I EEJ： August 2014

ｃ○ IEEJ 2014

Special Bulletin

A Japanese Perspective on the International Energy Landscape (182)

August 12, 2014

Iraq, Ukraine and Gaza
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan

Three major geopolitical risks have been shaking the international situation. Furthermore,
new serious developments have recently been seen for these risks.

In Iraq, the government's war with the Islamic State militant group has entered a newphase as the United States has launched limited air raids. The Iraqi situation, which had been
obscured by new developments in Ukraine and Gaza in terms of media coverage, has begun toattract global attention since U.S. President Barack Obama announced that he had authorized aid
raids in Iraq on August 7.

When the ISIS group was intensifying attacks on the Kurdish minority Yazidi sect andapproaching Erbil, the base of the Kurdish autonomous government, after expanding its control overnorthern Iraq, President Obama made his decision on the bombing raids to address the humanitariancrisis facing the Kurdistan region. The U.S. military operations in Iraq were the first since U.S forces
withdrew from the country in late 2011. The president might have feared that leaving the ISIS group
to expand its control and suppress Kurds could lead to extreme turmoil and serious destabilization inIraq.

Air raids since August 8 have checked any ISIS militants' further offensives, effectively
supporting the Kurdish and Iraqi government forces. But the air raids have not necessarily collapsedor substantially reduced the militant group’s forces. The United States has limited its Iraqi operations
to air raids and has no intent to go so far as to send ground troops to Iraq. It has only provided
support for the Iraqi government and the Kurds, leaving the Iraqi people to solve their problems ontheir own.

Since national unity is required to solve the problems, moves have begun to replace
incumbent Iraqi Prime Minister Nouri al-Maliki. On August 11, Iraqi President Fuad Masum
nominated Haider al-Abadi, first deputy speaker of parliament, as next prime minister. But
incumbent Prime Minister al-Maliki has raised opposition to the nomination, leaving future
developments uncertain. Twists and turns are expected in Iraq's domestic politics and government1

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forces' fighting with the ISIS militant group.

The Ukraine situation has seen a new tense development. As Ukrainian government forces
have taken an offensive to contain and overwhelm pro-Russian forces, Russia is growingly expected
to invade Ukraine. Many people are discussing the possibility. Russia implemented a large-scale
military drill near its border with Ukraine, although it ended on August 8. Reports have stated thatRussia has also deployed a large military unit near the border. The Ukrainian government announced
that 45,000 Russian troops (with tanks, armored vehicles and missiles) were seen near the border at
11 a.m. on August 11. In a media interview on the day, Anders Fogh Rasmussen, Secretary Generalof the North Atlantic Treaty Organization, said Russia could invade Ukraine.

Russian President Vladimir Putin is willing to maintain Ukraine under Russia's influenceand cannot leave the pro-Russian forces in eastern Ukraine to be defeated. He is expected to sendtroops to Ukraine for the nominal purpose of humanitarian assistance in an effective invasion. Intelephone talks with European Commission President Jose Manuel Barroso on August 11, Putin
reportedly vowed to send a Russian humanitarian aid unit to the battle zones in eastern Ukraine incooperation with the International Committee for the Red Cross. If Russia unilaterally sends military
units to Ukraine for humanitarian purposes, Western countries and Ukraine may interpret theRussian action as a military invasion, rapidly escalating tensions in Ukraine into a serious situation.

The Gaza tragedy has continued rather than being terminated. After Israel launchedmilitary operations on July 8, Israeli forces continued a fierce battle with the main Palestinian armed
resistance group of Hamas, with damage expanding unremittingly. As of August 10, the death toll in
Gaza reportedly topped 1,900. As global calls for a ceasefire grew amid the escalation of humancasualties, a 72-hour ceasefire between August 5 and 8 was implemented at last. Efforts to extend theceasefire failed, allowing the battle to be resumed.

On August 10, Egypt mediated another 72-hour ceasefire agreement. After the ceasefire
started at midnight on the day, negotiations took place on a longer ceasefire. Egypt reportedly
attempted to achieve a one-month ceasefire. But Israel and Hamas, the parties to the ceasefire
negotiations, are wide apart. Israel calls for disarming Hamas, while the Palestine group demands anend to the Gaza blockade lasting since 2006. It is uncertain whether any new ceasefire agreement
could come. The fate of the Palestine problem, one of the factors destabilizing the Middle East,exerts deep and various impacts on relevant countries, their neighbors and the internationalcommunity. We have to pay close attention to the fate of the ceasefire negotiations.

August 2014 could be a hot month in which geopolitical risks in the world could reachmajor turning points. Such developments may exert major impacts on international politics, theworld economy and the international energy situation.
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