Six events and trends that were overlooked this year, but may be leading the headlines in 2014.
Russia and Canada Duke it Out over the North Pole
The race to lay claim to Arctic resources has been underway for some time now, but it entered an explicitly antagonistic phase in 2013 as Russia and Canada re-upped competing territorial claims and Moscow vowed to increase its military presence in the region. “I request that you pay special attention to the deployment of infrastructure and military units in the Arctic,” Russian President Vladimir Putin subtly said in a meeting with his Defense Ministry Board earlier this month. A spokesman for the Canadian Foreign Ministry immediately fired back, saying that Ottawa was prepared to defend its sovereignty “in adherence to International Law, and through science-based measures.”
The rapid retreat of polar ice caps has opened up shipping lanes and freed up potentially huge natural resource caches in the Arctic. According to the U.S. Geological Survey, the region could contain between 10 and 15 percent of the world’s undiscovered oil reserves and as much as 30 percent of its natural gas. Most of this lies within the uncontested territories of Russia, Canada, Norway, Denmark, and the United States (the United Nations allows countries to claim territory farther than 200 miles offshore if they can show that it is an extension of their continental shelf). But Russia, Canada, and Denmark are all pushing the envelope, indicating that their claims reach as far as the North Pole. In 2007, a Russian submarine went so far as to stake a flag on the North Pole seabed.
The Arctic scramble has also prompted military maneuvering by several of the region’s claimants. Earlier this year, Russia renovated its air base on the New Siberian Islands and announced plans to reopen a number of other Cold War-era bases in the Arctic. Moscow also plans to commission two nuclear submarines specifically detailed to the region, in addition to other military hardware. Canada, meanwhile, has held annual military exercises in the Arctic and announced plans to establish Canadian Forces Ranger units to patrol the area. “Canada is going to fight to assert its sovereignty in the north,” Canadian Foreign Minister John Baird said earlier this month. “[B]ut I think we will be good neighbors in doing so.”
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Japan Wins Southeast Asia
In his first year in office, Japanese Prime Minister Shinzo Abe has mounted an impressive charm offensive in Southeast Asia, strengthening economic and diplomatic ties with the 10-country Association of South-East Asian Nations (ASEAN) and becoming the first Japanese premier to visit all of them. In addition to buying ASEAN government bonds and making it easier for Japanese companies to borrow in local currencies, Abe’s government has canceled debts and extended generous aid packages to countries throughout the region. In the aftermath of Typhoon Haiyan, Japan offered the Philippines $10 million in assistance, compared with China’s initial offer of $100,000.
Looming large over Abe’s goodwill tour, of course, is Japan’s increasingly strained relationship with China. With tensions rising over disputed islands in the East China Sea — where China recently declared an air defense identification zone — Japan stands to gain from stronger ties with its neighbors, several of whom also have territorial disputes with China. Brunei, Malaysia, the Philippines, and Vietnam, for example, all have claims that overlap with those of the People’s Republic.
Japan has also expanded security cooperation with its neighbors, conducting counterterrorism exercises with Indonesia and supplying the Philippines with coast guard vessels. It is reportedly considering a similar arrangement with Vietnam. It comes as little surprise, then, that Abe’s diplomatic efforts haven’t played well in Beijing, which has largely interpreted them as “a plot to contain China,” as the official Xinhua news agency put it in June. According to a Chinese academic quoted by China Daily, “Abe is trying to hijack some countries that are not contending parties to the South China Sea issue, forcing them to take sides.”
But Abe’s efforts appear to be paying dividends. Not only have Japanese companies secured a bevy of lucrative contracts in Southeast Asia, but ASEAN countries followed Japan’s lead earlier this month in delivering an implicit rebuke to Beijing’s air defense zone. In a joint statement issued on Dec. 14, Japanese and ASEAN leaders underscored the “importance” of “freedom of navigation, unimpeded commerce, exercise of self-restraint and resolution of disputes by peaceful means in accordance with universally recognized principles of international law.” It may not be a knockout punch, but it’s a new jab at a rising superpower from a country once seen as over the hill.
