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Fiscal crises caused by falling prices limit governments’ room for domestic maneuver and force painful political choices

The economic profile of the Gulf states is not, however, typical of most oil-producing states. Most have a much lower ratio of oil reserves to population. Many large oil exporters have large and rapidly growing populations that are hungry for consumption, social spending, subsidies, and investment

In February, even before the coronavirus hit, the International Monetary Fund was warning Saudi Arabia and the United Arab Emirates that by 2034 they would be net debtors to the rest of the world. That prediction was based on a 2020 price of $55 per barrel. At a price of $30, that timeline will shorten. And even in the Gulf there are weak links. Bahrain avoids financial crisis only through the financial patronage of Saudi Arabia. Oman is in even worse shape. Its government debt is so heavily discounted that it may soon slip into the distressed debt category

Algeria—with a population of 44 million and an official unemployment rate of 15 percent—depends on oil and gas imports for 85 percent of its foreign exchange revenue

Populous middle-income countries that depend critically on oil are uniquely vulnerable. Iran is a special case because of the punitive sanctions regime imposed by the United States. But its neighbor Iraq, with a population of 38 million and a government budget that is 90 percent dependent on oil, will struggle to keep civil servants paid.

Ecuador is the second Latin American country after Argentina to enter technical default this year.

The oil and gas boom of the early 2000s provided the financial foundation for the subsequent pacification of Algerian society under National Liberation Front President Abdelaziz Bouteflika. Algeria’s giant military, the basic pillar of the regime, was the chief beneficiaries of this largesse, along with its Russian arms suppliers. The country’s foreign currency reserves peaked at $200 billion in 2012. Spending this windfall on assistance programs and subsidies allowed Bouteflika’s government to survive the initial wave of protests during the Arab Spring. But with oil prices trending down, this was not a sustainable long-run course. By 2018 the government’s oil stabilization fund, which once held reserves worth more than one-third of GDP, had been depleted. Given Algeria’s yawning trade deficit, the IMF expects reserves to fall below $13 billion in 2021. A strict COVID-19 lockdown is containing popular protest for now, but given that the fragile government in Algiers is now bracing for budget cuts of 30 percent, do not expect that calm to last.

Before last month’s price collapse, Angola was already spending between one fifth and one third of its export revenues on debt service. That burden is now bound to increase significantly. Ten-year Angolan bonds were this week trading at 44 cents on the dollar. Having been downgraded to a lowly CCC+, it is now widely considered to be at imminent risk of default. Because servicing its debts requires a share of public spending six times larger than that which Angola spends on the health of its citizens, the case for doing so in the face of the COVID-19 crisis is unarguable.

Faced with the price collapse of 2020, Finance Minister Zainab Ahmed has declared that Nigeria is now in “crisis.” In March, the rating agency Standard & Poor’s lowered Nigeria’s sovereign debt rating to B-. This will raise the cost of borrowing and slow economic growth in a country in which more than 86 million people, 47 percent of the population, live in extreme poverty—the largest number in the world. Furthermore, with 65 percent of government revenues devoted to servicing existing debt, the government may have to resort to printing money to pay civil servants, further spurring an already high inflation rate caused by food supply shortages

The price surge of the 1970s and the nationalization of the Middle East oil industry announced the definitive end of the imperial era. The 1980s saw the creation of a market-based global energy economy. The early 2000s seemed to open the door on a new age of state capitalism, in which China was the main driver of demand and titans like Saudi Aramco and Rosneft managed supply

The giants such as Saudi Arabia and Russia will exploit their muscle to survive the crisis. But the same cannot so easily be said for the weaker producers. For states such as Iraq, Algeria, and Angola, the threat is nothing short of existential.

Beijing has so far shown little interest in exploiting the crisis for debt-book diplomacy. It has signaled its willingness to cooperate with the other members of the G-20 in supporting a debt moratorium.

In a century that will be marked by climate change, how useful is it to restore profits and prosperity based on fossil fuel extraction?

The shock of the coronavirus is offering a glimpse of the future and it is harsh. The COVID-19 crisis drives home that high-cost producers are on a dangerously unsustainable path that can’t be resolved by states propping up their uncompetitive oil sectors. Even more important is the need to diversify the economies of the truly vulnerable producers in the Middle East, North Africa, sub-Saharan Africa, and Latin America.

