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Geopolitics

After nearly four years of a harsh blockade, a Saudi-led coalition lifted its blockade against Qatar, opening its air, land, and sea borders to Qatar. The changes went into effect on January 4, 2021.

 

Kuwait and the United States mediated the deal between the two sides which resulted in the resumption of diplomatic and economic relations between Qatar and the Saudi-led bloc of the United Arab Emirates, Bahrain, and Egypt.

 

The blockade began in 2017 after Saudi Arabia accused Qatar of supporting terrorist groups including ISIS and al-Qaida. While support for terrorism was the official reason for the blockade, relations between Saudi Arabia and Qatar had chilled over the previous years with Saudi Arabia fearing that its power in the region was threatened.

 

Not only did the blockade have an immense impact on geopolitics, but it also challenged Qatar economically. Despite the blockade, Qatar performed well economically with the International Monetary Fund stating Qatar “successfully absorbed the shocks” from the Saudi-led blockade.

 

While Qatar looked inward economically during this period, the renewed connections between economic powers in the region will give a major boost to certain flagship industries in the region.

 

Air Travel

 

Qatar Airways, owned by the state of Qatar, is the most well-known Qatari-owned entity around the world, and it suffered massively due to the blockade.

 

Due to the blockade, Qatar Airways had to not just avoid landing in Saudi Arabia and other countries, but it had to completely avoid flying in their airspace. This resulted in roundabout routes for Qatar Airways that hampered its ability to provide its service.

 

After one year of the blockade, Qatar Airways reported a $69 million loss in 2018 due to the Gulf State blockade.

 

With 2020 dealing a devastating blow to the airline industry at large, the lifting of the blockade could not come at a better time for Qatar Airways. Even before all impacts of the coronavirus pandemic are factored in, the financial year ending on March 31 saw record losses for Qatar Airways, with nearly $2 billion in losses.

 

The airline has not wasted time in rebuilding air routes with Saudi Arabia lifting the air space ban. Four days after the announcement was made, Qatar Airways began rerouting through Saudi airspace.

 

While air links between the countries have yet to be restored, the opening of airspace to Qatar means the next step will be commercial flights between Qatar and the other Gulf States.

 

Iran

 

One of the major sticking points between Saudi Arabia and Qatar has been the latter’s close ties with Iran. However, Qatar has stated that it will not change its relations with Iran or Turkey, two of Saudi Arabia’s biggest regional rivals.

 

Qatari foreign minister, Sheikh Mohammed bin Abdulrahman al-Thani, told the Financial Times, “bilateral relationships are mainly driven by a sovereign decision of the country… [and] the national interest.”

 

While he insisted that Qatar made few concessions in the diplomatic deal, al-Thani said that Qatar would cooperate with the Saudi-led coalition on counterterrorism and regional security.

 

The Saudi blockade listed many demands related to Iran, including demands for Qatar to shut down diplomatic relations with Iran, kick out Iranian military members, and abide by the United States sanctions on Iran. Despite Qatar refusing to do so, the two sides were able to strike a deal to start the new year.

 

Throughout the blockade, Iran and Qatar’s ties deepened as Qatar became more reliant on Iran’s air space and economy while it was shunned by its neighbours.  The blockade clearly failed to pull Qatar away from Iran, and the Saudi-American coalition may see the resumption of diplomatic relations as a necessity to decrease Qatar’s reliance on Iran.

 

During the blockade Qatar and Turkey have also strengthened ties, a development seen as unfavorable for Saudi Arabia as its rift grows with Turkish President Recep Tayyip Erdoğan.

 

Why Now?

 

Qatar stood strong and conceded very little of what it was asked to do when the Saudi coalition first released its list of demands in 2017.

 

Reports have indicated that Saudi Arabia is leading the push to reopen relations with Qatar in order to impress the incoming Biden administration. Others in the coalition including the UAE have expressed reluctance considering Qatar’s growing ties with Turkey.

 

Along with Kuwait, the United States was a mediator in the dispute between the two sides with the Americans concerned about Iran’s potential to gain due to the dispute. The Trump administration, continuing in America’s traditional foreign policy, has been hawkish towards Iran and saw the blockade as strengthening its foe.

