Country Risk Evaluation and Assessment Model (CREAM) is our online risk model which covers all countries across war, terrorism, political risk and civil unrest.

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Our accurate forecasts help clients successfully manage worldwide political and violent risk.

AFRICA

Multiple Regions

Our Forecast: 7 May 2007 - 'Electricity blackouts are likely to increase in frequency in Southern Africa at least until 2011.'

Result: 22 January 2008 - 'South Africa's neighbouring countries are feeling the pinch of Eskom's problems as they are plunged into darkness and face power crises of their own...'

Our Forecast: 19 July 2007 - 'The risk of armed groups increasingly targeting foreigners for political or enrichment purposes is rising in Niger, Ethiopia, Sudan and DRC.'

Result: 25 October 2007 - The JEM said it had captured 2 foreign oil workers at the Defra oil field, and ordered Chinese oil firms to leave within a week.

Algeria

Our Forecast: October 2006 - 'We are likely to see increased targeting of government officials and buildings, security forces and economic assets in order to damage the government's reputation.'

Result: 11 April 2007 - In Algiers, two bomb explosions, one at a government building and the other at a police station, left 24 dead and 222 injured.

Burkina Faso

Our Forecast: 6 December 2007 - 'Protests over food and Army pay are likely to meet violent police response, resulting in business disruption and property damage in the next year.'

Result: 22 February 2008 - 'More than 100 people have been arrested in Burkina Faso's second city after a protest against rising living costs ended in violent clashes... roads and services stations were trashed...'

Cameroon

Our Forecast: 20th November 2007- 'Militant attacks on Cameroonian soldiers in the Bakassi peninsula are likely to escalate the border dispute in the next six months.'

Result: Tuesday 10th June 2008 - 'A Cameroonian government official has been abducted and several policemen killed in an attack on a village in the border region of Bakassi.'

Ethiopia

Our Forecast: January 2007 - 'Ethiopian intervention in Somalia is likely to increase the risk of internal attacks by separatist opposition in Ogaden, Addis Ababa and the North.......covert attacks, especially on energy infrastructure and oil- exploration sites, will become more likely.'

Result: 24 April 2007 - In Abole, ONLF rebels attacked a Zhongyuan Petroleum Exploration Bureau oil facility; some 74 people were killed and 7 abducted.

Nigeria

Our Forecast: 30th November 2006 - 'Companies associated with Obasanjo Holdings Ltd. are likely to face corruption investigations after elections in April 2007.'

Result: April 4th 2008 - 'The sale of Nigeria’s biggest steel plant to an Indian company has been cancelled after an inquiry found that the privatisation process was riddled with abuses.'

Our Forecast: 1st November 2007-“Nigeria is likely to seek to reduce its investment obligations, whilst increasing revenues and control of the energy sector in 2008.”

Result: May 17th 2008 - '"The plan is to restructure or reposition the NNPC to become a truly national oil company that will go and compete and operate like other international oil companies with the capacity to use its assets, get credit from the market and become an international operator in the sector independent of government,"'

 

Sierra Leone

Our Forecast: 2 October 2007 - ' Mining concessions are at increased risk of renegotiation and cancellation in the next year.'

Result: 31 October 2007 - Sierra Leone's government will review all mining contracts in the West African state to try to clean up corruption and cheating and maximise benefits for the nation, Minister of Mines Alhaji Abubakarr Jalloh said.

 

Sudan

Our Forecast: 29 August 2006-“The risk of violent conflict in the Kordofan oil fields over disagreement on the Abyei boundary will increase over the next year.”

Result: May 20 2008 - 'Deadly fighting raged between Sudanese forces on Tuesday in Abyei, a flashpoint oil district between north and south where the UN warned that violence threatened to undermine the fragile peace process.'

 

Our Forecast: 10 Mar 07 - ‘There is a strong likelihood that the struggle for this oil-rich area could turn violent, with the Misseriya and Dinka used as proxy forces in a larger struggle for access to resources between the North and South.’

