Much is being written about the potential for the spread of political upheaval that started in Tunisia and recently led to the end of the 30 years rule of the Egyptian dictator Hosni Mubarak. Most of the commentary and punditry has so far been focused on potential political instability forced by possibly massive street protests.
Political fall-out from the events in Tunisia and Egypt has already engulfed the Middle Eastern nations of Bahrain, Libya and Yemen. However, little attention has so far been paid to the more immediate impact of spreading trouble in the oil-rich Middle East on developing nations in South Asia and elsewhere.
Crude oil prices have been rising for some time but the fears of the spread of the political unrest have accelerated the rate of increase. The price of crude has already crossed the crucial $100 a barrel mark with the Libyan crisis in full bloom. South Asian economies are keeping a close eye on the situation in Africa and Middle East but still remain unaffected in receiving their oil supplies through this region. Any further spread of the unrest into GCC countries, particularly Saudi Arabia, could have a huge impact on the health of South Asian economies.
According to the World Bank's Immigration and Remittances Factbook 2011, the top remittance sending countries in 2009 were the United States, Saudi Arabia, Switzerland, Russia and Germany. Worldwide, the top recipient countries in 2010 were India, China, Mexico, Philippines and France, according to Dawn News. In South Asia, the top five remittance receiving nations in 2010 were: India ($55.0 billion), Bangladesh ($11.1 billion), Pakistan ($9.4 billion), Sri Lanka ($3.6 billion), and Nepal ($3.5 billion).
Pakistan's exports to the Middle East add up to several billion dollars a year. The United Arab Emirates alone imported $1.7 billion worth of Pakistani products last year, according to Arabian Business.
Relatively stable energy prices and rising exports and surging remittances have helped South Asian nations in 2009-2010. But this could all unravel with rising oil import bill combined with the fall of inflows from worker remittances and decline in exports to the Middle East region. India and Pakistan are already running significant current account deficits, and experiencing high rates of inflation exacerbated by rising food and energy prices since late 2010. The economic hardship, particularly high food prices and unemployment, could become a catalyst for serious political turmoil in South Asia in 2011 and beyond.
Pakistan's Economy 2008-2010
Pakistan's Rising Exports and Remittances
Indian Economy: Hard or Soft Landing in 2011?
China's Trade and Investment in South Asia
India's Twin Deficits
Inflation Hits India
Goldman Sachs India Warning on Twin Deficits
India's Nov 2010 Imports, Exports
riaz jee pakistan just hiked petrol prices by a whopping 10%.
Just came from Karachi:
Power outage 3 times a day everyday
12-1 pm, 4-5 pm, and 9-10 pm!
Water supply every other day!
Inflation 25%! Petrol forget it!!
I have no idea how people are surviving.
Why there is suddenly revolt in gcc. ?
What are the intentions and outcome?
What actually happened in egypt?
These question will show indicators.
Nobody knows suddenly why there is a revolt and it has happened in few months.
Oil price has gone - swf and western oil company has become rich
Dollar is looked upon as stable due to uncertainity in the world economic due to price raise.
in egypt, hosni has been changed with another crony of him with same reputation.
Arms and oil companies wants unrest and they are running a drama of change of actors but the play will continue in the same manner.
New player who emerges will either perish or fall in line with these two companies across the globe
Arab protesters demand democracy, but not secularism, says Michael Scheuer, former Bin Laden hunter at the CIA:
The Arab world’s unrest has brought forth gushing, rather adolescent analysis about what the region will look like a year or more hence. Americans have decided that these upheavals have everything to do with the advent of liberalism, secularism, and Westernization in the region and that Islamist militant groups like al-Qaeda have been sidelined by the historically inevitable triumph of democracy—a belief that sounds a bit like the old Marxist-Leninist claptrap about iron laws of history and communism’s inexorable triumph.
How has this judgment been reached? Primarily by disregarding facts, logic, and history, and instead relying on (a) the thin veneer of young, educated, pro-democracy, and English-speaking Muslims who can be found on Facebook and Twitter and (b) the employees of the BBC, CNN, and most other media networks, who have suspended genuine journalism in favor of cheerleading for secularism and democracy on the basis of a non-representative sample of English-speaking street demonstrators and users of social-networking sites. The West’s assessment of Arab unrest so far has been—to paraphrase Sam Spade’s comment about the Maltese Falcon—the stuff that dreams, not reality, are made of.
