The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. To explore and download the map, click here.

Sector Snapshot: Energy

Sectors Impacted Upstream: Hydrocarbons, coal

Sectors Impacted Downstream: Electrical, metallurgy, chemicals, consumer goods, clothing and textiles, construction, food processing, automotive, manufacturing

A Taiwan Strait Crisis would prompt a massive energy shock in the short term and would irrevocably alter the energy market. Seabourne imports from the Middle East to China, Japan, and South Korea — three of the five top global energy importers — constitute over half of the total global oil trade. The sea lanes through which the energy is transported would be contested in the event of a conflict.

Short-Term Impact: Moderately Adverse

• A Taiwan Strait Crisis would prompt an unprecedented global energy shock.
  • Major international crises trigger energy price shocks as the geopolitical instability and uncertainty of the situation are factored into the market. 
• Seabourne energy delivery to East Asia, and China specifically would be disrupted.
  • China, Japan, and South Korea are three of the world’s top five oil importers, constituting around half of the global oil trade. These nations are also major importers of LNG and coal.
  • Delivery of Middle Eastern oil and gas in the midst of a conflict at sea would be complicated, even if price shocks and sanctions are left out of the equation. If China engages in a blockade of Taiwan, shipping oil to China, Taiwan, Japan, South Korea, and even the Philippines through the affected area may prove uninsurable to the point of non-profitability.

Medium to Long-Term Impact: Nuetral

• A military conflict in the Taiwan Strait could irrevocably alter global energy markets.
  • Western sanctions and the United States’ naval control over the Malacca Strait could disrupt China's oil imports. China will likely need to rely on Russia to secure its energy supply.
  • With China replacing Europe’s demand for Russian oil and gas and Russia replacing the Middle East’s supply of oil and gas for China, China and Russia could form a de-facto regional energy market with different market dynamics and little external oversight.
  • The existence of a parallel oil market with different prices would create an extremely lucrative space for smuggling and arbitrage.
• Depending on how long a conflict lasts, insurance costs for transporting oil to East Asia from the Middle East could rise precipitously. Taking a more circuitous route that avoids the Strait would also increase transportation costs.
• Should the Taiwan Strait remain uninsurable, North American (and Australian) energy exports to Japan and South Korea could become more attractive.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. To explore and download the map, click here.

Sector Snapshot: Consumer Goods

Sectors Impacted Upstream: Raw materials (fabric, wood, metals, precious metals), and semifinished goods (textiles, furniture components, plastics, electronics)

Sectors Impacted Downstream: Retail, ecommerce, transportation and logistics

A decoupling with China would cause a major shock to the consumer goods sector hitting supply and demand and opening firms up to a number of legal, regulatory, and supply chain risks. The long-term impact of a Taiwan Strait Crisis largely depends on the policy response of the world’s major economies,  but major opportunities would exist for firms who enter markets previously dominated by Chinese manufacturers.

Short-Term Impact: HIghly Adverse

• Firms operating in China will likely face intense legal, regulatory, and logistical pressure to reshore or “friendshore” their production to other countries. There would likely be high up-front capital costs involved in relocating production and rebuilding institutional knowledge.
• Firms selling in the Chinese market would be impacted by sinking demand.
  • China’s unemployment problem — and overall economic rut — will be exacerbated by a Taiwan Strait Crisis, leading to a massive decrease in discretionary spending. China’s youth are both reliant on the medium-skill manufacturing jobs that would be lost and are the largest buyers of foreign consumer goods.
• Firms that rely on China for both production and consumption — such as cosmetics, over-the-counter medications, and packaged food products — may find themselves squeezed between increased production and capital costs and decreasing revenues simultaneously.

Medium to Long-Term Impact: Moderately Adverse

• The long-term impact largely depends on the policy response of the world’s major economies, particularly concerning sanctions and continued decoupling. It is possible — if sanctions and decoupling are maintained — that the situation never returns to the status quo ante-conflagration.
• No country has the infrastructure, labor pool, and middle-class growth at the scale necessary to replace China’s role in maintaining the availability of cheap consumer goods and demand for middle-range and luxury products.
• A long-term decoupling of the Chinese and global economies would result in a long-term elevation of the price equilibrium for most consumer goods.
• The permanent price elevation could allow firms to profitably enter markets previously cornered by Chinese manufacturers.
  • Certain Chinese-made consumer products may not face direct sanctions, but through supply chain disruptions, domestic and non-Chinese foreign consumer goods may become newly competitive.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. To explore and download the map, click here.

