News Analysis: A Happy New Year Ahead?

What’s the story? Happy New Year!

Why ‘happy’? Optimism: You’ve got to start the New Year thinking it can get better.

But any reason to be so cheerful? It’s better to be an optimist who is sometimes wrong than a pessimist who is always right.

You’re getting annoying – I mean is there anything in the Middle East to suggest this year could be better than the last? There’s plenty of hope, but it’s not clear cut – but then when has the Middle East been simple.

In terms of the economy and GCC economies, the oil price has remained remarkably resilient and most analysts see this continuing, despite signs of global weakening.

As a result, budgets are being boosted with increased spend going on infrastructure and social projects, particularly in Saudi and Bahrain meaning a fair amount of liquidity within the system cushioning any political discontent. A higher oil is now being built into budgets. The Saudi budget for example, balances at around $70 per barrel.

In the UAE, 2011 was a bit of a return to form, with Dubai wrestling back the light from Abu Dhabi; the smaller, oil poor emirate, successfully positioning itself – again – as an oasis of calm, boosting its commerce, tourism, and banking industries. Only property remains its Achilles heel.

Abu Dhabi meanwhile seems to be questioning its 2030 plan. After 18 months of the capital vying with Qatar for the title of The Next Big Thing, economic pundits are once again questioning where its headed. Abu Dhabi’s leadership shows no desire to explain recent cuts in spending – although it has been noted federal spending in poorer northern emirates has been increased as spend on the capital’s more strategic projects has been reduced…

Qatar continues to forge its own economic and political direction – catalysed by its WC 2022 win, and its independent political decision making – which has seen it take a leading role in Libya, a role Saudi Arabia, as the region’s biggest country, could have been expected to have taken. Recent calls for the GCC union may be an indirect way to clip the independent foreign policies.

Only Bahrain’s economy ends the year looking markedly less certain than it started. Its fight for the position of the preeminent financial center, and the Gulf’s business friendly capital, is far less assured in light of its growing religious tensions. Financial support from Abu Dhabi and Saudi Arabia only goes so far.

Outside the Gulf, the Arab Spring countries are showing signs of improvement after GDP contractions in 2011 – largely as a result of political chaos which affected tourism (particularly in Egypt) and FDI across the board. Tunisia showed the way with a seamless transition to democratic elections, while Egypt is also making good progress.

The hope is of course not just for a return to pre Arab Spring growth levels, but of something much more profound. That will require economic liberalization to go along with political liberalization, which is possible – just not guaranteed. There are huge vested interests in the status quo.

And politically? Surely here there’s huge reason to be optimistic? Absolutely, while the word democracy is being devalued in the West, it is very much being championed in the Arab World – albeit really by three countries in North Africa, rather than the Middle East. Tunisia, Egypt and Libya are shining a light for others to assess and learn from, if not follow directly.

Tunisia’s burns brightest with an almost seamless electoral process, and a balance of results that seems to have pleased everyone. As elsewhere Islamist groups won the majority of votes, but contrary to Western perceptions, they have extended their olive leafs to secularist parties to share power.

Egypt, a much larger and more complex country, is still journeying down its electoral path, and Islamists are set to form a much larger majority. The SCAF is positioning itself as the champion of minority interests – whether out of economic self interest or a genuine desire to retain the countries secular constitution. Whatever the reason, the policy could well backfire. The majority of Egyptians – including secularists – want democracy, and a real chance to judge those that do get into power.

Of the three Libya has the farthest to go – perhaps because it went through the most traumatic and violent path to freedom. One of its first jobs in reconciliation is a fair trial for Saif al Gadaffi. The country needs to be better than its past leaders.

In the Middle East itself, social spending and intolerance to any form of dissent has kept calls for changes to the way Gulf countries are governed in abeyance. Saudi and the UAE sent in the troops to quell Bahrain’s popular uprising on claims that discontent was being stoked up by a hostile alien power – Iran. Outside Bahrain, Gulf dissent has been neutered with by a surfeit of social benefits to national populations, and a hard line on any “constitutional questioning”.

You could argue whether that was necessary. Local populations in the Gulf tend to be a much more satisfied bunch than their regional counterparts, with a genuine affection for the ruling classes. Only in Yemen, which does not have the wealth of its peers, do social, political and economic frustrations continue to rumble just below the surface.

In the Levant, Syria and Iraq remain the countries whose future is most unclear. In Syria, Bashar al Assad seems intent on clinging to power, rather than being the conduit to democratic change. While it’s still not clear what the outcome will be, what is is that every day looks set to be more violent until a final conclusion does come. In Iraq, the people cheered at the outgoing US army, but despite American claims of mission successful, the country has been left with an egg shell peace between its Shiaa and Sunni populations, and a political vacuum Iran is only too happy to fill.

Perhaps the most fundamental, but arguably positive shift in 2011 has been that questioning Israeli policy is no longer a taboo subject. In 2011 the Jewish state found itself unusually wrong footed by the Arab Spring and an unusually impatient and ‘balanced’ (depending upon your point of view) White House.

Objectively Israel is no longer the only democracy in the region surrounded by a sea of autocratic dictators and Islamist insurgents hell bent on “terror”. Islamist groups have so far proved themselves not the stuff of Western nightmares, but as potential partners in the region. Should that process of trust building continue, and Israel continues heightening tensions by building in occupied lands, while denying Palestinians their own nation, it could well find the show on the other foot as the region’s pariah.

For that to happen, Islamic groups, and the Palestinians themselves, need to continue to project themselves responsibly, and Iran needs to not become an issue that would force the U.S. and its allies to once again see the world in black and white.

Iran clearly remains 2012′s biggest trip wire.

So, if you were to sum up, the biggest reasons for optimism are? The Arab Spring, the fact that governments are now listening to their people, a growing recognition that the people care about their economy and general welfare more than military influence, and a new breed of Arabic people that won’t be fooled by simple propaganda.

And reasons to be careful? What Iran does next, what Israel does next, the attitude of peoples and governments in countries across the region to minorities (Christians in Egypt, Sunni, Shiaa populations everywhere), the Egyptian army relaxing controls, Bashar al Assad, and Islamist groups working for the better of their societies as a whole, not specific interest groups.

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