Economic Woes Could Trigger New Levant Conflict

When the militant extremists of ISIS started occupying territory in 2013, Iraq and Syria seemingly became the center of the world. Camera-crews from around the world reported breathlessly on each small town where black-clad men in pick-up trucks were advancing. Cities like Mosul, Raqqa and Palmyra became common features in news items as each small conquest was widely shared.

But in 2020, it seems very few still care about the region. Camera-crews have moved on and politicians have found new enemies to worry about. The reporting in the region does garnish is a stream of negative news. Financial crises, the impact of COVID-19, rising bread prices, it appears the region just cannot catch a break from misery.

Countries like Lebanon, Iraq, and Syria face multiple crises at once, with far-reaching consequences for neighboring countries and the region as a whole. What seems like an uncommonly troubled region where misery appears to simply compound and evolve, is largely a strategy of orchestrated and controlled chaos at the behest of foreign powers and institutions.

Hyperinflation

Comments on “hyperinflation” are becoming more common in reports on Syria and Lebanon, as extreme inflation causes prices for basic necessities to skyrocket amid stagnant or diminishing wages. Hyperinflation has sparked renewed protests in Syria, unseen since Bashar al-Assad and Russia reasserted control over the country through a brutal military campaign.

In Lebanon protests have again rocked the country, with much of the ire aimed at the country’s banking sector and the Lebanese central bank itself. A crisis of institutionalized corruption and sectarianism have intertwined with the country’s dwindling foreign currency reserves and the emergence of the COVID-19 pandemic to create a “perfect storm” of troubles for the Lebanese.

Austerity

In response to a historic drop in oil demand, oil prices have tumbled to levels that no expert could have predicted at the start of the year. For countries in the region, the drop in state revenue leaves large gaps in their national budget amid an increase of costs for the healthcare sector and much needed basic support for the poorest and most vulnerable.

In order to find funds abroad, countries like Lebanon and Iraq face increasing pressures from global institutions to reform their countries in order to cut public spending, boost the private sector and increase foreign direct investment. Receiving loans from institutions like the World Bank and the IMF means bending domestic policy to align with foreign visions and implementing unpopular reforms.

Sanctions

Then there are ever increasing sanctions that further weaken local economies. The US targets the leadership of Syria by halting most international trade, including from its destitute neighbor Lebanon. Washington similarly limits Iraq’s ability to buy much needed energy from its neighbor Iran, with the US issuing “waivers” that allow Iraq to import Iranian electricity.

Iran itself is facing crippling sanctions that have turned a health crisis into an unmitigated human tragedy, as the country continues to have the life squeezed out of its last remaining international trade. Iran has faced severe medical shortages and faced major barriers to importing much needed protective equipment and medicine, making the spread of COVID-19 in the entire region more likely.

Misery by Design

While hyperinflation, austerity, and sanctions continue to make an impact on citizens’ lives in the region, none of these are accidental byproducts, but instead are very much the intended goal. Financial support only comes when nations submit to the “Washington Consensus,” turning their countries into neoliberal countries rife for exploitation by foreign multinationals.

Sanctions and hyperinflation are similarly highly related to foreign influence. Sanctions on Syria intend not just to hurt its leadership but actively intend to starve the people of Syria and Lebanon into revolt against its leaders. US officials regularly regurgitate their belief that economic hardship for citizens will lead to a popular uprising that will replace elements of the government that the US does not like.

Sovereignty

While it appears that countries in the region roll from one crisis to the next, in truth these countries have never been “granted” the ability to stop these crises. Iraq cannot exercise any sense of a sovereign foreign policy because of its reliance on US support, Lebanon cannot reform its banking sector without demands from the IMF, and Syria is unlikely to have a “successful” new revolution after al-Assad’s inhumane crushing of dissent.

If foreign powers are genuine about creating stability in the region, they would be best served by leaving the region to determine its own future. The US alone could make a significant contribution to local stability by following the will of the Iraqi people by withdrawing its forces. The US could also lift sanctions on Syria and Iran and allow Iraq, Syria, and Lebanon to freely decide who it trades with.

Freedom to choose

Stability in the region will only materialize when local economies are allowed to grow, politicians are permitted to succeed, and nations can freely trade with one another. The only standard the West needs to follow, is the standard of national sovereignty that it sets for itself. Greater personal freedoms, religious tolerance, and gender equality all depend on rising living standards and the absence of fear and chaos.

