Oil Games: What is the Nash Equilibrium for Iran and Saudi Arabia? #OilGames #

Dear Pita-consumers:

We are trying to include both the Saudi Arabia stock exchange index, Tadawul (Tasi) and Iran’s stock exchange index, Tepix, within the PITAPOLICY blog so that you can read and critique our posts while getting updated about the biggest stock markets in the Middle East & North Africa region–all in one place!  But we are troubleshooting with some plug-ins that allow Tasi and Tepix to run across our sidebars on the screen.  Currently, we are fumbling with ‘Custom Stock Widget’ and ‘Custom Stock Ticker’.  Soooooo, if you have any suggestions of which widgets or plug-ins to install, please tweet us @PITAPOLICY!  We especially feel that our readers would appreciate these tools on the blog as they read through this week’s post on the oil business spilling into political shenanigans among Saudi Arabia, Iraq, and Iran.

Oil Games

Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.~Saudi Arabian oil minister Ali al-Naimi

Despite Saudi Arabia’s and Russia’s opposing stances in the Syria crisis, both oil-producing countries believe they will more likely gain if they agree to cut oil output as OPEC members.  Oil prices have dropped to $35 a barrel in contrast to $116 in June 2014.  Their mission: convince other OPEC members (Venezuela, GCC countries, Iraq, and Iran) that they share in this oil production freeze interest. The United Arab Emirates, OPEC’s third largest producer, has already agreed to the Saudi-Russia strategy to cut oil production.

A set of choices to either ‘produce oil’ or ‘not produce oil’ is a clear example of predicting player behavior:  deciding whether the country/’player’ decides to cut oil production or not cut oil production, hence game theory.  So far, Iraq, Venezuela, and the UAE have agreed to play along with the Saudi-Russia strategy.  This is significant since Iraq is the OPEC’s second largest producer and captures quite a bit of the oil market share.  However, Iran remains unconvinced of their strategy providing gains for all OPEC members since they’ve been prohibited from selling oil for decades.  Iran wants to recapture what it believes is its market share of oil before the sanctions took Iran out of the oil game.  Let’s play a round, pita-consumers.

Now, before we play, let’s step back to remember in the movie, a “Beautiful Mind“–about Nobel prize winner for economics, John Nash–where he stands in a bar with his friends and notices a group of women.  Two of the women are physically attractive, two are average-looking, and the last one is considered the most physically attractive.  Nash applies game theory to the problem that he and his friends encounter at the bar.  He questions whether they should all approach whom they feel is the most attractive option and risk all getting rejected–not once, but twice–since they will likely be rejected by her friends after feeling that they are the men’s second choice.

Finally, Nash concludes that the two attractive women–or attractive options with less risk, and higher gain– rather than the ‘most physically attractive”–high risk and chance of zero gain– are more likely to be approached by his friends because each can be paired off successfully and produce no ‘losers’.

We introduce this somewhat crude explanation of Nash equilibrium to illustrate how the choice to cut output by each member depends on how much each OPEC member believes it gains in the short-run.  By cutting output to raise demand, and hence oil prices for pita-consumers, many OPEC members argue that this produces stability in the long-run for them.

Yet, at the same time, if another player/member, like Iran, decides to play the Saudi/Russia/Kuwait strategy, then they must lose out on the opportunity to regain their market share.  Yesterday Iran’s oil minister, Bijan Namdar Zanganeh, said that Iran “supports any measure to boost oil prices” but stopped short of committing Iran to capping its own output, which stands at 2.9 million barrels a day.

Iran Gains After Re-entering Oil Games

As expected, the lifting of the economic sanctions is most beneficial to Iran, where per capita welfare is expected to rise by almost 4 percent.

Since the sanctions on Iran were lifted post-Iran nuclear deal, Iran has re-entered the “Oil Games”.  The World Bank’s Middle East & North Africa Division estimated how much Iran and its neighboring oil-exporting countries would gain or lose with the re-emerging Iran player.  In a nutshell: Iran gains almost 4 percent in per capita welfare.  Furthermore, if Iran implements additional reforms to be more competitive, Iran gains an additional half percentage point “to upgrade their factories and import new technology.”  So Iran can continue to increase its economic gains as it becomes more integrated in other technology sectors.

From Iran’s point of view: all OPEC members playing their dominant strategy to cut oil, is at the expense of their opportunity to re-enter the oil market at their pre-embargo level of participation.  Perhaps Iran is going after the “most attractive” option and ready to risk lower oil prices just to get back into the oil game in the long-run.

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Managing Socio-#Econ|omic Expectations #IranElections #ImplementationDAy

“We intend to re-open trade with all our neighbors…. and begin cooperation.”~President of the Islamic Republic of Iran, Hassan Rouhani

Earlier this month, 78.4 million Iranians saw the economic sanctions lifted, which were imposed in 1979 after Iran underwent a revolution.  During this period, the infamous American Hostage Crisis occurred where a group of Iranians took over the American embassy to protest American intervention in Iran’s domestic affairs.  [Note: this recap does not do justice to all parties involved.]  At this point, the U.S., France, Britain led the majority of the advanced economies in cutting off diplomatic ties with Iran’s new regime by imposing US, United Nations and European Union sanctions, thus prohibiting Iran from selling its oil, much like the situation in Iraq during the Saddam Hussein era.  Both the U.S. and EU froze Iranian assets and refused to trade with Iran by implementing sanctions.  Over two decades later, Iran underwent further isolation and sanctioning after Iran developed a nuclear program to explore various technological uses–including peaceful purposes.

