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Economy, Investment

The coronavirus pandemic and subsequent near worldwide shutdown of international travel has hit every economy, but those countries who rely on tourism dollars have been especially impacted. With the European Union wrestling the virus under control after a debilitating number of months, European countries are beginning to open up their borders to other countries with similar numbers of coronavirus cases.

 

The EU announced the first fifteen countries on June 30 that would be allowed access into the EU, and the list includes three North African countries that draw Europeans for tourism in the summer: Morocco, Algeria, and Tunisia. Airlines and the tourism industry will welcome the move, but some countries are still holding off for similar access to the countries, including Spain.

 

Spain is holding out for a reciprocity agreement with Morocco that would allow Spaniards to travel to Morocco. The European Union is also only provisionally open to China on the condition that EU citizens are allowed back into China.

 

Morocco has had one of the strictest responses to the coronavirus with an array of limitations including a complete ban of printing and distributing physical newspapers. Morocco began their lockdown on March 20 when it still had less than 100 cases.

 

An early lockdown prevented Morocco from getting hit with the hardest of the coronavirus and as of July 2, the country of 36 million people has had only 12,854 confirmed cases and 228 deaths. But the Moroccan government has played it very safe and only began lifting the lockdown on June 24, the same day they announced a record 563 coronavirus cases.

 

 

Open for Business?

 

The European Union may have deemed Morocco safe, but the Moroccan government did not immediately open up its borders to European travel. While Moroccans flocked to the beach to celebrate a reopening of public life, the government refused to reciprocate the opening of its border with Europe.

 

Morocco’s coronavirus success story has also come at a high cost with immense restrictions on civil liberty and economic fallout from a stalled economy. Human Rights Watch detailed the case of a woman who was jailed for posting a video online making that poked fun at a strict civil servant enforcing coronavirus rules.

 

The economic fallout from coronavirus has been shared across the globe, but Morocco’s economy comprises heavily on several sources of money that have been heavily impacted by the spread of the virus. Approximately 7% of the country’s GDP comes from remittances from citizens working abroad, a number which is expected to dip in 2020 due to the pandemic.

 

In 2019, the tourism sector accounted for 7% of Morocco’s GDP, and 750,000 people were employed in the industry. Tourism has been brought to a standstill, and the government has tried to encourage domestic tourism to mitigate a predicted $3.4 billion shortfall thanks to coronavirus.

 

The OECD detailed Morocco’s economic woes related to tourism as 2.5 indirect jobs are related to the country’s tourism industry. One industry indirectly related to tourism, gas stations, saw an 80% decrease in revenue in March at the beginning of the lockdown.

 

With an emphasis on domestic tourism, the Moroccan government is acknowledging its reliance on tourism while still remaining cautious about opening its border. While extreme caution has led to concerns in the business world, the Moroccan government’s strong response will help the country build its reputation with coronavirus-fearing travellers.

 

 

Eager to Open

 

One of Morocco’s neighbours reacted more swiftly when the EU began discussing opening up their borders to international travel. Tunisia, another sunny North African nation with a hearty tourism industry, opened its borders to international travel on June 27.

 

Tunisia’s tourism industry is familiar with shocks to its international reputation as it has had to recover from a terrorist attack that killed 38 European tourists in 2015. 2011 Arab Spring protests also reduced international travel from countries with richer tourists.

 

But Tunisia’s touristic draw has proven to be resilient, and the government has shown a greater eagerness to open its borders than Morocco. Tunisia also has a better control over the virus with single-digit case numbers trickling in every day.

 

Tunisia and tourism companies will likely advertise Tunisia’s low level of coronavirus cases and success in suppressing the virus to attract European tourists back to their shores.

 

Rising unemployment numbers have also caused civil unrest in Tunisia with protestors in southern Tunisia demonstrating against the lack of jobs provided by the government. Tunisian police fired tear gas at protestors to disperse a crowd in Tataouine.,

 

Civil unrest due to an economic downturn has not been restricted to Tunisia, Moroccan taxi drivers also demonstrated against coronavirus restrictions. Algeria, another North African country that gained access to the European Union has had sustained protests for over a year. The Algerian movement was able to kick out long-time president Abdelaziz Bouteflika, but they have been less active due to coronavirus restrictions.

 

 

Stability

 

Of Morocco, Algeria, and Tunisia, Morocco has been the most stable in recent years, and this confidence may lead them to the decision to hold off on European tourists until further safety precautions are in place.

 

No country reliant on tourist dollars will fare well if an outbreak occurs due to tourism, but with rising unemployment, some governments will be more receptive to opening than others.

 

If countries like Morocco and Tunisia are able to keep coronavirus numbers down while opening up to tourists for the summer season, they will benefit from the harsh coronavirus regime. It may be the big payoff that many citizens are waiting for, a tourism-induced boost to the economy as a reward for patience and a tough suppression of the virus.

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Economy, Geopolitics

In mid-April, Turkey was in the thick of the coronavirus crisis averaging over 4,000 new cases a day, but three weeks ago President Recep Tayyip Erdogan declared “mission accomplished”, and government spokespeople said the virus has been contained. At the start of June, the country opened up most public places with the government eager to wake the economy out of its lockdown slumber.

 

Europe’s tampering of the coronavirus spread, along with Turkey and other countries’ proclaimed containment, has been viewed positively. However, there are still many questions left to be answered about how society moves forward.

 

Even leaving aside the chequered past of the ‘mission accomplished’ claim, Turkey may have the virus contained, but the world economy is entering a great period of uncertainty. The country has flattened the curve, yet it is still averaging 900 coronavirus cases a day and the next one to two months will be telling for Ankara.

 

Turkey’s response has received plaudits from some circles, including the WHO, for its quick response and high-capacity, quick-turnaround testing. But the Turkish Medical Association has been critical of Erdogan’s response, and chairman Sinan Adiyaman said the June 1 reopening of the economy is “too early”.

