[Rana Khoury & Mary E. Stonaker co-authored this post]
Why should Singapore – and Asia, more broadly – care about the astonishing upheavals rippling across the Middle East and northern Africa?
While seemingly far away, there is much at stake in this troubled region. The current turmoil should be a wake-up call for Asia to realize that what happens there has a growing impact on its economies and even on security issues.
The Middle East is increasingly significant to the Singapore economy, given its growing business interests. An increasing number of Singapore companies, including SembCorp, Keppel and Hyflux, have established a presence in its markets.
Aside from finance, oil and gas, and infrastructure, Singapore has interests too in markets such as environmental technologies, logistics, retail and tourism. According to the Ministry of Foreign Affairs, companies in these sectors hold more than S$25.5 billion worth of contracts in the Middle East.
In recent years, many Singapore leaders, including President S R Nathan, Minister Mentor Lee Kuan Yew and Senior Minister Goh Chok Tong, have visited the region – going to places such as Oman, Qatar and Bahrain. Last year, Mr Goh, during a visit to the Middle East, described Asian and Arab countries as “indispensable partners” as Arab countries look to the East and as trade linkages grow.
Asia in general is fast expanding its energy, trade and investment activities in the Arab world. Last year, 54 percent of China’s total oil consumption came from the region, while its national oil companies have stakes from Sudan to the Arab Gulf states.
Meanwhile, China’s largest competitor, India, sources nearly 70 percent of its oil imports from the region and is seeking to match China’s investments with its own. The currencies and stock exchanges of both countries have fallen amid fears over the disruption of oil supplies as a result of the turmoil in Libya.
Singapore also relies on the region – primarily the United Arab Emirates – for most of its crude oil, and its currency too has dipped since the upheaval reduced Libyan exports. Singapore serves as a major refinery and storage port, rivaling Dubai in size and importance in the global market.
In attempts to stem panic across world market,s the Saudi government is promising to increase its share of exported oil, asking companies and governments “what type, how much and what quality” are required to prevent an economic depression. However, we cannot even take Saudi Arabia’s stability for granted in this tumultuous time.
The disruption to Asia’s energy supplies is a matter of concern. Already, we are seeing an extraordinary rise in the price of oil, which is the result of fears that Libya’s 1.3 million barrels per day (bpd) of light crude exports – 85 per cent to Europe and 13 percent to Asia through the Suez Canal – are in jeopardy.
Shipping insurance rates are rising, as is the cost of financial business. Things could get much worse if troubles in the Gulf should threaten the daily passage of some 16 million bpd of oil through the Strait of Hormuz.
How might this happen? There are two danger points. One is that production and shipping from the oil-rich areas of eastern Saudi Arabia might be threatened if the upheaval in Bahrain, which is fuelled substantially by Shi`ite unrest, should spread to the Shi`ite populations in eastern Saudi Arabia.
The second is Iran: If the long-simmering issue of Iran`s nuclear programme should trigger Israeli (and American) military action, there is a real danger that passage through the Hormuz Strait could be impeded or at least become prohibitively expensive.
If oil prices go over US$150 per barrel, as they very well may, Asian economists will be scrambling to calculate the negative ripple effects on their economies. Higher oil prices will lead to higher food prices and higher inflation.
They could also slow down the region`s economic growth, leading to unemployment problems. It would be naive to suppose that the economic fallout would not eventually lead to political instability in certain Asian countries.
The Middle East and North Africa have always attracted outside powers, a major cause of the region`s chronic instability. In an earlier era, Britain and France tried unsuccessfully to dominate the area. Then came the Americans.
There was a time - very different from the present period - when the United States was popular and respected throughout the Middle East. World War II marked a coming of age, as US relations with the region evolved from a position of rejecting political responsibility to an acceptance of that responsibility on a global or great power basis
While the US was growing in power and its interests in the Middle East were deepening, the region itself was not standing still. In fact, it was, and still is, undergoing major social, economic and political changes.
It has been experiencing rapid population growth and suffering from uneven and sluggish economic development. Oil wealth is mainly concentrated in just a few small, thinly populated countries, and it has not been successfully deployed to promote region-wide sustainable development. Moreover, the collapse of oil prices in the mid-1980s continued to generate socio-economic strains on governments. Poor educational systems and a growing pool of unemployed young people pose a constant challenge to largely inefficient, authoritarian regimes.
If the US was at least dimly aware of these developments within the region, it was unable to come to terms with them. Its concerns about the Soviet Union, access to oil and the project for a Jewish state in Palestine - concerns that clashed with the rising nationalism in the region - eroded its earlier positive image. Hamstrung by its domestic politics and an inadequate understanding of the region, the US has been unable to stabilise or remake it.
Now, Asia is in the midst of its own coming of age. As it does so, rising Asian powers have so far confined their roles to one of a mere purchaser of commodities, chiefly crude oil. Yet as recent upheavals have clearly shown, the Arab world is becoming too important for Asia to ignore. As the Arabs look eastward, a rising Asia has the potential to play a major role - as the region`s economic and political partner in trade, innovation, cultural exchange, global stability and development.
[The co-authors are researchers at the Middle East Institute at the National University of Singapore]