In the meantime, the International Monetary Fund served as the awkward “friend of a friend” who hosted a financial wonk/nerd potluck of 188 guests at semi-annual meetings, including Iran whose one-dish gift would be scrutinized. Same may apply to World Economic Forum meetings.  However, the World Economic Forum 2016 invited President Hassan Rouhani to articulate what he believed Iran’s agenda should be as Iran gets pulled into a more interconnected global network…of investment? or a pregnant pause to integrate politically for economic gains.

With the 2015 Iran nuclear deal, says it has access to $100 billion worth of frozen overseas assets after negotiating its nuclear deal with world powers.  On January 16th, the International Atomic Energy Association–agency that faced uncannily similar political pressure with Iraq in 2002– verified that Iran had met all the Iran nuclear deal commitments negotiated by the P5 +1 parties (China, Russia, US, France, Germany, and the UK–note the exclusion of Turkey, a NATO ally) in the Joint Comprehensive Plan for Action and signaled the next step of lifting economic sanctions.

We were too excited on #ImplementationDay, January 16th, to blog about this event.  Why? Well, for example, lifting economic sanctions represented a double win for science & technology and  : MRI machines allowed to treat cancer patients.  Furthermore, Iran is now able to buy new airplanes after three decades of aviation sanctions that led to dangerous flights and many civilian deaths. As such, it was no surprise that EU members jumped at the opportunity to meet this demand and sell hardware for oil.  For example, France sold 118 commercial planes to Iran.  Immediately before President Rouhani & France reconciled, Italian companies signed contracts estimated at $18.62 billion with Iran.

On the other hand, there are legal issues to consider for Americans and others who want to re-enter into business in Iran after the 37 year hiatus as noted by Managing Parnter Farhad Alavi of Akrivis Law Group.

…plus we wanted to see how American news stations would review and assess this situation from a distance.  Take a listen:

Lifting Economic Sanctions produces high expectations for Iran's economic growth.

Lifting Economic Sanctions produces high expectations for Iran’s economic growth.

  • National Public Radio (United States) program

Beyond Iranian Oil

By the end of 2016, “Iran will likely add around 400,000 barrels per day to the market,” forecasted oil markets specialist, Webster Drake, at the Atlantic Council based in Washington, DC.  Although the banking sector in Iran is a remote idea for the US and EU countries, 31 foreign banks have operated in Iran.  Two ironic twists in Iran’s banking story:

  1. Merrill Lynch and the Canada operate banks in Iran among the 31 foreign banks.
  2. Arab Gulf Cooperation Council members, Bahrain and Kuwait–sworn allies of Saudi Arabia, but whom harbor cold relations with Iran–also operate banks in Iran.

For all the Gulf Arab and Iran tension discussion noted in the U.S., the banking relations raises doubt about how negative the potential for increased relations really are.

In the last 6 months, economists and Iran watchers have focused on Iran’s second biggest industry, automobile production.

Iran Elections for Parliament: #IranElections2-16

On February 26th, Iran will holds its first election since #ImplementationDay–an historic day when the economic sanctions on Iran were lifted.  Iran has 290 seats in parliament.   The will drive Iran’s political economy further into the right or left hand turns.

Reformist factions said that out of the 3,000 candidates they had put forth, only 30 were approved.~BBC News

Now that economic sanctions against Iran have been lifted, it has been informative to see how Iran’s political elites–whether “hawks”, “doves”, “Conservatives” or “Reformists”– will frame what they believe are Iran’s top economic concerns.  How will they argue where Iran must posture itself in global affairs?   Meanwhile 88 of those must be screened by Guardian Council.  The screening process was called into question by former leaders, like Akber Hashemi Rafsanjani, who has ties to both “conservatives” and “reformists”.  Of the 12,000 candidates that applied for those 88 contested seats, the Guardian Council rejected 7,000 potential candidates.

One thing does unite Iranian politicians: Managing citizen’s socio-economic expectations as consumers after “Implementation Day”.  After that, political camps will diverge on this point depending on how much this agenda item can distract from managing civil society’s political expectations.

“The ingredients are all there,”  “Iran has an established history of elections that has put people in the habit of going to the polls. Iranians are used to hearing different opinions expressed in parliament and in the press. They turn out to vote in great numbers, and hold elected officials accountable for their actions.”~Barbara Slavin, recently a senior fellow at the United States Institute of Peace and author of Bitter Friends, Bosom Enemies: Iran, the U.S., and the Twisted Path to Confrontation.



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Food Crisis in Syria Triggers a Drop in Syria’s Human Development Index

Happy New Year PITA-consumers!

What are you all expecting for 2016 in business, intra-MENA trade, development goals, and political bargaining?  Whether you are an optimist, pessimist or cautiously optimistic, that list is probably long!  Before we ramble on and on about Saudi Aramco — the largest oil company in the world, and the first in the region to open itself up to privatization — we just want to share the latest development challenge in Syria since its Human Development Index continues to drop for the fourth year in a row.  In 1980, Syria boasted an HDI of .528, and ranked 69th in the world.  Now, 35 years later, Syria’s HDI of .598 has sunk Syria to 134th place, according to the World Bank.  Why?  How?  Well, check this video out explaining how the Syrian government in Damascus uses food as a weapon of control, or “tool of war”, during the siege.  For example, in the town of Madaya, 40,000 people have little access to food.

  In some areas, the price of food has skyrocketed so that a kilogramme of rice now costs $100.


Meanwhile, Saudi Arabia’s new Council of Economic and Development Affairs has finally heeded IMF’s call to move towards privatizing its primary sector, oil and petroleum.  (By the way: Prince Mohammed bin Salman is the Chief Economic Planner who leads the Council– as well as the one in charge of Saudi’s Defense Ministry.)  How big is oil in Saudi Arabia?  Well, they represent 15 percent of global oil reserves.  Saudi ranks as the 19th largest economy in the world.