Sector Snapshot: Mining

Sectors Impacted Upstream: Equipment manufacturers, energy, and transportation

Sectors Impacted Downstream: Metals, green energy, heavy industry, construction, and electronics

A decoupling with China would result in a supply shock in commodities that China imports, extracts, and refines. In the long term, higher prices and opportunities to expand domestic and African operations may arise.

Short-Term Impact: Moderately Adverse

• Companies that are engaged in joint ventures with Chinese firms will have to navigate a narrow path to avoid the legal consequences of sanctions and the economic consequences of divestment.
• A rapid decoupling would result in an immediate, extreme supply shock in commodities that China extracts and refines. China’s market dominance in rare earths mining and processing cannot be quickly substituted.
  • China is the world’s largest producer of more than 20 different metals and minerals, including zinc, gold, aluminum, lead, and most significantly, rare earths.
• Companies engaged in the mining of cobalt and lithium would likely see sustained price increases for those elements. The price increase for inputs such as mining equipment from China would not match or negate the increase in revenue from lost Chinese competition.  
• Firms with logistical or other services that could be offered to mining companies in Central and East Africa may be able to capitalize on the increased access Western companies may gain to important mineral deposits concentrated in these areas.  
• Companies engaged in the production or sale of consumer electronics, batteries (including electric vehicles) and green energy generation will be hurt in the short term by the decreased supply of precursor components and materials.
  • China conducts roughly 63% of all rare earth mining, 85% of rare earth processing, and 92% of rare earth magnet production.
  • Rare earths and their derivatives are critical in the production of semiconductors, small magnets, and other necessary components for batteries, smartphones, electronic controllers, communications equipment, etc.
  • China manufactures 80% of the world’s solar PVs.

Medium to Long-Term Impact: Neutral

• Chinese capital and logistical constraints and challenges may open the door for Western companies to expand in the African market.
• This shock could result in Western governments loosening environmental regulations to allow for more domestic mining operations.
•  Opportunities exist for companies to capitalize on potential Chinese exits from certain competitive metal markets.
• Decoupling could create sticky higher prices for rare earth metals.
  • The current affordability of these minerals and their downstream products rests on an effort by the Chinese state to capture the market. Prices will approach a new higher equilibrium in a decoupled environment.
• Commodities like copper, zinc, and nickel will see price fluctuations, as both supply and demand dynamics will be altered.
  • The new equilibrium price for these metals will depend largely on future trade, regulatory and environmental policy responses, and China’s ability to evade sanctions.

The following impact report is part of Global Guardian's 2024 Taiwan Shock Index. To explore and download the map, click here.

Sector Snapshot: Advanced Manufacturing

Sectors Impacted Upstream: Raw materials, software, energy, semiconductors, metallurgy, chemicals

Sectors Impacted Downstream: Aerospace, construction, transportation and logistics, automotive, medical, electronics

A decoupling with China would cause a major shock to the advanced manufacturing sector impacting supply chains, market size, and open up firms to a number of thorny legal, compliance, and possibly expropriation risks. China’s near monopoly on the primary stages of the semiconductor value chain could create catastrophic disruption to the production and supply of microchips,  photovoltaic solar panels, and batteries.

Short-Term Impact: HIghly Adverse

• Advanced manufacturers would be faced with diminished access to the Chinese market due to a combination of export controls, reciprocal Chinese sanctions, and logistical disruptions in the Taiwan Strait and South China Sea.
• Firms producing strategically valuable or dual use products in China — including semiconductors, complex machine parts, or certain chemicals — would likely be forced to divest from China or face legal sanctions directly.
  • These firms would also have to increase spending on compliance to minimize the legal risks associated with export controls and sanctions.
  • Firms engaged in the production of goods that contain sanctioned components could also face supply chain risks due to sanctions.
• Companies with assets in China may face expropriation risks.
• Manufacturers with production outside of China would likely see increased costs for Chinese-supplied components and raw materials. The procurement of these inputs could become extremely challenging.
  • Most personal electronics use components and materials produced and processed in China. While some of the raw materials, such as cobalt and lithium, are produced abroad, Chinese capital, labor, and technology are highly involved in their extraction.
  • Other raw materials, including rare earths, are largely extracted and processed in China.
  • Chipmakers, firms in the green energy sector, as well as electric vehicle manufacturers, would be highly affected by the increased costs of many of these materials.