Result: 2 March 2008 - The authorities in southern Sudan say nearly 70 armed Arab nomads have been killed in clashes on the border between the north and south of the country. The clashes occurred between Misseriya tribesmen and fighters from the Sudan People's Liberation Movement (SPLM).

 

Our Forecast: 29 November 2006 - 'It is very likely that the North will seek to fuel insecurity in the South to push the Southern government to break the ceasefire -- undermining the peace agreement and, by extension, the 2011 referendum on independence.'

Result: 11 October 2007 -  The SPLM suspended its participation in the national government citing its failure to implement the Comprehensive Peace Agreement.

 

Zimbabwe

Our Forecast: 27 March 2007-“In addition, we forecast that as the regime becomes even more desperate for control, violence against opposition activists will escalate…”

Result: 25th April 2008- '“We’re seeing a major increase in government-sponsored violence in Zimbabwe right now,” said Georgette Gagnon, Africa director at Human Rights Watch. “The ruling party has been sending its allies – youth militia and so-called “war veterans” – after people it thinks voted for the opposition in last month’s election.”'

 

ASIA

Sri Lanka

Our Forecast: January 2007 - "Increased Air Force attacks on LTTE targets in north and east Sri Lanka raise the likelihood of LTTE attacks on air bases and airports."

Result: 25 March 2007 - The Sri Lankan Air Force's Katunayake Air Base was bombed by LTTE light aircraft, killing three soldiers and injuring 16 others.

China

Our Forecast: 6th May 2006-“China will continue to expand its economic and

political influence in Africa.”

Result: 29th March 2008 - 'The Chinese government has concluded arrangements to spend about $50 billion on development of infrastructure in Nigeria through SINOSURE, the Export Credit Guarantee Agency of China.'

 

EURASIA

Turkey

Our Forecast: May 2006 - "Turkey's ruling AKP straddles a delicate line in its pursuit of secularist and Islamist agendas; any significant deviation from the middle course will likely result in regime instability and military intervention."

Result: In April 2007 the AKP nominated Foreign Minister Abdullah Gul for the presidency. Turkey's armed forces said they were following the presidential election "with concern" and that they remained "the determined defenders of secularism." Equities, bonds and the currency fell sharply in response.

Russia

Our Forecast: 4 October 2007 - "United Russia is likely to secure upwards of 65% of the popular vote in December elections, thus retaining its constitutional majority in the Duma. Pro-Putin parties, including Zhirinovsky's LDPR as well as Just Russia, designed by the Kremlin to lure the staunch communist voters away from the Communist Party, will probably hold around 85% of all the seats."

Result: 3 Dec 2007 - With 97.8% of the ballots handled, United Russia leads with 64.1% of the vote, LDPR holding 8.2% and Fair (Just) Russia 7.8%.

 

LATIN AMERICA

Argentina

Our Forecast: February 2006 - "Price controls will tame inflation temporarily, but will undermine economic policy credibility, triggering unrest."

Result: 10 December 2006 - Farm workers ended a 9-day strike against the government's decision to cap beef and cereal exports to control inflation; on 20 April 2007 the government and six of the largest labour unions agreed on a 16.5% salary increase - unions had demanded above-inflation increases due to mistrust of the government's inflation reporting.

Colombia

Our Forecast: 28 November 2006 - 'Huila has a strong and long-standing presence of FARC guerrillas; the region lies on a key strategic corridor for Colombia's conflict... guerrillas are most likely to target infrastructure and energy assets although transmission and distribution networks and substations are more likely targets than major well-protected facilities in cities.'

Result: 26 February 2008 - Near Neiva, Huila, a FARC bomb against a police patrol damaged an electricity substation, leading to power supply disruption.

Mexico

Our Forecast: February 2007 – President Calderon is likely to tackle monopolies gradually, with telecoms and broadcasting being opened to competition.

Result: On 30 May the Mexican Supreme Court invalidated various articles of the controversial Federal Radio and Television law in an 8-1 vote, removing barriers of entry to a market until now cornered by Mexico's media giants Televisa and TV Azteca.

