The Spectacle Blog

Risk and Opportunity, Both Political and Financial, From Arab Protests

By on 1.28.11 | 3:24PM

With protests (to put it mildly) from Tunisia to Egypt to Yemen, the Arab world is in turmoil. From the point of view of those who support a widening of democracy and freedom, the outcomes could range from disastrous (creating the next Afghanistan or Lebanon) to the tolerable (creating a relatively stable but essentially dictatorial situation, as Egypt has been), to something as close to good as you tend to see in that region (perhaps Jordan.)

[By the way, perhaps the most explicit recent demonstration and reminder of the risks which havens for Islamism pose to humanity is this news story, which I can barely read, much less watch any video of.]

Before getting to the events on the ground in North Africa and Yemen, it's worth noting the reaction in U.S. markets: The dollar is up sharply against the Euro and the British Pound, which is a common occurrence as people flock to the much-maligned "safe haven" of the USD during times of uncertainty. While a strong dollar normally means weak commodity prices, we're instead seeing gold up more than $20, or almost 7 percent, with silver also up more than 2 percent. 

Most importantly, oil is up big, with March (the "front month") futures up $3. Of note is the fact that May (the third month) is up about 80 cents less than March, much more than the usual difference between the moves in those months and implying a substantial fear of short-term disruption in oil supplies. The only way that makes sense is if traders fear -- as I do -- that the next place for an uprising is in Saudi Arabia. The market is accelerating downwards, with the S&P 500 down more than 1.7 percent, or 23 points, and the CBOE's volatility index (VIX) up by more than 3 points, the biggest jump in months, showing increased fear of continued market declines.

In the meantime, despite the Egyptian government shutting down Internet and cell phone services, protests (or perhaps organized insurrection) are in full force in Cairo.

The dynamics in that large country are very interesting.  The government's response has not been as brutal as one might expect, despite the gripping footage coming from Egypt.

It's interesting to read a comment attributed to someone from President Hosni Mubarak's ruling party that the government might need to respond with, among other things, "more freedoms."

On the other hand, it's frightening to see images of protesters stopping in the street to pray. It gives an indication of one likely outcome of successful protests: the installation of an Islamic or at least more-Islamic-than-now government.

Current reports such as this one from CNBC earlier indicate that the Muslim Brotherhood is influencing the protests: "The early cheers were mostly against Mubarak.  But as the clashes got more intense, the protests took on a more Islamic flavor. There were more shouts of "Allahu Akbar"..."  Make no mistake, this is very bad news and is exactly the opening that Islamists are hoping to exploit.

Prior to these protests, it seemed that Hosni Mubarak's son, Gamal, was a likely successor. This article by NPR discusses Gamal's chances and his chief rival as well as the Madame DeFarge-like impact of the wives of of the presidents of Egypt and Tunisia.

Meanwhile, Mohammed ElBaradei, former head of the International Atomic Energy Agency, the group that so spectacularly failed to understand or deal with Iran's nuclear plans has returned to his home country of Egypt, offering to head a resistance movement.  While some cynicism regarding political opportunism is warranted, at the end of the day this is a guy well-steeped in Western traditions, operations, and values.  A government including or run by him is perhaps the best currently visible outcome, even if no particular outcome is actually probable at this time. Perhaps not surprisingly, al Jazeera has published an article critical of ElBaradei as an elitist opportunist, but it lays out the issues for and against him within Egypt quite well.

Given the news of the Islamic turn in the tone of the protests, we should probably hope that ElBaradei has success in organizing a pro-democracy movement -- and that he does a better job in Egypt than he did at IAEA.

In Yemen, street protesters are calling for the removal of that nation's president/dictator who has been in power for 32 years. We've all heard the stories of Yemen as the base of operations for Al Qaeda in Yemen and the American-born terrorist "imam" (again, a great reason to hope for the extinction of Islamism over time) Anwar al-Awliki. A NY Times story from just a week ago describes Yemen has having sentenced al-Awliki in absentia for murder, but the chances of their bringing him to justice don't seem much higher than the chances of Pakistan bringing in Osama bin Laden or Ayman al Zawahiri.

If the Yemeni government falls, there is real risk of the nation becoming even more lawless and a petri dish for terrorists. It's particularly true in a nation as poor as Yemen, with one news story saying "With one-third of Yemen's 23 million people living and suffering from chronic hunger and soaring unemployment, and almost half of the population living on less than $2 a day, the population is struggling, according to the United Nations Development Program." While it's nice to think that anti-corruption forces would appeal to the rational mind of the population, rich westerners should not overestimate the amount that the desperately poor spend thinking about politics. They're too busy just trying to survive, and probably have religion as a substantial force in their day-to-day lives. Therefore, it's more likely that "populist" Islamic forces would have an upper hand than that any push for good government would gain a strong footing.  I hope I'm wrong.

Tunisia has perhaps the best chance of a decent outcome, having been a less Islamic nation for many years. The protests, which reportedly started when a would-be street vendor lit himself on fire after being denied a permit to sell vegetables, have resulted in nearly 100 deaths, according to recent reports. This discussion by a Tunisian writer frames the situation well, and begs the critical question for all the current protests as well as potential future protests which much have leaders across the Arab world -- not least in Saudi Arabia -- scared to death:

Are these truly -- as they appear to be at first glance -- popular uprisings against corruption and in search of freedom and democracy? Or are the protesters witting or unwitting tools of Islamists who want to turn more of the Middle East into safe havens for their own purposes?

Only time will tell, but perhaps sooner than many people think. Until the meantime, we're witnessing events which, unlike many world happenings, are utterly outside any possible control or even substantial influence by the US or the western world. We're watching history in the making and watching time when many in the Arab world must make a decision which will impact the direction of their nations for generations to come.  Will they support relative freedom -- leading to relative prosperity, or will they be co-opted by forces of primitive backwardness and tyranny?

Perhaps above all, even though it's not in the news yet, the world should keep its eye on the streets of Riyadh. If an insurrection contagion spreads to the world's largest oil supplier, the economic and market impacts, in addition to the geopolitical ramifications for Iran and Iraq, could be extremely damaging.

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