A year from now, we will find that most Arab Muslims have neither embraced nor installed what they have long regarded as an irreligious and even pagan ideology—secular democracy. They will have instead adhered even more closely to the faith that has graced, ordered, and regulated their lives for more than 1400 years, and which helped them endure the oppressive rule of Western-supported tyrants and kleptocrats.
This does not mean that fanatically religious regimes will dominate the region, but a seven-year Gallup survey of the Muslim world published in 2007 shows that a greater degree of Sharia law in governance is favored by young and old, moderates and militants, men and even women in most Muslim countries. While a façade of democracy may well appear in new regimes in places like Egypt and Tunisia, their governments will be heavily influenced by the military and by Islamist organizations like the Muslim Brotherhood and al-Qaeda. If for no other reason, the Islamist groups will have a powerful pull because they have strong organizational capabilities; wide allegiance among the highly educated in the military, hard sciences, engineering, religious faculties, and medicine; and a reservoir of patience for a two-steps-forward, one-step-back strategy that is beyond Western comprehension. We in the West too often forget, for example, that the Muslim Brotherhood and al-Qaeda draw from Muslim society’s best and brightest, not its dregs; that al-Qaeda has been waging its struggle for 25 years, the Muslim Brotherhood for nearly 85 years; and that Islam has been in the process of globalizing since the 7th century.
As new Arab regimes develop, Westerners also are likely to find that their own deep sense of superiority over devout Muslims—which is especially strong among the secular left, Christian evangelicals, and neoconservatives—is unwarranted. The nearly universal assumption in the West is that Islamic governance could not possibly satisfy the aspirations of Muslims for greater freedom and increased economic opportunity—this even though Iran has a more representative political system than that of any state in the region presided over by a Western-backed dictator. No regime run by the Muslim Brotherhood would look like Canada, but it would be significantly less oppressive than those run by the al-Sauds and Mubarak. This is not to say it would be similar to or more friendly toward the West—neither will be the case—but in terms of respecting and addressing basic human concerns they will be less monstrous.
Here's State Bank of Pakistan (SBP) assessment of the effect of Arab revolt and Japan quake-tsunami on Pakistan's economy:
KARACHI: The State Bank of Pakistan (SBP) said on Saturday that the global trade shock due to the conflict in Arab world and earthquake and tsunami in Japan remained beneficial for the country’s economy.
In its Monetary Policy Statement for the next two months, SBP said that the scenario helped the country to fetch better export price in international markets.
SBP said that there remains growing uncertainty in the global economic environment. The popular uprising in the Middle East and North Africa (MENA) region and unprecedented damage to the Japanese economy because of an historic earthquake and tsunami have shaken the global economy, which has yet to fully recover from the repercussions of the financial and economic crisis of advanced economies, it said.
One consequence of these developments has been high international commodity prices, especially of oil, it added.
“So far, the terms of trade shock have been favorable for Pakistan’s economy. More than 90 percent of the incremental increase in export earnings during July ñ February, FY11 over the corresponding period of last year has been due to high international prices of Pakistan’s exports.”
SBP said that the contribution of high import prices, particularly of oil, to the import bill has been relatively low, but is substantial and rising.
SBP further said that the turmoil in the Arab region may also influence the flow of remittances to Pakistan. “However, assuming that the inflow of remittances continue its current trend for the remaining months of FY11, there are no immediate risks to the external current account balance,” SBP added.
The financial account inflows such as foreign direct investment and portfolio investments have remained fairly modest during July ñ February FY11, almost half the level of inflows seen in the corresponding period of the last year, which was also small compared to historical levels.
SBP said that the overall balance of payment position appears to be strong at the moment with a gradual build-up of foreign exchange reserves and a stable foreign exchange market. “However, given the uncertainty with respect to foreign inflows, the developments in the external sector will need to be monitored closely in the coming months.”
Talking about democracy, here are some excerpts from a Vanity Fair article by Nobel Laureate Economist Joe Stiglitz about growing concentration of wealth and power in America. It's titled "Of the 1%, For the 1%, By the 1%":
Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.
It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequal ities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.
