Reference no: EM133035347

Entara is a (fictitious) nation that used to be part of a confederation of colonized nations but has now been independent for over 80 years. Entara borders Milinip, its former colonizer. Entara has established close trade and financial relations with different nations, including Milinip. Many current trade partners of Entara don't look favourably on the nation of Milinip, which has a long and ongoing history of authoritarianism and conflict. Following the country's independence, Entara banks and companies have gained access to international financial markets which in turn has allowed the country to prosper. The natural gas industry contributes 75% to Entara's GDP, and employs 30% of the population. International lenders have been particularly eager to supply credit to these natural gas companies, offering lower interest rates than domestic banks. As a result, Entara banks are limited to lending to industries other than the natural gas industry. Entara banks also hold large amounts of Entara government bonds. Following the recent pandemic oil and natural gas prices have fallen to record lows, putting pressure on the natural gas industry. It seems that Entara holds even more natural resources than previously estimated, as a recent report indicated that massive gold and silver deposits have been found in the region bordering Milinip. Following this report, Milinip's military has been deployed near the border with Entara, and they have conveyed a desire to reclaim at least part of their former colony.

a. Which risks and imbalances do you see in this situation?

b. Outline one (1) scenario in which the risk(s) may materialize. You may use bullet points, but try to be as detailed as possible.