Global Arab Network | New Challenges for the Region

Translate this article to your language:

GANPublications

e-Publications

Service Menu

Add Site to Favorites

Add Page to Favorites

Make Homepage

Share This Page

New Challenges for the Region

Claire Spencer

Sunday, 12 July 2009 14:14

This year began with the sharp shock of the Gaza crisis, which illustrated more than ever the interrelated nature of geopolitics in the Middle East and North Africa region, writes Claire Spencer.

Only ten years ago, the enduring conflict between Israel and the Palestinians would have been seen through a prism that affected only its immediate neighbours: Jordan, Egypt, Syria and Lebanon, and the external brokers to the then failing Oslo peace process, the US and Europe. This time around, virtually everyone was involved: from Iran to Turkey to the divisions that arose within the ranks of the Arab League.

While not an exact science, this latest crisis revealed the emergence of an ideological faultline, not one based, as previously assessed, on religious or sub-regional groupings. On the one side are the region's traditional moderates - so-called because of their strong relations with the US and the longevity and stability of their leaderships. These include Egypt, Jordan, Saudi Arabia, most of the Gulf states and typically Morocco in North Africa. On the other side are their challengers, comprising both state and non-state actors: Iran, Syria, Hamas in Palestine, Hezbollah in Lebanon and al-Qaeda wherever it can find a foothold. In-between are those that are essentially moderate, but keen not to espouse an agenda that resisted blaming Israel for the upsurge in violence. President Erdogan of Turkey surprised the world - and in turn, delighted his own population - by walking out of the World Economic Forum in January, in protest at Israeli President Peres's defence of Israel's military action. Qatar was likewise vocal in condemning and calling for a halt to the civilian death toll in Gaza.

The erstwhile radicals of the region - Algeria and Libya among them - are increasingly perturbed by the benefits accruing to Iran from this situation, and in the moderate camp, none more so than Egypt. Caught between brokering a peace deal between Hamas and the Palestinian Authority on behalf of the US, Europe and Israel, the Egyptian government has had to juggle popular sentiment set against Israel with President Mubarak's public blaming of Hamas. This reflects a longer-standing internal concern that the opposition Muslim Brotherhood could opportunistically seek to exploit its association with Hamas to gain greater support.

Finding your place
However the immediate Gaza conflict is resolved, this jockeying for regional and local influence presages a much longer-term process of readjustment and shifts in alliances across the Middle East and North Africa (MENA) region. The change of American presidency in early 2009 meant that some re-balancing was likely to have happened regardless of Gaza. This may now bring some of the underlying issues, above all the fast-disappearing space for the creation of a Palestinian state, more swiftly to the fore. Economically, of course, the sands had already shifted in the second half of 2008. The booming economies of the Gulf, Dubai in particular, came under closer scrutiny, as the inevitable fall-out from the global economic crisis came home to roost. Ironically, for a region that has both embraced and resisted globalisation to differing degrees, it has been the cash-rich and protectionist, rather than stock-market and property-investment-exposed economies that have weathered the short-term consequences of the storm better.

The good news for business is that there is still capital to be deployed and infrastructure plans to be completed across the region. In the short term, only those over-exposed to speculative investments are likely to have suffered dramatic losses. It has nevertheless dampened the enthusiasm expressed in the second half of 2008 for the region's untapped frontier market potential. As late as autumn 2008, private equity investors were extolling the virtues of the region's relative isolation from sub-prime markets, lower inflation rates and loosening barriers to the entry of foreign capital. The flurry of joint investment projects across the region, in tourist and transport infrastructure, were intended to be part of longer term region-wide plans to invest oil revenues in local capacity-building and ultimately the creation of jobs. These equations will now come under increasing strain, as both local and international investors reassess the kinds of risks they face in the global downturn.

Quick action needed
The most immediate impact of Gaza was that the long-planned Arab League Economic Summit was pushed off course in January 2009 by the emergency intra-Arab diplomatic bridge-building needed at the height of the crisis. Some ground has since been recovered, but the confidence of the region in 2008 has been shaken. With the rash of popular demonstrations over Gaza - as far afield as Muslim Indonesia - the urgency of satisfying local demands for employment is becoming ever more pressing, growing at a rate that MENA's current investment and privatisation plans cannot match. Even though the major hydrocarbon exporters (Saudi Arabia, Algeria, Libya, Abu Dhabi and Qatar among them) still have large cash reserves, they are in danger of being eaten into by recurrent expenditures before longer-term projects come online. Where these also depend on external take-up - as in the tourist and real estate sectors - decisions made now will reflect how open each economy is prepared to be in a period of lower oil prices and capital inflows from Europe, the US and China.

As the Chinese themselves might say, the MENA region lives in interesting times. Iraq, meanwhile, has seen a lower death toll in 2009, and municipal elections took place peacefully, although regional divisions of authority are still pending. What MENA's more enlightened leaderships might conclude is that it is now politically astute to invest resources more directly in narrowing the gap between the economic winners and losers across the region. If Iran, by default, and in the midst of its own largely internally-driven economic crisis has reaped popular rewards from the dwindling legitimacy of moderate Arab governments, then the latter might well spend their way towards regaining the respect and confidence of their populations.

If so, it is in the interest of local and international business partners to assist them. The genie of fully state-controlled politics and economics is out of the bottle across the MENA region. More people (including outside the region) followed events in Gaza via satellite TV channels, blogs, email traffic and video-clip websites such as YouTube, than through their nationally-controlled media. If the ideological shifts taking place really do constitute a battlefield for the future direction of the region, it will take place as much within economic and business circles as it will through high-level diplomatic efforts to re-orient and reconstruct the region's security architecture.
Global Arab Network

Dr Claire Spencer is head of the Middle East and North Africa Programme at Chatham House.
This article was first published in Business Focus (Issue 2, 2009), a Middle East Association publication produced by Newsdesk Media Ltd.