17 may 2013
Outlook for the Situation in the Middle East in the Period up until 2020
REUTERS/Amr Abdallah Dalsh
People are seen at Al Azhar mosque before
a protest in support of the Islamist institution
Al-Azhar's assertion of independence from
the Muslim Brotherhood, in old Cairo
April 5, 2013
Because of rapidly changing processes taking place across the Middle East, we divide the 8-year period reviewed here into two equal parts, 2012-2016 and 2016-2020, in order to identify both short-term and mid-term prospects for these countries. To be sure, this in no way means that this is anything more than an arbitrary line dividing the two periods.
The last ten years have been a time of serious turmoil in the region, seeing the rise of Islamic radicalism and the beginning of a global war on terrorism, foreign intervention in Iraq and overthrow of Saddam Hussein’ regime, and Israel’s new peripheral wars with the Arabs (2006 and 2009). On top of this, the “Arab Awakening” that unfolded in 2011 became an event of historic significance for the region, comparable to the disintegration of the Ottoman Empire in the wake of World War I with the ensuing emergence of independent Arab states under British and French mandate, or alternately liberation of these states from colonial dominance through national revolutions in the third quarter of the 20th century. The stormy rebellions of 2011-2012 in six Arab countries (described in some cases as revolutions) have already resulted in changes in the leadership and regimes in some of them, and in political triumph for Islamist forces that had for decades been driven underground. There is no reason to expect that all other states are immune to the fever of youth protest that was the locomotive of the recent changes. However, there is likewise no reason to speak of some kind of domino effect, since in some of the states in the region there were practically no protest movements at all, while in others they were pacified through the use of reforms: superficial reforms in Jordan and Morocco, cash infusions in Saudi Arabia, or the use of force in Bahrain. It appears that the key issue in the region in the mid-term is the possibility of changes in such regional giants as Iran and Saudi Arabia, where the situation so far has remained stable.
Overall trends in the development of the regions are going to be shaped by a combination of answers to the following questions.
- Will the wave of rebellions, protests and revolutions subside in the region?
- Will it be possible to prevent the proliferation of mass destruction weapons in the region?
- What are the policies that the most influential global powers will pursue with regard to the states in the region?
- Are there chances for success in achieving an Arab-Israeli settlement (first of all, with regards to Palestinian-Israeli relations)?
- How serious and protracted will the aggravation of inter-confessional and in-confessional conflicts be?
- Will religious extremism and terrorism go on the wane?
- Is there a possibility of avoiding new wars and foreign intervention?
- Will the “new Arab Islamic regimes” develop towards democracy?
- What will the situation on the oil and gas market look like?
- How successful will economic development in the region’s countries be?
In this context, it is economic development that will be the key issue for the region in the period reviewed.
Prospects of Economic Growth in Middle Eastern Countries
The “Arab Awakening” that unfolded in 2011 became an event of historic significance for the region, comparable to the disintegration of the Ottoman Empire in the wake of World War I with the ensuing emergence of independent Arab states under British and French mandate, or alternately liberation of these states from colonial dominance through national revolutions in the third quarter of the 20th century.
The Arab World’s Potential Importance
to Russia’s Economy
The Middle East as expected will remain the largest supplier of petroleum and natural gas (more than two-thirds of the world’s petroleum deliveries), and also a supplier of high tech solutions in a variety of areas ranging from military technologies to agriculture (such as those coming out of Israel). At the same time, there is an ever stronger trend towards an increase in the region’s potential in manufacturing (Turkey) and petro-chemistry (Saudi Arabia).
In another development, the Middle East will play an increasing role as a world financial center (mainly in the Emirates), and will remain a large importer of the most diverse types of industrial and agricultural products. On the one hand, Arab countries in the Gulf area will maintain their position as large capital exporters. Among all else, the value of foreign assets owned by this group of countries already exceeds US$1.8 trillion, which is approximately twice their aggregate GDP, with the main share of investments located in the U.S.A. (over US$300 billion) and European countries. On the other hand, the region’s countries are themselves recipients of direct foreign investment, the largest of which go to Saudi Arabia, Qatar and Turkey. The key investment sectors in the Arab countries of the Gulf area include petrochemical industries, metallurgy, aluminum, cement and construction materials production, mining and food industries, infrastructure facilities, and services.
