Will Asia Ignite A Second Arab Spring?

Tyler Durden's picture

Submitted by Zachary Zeck via The Diplomat,

One of the more interesting aspects of the Arab Spring is that it largely spared the Gulf monarchies. To be sure, the monarchies in Bahrain and Jordan had to contend with a degree of unrest. Still, the core of the Arab Spring protests occurred in the Arab Republics, some of which fell from power. By comparison, the monarchies in the region—many of which are located in the Persian Gulf—were spared the worst of the unrest.

Still, the past is often a poor indicator of the future, and the fact that the region’s monarchies were able to weather the Arab Spring does not necessarily mean they are stable. In fact, many fear that the violence in Syria will destabilize monarchies like Jordan, much as the civil war in Syria is already destabilizing countries like Lebanon and Iraq that had previously not witnessed much Arab Spring unrest.

Although this possibility cannot be discounted, the Persian Gulf and other Arab monarchies face a much graver threat to their stability, and that threat originates in Asia. Specifically, the economic slowdowns in Asia in general, and China and India in particular, could very well ignite a second Arab Spring, and this one would not spare the monarchies.

One of the major global developments over the past few decades has been the shift of economic power from Europe and North America to the Asia-Pacific. In few places has this shift been felt more intensely than in the Persian Gulf. In the span of a few years Asia has surpassed the West as the region’s largest trading partner.

Although this development is frequently discussed from the vantage point of Asia’s growing dependence on Middle Eastern oil, the flip-side of the equation—the Middle East’s growing dependence on Asia—usually gets short shrift. This is unfortunate, as the Middle East’s dependence on Asia is nearly as substantial. Take the six countries comprising the Gulf Cooperation Council (GCC), for example. Asia makes up no less than 57 percent of the GCC’s total trade. Asia also purchases an incredible two-thirds of the GCC’s most important export—oil. This figure will continue to rise substantially in the years ahead. According to the International Energy Agency, by 2035 Asian nations will purchase 90 percent of the Persian Gulf’s oil exports.

 

Asia’s willingness and ability to meet these projections are vital to the Persian Gulf’s stability. For the most part, Persian Gulf states like Saudi Arabia maintain stability by buying off their populations. They do this in at least two major ways. First, by maintaining excessively large bureaucracies that keep the population employed doing unproductive and unnecessary work. Additionally, many Persian Gulf states and Arab monarchies provide substantial subsidies to ensure low prices. For example, according to the Financial Times, Saudi Arabia subsidizes water to the tune of $50 billion a year.

The regimes use these subsidies of labor and goods to safeguard their rule, including by increasing wages and subsidies on various household staples when they fear potential unrest. For example, when unrest began afflicting Egypt in early 2011, Saudi Arabia quickly announced a $36 billion increase in subsidies. Jordan similarly authorized a $125 million subsidy package for its population, while Kuwait introduced both higher direct stipends and over a year of free food for its citizens.

This is a shrewd move, as it ties the population’s livelihood to the regime’s survival (much like the Chinese Communist Party’s 80 million person membership roll helps ensure support for the CCP). However, it is also prohibitively expensive to maintain these subsidies, and once they are so given, any government will find it difficult to eliminate them.

The Persian Gulf regimes, of course, use their extensive oil wealth to pay for these subsidies, which is what makes Asia’s slowdown so dangerous to the Persian Gulf states. Since Asia figures to purchase such a larger percentage of the Persian Gulf’s oil exports, if it proves unable to do so the price of oil is likely to plummet. Should this decline in oil prices persist for too long, depleting the monarchies’ treasuries, it would leave them unable to continue buying their populations’ loyalty.

China’s economic course in the coming years will be particularly crucial to Middle East stability. Not only does China directly purchase a greater proportion of Persian Gulf oil than other Asian nations, but China is the top trading partner of most of these other states.  Therefore, a significant downturn in the Chinese economy will greatly disrupt the economies of other important Middle East oil consumers like Japan and South Korea, further reducing petroleum demand.

Especially when combined with rising oil production in the Western Hemisphere, it’s hardly unimaginable that global energy prices could decline sharply in the years ahead. This would be disastrous for many Middle Eastern monarchies, particularly those in the Persian Gulf (as well as other so-called petrol states like Russia and Venezuela). Notably, this process could easily become self-sustaining as instability in the Persian Gulf is likely to cause a spike global energy prices. While this may temporarily help some of the Middle Eastern regimes, it would also further dampen the prospects of an economic recovery in Asia. This in turn would further soften global demand for oil.

Despite the perception in the West that the Arab Spring was largely a movement for greater negative freedoms like the right to vote and limited government, it in fact was principally driven by demands for greater positive freedoms like more economic opportunity. The second Arab Spring would be no different.