By Hani Sabra

Egyptian President Mohamed Morsy's sacking of the intelligence chief and other powerful security figures in the wake of an attack on Egyptian border police gave him some short term credibility. He wisely used that political capital to sideline the two most powerful members of the Supreme Council of the Armed Forces (SCAF) and cancel amendments to the interim constitution that gave SCAF legislative power. On paper, Morsy is now the most powerful person in Egypt. But claims the move is an important step toward civilian ascendency in Egypt misread both the military's ongoing strength and the motivations of the SCAF's new senior members.

A closer look at the firings reveals the limits of Morsy's power. Remember that Morsy did not elevate junior officers to fill the positions opened up by sacking SCAF head Field Marshal Hussein Tantawi and army chief of staff General Sami Enan. His appointments were in fact conservative and he chose other top military men to fill the vacated posts. More importantly, Morsy would never have been able to sideline Enan and Tantawi without the support of other military leaders. That step was the Brotherhood's greatest tactical success; it was able to build strong enough links with some members of SCAF, exploiting personal differences and opportunism rather than ideology.

Senior members of the military want to benefit financially from their positions and are not a force for secularism as some observers allege. Morsy was able to convince some commanders, such as the new Minister of Defense Abdel Fattah el Sisi, that it would be better for them to tie their fortunes to the Muslim Brotherhood rather than the old guard (Tantawi and Enan were closely associated with Hosni Mubarak's regime). Morsy will need to nurture these relationships; if they feel threatened, senior officers remain powerful enough to cause the president real problems. As a result, the seesawing battle for ascendancy between the Brotherhood and the military will go on.

Hani Sabra is an analyst in Eurasia Group's Middle East Practice.

By Ayham Kamel

Iranian leaders believe more and more that Western and Arab involvement in the uprising against Syrian President Bashar al Assad is designed to weaken the Islamic Republic. Tehran feels threatened by the so-called Sunni Triangle's (Turkey, Qatar, and Saudi Arabia) support for Syrian rebels, which Iran views as a complement to sanctions that aim to limit its regional influence and prestige. The United States's alliance with these countries makes it more difficult to resolve any disagreements over Syria. In this context, Iran finds supporting Assad -- at least in the near term -- as the best worst option. This policy isn't new, but the parameters of what Tehran is willing to provide have expanded.

The audacious bombing of the National Security Council in Damascus on 18 July probably represented a watershed moment in Iranian thinking about the uprising in Syria. The "nuclear" option, dispatching units of the Iranian Revolutionary Guard Corps to assist Assad's weakened forces, is very unlikely -- it would likely trigger a so-called Chapter 7 UN resolution authorizing Western military intervention or provide enough impetus to inspire a coalition of the willing. But Tehran, now more than ever, is willing to do more to help Syria's embattled president.

First, the Iranian regime is likely to divert perhaps tens of millions of euros to help Assad counteract the flight of foreign reserves. It views support of Assad as important enough to justify the diversion of scarce reserves despite the increasing domestic economic pain caused by international sanctions. Second, Iran is likely to boost its provisions of arms and intelligence to the Assad regime. It has so far been reluctant to provide a large amount of support out of fear that doing so would play into the Syrian opposition's efforts to divide the regime's base on sectarian grounds. As the threat to the Assad regime has grown, that calculus has changed. Finally, Hezbollah forces have a great deal of fighting experience that would be valuable to Assad. However, the regime will likely dispatch them in a covert manner to avoid destabilizing the Lebanese government.

Iran, for now, may have an unrealistic view of Assad's chances of staying in power, and of its own ability to influence the outcome. It is likely that Iran will eventually reduce or eliminate its assistance to Assad as the latter's position grows increasingly untenable. Biting sanctions, declining oil revenues, rampant inflation, and dwindling foreign reserves will force Iran to focus internally. In the long run, the Islamic Republic will not be able to afford supporting a sinking Syrian regime either financially or diplomatically.

