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MENA Crisis: The Key Risk to Global Recovery and Stability
Business Monitor International, March 2011, Pages: 46
A Pivotal Moment - History in the Making
The wave of popular protests that has swept across the Middle East and North Africa (MENA) since January constitutes the biggest shake-up to the region for at least a generation, and its impact will be felt for many years to come. The unrest also poses the biggest risk to the global economic recovery this year, not least because it is causing oil prices to spike higher.
Although it is still too early to determine whether the unrest will lead to genuine democratisation or renewed authoritarianism, it is clear that most countries' political risk profiles will remain elevated for the foreseeable future. The countries that have already seen regimes ousted are entering uncharted territory, as they transition to a new political order, while the states that have yet to see change will be bracing themselves for all eventualities.
Democratisation is now a realistic possibility, but the path will not be easy, and any attempt to hold back the tide will risk greater unrest. Although rising inflation has fuelled discontent, the protests are being driven by more fundamental issues, such as a lack of democracy, high unemployment, poor opportunities for social advancement, anger at perceived government corruption and high inequalities, significant demographic youth bulges, and in some cases, ethnic and sectarian strife.
Algeria, Bahrain, Iran, and Yemen are deemed to be most at risk of further unrest, although BMI emphasises that virtually no state will be completely immune to public protests. Egypt will remain in a delicate transition to democracy, and if the people's hopes are dashed, further protests could erupt. In Bahrain, the growing demands of the Shi'a majority could transform the polity, with major implications for Saudi Arabia, which fears unrest among its own Shi'a minority in the oil-rich Eastern Province. Saudi Arabia also fears that
Iran may be instigating unrest in Bahrain to increase its geopolitical influence. Ironically, Iran itself is at risk of severe political upheaval, due to its deteriorating economy and tighter international sanctions, and BMI sees scope for regime change in both Saudi Arabia and Iran by the end of this decade.
Libya's descent into civil war represents the most immediate risk to the region and Europe. The country's oil supplies are of key significance to the EU, but southern European countries also fear a massive influx of refugees from the country. Even if Colonel Qadhafi is formally removed from power, Libya's wounds will take a long time to heal, and the ensuing power vacuum could necessitate Western military intervention. In addition, chaos and lawlessness in Libya could allow Islamist extremists to establish a greater presence in the country.
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