By removing foreign influence from the region, the Levant and its neighbors could have a genuine shot at improving the lives of its citizens, unconstrained by the motivations and goals of nations thousands of miles away. As long as foreign powers freely meddle with the fate of millions of local people, the Levant and its neighbors will continue to spiral into further chaos, exactly as was intended.

Russian Sources Signal Possible End to Oil Production Cuts

With oil prices nearing their highest since early March, Kirill Dmitriev, one of Russia’s top oil negotiators  signaled his will to draw down production cuts on Friday June 19. Dmitriev is one of the key players leading negotiations with the Organization of Petroleum Exporting Countries (OPEC). Agreements between OPEC and the Russian-led alliance of non-OPEC countries, called OPEC+, have been one of the primary factors in the efforts to stabilize the oil market.

With demand for oil increasing as economies reopen, Russia appears to see no point in further extending production cuts. The existing agreement calls for a global production cut of 7.7 million barrels per day, from August to December. From January 2021, production cuts would drop to 5.8 million barrels per day, lasting until April 2022 when the agreement expires.

Price uptick

In April, oil prices hit their lowest price since the turn of the millennium as high global supply met an unprecedented dip in demand when flights were grounded, citizens faced lockdowns, and non-essential economic activity dissipated. In April prices hit $16 per barrel, with WTI briefly dipping into historic negative territory amid a scramble to offload futures before their expiry.

The extreme fluctuations in the already volatile oil market prompted most of the world’s oil producing countries to come together to establish painful, but necessary, production cuts in order to ease over supply that led to oil storage running out, with tankers and oil bunkers used as temporary storage to accommodate for a lack of buyers.

OPEC+

Ever since, any news around negotiations over production cuts between OPEC and the OPEC+ groups has led to swings in global oil prices. Now that demand is increasing and most OPEC members report compliance with the agreed upon cuts, meetings have revolved more around suring up lagging countries like Iraq and Kazachstan.

The current oil price hovers around $40, sufficient for Russia to balance its budgets. For many higher-cost oil producers however, the current price means losses, involuntary production cuts and even bankruptcies. The US shale gas industry, Canadian tar-sand extraction and Brazilian off-shore oil all struggle to survive at current prices, while countries like Saudi Arabia would be able to live with “lower for longer.”

OPEC

But while many OPEC members in the Gulf could make a profit on current prices, their national budgets have been based on much higher prices, leaving major gaps. A country like Iraq, that has some of the cheapest oil to extract, still needs oil prices to be at $56 per barrel in order to fund the $135 billion in estimated state revenue. The country has struggled to comply with OPEC’s agreed cuts as most of its oil production is done by foreign supermajors, leading to difficult negotiations.

Many countries of the Gulf Cooperation Council (GCC) similarly presented ambitious budgets for 2020, expecting much higher revenues than those that materialized due to the COVID-19 crisis. For these countries production cuts remain one of the few tools to drive prices up further, but it appears that major players like Russia and Saudi Arabia would prefer oil prices to not increase too rapidly, in order to prevent a resurgence in its higher-cost competitors like shale gas.

Diverging forecasts

Saudi Arabia and Russia are expected to have a much larger market-share in the near future. After a decade of losing market-share to US producers, Saudi Arabia is expected to have the largest market-share since the 1980s. With production down significantly and demand slowly returning, prices are likely to go up in the long run.

Investment bank JP Morgan Chase in early March predicted oil to hit $190 per barrel due to a “supercycle” where a downward swing in prices is followed by equally dramatic upswing. The bank’s predictions were squashed by the COVID-19 related drop in demand, but its experts remain confident that a “bullish supercycle is on the horizon,” according to CNN.

“The reality is the chances of oil going toward $100 at this point are higher than three months ago,” JP morgan’s Christyan Malek. However, uncertainty remains as economic results are highly dependent on public health successes in containing the spread of the coronavirus. BP has slashed its forecast, expecting COVID-19 to have an “enduring impact on the global economy.”

MENA Region Faces Wave of Post-Lockdown Protests

Citizens of several countries in the Middle East and North Africa (MENA) have taken to the streets following the easing of COVID-19 measures. Citizens are demanding action from their governments after having adhered to painful lockdowns and curfews that brought severe economic hardship.

