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Economy, Geopolitics

With a historic peace deal announced between the United Arab Emirates and Israel in mid-August, US Secretary of State Mike Pompeo embarked on a whirlwind tour of the Middle East in search of more peace deals with Israel.

 

The normalizing of relations between UAE and Israel was met with fanfare from the Trump administration, with President Trump’s senior adviser and son-in-law Jared Kushner on the first direct flight from Israel to the UAE.

 

The next step for the United States government was to send Pompeo to the UAE, Bahrain, Oman, and Sudan in search of more good news for the administration. But Pompeo was unable to secure any further declarations and the Secretary of State went back to Washington empty-handed.

 

Each state has relations with the United States beyond Israel, and some viewed them as a roadblock to further negotiations. For example, the Sudanese Prime Minister said the issue of normalization of ties with Israel should not be linked with the country’s removal from the US state sponsors of terrorism list.

 

The best news Pompeo received was from Oman, whose leader Sultan Haitham bin Tariq al-Said praised the UAE-Israel deal but did not comment on his own country’s relations with Israel.

 

Ahead of Pompeo’s visit to the region, Israel announced it expected Bahrain and Oman to follow in the UAE’s footsteps, but hopes have been tempered slightly after no new big announcements.

 

Before Pompeo’s visit, Israel said it also expected to normalize relations with several Muslim-majority African countries.

 

With some expectations that the UAE-Israel peace deal might cause some diplomatic issues in the Arab world for the UAE, it has been Palestinians who have voiced the biggest concerns.

 

Palestine

 

The peace deal is a great concern for many Palestinians considering the decades-long agreement between countries in the Arab world to put pressure on Israel to return annexed land. 

 

Palestinian President Mahmoud Abbas said he “rejects and denounces the surprising announcement by Israel, the United States and the UAE,” and called it a “betrayal of Jerusalem, Al-Aqsa Mosque and the Palestinian cause.”

 

Palestinian officials also insist they were not consulted about the UAE deal before it was announced.

 

The UAE has billed the normalization as a measure to stop further annexation in the West Bank. However, Israeli Prime Minister Benjamin Netanyahu said annexation was “still on the table” after the UAE deal.

 

Furthermore, a discrepancy in the English and Arabic versions peace deal has triggered skepticism among Palestinians. The Arabic version of the deal released by UAE state media, said, “the agreement … has led to Israel’s plans to annex Palestinian lands being stopped.” But in English, the agreement was only said to “led to the suspension of Israel’s plans to extend its sovereignty”.

 

This small detail is of immense importance as Palestinians fear Israel could continue annexation at a later date after a suspension of its plans.

 

Egyptian President Abdel Fattah al-Sisi, among other leaders of Arab countries, spoke in support of the deal while calling on Israel to drop plans to further annex portions of the West Bank.

 

The United States, while always an ally of Israel, has become a very vocal and outward supporter of Israel and has sought to shift the state of regional politics in Israel’s favor. The UAE deal was a huge win in this direction, and with other countries supporting the deal, other leaders may follow suit.

 

What has been hailed as a huge win for the Israelis has been met with condemnation and worry from many Palestinians. The New York Times characterized the deal as swapping one nightmare for another, instead of annexation, the Palestinians now have to fight for their struggle to be viewed as relevant with unanimous support faltering. 

 

The Grand Mufti of Jerusalem resigned from a UAE forum promoting peace after he called the UAE’s normalization of relations with Israel, “a stab in the back of Palestinians and Muslims, and a betrayal for Muslim and Christian holy sites in Jerusalem.”

 

However, whether the Trump administration has permanently realigned the geopolitical situation in the region remains to be seen.

 

Pompeo, Trump Use Israel as Foreign Policy Victory

 

Pompeo was not only busy with diplomatic events; the Secretary of State also spoke to the Republican National Convention from Jerusalem to tout the President’s foreign policy credentials.

 

Pompeo called the UAE-Israel peace deal “a deal our grandchildren will read about in their history books.” He also held up the Trump Administration’s decision to move the United States Embassy to Jerusalem.

 

Domestically, there was more concern about potential violation of the Hatch Act, a law that prohibits civil service employees in the federal government from engaging in some forms of political activity, than the contents of the speech. Pompeo has denied any legal wrongdoing, but Democrats in the House have said they intend to pursue an investigation.

 

This episode sheds some light on the limitations of viewing the Trump administration’s policy as a blip.

 

With Trump facing reelection in two months, according to polls his days in the Oval Office may be numbered. Despite this reality, the UAE plowed ahead with the Israel peace deal, and some comments from other Arab states may suggest a more permanent realignment in the region.

 

With that said, Pompeo and Kushner have been yet unsuccessful in securing further public affirmations that point in the direction of similar deals.

 

The reluctance on some states to join in can be chalked up to multiple reasons, including domestic politics, regional relations, American relations, and the uncertainty surrounding the Trump administration.

 

However, Pompeo’s trip to the region and the UAE-Israel peace deal show that Israel is currently able to achieve a deal with an Arab country with favorable terms. Unfortunately for the Palestinians, Arab solidarity is shakier than ever before in modern memory.

 

While current events spell out more potential peace in the region, what it means for peace within Israel is up in the air.