Medium to Long-Term Impact: Moderately Adverse

• This sector may see increased costs and tighter margins in the long term.
  
  • The profitability of advanced manufacturing in developed economies has been driven in part by several macroeconomic trends dependent on Chinese growth and integration into the world economy. A hard decoupling would slow, end, or reverse some of these trends.
  • China subsidized the development of strategic upstream sectors like rare earths processing for market capture. The economies of scale that China added to the supply chain reduced costs for both Chinese and Western firms downstream.
  • However, the extent of cost increases for firms is largely dependent on future governmental policy on subsidies and trade.
• In some cases, the loss of access to Chinese markets by foreign firms may be partially offset by reduced competition from Chinese-subsidized competitors.
  
  • As China often prioritizes revenue over profit in its state-owned companies, Chinese companies can operate at price levels that foreign companies cannot. The electric vehicle market is a prime example. With strict reciprocal sanctions and trade restrictions in place, the loss of access to Chinese customers by foreign automakers may be offset — to a degree — by the removal of Chinese automakers from certain foreign markets.

The conflict between Israel and Hamas continues with clashes along the Gaza border and multiple IDF airstrikes targeting Hamas positions. Israel's defense minister ordered the complete closure of the Gaza Strip for the first time, cutting off food, fuel, water, and electricity. Prime Minister Netanyahu has ordered the military to evacuate residents around the Gaza and Lebanon borders in advance of further activity. At the same time, cross-border exchanges of mortar and artillery continue between the IDF and Hezbollah in the north, setting the stage for a major conflict that could embroil the entire region.

CONFLICT IN ISRAEL

At approximately 06:30 local time, Hamas launched a multifaceted surprise attack on Israel, with a massive rocket barrage and a mass infiltration of hit squads into Southern Israel. Dozens of Israeli civilians have been kidnapped and taken to Gaza as hostages, as Hamas terrorists took control over several townships and military installations. Over 2,200 rockets (Palestinian sources claim 5,000) were fired into Israel, with more than one-third of the Israel population impacted, including Tel-Aviv and Central Israel. Israel has declared a State of War and is mobilizing its reserves as it attempts to regain control over the communities around the Gaza Strip. The situation is rife with escalation potential with regional implications.

Conflict in Nagorno-Karabakh

On 19 September, Azerbaijan began shelling ethnic Armenian positions in the contested Nagorno-Karabakh (Artsakh) region around 06:30 EDT. Azerbaijan announced the offensive following the alleged deaths of six people in Azerbaijani-controlled territory due to Armenian landmines. Azerbaijan has been preparing for this operation for several weeks, having been resupplied by its patrons Turkey and Israel and conducting high-level meetings with regional players. The fighting is mostly limited to Nagorno-Karabakh and has not fully spread to the internationally recognized borders of Armenia and Azerbaijan.

MEXICO | GABON

In Global Guardian's monthly Risk Barometer, our Intelligence Team highlights current global hotspots with the potential to impact your business operations and travels. Read below for analysis on the threats we are closely monitoring this month and click here to subscribe for regular intelligence updates.

 

Violent Unrest Flares in Michoacan State After Cartel Alignment Shifts

The final weekend in August saw a significant escalation in the Tierra Caliente region of Michoacan state. The violent clashes, including shootouts, vehicle blockades, and fire-bombings, started in the municipality of Buenavista before spreading to Apatzingan and Uruapan. Two OXXO convenience stores were targeted with Molotov cocktails. As a result of the unrest, at least two suspects were killed, five police officers injured, and six more suspects arrested.

Global Guardian recommends low-profile, secure transportation for all travel within Mexico. At this time, we also advise against non-essential travel to Michoacan.

The violent unrest in Michoacan is the result of ongoing conflict between the Cartel Jalisco New Generation (CJNG) and Carteles Unidos, a loosely coordinated group of cartels operating in the Tierra Caliente region that includes La Familia, Templarios, and Los Miguelados, a former CJNG ally.