 

However, the Trump administration has worked closely with Saudi Arabia and infamously failed to distance itself from Crown Prince Mohammed bin Salman after journalist Jamal Khashoggi was killed in the Saudi consulate in Turkey.

 

Foreign policy observers believe a Biden presidency will be less forgiving to Saudi Arabia while still focusing on containing Iran. Therefore, rapprochement with Qatar is viewed as a necessity in Riyadh to stabilize relations with Washington.

 

According to Reuters, Saudi Arabia is the only country in the blockade coalition that is actively opening airspace to Qatar.

 

With other countries still more critical and less concerned about their American relations, the diplomatic crisis is not completely over for Qatar. The UAE is looking to remain critical of Qatar for its links with Turkey and Iran.

 

“The thaw may do little to dampen competition between Qatar and the UAE, and their respective allies in regional hotspots,” said Elham Fakhro, senior Gulf analyst at International Crisis Group.

 

With that said, business will be returning to Qatar with airspace and travel expected to be opened by other states in the coalition despite their cold feet compared to the most powerful in the group, Saudi Arabia.

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Geopolitics

On November 13, Morocco launched a military operation into the disputed Western Sahara region to quell protests in border regions.

 

The Polisario Front, a rebel liberation movement, cited the military operation as the final straw to break the 29-year ceasefire between Morocco and the Sahrawi independence movement. Polisario Front’s secretary-general Brahim Ghali declared the “resumption of armed struggle in defence of the legitimate rights of our people.”

 

Moroccan forces exchanged fire with separatist forces, sparking fear of wider conflict in the region.

 

Amnesty International released a call for independent human rights monitoring as Moroccan military and police forces have harshly cracked down on Sahrawi activists. “Now, more than ever, impartial and independent UN human rights monitoring and reporting in Western Sahara is desperately needed,” wrote Amnesty International researcher Yasmine Kacha.

 

The international press rarely gains access to the region, but no civilian casualties have yet been reported. Nonetheless, with the Moroccan state increasing action against civilian activists and the Polisario Front committing to military action, the conflict zone has quickly turned from cool to potentially hot.

 

Directly after tensions flared in mid-November, regional partners and international organizations weighed in with attempted diplomatic solutions.

 

Days before the ceasefire was broken, a spokesperson for UN Secretary-General António Guterres said, “the secretary-general remains committed to doing his utmost to avoid the collapse of the ceasefire.”

 

Despite the commitment from the Secretary-General and years of aborted diplomatic solutions, the Western Sahara question has persisted. Without an easy solution in sight, the conflict between Morocco and the independence movement also has implications for regional partnerships and diplomacy.

 

Algeria

 

Algeria has been Polisario Front’s most ardent international ally for decades, so much so that Morocco has attempted to paint the independence movement as simply Algerian-backed and not an organic movement. Algeria officially supports the region’s right to self-determination and over the years has trained Polisario fighters and set up refugee camps for those fleeing from the conflict.

 

Prominent Algerian and Moroccan intellectuals released a statement advocating for increased dialogue between the nations as recent military operations have increased tensions between the neighbors.

 

But recent news suggests the states are still preparing for the worst, with reports that Algeria finalized a $2 billion deal with Russia to purchase stealth bombers after a year of negotiations. Morocco claimed the purchase was triggered by its purchase of 25 F-16 Vipers from the US in August.

 

Algerian politicians have also raised questions about other state’s actions in Western Sahara, including the UAE opening a consulate in Laayoune, the largest city in the region. Algerian diplomat Abdelaziz Rahabi had harsh words for the UAE in a press conference, “I consider any hostile position to the fundamental interests of Algeria from any Arab or foreign country as an aggressive stance towards Algeria.”

 

Algerian President Abdelmadjid Tebboune has been in Germany for over a month receiving treatment after contracting coronavirus, and the country has also been engulfed in domestic political uncertainty. Some Algerian diplomats and politicians have expressed concern that other nations are looking to take advantage of its president’s absence.