 

Erdogan has shown that he is particularly sensitive to the short-term economic impact of sustained coronavirus measures after he scrapped a sudden curfew and weekend lockdown in 15 municipalities. Turkey was seeing a slight uptick in cases heading into the weekend of June 6th, but the president said the measures “would lead to some social and economic consequences.”

 

 

Circuit Breakers

 

The original sudden announcement of new measures less than a week after announcing a large-scale reopening of the economy looked like a less severe version of Singapore’s ‘circuit breaker’ measures. Singapore, a densely populated city-state, originally received widespread praise for their handling of the coronavirus, but in early April they had to introduce and reintroduce various measures to quell a large uptick in cases.

 

Turkey’s original plan to put Ankara, Istanbul, and 13 other municipalities under a weekend lockdown looked like an admission that the virus spread had the potential to once again grow out of control.

 

The WHO said on June 8 that there was “no time to take (the) foot off (the) pedal” considering the high numbers of coronavirus cases around the globe. The United States, Brazil, Mexico, and India are all seeing continued increases in new cases. South Korea, the country with perhaps the best virus response, is still working to stamp out hotspots with economic disruption.

 

Some political commentators have floated the idea of on-off lockdown measures in the event of a new wave of coronavirus measures. Thus far, Erdogan has remained particularly aware of the economic consequences of widespread lockdowns, but this strategy still leaves the country like many other vulnerable to a second wave considering new cases remain high and most of the populations can still catch the virus.

 

As the pandemic continues countries will also have to be prepared to adapt to changes with how the virus acts. Turkey expanded the symptoms list for people to receive a coronavirus test.

 

But while Turkey, one of the most important economies in the region, declared mission accomplished in its fight against coronavirus for publicity reasons, the fight against the virus and economic fallout will continue in the long-term.

 

 

Tourism

 

Turkey has a booming tourism industry that grossed $34.5 billion in 2019, and some estimates have tourism contribution to the country’s GDP at 12%. The opening of the massive Istanbul Airport in 2018 sent a clear message that Turkey has hedged its bet on its growth as a tourism and transportation hub.

 

It has been no secret that tourism has been one of the hardest-hit sectors in the world economy with international travel coming to a near standstill over the last three months. As early as May, the Turkish government began announcing measures in an attempt to assuage travelers’ fears and ensure tourist dollars continue to flow into the country.

 

Even with international travel slowly restarting, it is unclear whether high-dollar tourists will resume international travel en masse over the summer. As European countries incentivize their citizens to take holidays in their own country to boost low tourism numbers, a much slower summer should be expected.

 

This second wave of economic impact could wreak havoc on the tourism sector and adjacent businesses such as shops and restaurants.

 

While some are trying to keep up hope, Erkan Yagci, chairman of the Mediterranean Touristic Hoteliers and Investors Association told Reuters, “We have to be realistic, this will be a slow process. The opening of 50% (of hotels) in July would be a big success in my opinion.” He also added that foreign currency earnings resulting from tourism could drop 60-70% with domestic tourism also decreasing by 50%.

 

 

Foreign Affairs

 

With the tourism industry in store for a difficult summer, Turkey still finds itself involved in several potential conflicts that could pop off at any moment.

 

Turkey’s intervention in Libya received a new wrinkle as Erdogan announced ‘agreements’ with American President Donald Trump who sits on the opposite side of the conflict. The Americans have yet to release exactly what the talks were about, but some sources reported Erdogan linked Kurdish rebels to Antifa, the loosely organized antifascist movement drawing ire from Trump as nationwide protests rock America.

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Economy, Geopolitics

As the world comes to grips coping with the deadly spread of coronavirus, familiar conflicts and security issues have persisted in the Middle East. While much of the world has been put on hold, Yemen, a country approaching five years in armed conflict, is still racked by internal conflict and foreign proxy war.

 

In early April, the Saudi-backed coalition declared a two-week ceasefire at the peak of coronavirus concern worldwide. But within days fighting resumed and skirmishes between Saudi-backed forces and Iranian-backed Houthi rebels have continued.

 

Now, the conflict has taken a new geopolitical and domestic turn as UAE-back separatists exchanged fire with Saudi-backed forces and declared self-rule over areas it controls in the south of the country. UAE and Saudi Arabia, along with the sides they backed in this conflict, were previously allies in the fight against Houthi rebels, but with that relationship now frayed the conflict has taken on a new and even more uncertain dimension.

 

And amidst war, medical professionals are concerned about the lack of preparation and capability to respond to a coronavirus outbreak. Thus far Yemen has been spared from a widespread coronavirus outbreak with 12 confirmed cases; but with little border control and an already overtaxed health system, the country is acutely at risk.

 

Mohammed Alsamaa of Save the Children told the BBC, “there is still tension everywhere. It is more urgent than ever that the conflict stops. No-one can go to hospital or a clinic if there’s war going on and this outbreak – when it comes – could be unspeakable.”

 

 

State of Conflict

 

In a conflict that has devastated Yemen, leaving over 100,000 dead, millions displaced and the country pushed to the brink of famine, patience wore thin within the Saudi coalition of forces fighting Houthi rebels.

 

The southern separatists have refused overtures from the Saudis for some temporary ceasefire, and in a conflict that looks to have no end, the Saudis have shown wariness themselves.

 

Before declaring the ceasefire in April, Saudi Arabia was in daily talks with the Houthi rebels about a resolution to the conflict. Saudi Arabia wanted to hold peace talks between the rebels and the Saudi-supported, internationally-recognized government of Yemen.

 

But the rebels dampened hopes of a resolution to the conflict by ignoring the Saudis’ attempt at a ceasefire in April, claiming it was an insincere offer.

