachment. As the annual forecast anticipated, Germany and France have led the charge on reforming the bloc's merger rules and pushing back against Huawei's involvement in 5G development, among other sensitive sectors.

Stratfor failed to anticipate the degree to which Washington would engage in direct talks with the Taliban in an effort to expedite the withdrawal of U.S. troops from Afghanistan.

South Asia

While India has long been a close U.S. ally, New Delhi is carefully balancing its defense relationship with Washington as it continues to negotiate a new trade deal. India is careful to maintain a strong defense relationship with Russia, especially as a weapons supplier. 

We were wrong about a change in the U.S. policy in Afghanistan, as the White House has taken to engaging more directly with the Taliban in negotiations, with hopes of expediting a drawdown of U.S. troops. The negotiations remain ongoing, and we've made adjustments to the shifting circumstances in our second-quarter forecast.

Eurasia

On Feb. 1, the U.S. formally announced its intention to withdraw from the Intermediate-Range Nuclear Forces Treaty formally acknowledging its long-anticipated intention. Such a move — which we correctly forecast — led to Russian buildups of troops and weapons along the border with Europe, with Moscow even going so far as to increase its military presence in Belarus.

Americas

Brazil's new president, Jair Bolsonaro, views the Common Market of the South (Mercosur) as an "overly restrictive customs union" and therefore is pushing for reforms to the bloc's policies. But, as we said in our annual forecast, the other Mercosur member states have already shown they may be willing to negotiate on some reforms, but are unlikely to go as far as Brasilia would like.

Stratfor forecast that in Mexico, newly elected President Andres Manuel Lopez Obrador would quickly begin to implement his populist agenda once in office. He has wasted little time in shaking up the country's energy sector with a series of actions supporting that agenda. In just the first two months of the year, the president has taken action limiting new gasoline import permits, increasing fuel import regulations and increasing the government's overall role in energy policy.

Sub-Saharan Africa

After decades of war, 2018 brought a tense peace between Ethiopia and Eritrea, its one-time province. As a result, we forecast that both countries would see an increase in foreign investment, which started to flow as early as January when Italy announced it would help support a railway line between the Ethiopian capital of Addis Ababa and the Eritrean port of Massawa. This was followed by announcements of investment from the European Union in February and France in March.

Check back throughout the year as we continue to track our 2019 Annual Forecast, and make sure to catch up with our 2019 Second-Quarter Forecast.