 

In contrast to Algeria, most Arab nations have expressed support for Morocco’s military action in Western Sahara including Bahrain, Jordan, Kuwait, Oman, and Yemen. But this time around some typical supporters of Morocco in the conflict have expressed a level of reluctance to back Morocco.

 

Egypt and Turkey

 

Noticeably, Egypt did not immediately release a statement of support for Morocco and instead expressed concern and called on all sides to restrain from increasing provocations. Over the past decade, relations between Morocco and Egypt have become more strained with Morocco participating in Libyan peace agreements against the wishes of the Egyptians and for Egypt’s growing ties with Algeria.

 

Egypt has continually shifted to a more neutral stance on Western Sahara in an attempt to balance relations between Algeria and Morocco, however, the calculation is likely supported more by Algeria than Morocco.

 

Egyptian ambassador Mona Omar told Al-Monitor, “Egypt’s position on this [Western Sahara] issue is unlikely to budge, no matter how criticized it is inside Morocco.”

 

Turkey’s relations with both Morocco and Algeria are also in the balance as President Erdoğan plays a delicate game in the country’s diplomatic and potential proxy conflict spats between Iran and Saudi Arabia.

 

To the dismay of Ankara, Morocco and Saudi Arabia have grown closer in recent years, potentially jeopardizing Turkish attempts to strengthen bonds across the North African region. The recent resurgence in conflict in Western Sahara has made it more difficult for Turkey to balance its interests in both countries.

 

Erdoğan has stated previously he will never support or recognise the Polisario Front, but with relations being stronger with Algeria at the moment some wonder if Turkey will soon switch allegiances.

 

On the potential switch to more strongly supporting Algeria over Morocco, an AKP bureaucrat told Al-Monitor, “now we may have to make a choice because the military establishment in Algeria is strong and for Algiers support for the Polisario Front is crucial, especially if we want to sell them arms and drones.”

 

While a potentially renewed war in Western Sahara has been sparsely covered in Western media, the tensions in the region have important consequences for regional diplomacy even if skirmishes do not spill over into war.  And with Morocco and Algeria potentially squaring up, powerful actors may be forced to choose a side, at least temporarily, that would have implications on other regional and global disputes.

 

And for the people in Western Sahara, a quick and easy resolution seems far away as Morocco still has not faced enough pressure to return to the negotiating table.

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Geopolitics

In a bid to placate over a year of widespread protest that began in February 2019, the Algerian government proposed a constitutional referendum that took place on November 1st. Algerians resoundingly passed the reform, but that is far from telling the whole story.

 

The referendum vote saw historically low voter turnout as opposition leaders and groups advocated a boycott from the referendum with many viewing it as simple window-dressing that would only make matters worse. Opposition campaigners were barred from holding meetings, calling into question the democratic legitimacy of the vote.

 

The Algerian government and political elite have been scrambling since popular protests ousted former president Abdelaziz Bouteflika in early 2019. While large-scale protests persisted, Abdelmadjid Tebboune was eventually elected in December 2019, succeeding Bouteflika’s 20-year reign.

 

However, Tebboune is hardly a new face to Algerian politics, he served as a minister under Bouteflika’s government and even served a short stint as Prime Minister. Suffice to say, Tebboune has failed to capture the support of the social movement that ousted his predecessor.

 

In March, protests died down as the COVID-19 pandemic became a public health emergency for Algeria, and the military enforced a nationwide ban on protests. And in a story similar to many other countries in North Africa, Algeria’s economy is struggling thanks to a drop in oil prices and the COVID-19 malaise on the day-to-day economy.

 

The public health crisis, economic downturn, and unpopular government quickly became the breeding ground for a return to street protests.

 

A Resurgent Frustration

 

In early October, protesters marched in the capital, Algiers, defying the nationwide ban on protests due to COVID-19 concerns. The protests continued through October despite increasing coronavirus cases in the country.

 

The frustration has not only manifested in the streets, but also in the ballot box with less than 20% of voters turning up for the constitutional referendum vote.