 

The Saudi-led coalition has been repeatedly accused of war crimes in Yemen and evidence has been brought forward by human rights lawyers of unlawful attacks against civilians. Saudi allies including the United States and the United Kingdom have been accused of turning a blind eye to these crimes and funneling arms to Saudi-backed combatants.

 

The viciousness and immense human loss in Yemen have done little to move the needle on an end to the fighting, but with the coronavirus pandemic wreaking havoc on the world economy and Saudi Arabia putting resources into an oil war with Russia, the international community’s distaste for the Houthi rebels and their own war crimes could precipitate a further retraction of foreign activity in Yemen.

 

 

Humanitarian Disaster

 

The long-standing conflict has thrown Yemen into a horrendous humanitarian disaster. Not only have lives been lost due to the conflict itself, but the fighting has caused immense displacement and a four-year famine.

 

In 2019, the United Nations reported that 70% of Yemenis, 20 million people, are food insecure and 10 million of those only one step away from famine.

 

Before coronavirus, Yemen was already dealing with a massive public health crisis. Since January 2020, the country has recorded 110,000 cholera cases, and according to UNICEF, 5 million Yemeni children are at a heightened risk of contracting cholera. Cholera had already claimed the lives of 3,886 people from October 2016 to November 2019.

 

In April of this year, the north of Yemen has been rocked by flash floods, further adding to the country’s despair and increasing the region’s risk to cholera. The floods have disrupted the nation’s water supply and diminished access to clean drinking water in the country’s north.

 

Since fighting started in 2015, Yemen’s healthcare system has been under immense pressure and reports have warned it is on the brink of collapse. Only half of Yemen’s health facilities have been functional since the war broke out, and many have been destroyed in bombing campaigns.

 

A temporary ceasefire or resolution to the foreign intervention in the conflict will relieve much strain on Yemen, but without adequate investment in health services and a great push to prevent the spread of coronavirus and other health emergencies the country will continue to be a humanitarian disaster.

 

 

Relief?

 

Thus far, no major foreign power in the conflict has made adequate assurances to the health and well-being of Yemen.

 

Crucially, the United States cut tens of millions in aid to Yemen after arguing the Iranian-backed Houthi rebels have been getting their hands on the funds. The United Nations warned 31 of its 41 programs in Yemen could be shut due to the lack of American funding.

 

The World Health Organization also announced it is preparing to cut 80% of its funding to Yemen after the United States announced it would unilaterally pull funding from the health organization.

 

The American strategy of isolationism and anti-Iran antagonism has been a hallmark of the Trump administration, and the White House has doubled down on these efforts despite the spread of coronavirus in Iran and domestically.

 

With President Trump renewing tensions with China and doubling down on Iranian sanctions, the United States has clearly chosen antagonism over collaboration in the face of its own domestic public health crisis.

 

Other important foreign actors in Yemen’s crisis are also looking inward to solve immense crises, so Yemen and other foreign conflicts may fall to the wayside. Without any resolution, that could mean more hunger and health crises for Yemen, while the biggest culprits of the violence escape without punishment.

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Economy, Geopolitics, Investment

With the world struggling to combat the spread of the coronavirus (COVID-19) pandemic, G20 countries met virtually to discuss the impacts on the global economy and health. Saudi Arabia is the current chair of the G20, and the country organized the virtual meeting at the end of March ahead of the planned G20 summit this November in Riyadh.

The world economy has been tossed upside down by the lethal spread of COVID-19 which has touched every major economy and brought many regions and industries to a standstill.

It has also thrown foreign diplomacy, with many politicians, ministers, and even world leaders testing positive for the virus. The airline industry is almost entirely shut for business with many countries closing borders or rejecting planes from coronavirus hotspots.

In the Middle East, Iran has been the biggest hotspot for confirmed coronavirus cases and deaths, but it has impacted all nations. According to Johns Hopkins University, Iran has nearly 50,000 cases with 3,000 deaths, Israel and Saudi Arabia also have 6,211 cases and 1,720 cases, respectively (as of 2 April).

In their virtual meeting, trade ministers from the G20 countries agreed to keep their markets open for essential goods and vowed to inject $5 trillion into the world economy.

In a joint press statement, G20 leaders said, “we reiterate our goal to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.”

However, with global economic uncertainty and an uneven response to the crisis around the world, many are still left with questions after G20 leaders’ assurances.

 

Will G20 Members Meet Face-to-Face?

Japan waited as long as they possibly could to postpone the 2020 Summer Olympics, and while the G20 does not create the same stream of tourists, it is still a massive event requiring international travel.

There is no consensus on what the world will look like in November, but many governments are already preparing their populations for COVID-19 to come back in the winter months even if the world manages to get it under control.

Cop26, a UN climate conference, was set to take place in November in Glasgow, but it has already been postponed until 2021 by organizers. The UK’s Secretary of State for Business, Energy and Industrial Strategy, Alok Sharma, said “the world is currently facing an unprecedented global challenge and countries are rightly focusing their efforts on saving lives and fighting COVID-19. That is why we have decided to reschedule Cop26.”

Thus far, only preliminary G20 meetings have moved online, and there has been no indication as to whether the November meeting in Riyadh will continue as planned.

Due to the 2012 MERS outbreak, Saudi Arabia was better positioned than many other countries to handle the wave of COVID-19. The Saudi government has put in stringent rules including suspending access to pilgrimage sites, but the region’s response has not gone as smoothly as South Korea, another country prepared due to recent outbreaks.

While Saudi Arabia may be able to take control of COVID-19 faster than Europe or North America, major economies are preparing for a sustained period of economic inactivity and social distancing. From where we sit now it’s hard to imagine many diplomatic meetings between foreign leaders will take place in-person for the rest of 2020.

 

Rippling Effect on Foreign Diplomacy

With governments scrambling to limit damage to public health and pump money into their national economies, much of coronavirus coverage has been focused on domestic politics. But the virus also has a clear and direct impact on foreign relations that extends to all geopolitical calculations.