Ayham Kamel is an analyst in Eurasia Group's Middle East practice.

By Famke Krumbmüller

The Dutch have long been one of the eurozone's and the EU's most reliable members. Since the introduction of the euro in 2000, the country has easily met EU economic targets for the maximum allowable budget deficit (3 percent of GDP) and national debt (60 percent of GDP), generally turning in better numbers than even Germany. That policy position has been supported by broad consensus among political parties and the general population. But in a timely reminder that the politics of austerity are tough, even for fiscally conservative countries, the Dutch political system is now wracked by some of the same tensions that are roiling politics in the EU's peripheral members. The Netherlands faces important general elections in early September as a consequence of failed budgetary talks. The Socialist Party is polling well with a populist policy platform that resists ongoing fiscal austerity, with possible implications for broader management of the EU's ongoing crisis.

In the early days of the eurozone's predicament, the Dutch were in the forefront of the drive for austerity. In September 2011, the minority coalition government led by Prime Minister Mark Rutte slashed €18 billion from the budget. And when the economy slid into recession in spring 2012, the government was forced to cut another €12.4 billion in spending. But Rutte's coalition made up of the People's Party for Freedom and Democracy (VVD) and the Christian Democratic Appeal (CDA) with parliamentary support from far right Party of Freedom (PVV) collapsed at the end of April when Geert Wilders, the PVV's leader, withdrew its support. He claimed that the budget cuts would hurt growth, purchasing power, and the elderly, a populist tactic designed to attract voters fed up with further austerity. A broad coalition of five parties (including the VVD and the CDA) passed the budget shortly after Wilder's defection, but the minority coalition's collapse echoed the messy politics of austerity that are playing out across the EU's peripheral countries and which provide an opportunity for parties at the extremes of the political spectrum to gain ground. 

The next challenge comes with the 12 September elections. So far it looks as though the politics of austerity are favoring the leftist Socialist Party, which is leading in the polls after winning support from Labor Party (PvdA) voters disenchanted with their party's backing of the pro-austerity Rutte government on European issues. The Socialists are running on a platform that rejects the EU-imposed austerity measures and any further transfer of sovereignty. The party argues for policies that favor growth and social agendas. At the other end of the political spectrum, the PVV continues to maintain solid support with its anti-European platform that includes a euro exit. Together these two fringe parties currently have support from about one-third of voters. Both parties (but especially the PVV) have populist tendencies and aim to capitalize on Dutch voters' disenchantment with austerity and any discomfort with financial support for peripheral countries that provides few obvious domestic benefits.  

The next Dutch government will continue to be pro-European and support sound public finances, but voter concerns will make it more difficult for it to justify continuing hardship for the sake of the EU. This outcome is likely because the Dutch political system features a number of small centrist parties that will always be needed to build a ruling coalition. That dynamic will likely ameliorate any dramatic shift in policy. As a result, public finances will return to health, but perhaps not on Germany's and the European Commission's preferred time line, and Berlin may lose the support of what has been a close ally in the drive for austerity. Nonetheless, strong supranational supervision will remain a precondition for further financial or monetary policy integration, in part to ensure that Germany and France do not break their own rules. But the next Dutch government will find it difficult to secure domestic support for any further transfer of sovereignty to the EU. The Socialists' increasing popularity will also encourage a debate on the social consequences of the eurozone crisis and the European project in general.

By Carroll Colley

The story grabbing most of the headlines in Russia the last two weeks has a racy hook, but it's not the story the international community should be watching. Sure, the criminal trial against feminist/garage band Pussy Riot has its share of political intrigue. But that trial is more about church-state relations than the political repression of the women involved. Criminal charges against opposition leader and blogger extraordinaire Alexey Navalny, however, are far more serious, and they provide a window into the Kremlin's current strategy of zero tolerance for political opponents. If Navalny is convicted and jailed, the opposition would be weakened, but it could well provoke even larger protests and greater political uncertainty.