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HIV/AIDS Treatment Leaps Forward
At a medical conference in March 2013, doctors revealed that for the first time ever an infant had been “functionally cured” of HIV after aggressive and immediate antiretroviral (ARV) treatment. The patient, a Mississippi girl, remained in remission 18 months after treatment ceased, according to a foll
ow-up study published in October in the New England Journal of Medicine. According to the study, the drug therapy, administered within 30 hours of birth, likely prevented the formation of viral reservoirs in the child’s immune cells.
The Mississippi girl’s case has potentially huge implications for the roughly 1,000 babies born with HIV around the world every day. But there is also evidence that rapid treatment for newly infected adults can result in long-term remission. In another study published in the medical journal Plos Pathogens in March, researchers identified 14 out of 70 patients whose viral loads remained controlled after prolonged periods without treatment. All of the study’s participants had received ARV treatment within 10 weeks of infection. According to the study’s authors, the findings suggest that early and prolonged ARV treatment may help some patients “achieve long-term infection control and may have important implications in the search for a functional HIV cure.”
In addition to major progress toward a functional cure, 2013 saw the adoption of new World Health Organization (WHO) treatment guidelines that make an additional 9 million people in low- and medium-income countries eligible for drug therapy. Implementation is expected to cost of roughly $2.3 billion per year.
The new guidelines recommend that patients begin ARV treatment as soon as their CD4 count, a measure of immune system strength, falls below 500 white blood cells per cubic millimeter of blood. Previous guidelines, followed mostly by donor-dependent countries, recommended therapy for patients with CD4 counts lower than 350, meaning that large numbers of HIV patients were told to wait for treatment until they became sicker. This despite the fact that treatment drastically reduces the chances that patients will infect others.
Despite being an obvious step in the right direction, the new guidelines nonetheless attracted criticism for not going far enough. One area where some medical professionals would have liked to see the WHO push harder is in the arena of preventative medicine: recommending a daily drug regimen for high-risk individuals, like prostitutes and drug addicts. That the new treatment guidelines do not make any such recommendation, one U.N. AIDS agency executive told the New York Times, represents “a missed opportunity.”
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Business Booms in Iraq
The biggest story out of Iraq this year was its rapid descent into chaos — a story that itself was arguably under-covered. (Iraq is as dangerous today as it was during the height of the U.S. troop surge in 2007.) But attracting even less attention is the minor economic miracle that is playing out in the war-ravaged country. Even as the security situation deteriorates, Iraq’s economy continues to grow, with major investment banks lowering their growth projections only slightly as a result of the persistent bloodshed. For 2013, Barclays projects 9.1 percent growth, fueled by oil production that is higher today than it was on the eve of the U.S. invasion, despite slipping in recent months because of ongoing maintenance work.
With demand from China and India on the rise, OPEC’s second-largest oil producer is set to boost production further in 2014. In October, the government signed a $6 billion contract with a Swiss company to build a new refinery in Maysan, and it is expected to sign similar deals for additional refineries in Karbala and Nasiriya. Several Western oil companies recently slashed output targets for individual oil fields, but according to the Wall Street Journal, most analysts still think Iraq is on the cusp of increasing production dramatically. Nor is oil the only bright spot on the horizon.
Increased government spending on infrastructure projects — expected to reach $1 trillion as the country rebuilds roads and bridges after the war — coupled with one of the region’s most appealing credit profiles makes Iraq an increasingly attractive destination for international banks. Fifteen international banks are now operating in the country. In the last year alone, Citigroup, JP Morgan Chase, and Standard Chartered all expanded operations in the country. “Iraq is an important market, with an economy that has substantial potential over time,” the CEO of Citi’s Europe, Middle East, and Africa division said in July.