Los Viagras, once the strongest member of the Carteles Unidos, reportedly switched sides and formed an alliance with the CJNG in Michoacan. This came as a surprise, as Los Viagras were considered bitter enemies of the CJNG. The shifting alliances within the cartel landscape will have violent ramifications in Michoacan and elsewhere, including Guerrero, Jalisco, and Guanajuato.

Impact

Public transportation was suspended in Apatzingan amid the violence and remaining convenience stores were closed. After the weekend of violence, Mexico deployed 1,200 members of its National Guard to help enforce security in the areas of Uruapan and Apatzingan. This may lead to a temporary reduction in violence, but further conflict and unrest is likely in the medium and long term.

Outlook

Michoacan, already one of the most violent states in Mexico, could see a full-blown cartel war break out as the Viagras-CJNG alliance strengthens. The conflict centers on control of the Lazaro Cardenas port, the Tierra Caliente region, and the routes connecting these areas to the center of the country. Cartel interests in the region include methamphetamine, other synthetic drug laboratories, the extortion of agricultural producers — especially avocado and lime growers — and the illegal exploitation of mines. Additionally, chemical precursors and synthetic drugs — including fentanyl and its precursors — arrive through the port of Lazaro Cardenas. Minerals, which are often used as payment for chemicals, also leave through the port headed for China amongst other destinations.

Palace Coup in Gabon Further Normalizes Military Takeovers in Africa

On 30 August, military officers in Gabon seized power and placed President Ali Bongo under house arrest. Officers of the Presidential Guard unit announced the annulation of the previous week’s election results, closed the borders, and suspended all state institutions. Gabon’s is the eighth coup in Central and West Africa since 2020. The situation in Gabon is relatively stable, but it represents another point in a destabilizing pattern of democratic backsliding on the continent.

Current Situation

The putschists — the Committee of Transition and the Restoration of Institutions (CTRI) — have begun the process of solidifying power. Gabon’s international borders and flights reopened on 02 September, though a nationwide curfew is in effect:

• 22:00-06:00: Libreville
• 18:00-06:00: Select areas on the outskirts of Libreville, between Marseille and Akanda, as well as from Nkok and Sobraga towards Owendo
• 19:30-06:00: Rest of the country

The CTRI unanimously elected General Brice Oligui Nguema — former head of the Presidential Guard — as President of the transitionary regime. The CTRI also appointed leading opposition figure Raymond Ndong Sima as prime minister. Ali Bongo’s son, Noureddin Bongo Valentin, and others associated with the Bongo regime have been arrested for corruption and treason while Jean-Remy Yama, a prominent trade union leader, has been released from prison. Prime Minister Sima announced a 24-month timeline for the restoration of democratic rule, citing the need to undo nearly 60 years of dynastic rule and cronyism.

Global Guardian recommends that those in-country carry proper identification, any relevant travel documents, and a valid Gabonese visa at all times.

• Travelers should avoid all demonstrations and large gatherings.
• Firms with travelers in Gabon should have a contingency plan in place should the junta impose new travel restrictions. Monitoring the political situation and pre-travel intelligence is recommended ahead of any travel to Gabon.

Analysis

Ali Bongo’s father, Omar Bongo, took power in 1967 and ruled until his death in 2009. Omar Bongo was a staunch ally of France and used his reign to enrich himself, his family, and his supporters. Ali Bongo continued his father’s close relationship with France, and domestic patronage system. Gabon is a major commodities exporter and features one of the highest per capita GDPs in Africa. However, most Gabonese live in poverty, and the country has a nearly 40% youth unemployment rate. This disparity explains the population’s largely ambivalent reaction to Bongo’s deposition.

While the coup has enjoyed some popular demonstrations of support, enthusiasm is likely being dampened by Oligui’s own association with the kleptocratic Bongo dynasty and French interests.

Ali Bongo’s election in 2009, as well as his reelections in 2016 and 2023, were marred by irregularities and accusations of fraud. Bongo’s 2016 reelection saw widespread violent demonstrations, and in 2019 officers unsuccessfully attempted to stage a coup. It is likely, given Bongo’s growing unpopularity and the population’s frustration with continued economic inequality, that this coup was a preventative measure by elements of Bongo’s inner circle to retain control of the country’s lucrative natural resources.

