Revolt & Revolution in the Middle East

Karen ZhangRichard La

Benjamin Rodriguez

Thomas Duzan

MGT 112 | Professor Soma

Winter 2011

Overview

• What’s going on• Politics & Economics• Oil• OPEC

Unrests in the Middle East and North Africa

Overall Report

TUNISIA: JASMINE REVOLT

• Initial uprising, sparking protests in other countries• Roots: unemployed man set himself ablaze, causing protests in

all the country• Complaints about high unemployment, corruption, rising

prices and political repression• Results: Autocratic President Zine El Abidine Ben Ali leaves

the country on January 14, after 23 years.• Now: Mr Essebsi unveiled a new interim government

EGYPT

• Began on January 25 at Tahrir Square.• Demonstrations against police corruption and abuses, lack of

free elections and economic issues, such as high food prices, low wages and high unemployment.

• Led to the removal of Hosni Mubarak from power on February 11, after 30 years in power.

• Now: Essam Sharaf is the new leader, after the resignation of Ahmed Shafiq

LYBIA

• Began in February• Roots: lack of freedom, high unemployment rate, violation of

human rights• Rebels and Moammar Gadhafi’s military forces are fighting,

causing deaths of civilians• International leaders all condemn Gadhafi but can’t decide

whether to act militarily or not• A no-fly zone over Lybia is discussed

OTHER COUNTRIES

• Common roots: lack of political and speech freedom, corruption, high unemployment, call for reform and democracy

• Demonstrations in Yemen, Bahrain, Saudi Arabia, Morocco, Iran

Political & Economic Impact

Within MENA

Lower economic output GDP

Pressure on fiscal budget

more freedom in contracts / hiring decisions

Bahrain & Kuwait: 1-time payoffs to leave demonstrations

Saudi Arabia: wage rate increase 15%Kuwait: free food for 14 months

Increase G; GDP = C + Inv + G + NE

t

Increased national debt (excl. Saudi Arabia)

Middle East & North Africa

GLOBALOUTLOOK

Companies

Economic Growth

Oil

Consumers

government contracts multi-nationals

indirect business dependencies

Companies

Consumersexisting increase in foodprices + inc oil prices

impact spending &growth

EconomicGrowth

stagflation= -GDP & inflation

eurozone debt

emerging markets:inflation & decreased output

EconomicGrowth

short term & localized

persistence in North Africa

persistence through ME

“Arab Paradox”

Government

Politics

“Arab Paradox”Human Development Report: 83 “high development” countries – 64 are democracies

“demographic bulge” – very young population

high unemployment (~25%) vs. 8% worldwide, event amongst well-educated

Government

influence of Islam – Iran (heavy) or Turkey (moderate)

Oil

Disruptions in Middle East and oil supply

• Too many disruptions in Middle East during history:

• Last disruption in the Middle East: o 2003 Invasion of Iraq (Iraq War)

Disruptions in Middle East and oil prices

How the present Middle East civil unrest is affecting oil supply?

• If Egypt is not a major oil producer how their situation can affect?o By its Locationo By its Influence (For Example: Libya)

• Obvious consequence:

Spike in Oil Prices!

Possible impacts on US Industries

• Increase in Transportation Costs

• People/firms wait to see how permanent change in price iso Delay purchase of automobileso Other energy using consumer durableso Delay new buildingso Delay new energy intensive plant and equipment

Oil Reserves

CountryReserves (billion bbls)

Production (million bbl/day)

Saudi Arabia 267 9.7Iraq 180 3.5Canada 179 2.1Iran 138 4Kuwait 104 2.6Venezuaela 99 2.7United Arab Emirates 98 2.9Russia 60 9.9Kazakhstan 47 1.4Libya 41 1.7Nigeria 36 2.4United States 21 7.5China 16 3.9Qatar 15 0.9Algeria 12 2.2Brazil 12 2.3Mexico 12 3.5

Oil Reserves – A region’s amount of crude oil that can be extracted using current technology

OPEC Overview• "Organization of the Petroleum

Exporting Countries"• Twelve developing countries: Algeria,

Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela

• Collectively hold 79% oil reserves and 44% production

• Competitors: OECD have reserves of 23.8% and produce 14.8% of oil

OPEC Goals:- Determines oil production and prices - Stabilizes prices in international oil markets with a view of

eliminating harmful and unnecessary fluctuation- Provide regular supply to consuming nations

OPEC Nations

2010 Civil Unrest in OPEC nations

OPEC nations + Top Oil Reserves:• Iraq, Iran, Kuwait,

Venezuela, United Arab Emirates, Libya, and Nigeria, Saudi Arabia

OPEC nations + Top Reserves + 2010 Civil Unrest:• Kuwait, Libya, Iraq, Iran,

Saudi Arabia

OPEC Oil Prices

• Question: Why are prices rising?

• Answer: Fear– Major oil transit “choke

points”– OPEC’s next meeting is in

June 2011 at Vienna – Risk Premium

• Oil Minister of S.A. says the “spike in oil costs stems more from financial speculation and unwarranted investor sentiment than industry fundamentals.”

Questions?

Thank You