First, the more colorful case. The state is prosecuting Pussy Riot for the band's performance of a musical rant against President Vladimir Putin in Moscow's largest cathedral, and the case exposes the dark underbelly of the Russian judicial system: incompetent prosecutors, questionable witnesses, and a highly politicized judge. Instead of pursuing administrative charges -- which many Russians favor -- the government is throwing down the gauntlet by pursuing a criminal case, though some legal scholars claim that the charges themselves are outside the scope of Russian law.

While a corrupt judicial system creates problems of its own, allegations of incompetence and corruption in Russia's court system are nothing new, and the state's position in this case is more a product of the Putin regime's wish to reward the Orthodox Church's political loyalty than to punish a little-known feminist punk band. Putin, the first Russian ruler since the era of the tsars to be a practicing Orthodox, wants to support one of the political system's most stalwart supporters which called on its members to vote for him in the March presidential election.

The three women face up to seven years in prison for "hooliganism" for performing an "anti-Putin hymn" ("Holy Mother, Drive Putin Out"). After meeting with British Prime Minister David Cameron last week in London, Putin said the women have already been punished enough -- they have been held in pre-detention for five months -- and should not be judged too harshly. The use of the legal system to prosecute Pussy Riot may be clumsy-and it has backfired by turning the band into an international cause celebre -- but in the end, it's little more than a colorful footnote to a worrisome trend.

On the other hand, the renewed criminal charges of embezzlement against Navalny (he was previously investigated on similar charges but cleared) should be recognized for what they are -- increased pressure against out-of-system opposition leaders that will grow under a third Putin presidential term.

Navalny has used his blog to wage a successful anti-corruption campaign against the government for several years, making him a major irritant for the ruling elite. He is the face of the opposition movement and has demonstrated that he can send a crowd of protestors into Moscow's streets. Most recently, he exposed that the head of Russia's Investigative Committee -- the Russian equivalent of the FBI -- violated Russian law by owning property in the Czech Republic and holding a Czech residence permit. The Investigative Committee responded quickly with these most recent charges.

Interestingly, Navalny remains free, which suggests that the Kremlin is making him an offer: Stop the anti-government shenanigans or risk 10 years in prison. If his past actions are a good indicator, Navalny won't take this deal; he has been playing this cat-and-mouse game with authorities for some time and has yet to blink. Among the opposition, Navalny appears to be the most charismatic and ambitious figure, one who could possibly rally Russia's disparate opposition movement and mount a credible political career. A potential show trial -- if the standard set with Pussy Riot is to be followed -- and subsequent prison sentence would create yet another political martyr and drastically underscore the authoritarianism of Russia's political dynamic.

If Navalny's case goes to court, he can't expect the leniency that Pussy Riot may ultimately receive. He'll probably get prison time, a verdict that would enrage the opposition (the upper-middle classes in Moscow and a handful of other major cities) and probably provoke greater unrest. But the outcome would be largely supported as a sign of strength by Russia's majority, the working middle and lower classes that support the current system. It will also send yet another signal that the Kremlin's patience with the democratic opposition has reached its limit.

Carroll Colley is an analyst in Eurasia Group's Eurasia practice.

By Philippe de Pontet and Clare Allenson 

Although today's African Union (AUえーゆー)-U.N. deadline for reconciliation between Sudan and South Sudan has come and gone without a resolution, the Security Council is unlikely to follow through on its threatened targeted sanctions for now (China and Russia are unlikely to endorse them).  While an oil deal in the next few weeks remains unlikely, the economic and patronage imperatives in both capitals finally point toward an interim oil deal before the end of the year or in early 2013 -- despite plenty of spoilers on both sides who see compromise as capitulation. Each side has made an initial offer on transit fees, and while more movement is needed, resumption of most of Sudan's 350,000 barrels per day (BPD) will likely occur by the end of the year or, at the latest, in early 2013.