If it [Saudi Aramco] went public, it could become the first listed company valued at $1 trillion or more, analysts estimate.

Finally, certain levels of Saudi leadership have either recognized the economic, social and political disadvantage of keeping Saudi Aramco out of the private sector…or they have felt their purse-strings tighten with the decreasing global oil prices.  Crude oil prices hover around $30. In 2014, financial analysts shouted worriedly when oil prices “crashed” to $70.  See the 60% drop within 2 years!


The food crisis in Syria, manufactured by Syria’s tyrant, Assad, still sounds worse than the oil crisis, manufactured by production players, in our humble opinion.  Both hurt societies, but one of these crises bears a humanitarian cost that can be solved by changing leadership. Let’s hope that 2016 is on the side of the citizens.


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How would you name a luxury good product to target Lebanese market?

Happy Holidays! PITAPOLICY is tracking product names in Lebanon and the Arab Gulf Countries.  Which brandnames experience the most success in the Lebanese marketplace?  Which brandnames experience the most success in Arab Gulf countries, like Kuwait?

Is product success in the Lebanese market tied to the origin of the brandname?  Is it true that European sounding names for products do better in Lebanon?  Or is this only true because European brand names invested more in drawing in Lebanese consumers?

Similarly, is it true that European sounding names for products do better in the Arab Gulf countries?  We would like to hear your thoughts and consumer experiences!

Non Sequitur: TAXES

Oil markets do not revolve around branding.  Regardless of brand names, oil consumers worry more about price than quality.  While oil (and pita) consumers enjoy low gas prices, oil suppliers in the Gulf Cooperation Council and Iran must adjust their spending and review their subsidies policies.

It is an alert, not an alarm, because all these countries, including Saudi Arabia, are starting from a position of strength where they have significant buffers accumulated over the last few years… But if countries do nothing and assuming the price of oil was to stay at the level where it is, then certainly reserves would be depleted promptly, and more promptly than one would imagine. ~Christine Lagarde, Managing Director of the International Monetary Fund

IMF Managing Director warns that if they do not consider the “sharp decline” in oil prices, countries like Saudi Arabia could run out of wiggle room in their oil reserve accounts to balance spending after five years.

How to deal with this: Impose taxes, argues Lagarde to Finance Ministers.  Last month she traveled to the Gulf to deliver this message in person.  Check out Lagarde’s interview as she discusses the impact for GCC countries.    http://www.aljazeera.com/programmes/talktojazeera/2015/11/lagarde-call-action-oil-taxes-gcc-challenges-151113094249193.html

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One bomb raises the cost of doing business like messed up legislation. #Cost_of_Doing_Biz

Two weeks ago, REBEL ECONOMY blogged about how one bomb in the Sinai adversely affects the Egyptian economy.

President Sisi has his eye on a mega $8-billion expansion of the canal that aims to double daily traffic by 2023 and increase annual revenues to more than $13 billion by 2023, from just over $5 billion in 2014. Yet, none of this is meaningful if the government continues to resist structural reform which has left the economy floundering for years. It is also resisting the simple fact that there was likely a bomb on flight.

Given the above, Egypt’s President Sisi has gained even more ground to justify a security state and target militants because attracting foreign direct investment is his duty.  He argues that no one wants to invest in a country with violent attacks that target tourists.  Note: we would add — or raise the counterpoint — that no one wants to invest in a country with violent attacks that targets its own country’s citizens.

As Egyptian businessmen, economists, and security forces sort out the conditions on the ground to attract FDI, neighboring countries also compete for FDI.  A few indicators track such conditions that are highlighted in the World Bank’s Doing Business Report 2016.  In a nutshell, business reforms have picked up in the Middle East & North Africa, despite conflict.  Eleven countries in the MENA region introduced a total of 21 reforms that ease the costs of doing business — a record in the last 5 years.

Morocco and the UAE continue to lead the region in reform activity as both economies undertook four reforms each during the past year. Morocco made Starting a Business easier by eliminating the need to file a declaration of business incorporation with the Ministry of Labor. The UAE was the only economy in the region that reformed in the area of Enforcing Contracts. As a result, commercial disputes in the UAE are now resolved in 495 days, which is less than the average of 538 days in the high-income Organization for Economic Cooperation and Development (OECD) economies.

For some reason, Arab countries that are not in political transition, lead in passing business reforms.  Does that mean that we can expect to see more growth in small and medium businesses in the next five years for the “non Arab Spring” countries than their “Arab Spring” counterparts?  If so, this implies that heavy-handed–dare we say authoritarian– leadership will pounce on these business growth numbers to continue justifying its political power hold.

However, just like how a bomb raises the cost of doing business, so does messed up legislation.   The costs of starting a business remain astronomical for the average citizen across MENA countries.  Specifically, in some MENA countries, it costs almost one-THIRD of income per capita for local entrepreneurs to start their business, compared to less than one-THIRTIETH in the OECD.

Here is how the MENA countries ranked within the 189 countries surveyed in this year’s Ease of Doing Business Report.  Areas of improvement noted in parenthesis.