In Lebanon, Iraq, Syria, and Tunisia, large protests have emerged over the last week as citizens call upon government officials to ease their suffering. While COVID-19 fears begin to wane, a new focus on structural poverty and inefficient government is emerging across the region as protesters express their discontent.

Lebanon

The Lebanese military arrested dozens of protesters on Monday, June 15, for alleged acts of vandalism. Protesters expressed their frustration with skyrocketing inflation amid a spiraling currency crisis, while the indebted nation struggles to balance its debt obligations with popular demands for a significant increase in living conditions.

After nearly two months of empty streets, economic deprivation, and fear of the coronavirus, the Lebanese people have returned to the streets to protest the lack of solutions offered by the government of Hassan Diab. Banks and shops were attacked as Lebanese people grow more desperate, even as new sanctions on neighboring country Syria are likely to further damage Lebanon’s economy.

Iraq

Newly inaugurated prime minister Mustafa al-Kadhimi’s “honeymoon phase” in government has ended quickly as increasing austerity measures are sparking furious protests. Monthly pensions were hit by a drop in oil-revenue that is forcing the government to take unpopular measures. Nearly one million Iraqis depend on their pension each month and this month the $920 pension was more than $100 short, according to France24.

The Iraqi government has introduced several ambitious reform plans, but a dramatic fall in government revenue as a result of cratered oil prices and production cuts has meant introducing painful cuts to public sector salaries and pensions. Public sector employment has served as a method to appease Iraqis since the 2003 US invasion, but falling state oil revenues have now undermined this strategy.

Syria

Syria has seen few large protests since the 2011 pro-democracy protests that started a civil war. But protests again emerged over the rise in prices of basic necessities, a doubling in food prices and continued corruption in government. The city of Druze saw four days of intense protests as the Syrian Pound continues to fall dramatically in value.

The protesters are unlikely to see a swift resolution to their concerns as the “Caesar Act,” a new round of US sanctions targeting Syria, is set to heavily impact the last remaining economic activity that has sustained the country’s flailing economy. With an apparent consolidation of power ongoing in Damascus that has gone public, Bashar al-Assad’s regime is facing renewed pressure from all sides.

Tunisia

Protests have emerged in at least seven Tunisian cities, Reuters reported on Thursday, June 18. Unemployed and economically deprived people across the country protested what they considered government inaction in the face of a continued economic crisis. University graduates shouted “we need jobs” in Gafsa and hundreds protested in Hajeb el Ayoun and Sidi Bouzid.

The Tunisian tourism sector has suffered an unprecedented crisis after COVID-19 measures closed borders and shut the industry that provides 10% of state revenue. After a decade of high inflation and unemployment, Tunisians now call for an increased focus on jobs by protesting and even halting the country’s phosphate production through sit-ins.

A new era

The current protests across the MENA-region are likely only the beginning of popular unrest in the region, with global institutes like the IMF predicting that local economies will suffer from post-lockdown economic woes for some time to come. Protests against corruption and ineffective government appear to be supported by data, and the World Bank has called for greater transparency from MENA-governments.

As global oil prices continue to be volatile, supported by painful production cuts, revenue will likely remain impacted in many oil-dependent MENA-countries. With structural economic issues in many countries, unemployment and poverty are likely to worsen in the months ahead, as the region braces itself for a new era of popular discontent.

Has Saudi-Arabia Won the Oil Price War?

Riyadh will likely celebrate in receipt of a new report by investment bank JP Morgan Chase. “Saudi Arabia will come out on top in the fight for market share as non-OPEC and U.S. production fades,” Christyan Malek, a managing director at JP Morgan Chase told Reuters. The report predicts that Saudi Arabia’s share of the oil market will be the highest since the 1980s.

It appears Saudi Arabia has increased its market share because of a decline in higher-cost oil production around the world, a development unimaginable even a year ago. The development will be much-needed positive news for most OPEC countries who have collectively seen a dramatic drop in government revenue because of a historic drop in oil prices.

Amid low oil prices, investment in the development of new fields drops and higher-cost oil production such as American shale gas or oil produced from Canadian tar-sands is no longer profitable. Because of the massive global scale of oil production, even a temporary dip in investment or bankruptcies of competitors can give low-cost producers an advantage for the foreseeable future.

