Macro Monday: The Middle East

The Middle East

I was feeling ambitious, so rather than post on Microsoft (coming soon) I thought I'd step out of my comfort zone and try something different.

I honestly think the piece is fantastic, and I hope you enjoy reading it as much I enjoyed writing it.

PLEASE NOTE: this is a look at the economic potential of the region given geopolitical realities - it's not an endorsement of anyone.

And with that...

In The Beginning

Don't matter who did what to who at this point. Fact is, we went to war and now there ain't no goin' back. I mean, shit, it's what war is, you know? Once you in it, you in it. If it's a lie, then we fight on that lie. But we gotta fight. - Slim Charles, The Wire

I searched everywhere for the "truth" behind conflict in the middle east and as far as I can tell, there's no such thing; experience colors perception, and alternative facts abound (thanks Kellyanne!).

Moreover I'd need to do a doctorate's worth of research to have a shot at explaining the history (and truthfully, I wouldn't do a great job), so I'm just going to focus on how things are, and do my best to project how things will be...

So what's the story?

As you might expect, it's complicated.

The One True God

Just as a candle cannot burn without fire, men cannot live without a spiritual life - Buddha

Religion might be the enabler, but I'm not so sure it's the cause of Middle Eastern conflict.

The Us vs. Them story sells: Christians vs. Muslims, Muslims vs. Jews, Me vs. You, the Good Guys vs. the Bad Guys...

Real life is rarely binary. Christianity, Islam, and Judaism - collectively known as "Abrahamic" religions - all share the same patriarch, Abraham.

The raw, visceral hatred that sometimes shows up between these 3 is well known, but the conflict occurring within them is often overlooked.

Some Catholics still despise Protestants, and go ahead and ask a right wing Orthodox Jew how they feel about the Reform movement (spoiler: not good).

Islam is no different. The Muslim world is roughly 85% Sunni - which for our purposes means Saudi Arabia, Egypt, Turkey, and Syria - and 15% Shia, meaning Iraq, Iran, Lebanon, and Bahrain.

The Sunni & the Shia disagree on some fundamental aspects of their faith, but are mostly non-violent.

Unfortunately, a few bad apples always spoil the bunch...

Killing in the Name of

Men never do evil so completely and cheerfully as when they do it from religious conviction - Blaise Pascal (On a scale of 1-10 how terrifying is that image?)

The radical side of Islam operates on a scale unmatched by Christian and Jewish contemporaries.

The 1915 KKK was the closest analog I could find: a Christian supremacist group boasting ~5 million (!) members, they used violence in the name of religion, and were denounced by every sect of the faith they preached.

The Salafi Jihadists, a Sunni sect, are similar, but FAR more dangerous. Estimates put their numbers around 10 million worldwide, and count Al-Qaeda, ISIS, Boko Haram and the Taliban as member factions.

Their operations are sophisticated, well financed, global in scope, and violent by nature; nearly all of the Muslim world rejects them.

As far as I can tell, these guys are bad news - period.

The Jihadists are part of a larger Salafi movement which includes Purists, who avoid politics, and Activists, who engage in the political process, hoping to spread sharia law globally.

Together, the three comprise nearly half of Qatar and the UAE, a quarter of Saudi Arabia, and number 50 million worldwide - this is important, and we'll come back to it.

Whether Hezbollah are terrorists or freedom fighters (or both :s) depends on who you ask, but they represent specific Shia interests and are an important regional player.

The Salafi Jihadis are - allegedly - funded by Saudi Arabia, and Hezbollah is - allegedly - financed by Iran.

Still with me?

Geography is Destiny

Nations have no permanent friends and no permanent enemies, only permanent interests - Lord Palmerston

I'm no petroleum engineer, but I think the technical term for the amount of oil pictured above is a "fuckton." Roughly half of the world's proven reserves reside in 6 Middle Eastern nations, with 13% in Saudi Arabia alone.

Aside from natural resources, the area is of major geostrategic importance, serving as a chokepoint between Africa & Asia, and providing direct access to continental Europe via the Mediterranean.

Ergo, the United States, Russia, and for the time being the EU (more on this soon too) all have interests in the region.

This is where things get extremely complex; the interplay of religion, politics, and economics is a case study in the human condition, and makes for some strange bedfellows.

Best Frenemies Forever

The enemy of my enemy is my friend - Ancient Sanskrit proverb (side note: there must be ungodly amounts of cash available to Middle Eastern bankers)

The Saudis & Israelis might not like each other, but they both despise Iran.