In some cases countries look to, at least temporarily, mend strained relations to combat the spread of the virus, but others are hardening stances. The US-Iran relationship is perhaps the starkest example of the latter scenario.

The United States has doubled down on sanctions against Iran after calls for sanctions to be relaxed so Iran can respond to its devastating spread of coronavirus. In the midst of COVID-19 ravaging America, President Trump tweeted, “Upon information and belief, Iran or its proxies are planning a sneak attack on U.S. troops and/or assets in Iraq. If this happens, Iran will pay a very heavy price, indeed!”

The Saudi-Iranian proxy war ripping apart Yemen is also continuing unabated by the threat of coronavirus. While a ceasefire has been agreed to, conflicting reports detail continued airstrikes.

The United Nations also called for a complete nationwide ceasefire in Syria. Despite peace talks in the northeast of Syria, the UN is still worried and said, “the current arrangements are far from ideal for the front-line response demanded by the COVID-19 outbreak.”

G20 leaders have asserted that they are committed to fighting the pandemic and helping “especially the most vulnerable.” But, with diplomatic conflicts and war still raging, much more needs to be done to ensure that all people in the Middle East and the world are better protected.

Whatever form the G20 takes in November, whether it be held virtually, with smaller travelling parties or postponed altogether, its focus clearly will shift to coronavirus response. The choices individual leaders make can have a great impact, but more coordination is needed to achieve the best outcomes.

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Economy, Geopolitics

COVID-19, commonly referred to as the coronavirus, has panicked global economic markets and precipitated a health crisis that is on the verge of going global.

What started in China in late 2019 has rapidly impacted the world economy, taken over 3,000 lives and struck fear in many citizens across the globe.

China remains the epicentre of the outbreak, but South Korea, Italy and Iran have also had to contend with swelling numbers of cases.

Iran has been particularly hard hit and has suffered the highest amount of deaths outside of China.

While the world scrambles to fight against the spread of the novel influenza strain, shocks have been felt globally, illuminating the precarity of the interconnected economy.

On February 27, the Dow Jones Industrial Average had its biggest one-day point drop and fell nearly 4.5%. It has since recovered, but with the number of cases and deaths likely to climb in the United States and across the globe, global health and the world economy are not out of the woods yet.

There have been positive signs, China has seen a decline in new cases, and as a result, they closed the first of 16 hospitals specifically constructed to fight the virus in Wuhan, the epicentre of the virus.

But the World Health Organization chief Tedros Adhanom Ghebreyesus said the world is in “uncharted territory. We have never before seen a respiratory pathogen that is capable of community transmission, but which can also be contained with the right measures.”

 

Iran: The Middle East Epicentre

Iran’s outbreak was identified February 19, but it has already rocked the country. Even an adviser to the Supreme Leader fell ill and died, and it has called the effectiveness of the government into question. Although there was a slow response, the Iranian government has now taken several drastic measures to curb the spread of COVID-19.

Iran shut down its parliament in what many citizens believed to be a delayed response that has fuelled public panic. Despite the measure, 8% of Iranian Parliament members were infected with the virus, and the country released an astonishing 54,000 prisoners to prevent the virus from spreading in prison populations.

“The more the officials are scared of scaring people, the more the virus will spread and the country will be further paralysed,” an Iranian doctor told the Financial Times.

Iran is also not positioned well in geopolitics to handle such an outbreak, considering heavy American economic sanctions and strained ties with regional partners.

Many countries have closed their border with Iran and restricted travel from the country, causing a large economic impact that will not be solved quickly.

While the Iranian economy looked to be rebounding after a poor 2019, early signs point to a devastating long-term impact on Iran.

“The virus outbreak will keep people from making unnecessary trips, purchases, and transactions, aggravating the downturn in the Iranian economy,” said Zahra Karimi to Bloomberg News.

Similar restrictions on air travel in the Middle East and across the globe will hurt the entire region, with economies built on air travel and oil.

 

Air Travel

Perhaps the biggest threat to multiple economies in the region is not the virus itself, but the fear it has raised in many travellers across the globe.

The International Air Transport Association (IATA) announced COVID-19 has already resulted in a $100 million loss to airlines in the Middle East.

The United Arab Emirates and other Gulf countries have cancelled all flights to Iran, and many countries have limited commercial travel to China.

Various airports across the Middle East serve as a key connection for travellers between East and West and with uncertainty in many different countries and announcements from airlines about cancelled flights, the loss could grow much larger.

Travel to Asia has been severely restricted which has had a big knock-on effect, impacting routes between countries with no virus outbreak.

Several weeks ago, the IATA released a report that projected a loss of $30 billion in revenue for the airline industry, but a spokesman told The Guardian that the projection was outdated and likely to get much higher.

Oil prices have also rubber-banded with both bleak and positive reports. Oil prices dropped heavily in mid-February, but they have been recovering after positive reports out of China.

OPEC has hinted at cutting output in order not to flood the market at a time of uncertainty and less demand for oil.

The outbreak may be a temporary blip for the oil and air travel market, but it does reveal the precarity of economies reliant on the industries.

 

Beyond Iran

While Iran remains one of the hardest-hit and the country most in need of containment, the virus has spread across the region.

Saudi Arabia, Jordan, Tunisia, and Morocco recently announced their first COVID-19 cases, and Egypt, Iraq, Kuwait, Lebanon, and Qatar said they have additional cases.

Extensive precautions have already been taken including Saudi Arabia taking the unprecedented step to forbid foreigners from going to the holy city of Mecca ahead of the annual Hajj pilgrimage.

Other major events across the Middle East have also been cancelled in fear of the spread of the virus, signalling that other industries will feel the ripple effects of cancellations.

The airline and tourism industry will be hit hard by Saudi Arabia restricting foreign travel to Mecca, and other smaller business and entertainment events will start to add up.

