MONTHLY INSIGHTSJune 2016

A Word from the Director of the Analytic Community

Wikistrat in the Media

Brexit: The Day After

The Middle East After the Territorial Elimination of ISIS

Turkey’s Policy Towards ISIS

A Chinese Spring

Upcoming Activities: July

TABLE OF CONTENTS

A WORD FROM THE DIRECTOR OF THE ANALYTIC COMMUNITY

We are pleased to send out this monthly update, summarizing some of Wikistrat’s activities during June.

June was dominated by the overwhelming effect of the Brexit vote, as well as the increasing turmoil in Turkey. In this report, Wikistratprovides an in-depth analysis regarding the consequences that the Brexit referendum result may have on global and regional actors.Additionally, we explore Ankara’s policy towards ISIS in the midst of increasing terror attacks against Turkey; and look into the futureof the Middle-East in a post ISIS era. Finally, our analysts have examined a scenario of a Chinese Spring, and have analyzed thepotential reaction to it by both Beijing, as well as other global players.

As always, you are welcome to comment, suggest activities or share your insights with us.

Dr. Shay HershkovitzChief Strategy Officer and Director of the Analytic Community

WIKISTRAT IN THE MEDIA

CNN The National Interest Big Data Made Simple

The Hufftington Post The National Interest Investor’s Business Daily

BREXIT: THE DAY AFTER

With 52 percent of voters in the “Brexit” referendum in favor ofleaving the EU, the world woke up last Friday to a newgeopolitical reality which some have compared to the day afterthe fall of the Berlin Wall.

The vote rattled global stock markets, generating sharpdeclines in major indexes, with the price of gold and silverseeing dramatic increases.

At the same time, Eurosceptics and far-right parties acrossEurope welcomed the results, seeing a boon to their domesticpolitical fortunes. Moscow seems to view the referendum ashaving a positive impact on its global position, anticipating aboon in relations with an EU now dominated by Germany.

BREXIT: THE DAY AFTER

INTRODUCTION

Click Here for the full Report

BREXIT: THE DAY AFTER

GERMANY

Britain historically used its influence in the EU to fight against tight financial regulations. Without it, there will be more strict regulations on banking to guard against the next financial crisis.

Erwin PfuhlerSenior Analyst, Wikistrat

Market Liberalization

• With the loss of Britain, the EU will lose a defender of market liberalization, shifting Europe’spolitical balance (and likely resultant policies) towards the left – e.g., state-centeredeconomic policy, more public financing, and lax attitudes toward debt and GDP growth.

• Germany must contribute strongly to a stabilization of the EU. There are tendencies insome Western European countries to follow Britain. Eastern European countries are notlikely to leave the Union, but they will try to gain more influence. Germany will have toassume the role of an integrator. It may not play the dominator.

Russia • Merkel’s policy of sanctions towards Russia (which are against Italy’s interest, and arealso increasingly opposed by the CDU’s coalition partners in the SDP) in exchange forfulfillment of Moscow’s Minsk II obligations might be weakened over time.

Crisis Management

• While Germany will push for a fast U.K. exit to avoid even more economic, financial andpolitical uncertainty and turmoil, it will also seek to avoid any harsh or hasty reactions on itsown part – or that of Brussels.

• The Brexit will ultimately be a long process. The shock and negative reaction to the move bylarge portions of the British public and a majority of the political elite will make Germany’spreferred faster exit harder to achieve. In addition, the U.K. government and David Cameron’ssuccessor will seek to draw the process out.

BREXIT: THE DAY AFTER

RUSSIA

Some more thoughtful Russian strategists are also aware that the Brexit is not an a qualified boon for Russia, and may have unexpected and problematic implications. The overall ideal, after all, is an EU that is distracted, divided and weakened – but not mortally so.

Prof. Mark GaleottiExpert, Wikistrat

Russian Concerns

• While Moscow is often contemptuous of the EU – especially its values, bureaucratism andsluggishness – it also recognizes that it acts as a moderating influence on both the U.S. andalso some of its more aggressive and ambitious members.

• If the EU fractures or even declines in significance, countries such as Poland – with a growingeconomy, desire to assert its regional role, and longstanding animosity with Russia – mayprove rather more problematic than Brussels. Likewise, if Washington feels Europe is not aviable partner, it may look more assiduously at cultivating regional relationships with Ukraineand countries in Central Asia, which would be a more direct challenge to Moscow's authority.

Wider Fractures

• President Putin has held back from expressing pleasure at the outcome of the vote, but manyKremlin-connected commentators are openly jubilant. It is not so much Brexit itself that theywelcome so much as the belief that this will open wider fractures within the West, and leavethe EU too divided and inward-looking to be meaningfully able to resist Russian adventurism inUkraine and elsewhere in its self-defined sphere of influence.

Western Unity

• While all parties claim to be committed to ensuring that a Brexit and subsequent realignmentswithin the EU will not affect defense cooperation or the transatlantic relationship, this cannotbe guaranteed. Moscow’s hope is that Western unity will suffer and that governments seekingto shore up their domestic support will be less committed to maintaining or increasing theirdefense expenditure and tough line on their eastern front.

China is concerned that a Scottish exit from the U.K. in response to a Brexit will encourage sub-state nationalist groups in Tibet, Taiwan and Xinjiang.

Timothy StaffordContributing Analyst, Wikistrat

BREXIT: THE DAY AFTER

CHINA

China-EU Relations

• China will benefit long-term from the newly exposed weakness within the EU, and willfocus on strengthening relations with individual member states rather than devotingresources to the European Commission – a process which it will find to besignificantly easier.

