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(Some of) your 2022 Top Risks questions, answered

(Some of) your 2022 Top Risks questions, answered
Written by publisher team

Parent company Eurasia Group this week published its annual list of the most significant geopolitical risks for 2022, which we hosted on Live Chat on Monday. During the program, we received many great questions from our viewers, but couldn’t answer them all in the allotted time, so we thought we’d have some Eurasia Group experts to tackle them here.

What are Jair Bolsonaro’s chances in the upcoming Brazilian presidential elections?

He has a chance, but they are not good. Bolsonaro has the support of nearly 30 percent of Brazil’s electorate, and his anti-establishment message continues to resonate among his core support base. But he has paid a heavy price for mismanaging the pandemic, and with inflation pressing on the disposable income of poor families, economic discontent has also increased. With most economists predicting near-zero growth in 2022, chances are that it will not recover. His best shot is still getting to the run-off against former President Lula da Silva, exploring the latter’s weaknesses due to the massive corruption scandal that rocked the two previous Labor administrations. Possible, but unlikely to succeed.

Chris Jarman. Managing Director, Americas

In Turkey, what share of the country’s youth supports leadership?

The ruling AKP gets more votes from the older age groups. The same is true for the AKP’s parliamentary ally, the Nationalist Movement Party. The AKP receives only 17 percent of its support from 18-34 year olds, while its average support is close to 24 percent. Young Turks are also the most dissatisfied with the state of the economy, with about 85 percent of those aged 18-34 rating the economy as very bad or bad.

What is the probability of war between the United States and China in the next 15 years?

Very low, but will likely grow over time.

If war breaks out anytime soon, it is more likely the result of an accidental conflict resulting from miscommunication than from a miscalculation. The United States and China have the strongest trading relationship in world history. Unless there is a fundamental rebalancing of that economic relationship over the next 15 years — which is possible given the continued decoupling of technology and capital flows — countries are unlikely to escalate any conflict to disrupt it. Moreover, cyber capabilities and economic capabilities are so closely interconnected that any actual conflict is likely to be limited to economic turmoil, and not turn into a hot war.

Taiwan remains the main flashpoint of tension, and China is still years away from possessing the military capability and economic dominance of an invasion without significant risks to economic and political stability. Even if the Chinese acted fast enough to surprise and overwhelm Taiwan’s defenses, the United States would likely respond with sanctions and trade embargoes that would severely impact the Chinese economy, and significantly raise the costs of the invasion.

Fifteen years is a long time, of course. The terms of war would include one and perhaps more of one of the following: a rapid separation in the physical goods trade between the United States and China, a significantly more advanced Chinese military, an internally weak U.S. president unable to rally Americans to the defense of Taiwan, and more. Adoption of China’s regional trading partners (India, Japan, and Australia), and the rebalancing of economic power in those countries away from the United States toward China.

john dear. Director General of the United States

How big is the economic and security threat posed by high energy prices?

Rising energy prices have become a major drag on global economic growth. In China, Japan, South Korea, and many European countries — all of which rely heavily on imports of fossil fuels from natural gas and thermal coal — prices have risen significantly since late 2020. Europe is further complicated by security of supply due to escalating tensions with its largest gas supplier, Russia. Major emerging economies such as India and Indonesia are also affected by rising import costs and supply disruptions due to COVID.

At best, higher industrial and household energy bills affect economic growth prospects. In the worst case, there is a shortage of supply leading to industrial shutdowns or even local power outages.

The government’s reactions show the severity of the problem. European governments have implemented measures to secure affordable household energy this winter, including unexpected taxes on the energy industry. China has repeatedly interfered in energy markets by setting prices, and shutting down some energy-intensive industries. Indonesia, the world’s largest exporter of thermal coal, has suspended exports amid tight domestic supply. Even in the United States, rich in domestic oil and gas reserves, the Biden administration in late 2021 intervened in the markets by releasing part of the Strategic Petroleum Reserve in order to cool retail gas prices.

The global energy crisis has led to passionate and polarized discussions about its cause. This will hamper climate action efforts, as governments reconcile the long-term need to reduce greenhouse gas emissions with the immediate priority to ensure reliable and affordable energy for all.

Henning Gloucestin. Director of Energy, Climate and Resources

Should we expect more government regulation of cryptocurrency this year?

After a massive influx of capital into the crypto sector and increased industry pressure in 2021, friendly lawmakers in the US Congress plan to introduce comprehensive legislation soon to fully integrate digital assets into the financial system. The growing pool of digital assets representatives and senators wants to provide clearer guidelines for digital assets and will seek to normalize their use with stablecoin rules, consumer protection provisions, and updated tax guidelines. While it will likely stimulate debate across industry and regulators, the bill’s passage will likely be delayed due to the administration’s more pressing priorities and a lack of understanding by policymakers on crypto issues.

New action is likely to be taken by the Securities and Exchange Commission before any new legislation is enacted. SEC head Gary Gensler made a series of speeches in late 2021 about the need for more regulation of the crypto sector, and the SEC appeared almost ready to launch a major regulatory investigation of global crypto exchange leader Binance and its CEO, likely on charges that include money laundering. Jurisdictions in Asia and Europe moved last year to rein in Binance’s operations. However, the major players in digital assets have deep pockets and will certainly launch legal challenges on any moves by the SEC. The outcome of the current SEC lawsuit against Ripple — in which expert witness testimony was largely completed in December — will be watched for clues about the position of US courts on issues related to defining cryptocurrencies as securities.

Paul Triollo. Head of Practice, Geotech

What are the major transformations we should be watching for in (sub-Saharan) Africa this year?

The upcoming elections across the continent will be a major observation point. Kenya goes to the polls in August to choose a successor to President Uhuru Kenyatta in a race expected to be soon, while Joao Lourenço is likely to win a second term as Angolan president in the same month despite a strong performance expected by the opposition. Meanwhile, Nigeria’s two major parties will hold primaries to choose their presidential candidates ahead of pivotal elections in 2023, while South African President Cyril Ramaphosa would prefer to win another term as ANC president despite growing divisions within the party. Finally, the African Continental Free Trade Area is likely to start this year once technical negotiations are completed, creating the world’s largest trading community by region. However, the economic benefits of the agreement will take years to materialize given the persistence of non-tariff barriers to trade.

Tucci Eni Kalo. Analyst and Practice Manager, Africa


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