Oil price war

Saudi Arabia and Russia together drove down oil prices by refusing to curb production even before the COVID-19 pandemic drove down demand to unprecedented levels. The combination of high production levels and dropping demand meant oil prices crashed to hit an absolute first: They fell to negative $40 as the expiration date for oil futures approached with no buyers for the actual crude.

While low oil prices are extremely painful for the state budgets of both Russia and Saudi Arabia, for countries where oil is produced at a much higher cost, like in the US shale gas industry, such low prices are potentially lethal.

Large-scale state-owned oil producers such as Saudi Arabia’s Aramco can dial back production without too much long-term damage, but for smaller producers that depend on a few wells or fields, closing down wells can mean buckling under debt and going bankrupt.

Saudi market share

By keeping production high while demand was dropping, Saudi Arabia directly influenced global oil prices. Media reported on the decision to continue high production levels as a price war between Russia and the Saudis continued until both countries agreed on production cuts in April.

However, both countries ultimately stood to benefit much more from a drop in production in the US than any fathomable end-game of a Russo-Saudi dispute could have realized. This begs the question if their “disagreement” was ever the real underlying motivation.

Russia and Saudi Arabia were both declining in market share as the US enjoyed its “shale gas revolution” over the last decade, with no end in sight. Although Russia likely has unexplored oil and gas reserves, the Saudi reserves have little way to go but down.

Their gamble to continue oil production and even send cheap crude to the already overflowing US oil market appears to have paid off in the long-run.

US shale gas decline

The victims of the geopolitical plays to influence oil prices will be those working in the US shale gas industry. While environmental groups will likely cheer the decline of shale gas, or “fracking,” millions of Americans are employed in the industry, working-class people who have been part of the essential workforce that has kept America running throughout the first wave of the pandemic.

Adopting a Green New Deal would more than offset these jobs with new positions in industries that support a healthy environment and provide good working conditions. However, hope for such a legislative move runs thin amid entrenched partisan tensions.

The international supermajors have already written off previously cherished gas assets in a sign of the time, yet the fate of Chesapeake Energy, one of the US shale gas pioneers, could signal what World Oil called “the end of an era.”

Because of the absence of available credit that saved many smaller oil firms during the last oil crash in 2015-2016, many smaller companies are now facing bankruptcies. The continued uncertainty over the future value of oil assets makes mergers and acquisition a risky game.

Between January and May, 18 oil and gas firms filed for bankruptcy protection in North America with more expected as “lower for longer” becomes the expectation.

The Saudi-led OPEC bloc has now promised to extend production cuts with an additional one-month voluntary cut, which is enough to prevent a new crash in oil prices, but likely not enough to help US producers.

Syrians Brace for Looming Sanctions

On June 17, the ‘Caesar Act’ will come into effect in the United States, with potentially devastating consequences for Syria’s economy. The act consists of a broad package of sanctions that would, in effect, make it illegal for most countries to do business with Syrian enterprises.

The Caeser act shares the pseudonym of a Syrian military photographer who smuggled thousands of photographs of Syrian torture out of the country, revealing the brutality of the Syrian regime’s practices against detainees.

However, the package of sanctions could have far-reaching consequences for Syria. The war-torn country’s economy is already suffering from hyperinflation that has caused food prices to rise by 50% in a single month.

“Prices of goods in Syria, including locally produced ones, are rising with the exchange rate,” Elizabeth Tsurkov, of the Foreign Policy Research Institute told the Guardian. “The inflation is so rapid that prices in the morning would be lower than in the evening,” she explained.

Looming sanctions

The already dire situation in Syria is about to get worse since the Caesar Act will effectively penalize any country that does business with any company in Syria.

While existing EU and US sanctions already target senior regime officials and aligned business interests, the US sanctions set to trigger on June 17 will target any country that trades with Syrian entities, effectively targeting Syria’s few remaining trade-partners in neighboring countries and with businesses in Europe and the Gulf states.

The largest impact of the sanctions will be felt both in Damascus and Beirut, as trade with Lebanon has been one of the few remaining lifelines on which Syria’s fragile economy depended. Both Lebanon and Syria are facing spiraling currency crises and  the US sanctions aim to exacerbate these troubles in order to weaken Iranian influence in the two countries.

