Valdai Club

It seems clear that Arab governments have been tested by the coronavirus. While all have faced a similar challenge in balancing public health needs with economic activity, they have had to do so with varying capacities. Some, like the Arab Gulf states, found themselves better resources and therefore more able to tackle the immediate demands of the crisis. But that they were able to do so is by no means certain in the future, writes Guy Burton, Visiting Fellow at the LSE Middle East Centre.

Looking at the Arab world, the story so far has been of a region which has seen governments taking similar approaches to the coronavirus pandemic  by introducing lockdowns while also struggling to keep economic activity going  while also juggling existing pressures and demands. 

The coronavirus first appeared in the UAE at the end of January before spreading across the Gulf and wider region in February and March. Seven months after its first appearance, Iran and Saudi Arabia lead the region with the most cases: nearly 377,000 and more than 316,000 cases respectively. They are followed by Iraq with 238,000, Qatar with 119,000 and Egypt with nearly 100,000 cases (as of 1 September 2020).

Governments responded relatively swiftly to the threat. Many imposed restrictions on movement in March, which became steadily stricter. Some also introduced financial stimulus packages, which according to the IMF averaged nearly 4 percent of GDP.

Despite these early moves, governments failed to contain the spread and have seen economic prospects plummet. Having predicted that regional GDP would grow 3.3 percent in 2020, the IMF reversed that to a 3.1 percent contraction in April. In July it revised it further, to a 4.7 percent fall.

The expected economic downturn owed much to falling global demand for oil. Oil prices halved, with consequences for oil producers budgets. The problem was made even worse when Saudi Arabia announced it would cut production in March, in response to Russian plans to do the same. A month later, the two, along with other OPEC and non-OPEC producers, agreed to curb production levels by 10 million barrels. That helped stabilize prices to around $40-45 per barrel.

The current oil price is still not sufficient for many Gulf producers to maintain their current and future spending plans. Indeed, one outstanding question is whether or not the pandemic will provide a catalyst for these countries to enact the diversification plans that they have sought since the 1970s. So far, they have failed to materialize, owing to the difficulty of transforming the existing social contract between rulers and their societies.
That social contract has helped insulate national populations so far.

Despite some spending cuts and tax rises, on the whole Gulf nationals have secure employment and income as well as generous welfare provision.
The same cannot be said for foreign workers who make up the majority of the populations in most Gulf countries. Some governments see the pandemic as an opportunity to reduce their dependence on foreign labor and replace it with national workers. Meanwhile, for many foreigners the lockdowns have made them vulnerable: unable to earn, they face high living costs and have also been unable to remit  which has had consequences in less revenue for their home countries. This situation has affected all foreign workers, whether those from poorer countries in South Asia to those from Arab countries, like Egypt and Lebanon.

Poorer workers have faced further difficulties. With many of them living in labor camps, they experienced high transmission levels of the coronavirus. For many nationals, these infected migrants were viewed with suspicion, prompting governments to persuade them to go home. India, which has been running a large subsidized repatriation service, extended it to the Middle East in May. To date, it has brought back nearly one million Indian nationals from around the world.

Arguably, the highly integrated nature of the Gulf states in the global economy contributed to the early and widespread transmission of the coronavirus. By contrast, countries at war, like Syria, Yemen and Libya, were among the last to record their first cases of coronavirus, in late March and early April.

In addition, the late arrival of coronavirus does not appear to have directly affected the wars in these countries. The most notable military developments since the start of the year was the Libyan Government of National Accords pushback of General Khalifa Haftars forces from Tripoli, following assistance from its Turkish ally. In Yemen, the Houthis siege of Marib has not yet succeeded while splits emerged within the governing coalition, leading to the Southern Transitional Councils brief pursuit of self-rule. Meanwhile, in Syria President Bashir al-Assad consolidated his rule in Syria. He stripped his cousin, Rami Makhlouf, of many of his economic assets and influence, even as Syrian society faced new economic pressure in the form of new US sanctions.

Although coronavirus did not have a direct effect in these cases, that could change in the second half of the year. Years of war has destroyed vital infrastructure, including hospitals. It has also made access to medical supplies and manpower more difficult. Consequently, these countries are extremely vulnerable should the coronavirus spread more widely. For now, the numbers are reportedly low  14,600 in Libya, under 3,000 in Syria and under 2,000 in Yemen, but given the few number of tests done and that are available, this may be an underrepresentation of the true picture.

The absence of coronavirus on political developments is not only tied to countries at war. Significant protest movements have emerged across the region over the past year, from Sudan and Algeria in early 2019 to Iraq and Lebanon later on. While causes and character of the protests are particular to each country and the movements have been careful not to draw too many parallels between them (a lesson learned from the 2011 uprisings when the linkages prompted governments to clamp down as they saw them spread), they share common traits, including frustration at sluggish economies, a lack of job opportunities and income, rising poverty, poor public services and unresponsive governments.

The lockdowns imposed earlier in the year paused the protests and provided some respite for affected governments. However, that was temporary; the lockdowns did not deal with protesrors grievances and demands. As the lockdowns eased and governments opened up their economies again, so too did people return to the streets.

If the coronavirus has not shaped military activity and the protests in the Arab world, it did stimulate international activity. China was an early mover, owing to the initial impact of the coronavirus there and its relative success in containing the spread. Both the Chinese state and businesses participated in the campaign, providing medical assistance and equipment to the most affected countries like Iran and Saudi Arabia. Chinese firms are also working in partnership in Saudi Arabia and the UAE to devise a vaccine.
Unlike China, the Arab worlds other, more traditional partners like the United States and the Europeans, responded more slowly. But like the Chinese, they have provided medical assistance and equipment, but also broader forms of support, including general relief for refugees, anti-poverty measures and budget support within the 2 billion euros allocated by the European Union and the $10 million set aside by the United States.

In sum then, it seems clear that Arab governments have been tested by the coronavirus. While all have faced a similar challenge in balancing public health needs with economic activity, they have had to do so with varying capacities. Some, like the Arab Gulf states, found themselves better resources and therefore more able to tackle the immediate demands of the crisis.

That they were able to do so is by no means certain in the future. The same may also be said of those countries which may be looking at the start of a pandemic crisis and are in poor shape to deal with it, like Syria, Yemen and Libya. In addition, there are other countries which while not at war are also vulnerable, albeit for economic stagnation and decline. Among them include Iraq and Egypt, for example, where job prospects are few and growing numbers of people risk falling into poverty. To that list should also be added Lebanon, which has severe economic deterioration over the past year and which has been exacerbated further by the destruction following the warehouse explosion in early August.

Finally, looking further down the track, it is not yet evident that the coronavirus crisis has so far transformed the region politically, economically or socially. While its long-term consequences may only be guessed at, it has contributed to exacerbating certain trajectories. Among those is the likelihood that regional economies will deteriorate further, which will add to peoples frustrations and contribute to the demands made by protest movements across the region. That will lead to governments facing greater pressures to respond.