It is an anomaly of the Tunisian political scene that the UGTT’s anti-austerity position has little representation among elected politicians: the largest political groups (the Islamist Ennahda party and various offshoots of the secular-modernist Nidaa Tounes party) have backed the IMF agreement

unemployment and the proliferation of grey-sector jobs are linked to structural biases in the economy that systematically favour a small group of politically connected businesses. Measures that might address this problem include increasing access to credit for would-be entrepreneurs, changing regulations and practices within the public and banking sectors that are tilted to a narrow elite, and reducing corruption. According to Tunisians, corruption has not been reduced but only “democratised” since the revolution. Investment in infrastructure serving disadvantaged parts of the country could also help spur more inclusive growth

Since the revolution, the overarching priority of political life in Tunisia has been to seek enough stability to preserve and complete the political transition. Much has been achieved, though a few important steps (notably the establishment of a Constitutional Court) remain unfulfilled. But Tunisia has now reached a point where the greatest threat to stability is no longer political rivalries around religious identity but unmet social and economic aspirations. Until now, the country’s political parties have not organised themselves to offer distinctive and coherent visions of how Tunisia’s socio-economic development can be improved, and they are paying the price in public alienation from the entire political system

Economists and Egyptian businessmen have long complained that the military’s role in the economy crowded out the private sector and scared away foreign investors. The army, the country’s most powerful institution, is exempted from some taxes and its businesses are notoriously opaque.

Cairo was forced to go to the IMF last year after foreign investors withdrew about $20bn from Egypt’s debt markets around the time of Russia’s invasion of Ukraine. The capital outflow triggered a foreign currency crisis and forced Cairo to turn to Gulf states for a multibillion-dollar bailout.

Egypt had been paying the world’s highest real interest rate to attract the portfolio inflows it used to finance its current account deficit.

the weak pound has added to inflationary pressures. Core inflation rose to 24.4 per cent in December

The decision to implement the new system was quickly reversed, however, over fears that the simmering bread crisis could provoke wider tumult. Seeking to allay citizens’ concerns that the move was a prelude to a reduction in their quotas of subsidized bread, Moselhy held a televised press conference on the day of the protests, apologizing to “all citizens who had not received bread” and asserting that their quotas would remain untouched. Promising to resolve the crisis within 48 hours, he blamed bakery owners for the crisis, hinting they were making profits off the subsidized flour they received from the government.

In the last six years, government spending on food and fuel subsidies has represented more than a quarter of annual government expenditure (more than the country spends on education and health services combined)

a thriving black market for the subsidized wheat, which is often resold by the bakeries at a profit rather than turned into bread

the weak currency is helping the economy by boosting exports and luring back tourists. A 25% increase in non-petroleum exports in January (compared with the same month last year), along with new loans from the IMF and other sources, is beefing up foreign currency reserves, according to The Economist. The weaker currency is also proving to be a blessing in disguise for local manufacturers as more consumers are opting to purchase local products, which are more affordable than their imported alternatives

Tensions have been simmering since the pound’s depreciation — a key requirement by the International Monetary Fund for Egypt to secure a $12 billion loan needed to finance the country’s budget deficit and shore up dwindling foreign currency reserves. Economists and analysts have lauded the flotation as “a much-needed reform that would restore investors’ confidence in the economy, helping foster growth and job creation.”

shrinking middle class was already struggling with flat wages, high inflation and mounting unemployment

Sisi’s approval ratings, which according to a poll conducted in mid-December 2016 by Baseera (Egyptian Center for Public Opinion Research) fell by 50% during his second year in office

“The patience of Egyptians is wearing thin,” Cairo University political scientist Hassan Nafaa told Al-Monitor. “Despite the economic pressures they are facing, citizens have so far restrained themselves from protesting because they are weary after two revolutions. They also fear further turmoil as they see the civil wars in some of the neighboring Arab countries. But if people are hungry and if their basic needs are not met, there is likely to be another rebellion,” he warned, adding that if that happens, “It would be messy and bloody.”

The real test will be the government’s ability to stave off unrest that could undermine the progress made so far. Nafaa said it is possible to quell the rising anger over soaring prices “through more equitable distribution of wealth, better communication of government policies, transparency and accountability.”

“The government must also ease the crackdown on dissent, release detainees who have not committed terror crimes and bring more youths on board,”

While we may not know exactly how much Arab regimes spend on their militaries, we do know that they are among the world’s leading importers of arms—an industry rife with corruption—and the largest recipients of military aid. As SIPRI has documented, six of the top 10 importers of major arms were Arab countries, totaling nearly one-third of all global imports ($146 billion) between 2015 and 2019. In 2017—the last year for which full data are available—four of the top 10 purchasers of U.S. arms were Arab countries, and nearly one-third of all U.S. weapons sales ($36.6 billion), along with roughly $5 billion in U.S. security aid, went to Arab regimes.