  • United Arab Emirates – (Dealing with Construction Permits; Getting Electricity; Protecting Minority Investors; Enforcing Contracts)
  • Turkey – 55 (Dealing with Construction Permits)
  • Bahrain – 65
  • Qatar – 68 (Trading Across Borders)
  • Oman – 70 (Getting Electricity; Trading Across Borders)
  • Tunisia – 74 (Paying Taxes; Trading Across Borders)
  • Saudi Arabia -82 (Registering Property)
  • Kuwait – 101 (Starting a Business)
  • Jordan – 113
  • Iran – 118
  • Lebanon – 123
  • West Bank & Gaza (Dealing with Construction Permits; Getting Credit)
  • Egypt – 131 (Protecting Minority Investors)
  • Pakistan – 138
  • Sudan – 159
  • Iraq – 161
  • Algeria – 163 (Dealing with Construction Permits; Starting a Business)
  • Morocco – 175 (Starting a Business; Getting Electricity; Registering Property; Paying Taxes)
  • Syria – 175
  • Yemen -177
  • Afghanistan – 177 (Getting Credit)
  • Libya – 188

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This Disease Needs to be Fought with Good Education & Economy

The total terrorism in the region is the fruit of terrorism by authoritarian regimes [across the Middle East & North African region]~Sheikh Rachid Ghannouchi

On October 28th, Sheikh Rachid Ghannouchi of Tunisia offered his perspective to the U.S. Institute for Peace in Washington, DC.   Ghannouhi, who was exiled during the Ben Ali regime, remains a vital voice in political, cultural, and religious circles throughout North Africa.  After Tunisians removed Ben Ali from power in 2011, Ghannouchi’s movement, Nahda, led the first post-revolution government.  The Nahda party formed and coalition to write the country’s new, more democratic, constitution. It is now a coalition partner in the secularist government led by President Beji Caid Essebsi. Sheikh Ghannouchi delivered remarks on the challenges facing his homeland and its region.

According to the U.S. Institute for Peace, Tunisia’s biggest challenges include the rise of extremism during its economic downturn, due to, in part, declining tourism.  Conversely, Tunisia’s declining tourism results from the violent extremist attacks.  Such violent attacks include the Bardo museum in 2014, the attack in Sousse earlier this year, and the three political assassinations since 2011.

However, one could argue that economic and socio-political unrest fomented during earlier authoritarian rule, and has finally come to a violent head.  As Sheikh Ghannouchi argued: political extremism in not just on the “right” but also on the “left”, and therefore, moderation tempered with “consensus” is the only way to govern inclusively.

We believe violence is a problem not a solution…Must focus on spread of dialogue and reconciliation.  Dialogue between secularists and Islamists is key to democracy in Middle Eas~Sheikh Rachid Ghannouchi

Nonetheless, U.S. interests remain keen on focusing on the national security elements in Tunisia.  In sum, the USIP stated:

Tunisia’s success or failure in building a peaceful democracy is central to U.S. and international interests in a stable North Africa, Middle East and Arab world—an importance recognized this month by the award of the 2015 Nobel Peace Prize to key mediators in the country’s political struggle. After two attacks by militant gunmen killed scores of people and crimped the country’s vital tourist economy this year, the government imposed a state of emergency—a step that raised fears among many Tunisians about a return to the country’s decades of authoritarian, police-enforced rule.

Ghannouchi explains high number of Tunisians joining Islamist politics in Iraq & Syria is result of years of oppression under Ben Ali. This mirrors the parallel trend of double digit unemployment that has persisted since 2000.   Tunisia “can’t fight terrorism without fighting the high level of unemployment,” says Sheikh Ghannouchi. 

  Sadly, Tunisia has inherited of the highest number of fighters who joined ISIS; 3000.

Disillusion among young Tunisians has made the country one of the biggest recruiting grounds for violent militant groups such as ISIS. As Tunisian youth circulate to battlefields in the Middle East—and as this nation of 11 million people hosts one million or more  refugees from the civil war in neighboring Libya—how can Tunisia manage its borders, improve its security, prevent violence, and also strengthen democratic politics?

Yet, in the most recent election, the lowest voter turnount was by the young with 30% unemployment.

A skeptic among the panel, Robin Wright, pushed back on Ghannouchi’s point that extremism increased in North Africa due to Tunisians political voice being suffocated in the Ben Ali ear.  She pointed out that it’s been 5 years since Tunisia’s revolution, so she finds it hard to believe that terrorism increased because of Ben Ali remnants & festering tension.  She specifically raises this contention in her new book “Rock the Casbah: Rage & Rebellion Across the Islamic World” and gives more weight narratives in Egypt & Tunisia (described as a weakness to frame context) and comments on the rise of ISIS from Tunisia to Iraq.  The lack of freedom, education, and under-development causes extremism, says Ghannouchi.  Also the political left’s denial of Islam as part of the social and cultural fabric contributes to internal unrest in Tunisa.  Ghannouchi brings up a relevant counterpoint, however, many could argue that the extremist elements within the political left have not, yet, resorted to violence.

Photo of Rachid Ghannouchi Presenting at U.S. Institute for Peace

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    Highlights from Ghannouchi Speech

    • Government cannot be ruled by simple majority of 51%…better to rule w/more consensus as seen with the Nida Tounis coalition formed in 2014.~Ghannouchi
    • Tunisia as a third way, beyond false binary between oppression (to get stability) or extremism (to get justice)

 Cooperation by way of moderate Islamists & moderate secularists is necessary for the success of democracy in our region.
    • We wanted democracy for all Tunisians, not just a majority.

    Ongoing Questions

  • Where are the redlines of the sacrifices made by ElNahda’s party when they join coalitions?
  • How can a “Marshall Plan” target sectors of development deemed as priority by Tunisians?

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Economic growth doesn’t translate as citizen growth. #GDP #Wellbeing

The World Bank’s Middle East & North Africa division released a report “Inequality, Uprisings, and Conflict in the Arab World” (included below along with the report link) that confirmed what many non-economists living in Tunisia, Syria, Yemen and Egypt suspected or could attest to personally.  Some Gallup polls related citizen’s dissatisfaction in many of these countries as well.  Despite consistently high growth rates in the Middle East & North Africa (pita-consuming) region, polling of populations “showed a precipitous decline in life satisfaction scores, especially for the middle class”.  In a nutshell, citizens living in Arab transition countries said “Enough/Bes” to the current social contract and the restrictions because they felt that — economy growth aside — THEY were not growing with the state.  Point taken as Qayyum @PITAPOLICY noted here on the World Bank’s Voices & Views site.

