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The crisis threatens major states first - ASHARQ AL-AWSAT English Archive
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The US and Western newspapers have recently been filled with articles and information about a grave economic crisis initially threatening the US, then Europe and the entire world, including our Arab states. Amidst the talk about this crisis, everyone is recalling the economic depression that shook the world in 1929, and are suggesting that a similar disaster is looming.

Whilst some speak of the crisis in particular, others talk about the state of the capitalist economy as a whole, which they say has become fragile and crippled. Such opinions are held by senior economists like Pier Carlo Padoan, Deputy Secretary-General and Chief Economist of the Organization of Economic Cooperation and Development, who says that “the current economic crisis is severe, dangerous and extremely serious, and its centre of gravity has moved from the US to Europe.”

Padoan’s assessment focuses on the entire European economic system, and he says that “We are dealing with a European system that has proved fragile in the face of crises”, calling for a re-evaluation of the whole system.

Amidst this, talk about the so-called Euro debt crisis is also prominent. Alan Krueger, a senior economic consultant to the US President, has stated that the banking and debt crisis in Europe is still the main threat to the recovery of the US economy, particularly as 20 percent of total US exports go to Europe. Therefore, Krueger urges Europe to take immediate measures to enforce the debt crisis rescue plan, as the current situation is threatening the US economy with a severe recession, which in turn would reflect badly on Barack Obama’s chances of winning a second presidential term.

As financial difficulties spread from America to Europe, Greece began to suffer a major reduction in its economy, which in turn signalled a renewed financial crisis. This has since extended to Italy and Spain; two countries suffering the consequences of considerable debts with huge interest rates.

Commenting on this, inside sources said that the European Banking Authority believes European banks require US$ 144 billion to restore confidence in their financial system.

Analysts unanimously agree that the main reason for the economic crisis suffered by the US, which in turn affects the rest of the world, lies in the exorbitant cost borne by America because of its occupation of both Iraq and Afghanistan. The US has spent US$ 700 billion as a result of the occupation of Iraq alone.

To cut its huge spending, the US rushed to increase oil prices, and the price of one barrel soon rose to over US$ 150. This reflected directly upon another economic sector, the real-estate market in 2009, where low-income households could not afford to pay off their mortgage instalments. Then banks and large companies embarked on large-scale redundancies, and a series of recessions occurred in different sectors of the economy.

The crisis extended from the US to Europe, where it engulfed Britain, and then Eastern Europe, most prominently Russia which was quick to support its economy with a US$ 300 billion injection.

It is impossible to talk about the global economic crisis without touching upon the Arab situation and Arab wealth, and without placing part of the blame here for what is happening to the international economy. In 2008, an American report was issued on Arab investment funds, such as future generations’ funds and sovereign wealth funds. The report was prepared by Richard Haass, former Director of Policy Planning for the United States Department of State, who focused on the sources of Gulf States’ sovereign wealth and expressed his deep concern that their influence will increase to grant them greater control over the US financial sector. Another report prepared by Daniel W. Drezner, published in 2008 under the title “White Whale or Red Herring? Assessing Sovereign Wealth Funds”, also emphasized that an era of domination on the part of Arab sovereign funds is coming, as a result of the growing financial influence of such funds (owned by their governments). Drezner’s analysis highlights the danger [to the West] of these funds becoming more powerful in one way or another, and highlights the need to frustrate their ability to influence global markets.

Henry Kissinger was proactive in such an endeavour when he published an article in the International Herald Tribune newspaper on the 19th September 2009, where he warned against the accumulation of billions of dollars of oil revenue in Gulf sovereign wealth funds, calling upon the West to act to curb OPEC’s abilities, in order to prevent its economic influence transforming into political influence. Here Kissinger was explicitly calling for a US political strategy to confront Arab oil finance.

As can be seen from the above, Western policies always seek to gain control of Arab strategic wealth. However, the West is not content with this alone, for at a later stage it will also seek to dominate the profits accumulated by Arab states. In fact, Arab states should invest these profits in developing their own economies, something which politicians like Kissinger are never comfortable to see. Indeed, Kissinger’s ideas now represent a school of thought that is prominent in the decision-making circles of more than one European capital.

As a result of all this, and in view of the major Western concerns towards the Arab states’ sovereign funds, the Arab world must pay more attention to the finance it has, and search for ideal means to exploit this domestically, in a manner that helps towards development and an increased economic standing. An example of this can be found in the railway expansion project currently underway in Saudi Arabia.

This, however, necessitates ambitious plans to be drawn up, in order to develop Arab economic infrastructures. This is especially pertinent when development plans require cooperation between more than one Arab country, such as the construction of transport networks between Arab states, whether by land, railway or sea.

Here there is no harm to recall that in 1980, and in view of the rise of peace theories along the lines of the Camp David Agreement, several American and European studies were conducted, focussing on the promotion of transport networks in the Arab region. Yet what was remarkable about these studies was the fact that the West was looking to create a complex transport network beginning from each Arab state and then extending, not towards neighbouring Arab capital cities, but towards the state of Israel, hence positioning Israel as the centre of all Arab transport networks. Although this plan did not succeed, it shows that Western projects are not concerned about the development of our region, but rather they are basically keen on strengthening Israel’s position, by linking it with Arab capital cities.

The issue of transport between Arab states is worthy of special attention as it is an issue of strategic importance. If considered within a specific framework that serves everyone’s interests, inter-Arab transport networks could strengthen the development of the region in the face of opponents and greedy onlookers. To do so, inter-Arab relations must be the fundamental basis of thinking and planning, instead of the Arab-Israeli idea that preoccupies the West, which aims to only serve its own interests.

Bilal Hassen

Bilal Hassen is a renowned Palestinian writer and political analyst.

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