Yemen War Begins, ISIS Takes Ramadi and Palmyra, Greece’s Banks Close and the Lausanne Nuclear Framework Is Agreed

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 July 2015 | Reporting Period: 3 April – 2 July 2015

Quarterly Briefing

• The Saudi-led military coalition’s air campaign in Yemen, launched March 26, intensifies through the quarter; Houthi forces are pushed back in some areas but humanitarian conditions deteriorate sharply.
• ISIS seizes Ramadi, the capital of Iraq’s Anbar province, on May 17 and captures the ancient city of Palmyra in Syria on May 21, reversing coalition gains and demonstrating the group’s continued capacity for offensive operations.
• Greece’s debt crisis reaches an acute phase: the country fails to make an IMF payment on June 30, becoming the first developed nation to default on the Fund; banks close from June 28 under capital controls; a referendum on bailout terms is scheduled for July 5.
• The P5+1 and Iran agree a framework for the nuclear deal at Lausanne on April 2; negotiations toward a final agreement continue with a June 30 deadline repeatedly extended.
• Al-Shabaab gunmen massacre 148 students at Garissa University in Kenya on April 2 in the deadliest terrorist attack in Kenya since the 1998 US embassy bombing.
• The US Supreme Court rules in Obergefell v. Hodges on June 26 that the right to marry is guaranteed to same-sex couples under the US Constitution, a landmark ruling with domestic political implications and diaspora community relevance.

Prologue: Old Wars, New Fronts and a European Crisis

The second quarter of 2015 saw established conflicts deepen and new ones open, while Europe faced an economic crisis whose drama rivalled anything in its post-war history. The Saudi-led coalition’s intervention in Yemen added a new theatre to the Middle East’s gathering conflagration, drawing the region’s two largest powers — Saudi Arabia and Iran — into proxy confrontation in a country already destroyed by internal conflict. ISIS demonstrated its continued capacity for territorial seizure despite coalition airstrikes. And Greece, a founding member of the European community, faced the imminent possibility of being forced out of the eurozone as its banks closed and its citizens queued at ATMs. As this edition is published on 3 July, Greece’s referendum on whether to accept EU bailout terms is forty-eight hours away; nobody knows how it will end. For Jamaica and the Caribbean, the quarter brought continued oil price weakness that benefited import budgets while the region watched the global financial system’s stability with the attention of economies whose foundations depend on it.

Yemen: A New War in the Gulf

The Saudi-led coalition’s military intervention in Yemen, which began on 26 March 2015 with airstrikes against Houthi forces that had seized Sanaa and were advancing on Aden, continued through the entire quarter. The coalition comprised Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Qatar and several other states; Egypt provided naval support. US military assistance included intelligence sharing and aerial refuelling. The campaign reversed some Houthi advances and enabled Yemeni government forces to retake parts of Aden. But it did not alter the fundamental military dynamics: the Houthis, backed by forces loyal to former president Saleh, remained in control of much of northern and western Yemen including the capital.

For oil markets, the Yemen conflict added a chronic risk premium: the country sits adjacent to the Bab el-Mandeb strait, through which an estimated 3.8 million barrels of oil pass daily between the Red Sea and the Gulf of Aden. Any disruption to shipping through that chokepoint would have immediate and severe effects on global oil logistics. For Caribbean oil importers, Yemen served as another reminder that energy security depended on shipping lanes whose security could not be taken for granted.

ISIS’s Renewed Offensive

The fall of Ramadi, the capital of Iraq’s largest province, to ISIS on 17 May was a significant setback for the US-backed Iraqi government and for the coalition’s strategy. The city had been defended by several thousand Iraqi army troops who fled in the face of ISIS’s assault, abandoning US-supplied equipment. The episode prompted sharp criticism in Washington of the Iraqi military’s reliability and capacity. Four days later, ISIS seized Palmyra in Syria — the ancient Roman-era city whose world heritage sites included irreplaceable monuments that ISIS subsequently began destroying with deliberate theatricality.

The ISIS offensives in May demonstrated that, despite a year of coalition airstrikes and the loss of significant territory in Kobane and Tikrit, the group retained the capacity to project offensive power and seize new territory. The coalition adjusted its strategy in June, with the US deploying additional special forces advisers and intensifying strikes. But the fundamental problem — that defeating ISIS required effective ground forces that the Iraqi army had not consistently provided — remained unresolved.

Greece: The Drama at the Eurozone’s Edge

The Greek debt crisis reached a new intensity in the second quarter as Prime Minister Alexis Tsipras, elected in January on an anti-austerity platform, failed to reach agreement with European creditors on the terms of a third bailout. On 30 June, Greece became the first developed nation to miss an IMF loan repayment, effectively defaulting on €1.6 billion. Two days earlier, Tsipras had called a referendum for 5 July on the creditors’ proposed terms — a decision that stunned European leaders and triggered immediate capital controls: banks were closed and ATM withdrawals limited to €60 per day. As this edition is published, the referendum result is unknown; both sides have been lobbying intensively and polls show the vote too close to call.

For Caribbean economies, the Greek crisis was a reminder of the systemic risk embedded in a global financial architecture where the distress of a relatively small economy could trigger contagion through the eurozone and global markets. Jamaica was itself engaged in its own IMF programme, and the contrast between Greece’s confrontational approach to its creditors and Jamaica’s negotiated adjustment was noted by international financial observers.

Lausanne Framework and East Africa’s Massacre

The framework agreement reached between the P5+1 and Iran at Lausanne on 2 April set out the key parameters of a nuclear deal: limits on enrichment capacity, the conversion of the Fordow facility, inspector access. The framework was not a final agreement; a June 30 deadline for a comprehensive accord was extended repeatedly as negotiators worked through remaining disputes. The direction was positive but the detail remained unresolved as this edition published. Meanwhile, in Kenya on 2 April, Al-Shabaab gunmen attacked Garissa University College, targeting Christian students; 148 people were killed. The attack was the deadliest on Kenyan soil since the 1998 US embassy bombing and reflected Al-Shabaab’s sustained capacity for mass-casualty terrorism despite significant counterterrorism pressure from the African Union Mission in Somalia.

Looking Ahead

Greece’s referendum is the immediate focus: a Yes vote would likely lead to a deal and eurozone stability; a No vote raises the prospect of an exit whose consequences for European and global financial stability are genuinely unknown. The Iran nuclear negotiations are approaching what all parties describe as a final deadline. Yemen’s humanitarian crisis is worsening with no ceasefire in prospect. ISIS holds its new territory in Ramadi and Palmyra. And Cuba-US normalisation is expected to reach a new milestone with the reopening of embassies in the coming weeks. For Jamaica, the second half of 2015 begins with the global environment demanding attention on multiple fronts simultaneously.

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Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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