Stratfor's 2007 Annual Forecast for South Asia

In a two-part series Stratfor recently came out with their annual forecast for the world. Here is their forecast for South Asia with Pakistan hogging the limelight.

South Asia: Pakistani Politics in the Spotlight As we expected, India and Pakistan made little progress in normalizing relations in 2006. Though the Kashmiri militant group Lashkar-e-Taiba carried out a deadly railway attack in Mumbai in July, relations between the rival countries remained in the usual state of distrust, preventing any major breakthroughs. We noted that Pakistani President Gen. Pervez Musharraf would face a galvanized opposition and would be forced to decide whether to stay on as the country's military chief. Musharraf successfully staved off opposition attempts to unseat him, allowing him to keep his dual portfolio as president and head of the military. In line with our 2006 forecast, the Baloch nationalist insurgency added to Musharraf's list of worries. He dealt with the insurgents through a combination of military and negotiation tactics. Our forecast that India's leftist parties would develop a stronger presence in the government and further hamper Indian Prime Minister Manmohan Singh's privatization efforts was correct. India also worked to expand its global influence by signing a landmark civilian nuclear deal with the United States. The insurgencies in Nepal and Sri Lanka remained significant in 2006, though we failed to predict in the annual forecast that the Maoist rebels and the political alliance in Kathmandu would be able to forge a power-sharing agreement and strip Nepal's King Gyanendra of his powers. In 2007, the main focus in South Asia will be on the Pakistani political scene, as the country gears up for general elections slated for Jan. 15, 2008. Musharraf battled a heavy wave of domestic criticism this past year, exacerbated by continued U.S. pressure on Pakistan to cooperate on the counterterrorism front -- and by U.S. airstrikes against Taliban and al Qaeda targets on Pakistani soil that resulted in a high number of civilian casualties. Accusations have been flying that Musharraf has spent too much time hobnobbing with U.S. officials in Washington rather than defending Pakistan's territorial integrity; but the general has developed a solid strategy to secure his re-election and outmaneuver the main opposition forces in the country -- namely the Pakistan People's Party (PPP), led by exiled former Pakistani Prime Minister Benazir Bhutto, the Pakistan Muslim League-Nawaz (PML-N), led by ousted Pakistani Prime Minister Nawaz Sharif and the Mutahiddah Majlis-i-Amal (MMA) coalition of Islamist parties. Musharraf has a comfortable majority in the sitting parliament to help him win a re-election bid, but his standing cannot be assured after the general elections are held and a new parliament comes to power. To consolidate his hold over the government, Musharraf will bend the rules and schedule a legislative vote ahead of the general election to get re-elected to another five-year term. Musharraf could even attempt to bypass this step by calling snap elections in the spring of 2007 if he feels confident enough in his ability to win. Snap elections or no, the legislative election results will be rigged as needed to allow Musharraf's parliamentary allies to hold onto their seats. The opposition forces will then use the allegations of a rigged election to hold street demonstrations, but are unlikely to muster enough support to change the election results significantly. Musharraf will continue with a careful strategy to prevent the PPP, the PML-N and the MMA from uniting in a potent opposition force, fueling distrust among the already severely divided parties by hinting at making deals with the various opposition leaders. Musharraf will also be able to hold onto his position as military chief this year. The biggest threat to Musharraf's election plan is the potential for large-scale U.S. military activity on Pakistani soil that would undermine the military's confidence in the general and turn public support against him. To enhance his domestic image, Musharraf will distance himself from Washington in the coming year and become even more restrained in cooperating with U.S. forces on the counterterrorism front. Pakistan's relations with Afghan President Hamid Karzai's government will further deteriorate this year as the Taliban insurgency strengthens. The Taliban will continue opposing NATO forces in Afghanistan and launch a spring offensive. NATO is not likely to have the capacity to surge troop levels and redouble reconstruction efforts. Nevertheless, Afghanistan will remain -- at least for this year -- a priority for the alliance. Because the Taliban lacks the strength to take the country from NATO forces -- and NATO forces are not willing to let things slip that far -- 2007 in Afghanistan will look much like 2006. Security operations will continue, and Taliban forces will improve their tactics and build on operational successes. India will keep a close watch on political developments in Pakistan, privately preferring the continuation of Musharraf's relatively stable regime. India and Pakistan will go through the motions of continuing peace talks, but those talks will only be for show. Primarily to boost his credibility at home, Musharraf will try to push India into resolving the long-standing Kashmir dispute, and New Delhi will politely rebuff Musharraf's proposals. For India, Pakistan's continued support for Kashmiri militant groups remains the block to any meaningful progress in the Kashmir negotiations. Kashmiri militant groups operating in India are stepping up their efforts to stage attacks designed to incite communal tensions between Hindus and Muslims and revitalize the Kashmir cause among Indian Muslims. However, such attacks have become routinized enough in India that incidents like the July 2006 Mumbai railway bombings prompt no notable shift in Indian society and policy. Kashmiri militant groups could attempt to vary their target set from the usual crowded market and transportation sites in major cities to the country's much-valued information technology (IT) sector. Such an attack would force an Indian response and threaten the country's ability to sustain a healthy inflow