Countries in the Middle East have displayed a willingness to shut down events and businesses in an attempt to contain the spread of COVID-19. These precautions mixed with global economic impacts will have a large knock-on effect that could potentially damage the regional economy in the short-term.

But due to the extreme measures, other countries may be able to contain the virus better than Iran and be better positioned when the world gets a handle on the global health crisis. Regardless of the outcome, the health crisis has shined a light on many of the risks built into the global economy, some of which disproportionately impact the Middle East.

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Economy, Geopolitics

On 15 November, the Iranian government announced a 50% hike in petrol prices, and angry Iranians took to the streets to air their grievances.  Protestors blocked roads, disrupted traffic and businesses, and marched against the current government.

 

The Islamic Revolutionary Guard responded with brutal force and killed an estimated 180 protestors, with some estimates going all the way up 450 civilian deaths.  The government also responded by shutting off the internet for the majority of the country, resulting in a disruption of the Iranian economy and many people’s daily lives.

 

The unrest comes at the end of a particularly difficult 2019 for the Iranian government, a year marked by increasing international and regional tensions that have damaged the economy and the well-being of its citizens.

 

Iran continues to face challenges from Saudi Arabia and its regional allies, and the shift in American policy has thrown the Iranian economy into uncertainty.  These factors have collided with the stagnating price of oil and the difficulty Iran has had in diversifying its economy away from oil dependence.

 

Protests

 

One of the biggest questions for those observing the region will be: are the protests a bigger sign of change within the country?

 

Hawkish Western foreign policy analysts have long been hoping and praying for and often predicting that Iran is ripe for regime change, but the immense power behind the Islamic Revolutionary Guard has been able to stamp out any unrest over the years.

 

The recent protests were characterised by the New York Times as the deadliest political unrest in the country since the Islamic Revolution 40 years ago.  Also, worth noting about the recent unrest is that much of it is targeted at the supreme leader, Ayatollah Ali Khamenei.

 

However, with the concentration of power in the state and military, it is hard to imagine an organic people’s revolution rising up without massive bloodshed.  Iran has time and again shown it is willing to forcefully suppress political dissent and the step to shut down the internet indicates the government is prepared to withstand considerable economic collateral damage to consolidate power.

 

But Iran’s economy will continue to limp under American sanctions, and an inflation rate of above 40% is preventing many Iranians from saving or conducting any meaningful economic activity.

 

Europe’s Response

 

The European Union has taken quite a different line to that of the Americans in their foreign policy approach to Iran.  After President Trump unilaterally left the Iran nuclear deal, the European Union has become the staunchest supporter of the multilateral agreement that seeks to prevent Iran from making a nuclear weapon.

 

Despite misgivings about Iran’s activities with its nuclear developments, the European Union has remained committed to the deal.  Of course, this entails facilitating economic trade within the country, the greatest incentive Iran has to abide by the deal.

 

The United States’ decision to abandon the deal deeply hurt Iran’s economic forecasts and the slack has had to be picked up by the EU.  In turn, the EU has had to be more lenient in the eyes of some.

 

Embattled Israeli Prime Minister Benjamin Netanyahu took umbrage with the Union’s unwavering support of the Iran deal in the face of the recent crackdown of Iranian protestors.  Israel and the United States have been the biggest detractors of Iran, along with the Saudis.

 

It does place the Europeans in a difficult spot, one in which their relative lack of military force is made up for by their promise of economic improvement.  However, the European market may only be able to prop up Iran’s economy for so long, and Iranian citizens will be likely to take to the streets again if conditions don’t improve.

 

Furthermore, despite the European Union being one of the most important proponents of the nuclear deal, Iran is still not always thrilled about their actions.  In fact, Iran has threatened to abandon the deal if the Union triggers deeper economic sanctions.

 

Some European leaders have also expressed misgivings with the deal largely due to domestic political pressure due to what many argue has been an overreach by the Iranian government in terms of the safety of Iranian expatriates.

 

Iraq

 

Iran’s neighbour Iraq has also been plunged into civil unrest in recent weeks, with some protesters specifically targeting what they see as an outsized Iranian presence in their country. 

 

While the Iraqi government has drawn much of the attention, many protestors have been calling for not only an ousting of the current political ruling elite but also of what they view as Iranian interference.

 

Anti-Iranian protestors went so far as to storm the Iranian consulate in Baghdad and replace the Iranian flag with an Iraqi one.

 

Iran has long been a supporter of the Iraqi regime, and in its recent downfall, protestors have pointed to Iran as part of the larger political problem within Iraq.

 

The Iraqi Parliament officially accepted Prime Minister Adel Abdul-Mahdi’s resignation on 1 December, but protestors have pledged to continue their fight until all of their demands are met.

 

Iraqi unrest does not bode well for Iran in its hopes to quell unrest within Iranian borders, and while the Iranian state has more resources at its disposal to use violence against protestors, outside factors could limit the stomach the supreme leader has for killing his own civilians.

 

With the EU potentially reconsidering its nearly unconditional commitment to the Iran deal due to internal politics, Iran may have to think twice about how much violence it deploys.  On the other hand, with the United States out of the picture diplomatically, Iran could make the calculation that any negative attention it gets from the unrest outweighs losing power since American economic support or diplomacy is an impossibility.

 

Whatever choice it makes, it is fairly safe to assess the situation in Iran as deeply unstable, and as a result the government will be desperate to get the economy
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Economy, Geopolitics

The Lebanese people have taken to the street since October 17 to protest the country’s current economic disparity and the government’s mismanagement and corruption.  What started as a protest against increased taxes on products and services ranging from tobacco to WhatsApp calls has devolved into a collective indictment against the Lebanese ruling class.

 

On 29 October Prime Minister Saad Hariri announced his resignation in an attempt to assuage the civilian uproar.  While the resignation temporarily cooled tensions, protests have reignited and citizens have demanded more reforms including some protesters calling for the entire political system and all government officials and politicians to be replaced.