Ever since South Sudan shut down its northern-bound oil production in January, the two nations have been engaged in a battle of economic attrition, punctuated with actual and proxy battles near their disputed border. South Sudan, which depends on oil for more than 95 percent of its revenue base, injected a ray of hope in recent weeks into the long-languishing talks, with an offer of over $8 billion in debt relief and compensation for Khartoum, and pipeline fees of about $8 per barrel of oil. The government of Omar al-Bashir in Khartoum wasted no time in rejecting the offer, insisting that border security is the top priority -- but its revised (albeit still low) offer of roughly $32 per barrel a few days later indicates that the two countries are slowly moving toward a deal. Sweeteners from China and the Gulf states will probably be necessary to get Khartoum to raise its offer further. Despite the initial rejection, the new terms should provide the basis for a reasonable oil deal that could get Sudanese crude flowing again. Though full production will take several months, the largely unexpected addition of more than 200,000 BPD of Sudanese crude would be a small, but not insignificant, supply bump for highly volatile oil markets.

The embattled Bashir administration cannot afford to appear weak, and declined a meeting with South Sudan President Salva Kiir ahead of the U.N. deadline this week. But it literally cannot afford the drastic austerity that looms on account of lost oil revenues, which explains Khartoum's acceptance to attend an AUえーゆー summit with Kiir in the near future. The envisioned Sudanese cutbacks make Greek austerity look like a walk in the park -- not to mention the additional pain of high inflation, a sharp depreciation of the Sudanese pound, and an incipient anti-regime protest movement. The Kiir administration faces an equally negative outlook, with inflation well above 70 percent and a 56 percent-unfunded budget despite a nearly 40 percent cut in spending. Dwindling donor patience will serve to push Juba's hand toward a deal. Even more significant is Juba's belated realization that a southern-based pipeline, if it emerges at all, is years away and therefore not a panacea for its pressing needs.

A binding deal on oil revenue sharing will not be possible or sustainable if the Sudans remain in a shooting war on both sides of the border. Both of the military-dominated governments would plough a huge percentage of oil revenues into security, risking an even greater escalation, making both sides understandably wary of an oil deal without security guarantees-particularly Khartoum, which faces multiple insurgencies just a year after its painful loss of the south.

Talks have broken down several times over the location of a demilitarized zone, which would represent the first step to ending hostilities. During her visit to Juba this week, Secretary of State Hillary Clinton will pressure the Kiir administration to follow through on security guarantees in order to move negotiations forward. Juba's implicit bargain now appears to be to demobilize its affiliated militias in Southern Kordofan and elsewhere, in exchange for an independence referendum in Abyei, which would likely see the district join South Sudan. Khartoum will no doubt exact a higher price, through higher transit fees. Hammering out such a deal will be tough, but the reality of a mutually destructive stalemate, together with both Juba and Khartoum's revised oil offers, should offer scope for a deal-albeit a shaky one-sooner than most would expect.

Philippe de Pontet is the director of Eurasia Group's Africa practice. Clare Allenson is an associate in the firm's Africa practice.

By Crispin Hawes

Iraqi Prime Minister Nouri al Maliki is losing patience with his fractious coalition and is trying a number of tactics to force it into line, including ceding concessions on some contentious issues designed to win over Sunni factions and weaken political opponents. The current political impasse has delayed much legislation, preventing progress on issues such as ongoing power shortages that are damaging the economy and the quality of life for most Iraqis. While Maliki has threatened to call new elections in an effort to sway his coalition, a vote is unlikely this year, as is any long-term easing of the current political impasse. A vote is possible, however, in 2013, one year before the next elections are currently scheduled.

Maliki continues to perform well in Iraq's limited opinion surveys, despite strong negatives in some parts of the country. His relative popularity results from his reputation for forceful government, and Maliki now views the legislative deadlock as a major problem that could undermine his position. As a result, Maliki wants his coalition to pass important legislation and has shifted his focus from backroom negotiations to openly confronting his political partners and rivals.