If this is the case, Gabon’s coup may have more in common with the coups of the Sahel than meets the eye. Both Generals Tchiani in Niger, and Hemedti in Sudan were facing dismissal — and thus discontinued access to rent — immediately before they launched their coups. This assessment is supported by the absence in Gabon of the anti-French rhetoric presented in Mali, Burkina Faso, and Niger. Oligui’s appointment of a former Eramet executive (Eramet is a major French mining concern which has indefinitely suspended Gabonese operations) as minister of petrol, indicates that Oligui and the CTRI hope to maintain economic ties to France. The CTRI has also stated that Bongo is free to travel abroad for medical treatment, likely a move to curry favor with the international community, particularly the African Union (AU), whose leadership is increasingly coming to fear for their own personal safety in light of the wave of recent coups.

Breaking Incident

Late on 08 September, a magnitude 6.8 earthquake struck about 50 miles south-west of the historic city of Marrakech. The earthquake led to dozens of building collapses, road blockages, and power and water outages. It was felt as far away as Spain. Rescue operations are underway in the areas surrounding the epicenter, including in the Medina of Marrakech, where historic buildings have collapsed. Global Guardian is currently conducting emergency evacuations of clients, including a group of travelers stranded at a resort damaged by the earthquake. It is the most powerful earthquake recorded in Morocco in a century.

Niger | Ecuador | Ethiopia

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Nigerien Coup Destabilizes Sahel. War Possible.

On 26 July, in Niamey, a military junta seized power and arrested President Mohamed Bazoum as well as his family. The Economic Community of West African States (ECOWAS) gave the junta until 06 August to reinstate Bazoum or face military intervention. The deadline passed and no intervention has yet taken place, but regional destabilization looms as opposing blocs form.

General Abdourahmane Tchiani — junta leader and former head of the Presidential Guard — instigated the coup amid escalating military dissatisfaction with Bazoum, and the likelihood of Tchiani’s own impending dismissal. The junta, styling itself the National Council for the Safeguarding of the Fatherland (CNSP), has instituted a no-fly zone over Niger, broken up pro-Bazoum demonstrations, and suspended the constitution. Niger’s neighbors — with the exceptions of Mali and Burkina Faso — have closed their borders and instituted sanctions on the putschists. France and the EU have also ended financial aid payments to Niger. Multiple flights have been re-routed and/or delayed to avoid use of Nigerien airspace. France, Australia, Italy, the United States, and others have evacuated their citizens from the country.

• Global Guardian recommends against all travel to Niger.
• We recommend travelers fully avoid all areas of Nigeria within 100km of the border with Niger.
• For essential travel to the region, we recommend real-time intelligence monitoring of the political situation and having an extraction plan in place.

Context

Niger is situated in the western portion of the Sahel region of Africa. The countries of the Sahel have been contending with a complex set of insurgencies based on a variety of ethno-religious and socio-economic grievances for more than a decade. Making progress in countering these insurgencies has become an important component of legitimacy for the governments of Sahelian countries.

While Niger has generally fared better than its neighbors, violence has increased across the region, with the number of conflict-related fatalities doubling since 2021. Fighting in the region, particularly with ISIS-Sahel, escalated after coups in Mali and Burkina Faso in 2020, 2021, and 2022. Following these coups, President Bazoum was publicly critical of both Niger’s military and those of its neighbors when he characterized the militants battling Sahelian state forces as “stronger and more battle-hardened" than regional armed forces. Bazoum also criticized Mali’s decision to partner with the Russian mercenary firm Wagner Group, and Burkina Faso’s decision to mobilize ethnic self-defense militias. Both policies resulted in deteriorations in the security situations.

Dissatisfaction with civilian leadership amongst the Defense and Security Forces (FDS) had been developing for years by the time General Tchiani learned of his impending dismissal. Tchiani, who had previously prevented coup attempts against Bazoum’s predecessor President Issoufou, was set to be dismissed by President Bazoum late last month following a souring of their relations. General Tchiani capitalized on the military’s grievances against Bazoum’s government and the perceived paternalism of that government’s French backers to seize power in an act of self-preservation. After a brief initial opposition, the Nigerien Armed Forces (FAN), joined FDS in the coup “to avoid bloodshed.”

