Middle East and North Africa Update

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By Hugo Foster

From bread riots to talk of Arab-Israeli war and/or peace, a lot has been going on in the region lately, although, admittedly, when has this not been the case? What follows are three big issues from the past week.

Oil exceeds $116 per barrel. Great news for the Saudis, Emiratis and other Gulf countries, who are being afforded even more time to build mega-cities, massive airports, record-breaking hotels and generally not-very-sensible-sounding projects like ski runs in the desert, before the oil revenues really dry up. Bad news for Western consumers, as they begin to face up to the potential fallout from the American economic slowdown.

Expect to hear much speculation in the coming months over the increasing role of Arab sovereign wealth funds in bailing out struggling Western banks and other cash-strapped enterprises (as with Citigroup, Merill Lynch and co. in recent months). With inflation issues and shortages in the supply of power and cheap labour limiting the speed at which the GCC countries can actually invest at home, the Gulf countries will undoubtedly seek to snap up more and more stakes in overseas assets.


In any case, there are few signs that oil prices will fall
significantly any time soon – if we are to trust Iran’s President
Ahmadinejad (which I am not advocating) the price of oil is
artificially low as it is andneeds to “find its real value".

Gazprom in Libya, Europe in a bind. Gas
is tipped to become the ‘new oil’ and concern has been rife in the EU
and US about Europe’s dependency on Russian gas and the long-term
geopolitical implications this might have. Last week Russian state gas
operator Gazprom signed a joint venture with Libya covering the exploration, production and sale of Libyan oil and gas, and discussed a possible pipeline project linking Libya with Italy. Through Gazprom, Russia already supplies a quarter of Europe’s gas. Plans
to develop Southstream (a $15bn pipeline that will transport gas across
the Black Sea to the Balkans and beyond) and Northstream (similar but
across the Baltic Sea) are central to fears of Russia’s increasing
control over Europe’s gas supply and that it may threaten to ‘turn off
the tap’ or manipulate prices towards political ends.

Because
plans for the EU and US-backed Nabucco pipeline (which would import
central Asian gas via Turkey) are struggling to get off the ground, and
because Iranian gas, ironically perhaps, is currently off limits, North
Africa’s sizeable reserves are integral if Europe is to diversify its
supply. This will, naturally, be much harder if the Russians get in
there first.

Gaza militants attack Kerem Shalom crossing.
On Saturday Hamas militants attacked the Gaza-Israel border crossing,
prompting the inevitable Israeli Air Force raids on the Gaza Strip. The
attacks, which resulted in the deaths of 3 militants and wounded 13
Israeli soldiers, are another nail in the coffin of the peace process.
They are also further evidence of Hamas’ shift towards increasingly
assertive tactics in trying to prize open gaps in the Israeli blockade
of the territory.

More
broadly, the attacks demonstrate the redundancy of the strategic
thinking behind the blockade (as with the broader policy of isolating
Hamas), namely that inflicting appalling damage on the civilian
population of the territory through starvation, unemployment and
encirclement, will make Gazans turn against Hamas. Clearly, this has
backfired. Gaza is like an enlarged prison, and when Hamas blew holes
in the crossing at Rafah (Gaza’s border with Egypt) earlier this year,
allowing Palestinians to pour into Egypt to stock up on supplies, it
was clear to many Palestinians who the jail-breaker was.

Unfortunately,
the only high-profile American in the region at the moment who seems to
grasp this is former President Jimmy Carter. In recent days, Carter has
held rounds of talks with Hamas leaders, as well as Syrian President
Bashar al-Assad, provoking criticism from US officials.
Carter (rightly) understands that Hamas and Syria are (rightly or
wrongly) here to stay and that until the root causes of their
grievances are addressed, peace is impossible.