TAG President Jack Devine provides his Fall 2017 Intelligence Report covering Trump, the Russia probe, the Iran Nuclear Deal, the threat of North Korea, and more.

Jack’s Fall 2017 Intelligence Report

Trump Normalcy

Despite President Trump’s lackluster congressional record to date, his administration is getting stronger. The White House staff, cabinet members and the government career professionals are slowly but surely settling into running the government. Likewise, foreign leaders, while still concerned, are starting to size up Trump, and are learning how to deal better with him. No matter how one judges Trump’s performance, the unending flow of national and international issues has provided, and will continue to provide, opportunities for Trump to play the powerful role of President. On this stage, he has cut a deal with the Democrats on the debt, arm wrestled with North Korean leader Kim Jung-un over nuclear weapons, and grappled with hurricane disasters and the shooting in Las Vegas. Moreover, the American public at large is getting used to a tweeting President who makes regular outspoken sharp-edged remarks about friend and foe alike. The prospect for a truncated first term is growing dim even among his biggest critics. Perhaps the biggest obstacle to sound decision-making and progress on the issues Trump cares about is this tendency to publicly criticize senior officials and Congress. This may result in a cabinet that is either afraid to speak up on critical issues or unwilling to stay, as well as create recalcitrant partners in Congress. This is worth keeping an eye on since it could become Trump’s Achilles heel.

Russia Probe

The Russia investigation is throwing up ample evidence of Russian Intelligence involvement in the 2016 election. Their use of social media platforms is now sparking the necessary soul-searching among the major social media companies. But, as stated in the previous forecast, the Mueller investigation is not likely to tie Trump to the charge of collusion, though some of Trump’s former colleagues could well get nicked for other transgressions.

Steep Climb for the Dems

With the Trump Administration gaining strength, the Democrats have their work cut out for them to recapture the Senate in 2018 and the Presidency in 2020. In the aftermath of the Hillary defeat, the party appears to be moving leftward, coalescing around single payer healthcare and immigrant rights. However, it still lacks a coherent message and compelling messengers, making electoral gains at the state and national level a steeper climb than many are prepared to accept just yet.

Economic Upswing Continues

The U.S. economy continues to grow, with the stock market making strong gains and manufacturing output hitting a 13-year high. There are conflicting views on what Trump’s tax plan would do to economic growth in the long term and whether a cut in corporate taxes would result in a significant upswing. I’m siding with the optimists on this issue. However, given the doomed GOP health care effort, it’s not at all certain that tax reform legislation will go through. But, the Trump Administration will muster all the muscle it can to get it done. Trump needs this victory for a whole host of reasons, including maintaining the influence of the Presidency. Still, the U.S. economy appears on solid footing, particularly as compared to other global markets.

Iran

Given President Trump’s campaign remarks and long-standing beliefs about the Obama Nuclear Deal, it is no surprise that he didn’t certify that Iran is adhering to all of the requirements of the deal. That said, he now has been exposed to extensive and deep intelligence reports and think pieces that highlight the considerable downside impact of abrogating the deal. This and the fact that virtually all key advisors and allies are against scuttling it, likely has tempered his decision to walk away altogether and instead hand it off to Congress. Congress now has 60 days to decide whether to impose stronger sanctions which it is unlikely to do. There are enough combined Democratic and Republican Party votes to stop this from happening. Iran will respond with negative rhetoric about the non-certification, but will not take any action that will imperil foreign investment and renewed economic activity. If Congress somehow pulls together enough votes to impose new sanctions, Iran will have no choice but to walk, and we will be off to the races with two rogue nuclear powers-Iran and North Korea-and no good military options.

North Korea

With military postures heightening on both sides, there is ever-diminishing space for error in the conflict between Washington and Pyongyang. The chances for misinterpretation are high with potentially devastating consequences. Despite Trump’s chiding of Secretary of State Rex Tillerson, it is time to negotiate since there is no realistic military solution for stopping Kim Jong-un from expanding his nuclear arsenal and ability to deliver it. China seemingly is exasperated and has taken a harder line with North Korea than ever before. With some prompting from the U.S., China may now be open to bringing Kim to the negotiating table for revived “Six Party” talks. We should not be overly optimistic that the talks will lead to a meaningful deal or to North Korea dismantling its nuclear program. At a minimum, however, these talks could yield a more cohesive alliance among the five parties in dealing with North Korea, and stall the testing of bombs and missiles while the alliance tries to organize a more muscular response to Kim Jong-un.