Saudi Arabia and the Emirates are rapidly improving their investment climate, which is an important pre-condition for sustained economic growth in the near future. In the period from 2005-2010, Saudi Arabia moved from 67th to 13th place in the world rating of business climate as defined by the World Bank. The country carries on with its strategic development programs that will in all probability be continued in the mid-term. In its Long-Term Strategy of Economic Development until 2024, with the 8th (2005-2009) and 9th (2010-2014) five-year plans of economic development as its first two stages, Saudi Arabia has set the goal of reducing the share of petroleum exports in the country’s overall exports from 65.8% to 19.5%, and boosting the share of other goods from 26.8% to 59.8% and exports of services from 7.4% to 20.7%.
On the whole, however, the importance of the petroleum-exporting Arab countries in the Gulf will certainly increase. Their aggregate GDP should by 2020 reach US$2 trillion, which will make up 1.7% of the world GDP.
The catalyst of investment within the framework of development strategy till 2024 should above all be private investment. The objective laid out is to increase private investment by an average of 10.3% annually, while the annual growth in public investment should reach around 8.7%. A key risk factor for the kingdom in the short-term is the depletion of its petroleum reserves as a result of increasing petroleum production in order to make up for shortages on the market following the sanctions imposed on Iran. The main customers of Saudi petroleum by 2020 will become Asian countries (led by China). Furthermore, we should expect that self-sufficiency in energy that may possibly be achieved in the West (as a case in point, the huge fields discovered in Brazil), should have a radical impact on relations between the Arab world and the U.S.A.
On the whole, however, the importance of the petroleum-exporting Arab countries in the Gulf will certainly increase. Their aggregate GDP should by 2020 reach US$2 trillion, which will make up 1.7% of the world GDP. The situation in this region is determined by the fact that Arab regimes are faced with a choice of the following options in their economic policies: either the promotion of large-scale economic development programs while allowing relatively slower political shifts, or, alternatively, the acceleration of political reforms if economic policies prove to be less successful than expected.
Turkey’s Armed Forces: A New Look At the Start
of 21st Century
In Turkey, the macroeconomic stabilization and increasing role of the private sector will be instrumental in economic growth. The plans of the country’s leadership are that by the republic’s centennial in 2023, the country will be among the world’s 10 largest economies (today, it is 17th in the world in terms of GDP). Irrespective of whether or not Turkish leaders manage to carry out this ambitious plan, it is clear that the country has embarked on the course of quite sustainable and dynamic economic growth and has consolidated its status in authoritative international communities, such as the G-20. The investment rate exceeds 21%, and the volume of direct foreign investment has increased. The key risk factor for Turkey is the considerable role of foreign financial resources. The current account deficit in the balance of payments in 2008 reached US$42 billion against US$1.5 billion in 2002, and forecasts are that it will be around US$60 billion by 2025. This trend against the backdrop of aggravating financial problems in Western countries makes Turkey more vulnerable to any expansion of the world financial and economic crisis. On the other hand, an indication of the level of industrial development in Turkey is the successful performance of its military industrial complex, which is producing aviation and missile materials, large warships and submarines, and electronic warfare weapons.
Iran’s economy is heavily affected by the regime of international sanctions that has been in force since 2010. Iran is highly dependent on exports, with the volume of foreign trade accounting for more than 45% of the country’s GDP. At the same time, its considerable human and natural resources help maintain the domestic market that supports economic activities even under conditions of a deteriorating world economic situation. The Iranian leadership‘s practical steps towards gradually reforming the economy towards world standards is grounds to expect stable development in the country. As a result of the high probability that oil prices stay high, we expect that no significant slowdown will occur in Iran’s economic growth rate. One characteristic fact of the level of the real sector in its economy is that the country possesses its own missile building industry, well developed pharmaceutics production and several other high tech sectors.