of foreign investment. But the Pakistani government and intelligence service have largely maintained their hold over these militant groups to prevent them from altering their tactics in India. Particularly while in the heat of the election season, the Pakistani regime will be uninterested in provoking a major conflict with India. That said, Kashmiri militant groups will likely succeed in carrying out another large attack in a major Indian city this year that would fall in line with their usual target selection of markets, transportation hubs and religious and tourist sites. Such an attack will increase tensions on both sides of the border and lead India to implicate the Pakistani regime, but the Indian government led by Prime Minister Manmohan Singh is unlikely to respond with a major military confrontation against Pakistan. India's attention will primarily be absorbed by domestic political and social issues. No major shift in the Indian political landscape is expected in the coming year; the main opposition Bharatiya Janata Party is suffering from internal divisions and is unable to threaten seriously the ruling Congress party's hold on power. The Congress party's main headache will come from its allies in the Left Front, who will continue to link up with powerful trade unions to resist Singh's privatization efforts and labor policies. As a result, Singh's government will need to turn more toward populist politics in an attempt to quell domestic unrest. Barring a significant attack by Kashmiri militants on India's IT sector in 2007, the country should experience sustained economic growth in the range of 8 percent, similar to the past year. India's economic focus will be on expanding its automotive, steel, aviation and IT sectors, though substantial growth will be hampered by political considerations and slow infrastructural growth. The Left Front will also make noise over the Singh government's growing alliance with Washington. India and the United States will cement their landmark civilian nuclear deal this year through a bilateral treaty; however, Singh will maintain a multilateral foreign policy agenda to tame the opposition and avoid getting caught in any binding agreements with the United States that would require it to place a moratorium on nuclear testing or impose punitive measures against Iran. India will also keep a watchful eye on its porous northeastern border, where a political crisis in Bangladesh spells a likely increase in militant traffic into India. General elections in Bangladesh were scheduled for Jan. 22, but have been delayed following the resignation of the caretaker government. The main opposition, led by Sheikh Hasina of the Awami League, likely has the numbers to win a majority against the ruling Bangladesh National Party (BNP), led by Hasina's bitter rival, Khaleda Zia; however, the Awami League has damaged its secular credentials by allying with one of Bangladesh's most notable radical Islamist parties -- a politically opportunistic move that has dismayed a large number of voters. The Awami League has announced a boycott of the polls until changes are made to the pro-BNP caretaker government in charge of conducting the elections, and until the BNP makes assurances that the elections will be free and fair. The polls are guaranteed to be rigged under the caretaker government, but the Awami League is trying to level the playing field before it takes part. After a series of negotiations and violent demonstrations, the BNP will likely give in to some of the Awami League's demands in order to allow the elections to take place. Nonetheless, the results are bound to be disputed, and Bangladesh will continue to be wracked by political violence for much of the year. Whether the Awami League or BNP emerges victorious means little in the larger strategic view of Bangladesh; the instability caused by the warring parties is unlikely to wane regardless of which party is in charge. But the political developments in Bangladesh will be a cause for concern for India, as the rival political factions turn increasingly toward radical Islamist parties for coalition support. The growing Islamist influence in Bangladesh will give rise to radical groups that will play host to jihadist and Kashmiri militant operatives with an interest in launching attacks in India. The Indian government will attempt to secure its northeastern border, but is unlikely to intervene directly in Bangladesh. To India's south, the undeclared civil war in Sri Lanka between the Tamil Tiger rebels and Sri Lankan armed forces will escalate this year in heavy tit-for-tat fighting as the Sri Lankan army attempts to divide the northern and eastern Tamil strongholds in the country. Neither the Tamil Tigers nor the Sri Lankan army has a clear enough advantage to launch a sustained offensive that would result in a decisive victory. India will be concerned with the Tamil refugees flowing into the southern Indian state of Tamil Nadu, but cannot afford to throw its support fully behind the Sri Lankan government for fear of alienating India's sizable Tamil population. The ongoing instability in Sri Lanka will give India's regional adversaries -- namely Pakistan, and to a lesser extent China -- the opportunity to meddle in India's backyard and escalate the conflict by providing arms and support for the Sri Lankan government. These parties are not as interested in helping the Sri Lankan army wipe out the Tamil Tiger rebels as they are in prolonging Sri Lanka's crisis to keep India preoccupied. External involvement, however, could lead the Tigers to target foreign diplomatic personnel in Sri Lanka. India will at least have one border that it can worry less about this year. Political developments in Nepal in 2006 reached a point where the Maoist rebels now have a solid opportunity to integrate themselves in the country's political and military apparatuses. Parliamentary elections will be held in April 2007, giving the Maoists a chance to enter the government formally. Though this should be a relatively stable year for Nepal, bursts of instability can be expected as dissident Maoist factions resist the integration effort. A return to a militant insurgency is unlikely, but extortion, kidnappings and economic blockades remain usable options for the Maoists.[Stratfor]