 

In contrast to previous protests and revolutions, this unrest is not divided on sectarian or political party lines.  Rather, a mass grassroots uprising has formed to fight against the inadequacy and corruption of the Lebanese political class.

 

While the protestors’ demands are broad, dissatisfaction with government economic policy and deep-seated corruption have been consistent throughout the duration of the ongoing street protests.

 

Economy and Corruption

 

Lebanon’s economy has tanked and currently sits at 0% growth, precipitating a wide-reaching economic crisis.  Protesters have accused the government of stealing money from the Lebanese people and creating a pervasively corrupt economy.  This has caused a litany of problems for both the Lebanese economy and its people.

 

In the country’s second-largest city, Tripoli, unemployment has been estimated at 50%, and many citizens feel they have no future economic prospects.  Economic uncertainty and poverty have clearly deepened the distrust and anger with the government.

 

As to how the economy has got so bad, according to protesters, there are multiple answers and mistakes the government has made in recent years. 

 

One of the loudest critiques of the government has been corruption, which not only has taken money out of the hands of the average Lebanese household, but it has also frozen foreign investment into the country, only worsening the already woeful economic conditions for many Lebanese people.

 

Lebanon’s President Michel Aoun has been attempting to position himself as the solution to corruption within the country, and he had thousands of supporters in the streets trying to spread his message.  However, anti-government protests in the following days have roundly rejected Aoun’s overtures and outnumbered his supporters.

 

Without investment, Lebanon’s economic woes will only worsen as its massive debt piles up and threatens an even bigger economic and political crisis. 

 

Foreign Relations

 

Before protestors took to the street en-masse, former Prime Minister Hariri had been exploring options to increase foreign investment, specifically from the United Arab Emirates.  Hariri visited the UAE to plead for a cash injection into Lebanon’s debt-ridden economy, and the UAE agreed to lift a travel ban on its citizens to Lebanon.

 

While Saudi Arabia and Western allies of Lebanon have made fewer public announcements about the ongoing developments, UAE announced they are still mulling over projects that were proposed nearly a month ago in their meetings with Hariri.

 

However, protestor’s dissatisfaction is only mounting and outside help from UAE can only go so far.  The UAE and other foreign investors are also unlikely to invest heavily or relieve the economic problems if the uncertainty around the political future of Lebanon is not resolved.

 

Perhaps even more important than potential future UAE investment, the White House announced the United States would freeze military aid to Lebanon and hold out nearly $105 million from the Lebanese Armed Forces.  The shortfall could potentially impact the reaction of the Lebanese government to protestors on the streets and puts President Aoun in a difficult spot to form a new government.

 

Historically, the United States has supported the Lebanese Armed Forces as a vehicle to fight the Iranian-backed political party Hezbollah.  Many voices in the United States Congress, State Department, and security apparatus have condemned the move.

 

While it is difficult to read the current erratic intentions of American foreign policy, many other states in the region will likely be looking at Lebanon with bated breath.  Iran, Saudi Arabia, UAE, Israel, and more all have great interests in the small country and could potentially try to interfere in the country’s future political alignment if protests persist.

 

Political Future

 

While Lebanon’s political future is unstable and uncertain, changes are surely coming.  The country’s current economic situation and political alignment are clearly untenable.

 

With infrastructure crumbling, the Lebanese pound falling, and unemployment, inequality and unrest exploding, street protests will continue until the material conditions change.

 

Whether that takes the form of a civilian-led political revolution, technocratic policy changes, or brutal repression remains to be seen.  In the meantime, the Lebanese people will keep searching for answers and perhaps look to take matters into their own hands.

 

Until corruption within the country is tackled and the needs of protestors are met, foreign investment is unlikely to flow into the embattled nation.

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Economy, Geopolitics

On the first day of October, thousands of Iraqis began taking to the streets to protest high unemployment numbers, corruption, poor public services, and an anaemic economy.  Iraqi security forces disbanded initial protests, but citizens began coming out in bigger numbers.  In response, the Iraqi government reacted with deadly force and brutally crushed the resurgent protests

 

From October 1st to October 6th, 108 protesters were killed and thousands more were injured at the hands of Iraqi security forces according to the Iraq Human Rights Commission.

 

It made a difficult anniversary for Prime Minister Adil Abdul-Mahdi who assumed his office in October 2018.  In addition to killing over 100 protesters, Abdul-Mahdi also announced a series of assistance packages for low-income residents to stem the tide of protesters.

 

The government also cut off internet access to limit protest organisation and any further uprisings, a move highly criticised by the UN for convening international human rights law.

 

For now, the protests have dissipated, in large part thanks to a repressive response by the Iraqi government.  But, if the protesters’ cries go unanswered, the government will soon face similar push back.

 

Source of Protests

 

The protests in Iraq originate from Iraqis’ discontent with the government’s economic policies which have marginalised the poorest  citizens.  While Iraq enjoys the fourth largest oil reserve in the world, many Iraqis have not seen that wealth trickle down to them and are expressing their anger at that fact.  

 

According to the World Bank, unemployment has only decreased by 1% in the last decade, and youth unemployment remains at a staggering 16%.  Female unemployment has also ballooned to 12%,  signaling a deepening economic divide between men and women.

 

While Iraq’s neighbours are looking to diversify their economy to meet with new demands and the inevitable decline of oil, Iraq is pumping out more than ever, over 4.6 million barrels per day.  Despite the increased production, forecasts predict the Iraqi economy will have a dip in annual GDP growth over the next several years.

 

These combined factors spell a difficult future for Abdul-Mahdi’s government and the unemployed and impoverished Iraqis demanding change.  While the current protests have been beaten back violently, an economic downturn will enlarge the fervour and protest numbers.