Social and Economic Problems and some Economic Scenarios
If we consider specific aspects in the development of the region that will occur under any scenario, we might include high rates of population growth, in the short-term (with some exceptions, for example, Turkey), continued aggravation of environmental problems, and shortages of resources, agricultural land and fresh especially water. With the exception of Turkey, all countries in the region are faced with an extremely low level of water supply that acts as a brake on agricultural development.
The region has to import considerable amounts of food products and fodder grain. Due to the fresh water shortage, the development of agriculture requires considerable investments. Furthermore, economic development overall in these conditions, including, along with agriculture, urban infrastructures and certain water-intensive industries, calls for the construction of an adequately equipped industry for fresh water production, which includes water desalination and transportation, all of which are capital-intensive endeavors.
Over the past four decades, the share of young adults in the population of Arab countries has been growing steadily. Projections by World Bank experts envision an excess of 30% by 2015. Given the limited opportunities for the growth in manufacturing and agriculture, this process will generate a high level of unemployment, and this above all affects young people. Youth unemployment in the Middle Eastern countries is at present more than 25%, which is one of the highest in the world. This, in turn, determines the quite high growth rates of regional labor resources: 3.3% in the period of 1980-2010 (2.1% in South Asia and 1.5% in East Asia).
Youth unemployment in the Middle Eastern countries is at present more than 25%, which is one of the highest in the world.
The problem of high unemployment in Arab countries is closely associated with the quality of labor resources, which lags considerably behind other developing countries. The share of the labor force in the low-skilled and unskilled bracket is around 60-65% of the economically active population in the Arab world, which, in turn is the result of low levels of education. The extreme poverty of the population in various countries in the region remains a critical social problem.
A no less pressing problem for the Arab world is that chronic poverty affects broad strata of the population. The growing unemployment and rising prices of consumer goods (especially food products) have led to significant growth in the share of the poor in the population. Assessments that account for national criteria of poverty show that by the end of the 2000s the share of poverty reached an average of 40%, with 60%, as a case in point, in Yemen.
Considering all of the above, we expect several scenarios for economic development in the region, depending on the political situation. The first scenario is that “Political processes lead to an explosion in the region and its economy”. In this scenario, various conflicts will destabilize the socio-economic situation to such an extent that economic activities fall off sharply, business declines, and the economy suffers a deep setback in its level and scope of development. Examples of this scenario materializing today are Iraq and Libya.
The second scenario is that “Economic processes abroad trigger a political explosion”. The world financial and economic crisis, the development of alternative energy technologies ranging from solar and wind energy to shale oil and gas, and a slowdown in China’s economic growth rates result in a sharp shrinkage of demand for the region’s staple exports – petroleum and natural gas. The dwindling of these countries’ economic opportunities will generate destructive processes in the political sphere.
The third scenario is “Sustainable development”. This scenario is possible both amid a positive development of the world economy and in the conditions of a world crisis if this crisis does not produce any considerable decline in petroleum and natural gas consumption in the fast growing economies of Asian countries. With the world economy growing, demand for oil and gas in various countries will increase, and this will stimulate the region’s development. The economic slump in Western countries following the world financial and economic crisis may lead to a decline in oil and gas consumption in this part of the world economy. However, the growing economies of China, India and South-East Asian countries will need additional amounts of fuel, especially for automobile transport, and these increasing oil and gas requirements in East and South Asian countries will sustain demand for Middle Eastern hydrocarbons.
Alternatives in the Development of the Political Situation
One of the worst negative consequences of the turbulent developments in the past decade has been a sharp exacerbation of inter-confessional strife (between Muslims and Christians) and in-confessional strife (between Sunnites and Shiites) that in the near future has a tendency not only to continue, but also to grow worse.
The stormy processes of transformation that of late have developed in the region’s countries (above all in Arab states), persisting old and emergent new threats to security, and unresolved conflicts (quite many of which are of global significance, such as the Arab-Israeli conflict, the situation in Sudan, Kurdish problem, activities of extremist and terrorist organizations, the situation in Syria and Yemen, unclear future of Iraq, etc,) are all reasons to expect the situation in the region to develop in a direction detrimental to peace and stability.
