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The recent referendum in Turkey changed its system from a parliamentary government to a presidential one. The newly empowered president will be able to appoint all ministers and head the Council of Ministers, issue decrees, and directly appoint or nominate almost all judicial members at the Constitutional Court and the High Council of Judges and Prosecutors. Opposition parties argue that the new constitution gives too much power to a single person, violating the principle of separation of powers and creating a de-facto dictatorship. The governing party insists that it guarantees a more stable and efficient government, which is required to effectively deal with today’s problems.

However, to the dismay of the current president, Recep Tayyip Erdogan, who was expecting a landslide victory, the new constitution was only approved by a 51-49 percent slim majority, leading many opposition groups to question its popular legitimacy. In addition, the Organization of Security and Cooperation in Europe (OSCE) and the Council of Europe stated in their post-referendum reports that the referendum fell short of meeting democratic standards. In fact, it was held under a state of emergency rule, all the means of the state were put in the service of “yes” campaigners by the government, and the Supreme Election Board changed the referendum rules in favour of the yes-side while the voting was still going on.

Erdogan adopted a very harsh rhetoric in his referendum campaign and called some European countries as “Nazis” and “Fascists” and the opposition as “terrorist allies.” He frequently stated that Turkey is surrounded by internal and external “enemies” that want a “weak Turkey” and for that reason oppose his rule. His main goal was to reach and mobilize the nationalist/conservative bloc in Turkey. The first public opinion survey following the referendum suggests an inverse relationship between education level and yes-votes. Accordingly, 70 percent of primary school graduates said yes in the referendum, while the same rate was only 39 percent for university graduates.  Erdogan’s supporters were concentrated in rural areas. He lost in commercial, industrial and coastal cities that suffer from the deteriorating relations with Europe and the declining economy most. In short, Erdogan’s anti-Europe, nationalist and harsh rhetoric did not appeal to voters living in urban areas but it did to voters in rural regions where small-scale farming is the primary source of income and people tend to be less-educated but more conservative, nationalist and pious.

In January 2017, the Turkish lira experienced a sharp drop, with the dollar/lira parity reaching to 3.9 lira per 1 dollar. The Financial Times wrote on January 10, 2017, that “Turkey appears closer to a full-blown currency crisis than at any point since the ruling AK party (Erdogan’s Justice and Development Party) took power in 2002.” Rising interest rates in the United States, high government spending in Turkey and a confidence decline in the country’s economy drop the value of the lira. However, Erdogan declared that it is the usual “internal and external enemies” that cause the decline. He even called all Turkish citizens to sell their dollars and euros, stating that those who have foreign currencies in their hands are not different from terrorists who carry guns and bullets. A dramatic interest rate increase would probably stabilize the currency and restore some of the lost confidence in the economy, but Erdogan strongly opposed it because an interest rate increase would further slow down economic growth while further increasing the already high unemployment level (currently 13 percent) and could therefore cost him the referendum.

Erdogan needs to make politically risky decisions to save the economy. He needs to improve relations with the West, reduce the political tension at home, adopt a more conciliatory rhetoric, encourage foreign direct investment, increase interest rates and cut government spending. But in his victory speech after the referendum, he actually promised to hold another referendum to reinstate the capital punishment, which violates the Copenhagen criteria and ends Turkey’s EU accession talks. Although the referendum is over, it appears that Erdogan still appeals to his conservative/nationalist/pious voter base and aims to keep them mobilized. He may in fact have plans for an early election, instead of the one scheduled in 2019. It seems likely that political tensions will remain high in Turkey and economic policies will be subordinate to domestic political calculations in the near future.

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The Organisation of Petroleum Exporting Countries (OPEC) is, of course, operating in a very challenging time. OPEC is facing serious competition in the global market share for oil supply. The primary competition to OPEC’s market dominance is emanating from suppliers of shale gas, particularly US-based producers of shale gas. While many commentators are forecasting that demand for oil will eventually slow down, at this point in time it certainly remains strong. The ‘peak oil’ time that many have predicted is still many years away suggesting demand for oil will continue to remain strong for the foreseeable future.

OPEC recently decided to cut its oil supply, abandoning the idea that it should pursue market share at all costs. This decision has benefited OPEC’s primary competitor- namely US shale. One can understand OPEC’s decision given its members, particularly Saudi Arabia, have previously experienced negative consequences as the result of a ‘pump-no-matter-what’ approach in order to secure market share. While the rig-count in the US continues to rise, OPEC has publically declared and demonstrated that it will stick to curtailing its oil supply in an attempt to boost oil prices and bring the market back into what it considers to be the ‘right balance’.

There is a view that this tug-of-war between OPEC and shale-gas producers could result in the former’s demise. However these predictions are unlikely to come to fruition. The major problem with shale-gas is that despite recent improvements and efficiencies it remains a comparably very expensive operation. Saudi Oil Minister Khalid al-Falih hit the nail on the head when he recently addressed the current situation in his speech at the World Economic Forum in Davos, Switzerland. Al-Falih rightly stated that it would take considerable time for US oil production to claw back the ground it recently lost to OPEC in the ongoing fierce competition between the two for market-share.

