Coronavirus in the Middle East

A different kind of conflict

The devastating health impact of Covid-19 has precipitated a raft of drastic policy measures by governments across the Middle East. In Iran, where well over 3,000 have died as result of the virus, Supreme Leader Ali Khamenei temporarily released up to 85,000 prisoners to combat its spread. The Saudi government has asked Muslims to forgo making haj – the pilgrimage incumbent on every Muslim – this summer. Images of an empty al-Haram Mosque in Mecca, usually teeming with thousands of Muslims prostrating before the Kaaba, Islam’s holiest site, appeared in news broadcasts and on social media. Kuwaiti authorities even amended the call to prayer, or adhan, urging citizens to pray from their homes (as-salatu fi buyutikum) rather than gather in mosques (hayya alas salah, or literally come to pray).

The UAE was among the first in the region to take serious action, suspending the issuance of all visas in mid-March, thereby delaying this author’s relocation to Wallbrook’s Dubai office. The Emirati government has also formally requested to postpone World Expo 2020 Dubai to next year.

Impact on regional markets and FDI

The wider economic consequences for the Middle East are gloomy: a shock to regional markets; airport and business closures; bans on public gatherings; the collapse of tourism – the list continues.

A supply pact between OPEC and its allies led by Russia collapsed after Moscow rejected Riyadh’s request to implement production cuts, further saturating an already overflowing market and sending oil prices into a spin. According to the Purchasing Managers’ Index (PMI), which measures activity in the manufacturing and services sectors, operating conditions in Saudi Arabia and the UAE worsened at record rates in March, with Egypt’s non-oil private sector recording its largest slump in over three years. With any number below 50 considered a contraction, as of the end of March the PMI of all three countries was in free fall, declining to 42.4, 45.2 and 44.2, respectively.

MEED Projects has revised down its annual forecast for contracts awarded in the Gulf in 2020 from USD 127 billion to USD 107 billion. This figure could drop to USD 87 billion if the lockdown lasts six months. Foreign direct investment will be hit and forecasts similarly revised, which could have significant repercussions for due diligence.

Although the business intelligence sector is well positioned to carry out research remotely, gathering information on the ground – whether that be speaking to local sources or retrieving records from the relevant ministries – now requires more time, adding delays to projects. Meeting sources in person and conducting site visits as part of asset tracing assignments has become virtually impossible.

The local response

Middle Eastern governments vary in their capabilities to cope with the crisis. For Gulf petrostates like the UAE and Kuwait, with the health infrastructure and cash reserves to handle the rising number of infected patients, the emergency should be more manageable: “Kuwait has been a leader in the region in terms of enacting strict quarantine measures and social distancing rules. Hospitals are well staffed and well equipped, and the vast majority of people are following quarantine protocols,” a Kuwait-based academic and businessman told us.

The outlook is considerably bleaker for war-torn countries like Yemen and Syria. Wallbrook’s Head of ESG and Human Rights, Mariana Abreu, formerly a campaigner at international NGO Global Witness, commented: “Yemen and Syria have a very limited healthcare infrastructure. Covid-19 risks spreading quickly in and around these countries, especially in refugees’ and displaced persons’ camps, where people often live in overcrowded settlements with little access to hygiene products, medical supplies and sanitation services. Of particular concern, lockdowns could block humanitarian aid access corridors. There are entire populations relying on aid, especially food distributions, to survive.” The virus could be similarly problematic for countries like Turkey, Lebanon and Jordan, which have been forced to shoulder most of the refugee burden and collectively house over five million Syrian refugees.

Beyond this, it is not unthinkable that Covid-19 could aggravate already sensitive political dynamics – especially if regional governments distribute aid and offer services along sectarian lines. And it could be a boon for militant groups seeking to take advantage of distracted governments pooling their resources towards treating citizens afflicted by the disease. Additionally, fears are growing that autocratic regimes could exploit current circumstances to justify repressive actions.

Unexpected upsides

Despite these myriad concerns, silver linings are beginning to appear. While it is too early to see any meaningful long-lasting positives, the outbreak has sparked an “extraordinarily high level of cooperation and coordination” between Palestinians and Israelis and could be an “important opportunity for some relief for Palestinians”, according to Daoud Kuttab, an award-winning Palestinian journalist, writing in the online Middle East news forum al-Monitor. Sceptics are probably right in believing that the two sides will revert to type once the crisis ends, but the brief joining of forces offers a glimmer of hope for a potentially more collaborative future.

In terms of the Saudi and UAE-led boycott of Qatar, the unifying effect of the virus could also lead to increased regional collaboration. The Gulf Cooperation Council has been actively coordinating a response and e-meetings, which have included Qatar, have taken place on a ministerial level, with particular weight given to health, commerce and finance. In March, the UAE carried out a coronavirus aid mission to Iran in collaboration with the World Health Organisation, sending 7.5 tonnes of medical supplies.

Still, it is hard to avoid the conclusion that this deadly and highly infectious disease will be anything other than another setback for a region beset by decades of war, displacement and tyranny. Let us hope this latest crisis is short lived.