When IFIs provide assistance, even emergency aid, to Arab governments, they should condition the funds on transparent budgets, including a full accounting of military expenditures

In 2016, the military and other security institutions were given exemptions in a new value-added tax (VAT) law enacted as part of IMF-inspired reforms. The law states that the military does not have to pay VAT on goods, equipment, machinery, services and raw materials needed for the purposes of armament, defense and national security.The Ministry of Defense has the right to decide which goods and services qualify. Civilian businessmen complain that this can leave the system open to abuse. Receipts for a cup of coffee at private sector hotels, for example, add 14 percent VAT. Receipts at military hotels do not. Employees at the military-owned Al-Masah Hotel in Cairo told Reuters that no VAT was charged when renting venues for weddings and conferences.

The Ministry of Military Production is projecting that operating revenues from its 20 firms will reach 15 billion Egyptian pounds in 2018/2019, five times higher than in 2013/2014, according to a ministry chart. The ministry does not disclose what happens to the revenues. The chairmen of two of the firms said profits go to the ministry or are reinvested in the business.

“I don’t want to be a local shop. I want to be a company that has the capacity to export and compete internationally.”

Egypt’s military, the biggest in the Arab world, has advantages.It enjoys financial support from Saudi Arabia and the United Arab Emirates, staunch supporters of Sisi since he toppled the group they see as a threat to the Middle East, the Muslim Brotherhood. Western powers see Cairo as a bulwark against Islamist militancy. Egypt receives $1.3 billion in military aid annually from the United States alone.

The chairmen of two military engineering companies, Abu Zaabal Engineering Industries Co and Helwan Engineering Industries Co, said in recent years it had become much easier to access financing through the Ministry of Military Production.

The Ministry of Military Production signed a memorandum of understanding with China’s GCL Group last week to build a solar panel factory worth up to $2 billion. The military has taken over much of the construction of intercity roads from the Ministry of Transport and now controls the toll stations along most major highways.

Economists and investors say reforms tied to a $12 billion three-year IMF program signed in Nov. 2016 should lay the ground for economic expansion. But foreign investors are still shying away from Egypt, apart from those focusing on the more resilient energy sector. Non-oil foreign direct investment fell to about $3 billion in 2017 from $4.7 billion in 2016, according to Reuters calculations based on central bank statistics.  

foreign investors were reluctant to invest in sectors where the military is expanding or in one they might enter, worried that competing against the military with its special privileges could expose their investment to risk. If an investor had a business dispute with the military, the commercial officer said, there was no point in taking it to arbitration. “You just leave the country,” he said.

Among projects the Ministry of Military Production announced in 2017 was a plan to plant 20 million palm trees with an Emirati company and build a factory to make sugar from their dates. It agreed with a Saudi company to jointly manufacture elevators. The military inaugurated the Middle East’s biggest fish farm on the Nile Delta east of Alexandria.

In 2015, the defense minister issued a decree exempting nearly 600 hotels, resorts and other properties owned by the military from real estate taxes

Military companies receive an exemption from import tariffs under a 1986 law and from income taxes under a 2005 law. Cargoes sent to military companies do not have to be inspected.

At bustling Cairo squares, people line up to buy subsidized meat and other food handed out from trucks sponsored by the military. Sisi said he had instructed the military to enter the market “to supply more chicken to push down prices.”Some disagree with such measures on the grounds the military’s mission is to protect the country from external threats.“We have reached a point where they are competing even with street vendors,”

when he talks he talks the language of the street and the street listens to him. That's Sisi's problem.  

Sisi  was a "failed man", a "disgrace", a "midget" who uses make up and hitches his trousers up too high, Ali told Egypt. Sisi was a con man who lectured you on the need to tighten your belt while building palaces for his wife Intissar.

Ali listed them: a luxury house in Hilmiya ($6m), a presidential residence in Alexandria ($15m), a palace in the new administrative capital, and another one in the new Alamein city west of Alexandria.

A report published by the World Bank in April calculated that "some 60 percent of Egypt’s population is either poor or vulnerable". 

Most Egyptians have seen their real incomes fall, while Egypt under its IMF-backed austerity programme is racking up huge foreign debts. It was $43bn during Morsi’s presidency. It is $106bn now. Seventy per cent of taxes now goes into paying these debts off. Internal debt is over 5 trillion Egyptian pounds ($306bn).