Hezbollah’s role in Lebanon’s government and Iranian support for both countries have long been a thorn in the side of the US military and the US now aims to break business ties between the two countries and plunge both into a dire economic crisis.

Victims

However, the victims of sanctions are rarely the elite that they nominally target. Rising prices of basic essentials and food scarcity are inevitable, but the regime’s leadership will always have enough to eat. The sanctions hope to make the economic situation in Syria and Lebanon so dire that the starving people will rise up and hold the governments responsible.

In over a century of sanctions, they have never actually produced this result. Sanctions on apartheid south-Africa actually further impoverished the black population, according to the then prime-minister de Klerk. Cuba has been under crushing US sanctions since it’s communist revolution, but the sanctions actually allow the regime to blame the US for any economic issues.

In Syria, an already devastated country with its infrastructure in ruins is facing an economic crisis even without the new sanctions. Rising bread prices have sparked protests which were met with counter-protests by government supporters, who directly highlighted Western sanctions as the reason for the economic troubles.

Following a nine-year conflict, Syria has few resources left to rebuild. The US now attempts to once again spark a popular uprising and reduce the influence of Iran and Hezbollah. But, after the first uprising was crushed with little to no official western backing, how are Syrians supposed to topple al-Assad now?

Crucial US-Iraq Strategic Dialogue Begins, Online

Former intelligence chief Mustafa Kadhemi’s elevation to the role of prime minister seems to have helped restore US confidence in Iraq and laid the ground for the two to re-engage in strategic dialogue starting on Thursday. The talks were originally planned as a high-level meeting for April, but the COVID-19 pandemic has pushed them online.  

“With new threats on the horizon, including the global coronavirus pandemic, collapsed oil prices, and a large budget deficit, it’s imperative that the United States and Iraq meet as strategic partners to plan a way forward for the mutual benefit of each of our two nations,” Pompeo said in a June 10 media briefing

Pompeo warmly welcomed Kadhemi’s April ascension to the premiership, and Iraqi sources say the White House has invited the new leader to visit this year. 

“There was a lack of confidence in the relationship with the previous government, and we’re not there anymore,” an anonymous official told the French Press Agency (AFP).

Relations between Baghdad and Washington cooled after a US rocket strike on a convoy leaving Baghdad Airport killed Iranian Quds Force Commander Qassem Soleimani and a number of Iraqi militia leaders in January. There have also been a number of rocket attacks against US targets in Iraq this year, carried out mainly by Iran-backed Iraqi militia groups, placing further stress on the bilateral relationship.   

Dialogue despite tensions

Months of political uncertainty also dogged ties, but former Iraqi Foreign Minister Ali Alhakim said that in spite of those tensions, “the dialogue between us and the United States has never stopped.” 

“This dialogue is appropriate, and it’s timely as well. Our relationship went into sort of a quiet mood and we want to reinvigorate it,” said Alhakim, who served as foreign minister from 2018 until Khadhemi replaced him with Fuad Hussein in April.  

On June 9, the ex-foreign minister and career diplomat told the Atlantic Council talks will likely center on how to move forward with the 2008 Strategic Framework Agreement (SFA) that underpins the two countries’ bilateral relationship. 

“Where do we go from here? Do we continue on the same path? This will be answered in the first ten or fifteen minutes, just to figure out where the two sides are,” Alhakim predicted.  

An unnamed US official who spoke to AFP echoed Alhakim’s thoughts, telling them, “whatever comes out of the dialogue is going to set the future of our strategic relationship.” 

“Am I still going to fly surveillance drones or not? Do you still want our intelligence?” are the sort of questions the US source believes will be on the table.  

Relationship deeper than security cooperation

US Ambassador to Iraq Matthew Tueller stressed in a recent video that the US-Iraq relationship goes much deeper than security assistance. He said the talks will also center on politics, economics, culture, and energy — as well as US support for Iraqi troops fighting ISIS. 

According to the US Embassy in Iraq, the US has been an active supporter of Iraq’s fight against COVID-19. The US has donated $44 million worth of COVID-19 aid through USAID, and is also funding UN Migration’s (IOM) virus surveillance program and outreach work with vulnerable communities across Iraq.

