Political Risk: Conceptualization, Definition, Categorization, and Methodologies

India Kashmir Elections

Indian paramilitary soldiers stand guard near Sheri Kashmir cricket stadium where Prime Minister Narendra Modi, portrait seen in the backdrop, is expected to address a campaign rally ahead of local elections in Srinagar, India, Monday, Dec. 8, 2014. Separatists called for a strike as authorities imposed a daytime curfew Monday across the disputed Himalayan region of Kashmir, barring residents from leaving their homes. Main roads leading into Srinagar were lined with razor wire to contain traffic, and police and paramilitary soldiers were patrolling on foot and in armored vehicles. These and other considerations contribute to high levels of political risk in Kashmir. (AP Photo/Dar Yasin)

Journal of Political Risk, Vol. 3, No. 4, April 2015.

By Vishrut Kansal

Abstract

The paper is aimed at presenting a conceptual analysis of the political risk that impacts investors, project sponsors, creditors, and host government alike. First, an attempt to conceptualize and define political risk is made along with its subsequent categorization into its different types. Then, the methodologies of mitigating and managing political risk are elucidated upon. Lastly, political risk insurance as a mitigating factor of political risk is briefly dwelt upon. While presenting this overview, concerted attempt has been made to identify the practical techniques that investors and host governments may adopt while undertaking decisions involving political risk.

Continue reading

Iran’s New Generation of Oil and Gas Contracts: Historical Mistrust and the Need for Foreign Investment

Iran Qatar Gas

In this Monday, July 19, 2010 file photo, portraits of the late Iranian revolutionary founder Ayatollah Khomeini, right, and supreme leader Ayatollah Ali Khamenei adorn a construction site which is part of the South Pars gas field, on the northern coast of the Persian Gulf in Assalouyeh, Iran. Iran’s President Hassan Rouhani said his country intends to increase production from a giant joint gas field shared with neighboring Qatar, state TV reported on Sunday, Dec. 1, 2013. The report quoted Rouhani as saying Iran that intends to match Qatar’s production by 2017. (AP Photo/Vahid Salemi, File)

Journal of Political Risk, Vol. 3, No. 4, April 2015.

By Reza Yeganehshakib, Ph.D.

Reza Yeganehshakib  holds a Ph.D. in history with a specialization in World and Middle Eastern history at the University of California, Irvine (UCI). He received a B.S. degree in Chemical Engineering from Iran Azad University, and an M.A. in history from UCI, where he serves as a Research Associate at the Samuel Jordan Center for Persian Studies. Dr. Yeganehshakib is a member of the Middle East Studies Association and the International Society for Iranian Studies. He is affiliated with the Persian Language Institute at California State University, Fullerton and was previously affiliated with the National Iranian Oil Company.

Abstract

After nationalizing the oil industry in Iran in 1951, the government passed protectionist laws that restrained foreign ownership of Iran’s oil fields and industries. Since the Islamic Revolution in 1979, these laws have been reinforced to further reflect the anti-Western ideological underpinnings of the revolution. Yet, after the Iran-Iraq War and the beginning of the era of so-called “reconstruction” in 1988, the Iranian government adopted several laws to encourage foreign investment, particularly in the country’s largest industry, oil and gas. These laws, particularly the Foreign Investment Promotion and Protection Act (FIPPA), despite having been revised several times, have not been successful in either encouraging foreign companies to invest in Iran’s oil and gas industries. As a result, the Iranian oil ministry announced recently that it would issue a new generation of oil and gas contracts that is more attractive to foreign investors. This paper investigates possible challenges that Iran’s protectionist laws may pose for these contracts particularly in light of Iran’s prevailing political and religious anti-West/anti-imperialist ideology and Iran’s distrust towards the West after the fall of Mossadegh’s government in 1953. It also studies Iran’s political and legal realities and whether they might provide foreign investors with attractive incentives such as partial or conditional ownership of the industries in which they invest.