Every Egyptian remembers the lectures Sisi gave them on the need to tighten their belts. When the IMF forced the state to reduce subsidies, Sisi’s response was: "I know that the Egyptian people can endure more... We must do it. And you’ll have to pay; you’ll have to pay," Sisi said in one unscripted rant a year into his presidency.

"Now you say we are very poor, we must be hungry. Do you get hungry? You spend billions that are spilt on the ground. Your men squander millions. I am not telling a secret. You are a bunch of thieves."

Ali’s YouTube channel has done more in three weeks to destroy Sisi’s image than the Brotherhood, liberals and leftists, now all crushed as active political forces in Egypt, have done in six years of political protest. 

To their credit the opposition did not crumble, paying for their stand with their lives and their freedom. To their shame the Egyptian people did not listen.

Sisi thinks he can ride this out, as he has done challenges in the past. Hundreds of protesters have been arrested since last Friday.

The initial demonstration in Tahrir Square in January 2011 was smaller than the ones that broke out in Cairo, Suez and Alexandria last Friday. They called for reform, not the overthrow of Hosni Mubarak. Last Friday, Sisi’s portrait was torn down. “Say it, don’t be afraid, Sisi has to leave!” they shouted on day one of this fresh revolt. 

the "opposition" is everybody - ordinary Egyptians, disaffected junior ranks in the army, Mubarak era businessmen. This is a wide coalition of forces. Once again Egypt has been reunited by a tyrant

unlike 2013, Sisi’s bankers  - Saudi Arabia and the UAE - have run out of cash for Egypt. Today each has its own problems and foreign interventions which are all turning sour - Yemen and Libya.

The steam is running out of the counter-revolution.

popular protest is re-emerging as a driver for change across the region. We have seen it topple dictators in Sudan and Algeria. Both have learned the lessons of failed coups in the past and have so far managed the transition without surrendering the fruits of revolution to the army. This, too, has an effect on events in Egypt.

Europe’s neighbors are set to endure even more hardship when it comes to trade imbalances as their exports are due to collapse. They will be among the most affected from the ongoing fall in consumer demand in Europe given their heavy reliance on the continental market. The European Union’s share of total exports stands at some 65 percent for Morocco, 50 percent for Turkey, and 43 percent for Ukraine.

a perfect storm on Europe’s borders. The combination of recessionary economics, balance of payments difficulties, and surging unemployment has created a formidable challenge that will jeopardize domestic social contracts

The ensuing political and economic instabilities would not only create the conditions for the rise of radicalization in these afflicted societies but also trigger new cross-border movements and refugee flows across the Mediterranean.

In the absence of a global consensus, EU governments should consider shifting their IMF-held SDRs to financially strained neighboring countries. That would amount to a financial stimulus of about $95 billion with no fiscal impact on EU and national budgets.

the European Central Bank (ECB) should be more actively involved in establishing swap arrangements with the central banks of partner countries. Under such a scheme, beneficiary countries would obtain euros from the ECB against a collateral in their own currency. These arrangements would provide beneficiary countries with foreign exchange liquidity and replenish their reserves

a series of shared behavioral patterns. The personas identified by The Daily Beast were generally contributors to two linked sites, The Arab Eye and Persia Now; had Twitter accounts created in March or April 2020; presented themselves as political consultants and freelance journalists mostly based in European capitals; lied about their academic or professional credentials in phony LinkedIn accounts; used fake or stolen avatars manipulated to defeat reverse image searches; and linked to or amplified each others’ work. 

In February, two websites, The Arab Eye and Persia Now, were registered on the same day and began to acquire a host of contributors. 

both sites share the same Google Analytics account, are hosted at the same IP address, and are linked through a series of shared encryption certificates

Persia Now lists a non-existent London mailing address and an unanswered phone number on its contact form. The apparent editors of the outlets, Sharif O'Neill and Taimur Hall, have virtually no online footprints or records in journalism.

placed articles critical of Qatar and supportive of tougher sanctions on Iran in conservative North American outlets like Human Events and conservative writer Andy Ngo’s The Post Millennial, as well as Israeli and Middle Eastern newspapers like The Jerusalem Post and Al Arabiya, and Asian newspapers like the South China Morning Post.

constant editorial lines like arguing for more sanctions on Iran or using international leverage to weaken Iran’s proxy groups in Lebanon and Iraq. The personas are also big fans of the United Arab Emirates and have heaped praise on the Gulf nation for its “exemplary resilience” to the COVID-19 pandemic, its “strong diplomatic ties” to the European Union, and supposedly supporting gender equality through the Expo 2020 in Dubai.

criticizing Facebook for its decision to appoint Tawakkol Karman, a 2011 Nobel Peace Prize laureate, to its oversight board. Media outlets in Saudi Arabia, Egypt, and the United Arab Emirates have criicized the appointment of Karman, a former member of the Muslim Brotherhood affiliated Islah Party in Yemen, for her association with the group.