One of the worst negative consequences of the turbulent developments in the past decade has been a sharp exacerbation of inter-confessional strife (between Muslims and Christians) and in-confessional strife (between Sunnites and Shiites) that in the near future has a tendency not only to continue, but also to grow worse. The alliance of Islamist Sunni regimes (or those that sympathize with Islamist patterns even while maintaining the secular character of their statehood, which, as a matter of fact, may erode) emerging in the Middle East, with Saudi Arabia, Qatar, Turkey and Tunisia serving as its axis, will strengthen their desire to dominate regional politics and impose their agenda on their neighbors.
White House workers walk on the roof of
the White House after lowering the flag to half
staff for the death of U.S. ambassador to Libya
Christopher Stevens, Wednesday, Sept. 12,
2012 in Washington
It is not clear whether the unexpected understanding and rapprochement of this group of states with the West, the U.S.A., in the first place, will continue for any length of time. These countries supported the Arab Tahrir-type revolutions and established cooperative relations with political Islam. However, they will probably not be able to overcome anti-American sentiments deeply ingrained in local societies and fueled, furthermore, by Washington’s unflagging support of Israel and the chronically smoldering Arab-Israeli conflict. Characteristically, even under conditions of the acute economic crisis, most of the Egyptians are opposed to the prospects of Western economic aid to be granted their country. Furthermore, the Jihadist movement keeps up its strength and, in addition to dealing with domestic issues, does not (several of its member organizations, at any rate) relinquish its global agenda. At the same time, we should not rule out the possibility of the marginalization of extremist terrorist movements who are concentrated on winning influence in vulnerable “borderline” areas of the Greater Middle East (including Northern Africa). There are assessments that Al-Qaeda may transform into a network of affiliates, or “lone wolves”, or (in the event of successful counterterrorist pressure) into a network of units connected only by information communications and ideological linkages.
On the whole, the potential of the Islamist movement in the coming period will be weakened by conflicts among the various factions of political Islam – the Muslim Brothers (and their offspring), Salafis and Jihadists. These disagreements will later on be used by regional actors to promote their own interests (as, for example, Saudi Arabia supporting Salafis, and Qatar – Muslim Brothers).
The potential of the Islamist movement in the coming period will be weakened by conflicts among the various factions of political Islam – the Muslim Brothers, Salafis and Jihadists. These disagreements will later on be used by regional actors to promote their own interests
In general, we can expect with high probability that at least in the short-term, uncertainty and instability following the Islamists’ rise to power and fuelled by mass protest movements will persist in a large number of countries in the Middle East.
Will Islamic political forces now in dominant positions in many countries (first of all, in Egypt, a leading country in the Arab world) and “power hungry”, as one of the participants in the events put it, manage to overcome the temptation to return to tested authoritarian methods of governance? Will their perception of their success as a result of “Divine predestination”, interfere with the fulfillment of their promises to remain committed to democracy and to follow the popular will? And the main thing, will they manage to cope with the formidable challenges of rehabilitation of the economies that were hit hard by the turbulent events of 2011-2012?
In the mid-term, the confrontation of two trends in the evolution of political Islam is here to stay. One of these is modernization. This involves the adjustment of political Islam to present-day realities owing to the very responsibility that the faith has in ruling the country concerned, and, further, its increasing commitment to democratic standards following the pressure of majority public opinion expressed in the course of protest actions demanding civil liberties and social justice. The other is the encapsulation within itself, that is, an attempt to construct a system of standards and values that to a considerable extent are at odds with those predominant in most countries across the world.
The partial deradicalization of political Islam is already underway, and already in the near future this process will be instrumental in changing the image of such groups as HAMAS and Hezbollah. The HAMAS movement, which at present is supported not by Iran, but by conservative Arab regimes, will probably move towards peace with Israel. Its possible democratic transformation into a ruling political force of the entire Palestine Autonomy will create a new situation that both Israel and Western countries will have to take into account.