Key observations made in the report that SCREAMED at PITAPOLICY’s interest are the following:

  1. Economic inequality in Arab countries is relatively high — in particular in Egypt, where this contributed to the 2011 revolution.  [Note, economic inequality is pretty high in the United States too.]
  2. Poverty headcount is higher in the Arabworld than the overall MENA region. [Note that Yemen is the poorest country in the MENA region where 80 percent of Yemenis face a humanitarian and food crisis.]
  3.  The 20 or so largest companies in most Gulf States, Egypt, Lebanon, and Morocco are not listed on national or world stock exchanges. Instead, they are either firms privately owned by prominent families or state – owned firms. [See p. 29 of report.]
  4. The Iran nuclear deal raised its profile in its economic evaluation.  The final adoption and implementation of the JCPOA could lead to the lifting of sanctions on Iran by
    the first quarter of 2016 thereby improving Iran’s access to trade, technology and finance.


WASHINGTON, October 21, 2015 – A longtime reliance on economic indicators as a barometer of progress in Middle Eastern and North African countries masked the level of frustration and dissatisfaction in the region ahead of the ‘Arab Spring,’ according to a new World Bank report released today.

While many observers praised the region for its consistently high growth rates in the years leading to the Arab Spring, polling of populations at the same time showed a precipitous decline in life satisfaction scores, especially for the middle class, said the latest Middle East and North Africa Economic Monitor. The report attempts to resolve the apparent paradox presented by mass demonstrations in the face of improving economic conditions. In examining the causes of the Arab Spring, the report identifies sources of frustration that persist today, and run the risk of being aggravated by the current economic slowdown.

The latest MENA Economic Monitor finds that the Arab Spring revolutions were triggered by growing and broadly shared dissatisfaction with the quality of life. Ordinary people were frustrated by their deteriorating standards of living, reflected in a shortage of quality jobs in the formal sector, poor quality public services, and the lack of government accountability, the report said. The system of general subsidies could not compensate for these problems – subsidies mattered less for the wellbeing of the middle 40 percent of society than they did for the bottom 40 percent.

“On the eve of the Arab Spring, the Arab world was an unhappy place for a variety of reasons,” said Shanta Devarajan, World Bank Chief Economist of the Middle East and North Africa Region. “The old social contract of redistribution with limited voice had stopped working, especially for the middle class, prior to 2011. People wanted a say and real opportunities for economic advancement.”

According to the report, many countries in the region seemed primed to fall into disarray following the Arab Spring uprisings. Unless there are global efforts to end regional conflicts and help countries renew the social contract, a vicious circle of instability exacerbated by economic weakness could be the long term future for the MENA region.

Just a few weeks ago, the World Bank Group launched a new Middle East and North Africa strategy focused on addressing the causes of conflict to promote peace and stability. One of the primary goals of the new strategy is to rebuild the relationship between citizens and governments through improved service delivery and increased transparency and accountability.

“The situation has continued to deteriorate in the region as many of the factors that made people unhappy before the Arab Spring are still present today,” said Elena Ianchovichina, World Bank MENA Lead Economist and principal author of the report. “Though grievances alone do not lead to civil wars, grievance-motivated uprisings can grow into civil wars in societies polarized along ethnic or sectarian lines. High male youth unemployment rates and the abundance of natural resources increase the risk of conflict.”

The report also provides an economic outlook for the Middle East and North Africa, predicting that regional GDP growth will average 2.8 percent for 2015. Thanks to continued low oil prices, civil wars and conflicts, and a likely global economic slowdown, prospects for faster growth are slim.  Civil wars have severely harmed the economies of Libya, Yemen, Iraq and Syria, and have had spillover effects on the economies of Lebanon and Jordan.  MENA’s oil-importing countries have not grown rapidly in the wake of low oil prices because they have been hurt to different extents by terrorist attacks, spillovers from neighboring wars, slow growth in the Euro zone, and political uncertainty.

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Rightly, or Wrongly, Neighbors Are Compared #egypt #Tunisia

For many reasons, we are very excited  that the Tunisian National Dialogue Quartet WON the prestigious Nobel Peace Prize on October 8th –pleasantly surprised since Pope Francis and other names were well circulated on popular polls without any mention of different Tunisian civil society leaders.  The first reason is that it’s an overdue win for Tunisian civil society, the drivers for peace in any country.

The second reason is that a Tunisian win for peace means that progress is not about a sole hero, or heroine, but how many must participate in order to promote positive change.  This point holds especially true when obstacles emerge after the initial high of success, or revolution energy, wears off and people feel too drained to participate beyond elections.  Remember the compromise and dialogue Tunisian unions and party leaders undertook back in 2013 when Tunisia’s dominant party, Ennahda, stepped down after political assassinations?  Shortly after, this was followed by the resignation of premier Ali Larayedh–the first voluntary resignation in a North African or Arab country that holds elections for high office.  And by voluntary, we remain cognizant of how sensitive the term “soft-coup” is in neighboring countries.  Unlike Egypt, this was not at all the case in Tunisia.

Speaking of Egypt, this brings us to our third reason for being excited about Tunisia’s Nobel Peace Prize win: governments in transition cannot subject segments of their civil society to repressive measures in the name of protecting them.  Making civil society more “secure” by sidelining media institutions and organizing groups only makes civil society more insecure to move forward with the changes it seeks.  That is instability.

building a strong government for weak civil societies is a strategy for failure…~Sherif Mansour, MENA Director of Committee to Protect Journalists

Sherif Mansour, Middle East & North Africa Director for the Committee to Protect Journalists, provided several examples of how a state weakens civil society, thereby increasing instability in Egypt, in his latest report to the National Endowment for Democracy.