 

Constitutional researcher Massensen Cherbi told Al Jazeera that the referendum would make Algeria’s constitution “the most authoritarian constitution in the entire Mediterranean.”

 

The “authoritarian” document was crafted largely without input from Hirak, the largest protest organization that emerged in 2019.

 

Without the ability to meet and hold demonstrations against the referendum, the opposition’s strategy turned to a boycott, and with historically low voters, many activists see the result as a rejection of the government.

 

“I hope men and women within the system will understand this lesson and do what is needed to listen to the peoples’ demands. The people want their own constitution and institutions,” Mustapha Bouchachi, a lawyer and human rights activist told Reuters.

 

Current Presidential Woes

 

While the government hailed the result as a big win, that message has fallen on deaf ears for much of the country and the international press. With low turnout and still angry social movement, Algeria’s president still has a tall task to attempt to stabilize society.

 

This fluid situation is also not aided by the President’s health. President Tebboune has been in a German hospital bed for a week with COVID-19 complications. Government sources finally confirmed Tebboune has COVID-19 after nearly a week of speculation over the health of the 74-year-old who regularly smokes.

 

Such a diagnosis would be difficult to handle in the best of times, but as the country continues to fight its own battle against the virus, its leader is MIA.

 

Beyond personal and public health, the economic conditions are exacerbating the current government’s instability.

 

Low crude oil prices have been a thorn in the Algerian economy’s side. As a member of OPEC, Algeria came out in favor of extending supply cuts in hope of staving off further price decreases.

 

The second wave of coronavirus in Europe, combined with a looming second wave in Algeria has given the state enough worry to cut supplies in anticipation of decreased demand. The final decision rests with Russian President Vladimir Putin who has expressed interest in curbing production.

 

The International Monetary Fund (IMF) has also expressed concerns about Algeria’s economy and the impact of COVID-19 on the country.

 

President Tebboune has been reluctant to call on help from the IMF, likely worried about saddling the country with debt and potentially unpopular austerity measures.

 

And the People in the Streets?

 

The popular protest movement that ended the reign of the longest-serving president in Algerian history has been hamstrung by the pandemic. A more robust military presence and legal bans on gatherings have decreased protest activity.

 

But the same complaints persist in Algerian society with the government unable or unwilling to take on many of the movement’s requests.

 

While the ouster of Bouteflika was hailed as a great achievement, the aftermath is yet to substantially change the reality of many Algerian citizens. President Tebboune is from a Bouteflika background, and while he’s given lip service to the protest movement, the constitutional referendum has done little to inspire hope in the men and women who took to the street.

 

If substantial change is not offered, it becomes a question of if not when the protests begin again. The Algerian government is working against the clock.

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Geopolitics

 

 

In a whirlwind of global news, the Azerbaijan-Armenia conflict over the Nagorno-Karabakh region has fallen out of the spotlight, if it was ever there to begin with. Not only is the conflict devastating for those in the conflict zone—it also has large implications for the European, Central Asian, and Middle East politics.

 

The majority ethnic Armenian autonomous region within Azerbaijan has long been a flashpoint for conflict between ethnic groups in the Soviet and post-Soviet era. Both the Azeri and Armenian governments have claimed the other side started the most recent conflict, which began on 27 September.

 

Since then, fighting has increased and again both countries have accused the other of targeting cities and endangering civilians. Viral footage has shown the capital of Stepanakert allegedly being shelled by Azeri cluster bombs.

 

As tensions ratchet up, Western powers have mostly remained mum on the topic, but Turkey threw their military weight behind their Azeri allies quickly. The forceful military support from Turkey marks a departure from previous conflicts over the region which were primarily of Russian interest.

 

The latest iteration of conflict leaves regional powers scrambling as Russia, Iran, and Turkey all share borders with the two nations in the Caucuses.

 

The Nagorno-Karabakh fighting has also roped in the Syrian National Army fighting on behalf of Turkey. The Turkish-backed force is fighting in opposition to the Assad regime in Syria, while Russia has been one of the Syrian leader’s biggest backers.