 

After violent suppression, Abdul-Mahdi told his countrymen and women on state television, “I will go and meet them without weapons and sit with them for hours to listen to their demands.”

 

While the protesters’ demands have been quite clear, it is unlikely that Abdul-Mahdi will be able to meet them without radically restructuring Iraq’s economy to favour the Iraqi people over oil company profits.

 

Economic Model

 

Since the US-led coalition invaded Iraq 16 years ago, the country has been ravaged and transformed.  One constant is the country’s dependence on oil, Iraq’s only noteworthy activity in the international economy over the past decades.

 

Before the 2003 invasion, Iraq suffered economic ups and downs associated with political events, oil price, periods of strict austerity and heavy lending.  But, after the invasionIraq shifted economic models from that of brutal dictator Saddam Hussein who let public spending flow to curry support from the public and politically insulate himself and build his power base.

 

Instead of the public spending and personal corruption of Saddam Hussein, Iraq has since carried out a more American neoliberal oil-dependent economy, one which lines the pockets of Western-backed oil elites and cuts public spending, allowing the free market to control Iraq’s economy.

 

As current Prime Minister Abdul-Mahdi has found this is becoming a tougher sell as many Iraqis continue to wallow in joblessness and economic despair while their country’s most valuable asset is being sold on the world market at a historical rate.

 

Future Implications for Iraq and the Region

 

The Middle East’s most powerful regional actor, Saudi Arabia has long been wary about regional unrest in its backyard.  Political conflict and calls for economic reform from angry protesters do not help the politically powerful hold on to their power.

 

But, Saudi Arabia’s opinion on unrest in Iraq largely depends on how hawkish they decide to play mounting tensions with Iran.  Some within Saudi Arabia view Iraq as intensely pro-Iran, and if relations with Iran worsen Saudi Arabia may stand to gain from destabilising a perceived Iranian ally in the form of Iraq.

 

Recent reports do indicate that Saudi Arabia is looking to cool tensions with Iran, making an aggressive role in Iraq unfeasible for the Crown Prince.  Instead, Iraq could play a pivotal role in thawing relations between the two regional powers, and the oil-dependent region might stand to gain from a ratcheting down of tension between the two.

 

In the case of increased Saudi-Iranian relations, once again the policy of stability over all else may dictate more brutal reactions to civilian uprisings.  Unfortunately for the Iraqi government and its citizens, when governments opt for the repressive route it usually increases bloodshed and while it may equal short-term economic stability, it’s often at the sacrifice of the long-term future of the country and its population.

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Economy, Geopolitics

The European Parliament elections which wrapped up on 26 May are not the end all be all when it comes to the European Union, but the election results show voting populations and member states are politically fragmented.  Balancing 28-member state interests means that the transnational political body does not always have a unified position on complex geopolitical issues. 

 

With this said, the Union still has an important role in the international community and many European actors want to have an impact on the issues of the day.  So, this piece will analyse what role the European Union and key member states are playing in growing tensions between Iran and Saudi Arabia, and how effective it is in achieving its goals.

 

Background

 

The United States has played a pivotal role in ramping up international tensions between the two regional powers.  President Trump’s administration has cozied up to Saudi Arabia and taken an antagonistic stance towards Iran to the delight of their Saudi allies. 

 

Most recently, the White House accused Iran of sabotaging four tankers off the coast of the UAE.  Two of the ships were Saudi, but no hard evidence has been produced to link Iran to the damage.  US national security adviser John Bolton repeated these claims without evidence on 30 May in Abu Dhabi, adding an accusation that Iran is responsible for a recent failed attack on Saudi Arabia’s port city, Yanbu.

 

Trump’s decision to leave the Joint Comprehensive Plan of Action, the nuclear non-proliferation agreement between Iran and the world’s nuclear powers, also plays a large role in the current situation, and it placed the European Union in an awkward position.

 

European Union’s Growing Role

 

After the United States decided to renege on the Iran deal, many anticipated the European Union to play a balancing role to the hard-American stance on Iran.  European leaders have repeatedly expressed their commitment to the deal and have taken a more neutral stance to Iran-Saudi tensions.

 

The ascendance of a hawkish American policy toward Iran has placed the European Union in a difficult position, one in which Europe is often playing the role of contradicting US policy, despite their supposed alliance with the Americans.  Europe’s position is much less extreme, and it has been accused of being drowned out by the forceful words of the Americans.

 

Iranian Foreign Minister Javad Zarif stated in early May that the EU had been bullied by America, and the Europeans had failed to speak forcefully against the US for breaking the nuclear deal and slapping more sanctions on Iran.  Several days before Zarif’s statement, EU foreign policy chief Federica Mogherini and the foreign ministers of Germany, France, and the UK released a joint statement reading, “we… take note with regret and concern of the decision by the United States not to extend waivers with regards to trade in oil with Iran. We also note with concern the decision by the United States not to fully renew waivers for nuclear non-proliferation projects in the framework of the JCPoA (Joint Comprehensive Plan of Action).”

 

Iran and Zarif were disappointed that all the EU was offering was “regret and concern” instead of more forcefully rejecting the United States’ breaking of the deal.  In response, Iran made several ultimatums and said they would stop abiding by several commitments due to the United States’ re-imposition of sanctions.

 

The EU issued a similar statement expressing concern about Iran’s commitment to the nuclear deal and rejecting any ultimatums made by Iran.

 

With Saudi Arabia and the United States on one side and Iran on the other, both sides are attempting to make the European Union choose a side.  But Europe has so far tried to remain neutral, a position made more difficult as the positions harden.

 

War in Iran?

 

President Trump, flanked by hawkish advisers, has made a variety of statements hinting at war with Iran in the hopes of effecting regime change.  Saudi Arabia has likewise issued hard words to this end, signifying a unified American-Saudi front.

