India's Middle-East Challenge

On Friday, December 17, 2010, when most Indians were watching a cricket Test match between India and South Africa (in which Jacques Kallis and Hashim Amla tortured Indian bowling with a 200-run stand), a sad but momentous event took place in a small town called Sidi Bouzid in faraway Tunisia. A 26-year-old street vendor named Mohamed Bouazizi set himself afire in protest against corruption and harassment by police. This isolated incident would anger Tunisians so much that a revolution would ensue and overthrow the 23-year-old regime of President Zine El Abidine Ben Ali. Within weeks, it would spread to Egypt, Libya and several other countries in North Africa and the Middle East, finally blossoming into the Jasmine Revolution. The Arab World would stand redefined and several countries — including India — would see their strategic and economic interests hanging in balance.

As much as 70 percent of India’s oil imports comes from the Middle East and North Africa. A large portion of our exports and imports pass through the Suez Canal. In recent years, a large number of Indian companies have set up businesses there. If they were to be uprooted, investor hearts would burn. As many as five million Indians live in the region and their safety cannot be taken for granted. All this requires that we, in India, understand the conflict in all its facets.

To do so, we turn to someone who has a first-hand experience of the region. Sundeep Waslekar, president of Strategic Foresight Group, a think tank, has worked closely with many governments and leaders of the 22-nation Arab League. He is the author of Cost of Conflict in the Middle East and The Blue Peace, both reports on the Middle East. He also advises governments around the world and makes recommendations on policy and strategy.

So, over to Sundeep Waslekar.

We, in India, are at the risk of not understanding the changes that are taking place in the Middle East. The problem with Indian strategic thought is that it is completely obsessed with the US, Pakistan and China. It doesn’t see the storm gathering in a region that we are completely dependent on oil for. But we can ignore it only at our peril.

So, why did the protests happen in the region and why have they ballooned into revolutions in Tunisia, Egypt and Libya so far? Actually, I am not surprised at all. In my frequent visits to the region, I could sense the desperation that people had been pushed into. Like the time I was in Cairo.

Suzanne Mubarak, the wife of the then President Hosni Mubarak, heard that I was in Cairo and wanted to meet me. When I went to see her, she asked me to visit some slums in the city. Now, she is a kind lady working to improve the livelihood of these poor people. Her emphasis was not just to give them a better life but also give them better dignity. She would build colonies for them and set up cultural and sports centres there.
 
I could never understand why she wanted me to go and see the slums. But I went anyway. And boy, the sight I saw! The slums there were worse than anything you could see in India in terms of filth and the low level of hygiene. In the outskirts of Cairo, there are huge garbage dumps; people make holes in those dumps and live there. It is not just a question of inequity but of indignity. What I saw there was not just the development deficit or the democratic deficit. It was the dignity deficit.

Well, now any reasonable human being would protest against this quality of life but in Egypt, there have been all kinds of blockage including that of free speech. You can’t blog or express any sort of dissent. And that is where the anger against Mubarak came from. What his wife and her well-meaning friends were doing on their own didn’t matter in the end. She was the President’s wife but even she could not get the state to step in. The state run by her husband perpetuated inequity and it paid the price.

This is a lesson for India. There are limits to which individual actions can go. To bring about real change, you need a change in state policy.

The Middle East has been a tinderbox for several years. The triple deficit — democratic, development and dignity — is simply untenable in any society. In the Arab World, the conflict with Israel adds to the people’s anguish. While Israel has moved ahead despite the conflict, the lack of freedom in the Arab countries has suppressed the potential of youth. In the 1990s, Al-Qaeda tried to mobilise such young people with a religious ideology. But in the aftermath of the September 11 attacks, its armed strength was cut from about 1,000 in 2001 to less than 100 now by the US-led War on Terror. Thus the project of a supra-state based on religious ideology has diminished. As a result, in the last five to six years, Arab youth have directed their ire at their own regimes. Presidential elections are due in Egypt in September 2011 and Hosni Mubarak wanted to contest himself or nominate his son. That had created a stir in the crowds that gathered at Tahrir Square. The fruit vendor’s suicide in Tunisia ignited it in December 2010, instead of September or December 2011. The Arab youth and indeed the elite benefiting from the system have been whispering about the coming crisis to Western scholars. But it fell on deaf ears.