Here's a Op Ed by Miranda Husain published in Newsweek Pakistan about Saudis and Bahrainis seeking Pak help in quelling Shia protests:
Less than three weeks after Gulf Cooperation Council (GCC) forces, led by Saudi Arabia, entered Bahrain to aid the anti-democracy crackdown there, dignitaries from both oil-rich kingdoms did their separate rounds in Pakistan. The royal houses of Saudi Arabia and Bahrain are nervous, and they need Pakistan’s mercenaries, and—if necessary—military muscle to shore them up.
This is a remarkable turn of events for Asif Ali Zardari, who had been trying since he was elected president in 2008 to secure Saudi oil on sweetheart terms. He had been unsuccessful in his efforts because the Sunni Saudis view his leadership with some degree of skepticism. It also doesn’t help that Zardari, a Shia, is big on improving relations with Shia Tehran. Riyadh now appears inclined to export oil on terms that better suit cash-strapped Islamabad. Manama, too, wants to play ball. It wants increased defense cooperation and has pledged to prioritize Pakistan’s hopes for a free-trade agreement with the GCC in return. But Zardari and his Army chief, Gen. Ashfaq Kayani, should fight the urge to get mired in the Middle East.
Pakistan already has a presence in Bahrain: a battalion of the Azad Kashmir Regiment was deployed there over a year ago to train local troops, and retired officers from our Navy and Army are part of their security forces. Media estimates put the number of Pakistanis serving in Bahrain’s security establishment at about 10,000. Their removal has been a key demand of protesters in the kingdom. Last month in Islamabad, Prime Minister Yousaf Raza Gilani reportedly assured Bahrain’s foreign minister, Sheikh Khaled bin Ahmed al-Khalifa, that Pakistan would offer more retired manpower to help quell the uprising against Bahrain’s Sunni rulers by its Shia majority. Gilani’s spokesman was unable to confirm the pledge.
Islamabad’s support to the tottering regime in Manama is not ideal. “It’s like our version of Blackwater,” says Talat Masood, a former Pakistan Army general, referring to Bahrain’s recruitment drive in Pakistan. “We’re doing [in Bahrain] exactly what we have been opposing here,” he says. Pakistan, he maintains, has no business in trying to suppress a democratic, people’s movement in another country. Short-term economic gains cannot be the only prism through which Pakistan views its national interests, he says.
Pakistan has a long history of military involvement and training in the Arab world. Its pilots flew warplanes in the 1967 Arab-Israeli conflict, and volunteered for the 1973 Yom Kippur War. Involvement in Bahrain’s current strife would not be the first time that Pakistan has used its military might to thwart an Arab uprising against an Arab regime. In 1970, future military dictator Gen. Zia-ul-Haq, then head of the Pakistani military training mission in Jordan, led his soldiers to intervene on the side of Amman to quash a Palestinian challenge to its rule.
“The U.S. has counted on Pakistan to help control the Arab world and safeguard Arab rulers from their own populations,” says Chomsky. “Pakistan was one of the ‘cops on the beat’ that the Nixon administration had in mind when outlining their doctrine for controlling the Arab world,” he says. Pakistan has such “severe internal problems” that it may not be able to play this role even if asked to. But the real reason that Pakistan should avoid this role is so that it can stand on the right side of history, alongside those who are fighting for democracy.
Here's a VOA report on Bahraini govt recruiting Pakistan Army and Police veterans to put down the Shia rebellion:
Former CIA officer Bruce Riedel, who has extensive experience in South Asia, says Bahrain has been recruiting Pakistani veterans for decades. But he says the eruption of the pro-democracy demonstrations in the Gulf state in March has sparked a sharp increase in the recruiting.
"This winter, when the very serious demonstrations began and it looked like the regime might even be toppled at a certain point, their hiring of mercenaries went up substantially," said Riedel. "And they began sending out basically want ads in major Pakistani newspapers advertising well-paying jobs in the Bahraini police and the Bahraini National Guard for any experienced soldier or policeman in Pakistan."
The ads placed in Pakistani newspapers call for ex-riot police and riot control instructors, military police, non-commissioned officers, and other military and security specialists - as well as cooks and mess hall waiters - for the Bahrain National Guard. The ads were placed by the Fauji Foundation, an organization set up to help veterans and their families. Calls to the foundation seeking comment were not returned.
