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Middle East unrest threatens global chaos

Faltering autocracies have failed to provide a coherent response to Middle East protests, risking wider destabilisation and endangering the global economy

FOR A region where the pace of change has tended towards the glacial, the events of the past three months in the Middle East and North Africa have been a shock to the system. Western politicians had grown accustomed to dealing with autocratic elites whose hold on power was absolute and nepotistic, with the keys of office passing only to sons and heirs.

Doing business with the likes of Libya's Muammar Qadhafi, President Hosni Mubarak of Egypt and the Mideast Gulf monarchs may not always have been straightforward – building trust could take years of painstaking negotiation – but international oil companies (IOCs) and political leaders could at least be assured that their Middle Eastern counterparts would remain in office for generations to come.

Longevity was hardwired into the region's political DNA. For example, veteran Saudi Arabian oil minister Ali al-Naimi is only the fourth person to hold that position since it was created 50 years ago.

Yet with Tunisia's Ben Ali and Mubarak now gone; the 42-year-old reign of Qadhafi looking precarious; senior Yemeni military commanders jumping ship to join the opposition; and even Gulf sheikhdoms Bahrain, Oman and Saudi Arabia facing rising unrest on the streets, comforting assumptions about the Middle East's modus operandi are coming unstuck.

Time for an IOC rethink

Escalating political risk in the region will force a recalibration of IOC strategies. But no-one yet has a clear idea about who the future interlocutors might be, or where their interests will lie. Finding credible partners in eastern Libya, for example, will prove difficult for IOCs looking to renew oil and gas concessions in the North African state.

And long-standing strategic relationships – cemented by stable oil exports – between Western consumer nations and Middle Eastern producers is under more strain now than it has been in decades. Even the US-Saudi alliance is fraying at the seams.

President Barack Obama's administration broke with protocol to condemn the Saudi-led security intervention in Bahrain, the most politically fragile of the Gulf sheikhdoms. The US has refused to provide a strong public defence of the actions of Sunni leaderships in the Gulf Co-operation Council (GCC), who view the outbreak of popular protest against the ruling Khalifa family in Bahrain as Iran's handiwork. GCC states claim Iran is covertly supporting Shia protestors in Bahrain as part of a subversive regional strategy.

Obama's green light to Mubarak's ouster suggests to the Gulf's ageing leaders that the US would be equally relaxed about their own demise. The base assumption that the US would always step in to save its strategic allies in Riyadh and other Gulf capitals in the face of an existential threat may no longer hold true – even if Obama's rap on the knuckles to the Saudis over the Bahrain intervention contrasts with the military action in Libya.

Gulf leaders have been paralysed as sleepy backwaters exploded like powder kegs. The sultanate of Oman, once a byword for political stability, has seen protests break out across the country. In late March, the uprising spread to the country's hydrocarbons sector. Petroleum Development Oman's oil production was interrupted as staff staged sit-ins at facilities, demanding improved benefits and wages to match those of expatriate employees.

Across the border, government forces backing Yemen's increasingly vulnerable President Ali Abdullah Saleh shot dead about 50 unarmed protestors on 18 March. This has palpably failed to shore up the most unstable country on the Arabian Peninsula.

The prospect of Saleh's departure will cause palpitations for the Gulf's collective political leadership. The long-standing Yemeni president has held the poverty-stricken country together over three decades through a mix of hard and soft power – concerted military attacks on rebels, backed up by the cultivation of tribal networks and the judicious application of state largesse. But his strategy of buying off the opposition appears to have run its course. Saudi Arabia has much to fear from a failed state on its doorstep.

Those kinds of worries were behind the Gulf states' efforts to bolster the Al-Khalifa leadership in Bahrain. In mid-March, Saudi and UAE troops were dispatched to the island to protect government buildings and oil-export facilities. Protests – mostly by Bahrain's Shi'ite majority -- were brutally suppressed.

The option of GCC intervention also exists in Yemen, where Saudi aircraft have in the past two years provided support to Saleh's attacks on northern rebels. But pacifying a conflict-wracked country of more than 20 million people is far more difficult than sending hundreds of troops down the Saudi-Bahrain causeway to restrain a largely peaceful protest movement.

In Riyadh, King Abdullah bin Abdulaziz must face down a slow-burning domestic challenge to Al-Saud hegemony. Although Saudi Arabia has so far avoided the level of street protest that has swept Bahrain, Yemen and Oman, the kingdom is increasingly sensitive to public opinion. A week after banning public demonstrations ahead of protestors' Day of Rage on 11 March, he announced a lavish increase in spending – the second in less than a month - and an anti-corruption drive.

The royal decrees boost welfare payments, create new jobs and provide funds for new housing and health projects – carrots to accompany the stick. Job seekers will now get a payment of $533 a month, while the public-sector minimum wage has risen to $800 a month.

The proposed creation of 60,000 law-enforcement jobs at the Ministry of Interior provides an intriguing glimpse into Saudi thinking about where public resources might need to be channelled. Ploughing state funds into building up state security forces suggests the House of Saud sees trouble ahead.

But the inchoate burst of protest also threatens to unsettle the region in ways that demonstrators may not have intended. The Bahraini Shia's challenge to the Sunni Khalifa monarchy – and the defence of it by GCC partners – has ended the tiny Gulf state's pretensions to independence. It also risks an escalation in tensions between Iran and the GCC, the ripples from which could spread well beyond Manama's now-bulldozed Pearl Roundabout, with Sunni ranged against Shi'ite in Iraq, Lebanon, Yemen and Saudi Arabia's Eastern Province.

The response of the Arab world's leaders to Libya's convulsions also reveals an incoherence that bodes ill for the region. Many of those who defended Mubarak also urged the West to impose a no-fly zone over Libya and may endorse action to remove Qadhafi from power. But the same regimes that condemned Qadhafi's assault on the Benghazi-based opposition also assisted in the brutal crushing of Bahrain's protest movement.

The Arab Spring shows little sign of losing momentum. If attempts to douse the fire of protest with state largesse and beefed-up security falls short, governments will have to evolve a more enduring and sophisticated response to the demand for change. So far, they have not proved up to the task.

Libya alone has seen oil production sacrificed to armed conflict. But wider destabilisation in the world's most important oil-producing region could yet turn regional instability into global economic chaos.

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