Continue reading

Vietnam Normalization Redux: Trade, Democracy, and Security

pVietnam 1

U.S. Secretary of Homeland Security Jeh Johnson (third from right) meets with Vietnamese Public Security Minister Tran Dai Quang (second from left) in Washington, D.C. on March 17. Discussions focused on cooperation in the realm of crime enforcement, but also touched on security, economic, war, and human rights matters. Photo: U.S. Department of Homeland Security.[1]

Journal of Political Risk, Vol. 3, No. 3, March 2015.

By Anders Corr, Ph.D.[2]

From March 15-20 of this year, the Vietnamese Public Security Minister Tran Dai Quang met with top United States congressmen and law enforcement officials, including Secretary of Homeland Security Jeh Johnson, and Director of the Federal Bureau of Investigation James Comey. General Tran and U.S. officials focused on increasing cooperation between the two countries’ law enforcement authorities, but also addressed bilateral and multilateral trade agreements, legacy war issues, security including the South China Sea, and human rights. Party Secretary General Nguyen Phu Trong will continue to push bilateral ties, likely through a visit to the United States this year. In November, President Obama will most likely visit Vietnam during his planned Asia trip.[3]

Continue reading

SWIFT Russia Sanctions: A Necessary Step for Ukraine and the World

Garegin Tosunyan

The head of the Association of Russian Banks Garegin Tosunyan speaks to the media in Moscow, Russia, Thursday, Jan. 29, 2015. Tosunyan said during his conference at RIA Novosti, that the exclusion of Russia from SWIFT will benefit no one, adding that such statements are a form of blackmailing. The Russian ruble has continued its decline to just over 60 rubles against the dollar, from 35 rubles to the dollar in July 2014. (AP Photo/Alexander Zemlianichenko)

Journal of Political Risk, Vol. 3, No. 3, March 2015.

By Sergey Fursa, Alexander Baldwin McCoy, and Irene Kovalchuk

Sergey Fursa works for Dragon Capital in fixed-income sales in Ukraine. Alexander Baldwin McCoy is a former United States Marine and worked in counterintelligence for the U.S. Department of State from 2010-2013. Irene Kovalchuk worked in finance and banking in Ukraine for over 10 years.

‘No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend’s or of thine own were. Any man’s death diminishes me because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee’ (Ernest Hemingway, For Whom the Bell Tolls).

Ukraine features prominently the media. The escalating political crisis and violence are spiraling out of control. News coverage paints an alarming picture of chaos and destruction, with NATO countries reluctant to get involved and put a stop to the madness. Many citizens of countries in Western Europe and America wonder why the suffering of the Ukrainian people should matter to them. What business is it of the people of Berlin or Paris or New York what happens in this distant land? In the cult French movie “The Toy” (1976), a child observes ‘the French only care about dead Frenchmen’[1]. Why should a regular citizen worry about what is going on in Eastern Europe, when it does not affect their life? The answer is simple. The crisis in Ukraine represents a greater threat than the mere stability of one state, and failing to respond will have disastrous ramifications around the globe.

Continue reading

Iran Seeks to Remove Binding — Not Advisory – UN Sanctions

Switzerland US Iran

U.S. Energy Secretary Ernest Moniz, U.S. Secretary of State John Kerry, Iran’s Foreign Minister Mohammad Javad Zarif and the head of the Atomic Energy Organization of Iran Ali Akbar Salehi, from left to right, pose for a photograph before resuming talks over Iran’s nuclear program in Lausanne, Switzerland, Monday, March 16, 2015. The United States and Iran are plunging back into negotiations in a bid to end a decades-long standoff that has raised the specter of an Iranian nuclear arsenal, a new atomic arms race in the Middle East and even a U.S. or Israeli military intervention. (AP Photo/Brian Snyder, Pool)

Journal of Political Risk, Vol. 3, No. 3, March 2015.

By Anders Corr, Ph.D

Iran is seeking to remove all binding United Nations sanctions, according to an official interviewed by the Journal of Political Risk on Monday. The official said that Iran has offered to leave the non-binding UN sanctions in place. “As the P5+1 and Iran race to meet the March deadline for a political framework agreement on Iran’s nuclear program,” said the official, “one of the main obstacles is how to lift United Nations Security Council sanctions imposed on Iran.” According to the official, “Iran has insisted that those measures set out in the four resolutions adopted by the Security Council from 2006 to 2010 should be lifted, especially those provisions seen as legally binding for Member States under Chapter VII of the UN Charter.”