Iran says the Saudis are spreading extremist doctrine, and claims Israel is engaged in a Zionist plot to destroy Islam.

Israel fears a nuclear Iran marching northwest, uniting the region, and driving the Jewish people into the sea.

Aside from religious divide, Saudi Arabia and Iran are at odds over oil strategy, despite being 2 of the 5 founding members of OPEC,

Saudi-Israeli-Iranian tension manifests as proxy contests locally in Iraq, Syria, Yemen, and Lebanon, as well as fighting on the periphery in Central Asia and Africa.

Russia maintains close ties to the Iranians for oil, and for eyes & ears in the territory.

America supports Saudi Arabia in return for preferential oil treatment, but it's something of a faustian bargain - remember the Salafis? Authorities speculate that Saudi petro-dollars financed their movement to the tune of $2-3 billion per annum since 1975, 2-3x what the Soviet Union spent on propaganda per year.

In theory, the US should prefer Iranian rule because of the Saudi Jihadist connection. In practice, Iran's alliance with Russia and America's military and cultural ties to Israel makes Saudi Arabia the less bad option.

Russia fears Islamic uprising in central Asia, and therefore allies with the Americans against ISIS et al.

This doesn't include quieter but still influential players such as Egypt, Turkey, Jordan, Qatar, Kuwait, and the UAE.

Add in maverick concerns from gun runners, drug cartels and local warlords, and the whole area begins to resemble one giant powder keg.

Here's what the dynamic looks like:
I am using him and you are using me and this is how it works - Leonardo DiCaprio, Blood Diamond

Did I mention it's complicated?

And unfortunately there are always people caught in the crossfire.

Collateral Damage

"Men sooner forget the death of their father than the loss of their patrimony" - Niccolo Machiavelli

Pawns in the global political chess game, the Palestinians are stuck between a rock and a hard place.

Argue over the morality of the situation all you want, but there is precisely zero chance Israel voluntarily gives up any land, and no way for Palestine to mount a counter-offensive - the IDF is just too strong.

Worse, Palestine has two sets of leadership, with Hamas representing Gaza and the Palestinian National Authority governing the West Bank, so the Palestinians are divided internally.

Hezbollah, through Hamas, has encouraged rocket attacks on Israel. Israeli politicians point to these incidents as justification for military action - this mobilizes the religious right, an extremely powerful group within Israel, who then demand more military action.

External support for Palestine ebbs & flows, and changes so rapidly it's hard to make sense of what's happening and why.

Major, seemingly structural shifts have happened recently, with the Trump administration officially recognizing Jerusalem as the capital of Israel and Saudi leadership publicly criticizing Palestine.

Egypt, Gaza's other border neighbor, offers only token assistance to Palestine, and mostly out of spite for Israel: Egyptians don't like the Palestinians - have a look at the barrier separating Egypt from Gaza - and they HATE Hamas.

The EU sends money, and the rest of the world watches, fearing instability and the wrath of the big guys.

But there might be a glimmer of hope for the Palestinians after all...

Shifting Sands

Bullets change governments far surer than votes - Lord of War

The proposed Saudi Aramco IPO is a harbinger for the end of oil, and the coming price collapse is going to radically remake the Middle Eastern landscape.

You can debate the timeline, but it's going to happen - even OPEC acknowledges this, projecting a total of 250m+ EV's globally by 2040, with the Chinese leading the way.

The Saudis know this, which is why you see them promoting their Vision 2030 plan, shopping for technology investments abroad (go Tesla!), and more importantly publicly supporting Israel.

Most telling, Mohammed Bin Salman has been moderating religious policy within SA - this has immediate implications.

First, it marginalizes the Salafis. In theory, this cools tension between the Saudis and Iran; in reality, tensions remain high, and Western powers lose rebel forces in Iran, so the ties between the US, Israel, and Saudi Arabia are further bound.

It follows that Iran strengthens relations with Russia, and the rest of the neighborhood pick sides in the classic East vs. West narrative we all know and love

This is just beginning, and things get scary looking forward.

But shockingly, the transition will be, relative to past tectonic shifts, painless, with the Middle East aided by an unlikely player....

The Wealth of Nations

There are few ways in which a man can be more innocently employed than in getting money - Samuel Johnson

What finally brings peace - or some semblance of it - to the Middle East?

The quest for cold, hard, cash.

China squares the circle, and stabilizes the region.

A rising China requires access to inexpensive labor and natural resources through Africa (highly interesting dynamic), necessitating a strong presence in the Middle East.

Middle Eastern countries have already begun working with China, and OPEC nations will welcome East Asian money once oil profits starts to sag.