Terrorism

The fall of Raqqa to the Syrian Defense Forces (SDF) has put a stake through the heart of the ISIS Caliphate, ending its naive idea of creating its own Islamic state as well as ending its use of traditional armed forces. Like al-Qaeda before it, ISIS is now a terrorist organization in decline, although still a dangerous force to be reckoned with. It has lost the base from which it launched operations against the West, and will move to a post-territorial strategy. Some fighters will attempt to regroup, while others will join other global terrorist groups or return quietly to the West. For sure, ISIS will try to maintain its relevance and influence by attempting to stage bold attacks against Western targets as well as encouraging its global sympathizers to conduct attacks of opportunity. It will have its successes, and Western intelligence organizations must remain vigilant.

Turkey

Despite Presidents Trump and Erdogan’s warm statements after their September meeting in New York, U.S.-Turkish relations have continued their precipitous descent. Both countries recently suspended visa services in the wake of an arrest of a U.S. consulate (Turkish) staffer on trumped up espionage charges. A symptom of President Erdogan’s increasing authoritarianism, the arrests are also widely regarded as an attempt to leverage the extradition of Pennsylvania-based Turkish cleric Fethullah Gulen, who Erdogan holds responsible for the 2016 failed coup attempt. Erdogan’s relations with Germany are similarly frayed as Chancellor Angela Merkel recently called for scrapping Turkey’s EU accession bid.

While Ankara and Washington still share common security goals, they are decidedly at odds in the war against ISIS as Washington leans heavily on local militias, particularly the Kurdish YPG, whom Erdogan views as linked to Turkey’s domestic Kurdish separatist force. Now that YPG and allied forces have retaken the ISIS stronghold of Raqqa, Kurdish influence in Raqqa will no doubt remain a bone of contention. The Kurdish loss of oil rich Kirkuk to Iraqi forces in northern Iraq will be a relief to Ankara, but a headache to Washington because we have relied so heavily on Kurdish forces in the fight against ISIS. Washington will need to work to prevent a protracted battle over the issue between Kurdistan and Iraq. In Turkey as well, Washington continues to have an enormous stake in keeping relations on track, if for no other reason than to protect its Turkey-based Incirlik Airforce base. The Trump Administration will likely take this moment to look for incentives to bring Erdogan back on the reservation.

Europe

Voters across Europe are continuing to challenge or upend traditional parties and governing coalitions in response to ongoing economic and social dislocations and immigration fears. Austria’s centrist coalition was the most recent to fall at the hands of an anti-immigrant 31-year old political wunderkind, Sebastian Kurz, who may govern in coalition with the far-right Freedom Party. In Germany, Merkel’s center is still holding, but the recent election saw the unthinkable, an ultra-right party pass the vote threshold to make it into Parliament.

In Catalonia, fed up voters have turned Spanish politics on their head when they voted for independence under the leadership of firebrand Carles Puigdemont. Prime Minister Rajoy’s arrest of Catalan politicians and violent crackdown on voters and protesters only serves to fan the flames in Catalonia. But Rajoy is likely to prevail as Puigdemont’s independence bid has gotten the cold shoulder from the EU and foreign governments. Puigdemont is calling for dialogue, but Rajoy is so far having none of it and has been given him until tomorrow to back down or risk a take-over of the regional government. Puigdemont will likely be forced to accept a compromise that keeps Catalonia in Spain, but provides some meaningful, if limited, concessions toward increased autonomy – and Rajoy would be wise to accommodate some of the most reasonable ones. Both must seem to have “won,” even though many of their constituents will feel otherwise.

Venezuela

Unfortunately, but as predicted, months of protests in Venezuela did nothing to remove President Nicolas Maduro from power or alleviate the economic and humanitarian crisis. Surviving the wave of protests, Maduro consolidated power by jailing opposition figures and calling a sham election for a constituent assembly to rewrite the constitution. The recent regional elections, which may have been substantially rigged, were a further blow to the opposition. Maduro’s actions have been met with U.S. sanctions on Venezuela and government officials. Even so, the opposition is on for a protracted and uncertain struggle for the foreseeable future. In addition, the Venezuelan people continue to suffer, living without basic goods and services, and seeking to escape to the U.S. or Colombia. A default on debt payments coming due soon could worsen the crisis and create chaos for the only industry bringing in any money to Venezuela – oil.

If you or your firm would like individualized consultation or information, please contact Jack Devine at The Arkin Group.