  • Mansour described the  raised awareness about police brutality.  They organized to shift protest from social media to the Egyptian streets.  Unfortunately, the Egyptian government sent thugs after the Liars Campaign activists.
  • used internet to critique Egypt’s “deep state” dilemma and opened up civil society’s space for more voices.  Unfortunately Youssef moved out of Egypt after shutting down his media program due to increasing harassment in the Mursi and El-Sisi regimes.
  • Because public television and many Egyptian media outlets are influenced, if not controlled by the Egyptian government, Egyptian citizens are constantly seeking alternative news sources.  Satellite TV operated from abroad, but owned by Egyptians, is a growing option.  Once state-owned media faces bankruptcy, they will face a reform opportunity.

As such, it is harder for opposition & different economic solutions to emerge in the press when there are media restrictions.  Without open discussion and a public forum to voice suggestions, there is no way to create feedback loop.  Who will dare critique the huge monetary decisions and outline the pros and cons of devaluing the Egyptian pound?  In fact, Egypt’s Central Bank lowered the Egyptian currency for the second time this month.

Please STOP Comparing Egypt With Tunisia & Vice-Versa

We know that there is an extremely vocal group of Tunisians who gets upset when comparisons/contrasts emerge between Tunisia, Libya, and Egypt — because they feel that their cases are unique, or exceptions to the rule.  Yes: both Tunisia and Egypt are Arab, middle-income countries faced with subsidy reform while dealing with political culture shock.  No: both Tunisia and Egypt do not have a similar spectrum of political parties; nor the same voter-turnout trends.  [As of this date, we see how over 50 percent turned out in Tunisia’s last big election in 2014 whereas, Egypt’s voter turnout of 2% for 2015 parliamentary elections– single digit!?!– STARKLY contrasts with Tunisia’s.]  True: Libya, Tunisia, and Egypt do not experience exactly the same economic woes–a part from double digit unemployment.  But overall, neighbors compare. Visitors to the neighborhood compare.  That’s what they do. Rightly, or wrongly, neighbors are compared.  The one upside to the neighborly comparison is that civil societies within those countries may decide if they are on the path that they want to be on, or if they see a different path that they think might suit their interests better.

However, identifying differences and similarities is part of the analytical process.  So please indulge some of these observations shared by Mansour when reviewing how civil society has been oppressed in Egypt.  Much of the compare/contrast actually puts Tunisia in a position of praise.

Internet wasn’t seen as an organizational tool in Egypt until Tunisia proved it could facilitate change~ Sherif Mansour

Repression against journalists…helped return to a system of authoritarian stagnation.~Sherif Mansour


While Tunisia’s media outlets and unions voiced their concerns about politics and rights, they managed to demand political change.  However, this is not the case for Egyptian journalists, activists, and union leaders: their positions to advocate are weakened by the state.  According to Mansour, “The Muslim Brotherhood used their time in office to go after their critics,” and argues this triggered a slippery slope for any ruling power to hold back opposition.  Consequently, El-Sisi will have to seek outside economic and military assistance because of a weakened society in Egypt.


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If We Don’t Compare MENA Countries’ Fiscal Fragility, Then How Will Gather Lessons Learned?



Breaking bread, hence sharing a meal with anyone, symbolizes the conscious and informal way of engaging in respectful conversation.  Moreover, if one can “break bread” with another, they have taken the first step towards engagement, and building more concretely upon that diplomacy.  Pita bread operates as the common denominator that links the various cultures in that region–from Morocco to Pakistan–in reflecting upon dynamics and anticipating trends in the region. ~ PITAPOLICY, LLC

Greetings Pitaconsumers!

This week includes a montage of political economy issues that PITAPOLICY observed for the Middle East & North Africa region because of the International Monetary Fund’s and the World Bank’s conference.  Overall, MENA GDP growth barely reaches 3% for the third year in a row, according to the World Bank’s Economic Outlook reports.  In addition, some MENA countries’ economic reforms are overshadowed by political developments.  Cases , like Tunisia and Iran, illustrate this below following the MENA Economic Outlook findings and comments.

The most pressing issue is: “Fragility in Middle Income Countries: New Ideas for Unique Challenges”, which includes many MENA countries facing debates on fiscal austerity while balancing social responsibility.  Countries representing these key challenges, Libya, Tunisia, Lebanon, Jordan, and Palestine participated in these discussions taking place in Lima, Peru from October 6th-10th.  While country ministers highlighted the budgetary challenges in the political and economic spheres, community service organization leaders relayed the social and economic factors resulting from growing refugee influx brought about by Assad regime’s human rights abuses in Syria.

Fragility Discussion Participants Weigh In with respect to Palestine, Jordan, Libya and Tunisia

Achieving development goals in middle-income countries requires spending.  Not surprisingly, Jordan’s Minister of Planning and International Cooperation pinpointed a key theme shared by many MENA countries–not just middle-income ones — questioning financial austerity measures when trying to address key challenges, like the influx of Syrian refugees.  He pushed back by saying, “do not penalize us for being a middle income country- we’re losing development gains because we are doing the right thing by refugees,” as he explained that the MENA region has dealt with waves of Palestinian, Iraqi and Syrian refugees displaced by occupation, ISIL, and chemical weapons attacks.