Analysis

The CNSP adopted an anti-French line in keeping with patterns established by Mali, Burkina Faso, and the Central African Republic. The choice of demonstrators in Niamey to burn French flags while waving Russian ones indicates the growing regional presence of Russia and the success of Wagner’s information campaigns. Nigeriens, like their neighbors in Burkina Faso and Mali, hold deeply negative attitudes toward France as a colonial and neo-colonial actor. The lack of progress in ameliorating the security situation despite the decade-long presence of French troops in the country, coupled with the continued operation of western commercial interests (such as uranium mines), paints a picture of a once-colonist more concerned with commercial exploitation than an equal partner in the war on terror. The CNSP has capitalized on this attitude by painting itself as a force against western colonialism as well as a more competent political force for battling the insurgency.

Alignment with the coup by senior officers of the FAN probably indicates opportunism rather than enthusiastic support for the putsch. By supporting the CNSP, senior officers position themselves to dismantle or assimilate the political and patronage systems that the ruling PNDS party had established and entrenched under Issoufou and Bazoum. They also free themselves of mediation in dealing with the French (1,500 troops) and American (1,000 troops) military missions to aid Niger with counter-terror and counter-insurgency operations.

Similar “anti-colonialist" power seizures played out in neighboring Mali and Burkina Faso. Cohorts of young colonels presented themselves as champions of independence and security. However, the dismissal of western military assistance, and in Mali’s case, the introduction of Wagner fighters to the situation, has led to increased rather than abated violence.

For their part, the situation in Niger finds the leaders of the ECOWAS member states in an existentially precarious position. Niger’s is the seventh coup since 2020 in a region where most countries share the same recipe for the kind of democratic unraveling seen in Niger, Burkina Faso, and Mali. Many of the ECOWAS countries share a history of exploitation by the French, ongoing farmer-herder conflicts infused with Jihadist elements, and lack the robust and legitimate state institutions needed to prevent coups. ECOWAS’ present hardline position is understandable, then, in the face of a wave of anti-democratic and anti-western military uprisings when ECOWAS largely consists of western-backed, civilian-led democracies. ECOWAS has slated an emergency summit on 10 August in Abuja, the Nigerian capital.

Looking Forward

The outcome of this crisis, regardless of whether or not ECOWAS intervenes, will lead to regional instability. If Niger follows the pattern established by the Central African Republic, Mali, and Sudan, it will invite the Wagner Group to assist with security and regime stability in exchange for extractive concessions. While France’s light footprint counter-terror approach proved itself incapable of addressing the underlying political sources of conflict for its security partners, Wagner has no illusions of creating a lasting security architecture. Wagner’s continued access to the region is predicated on instability. And Wagner’s ability to extract hard value through resources, extend influence, and upset western plans are all predicated on continued access. Wagner, therefore, has no incentive — let alone capability — to address the region’s deeply rooted political issues, but will rather tend to exacerbate them.

Should ECOWAS intervene, the region, already in need of humanitarian aid, could slip into a protracted war where Nigeria, its ECOWAS partners, and their western backers face off against Niger, Burkina Faso, Mali, and Wagner in a proxy-war. In the case of a protracted war, all of the ECOWAS states participating would be at a significantly elevated risk of coup as they shift precious military and economic resources out of their domestic arenas. The possibility of a swift victory and reinstallation of President Bazoum exists but is improbable.

Gang Violence Leads to States of Emergency, Curfews Ahead of Election

Ecuador is experiencing a wave of drug gang-driven violence that began in 2022 and is worsening. There were 4,600 homicides in 2022, an 82% increase from the previous year, as a small number of powerful drug trafficking organizations fight for control of the increasingly lucrative transport corridors in Guayas, Esmeraldas, Manabí, Los Ríos, and El Oro provinces. Through June 2023, homicides were up 74% over the same period in 2022. Shootouts, prison riots, and bombings continue in 2023 ahead of the 20 August general elections which could be directly impacted by violence, if not indirectly, as voters consider their government’s response to the violence.

• Global Guardian advises against any non-essential travel to Ecuador, and especially to the provinces of Guayas, Manabi, and Esmeraldas.
• Travel to Quito should be carefully considered.
• Global Guardian strongly recommends the use of low-profile secure transportation for essential travel within Ecuador.