The Spark in the Jungle
But even Mubarak’s neighbours don’t seem to have learnt that lesson. Just check out where the trouble has spread: Yemen, Libya, Egypt, Tunisia and to some extent, Algeria; and in the second phase, Bahrain. But everything is not turmoil or a revolution. There are five large states in the region: Saudi Arabia, Iran, Syria, Egypt and Israel. But so far, we have seen a revolution only in one: Egypt. Other countries, where there are revolutions or protests or any kind of serious turmoil, are all medium size and small size. These include Libya, Tunisia and Yemen.

 

There have been demonstrations and some expression of discontent in Jordan and there has been a political upheaval in Lebanon. The change is Lebanon is quite significant but has not been noticed in India.

It is important to bear in mind that Saudi Arabia, Iran and Syria are stable despite some small indications of discontent. Ultimately, it is these regions that will have bearing on global economy, international energy crisis and the movement of goods in the Gulf. And so from the point of view of the world economy, the disturbances or changes that have taken place so far have a lot less significance than what the world media fears. So far.

But can it spread further from here?

The most interesting development is taking place in Bahrain. If Bahrain falls, it could create pressure in the Gulf states. The UAE will be in trouble, especially Dubai and other small states. The changes in the Gulf, in turn, will create a tremendous amount of pressure in Saudi Arabia. You can’t even say that Iran will be immune. And most of the oil reserves are really in the Gulf Cooperation Council member states and in Iran.

If this chain of events takes place, India and Philippines will be affected as there will be a reversal of man power exports back to these countries. Remittances will fall and oil prices will rise. If this turmoil continues, impact will be on oil though not on natural gas.

Basic inequality exists in Saudi and Iran as well. So anything is possible. That’s why Bahrain is so important. But Bahrain will probably squash it. There is a lot of indirect help from Saudi Arabia and the US. They have created a network of loyalty. And the conflict there is a sectarian conflict. Bahrain will survive. There was an effort to form a political party in Saudi Arabia but that has been squashed.

So I don’t really see any kind of a danger to any large players. India should be on the lookout for what happens in the large countries because that is what will affect the world economy.

Pax Americana
Every conflict has its winners and losers. In the realm of global diplomacy, every nation must play for its own advantage. So, who has benefited the most from the current conflict?

Surprisingly this time, it is not entirely the US. Much of the change or movement towards change has taken place against authoritarian regimes friendly to the US. Egypt is a strategic ally of the US and its regime has been overthrown. That doesn’t mean that the new regime that replaces it will necessarily be anti-US. In all likelihood, it could continue the pro-US policy.

America counts Tunisia and Jordan among its friends. While the Tunisian rulers have been shown the door, Jordan’s king has handled the situation very well. His citizens still favour him.

In Lebanon, we had the Saad Hariri government which was very friendly to the West and Saudi Arabia. That collapsed. It collapsed because the Sunni-Shia conflict changed arithmetic in the Parliament. But of course, the arithmetic is not independent from what is happening on the street.

 

Infographic: Sameer Pawar

On the other hand, governments like Syria and Iran that are quite against the US, are more or less steady. But there is no scope for generalisation. US ally Saudi Arabia is not in serious trouble. In any case, most of the new regimes will try and be friendly towards America.

But within the region, who has gained the upper hand now?

The biggest beneficiary is Turkey. Turkey has emerged as a power broker and as a model. Prime Minister Recep Tayyip Erdogan was the only leader from the broader region who very openly called for the resignation of Mubarak right at the beginning of the movement in Egypt. So he has become tremendously popular among the masses. He took a huge political bet by doing this. And it paid off.

The second country that has benefited is Iran. The nature of Iran’s regime is not really liked by anybody including the Iranians. Many in the Arab World like the fact that they stand up to the US and Israelis. But beyond that, nothing. But now, Iran has stepped into the power vacuum. For instance, it is Hezbollah that dictates things to the new Lebanese government; Hezbollah is supported by Iran. Iran has thus gained a direct influence in Lebanon.