Maliki is also preparing the ground for elections. His chief tactic has been to allow the reinstatement of Sunni officers in the military and security forces, a decision reached in June and intended to ameliorate some of the anger among Sunnis. Maliki is not allowing across-the-board reinstatement and instead has instructed the military to focus on recruiting expelled officers from Anbar province. The political goal is to undermine support for the main political opposition Iraqiya.

Maliki has threatened snap elections, in large part to spur his coalition into action. He can do this because opinion polling indicates he would have won an election held in July this year, while some of his most fractious allies and opponents would have performed particularly badly.

The tactic may well result in some legislation being approved, a step that could add further gloss to Maliki's reputation for forcefulness. But a resolution on important issues, such as the long-running dispute between the Kurdistan Regional Government (KRG) and the Baghdad government over the legality of disputed oil contracts, will almost certainly be delayed until the next government. And even if some legislation is approved in the near term-which would be enough to delay any snap general election-structural issues will encourage tensions to eventually resurface.

As a result, Maliki is unlikely to make good on his threat to call elections this year, but is actively considering calling early polls in 2013. Despite his skepticism of opinion surveys, the consistent results could tempt him to schedule a vote a year ahead of schedule in an effort to maintain his position atop the delicate balance of forces in Iraq. Early polls would probably also favor his more coherent State of Law party list over other coalitions, such as Iraqiya.

Crispin Hawes is the head of Eurasia Group’s Middle East and North Africa practice.

By Willis Sparks

Before the Republican National Convention opens the 2012 presidential campaign season on August 27 and returns the country's focus to its domestic hopes and fears, Mitt Romney is headed abroad to try to build some credibility on foreign policy. Having focused his campaign almost exclusively on the fragile U.S. economy, Romney wants to narrow Obama's polling advantage on foreign policy questions and offer an image of himself as "leader of the free world." The most obvious way to accomplish this is to stand alongside key U.S. allies facing traditional U.S. foes. Romney will make stops along the way in Britain, Israel, and Poland.

The visit to London is a reaffirmation of American foreign policy tradition and a chance to place Romney inside the "special relationship." With his appearance at the London Olympics, it's also an opportunity to remind voters of the leadership Romney brought to the 2002 Salt Lake City Winter Games -- the least controversial line on his resume.

The stop in Jerusalem underlines another special relationship -- and reminds voters that Obama has yet to visit Israel as president. It's certain to produce warm photos of Romney with Israeli Prime Minister Benjamin Netanyahu, old friends who met while working together at Boston Consulting Group in 1976. The images will offer a stark contrast with the frigidly formal shots we've seen following Netanyahu's strained meetings with Obama. Romney will promise that Iran will not build a nuclear weapon on his watch -- and (at least) imply that a nuclear Iran is inevitable if Obama is re-elected.    

And Poland? A Pew poll released in June found that only 50 percent of Poles express confidence in Obama. Compare that with 80 percent in Britain, 86 percent in France and 87 percent in Germany. In some cases, this is a legacy of the preference among some Warsaw Pact countries for Republican presidents, but it's also a function of some notable Obama mistakes.

Obama trod on Poland's diplomatic sensitivities in May when he referred to Nazi concentration camps located in Poland as "Polish death camps" during a ceremony to bestow America's highest civilian honor on a Polish resistance fighter. Expect Romney to honor the Polish victims of Nazi atrocities.

And don't forget Obama's live mic gaffe with Russian President Dmitri Medvedev, the one where he asked outgoing president Medvedev to ask incoming president Putin for "space" in exchange for "flexibility" on the question of U.S. missile defenses scheduled to be deployed in Poland and the Czech Republic. Romney hopes his visit to Poland, at the invitation of former Polish president and anti-Communist icon Lech Walesa, will help him make the case that only he can forcefully meet threats from Russia, which he has (oddly) labeled America's "no. 1 geopolitical foe," carrying on in the tradition of uncompromising Cold Warriors like Ronald Reagan.