None of the Twitter accounts associated with the network ever passed more than a few dozen followers, but a few still managed to garner high profile endorsements for their work. An article by “Joyce Toledano” in Human Events about how Qatar is “destabilizing the Middle East” got a shout-out from Students for Trump co-founder Ryan Fournier’s nearly million-follower Twitter account and French senator Nathalie Goulet high-fived Lin Nguyen’s broadside about Facebook and Tawakkol Karman.

All of the stolen avatars were mirror image reversed and cropped from their originals, making them difficult to find through common Google reverse image searches

On her LinkedIn page, “Salma Mohamed” claimed to be a former reporter for the AP based in London, though no public record of an AP journalist matching Salma Mohamed’s description is available.

Another persona, Amani Shahan, described herself in bios for Global Villages and Persia Now as being a contributor to and “ghostwriting articles” for The Daily Beast. No one by that name has ever written for The Daily Beast and The Daily Beast does not employ ghostwriters. (Shahan also referred to herself with both male and female pronouns in different author bios.) 

“It’s a wonder how people survive,”

The massive fall in oil prices from over $100 per barrel in early 2014 to under $30 by January 2016 was caused primarily by then-Saudi Minister of Petroleum Ali al-Naimi’s strategy to gain market share for the kingdom and hurt the U.S. tight oil (or “shale”) industry by allowing the market, not OPEC interventions, to set prices.

While Riyadh has cranked up its production from mid-2014 to today by over a million barrels a day (to a peak of 10.7 mbpd in August this year), its fiscal position has taken a serious blow, with the budget deficit rising from 3 percent of GDP to 16 percent in 2015

The resilience of U.S. shale makes the argument that OPEC has experienced a resurrection a fragile claim. The cartel can probably raise prices in the short term through an output cut, but it will only be so long, perhaps already by mid-2017, before the U.S. shale industry revives and grabs any market share conceded by OPEC in a higher price environment. This will ultimately bring prices lower again, all else being equal.

Within OPEC, while other Gulf Co-Operation states, namely Kuwait and the United Arab Emirates, may be prepared to make a small cut to their production, key producers like Iraq and Venezuela are in too difficult a fiscal position to agree to any major cut.

Outside OPEC, Russia reached a production record of 11.1 mbpd in August, eclipsing Soviet levels. Being so close to the maximum anyway, Russia has little to lose by supporting the OPEC output cut and agreeing not to raise production further. Yet the Kremlin is unlikely to impose actual cuts on the range of oil companies that operate in the country.

In the short term, it seems Riyadh’s fiscal position was under such pressure from low oil prices that something had to give. While the kingdom has eased the fiscal pressure by starting to issue sovereign debt, the burn rate through its foreign reserves has been relentless (from about $740 billion in mid-2014 to $550 billion today) as it has attempted to defend the currency in the face of substantial capital flight from the country since the oil price crash in 2014.

Climate change will plainly be a major problem of the 21st century, and the world is moving away from fossil fuels: game over for an unreformed Saudi Arabia.

Saudi Arabia will face hard years ahead as the oil market increasingly looks to U.S. shale, not OPEC, as a handrail to oil prices on the supply side. However, this might well be the jolt that Salman needs to push through painful but necessary reforms

resources for this purpose must be provided through the suspension of debt service payments and through the cancellation of illegitimate public debts

we are planning on organising campaigns of denunciation, raising awareness and initiatives in order to encourage common struggles and establish forms of coordination and solidarity with movements sharing the same objectives

Food sovereignty is the antithesis of the productivist capitalist food system, which is responsible for the destruction of natural resources and a climate chaos that threatens the lives of millions of people. It is peasant agriculture and subsistence fishing that feed humanity and preserve the environment, rather than the intensive, industrial, commercial and chemical agriculture promoted by capitalism.

collective struggle against free trade agreements, fisheries agreements and the World Trade Organization, as well as against the International Monetary Fund and the World Bank, which enslave people through the debt system

initiation and promotion of experiments in popular farming systems that aim at breaking free from food dependence

Broadening international solidarity in order to stop the growing repression against popular mobilizations (peasants, fishermen, indigenous, and agricultural workers, etc.) and to organize and protect their lives, their lands, their environment and their food traditions.