“Security is important, but so is finance and health. These are part of the SFA, and this is where the US and other countries are actually helping us, along with the International Monetary Fund,” Alhakim said. “We need help with humanitarian issues. These are not really under the radar; they are visible, and this money is assisting Iraqis.”  

Domestically, the challenges facing Iraq have escalated dramatically in 2020, driven by COVID-19, a drop in global oil prices, and the political deadlock that Wednesday’s vote ended. Record-low oil revenues have hit the economy hard, while the country’s ill-equipped health system is struggling to deal with a COVID-19 outbreak and the remnants of ISIS remain a top security threat.

The US, backed by its coalition partners, will be gunning for US troops to remain, a proposal the Iraqis are likely to accept in a bid to sure-up state security for Kadhemi’s fledgling government.  

Another hot topic will be Iraq’s besieged economy. The country’s out-dated energy grid, for one, could do with US infrastructure funding, but given the long-term nature of weaning Iraq off its Iranian-energy dependency, securing a longer waiver protecting Iraq from US sanctions will likely be a priority for Iraqi negotiators. 

Read also: Iraqi PM Kadhimi Promises Transparency, Release of Detained Protestors 

 

The MENA Preserves History, Heritage During COVID-19 Crisis

The rich history of the MENA is an undisputed fact. The region is home to the “cradle of civilization,” where man first domesticated plants and developed writing systems, and the world’s three monotheistic religions: Judaism, Christianity, and Islam. 

With a plethora of archaeological and historical sites, the MENA provides valuable insights into some of the world’s oldest civilizations. 

Decades of war, political instability, and terrorism have, however, obscured the cultural and historical significance of the MENA and seen many of the region’s most important sites damaged or destroyed. 

Eager to reverse this trend and preserve historical sites, governments, international organizations, and religious groups across the region are collaborating to excavate, rebuild, and restore artefacts from across the region. 

This important work ensures that the story of man’s experience from our most ancient civilizations to the present day will be preserved for future generations. 

Restoration efforts in Iraq 

In Iraq, efforts to rebuild heritage sites take place alongside those to rebuild cities.

In Mosul and the surrounding region, ISIS destroyed museums, churches, and mosques indiscriminately during its occupation from 2014 to 2017. Among those destroyed were the 12th century Great Mosque of al-Nuri and the 19th century Our Lady of the Hour Church. 

The church is currently undergoing reconstruction in a project spearheaded by UNESCO and the United Arab Emirates (UAE), who have committed over $50 million to rebuilding heritage sites in Mosul. 

UAE Minister for Culture and Knowledge Development Noura Al Kaabi highlighted the importance that historical sites have on society’s understanding of itself, explaining that “by rebuilding a fraction of the past, Iraq can shape its future as an inclusive, tolerant and open society.” 

The UNESCO and UAE collaboration will also restore the al-Nuri mosque. 

This work to restore cultural artefacts provides much-needed employment to traditional artisans and for some is part of the healing process following occupation by ISIS. As Dr. Richard Kurin, Distinguished Scholar and Ambassador-at-Large at the Smithsonian Institution explains, “rehabilitating the museum can help the city rebuild its spirit and restore pride and esteem in people who were terrorized.”

In May, the Mosul Museum, Iraq’s second largest museum reopened amid the easing of coronavirus restrictions. Whilst it may be some time before the region sees much-needed tourists, the work to restore goes on. 

New discoveries in Egypt 

In Egypt, archaeologists continue to document history with the country’s Ministry of Tourism and Antiquities reopening work on sites from mid-May. 

In the Bahnasah region, archaeologists on a joint Egyptian-Spanish excavation recently discovered a cemetery and eight tombs from the Roman era. The city, known at that time as Oxyrhynchus, was home to over 30,000 monks and many monasteries with earlier excavations unearthing detailed archives. 

Work also continues on the documentation and restoration of Khufu’s second ship. To date, over 1,200 pieces of the ship have been removed, digitally archived, and restored. The painstaking work is currently being undertaken in line with special coronavirus precautions that include a reduced team and daily sanitizing. 

Dating from approximately 2500 BC the ship will eventually be rebuilt at the Grand Egyptian Museum and displayed alongside the first ship. Kamal el-Mallakh discovered Khufu’s two ships in 1954 at the pyramids in Giza.