Continue reading

The Mexican Cigarette Market: A Cautionary Case Study for Legalization of Marijuana

Cannabis leaf

Zinsmeister argues against using state policy toward cigarettes to discern marijuana policy in Mexico.

Journal of Political Risk, Vol. 3, No.3, March 2015.

By Jeffrey E. Zinsmeister

Abstract

Marijuana legalization advocates in Mexico often point to the cigarette market as a regulatory model for marijuana—a way to control consumption, assure product quality, and reduce the power of narcotraffickers.  While the comparison between the two markets is apt—both are capital-intensive industries that favor economies of scale—it is not a favorable one in the Mexican context.  Due to these market dynamics and pervasive corruption, the Mexican cigarette business is divided into a legal business dominated by two multinational tobacco companies, and a large black market dominated by drug traffickers.  Accusations of corrupt practices are rife with respect to both markets, practices that undermine anti-smoking regulations, increase smoking rates (especially among minors), and enrich organized criminal syndicates.  Perhaps as a consequence, Mexico’s anti-smoking program yields far less in government revenues than it must pay out in increased public health costs.  As legalized marijuana would likely follow this same negative pattern, legalization policies will likely degrade public safety and health in Mexico.

Continue reading

Overriding Legal Authority in Nation-Building Missions

AP441061384142

An Afghan woman passes by a sign of the New Kabul Bank in the center of Kabul, Afghanistan, Tuesday, March 5, 2013. An Afghan tribunal convicted two top executives of the Kabul Bank, renamed the New Kabul Bank after the scandal broke, and sentenced them to five-year prison terms on Tuesday for their role in a massive corruption scandal that led to the collapse of Afghanistan’s largest bank and threatened the country’s fragile economy. The bank’s former chairman Sherkhan Farnood and former chief executive officer Khalilullah Ferozi were found guilty of theft of $278 million and $530 million, respectively. Farnood and Ferozi have also been ordered to pay back these funds. (AP Photo/Anja Niedringhaus)

Journal of Political Risk, Vol. 3, No.3, March 2015.

By Thomas Buonomo

Throughout U.S. involvement in counter-insurgency (COIN) operations in Iraq and Afghanistan, rampant government corruption has driven continuing instability and hampered U.S. nation-building efforts.[1] Corruption was a major reason for the collapse of the Iraqi military in northern Iraq upon impact with the Islamic State.[2] It is also the reason why Afghans are turning to the Taliban for resolution of their legal disputes.[3]

These are profoundly tragic and frustrating outcomes that can only be precluded in the future in one of two ways: the U.S. must either obtain legal authority from the U.N. Security Councilor, in critical situations, through unilateral measuresto override a host nation’s legal system and hold corrupt actors accountable when local officials refuse. Alternatively, should this approach fail, the U.S. government should refrain from nation-building missions entirely and provide the U.S. military with a mission more closely aligned with its core competency: kinetic military operations.

Continue reading

Ukraine’s Former President Yanukovych Deposited Billions of USD with China

Viktor Yanukovych, Xi Jinping.

According to two independent JPR sources, Ukrainian President Viktor Yanukovych, left, deposited billions of dollars before and during his departure from Ukraine in the spring of 2014.

Journal of Political Risk, Vol. 3, No. 2, February 2015.

By Anders Corr, Ph.D

Former President of Ukraine Viktor Yanukovych has deposited billions of dollars with the Chinese, according to two independent sources available to the Journal of Political Risk.

President Yanukovych deposited approximately $1 billion USD with China on either his first or second visit to that country, according to one of the sources. Two large pallets of cash, of approximately $1 billion USD, were delivered to China through Hong Kong.

The other source, which we accessed in April 2014 on a visit to Ukraine, said that President Yanukovych transferred most of his deposits to China prior to departing the country and closing the banks with which he was associated. His bankers fled the country at that time.

When President Yanukovych fled Ukraine for Russia in February 2014, he transferred billions of dollars in a hurry. He and his family closed their four banks, according to our source. President Yanukovych’s men stuffed several vehicles full of cash, and drove them to Russia. What is reported here for the first time is that most of his estimated $32 billion in assets were wired to China, according to our source.