 

FINANCE

Our Forecast: November 2006 (within Foresight 2007, our annual publication) - "Financial regulators are likely to scrutinise more sophisticated services and products than they have previously (e.g. hedge funds and derivatives), and industry bodies are likely to agree to voluntary codes of conduct. Hedge funds are likely to see voluntary regulation as pre-emptory of regulation and litigation risk in the event of a financial collapse. Self-regulation would also increase barriers to entry in the fast-growing hedge fund market."

Result: 10 October 2007 - A working group of Europe's top hedge funds released a best-practice code for hedge funds advocating voluntary disclosure of information about investments and risks, intended to prevent imposed regulation.

 

Analysis

DR Congo (26 April 2007)

'In-country' processing rules pose greater risks than reviews of mining permits.

On 27 March 2007, the government announced it was suspending negotiations on future mining deals until a mechanism to review existing contracts was created.

A long ignored June 2005 parliamentary report, named after parliamentarian Christophe Luntundula, also called for such a review. However, President Kabila's new government is unlikely to carry out Lutundula's most substantive recommendations - rescinding contracts that offered extremely favourable terms to investors - because many such contracts were offered to important Kabila supporters. The two most infamous examples are the Zimbabwean businessman George Forrest and the Israeli Dan Gertle, but others include Australian Anvil Mining, American Phelps Dodge Mining Corp., and Canada's First Quantum Minerals. However, limited renegotiation of existing contracts (especially royalties and venture structures) is expected and incoming investors are unlikely to secure such favourable terms as their predecessors. None of this necessarily damages the investor climate.

However, other risks are emerging, fostered by the government's urgent need for increased revenue. Donors provide over half the government's budget but corruption concerns have led to the suspension of new IMF and World Bank loans, and many bilateral donors are channelling their aid through NGOs and UN agencies.

As a result, provincial governors have suddenly begun enforcing local (value-adding) processing rules. These stipulate that the processing of minerals extracted in DRC must take place within the country's borders, partly to encourage economic activity and partly to benefit from processed minerals' higher prices. However, with little to no local processing capacity currently, recent moves have been disruptive.

On 3 March, the governor of Katanga province suspended mineral exports until local processing rules were met. He closed the border with Zambia through which the bulk of the region's vast copper and cobalt reserves transit to Zambian smelters; the border was re-opened after a month. In mid-April, mineral exports from the Kivu provinces (cassiterite, coltan and wolfomite) were also suspended. Similar initiatives are likely as the regional economies struggle to benefit from their resources. Therefore, the risk of disrupted exports from mineral rich areas, as well as delays across the border at Zambian processing plants, will be significant through 2007 and into 2008.

Vietnam (26 April 2007)

Infrastructure underdevelopment is deterring foreign investment in Vietnam's central provinces.

Since 1998 Vietnam's central provinces have received just 9% of total foreign direct investment into the country. The majority has thus far been channelled into Vietnam's industrial zones, mostly located in the north near Hanoi or in the south near Ho Chih Minh City (HCMC).

Beyond the busy port city of Danang, infrastructure in the central provinces is underdeveloped. There are few motorways and only the Hanoi-HCMC railway passes through the region. The central provinces rely heavily on power supplies from HCMC and have limited telecom network coverage. These factors are delaying several projects proposed for the central provinces. The Dung Quat oil refinery project in Quang Ngai province was approved in 1997 but remains incomplete, forcing Total SA (1997), LG Group and Petronas (both 1999) to withdraw their investments.

In 2002 the government dissolved the Dung Quat joint venture with Russia's Zarubezhneft and reimbursed the company's $235 million investment. Dung Quat is located more than 1,000km away from the southern Bac Ho oil fields but without an oil pipeline in between. The deep sea port at Dung Quat is not equipped with the appropriate cargo facilities to handle oil shipments.

The project is now undertaken by the state-owned PetroVietnam but the projected 2009 completion date is again likely to be pushed back. The government is committed to develop infrastructure in the central provinces, but the absence of a coherent national development strategy is stalling progress. The delay in implementing the national power development master plan has put several foreign power projects on hold, including Japan's Sumitomo Corp (Khanh Hoa) and J Power (Phu Yen and Thanh Hoa), Singapore's Boustead Group (Binh Dinh) and China's Phang Nan (Binh Thuan). The proposed $10 billion Hanoi-HCMC high speed railway has not yet been finalised and would in any case take at least five years to become fully operational.