Alaa Tartir, Palestine

  • : I’m aware of donors don’t want to intervene in politics, but the politics of donors do have consequences

Minister of Planning and International Cooperation, Imad Fakhoury, Jordan:

  • measure for refugees are too little too late, has 20% of its population as refugees. The European Union should have taken in 10 million refugees.
  • It’s the time, window of opportunity for int. community to rethink sense of urgency & scale needed to deal w the Syrian crisis
  • In we have 700K people knocking on clinic doors, double shift in hospitals & schools, a nightmare each day in urgency

Ayat Mneina,

  • Libya is a unique case, its an upper middle income country however it suffers from weak institutions

Wala Kasmi, Civil Society Organization Representative, Tunisia

  • We can’t compare ‘s situation to & just because the democratic transition is going well there.

Ms. Kasmi resented being compared to Egypt and Libya, Arab countries that also underwent drastic government changes since 2011.  However, we beg to disagree, and offer this suggestion: Fine, but what about contrasting to identify lessons learned.  Firstly: Why not at least identify the similarities since each of these countries’ parliaments are stuck in debate regarding economic reform and combating corruption.  Secondly, Egypt, like Tunisia, has faced political assassinations in the wake of controversial laws or executive actions being debated, if not implemented.  For example in Egypt, Prosecutor General Hisham Barakat, who oversaw the cases against thousands of Muslim Brotherhood affiliates, was assassinated in late June this year after President Sissi and the judiciary took heavyhanded measures without due process.

“The judiciary is restricted by laws, and swift justice is also restricted by laws. We will not wait for that,” el-Sissi said.

Corruption Reform Bill

Similarly –and more on point with fiscal fragility discussed above — legal debates introducing heavy-handed action by Presidential heads have also faced violent repercussions in Tunisia.  Tunisia’s parliament muddles through legislation to fix its economic woes.

In September 2015, Tunisia’s leading party, Nidaa Tounes, introduced Corruption Law that would exonerate business leaders who worked with ousted Tunisian President Ben Ali.  If they reveal their stolen wealth to a parliamentary committee, they they avoid prosecution for corruption charges.  Tunisia’s current president, Beji Caid Essebsi, argues that the Tunisian Treasury would recoup 5 billion dollars, a crucial measure to boost Tunisia’s struggling economy.

This project will hurt transitional justice and the political transition.~Khaled Krichi, a member of a truth and dignity commission set up in 2013

Controversy has built because Tunisia’s Labor Union, and other parties, have disputed President Essebsi’s argument because 1) he is a former official of the Ben Ali regime, and is not impartial, and 2) such measures would disrupt the transitional justice process since Ben Ali’s ouster, and backtrack political gains for Tunisians.  As such, political assassinations remain a concern.  Perhaps controversial legislation debates act as cover for violent reprisals — we hope not.  But Tunisian lawmaker, Ridha Charfeddine of the Nidaa Tounes party, escaped an attempt at his life on October 8th, 2015.

Social Safety Nets

On the subject of social responsibility, Iran offers an example that relies on a singular authority — the Supreme Leader, Ayatollah Khamenei —  access the finances.  Although Iran was not vocal in the MENA forum discussions, like its neighbors, social safety net programs continue to comprise a cornerstone of its economic programs.  Yet, one in particular, “Setad Ejraiye Farmane Hazrate Emam” – Headquarters for Executing the Order of the Imam — targets Iran’s poor…but Setad’s source of funding raises questions about redistribution policies as the Irani government began to seize property since 1979.  Reuters investigates here:

The organization’s total worth is difficult to pinpoint because of the secrecy of its accounts. But Setad’s holdings of real estate, corporate stakes and other assets total about $95 billion, Reuters has calculated. That estimate is based on an analysis of statements by Setad officials, data from the Tehran Stock Exchange and company websites, and information from the U.S. Treasury Department.~Reuters


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United Nations General Assembly Speeches Underline #SyriaCrisis

The Annual United Nations General Assembly Summit is convening in New York.  The good news: the UN Secretary General –the highest office within the multilateral organization–Ban Ki Moon expressed support by looking forward to raising the Palestine flag like other nations.

Embedded image permalink

However, the UNGA also feels like a series of severely awkward moments where many world leaders use their speeches to deliver “truthbombs”, true statements that do not bear any semblance of diplomacy.  Here are some prime examples:

“We won’t forget the past but we do not want to live in the past.”~Iran’s President, Hassan Rouhani

“Bashar al-Assad is the source of the problem. He cannot be part of the solution,” Hollande says. “Just because a terrorist group also carries out massacres doesn’t mean that pardons or amnesties the regime which created this situation…You can’t make the victims and the executioner work together.”~French President, Francois Hollande

At the same time, other world leaders deliver what they believe to be “truth bombs”, but are in fact, devoid of historical accuracy.  Here’s a prime example:

“Ladies and gentlemen, check your enthusiasm at the door…It makes war more likely.​”~Prime Minister of a nuclear power that did not sign the Non-Proliferation Treaty and disapproves of recent nuclear deal (formally known as the Joint Comprehensive Plan of Action) with Iran– which did sign the NPT.

Getting back to severely awkward moments, the most striking would have to be between U.S. President Obama and Russian Premier, Vladimir Putin regarding the Syrian crisis.

“…we should acknowledge that no-one except for Assad and his militia is truly fighting Isis in Syria.”~Russian Premier Vladimir Putin

“In accordance with this logic (Putin’s), we should support tyrants like Bashar al-Assad who drops barrel bombs to massacre innocent civilians because the alternative is surely worse,” ~ U.S. President, Barack Obama

Putin may have co-opted to flex geopolitical muscle, but Assad co-opted to do his dirty work.  Why do we say this?  Bashar Assad called Vladimir Putin to request military assistance to deal with the Islamic State (IS, ISIS, ISIL).  Moscow’s airstrikes against the IS/ISIS/ISIL were not to protect Syrian civilians, but to protect Russia’s own airbase — which is based in Latakia — as well as target Assad opponents in .