Former President Yanukovych denies having foreign bank accounts.

Update (3/7/2015): An email request for comment to the People’s Bank of China was not returned. The JPR was unable to reach Viktor Yanukovych for comment, though he is thought to reside in Rostov-on-Don, Russia

Anders Corr, Ph.D. is the founder and principal of Corr Analytics. JPR Status: Report, archived 2/28/2015. 

Russian Military Force Structure in Ukraine Area

Russian Military in Ukraine Region

This official document obtained by Corr Analytics reveals the force structure of Russian military personnel and equipment in and around Ukraine, including in Russia, Ukraine, and Transniestria.

Journal of Political Risk, Vol. 3, No. 2, February 2015.

By Anders Corr, Ph.D

Corr Analytics received official documents yesterday that reveal the force structure of Russian military personnel and equipment in and around Ukraine, including in Russia, Ukraine, and Transniestria. The key document is republished here, and details 63,200 personnel, 755 tanks, 2,610 armored vehicles, 305 multiple launch rocket systems, 955 artillery systems, 355 combat aircraft and helicopters, 30 combat ships, and 2 submarines.

The released document shows the locations of forces, including in the Donbas region of Eastern Ukraine, Crimea, Russia near the Ukrainian border, and Transdniestria.  Of particular interest are Russian-flagged forces shown to be in the Donbas region, including 13,000 personnel, 290 tanks, 765 armored vehicles, 125 multiple-launch rocket systems, and 210 artillery systems.

The army arrayed against the Ukrainian military is clearly a powerful Russian force that surrounds the country. Yet, Ukrainian officials yesterday were optimistic about a Ukrainian win against Russia. Russian foreign reserves are running low and being burned at a remarkably high rate. The United States, United Kingdom, and Canada have finally broken with France and Germany, and put military advisors in Ukraine. Ukraine expects to receive Javelin anti-tank missiles, sophisticated artillery equipment, and other military assistance in the near future.

Ukraine will accept conditions imposed by the IMF for a $17.5B loan in the coming days. This will cause social unrest in Ukraine, according to officials. Ukrainian citizens are expected to denounce such conditionality when the country is at war. Russian intelligence will likely take advantage of such unrest, according to the officials. However, Ukraine will accept the conditions in order to maintain unity with its allies and to obtain the much-needed loan.

Anders Corr, Ph.D. is the founder and principal of Corr Analytics. JPR Status: Report, archived 2/28/2015. 

An Attack on Freedom of Speech: What We Should Do As A Democracy To Protect Our Rights From Terrorists

Charlie Hebdo Cover

On January 7, two armed gunmen murdered twelve at the Paris office of Charlie Hebdo magazine. Before these attacks, the magazine had previously been targeted for its portrayal of the Prophet Muhammed. Following the publication of this Charlie Hebdo magazine cover in November 2011, Charlie Hebdo’s website was hacked and its office firebombed.

Journal of Political Risk, Vol. 3, No. 1, January 2015.

By Anders Corr, Ph.D

The January 7 terrorist attack on Charlie Hebdo in Paris wasn’t just an attack on human beings, but also an attack on freedom of speech and democracy. The French people wish to live in a free system where journalists and cartoonists have rights, including the freedom to lampoon Muhammad, Jesus, the French President, or anyone else they wish to put in the spotlight. These freedoms are deeply rooted in the history and philosophy of all democracies, and will be defended at great cost in blood and treasure.

The terrorist attack resulted in 12 deaths, which included well-known cartoonists at the magazine and the magazine’s editor, Stephane Charbonnier. The act of killing journalists only strengthens the people’s resolve to protect their freedoms, especially freedom of speech. Indeed, the response to the Paris attacks should not be fear to publish images of Muhammad, but rather a resolution to do so in many more outlets in order to act as a movement, a school of fish, and thereby de-isolate and protect the freedoms of others to do the same. Equivocation in the name of cultural sensitivity, an acceptable response prior to these attacks, is no longer an option. Fear and equivocation are now indistinguishable and would set a horrible precedent for giving in to terrorism, and against freedom of speech and democracy.

Continue reading