The chances for creation even in the Middle East and even by 2020 of a nuclear-free zone, or for progress towards a “global zero”, still remain slim.
Hezbollah’s strategy will possibly be less associated with objectives pursued by Iran. However, the increasing stocks of missiles that the group has accumulated coupled with its ability to launch its own production of these weapons, constitutes a serious challenge for Israel. There have been so far no grounds for any alarmist forecasts in the area of nonproliferation. At the same time, however, among the negative scenarios persist, that is, with the crisis around Iran remaining unresolved, a military action launched against it, and Tehran producing its own nuclear weapons, which will spur on other countries in the region to take similar actions. A more positive prospect is quite possible, which involves keeping Tehran “along the nuclear line”. This means that Iran would maintain its program of acquiring capacity for developing, in case of necessity, its own nuclear weapons in the shortest possible time, but would still take no political decision on this issue. Other countries in the region and global players will be prepared to cohabitate with this kind of Iran, and it should not be ruled out that other regional powers would also be willing to follow Iran’s example. The chances for creation even in the Middle East and even by 2020 of a nuclear-free zone, or for progress towards a “global zero”, still remain slim.
Non-Arab powers that at present regard themselves as beneficiaries from the “Arab Spring”, will continue their rivalry for influence in the region.
Mark N. Katz:
Syria. Russia’s opportunity is to take advantage
of the differences
There is still a persisting threat that terrorist groups may get ahold of nuclear materials or that either they or failing regimes may gain access to a weapon like the dirty bomb. The very possibility of the expansion of the number of failing regimes as a result of the process of Somalia-type territorial disintegration (Somalization) is by far not ruled out. The list of candidates for this group of states, in addition to those whose names are frequently mentioned today, may be supplemented by others where the situation at present is seen as well-balanced. Some of the global and regional players pursuing various objectives, including ones that are self-seeking, will most likely continue to try and bring pressure to bear on certain regimes. This pressure may involve sanctions, including unilateral ones, and even the use of armed force. On the whole, however, the time for unilateral decisions has expired, and even the strongest of the powers will most likely not venture to take this kind of action without a mandate from the international community (the UN, above all, which in the mid-term will maintain its role even without reforms). In the meantime, there will hardly be any resolution of differences among the various groups of global and regional powers. These differences concern the balance between the principle of respect for national sovereignty and possibility of intervention in the domestic affairs of states that violate universal principles, especially on the issue of human rights.
The alignment of forces in the region will, evidently, keep changing, too. Non-Arab powers that at present regard themselves as beneficiaries from the “Arab Spring”, will continue their rivalry for influence in the region. Both Israel and Turkey have already begun to refer to their victory as a Pyrrhic one that can be reduced to nil by new threats. Iran, which earlier also regarded itself as one of the winners, is today concerned extremely about the developing situation in Syria, and the possible consequences for the Lebanon and Iraq that the Syrian crisis may bring about.
It should not be ruled out that the destabilization of the situation in the region may in the mid-term result in inter-state, ethno-political and ethno-confessional conflicts, with further developments leading to re-delimitations of frontiers and the emergence of some new territorial formations. However, there is no threat of emergence of any new caliphate in the region.
Challenges and Opportunities for Russia
The turbulent events in the Arab world discussed here have turned out to be both a gain and a loss for Russia. On the one hand, Russia has demonstrated its role as one of the key actors in the situation, capable of exercising its influence not only on decisions that the international community takes connected to the most pressing problems in the region, but also on the regional situation itself.
In the short-term and even the mid-term, a complicated process will probably be underway to establish contacts between Moscow and new political forces, especially Islamist organizations, and groups of liberal orientation.