Still, international banks remain skittish about the security situation on the ground. If the increasingly authoritarian Nouri al-Maliki fails to reconcile with the growing Sunni insurgency — and if the Iraqi and Syrian conflicts become more deeply enmeshed — international lenders could easily decide to pick up and leave. Part of the explanation for Iraq’s impressive economic trajectory is the localized nature of the violence (91 percent of deaths occur in seven of the country’s 18 provinces, according to one estimate.) A gradual metastasis of the conflict could easily reverse Iraq’s economic fortunes.
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Renewable Energy Threatens to Destabilize the Grid
While the shale gas bonanza and supposed new era of “oil abundance” were grabbing headlines in the United States, renewable energy sources, particularly wind and solar, have been quietly expanding their market share on both sides of the Atlantic. The shift, as a recent report from the investment bank UBS puts it, represents a “perfect storm” for major utility companies, which are struggling with depressed electricity prices and fearful that the clean energy revolution could ultimately destabilize the grid.
Renewable energy capacity in the United States more than tripled in the first decade of the millennium and in 2013, President Barack Obama ordered the share used by federal agencies to be tripled again by 2020. (Renewables account for nearly 16 percent of installed capacity in the United States today.) In Europe, where many governments have offered generous subsidies, the trend toward renewable energy has been even more pronounced. Germany now gets 21 percent of its electricity from renewable sources, while Denmark gets 40 percent, a whopping 28 percent of which comes from wind. The Fukushima nuclear disaster, meanwhile, has fueled a frenzy of investment in solar and wind in Japan.
The rise of renewables has had surprisingly little affect on the environment — the result of increased shale exploration, which has depressed coal prices in Europe, and an overabundance of carbon permits on the European exchange — but it has profoundly impacted utility companies, which by definition profit from inefficiency. For decades, these companies met baseload demand, the minimum amount of electricity that must be supplied around the clock, with coal and nuclear plants, and then ramped up more easily moderated gas or hydroelectric power plants during peak energy hours. Since renewables like wind and solar are intermittent, however, they have upended the normal mode of doing business, and resulted in numerous management challenges for providers. Coupled with depressed electricity prices — which in some cases have been negative — they are calling into question the survivability of the centralized generation model.
In the last five years, according to the Economist, Europe’s 20 largest utilities companies have together lost more than half of their value. In the United States, utilities have likewise struggled to stay afloat, with California’s top three electricity providers reporting this year that they lost $1.4 billion to customers with solar panels installed on their homes. “[T]o survive the renewable era,” according to the UBS report, utilities “will need to examine and change their traditional business models.”
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Latin America Erupts in Protest
Buried beneath the news of Hugo Chavez’s passing and NSA snooping on Mexico, Brazil, Colombia, and Venezuela, was the regional groundswell of popular discontent that engulfed Latin American in 2013. The impetus for protest was manifold: Anger over corruption, price hikes, public sector reforms, and poor economic performance drove thousands of people into the streets in Brazil, Argentina, Colombia, Mexico, Peru, and Chile. In Venezuela, supporters of Chavez’s anointed successor, Nicolas Maduro, and opposition leader Henrique Capriles clashed in the aftermath of April’s disputed election.
The most vehement outpouring of anti-government sentiment was in Brazil. In June, a 10-cent hike in public bus fares touched off nationwide protests against inadequate healthcare, education, and housing — as well as the rising cost of living. The 2014 World Cup, expected to cost more than $13 billion, became a symbol of the government’s misplaced priorities: Banners emblazoned with some variation of “FIFA Go Home” are a fixture of the protest movement that has yet to fully subside.
Across Latin America, governments have failed to meet the expectations of the region’s emerging middle class. In Argentina, an estimated 1 million people marched in opposition to President Cristina Fernandez’s failed economic policies, while thousands of Colombians rallied against free trade. Mexico, meanwhile, saw teachers go on strike and thousands demonstrate against energy reform. Chile and Peru were also rocked to intermittent protests in 2013.
In all likelihood, the year of the protest will bleed over into 2014. The World Cup is certain to focus attention on income disparities, as is the Summer Olympics, slated for Rio de Janeiro in 2016. “The ire of expectations,” as Time magazine put it, is unlikely to evaporate anytime soon.
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