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Economy, Geopolitics, Investment

A Saudi-led consortium’s bid to purchase Newcastle United failed after months of controversy surrounding the planned takeover.

 

The biggest sticking point was the Premier League viewing the Saudi Public Investment Fund (PIF), the group behind the bid, as a proxy for the Saudi state.  Saudi Crown Prince Mohammed bin Salman is the chairman of the Saudi Public Investment Fund.

 

But the group cited “this difficult phase marked by the many real challenges facing us all from Covid-19,” as a chief reason for the deal falling apart.

 

The deal falling through was a surprise to many as the deal was in its final stages. Newcastle’s current owner Mike Ashley, CEO of Sports Direct, will keep the £17 million deposit put down by the Saudi-group. The final deal would have seen the club sold for £300 million.

 

The collapse of the deal is a major setback for Saudi’s sovereign wealth fund, as the purchase of a Premier League club could have been a huge public relations coup. Saudi Arabia has struggled in the public eye of the West after the murder of Jamal Khashoggi in a Saudi consulate in Turkey.

 

Some recent investments from the fund have also decreased massively in valuation. In May, Softbank announced its Vision Fund, in which the Saudi sovereign fund invested $45 billion, lost $17 billion in the last fiscal year after it wrote down the value of WeWork and Uber.

 

Despite the setbacks, the Saudi Public Investment Fund announced it was still keen to continue the takeover if the Premier League gave the deal the green light. Newcastle United fans have also petitioned the Premier League to provide more details as to why the takeover deal was abandoned after four months of negotiations.

 

While the deal might not be completely dead, the prolonged process and massive money put up shows the PIF and the Saudi state are still keen on further diversifying their economy and wealth. However, that process may come at a higher price due to strained diplomatic relations and poor public relations.

 

Economic Diversification

 

The Saudi state and the PIF have long been pushing for more diversification in order to lessen the country’s dependency on oil. The push has been spearheaded by Crown Prince bin Salman, who has deployed a charm offensive on Western companies and politicians.

 

But in the wake of Khashoggi’s murder, the business relations between foreign companies and the Saudi state have become more difficult.

 

Shortly after the incident in 2018, an array of businesses, media companies, politicians, and international organizations pulled out of business deals or refused to attend business forums in Riyadh.

 

The private ventures most supportive of the Saudi state also found themselves in hot water in the wake of the scandal. Uber, who received a $3.5 billion cash injection from the PIF in 2016, stepped into the scandal when its CEO Dara Khosrowshahi dismissed the murder as a “mistake”.

 

Not only has the push for economic diversification come with diplomatic headaches, but some of its most high-profile investments have resulted in massive losses that predate the coronavirus economic crisis. As of late 2019, the PIF had lost $1 billion due to its investment in Uber.

 

Spending Big in the Crisis

 

But big losses and the current economic crisis have not scared off the sovereign wealth fund. The PIF has been pouring money into many ventures as the worldwide economic impact was beginning to hit, attempting to snap up shares in deflating industries.

 

According to the Financial Times, Yasir al-Rumayyan, governor of Saudi Arabia’s sovereign wealth fund, said at a virtual investment conference in April, “you don’t want to waste a crisis . . . So, for us, definitely we are looking into any opportunities.”

 

The PIF invested in a wide range of industries including the hardest hit, acquiring a 5.7% in Live Nation, an American events promoter, and a 7.3% stake in Carnival, the American cruise line.

The Saudis have also been snapping up shares in blue-chip companies with household names like Disney, Facebook, BP, Boeing, and Citigroup.

 

But critics abroad and domestically are beginning to criticize the tactic of splashing cash in foreign companies as it simultaneously funds proxy wars and potentially ignores economic damage at home.

 

The Footprint of Saudi Wealth Domestically and Abroad

 

The PIF’s expanding international investments and its interest in purchasing an 80% stake in a top-flight English football club have drawn attention to the Saudi’s aggressive strategy during uncertain times.

 

The coronavirus crisis has been a devastating period for the Middle East, at first for economic reasons, and now due to a rise in infections for public health reasons. The world economy was brought to a standstill for several months, and it is still far from reaching its pre-pandemic levels.

 

Oil prices have picked up in recent days and weeks, but they are still far off of pre-pandemic levels.

 

And while oil prices were slowly recovering, the rate of coronavirus infections took off in Saudi Arabia. The number of cases is currently stabilizing at over 1,000 a day after peaks of over 4,000 daily confirmed coronavirus cases.

 

$1 billion was pumped into Saudi businesses to keep them afloat during the crisis, but the near-term, as in many countries, still looks grim.

 

The economic developments may put a damper on some of Saudi Arabia and MBS’s more ambitious goals, including Neom, a $500 billion futuristic city planned to be built in the country’s barren northwest.

 

Saudi Arabia’s international engagements may also serve as a thorn in their side. While the Khashoggi murder has proven to be a much worse diplomatic hit, the Kingdom’s involvement in worsening the humanitarian crisis in Yemen through war still draws harsh criticism from many corners.

 

With an aggressive and risky strategy during an unprecedented economic standstill globally, the PIF and Saudi Arabia may pay for its bet against the house. But with growing economic sway in many Western institutions, MBS and Saudi Arabia could be playing a long game that will see them sheltered from their gravest sins.     

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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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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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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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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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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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