A senior Pakistani source says President Zardari and King Hamad discussed the issue of recruitment during the Pakistani leader’s visit to Bahrain Wednesday. But asked to comment on the matter, a Pakistani embassy spokesman said the recruitment of veterans is done through private channels and has nothing to do with the Pakistani government.
Riedel says hundreds, if not thousands, of unemployed Pakistani military and police veterans were hired. Most have come from the province of Baluchistan in southwest Pakistan.
Bruce Riedel, now a senior fellow at the Brookings Institution’s Saban Center for Middle East Policy, says the Bahraini policy has aggravated the Shia-Sunni sectarian divide.
"The fact that the [ruling] Khalifa family is importing Sunni Pakistani mercenaries to repress the Shia majority only underscores the perception of the Shia majority that the regime is not interested in genuine reforms, not interested in building a constitutional monarchy, but interested in repressing the majority simply because they are Shias," he said.
Repeated calls and e-mails to the Bahrain Embassy in Washington seeking comment got no response.
Riedel adds that for Bahrain's rulers, there is a side agenda to the recruitment.
"Many of these Sunni Pakistani troops, if they’ve served well and served long enough, will also be offered Bahraini citizenship at the end of their career - an offer that is intended to try to increase the demographic size of the Sunni minority on the island. And that only intensifies Shia frustration with the way things are governed in Bahrain," he said.
The issue also has diplomatic repercussions. Iran, a Shi’ite nation, has voiced concern about the Bahraini government’s response to the demonstrations. In March, a 1,600-man Gulf Cooperation Council force, led by another Sunni monarchy, Saudi Arabia, went into Bahrain. In April, Iran summoned the Pakistani ambassador to hear official concern about Bahrain's recruitment of Pakistani mercenaries to help put down the protests. According to Iranian press reports, Iranian officials warned of “serious ramifications” for Pakistani-Iranian relations if the recruitment continued.
China has become Pakistan's largest trading partner, replacing the US which slipped to third place, according to Dawn News:
China has emerged as Pakistan’s largest trading partner replacing the US and is being closely followed by the UAE. The US has slipped to third position on the list of the top ten trading partners.
Germany and the UK occupy eighth and 10th slots respectively and Japan is no more on the ten top list. The latest rankings based on the FY11 statistics indicate that Pakistan is doing much more trade within Asia and its reliance on American and European markets is on the decline.
Emergence of the new rich in China and expansion in middle-income consumers in the Middle Eastearn countries opened up new opportunities for Pakistan to boost trade with all these nations. Moreover, the trade gravity played its part in redirecting our external trade towards South and East Asia including Malaysia and Indonesia.
Small wonder then, that in the last fiscal year seven out of the top ten largest trading partners of Pakistan were all Asians—China, the UAE, Saudi Arabia, Kuwait, Malaysia, Afghanistan and India. And all of them except Saudi Arabia and India showed an improvement in their respective rankings, in a small span of three years.
“Interestingly whereas recession in the US and troubled political relationship between Islamabad and Washington affected growth of bilateral trade, the surge in the US troops in Kabul aimed at winding up the military operation there increased our exports to Afghanistan,” according to a senior official of Trade Development Authority of Pakistan (TDAP). That explains, at least in part, why Afghanistan’s seventh slot among our largest trading partners in FY11.
Our exports to Kabul totaled $2.3 billion in FY11. This growth trend is continuing and in the first five months of this fiscal year, exports to Afghanistan have touched a billion dollars mark------------
Business leaders say Pakistan’s top bilateral trade partners are changing not just because of economic miracle of China and overall better average economic growth in Asia than in America and in Europe. “Increase in imports from China, for example, is also related to the Chinese investment projects in Pakistan part of which are scaling down American influence,” said a former president of the Federation of Pakistan Chambers of Commerce and Industry.
India and China are two of the six countries on the list of the top ten trading partners with whom Pakistan runs trade deficits.
The other four are the UAE, Saudi Arabia, Kuwait and Malaysia. Whereas Pakistan imports large amounts of costly fuel oil from the first three countries, it runs trade deficit with Malaysia primarily due to huge import bills of palm oil.