 

Russia-Turkey relations threaten to worsen as the Nagorno-Karabakh situation makes the third armed conflict in which the two countries are on opposing sides, with Libya and Syria as the others. Russia has been an ally of Armenia, but thus far it has not supplied Armenia the same military support as Turkey has given Azerbaijan.

 

Turkey Flexes Power

 

Turkey’s latest moves to support Azerbaijan are part of a much larger increase in the country’s military presence in the last decade under the leadership of President Recep Tayyip Erdoğan.

 

Turkey’s military expansion has extended beyond Syria and Libya, as Erdoğan has increased tensions with Greece and Cyprus over Mediterranean gas reserves, much to the dismay of Egypt and other regional players. Greece has drawn support in the form of military exercises from Italy and France as other European Union members attempt to solve the crisis diplomatically.

 

The increasing military exploits in Syria, the Mediterranean, and Nagorno-Karabakh come as the Turkish lira is in freefall against the US dollar and the Euro. The coronavirus pandemic has accelerated the fall of the lira which has been trending down against other currencies for years.

 

As the Turkish economy has stuttered and domestic crises run amok, Erdoğan has run a tight ship at home and attempted to both appease voters and business interests by flexing Turkish military might in the region. An attempt to secure gas rights in the Mediterranean is a business calculation, nevertheless one that threatens relations with European counterparts.

 

And much like Mediterranean gas, Turkey’s interest in the Armenia-Azerbaijan conflict lies further than the historic, ethnic, and cultural ties between Turkey and Azerbaijan. Recently, Azerbaijan became Turkey’s top gas supplier, as part of Erdoğan’s diversification from Russian gas dependence.

 

Russia and Europe

 

While Armenia does not enjoy a level of support from any country equivalent to Turkey’s support of Azerbaijan, it can count several ‘allies’ on its side.

 

French President Emmanuel Macron spoke most forcefully of Western leaders and called for a ceasefire in the region. Macron also called the deployed of Turkish-backed Syrian forces a “jihadist” deployment. In recent days, Macron has been outspoken against “Islamist radicalism”, drawing ire from Muslims in France and around the world.

 

Russia and the United States have also called for a ceasefire in Nagorno-Karabakh, but no foreign power has rushed to their aid and offered direct military support. NATO also joined the calls to cease fighting.

 

Turkish Foreign Minister Mevlut Cavusoglu was very critical of the international community’s call for a diplomatic solution after ten days of fighting. While visiting Baku, Azerbaijan’s capital, Cavusoglu said, “we look at the calls coming from around the world, and it’s ‘immediate ceasefire’. What then? There was a ceasefire until now, but what happened?”

 

While international leaders duke it out on the international stage, deaths are mounting. And, Azerbaijan and Armenia have both been adamant that a ceasefire cannot occur.

 

On the Ground

 

For Azerbaijan and Armenia, the fighting seems to be intractable, with both sides taking hardline stances.

 

Armenia is particularly wary of Turkey’s involvement in the fight considering the Ottoman Empire committed a genocide against ethnic Armenians, a fact Turkey still denies over 100 years later.

 

The Armenian diaspora and government officials have linked the current battles as a continuation of the genocide which spanned from 1914-1923. Armenia’s Prime Minister Nikol Pashinyan said Turkey is “once again advancing on a genocidal path.”

 

Armenia seems to want nothing less than the removal of Azeri and foreign troops from the autonomous region.

 

For Azerbaijan, they have a similar request, the removal of all Armenian troops from Azeri territory (Nagorno-Karabakh is internationally recognized as a part of Azerbaijan).

 

So, the two sides have hardened stances with Armenia arguing they cannot leave the region as Azeri-Turkish control is a threat of genocide in the region, and Azerbaijan insists that the territory is under their control.

 

And thus far, the international community has been unable to broker a diplomatic solution, with Turkey the only major power to take a commanding role. With regional and global powers from the European Union, Iran, Russia, and the United States attempting to play a balancing act between interests in the region, Armenia finds itself up against a more populous Azerbaijan with the military backing of Turkey.

 

Without a diplomatic answer on the horizon, the conflict threatens to grow out of control and spill into conflicts in other arenas.

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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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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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