A strong point for Russia has been the fact that on a whole number of crucially important issues, it has worked together with China and, although to a lesser degree, with other BRICS and SCO partners. On the other hand, Russia has lost a number of its contracts following the downfall of some of the regimes. Furthermore, its persistent policy with regard to the Syrian crisis has brought forth critical and even hostile attitudes from a whole number of governments and important segments of public opinion that support foreign intervention on the side of the opposition. Russia will have to overcome these handicaps without surrendering its proclaimed fundamental stance, and any sharp departure from these positions would hardly be reasonable. In the short-term and even the mid-term, a complicated process will probably be underway to establish contacts between Moscow and new political forces, especially Islamist organizations, and groups of liberal orientation. In this regard, practically all Middle Eastern governments will to some extent or another be interested in developing relations with Russia as an influential global power. They will have an acute need to diversify their foreign relations. As for Turkey, whose relations with Russia having reached a level of closest interdependence, differences over Syria may hardly worsen these relations in any serious way.
In addition, the fact that an appreciable proportion of Russia’s population belongs to the Muslim confession opens the way for Russia to strengthen its ties with the Muslim world, including the countries of the Middle East. But it also may give rise to serious new threats associated with the strengthened positions of Islamists. At least in the short-term, Russia’s policies vis-à-vis its Middle Eastern partners will be influenced by the possibility of expanding destabilizing activities by Salafis and Muslim Brothers in Russia’s Muslim regions and in neighboring Central Asian states. As for economic cooperation with the region’s countries, the following developments could be expected.
Iraqi Market Potential for Russian Companies
The oil and gas sector. To maintain their positions as the world’s largest oil and gas suppliers on the market, the petroleum exporting Middle East countries and Russia have to coordinate their actions in the area of pricing. With regard to launching joint investment projects in this area, prospects are not all that encouraging, for both Russia and the Middle Eastern more often than not have Western companies for their partners. One of the reasons is that these Western companies possess technologies required for prospecting and production in complicated conditions.
Russia’s gas exports to Israel are coming to a halt. Following the discoveries of new gas fields made since 2009, the energy situation in the Middle East has changed considerably. Israel, a traditional energy importer, may before long (in 2016-2017) turn into a net exporter. As a result of geological work carried out, the total reserves of the proven gas fields in Israel amount, as of summer 2011, to some 720 billion cubic m.
Iran may be regarded as Russia’s potential competitor on the gas market. Possessing the world’s second largest reserves of natural gas, Iran remains a net importer and at present is only striving to become a large exporter, but energy sanctions imposed on Tehran interfere with these plans.
Cooperation in military technology and infrastructure projects. Russia’s opportunities in this area will most probably be decreasing because of the technological lag of its industry and increasing competition on world markets.
Agriculture. Whatever the scenario of developments in the region, Russia is sees a potentially growing market for its agricultural products, especially grain. At present, the main direction for Russia’s grain exports is the Middle East and northern Africa, and exports to these areas have strong potential for growth. Both commodity exports and cooperation in production are possible here. The development of livestock husbandry may in the future expand Russian exports. Production cooperation is possible in the form of investments from Middle Eastern countries involved in Russian projects that are earmarked for subsequent exports. The expansion of exports will require greater carrying capacities of railroads and seaports, and this again is yet another possible option for investment cooperation.
International migration. The demographic pressures in the region increase the potential for emigration, part of which may be headed for Russia and CIS countries. This kind of migration traffic may have a negative impact on Russia if emigration involves marginal segments of local societies, or else a positive effect if Russian private companies and the country’s authorities manage to arrange a flow of qualified labor force for employment, for example, in agriculture.
Interlocking investments. Arab investments can be attracted into Russia’s economy already in the foreseeable future. In order to encourage large Arab investors to direct their resources into Russian projects, Russia’s federal legislation has to be further improved to protect property rights and foreign investments in the country, and to improve law enforcement practices. Russia has to turn its attention to credit organizations and financial institutions in Arab petroleum producing countries that fund large development projects in various parts around the world. It should be added here that Russian companies are already active in a whole number of countries in the region, and Russian investors have a stake in real property in several of these (in the Emirates, for example, they have invested around $US15 billion in property).
Translated from Russian. Original text http://russiancouncil.ru/inner/?id_4=1777#top
Alexander Akimov, Vitaly Naumkin, “Outlook for the Situation in the Middle East in the Period up until 2020,” Russian International Affairs Council, 17 May 2013, http://russiancouncil.ru/en/inner/?id_4=1834
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