• China will be circumspect but will urge the EU to cut a deal with Britain that willminimize negative global economic impacts.

China-U.K. Relations

• The U.K. will be less able to take a stand on issues such as human rights,cyberwarfare and Tibet due to constrained global freedom of action and anincreasingly perilous hold over its own financial services industry. The U.S. will as aresult be increasingly isolated in its calls for democracy and human rights.

• An EU lacking British participation will prove less willing to prohibit arms sales toChina, as France and Germany will drive the common defense policy towards a morecommercial, trade-oriented agenda.

• Outside of Europe, Britain will find itself less able to afford export controls onadvanced equipment due to reduced European purchases, thus increasing its owngovernment’s willingness to allow for sales to countries like China.

TURKEY’S POLICY TOWARDS ISIS

ISIS seeks to benefit from Turkey’s sectarian polarization to acquire financial and material supportfrom wealthy sympathizers. The group’s ultimate objective is to not disturb its “surrogate mother”– instead allowing it to remain healthy so recruitment and financing can continue without seriousdisruption.

ISIS Objective

In contrast to Europe, Ankara’s biggest problem with ISIS is that this highly radicalized and capableterrorist organization finds its natural habitat and center of gravity within Turkey and across itsborder. In that regard, it is much harder for Ankara to measure and plan for the true extent of thethreat

Extent of the Threat

Turkey will need to close at least one of the two fronts on which it is currently fighting. The Kurdishconflict is sapping immense security resources and making it very difficult for Turkey to get theinternational community on its side.

Two Fronts

ISIS benefits from a vast, hard-to-control frontier and past neglect by Ankara on its border, and thus has been able to embedits affiliates and cells within Turkey. These cells have two aims: (a) intensify Turkey’s existing sectarian and ethnic faultlines and (b) use this polarization to recruit from a large population pool and achieve a numerical advantage against itsenemies in Syria and Iraq. Click Here for the Full Report

TURKEY’S POLICY TOWARDS ISIS

THE MIDDLE EAST AFTER THE TERRITORIAL ELIMINATION OF ISIS

THE MIDDLE EAST AFTER THE TERRITORIAL ELIMINATION OF ISIS

On June 14, Wikistrat ran a simulation entitled “The Middle East After the TerritorialElimination of ISIS” on its platform as part of the Herzliya Conference.

The exercise involved over 85 participants – including 50 of the world’s leadingexperts on the Middle East, Russia, China and counterterrorism (three of whichwere from the Wikistrat community), more than 30 students, five managementteam members, and Wikistrat’s staff members.

The U.S.Washington would use the new reality as an opportunity to reaffirm its commitment to the region,while at the same time continuing to consult closely with Russia and other Geneva II partners(including the Syrian opposition) in this regard.

Opportunity for Russia

The aftermath of ISIS’s defeat would provide Russia with an opportunity to extend its reach in theMiddle East. Yet it would struggle to shape the region according to its interests due to clashes withother regional actors such as Saudi Arabia – and, at some point, Iran.

ISIS Going GlobalThe defeat of ISIS in Syria would lead to an increase in organized terror attacks across the world. ISISwould continue to operate on a global scale in order to maintain the reason for its own existenceamong its followers.

The Kurds

Most countries in the region and great world powers (except Russia) are opposed to theestablishment of an independent Kurdish state. Yet no settlement of the Syrian conflict can beachieved without one. An independent Kurdish state would likely be formed following an end to ISIS,but border disputes and clashes with regional actors would threaten any stability achieved.

THE MIDDLE EAST AFTER THE TERRITORIAL ELIMINATION OF ISIS

A CHINESE SPRING

THE MIDDLE EAST AFTER THE TERRITORIAL ELIMINATION OF

ISIS

Wikistrat’s simulation suggests that Chinese leaders are more likely to make empty gestures in anattempt to placate protesters than pursue actual policy changes.

Empty Gestures

If faced with turmoil at home, China will attempt to build nationalistic fervor by pointing to“ominous” outside forces seeking to drag the country back to the past. Stirring up trouble in theSouth China Sea is the most obvious way to accomplish this.

NationalisticFervor

Media suppression is the government’s number-one focus, but its ability to controlcommunications is far more limited than in the past. As one analyst put it, “Protest in the 21stcentury is more than just people crowding and shouting in a public square.”

Media

The quicker the party responds to unrest, the better. Immediately meeting some demands, likeincreasing funding for education, relaxing press censorship or lifting restrictions on protests, coulddefuse the situation and prevent worse outcomes.

Defusing the Situation

In case of a Chinese Spring, Globalization works in the CCP’s favor. The more interdependence between the Chineseeconomy and the global economy, the more freedom of action it gives the Party. The longer the crisis goes on, the moreeconomic pain is inflicted on Western economies, and the fewer options Europe and the United States will have to doanything but support the Communist government. Click Here for the full Report

A CHINESE SPRING

ACTIVITY METHODOLOGY OBJECTIVES LAUNCH DATE

Assessing the New Cold War's Frontline Simulation

This simulation is aimed to determine the extent to which RAND’s assessment of Russia being able to occupy the Baltic states regardless of circumstances can

be validated.

July 5

Rise of the robots SimulationSocial tensions created by Robots and

their implicationsJuly 12

The Future of Food Simulation

Analysts will explore recent trends in food consumption and how will they

shape and develop over a period of five years.

July 21

UPCOMING ACTIVITIES: JULY

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