The comparatively low-cost producing OPEC reduced their oil production late last year by an estimated 1.8 million barrels a day with the aim of propping up oil prices. The consequential rise in oil to above US$50 a barrel led to an increase in the number of US-based rigs for shale production that had previously shut down due to their unprofitability. However this resulted in an exhausting of the most fertile reservoirs and an increase in costs for contractors involved in the oil production process. As al-Falih pointed out, this will mean that there will be an inflation of costs for US shale producers in the coming years at least.

OPEC members are old hands at the oil game. They have faced challenges like this before and have predictably triumphed. The shale-gas producers are the new kids on the block buoyed by early success. However, the highly efficient OPEC is playing the long-game and it will continue to remain the key market-player until (if ever) the world decides it no longer needs oil.

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Saudi Arabia recently established a coalition of Sunni states to combat terrorism under the banner of the Islamic Military Alliance to Fight Terrorism (IMAFT). Its stated purpose is to help defeat the Islamic State, al-Qaeda and others they believe to be terrorist states and organisations. To the surprise of many, Oman has decided that it wanted to join the Riyadh-led network declaring the organisation ‘a new chapter in regional Muslim unity’. Oman was the 41st nation-state to join IMAFT which includes nations like Pakistan, Egypt and Turkey but which does not include Iran, Syria or Iraq.

There are numerous obvious benefits associated with Oman’s decision including the sharing of vital intelligence with some of the Middle East’s leading intelligence organisations and a strengthening of its own counter-terrorism capabilities. These are extremely important considerations given the ongoing volatility in the region. However, this decision made in Muscat has also raised many eyebrows and questions.

Notable among these is that Oman has traditionally been non-interventionist in its foreign policy stance. This is perhaps best recently evidenced by its decision to stay out of civil war in Yemen where Saudi Arabia has played a leading role. Oman was the only member of the Gulf Cooperation Council who did not join hostilities, instead choosing to adopt more of an intermediary and diplomatic position. Oman also decided against joining the US-led war against Islamic State and stayed out of the recent Libyan uprising in 2011. In remaining committed to its policy of neutrality and non-interventionism, Oman has obviously not had to deploy its military into the neighboring sovereign nations, unlike most of the other states in the region. In short, Oman has preferred neutrality above all else.

A second important point worth considering regarding Oman’s decision to join IMAFT has to do with its relationship with Iran. Traditionally Oman has enjoyed close relations with Iran, a Shia state obviously left out of the alliance given its ongoing conflict with Saudi Arabia for hegemonic control in the Middle East. Tehran is less than impressed with Oman’s decision especially given the recent rise in tensions between the two Middle Eastern powerhouses.

Two inevitable questions arise from this. Does Oman’s decision to join IMAFT signal an abandonment of from its non-interventionist neutral position in favour of closer ties and siding with Riyadh? And if so, what does this mean for the future of Omani-Iranian relations?
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There have been new developments in Egyptian-Saudi relations with regards to the ownership of two Red Sea Islands, Tiran and Sanafir, located at the southern entrance to the Gulf of Aqaba. Ownership of the islands gives one control of the entry and exit of the eastern arm of the Red Sea, leading to the port of Aqaba, which is a very popular tourist terminal for passengers and automobiles coming from across the shore in Egypt. The Gulf of Aqaba, where Jordan and Israel also maintain important ports, is of major importance for international commerce given it serves as a connecting point for the African and Asian continents. The importance of this passage is also evidenced by Egypt’s 1967 blockading of the Strait of Tiran, which helped trigger the Arab-Israeli/Six Day War.

The appeals court in Cairo has just upheld a decision by the lower Egyptian administrative court demanding the two uninhabited Red Sea Islands be transferred from Egyptian to Saudi control. There is no dispute between the two ruling regimes’ about the islands’ ownership, which Egypt has been protecting since 1950 at Riyadh’s request. In 1950 Saudi King Abdul-Aziz al Saud authorized the transfer of the islands to King Farouk’s regime with the aim of better protecting the islands against a possible Israeli attack. Saudi Arabia did not at the time possess the capabilities required to defend the islands against such an attack, which they were worried would occur following Israel’s successful defeating of Arab forces in the 1948 war in Palestine. Israel did manage to occupy the Islands in 1967 but then evacuated them in 1982 in accordance with a peace treaty it signed with Egypt. This court decision follows years of discussions between the two countries about their maritime borders.

Most Egyptian officials appear to be happy with the decision bearing in mind the Saudi Kingdom has provided Egypt with a large amount of aid and has heavily invested in the country in the last few years. Relations between the two countries only appear to be getting stronger with the Saudi Kingdom providing billions of dollars for the funding of a causeway connecting Sharm el-Sheikh and Saudi Arabia, helping to supply Egypt’s long-term energy needs. Internationally, the deal to return the Red Sea Islands to Saudi control seems to be well-received given there are no international agreements including the Camp David Accords which forbids Egypt from transferring this land back to Saudi Arabia. The transferring of the land also paves the way for the constructing of a bridge linking Saudi Arabia to the tip of the Sinai Peninsula in Egypt.

It should however be noted that whilst the deal has been supported by Egyptian parliament there are others in Egypt who have opposed the deal, interpreting the court order to be a violation of Egyptian sovereignty. Central to their argument is that Egypt had a claim to the islands predating the founding of the modern Saudi state. Some Egyptians have accused the government of ‘selling off their islands’.
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