A nation of atheists, the radical sects of Islam (becoming less powerful as we speak) will reject China, but the moderate groups will tolerate them if the Chinese bring economic prosperity, which they will.

China has no interest in playing regional cop, and needs Israel as a check on any leftover Islamic fundamentalism.

What happens post-transition?

The End of the Beginning

Chaos is a Ladder - Petyr Baelish, Game of Thrones

The Chinese-Africa relationship becomes a major worry for the Americans, as an aging population and declining birth rate force America to look to the dark continent for labor. This would get ugly, but economic interdependence precludes military mobilization.

Russia is the wild card, but with the US neutralized, the Russian people can turn their focus inward.

A rising middle class causes support for Islamic extremist groups to wane in the Middle East.

Israel continues to serve as the world's information broker, connecting East & West.

The Palestinians don't get the land they want, but are finally left to their own devices and start the (long) process of building a stable society.

And finally, Walls will crumble, people on the Streets will rejoice, and the desert's Oasis (see what I did there?) will be revealed.

Cheers,

CC

(P.S. - Europe is likely the big loser here, but that's for another time)

Comments (15)

Oct 15, 2018

well done bro

@My Name is Jeff should comment, I believe he spend some time in the ME region and knows his shit

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Oct 27, 2018

Thanks for the shoutout, and excellent summary, although there's one big factor that led to the current state (mess?) of affairs that you left out - colonialism. Or rather, Imperialism.

The biggest cause behind most of the violence in the Middle East is actually rooted in colonial aspirations and empire building by the Europeans and Americans, and most importantly, the inability to contain regional violence that exploded to the current mess. So where exactly was the beginning? The Victorian era all the way till the end of the Great War (WW1). How?

Well, you see, it all began with the divvying up of the crucial lands beside the Suez Canal and the Mediterranean. The Ottoman empire was a complete hedonistic clusterfuck, control a nice chunk of Syrian land that they still retained after the European (mostly Napoleon) invasions. Egypt and Palestine (since Israel was actually non-existent at this time, and I'm going with the British and Roman name for the region) was under the control of the British (along with the Suez - a joint British-French initiative), while parts of Lebanon and Syria were under the French. Politics in the region mainly involved these two global powers (the Americans were nobodies at this time, compared to these two), both of which barely fought over the shit land - as expected. They just used some math and common sense, and for the most part cooperated against the giant in the room - the declining Ottoman empire. (see Sykes-Picot agreement, the biggest fuckup in history)

Obviously this resulted in some really clean borders. Except the borders were a bit too clean. Britain got Iraq, Israel, Transjordan and Egypt mainly, while the French got Syria and most of the rich Levantine lands. Except regional and cultural variations were not accounted for - such as the status of the Kurds who were spread out in Iraq, Syria and Ottoman Anatolia. Meanwhile the rest of oil-rich Arabia was basically filled with the hillbilly version of Arabs - ultra orthodox Wahhabis/Salafis who were mostly members of very regional Bedouin tribes. Nobody cared about them. Then there were the Hejazi Arabs, ruled by the Sharif of Mecca and Medina (a joint position created by the Ottomans), the Yemeni Arabs in, you guessed it, Yemen, the chilled af Omani Arabs in Oman and the Khaleeji Arabs in Qatar, UAE and Bahrain.

So the Hejazis were under the protection of the Ottomans, the Khaleejis kept pirating British ships so much that the British protected them and paid them to pirate the ships of other nations, the Oman traders chilled the fuck out and mainly resided in Zanzibar (till they were kicked out by the Brits) then mostly relaxed in sweet old Oman where they kicked out the Portuguese. The Yemenis were under British rule (as expected, Horn of Africa being of strategic importance to the world superpower at the time, etc), while Djibouti was under French rule and Somalia was divvied up between Britain and Italy. Oh by the way, they discovered oil in Saudi Arabia, so now everyone wants to be friends with the Arabs.

Then the Great War happened, the Ottomans lost, and the British team won. Thus the Ottomans were unable to provide protection to the Hejazi Sharif of Mecca and Medina. Remember the tribal hillbilly Arabs? Well they were led by a guy named Abdulaziz al-Saud, who just defeated his strongest rivals and saw that the Sharif was unprotected. So he decided to launch a raid against the Sharif. And he won. The Sharif of Mecca, under whose protection the two holy cities were for more than a millenium (since he was a Hashemite and thus a descendant of the Prophet), ran to the British and sought their help. Now the Brits wanted to help the poor dude, but also didn't want to piss off the Sauds because oil. So they decided to compromise and gave the entire Transjordan territory to the Sharif to rule over. The Sharif agreed and ruled over that, while the Sauds kept extending their territories, even threatening to attack the British protectorates in Oman and the Khaleeji pirates (which the British prevented with a superb show of power by - one aircraft. One fucking aircraft).

