The Week Ahead: 21 – 27 January 2018

Meeting in Davos to unite several world leaders and financial experts. Cape Town restricts water use. Secretary Tillerson travels to Europe to discuss Iran. All in The Week Ahead.

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FINANCE: Meeting in Davos to unite world leaders and financial experts

• This week, world leaders and economic experts will meet in Davos, Switzerland for the annual World Economic Forum; this year entitled “Creating a Shared Future in a Fractured World.” The biggest issue to be discussed will be Trump’s effect on domestic U.S. politics and global affairs, though there will be many other important geopolitical and economic events discussed.
• Watch for what Trump administration officials will say, including the president himself, remains a mystery. For a man that forged his political career on bucking elites, an interesting indicator will be the position he may take when surrounded by the most powerful political and economic figures the world has to offer.

GRI take: In addition to Trump, the ongoing uncertainty of Merkel’s ability to forge a successful governing coalition, Venezuela’s growing humanitarian catastrophe and the collapse of nearly every major institution outside the military (including PdVSA), central bank interest rates and the emergence of bitcoin as a legitimate (if faltering) cryptocurrency will all receive substantial attention.

SOUTH AFRICA: Cape Town restricts water use

• Following reports that the city of Cape Town is running out of water, the city introduced a raft of mandatory and suggested measures to limit water consumption. Showers have been limited to less than 2 minutes, and residents have been told to stop watering gardens and extraneous water use.
• Although experts projected that water (following months of drought) would run out by April, it’s entirely possible South Africa’s 2nd largest city and Africa’s 11th largest metropolitan area will run out of water far sooner. According to reports, over 60% of Capetonians continue to ignore water usage limits, raising the possibility that the city will run out of water before the city and national governments are able to do anything about it.
• By next Thursday, Cape Town residents are required to limit their usage to 50 liters of water a day (for reference, an average bath uses about 50 liters). Conflict is possible and anger with the local government and the administration of Mayor Patricia de Zille is likely, particularly if a long-term solution is not found soon. While some South African drillers are searching for aquifers to supply the city’s water needs, they are not expected to come online in time.

GRI take: Expect tensions to rise this week and in the weeks ahead as residents have to restrict their water usage substantially and face large fines in the event that they do not.

IRAN: Secretary Tillerson travels to Europe to discuss Iran

• While Washington reels from one crisis to another, Secretary of State Tillerson will be travelling to Europe, notably to Britain and France, to discuss transatlantic relations and build up support for a tougher line on Iran. This will be difficult for the Secretary to accomplish due to a number of factors:
• First, the unpopularity of the administration both in the United States and Europe will diminish its chances of persuading Europe on the Iran issue.
• Second, the European Union has remained resistant to a hard line on Iran, due in part to differences in opinion of the regime among EU member states, in addition to budding investment and EU-Iran economic partnerships.

GRI take: Talks to toughen Iran sanctions will also be complicated by Brexit as the UK uses the vast majority of its available diplomatic bandwidth to get the best possible deal out of a Brexit settlement. Further, with France focusing much of its attention on coordinating with the German government on a more unified EU monetary policy, expect European attention to be elsewhere.