Top 10 Middle Eastern Developments To Watch (Part 1)

The first of a two-part piece providing the top 10 Middle Eastern developments to keep your eye on. In this section:  Azeri-Iranian relations, the rise of Islamism, changing Israeli demographics, the Chinese economy and Brazil’s oilfields.

Nobody knows better than policy analysts that predicting international relations is like stepping on ice, and when it comes to the Middle East the chances of getting it right are as low as being struck by lightning, not once, but ten times. With that caveat, this piece will attempt to identify the 10 most important developments, within and outside of the Middle East, that will occur or are already starting to affect the region.

10. Azeri – Iranian deteriorating relations

Few, if any, would consider Azerbaijan to have any political weight in regional, even less so, global, politics. However, the oil-rich Transcaucasian country may soon draw attention due its growing impatience with what it perceives as an Iranian interference in its domestic affairs. In January 2012, while the world’s attention was drawn to the Syrian Civil War, three men were arrested in Baku on suspicion of attempting to carry out a terrorist attack on a Jewish School in the Azeri capital. The Ministry responsible for their arrest claimed that the weapons, funds and all the necessary training for the terrorists-to-be came in from Iranian sources. Only two months later, 22 men were arrested on suspicion of plotting to attack the US Embassy in Baku. Again, the support was to come from Iran. STRATFOR has also reported that Iran secretly supports the outlawed Shiite Islamic Party of Azerbaijan. These events however, should be clearly separated from the recent allegations of Baku’s approval for Israel to use its airbases to attack Iran. The Azeris are not mad enough to voluntarily bring the Ayatollahs’ wrath on themselves, nor are they so naïve to agree to carry the costs of Israel’s war with their powerful neighbour. What might be the consequence of deteriorating relations between Baku and Tehran is closer cooperation between Azerbaijan and Israel (which is already relatively close). Jerusalem will use all its might to reduce Iranian influence, be it through financial assistance or the supply of military equipment. In fact, Israel already has some experience in arms trade within that region – Israeli drones were sold to Georgia, to Russia’s disappointment, as early as 2008.

9. Islamists consolidating power

It should come as no surprise: political Islam is gaining power all over the Arab World. Moderate Islamists in Tunisia, Egypt, potentially even in Syria, have gained political ground and, being supported by the majority of their constituencies, heralded the dawn of the third political era in the Arab World: an Islamic democracy (the previous two being the post-colonial monarchism and Arab nationalism). To some extent this new force was spearheaded by the Turkish AKP by providing encouragement through its successful reconciliation of Islamic and democratic values coupled with rapid economic growth. However, one should be careful about making premature judgments on Turkey becoming ‘the Germany of Arab World’. There is no doubt Erdoğan’s administration does have such ambitions, but an important aspect, which quite often is left unmentioned, is the fact that Middle East is not as nearly globalized and interdependent as Europe and the outreach of the Turkish economy to the Middle East is very limited. On the other hand, there is a good chance it might change in the middle- to long-term and Europe and America should definitely not rule out such a scenario. The EU may end up regretting its poor decision to not permit Turkey to join the Union.

8. Israeli demographic trends

The Jewish State has seen better days, soon there might not be anyone who still believes in the Zionist dream of Jews becoming a nation as any other. The growing Palestinian population is one thing, but the emigration of the middle class secular Jewish population and a fast growing population of Ultra-Orthodox Jews is another. Right now 50% of Israeli children are Arab or Ultra-Orthodox. By 2040, this number is supposed to rise to 78%. Emigration has now regularly been exceeding immigration. Those who emigrate, or in Hebrew ‘descend’, are usually highly skilled, productive and well-off seculars, who have had enough of living under constant threat, intensified by the ongoing Netanyahu government’s right-wing gibberish paranoia, as well its failure to provide the welfare reforms it promised at the last elections. Instead, they choose better living standards in Berlin or New York, where the neighbouring countries do not want to see them drown in the ocean.

And so, year after year, the left-wing secular constituency base slowly diminishes, letting the religious and ultra-nationalists fill in the political vacuum. In the 1980’s, the European Jewish Israelis were afraid that soon they will be flooded by the Sephardi ‘Orientals’ – Jews from the Arab World – but then the ex-Soviet Jews came to save Israel’s demographic balance; the last large Jewish population outside of Israel lives in America, but an en masse immigration from the Land of the Free to the Land of the Prophets is unlikely to materialise.

7. Future Chinese economic downturn

The Chinese economy is going to enter recession, the question is when it is going to happen. A number of experts have predicted that a major crisis in China will bring about social unrest and a push for liberal reforms and democracy. I will leave the probability of such a scenario to those more fluent in the subject; what is of greater importance for this article is the impact of the Chinese crisis on Iranian exports. Iran is one of China’s biggest oil suppliers and the Iranian budget is highly dependent on Chinese sales.

To spice things up, China is paying for Iranian oil with Yuan, due to the UN sanctions on Iran’s international trade, which is then used by Tehran to buy Chinese goods. Should China suffer a sharp rise in inflation in the future, Iranian exports might turn out not to be so profitable any more and might need to look for a bigger diversification of its export partners, which would mean convincing the Security Council to lift its sanctions. China has acted so far as Iran’s financial guarantor, but if Beijing is consumed with its own crisis, Iran won’t be so readily launching tirades against the Great and the Little Satans.

6. Brazil’s new oilfields

When this news arrived in Riyadh and Tehran, the princes of Al-Saud and the Ayatollahs alike must have shaken in terror. Petrobras, a Brazilian oil company, announced in February the discovery of off-shore pre-salt oil reserves. The actual volumes are not yet known, but, given that Brazil is not part of the OPEC cartel, the amount might easily bring down oil prices, thus cutting Middle Eastern oil giants short of revenue. The extent to which a Brazilian oil bonanza will affect the global economy is yet to be revealed, but it might bring Brazil to the top of the list of oil exporting countries, further deteriorating Iranian economic isolation and bringing the Saudis more worries about budget balancing, while dealing with the unrest in the Shia dominated Eastern Province.

View the second half of this piece here.

Tagged Brazil, Egypt, Iran, Israel, Middle East, oil, Sinai, Syria, Yemen