Top 11 global events that shook the Middle East in 2015
- Oil price decline
The Middle East saw the worst of everything as crude oil prices began to plummet, hitting new lows since the past years. Saudi Arabia ran a deficit of SAR367 billion in 2015 and announced a cut of SAR 326bn in spending next year.
Qatar has forecasted a QAR46.5bn deficit budget in 2016 and expects that revenues will likely fall to QAR156bn, compared with QAR226bn in 2015.
The UAE has already made an AED500 million cut in its federal budget for 2016 while Oman posted a budget deficit of OMR3.26bn in the first ten months of this year, falling back from an OMR189.6m surplus a year earlier.
Oil prices plunged more than 60 per cent from $100 per barrel last year due to weak demand and oversupply.
The slump in oil prices has forced the states in the region to take several measures to keep their economies upright. Countries like the UAE, Saudi Arabia and Bahrain deregulated domestic fuel prices and the GCC states are in the process of introducing value-added tax (VAT) in the region.
- Iran nuclear deal
After months of tough discussions, Iran and six global powers reached a historic deal limiting the Islamic Republic’s nuclear programme, in return for the lifting of sanctions against Tehran in July.
The news of the historic deal was welcomed worldwide with many countries reaffirming their ties with Tehran.
However, the agreement turned out to be a bittersweet deal for the oil-exporting countries as they feared that Iran will now be able to flood its oil reserve into the oil market that has already been hit by oversupply and price declines.
Iran has already vowed to target oil and gas projects worth $185 billion by 2020.
Analysts believe the deal will bring major developments in the nations’ diplomatic ties with Iran, but they also expect changes in the relationship between Iran’s archrival Saudi and the US. One can certainly say that with the nuclear deal an era just began in 2015.
- China economy crisis
The Arab world was not spared again when the troubled Chinese economy sent shock waves around the globe. The devaluation of the yuan and nosediving Chinese shares alarmed the stock markets in the Middle East region. The Dubai Financial Market’s main index fell more than seven per cent on the day Chinese media dubbed “Black Monday”, while Saudi Arabia’s Tadawul lost 5.9 per cent. The Saudi stock exchange was down by 17 percent at the end of August compared with July. The oil-rich Arab nations have several reasons to worry if the Asian giant faces a tough time as it is the major market for the oil and non-oil business of the GCC states.
- Yuan becomes reserve currency
The International Monetary Fund has approved China’s yuan (renminbi) into its elite list of reserve currencies that comprise of the US dollar, euro, Japanese yen and British pound.
The move is expected to be “an important milestone” for China and its major trading partners in the Arab region. The UAE has announced that it plans to set up a centre for clearing transactions in yuan. Qatar has already opened a clearing house for the currency to settle transactions with Chinese companies.
- Asian Infrastructure Investment Bank
China established the Asian Infrastructure Investment Bank (AIIB), to rival the top international financial institutions such as the World Bank, IMF and Asian Development Bank. The UAE, Saudi Arabia, Kuwait, Oman, Qatar, Egypt and Jordan were among the 57 prospective founding members of the bank, which aims to support infrastructure construction in the Asia-Pacific region.
- Federal Reserve rates hike
The central banks in the Middle East region have revised key interest rates in response to the US Federal Reserve’s decision to raise rates for the first time in nine years. Following the Federal Funds rate hike of 0.25 percentage points, the UAE’s central bank decided to raise the interest rate on its certificates of deposit by 25 basis points.
Bahrain raised the interest rate on its overnight deposit facility to 0.50 per cent from 0.25 per cent, while Kuwait hiked its discount rate by 0.25 per cent to 2.25 per cent. Meanwhile, the Saudi Arabian Monetary Agency raised reverse repurchase rate by 25 basis points to 50 basis points but did not revise the repo rate.
- Islamic State and Yemen conflict
Not a single day in 2015 passed without the militant group Islamic State (IS) being mentioned in the media around the globe. The group drew the attention of the world community after it formally declared the establishment of a “caliphate” in large swathes of territory it seized in Syria and Iraq. The US formed a coalition to fight the IS, which has succeeded in pushing the terrorist group back from some territories. But the militants, who are notorious for their brutality, including mass killings, abductions and beheadings, have expanded their network to capture new territories and have taken the lives of thousands. The war against the extremely violent group has cost millions of dollars and the loss of abundant resources. With no trace of light visible at the end of the tunnel yet, one can expect that the war will continue through the next year.
Middle Eastern nations have lost several of their soldiers and spent millions of dollars in Yemen where the Saudi Arabian-led coalition of nine Arab states began fighting Houthi rebels in 2015. UNHCR estimates that more than 300,000 civilians have been displaced in the recent conflict in Yemen.
- Volkswagen scandal
The German carmaker was embroiled in one of the biggest corporate scandals after it admitted that many VW, Audi, SEAT and Skoda cars being sold in the US and Europe had a “defeat device” to allow them to cheat in emission tests.
A study by YouGov found that VW has seen a 50 per cent dip in its brand impression in Saudi Arabia following revelations about the scandal on September 18.
Qatar Investment Authority, a $256bn sovereign wealth fund, is the third-largest shareholder in Volkswagen with a 17 per cent stake in the company. It has lost nearly $5bn after the car maker’s shares dropped 34 per cent following the emissions scandal, according to reports.
- Refugee crisis
2015 was also the year of refugees. More than am migrants and refugees, of whom a majority are Syrians, have crossed into Europe, Canada and some parts of the Middle East. The huge influx of refugees has put the countries in a crisis as they struggle to cope with the resettling of people.
According to UNHCR, its financial requirements for the Middle East have increased dramatically “from $506.4m in 2011 to a revised 2014 budget of $1.6bn, as a result of needs arising from the crisis in Syria. In 2015, these financial requirements have increased again to $1.7bn due to growing needs chiefly stemming from developments in Iraq, Syria and Yemen.”
- Paris climate summit
Heads of state from 147 nations addressed the 2015 United Nations Climate Change Conference (COP 21) held in Paris from November 30 to December 11. Ahead of the summit, which saw the participation of more than 40,000 delegates from 195 countries, the countries in the Arab region announced their action plans and projects for sourcing energy from non-fossil resources. The UAE has been ramping up its efforts to diversify energy sources and has plans to invest $35bn in clean energy projects by 2021. Dubai launched the AED100bn ($27.2bn) Dubai Clean Energy Strategy 2050, which aims to provide seven percent of the emirate’s energy from sustainable sources by 2020, raising that to 25 per cent by 2030 and 75 per cent by 2050.
US Republican presidential frontrunner Donald Trump revealed his anti-Muslim stance during his campaign. He went on to call for a ban on Muslims entering the US following a deadly attack in California.
In response to the American business magnate’s foul statement, Dubai-based Landmark Group decided to cease the sales of Trump Home products in its Lifestyle department stores in Kuwait, the UAE, Saudi Arabia and Qatar.
Damac Properties took down a huge billboard featuring Donald Trump at its Akoya development site in Dubai following the controversial remarks. But the developer restored the signage saying that its partnership is with the Trump Organization, which had nothing to do with Trump’s political views.