 

So far, the European Union has rejected any notion of a threat from Iran and British Major General Chris Ghika broke from the American line that Iran is a danger and said, “no, there has been no increased threat from Iranian-backed forces in Iraq or Syria.”

 

Ghika’s words are particularly notable as he is the deputy commander of an American-led coalition fighting the Islamic State.

 

American Secretary of State Mike Pompeo once again failed to curry favour for a more confrontational stance from the EU toward Iran during a mid-May meeting in Brussels.  Instead, Mogherini urged Pompeo to take a cautious approach to Iran, “we are living in crucial delicate moments where the most responsible attitude to take and should be is maximum restraint and avoiding any escalation on the military side.”

 

An all-out war in Iran or any intervention to facilitate regime change does not have the support of the European Union, and for now, it appears that the United States has failed to generate support for such actions at home or abroad.  But, the European Union’s more neutral stance on the Saudi Arabian-Iranian tensions will always face challenges as long as the United States strongly supports the Saudi Arabian stance.

 

Without taking a forceful position in support of Iran or against the United States and Saudi Arabia, the European Union runs the risk of being side lined in favour of more aggressive actors.  The European Union’s ‘neutral’ stance is also compromised by continued arms shipments to Saudi Arabia, a development left unchecked that undermines Europe’s commitment to peaceful resolutions and conflict prevention.

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Economy, Geopolitics

President Donald Trump announced plans to end exemptions from sanctions for countries purchasing oil from Iran.  The sudden announcement will have broad impacts on the world economy and international relations, some more hidden than others.

 

The White House’s staunch opposition to Iran comes as no surprise considering Secretary of State Mike Pompeo and National Security Advisor John Bolton are both notoriously hawkish towards Iran.  This latest move shows that the White House is showing no sign of rapprochement with Iran and will continue their antagonistic stance which has further hardened recently.

 

Early in April, President Trump designated Iran’s Islamic Revolutionary Guard Corps as a foreign terrorist group.  Iran responded in turn by declaring the United States military is a terrorist organization.

 

The end to exemptions from sanctions is an attempt from the United States to drive Iranian oil exports to zero.  Iran is already feeling the pressure from previous sanctions and an end to its oil exports would be disastrous.  The IMF has reported that Iran is tumbling into an economic recession, and the most recent numbers show inflation at 40 percent and a forecasted 6 percent reduction in the Iranian economy in the upcoming year.

 

But more than just affecting America’s bilateral relations with Iran and Iran’s economy, the announcement threatens sanctions to valuable trade partners and economic powers such as India, China, South Korea, and Turkey.  It also has far-reaching implications on Middle Eastern politics.

 

Turkey

 

Turkey could be particularly hard hit by this decision as President Erdoğan has increasingly pivoted toward Iran as a trade partner as tensions have soured with Saudi Arabia and other regional partners.

 

An economic downturn now would come at a particularly inopportune time for Erdoğan considering his party AKP’s unexpected defeats during recent local elections.  Voters in Istanbul and Ankara both voted for opposition party CHP to take over the mayoral office in a stark rebuke to Erdogan, former mayor of Istanbul.  Turkish voters have been animated by economic disparity in the country, so the ruling political elites are vulnerable in the event of an oil crash.

 

Next to Iraq, Turkey is one of the countries with the greatest reliance on Iranian oil, despite ratcheting down oil imports from Turkey over the last two years in expectation of America’s hardened stance toward Iran.  However, Turkey’s foreign ministry announced that their trade ministry would be working with Iran to circumvent any new American sanctions to keep up oil trade between the two partners.

 

Simultaneously, the Turkish foreign ministry is working to convince the White House that the sanctions are bad for business.  But Turkey and the United States seem to be growing apart as Turkey continues to work with Iran and increases its ties to Russia.

 

Iraq

 

Iran is Iraq’s most important regional trade partner, and Iraq is heavily reliant on Iran for oil amongst other energy sources. 

 

Iraq’s Prime Minister Abdul Mehdi made a statement on the tensions between America and Iran and said, “we are going to deploy all our efforts to ease and calm down the situation.  It is not in the interest of any of the parties engaged.”

 

The United States still has around 5,000 active duty troops in Iraq despite factions within the Iraqi government asking for the American troops to leave.  President Trump has stated his policy on American troops is to keep them in Iraq to keep an eye on Iran.

 

But the Iraqi government may be pushed into a corner if America continues its hard line stance on one of its most valuable partners, Iran.  Harming Iran could cripple Iraq’s economy, and it has already begun to look for other great powers outside of the US.

 

Russia and Iraq held high-level bilateral meetings at a two-day conference and came to 16 agreements.  One of the highlights of the meeting was Russian-Iraqi trade in oil and gas.  Russian energy giant Lukoil is heavily investing in the Iraqi economy, and Lukoil’s president met with Prime Minister Abdul Mehdi in late March.

 

Both Iraq and Russia committed to deepening ties between the two states during the meetings, and developments in their relationship indicate that Iraq is turning away from America into the hands of Russia as a direct result of America’s anti-Iran stance.

 

Oil Prices

 

Outside of foreign relations, the latest anti-Iran move is expected to cost Americans at the gasoline pump.  If prices hike significantly during the summer months, the Trump administration may face the brunt of anti-motorist sentiment.

 

Americans are particularly sensitive about their gas prices, and President Trump often appears to be very sensitive to his supporter’s perception of him.  If his Fox News allies turn on him due to rising gas prices then he could decide to change course on a whim.

 

President Trump has indicated that Saudi Arabia and the UAE will pick up production to cover for the loss of Iranian oil to the global market.  However, neither state has committed to a plan to pick up their production.

 

Unfortunately, American foreign policy is quite unpredictable in the age of Trump, however, his foreign policy confidants have been steadfast in their opposition to Iran.  If one was taking bets, you would expect the Trump administration to remain firm in their position toward Iran despite potential backlash from the public.
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