These factors are deterring foreign investment in the central provinces.

Russia (19 April 2007)

Privatisation of electricity-generating assets is likely to start in late 2008, creating opportunities for foreign investors.

Liberalisation of the domestic energy market, involving privatising electricity-generating plants and gradually lifting price controls, has been on the Kremlin's agenda since 2002. However, the struggle among business elites to profit from privatising power plants, combined with the political sensitivity of easing price controls, has slowed progress.

As a result, only one wholesale energy generating company and one regional generating entity have been privatised. Both attracted substantial investor interest and are proving highly profitable under private ownership. Privatising the five remaining wholesale generating companies and thirteen regional generating companies will probably commence in earnest in late 2008 following presidential elections.

The current proposal is to complete privatisation of these assets by early 2009. In reality, the process will probably stretch well over three years (440 thermal and hydropower plants are up for privatisation) and the liberalisation plan currently being considered is likely to go through at least minor adjustments.

RAO UES, presently 52%-state owned, will be disbanded as the result of proposed reforms, with the state only retaining ownership of grid lines, dispatch centres and 31 nuclear power plants operating in Russia. Current plans for lifting controls on energy prices stipulate that electricity tariffs are to be raised by 5% twice annually until the market is fully liberalised by 2011. Domestic gas prices are set to increase alongside electricity tariffs, first by 15% in 2007 and 2008 and then by over 35% in 2009 and 2010.

However, it is unlikely that tariffs will be fully liberalised in line with current projections given the electorate's sensitivity to energy price hikes. Energy prices are, however, likely to go up substantially over the next 3-5 years, thus making energy generation considerably more profitable. The government hopes to invest $112 billion in upgrading energy generation and transportation facilities by 2015; the funds for this initiative are to come from the privatisations. Foreign investors are likely to be able to participate in the privatisation of UES' assets as minor partners to state-controlled firms and Kremlin-friendly oligarchs.

Ecuador (5 April 2007)

Protests against oil producers are highly likely in 2007, particularly in Orellana and Sucumbios provinces.

A three-week protest at Block 18, an oil field operated by Brazilian firm Petrobras in Orellana province, led Ecuadorean state oil firm Petroecuador to declare force majeure in late March as it was unable to fulfil oil export commitments.

The protest interrupted some 840,000 barrels of oil worth $40 million, and only ended when a government delegation secured promises of salary increases and local infrastructure investment from Petrobras. Oil accounts for 40% of Ecuador's exports which totalled around $12 billion in 2006.

Protests against multinationals have become increasingly frequent in the Amazonian provinces of Orellana, Sucumbios, Napo and Pastaza. In mid-2005 the government declared a state of emergency and deployed the Army in Orellana and Sucumbios after waves of protests severely disrupted the oil industry. Protests against Petrobras in the region saw the company abandon plans to build a road through the Yasuní National park. They have delayed plans for its development of Block 31, and President Correa warned in early February that the block would be taken back from Petrobras if studies showed it was damaging the park.

In June 2006 the Anglo-French oil firm Perenco was targeted at its El Coca field in Orellana; protesters took over a pumping station and the Army was called to clear them from a local airport. In November 2006, Chinese firm Andes Petroleum had 40 of its staff taken hostage in Sucumbios and protesters seized its airfield.

Despite being politically indebted to a plethora social movements, President Correa issued an unusually strong admonition against local leaders around Block 18, accusing them of 'promoting anarchy' and hurting their own interests by tolerating demonstrations that crippled oil production. By issuing this statement, Correa may also have been trying to score points against followers of his political rival, ex-President Lucio Gutierrez, who are particularly strong in the region.

If, as has often happened, promises of new investment do not materialise, Petrobras' Ecuadorian operations will face further disruption. Correa has vowed to renegotiate oil contracts, but his weak political position is likely to result in measures falling short of those demanded by the more radical protest movements, thus exacerbating disruptive unrest in the Amazonian provinces even more during 2007.