With four countries out of the ten largest trading partners, Pakistan boasts of a trade surplus. These are the US, Afghanistan, Germany and the UK. “Whereas it is easier to retain Afghanistan as a major export market and it is encouraging that Bangladesh has emerged as a billion-dollar market for our products, the US, Germany, the UK and other European countries are equally important for sustained growth in overall exports,” remarked chairman of Pakistan Bedwear Exporters Association Mr. Shabbir Ahmad. He and many other exporters believe that normalisation of political relationship with the US and continuing of efforts to win trade concessions in European Union are required for keeping exports on a high growth trajectory.
Here's an Asia Times piece on the importance of GCC Arabs to US power and US dollar:
There's no way to understand the larger-than-life United States-Iran psychodrama, the Western push for regime change in both Syria and Iran, and the trials and tribulations of the Arab Spring(s) - now mired in perpetual winter - without a close look at the fatal attraction between Washington and the GCC. 
GCC stands for Gulf Cooperation Council, the club of six wealthy Persian Gulf monarchies (Saudi Arabia, Qatar, Oman, Kuwait, Bahrain and the United Arab Emirates - UAE), founded in 1981 and which in no time configured as the prime strategic US backyard for the invasions of Afghanistan in 2001 and Iraq in 2003, for the long-drawn battle in the New Great Game in Eurasia, and also as the headquarters for "containing" Iran.
The US Fifth Fleet is stationed in Bahrain and Central Command's forward headquarters is based in Qatar; Centcom polices no less than 27 countries from the Horn of Africa to Central Asia - what the Pentagon until recently defined as "the arc of instability". In sum: the GCC is like a US aircraft carrier in the Gulf magnified to Star Trek proportions.
I prefer to refer to the GCC as the Gulf Counter-revolution Club - due to its sterling performance in suppressing democracy in the Arab world, even before Mohammed Bouazizi set himself on fire in Tunisia over a year ago.
Cueing to Orson Welles in Citizen Kane, the Rosebud inside the GCC is that the House of Saud sells its oil only in US dollars - thus the pre-eminence of the petrodollar - and in exchange benefits from massive, unconditional US military and political support. Moreover the Saudis prevent the Organization of Petroleum Exporting Countries (OPEC) - after all they're the world's largest oil producer - to price and sell oil in a basket of currencies. These rivers of petrodollars then flow into US equities and Treasury bonds.
For decades virtually the whole planet has been held hostage to this fatal attraction. Until now.
Gimme all your toys
It's true that whoever dominates the GCC - with weapons and political support - projects power globally. The GCC has been absolutely key for US hegemony within what Immanuel Wallerstein defines as the world system.
Yet let's take a look at the numbers. Since last year Saudi Arabia is exporting more oil to China than to the US. This is part of an inexorable process of GCC energy and commodity exports moving to Asia.
By next year foreign assets held by the GCC could reach $3.8 trillion with oil at $70 a barrel. With all that non-stop "tension" in the Persian Gulf, there's no reason to believe oil will be below $100 in the foreseeable future. In this case GCC foreign assets could reach a staggering $5.7 trillion - that's 160% more than in pre-crisis 2008, and over $1 trillion more than China's foreign assets.
At the same time, China will be increasingly doing more business with the GCC. The GCC is increasingly importing more from Asia - although the top source of imports is still the European Union. Meanwhile, US-GCC trade is dropping. By 2025, China will be importing three times more oil from the GCC than the US. No wonder the House of Saud - to put it mildly - is terribly excited about Beijing.
So for the moment we have the pre-eminence of NATOGCC military, and USGCC geopolitically. But sooner rather than later Beijing may approach the House of Saud and quietly whisper, "Why don't you sell me your oil in yuan?" Just like China buying Iranian oil and gas with yuan. Petroyuan, anyone? Now that's an entirely new Star Trek.
KSA and UAE are the first two countries to welcome the military overthrow of Dr. Morsi, the first democratically elected and legitimate president of Egypt in its entire history. It shows you how scared the Arab royals are of what would happen to them if their people rose up against them and demanded democratic constitutional govt.
The big fear I have is that the Muslim Brotherhood would abandon the path of peaceful means and take up arms...just as some former Brotherhood members like Ayman Al-Zawahiri did when they joined Al Qaeda. This would lead to massive violence across the entire Arab world and the Arab royals in KSA, UAE and Jordan will not be spared. It could also badly hurt Pakistanis making a living in the oil-rich Arab kingdoms.
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