Context

The rapidly increasing high crime rates in Ecuador are attributed to the country's role as a transit route for cocaine produced in Colombia and Peru. The areas around the Guayaquil port in Guayas province and Esmeraldas port in the Esmeraldas province are particularly violent, as they are the primary exit and entry points for cocaine. In February 2023, 8.8 tons of cocaine were seized at the Guayaquil port. As a result of the violence in and around these cities, the government declared states of emergency and curfews in multiple provinces and across the entire prison system. Prison riots have been a hallmark of the violence in Ecuador, with hundreds of people killed in riots at prisons in Guayaquil and Esmeraldas specifically.

The influence of Mexican cartels on the drug trade in Ecuador is exacerbating the situation. The Sinaloa Cartel and Jalisco New Generation Cartel (CJNG) control the majority of the country's drug trade, while Los Choneros, Los Lobos, Los Lagartos, Los Chone Killers, Los Tiguerones, and the Latin Kings are among the biggest local criminal groups. As a result, crime scenes featuring bodies hanging off bridges and decapitated persons have been seen in Guayaquil.

Violent tactics associated with Mexican cartels, such as bomb blasts and ambushes, have targeted police officers, particularly in Guayas, Esmeraldas, Manta, and Manabí provinces. Bomb blasts targeting several government buildings took place in Esmeraldas in July 2023. The Ecuadorian government has since blamed the Sinaloa Cartel.

Notable Events

• 22-25 July 2023 : A prison riot in the Litoral Penitentiary in Guayaquil left 31 inmates dead and 14 injured. The riot was between rival gangs Los Lobos and Los Tiguerones.
• 23 July 2023: The mayor of Manta, Agustín Intriago, and a bystander were shot and killed in an assassination attempt.
• 24-25 July 2023: A series of bomb blasts targeted police stations and other government buildings in Esmeraldas.
  • The Ecuadorian government has blamed the bomb blasts on the Sinaloa Cartel, who is fighting for control of the drug trade in Esmeraldas province. The bombings are viewed as an attempt to intimidate the government and the police.
  • The blasts were all carried out by motorcycle riders who attached the bombs to the buildings and then fled the scene. The bombs were made with gunpowder and nails, and they caused significant damage to the buildings they targeted.
• 17 May 2023: President Guillermo Lasso dissolved the National Assembly amid an impeachment trial against him over alleged embezzlement charges.
• 04 April 2023: At least four people were killed following a shooting incident and a riot in La Roca maximum security prison in Guayaquil.
• 18 November 2022: At least nine prisoners were killed in clashes between two organized crime groups inside the El Inca Prison in Quito.

LOOKING FORWARD

The spike in violence comes amid heightened political tensions. In May of this year, President Lasso dissolved the National Assembly and is ruling by decree until 20 August snap presidential and legislative elections, with runoff elections scheduled for 15 October, if needed. Unlike in neighboring Peru, the actions of Lasso were widely viewed as legitimate, despite the conspicuous timing around his impeachment trial due to allegations of embezzlement. He received support from the military and police. As such, nationwide protests did not erupt following the dissolution of government, unlike in Peru.

The election will be a referendum on the widespread rise of gang violence along with the economic situation. Ecuador suffered during the pandemic and its economy remains slow to recover amid declining export income due to low oil prices, inflationary pressures, and a strengthening U.S. dollar. Additional austerity measures may be required which would be politically unpopular, possibly leading to unrest.

Civil War Nears New and Dangerous Phase

Ethiopia declared a state of emergency following clashes in Amhara between the federal military and local armed fighters on 04 August. The situation rapidly devolving into a security and economic crisis. In late July, violence intensified in the Amhara region with clashes between the Fano militia and defected Amhara paramilitaries on one side, and federal and regional forces on the other. Escalated clashes were reported in North Shewa, North Wollo, and Gondar areas. Given the widespread resentment toward the central government and the deep ethnic and social cleavages, the current crisis threatens to widen into a broader civil conflict as it did in 2020 with the Tigray Conflict.