Then the Jews. Now the Jews were stuck in Europe, and often discriminated against (thank Christianity and money-lending stereotypes for that). But when the Great War happened, the Jews unanimously supported the British and the allies against the Axis with technological innovation, most notably Chaim Weiszmann. So after the war, when asked for what would be a suitable honour for him, Chaim requested that the dream of "Eretz Yisrael" (Jewish homeland) be recognized. The Brits mostly agreed to the demands and gave the Jews rights to settle in the Palestinian land, via the Balfour Declaration. Almost full autonomy was granted, except for the right to sovereignty, since British needed control of that strategic point to secure access to that sweet sweet oil. Clashes between the migrant Jews and the indigenous Arabs began soon enough. Funnily enough, after the Balfour Declaration, the Hashemite king of Jordan (former Sharif of Mecca and Medina) invited the Jews to settle in Israel under his (puppet) rule.

Meanwhile, the Americans were chumming up to Al Saud himself, the source of the oil, and providing him with weapons and luxuries to get him on their side (which they did, quite easily). On the other side, we have these Arabs in Syria, Iraq and Egypt who were tired of foreign rule, first under the Ottomans, now under the Europeans. They were united in their attempts to secure independence, but mostly failed, since the Brits were going strong still at this point in history (play Rule Britannia in the background). Oh by the way, a revolt happened in Iran in which they threw out the Shahenshah and became a democracy.

Then WW2 happened, the Axis lost again, but this time, the power axis had shifted from the British and French to the Americans and the Russians. The British and French were exhausted from war and were slowly losing control over their empire. Although they tried maintaining it via dominion rule and/or puppet states, they could not, since money had dried out. First went India (and the shitshow that followed there), then the Arab nations one by one, then Africa, then East Asia and so on. Meanwhile the Americans were feeding the Saudis so much to the point that the Saudis were their puppet state.

Now the Arab nations that sprung out were fiercely nationalistic, to the point of a few steps below Japanese style fascism. They began to follow a philosophy called Ba'ath, something like Arabia for the Arabs, no external influence and all, and sought to unify all of Arabia under one banner. Prominent followers of this philosophy include Gamal Abdel Nasser and Saddam Hussein. And as expected, they failed often, because although they wanted to unify Arabia, they also wanted to maintain regional hegemony and compete with each other. They tried though, but it didn't last for long.

Meanwhile the Jews, noticing the weakness of the British rule over them after the war, began clamouring for an independent nation. The British were tired of maintaining order in the region, and decided to turn a blind eye. Except the Arabs didn't just sit idle and began resisting (with strong support from the Saudis by the way). Almost within a few hours after declaraing independence, the Arabs attacked. And lost. And lost again. And lost again. And lost again.

All thanks to American guns, intelligence and weaponry. Why? Because just as the British saw Israel as a strategic point of control over Arabia, the Americans saw it too and thought of doing the same thing - creating a puppet hegemon in Israel. Except now America is the puppet of the fiercely independent and innovative Israelis.

Oh, by the way, Iran. Iran was ruled by a popular socialist moderate, Mohammed Mossadegh, who was sort of leaning to Socialist USSR (sort of like his Indian counterpart Nehru). He realized that the West (mostly Britain) was looting his country's oil and decided to nationalise the oil revenues. Except the Brits didn't like that. So MI6 sent some shady shit to the CIA, something something Iran and Mossadegh will join the Communist block (Operation Ajax). America got nervous and replaced the democracy of Mossadegh with the autocracy of the Shahenshah, something the Iranians resent to this day. Then the Iranian revolution happened, the Shah was kicked out and the Islamic theocracy was established in Iran. Losing a key player in the region, America went een closer to the Saudis.

Good policing there America.....

TL;DR: Colonialism and Imperialism suck

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

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Dec 19, 2018

Thanks Jeff - I'm not sure if you saw, but I said that I made it a point NOT to talk about the regions history... there's just too much information to digest for a WSO blog post.

Jan 22, 2019

Got carried away lol

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Jan 23, 2019

Ha yeah the Middle East will do that to people...