Syria has gained by being friendly to these two countries. The new power equation in the region is led by Turkey. Israel and Turkey have had a fall-out over the last two years. Especially after Israel attacked an aid flotilla from Turkey, the relationship has been frosty. Now it looks like an ambitious plan to bring oil from Georgia and Azerbaijan through pipelines in Turkey to Eilat in Israel may not be revisited. Eilat is Israel’s southernmost city and is a convenient location to transport oil by tankers to East Asia including India. Right now it is transported through the Strait of Hormuz which is between Iran and the UAE. Eilat was an insurance against any disturbance in the Middle East. But now, any kind of destabilisation in the region will directly affect physical supply of oil to Asia.

The New Overlords
The problem with revolutions is that they can be spontaneous while governance can’t be spontaneous. Governance has to be structured and organised. If the protests aren’t able to transform these revolutions into viable forms of government, there will be a vacuum. And this could lead to two possibilities.

One is the entry of military into civilian governance. The military may come in ostensibly for a short term, but may stay on for a long term. But given the context, it cannot be a brutal regime because the military knows it would have to listen to the people’s voice. The military is the only organised institution that can fill this vacuum in some countries.

Then there is the possibility of pendulum democracy. Some political parties could be formed and they could fight elections. People, frustrated with the military, might bring in the democratic polity. But within a few years, they might find that these parties are not able to deliver social and economic equality and bring back the military.

It is also possible that some parties could position themselves on sectarian or ideological basis. That could lead to strong polarisation in the society.

I don’t think that the region has entered a democratic moment. I think it has entered an era of inconclusive protests. They could have cycles of protests. They had one major cycle that brought about political change. They will have protests for economics next. Another change. Middle East could be looking at a period of turmoil, constant transformation and uncertainty for a long time to come.

The earlier governments were for open economy. But the new, emerging leaders aren’t. They place a premium on nationalism.

In the case of Lebanon, you have Saad Hariri replaced by Mikati who has not been able to form a new government. Mikati is not against free market. He himself is one of the leading telecom magnates in the entire Middle East. But because he depends on Syria for his political survival, his policy orientation is against the West and the free market. So the regional economy is moving towards a closed economy in the immediate future.

This fight is basically about the economy. It is not about politics. The Egyptian military and the Tunisian government have already indicated that they would like to close the economy. They would like to have as much control as they can on the economy. To pacify the public, they will give some subsidies and some tax relief for the middle classes and they will get into some populist public expenditure. But that will put a strain on their finances. Deficits will increase in all countries. So in another three to four years, they’ll find deficit management very difficult. Inflation will go up. As it is, high inflation is one of the major reasons for the revolutions. But there could be another round. Again you’ll have protests irrespective of the government. For the last 25 years, people were quiet. They won’t be any longer.

Crisis And Opportunity
The Iranian regime may be stable today, but its natural fault lines will ensure it won’t survive for more than a decade from now. We don’t know what it will be replaced by. But for the Iraq War, it wouldn’t have survived even beyond 2003. The relations between Iran and the Arab states will only get worse. The Strait of Hormuz could be a theatre of instability. If and when that happens, oil supplies to India will be jeopardised. Crude prices will shoot up.

There is another issue that is much bigger than anything that’s happening today. The region is on the verge of an unprecedented humanitarian crisis as the water tables are depleting at an alarming rate, faster than anywhere else in the world.

Be it the Jordan River, Yarmouk, Lake Kinneret or the Dead Sea itself, water has depleted significantly over the last few decades. Rivers Jordan and Yarmouk have lost 90 percent of their water in the last 50 years. If this trend continues, large parts of the Middle East will simply have no water by the next decade. Half of Syria will become a desert in two or three decades.

When that happens, agriculture in these parts will be severely restricted. The region will face an unprecedented food crisis. Now one could say that Middle East could simply import food from India or China. But water tables there are going down too. Food production could fall everywhere from China to India to Pakistan to Syria to Egypt. This is no longer a storm that is some distance away. The storm has crossed the horizon. And the Middle East and North Africa will face political uncertainty till then and then they’ll be hit by this food crisis and that’s when destabilisation will start. They are entering an era of inconclusive uncertainty.

This crisis provides India a golden economic opportunity. People in the Middle East feel an antipathy towards the West, but they accept India. India can move to carve out a space for itself over there. These countries are very keen to develop their human infrastructure. India has the potential to help them achieve it. It is also an opportunity for India to help in the creation of strong institutions of governance. We will then get to partake in the decision-making process and we can use it to influence economics. And don’t forget, if we want to take advantage of the economic space, we have to stay strategically neutral.