Governor Romney can't match the ecstatic reception candidate Obama received in Berlin in 2008. Nor can he share credit for killing Osama bin Laden or ending the unpopular war in Iraq, Obama's signature foreign policy achievements.

But he can remind voters that Republican presidents like to draw clear lines between America's friends and foes -- and that while Obama remains remarkably popular in much of the world, at least a few U.S. allies are probably hoping for a Romney win.

Willis Sparks is an analyst in Eurasia Group's Global Macro and United States practices.

Scott Seaman and Ross Schaap

The fight to increase Japan's consumption tax may yet spark significant party system realignment -- something the country needs in order to secure a government that can more effectively address Japan's fiscal challenges and increase economic competition, especially through trade. Any move toward such change is now tied to the next Lower House election, with its timing depending largely on the behavior of former prime minister Yukio Hatoyama.

Hatoyama has returned to the limelight after Prime Minister Yoshihiko Noda managed to secure Lower House approval on June 26 of legislation that will increase the consumption tax. That process prompted a split of the ruling Democratic Party of Japan (DPJ) when Ichiro Ozawa and a group of his followers defected on the vote and formed a new party. Despite fears that Ozawa (nicknamed the "Destroyer" for his habit of creating and then wrecking political parties) would bring down Noda's government by leaving the DPJ with a large contingent of disaffected backbenchers, the DPJ has retained its Lower House majority. But the risk of a no-confidence motion has increased, and Hatoyama may yet snatch away Ozawa's moniker if he decides to defect as well.

Hatoyama is a DPJ stalwart, having helped found this party and lead it to victory in the 2009 general election. But as a backbencher he voted against the consumption tax hike and continues to criticize Noda's decision to pursue it. If Hatoyama were to defect along with 13 or more other Lower House members, Noda would not survive a no-confidence motion backed by a united opposition.

Despite stressing that he doesn't want to leave the DPJ, Hatoyama continues to speak out against Noda and has hinted that he may intensify efforts to challenge the party leadership if the Upper House fails to dilute the tax hike legislation (though he isn't clear about what he actually wants). Hatoyama will probably stay put when the Upper House passes the hike into law, likely in August without any major changes. If he defects and brings Noda's government down, Hatoyama could lose in the subsequent election. (The opposition Liberal Democratic Party is preparing to run a popular Olympic speed skater against him.)

If Hatoyama remains in place, Noda is likely to weather the current political storm and work to delay any snap election until after he secures reelection as the DPJ president in September. Such an outcome would slow any move toward restructuring of Japan's party system, which will likely advance fastest if elections occur that shake up representation in the Diet. There are other scenarios that could result in early elections, including other defections from the DPJ or an opposition refusal to help approve legislation to issue bonds to fund the budget, but they are less likely.

As a result, the odds are increasing that an election (and any resulting political party realignment) will not occur until mid-fall or later -- perhaps even next summer. A later election would allow Noda more time to position the DPJ and canvass potential allies and prepare the way for mergers or the formation of a formal coalition with reform-minded elements of the LDP and other parties. But if Hatoyama is appeased or cowed and the tax hike row dies down, pressure for an election will wane and Japan's gridlock would likely persist.

Ironically then, any hope for more rapid reforms in Japan would be best served at this point by Hatoyama jumping ship after the Upper House passes the tax hike, likely forcing Noda to call an election and potentially setting a broader realignment process in motion. For Hatoyama, replacing Ozawa as Japan's "Destroyer" by helping to dissolve the DPJ could end up being his most lasting contribution to Japanese politics.

Scott Seaman is an analyst with Eurasia Group's Asia practice; Ross Schaap is the director of the Eurasia Group's Comparative Analytics practice.