Middle East and North Africa Update

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.