Several countries, including the U.S. and Canada, have issued advisories for their nationals in the Amhara region to shelter-in-place. Ethiopian Airlines flights from Addis Ababa Airport (ADD) to Bahir Dar (BJR) and Kombolcha (DSE) airports were suspended until further notice, due to the ongoing violence. Flights to Lalibela (LLI) and Gonder (GDQ) were also suspended. Mobile internet in Amhara was shut down and the A2 highway blocked at multiple points amid deadly clashes and roadblocks in Gonder, Lalibela, Bahir Dar, Kobo, Debre Tabor, Weldiya, Burie, Amanuel, Sanka, Jiga, Finote Selam, Stayish, Kulmesk, Shewa Robit, Dega Damot, Quarit, Dembecha, Dega Damot, Debre Markos, Yejube, Arefa, Wegel Tena, and other areas.

• Global Guardian advises against non-essential travel to Ethiopia.
• Personnel in the Amhara region should gather as much food and water as possible and prepare to shelter-in-place.

Context

Fano is a part-time Amharan militia without a formal command structure. It previously supported federal troops during the two-year civil war in the neighboring Tigray region, which ended with a truce in November 2022. But the relationship between Fano and the federal government has soured due to concerns over the perceived disregard for Amhara's security.

Between 02-03 August, clashes occurred between Fano fighters and Ethiopian National Defense Forces (ENDF) troops near Debre Tabor. Given the situation's gravity, Amhara's regional government has requested additional assistance from federal authorities to restore order in the region.

Recent Events

• 06 August: Ethiopia's security official confirms armed groups in Amhara have "taken control" of several districts and towns in the region and released prisoners.
• 04 August: Ethiopia declares state of emergency in Amhara.
• 26 July: Fano gunmen ambushed the federal army in Gondar.
• 14 July: Gunmen killed the police commander of Debre Berhan town (North Shewa).
• 13 July: A Tigray official reportedly said that holding a referendum while parts of the region remain under Amhara's control would be illegal.
• 06 July: Prime Minister Abiy pressed Tigray and Amhara to resolve territorial disputes through peaceful consultations. Western and parts of Southern Tigray have been under Amhara's administration since November 2020.
• 03 July: Gunmen (likely Fano) shot the police chief and his deputy in Dejen District (East Gojam Zone).

Analysis

Despite the reduction in hostilities in Tigray, the persisting tensions among various regions, armed factions, and the federal government — exacerbated by the aftermath of the civil war — pose a significant challenge to President Abiy's endeavors to consolidate authority and foster national cohesion. In May 2022, Ethiopia apprehended over 4,000 individuals in Amhara as part of an effort to weaken Fano. This action was motivated by concerns about the militia's increasing influence potentially posing a threat to the state. In the subsequent month, government forces did little to prevent the loss of numerous lives among the Amhara population, caused by an armed group in Oromia. Concurrently, security forces in Afar apprehended and relocated around Amharan 9,500 residents from a town situated along its border with Tigray.

In April 2023, Abiy made an announcement regarding the integration of all regional forces into the national police and army. This decision led to protests in Amhara, and efforts to implement this integration have encountered resistance from militias. Consequently, Abiy has pursued a combination of negotiations and coercive measures to achieve his objective. Additionally, in April 2023, Ethiopia initiated peace discussions with the Oromo Liberation Army (OLA), a rebel faction with a longstanding history of opposition against the government. The OLA had aligned with the Tigrayan People’s Liberation Front during its advance towards Addis Ababa. In June 2023, Abiy pledged to persist with military operations in Amhara until only his federal security forces remained.

Politically isolated without security guarantees, or concessions for their contributions to Abiy’s war against the Tigray, many people in Amhara feel betrayed by the central government.

Looking Forward

An increased military presence in Amhara has the potential to intensify rather than ameliorate the situation. This is especially true if the Amharan public rallies behind Fano, a scenario that is quite plausible given the considerable local backing for the militia. It is possible that Abiy will begin to enact repressive measures against ethnic Amharans in the capital and outside the Amhara region, which would inflame the situation. With Ethiopia’s ever shifting regional political dynamics, should any of the recent peace treaties with the TPLF or OLA begin to falter, a wider civil conflict is possible.

KEY TAKEAWAYS President Abiy’s divide and rule strategy has started to backfire. After “betraying” the Fano, other groups who have sided with the federal government or signed agreements with it may begin to question Abiy’s guarantees. In a country that has seen intense sectarian conflict over the last three years, the conflict in Amhara is rapidly escalating.