Oct 15, 2018

Great post man. I know it's impossible to cover every single aspect of Middle Eastern geopolitics but I haven't noticed you discussing the current feud between Qatar and Saudi Arabia. You gave an amazing summary of many issues the Middle East has been dealing with in the past few years (or even decades) but I think the current Qatar-Turkey-Syria-Iran-Russia alliance (direct and indirect alliances) can't be overlooked when writing a post like this.

I've been thinking for a while of posting a post similar to yours but guess you beat me to it. Once again, great post.

P.S. Yes, Lebanon has many Shi'a people in its country but you risk slightly misguiding readers if you categorize them under the 15% Shi'a population. Lebanon hasn't had an official census of its population's religion since 1932 but there are as many Sunni's living there as there are Shi'as. The reason I say you risk slightly misguiding readers is that the other countries you mentioned (Iran, Iraq, and Bahrain) are indeed majority Shi'a countries while Lebanon isn't really (1932 census: 40.4% Christians, 27% Sunni, 27% Shi'a, 5.6% Druze). But, yes, Hezbollah currently has a lot of influence in the country (and region) and maybe it makes sense to add them along with all the other Shi'a majority countries.

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Oct 15, 2018

Yeah the post was already long and Qatar would have added a whole new level of complexity. Re: Lebanon you're right about the population, but I had to simplify.

Oct 17, 2018

Great post! Only comment I have is that Egyptians def don't dislike Palestinians, its actually quite the opposite.

"Risk comes from not knowing what you are doing"

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Oct 17, 2018

That might be the official position of Egypt, but de facto things are very different.

Oct 27, 2018

The officiak position is that the Egyptians are on more or less neutral-friendly terms with Israel since the time of Anwar Sadat, but they support the creation of Palestine and support humanitarian aid to the West Bank and Gaza Strip (more to the Hamas ruled Gaza Strip actually). The wall across the Sinai Gaza border was built to stop the infiltration of weapons into Gaza and is actually maintained by Israel. Egypt maintains a separate barrier to prevent the infiltration of Salafi terrorists into the now unstable Sinai region of Egypt.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

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Oct 27, 2018

(almost) Everyone officially supports the creation of and support for Palestine.

Egypt did support Hamas when the Muslim Brotherhood backed Mohammed Morsi was in charge, but now Egypt has designated Hamas as a terrorist organization ...

Agreed on the two separate barriers.

I like the term "cold peace" to describe Israel-Egypt relations.

Thanks for your comment, what did you think of the post?

Oct 17, 2018

The Saudis know this, which is why you see them promoting their Vision 2030 plan, shopping for technology investments abroad (go Tesla!),

Hah you had to sneak this in here. Awesome write-up. Should be on the front page!

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Dec 19, 2018

I'm going to give you some general pointers that you won't initially like but will help you down the road when writing something like this professionally.

1- don't oversimplify
2- use original analysis, don't just regurgitate information
3- your writing comes off as "impressions of thoughts" but nothing "hard"-- try to "speak" less anecdotally or you won't be taken seriously
4- stick with a simple outline and make your writing tight
5- avoid using random pictures and/or cartoons unless you want to appear goofy

Some points of contention:
- as Jeff mentioned, much of the current state of affairs is due to the unintended consequences of colonialism (pls don't use the "three religions hate each other" argument ever again)
- the statement that Islam is or can be more radicalized than other religions is highly subjective and your position is not well explained -- it also is part of the lazy logic stemming from "the three religions hate each other" thesis
- MBS is shifting the country more nationalist, and needs US capital and arms backing in order to manage their economy effectively, hence the relatively open bribery of White House officials and the President's family
- Salafi's are to Islam what protestants are to Christianity and exist across the political domain (salafis in Egypt helped President Sisi gain power, salafis in Turkey are anti-Saudi, etc.)
- Jihadists are private militias that are loosely banded together with other militias in their network (e.g. Al Qaeda's network is not the same as the Taliban, which is different than ISIS) and often compete with opposing networks (Al Qaeda warred against ISIS and lost); these are not religious groups, they operate as mercenaries and warbands; the US, Saudis, and ISI (Pakistans CIA) pumped money in those networks during the 80s (Russian invasion into Afghanistan); we're seeing blowback now because some of those networks have decided to declare sovereignty (ISIS), or enter the political domain (Al Qaeda)
- Khaleeji countries will likely continue to align themselves with powers who support and/or are ok with authoritarian rule (as the khaleeji states are basically princedoms or kingdoms)

I'm pretty bearish on the ME right now. There isn't any country that has the right mix of political legitimacy, economic policies, and security IMO, which just means more risk. It's hard to pick out who will be the winner(s) from here.

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Dec 27, 2018