Syria Crisis Background Pre-ISIS

In 2011, Homs emerged as a base of opposition to the Assad regime before the Syrian uprising accelerated into all out conflict.  In fact, Homs’ citizens –like the citizens of Aleppo, Douma and the Idlib district (northwest of Damascus)  — have experienced barrel bombing as early as August 12th, 2012 and as recently as August 8th, 2015.  It is no coincidence that the Assad regime also launched barrel bomb attacks on Deraa, the first town in Syria that called for “Down with the regime!” back in March 2011.

Moreover, before any discovery of “IS” elements, Assad’s military had carried out chemical attacks in the following areas based on United Nations Mission to Investigate Allegations of the Use of Chemical Weapons in the Syrian Arab Republic Report on December 13, 2013:

  • Khan Al Asal
  • Saraqueb
  • Salqin
  • Ghoutta
  • Bahhariya *biomedical samples tested negative
  • Jobar
  • Ashrafiyah Sahnaya

In 2012, chemical attacks served as the original “red line” that triggered the U.S., France, and the U.K. to call for Assad’s removal from power.  Three years later, this position remains the same with the additional point of approaching Iran, Syrian regime’s historical ally, to deal with Syria.  At the UNGA, the French president said that “the route to a solution does not go through Bashar al-Assad” but we will work with Iran.

Nonetheless, Assad’s rhetoric and actions to fight ISIL, by enlisting Russia came after his regime already carried out barrel bombing and chemical attacks on Syrian civilians–notwithstanding igniting the largest global refugee crisis since World War II.


Russia’s Interests

The Assad regime has served as a key customer of Russian arms as far back as the Hafez Assad era in the 1970s.  Russia’s state owned arms exporter, Rosoboronexport, has sold military vehicles and small arms where Syria paid a 100 million dollar advance in 2013.   As mentioned, Russia has a base in Syria, which it is keen to safeguard.  In addition, Russia leases a naval facility for military purposes in Syria’s coastal city of Tartous.

By the second week of September, Russia admitted that it was providing military assistance to Assad.  Now, at least seven attacks have hit Syria in the name of destroying ISIS/IS/Daesh.  However, none of the eastern side of Syria, which served as the entry point for ISIS to enter Iraq,  has been struck.  Note: the consequences of ISIS entering Iraq have resulted in 1) occupying Iraqi military bases, 2) displacing local governing authorities in Diyala, Mosul, Irbil, Fallujah, Mount Sinjar, and Qaim and 3) the ethnic cleansing of Yazidis and Kurds– not to mention compounding the existing refugee crisis.

Source: Map image from British Broadcasting Company News

Source: Map image from British Broadcasting Company News

Russia is using about 50 helicopters and planes for its Syria strikes, according to the Russian Defense Ministry.  By day two of the Russian air strikes, Russia’s military assistance went beyond protecting its airbase in Latakia and targeted Homs and Hama to destroy IS.  Yet, about 30 civilian deaths feed into the death toll of alleged Islamic State targets.  In a sense, one may echo what U.S. Defense Secretary Carter described Russian airstrikes:

Pouring gasoline on fire.

As famed comedian Azhar Usman noted, “fighting fire with fire is a ridiculous response because this just produces MORE FIRE.  In a related development, Iran has been reported to preparing a ground attack in Syria.  However, this report has been circulating for the last three years.

U.S. and Saudi Arabia Interests

“There are two options for a settlement in Syria. One option is a political process … where there would be a transitional council that would have executive authority … and that’s the preferred option.  The other option is a military option which also will end with the removal of Bashar Assad from power.” ~Saudi Foreign Minister, Adel Al-Jubeir

The U.S., French, and U.K. interests in seeing Assad removed from power overlap with the Middle East regional powers of Saudi Arabia and Turkey.  Each of these powers is on speaking terms with Iran, except for one major player…(Saudi Arabia who remains wary of the P5+1 Deal)… yet, Iran may be the more direct link toward getting Assad to stepping down, as highlighted in Saudi’s preferred option in ending the Syria Crisis.

Saudi Arabia (along with other Gulf States) have financially supported various opposition groups in and around Syria.  But not all opposition groups followed the same path.  For example, the Jabhat Al Nusra Front turned out to be more violent and disruptive as they raid Syrian towns.

In another example, the Free Syria Army operated distinctly and supposedly made up of more local Syrians who only target Assad’s armed forces.  Apparently, Russia distinguishes between the IS and other opposition groups.

“The Free Syrian Army is not a terror group,” stated the Russian Foreign Minister.

On one hand, he is implying that Russia is not targeting it since Russia claims that they are surgically carrying out strikes against IS.  In all fairness, a coalition comprised of the U.S., Bahrain, Saudi Arabia, Qatar, Jordan, and the UAE have carried out airstrikes against ISIS in Iraq since September of 2014 upon Iraq’s request.  Hence, Russia uses this campaign to argue that Russia is targeting ISIS too.  On the other hand, one may ask why the Russian airstrikes are targeting Homs and Hama–areas where the Free Syria Army had organized.

Two of Thursday’s sorties were against a rebel group trained by the CIA, ~Hassan Haj Ali, of the Liwa Suqour al-Jabal group.

The FSA received U.S. assistance as the moderate group selected to fight back against the Assad regime’s oppression.

“Russians are fighting alongside the Syrians, to destroy not just ISIS but all of the other rebel groups in Syria,” the Syrian Ambassador to Russia, Riad Haddad told an American news station.

At the end of the day, it is hard to believe statements when such statements do not match with actions.  Actions, not statements, continue to raise the Syrian death toll from 250,000… and counting

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