Two decades after 9/11, the global economy is still living with the consequences 

Two decades after 9/11, the global economy is still living with the consequences 
Traders on the floor of the New York Stock Exchange gather around a terminal on the day trading resumed after nearly a week off 17 September, 2001. (File/AFP)
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Updated 11 September 2021

Two decades after 9/11, the global economy is still living with the consequences 

Two decades after 9/11, the global economy is still living with the consequences 
  • From finance and aviation to trade and energy, Al-Qaeda’s assault on the global capitalist system was transformational
  • Fearing sanctions or for reasons of pure xenophobia, many Americans were reluctant to do business with the Middle East after 9/11 

DUBAI: The Al-Qaeda conspirators who selected the Twin Towers of New York’s World Trade Center for the main focus of their 9/11 attack knew what they were doing. The towers represented American power and bravura, but also symbolized the global dominance of the US financial system.

The banks, investment firms and stock brokers in the Twin Towers ran the global capitalist system; bring them down and it would be a body blow to US financial hegemony, paving the way for an “Islamic caliphate.”




Traders begin their work on the floor of the New York Stock Exchange after observing two minutes of silence before the start of the trading day 17 September, 2001. (File/AFP)

The effect when the towers fell was immediately apparent in downtown Manhattan, where they had stood since 1973. Three years after the attacks, Mike Bloomberg, then mayor of New York, told an investigating commission: “The 9/11 attacks took an enormous toll on New York City and New York state. They contributed to a decline in tax revenues totaling almost $3 billion in 2002.”

Inside the towers, the human carnage was terrible. In one investment firm, Cantor Fitzgerald, which occupied floors 101 to 105 of the North Tower, every employee who reported to work that day died in the attack. Other blue-blooded Wall Street banks, notably Morgan Stanley, also suffered terribly.

In such circumstances, the immediate economic and financial fallout was grim. The US financial system did indeed grind to a halt, as the attackers had intended. American financial markets, including the New York Stock Exchange just a few blocks away from “ground zero,” closed immediately.




A hijacked commercial plane crashes into the World Trade Center 11 September 2001 in New York. (File/AFP)

Huge chunks of American and global economic life simply stopped working. The aviation industry was grounded in the US for days, and elsewhere was subject to the tightest restrictions imaginable to prevent further attacks. Global trade and commerce dipped as a result. The insurance and financial industries were especially badly hit.

Oil markets, which had been healthy for the period before the attacks, nearly halved in the week after, amid growing fears for oil demand at a time of huge economic uncertainty. It would take until spring 2002, and worries for oil supply from the Middle East as America’s military response to the attacks became apparent, for oil to regain pre-9/11 levels.

When financial markets did reopen after a week of forced closure, they suffered a 10 percent crash in early trading, and took nearly two months to get back to pre-9/11 levels. In the circumstances of the worst terrorist attack in history, the fact that markets recovered in such a short space of time can probably be viewed as testimony to the system’s resilience.

But the longer-term repercussions were to be more serious. Nearly eight years after 9/11, the Department of Homeland Security conducted an in-depth analysis of the economic effect of the attacks, and concluded: “In addition to the direct impacts of fatalities and injuries, destroyed property, and business interruption in New York City, there was the emergence of the ‘fear factor’ and the range of fiscal and monetary policy responses undertaken by the US government that sustained economic activity.”

The “fear factor” had direct repercussions for Saudi Arabia and for the economies of the Middle East. “The uneasy but mutually beneficial political and economic relationship between the US and the Gulf Arab states was shaken to its core” by the attacks, said a prominent Middle East banker who requested anonymity because of the sensitivity of the events even two decades later. Furthermore, as he pointed out, there was a “discernible rise in anti-Arab sentiment in the US.”

There was certainly a witch-hunt in the US to identify the backers of the Al-Qaeda terrorists, which had the effect of casting blame far and wide, including Saudi and other Gulf financial institutions that were deemed to be responsible for funding the hijackers.




A trader on the floor of the New York Stock Exchange holds his head early in the trading day as the Dow Jones Industrial Average fell nearly 500 points in early trading 17 September, 2001. (File/AFP)

Few of these wild allegations had any truth to them, but the damage was done. Americans were increasingly reluctant to do business with the Middle East, for fear of sanctions by their own governments and for reasons of pure xenophobia as the “war on terror” began to accelerate. US exports to Saudi Arabia fell by 25 percent in the first nine months of 2002.

It was a two-way street of distrust. In August 2002, the Financial Times reported that “disgruntled Saudis have pulled tens of billions of dollars out of the US, signaling a deep alienation from the USA.”

Though these developments were worrying for global trade and financial flows, there was an immediate benefit for the economies of the Gulf. Middle East capital, which had previously looked to the US for maximum return, instead began to seek investment opportunities at home.




A trader on the floor of the New York Stock Exchange talks on a phone halfway as Wall Street reopened 17 September, 2001 after a four-day closing due to last week's terrorist attacks. (File/AFP)

Despite the invasion of Afghanistan in late 2001 and the US coalition-led attack on Iraq in 2003, the immediate aftermath of the 9/11 attacks was a boom time for financial markets in the Middle East, as capital was repatriated and oil prices surged on worries about tight supply in the tense security situation.

By the time President George W. Bush stood on the deck of the aircraft carrier USS Abraham Lincoln in May 2003 and declared “Mission Accomplished” in Iraq, the Saudi stock market was up nearly 12 percent on the year, and went on to greater heights later that year as the first phase of the Iraq war drew to a close.

“Arab relations with the US may have been strained but the removal of Saddam Hussein was a widely shared objective that seemingly removed the threat of wider regional conflict,” the banker told Arab News.




A street sign near the front of the New York Stock Exchange August 5, 2011. (File/AFP)

That hope of a US-led period of peace and liberal democracy in the Middle East proved illusory by subsequent events, and it is in these that we discern the long-term economic significance of the 9/11 attacks.

The “forever wars” in Afghanistan and Iraq that President Joe Biden is only now bringing to an end caused endless human suffering in the Middle East, destabilizing other Arab states and contributing to the chaos of the Arab Spring in 2011. But they also had a direct effect on the global economy.

“The US spent unimaginable sums trying to force its lifestyle and politics on Muslim countries,” Anthony Harris, a former British ambassador to the UAE who is now a Gulf-based businessman, told Arab News.

“The exact amounts will never be known, but the Afghan and Iraqi wars probably cost America about a trillion dollars each for each decade of these campaigns, or upwards of $4 trillion in all.

“Debts on such a vast scale have impacted financial markets and benefited those who run trade surpluses with the US, like China and some of the Arab oil producers.”

In this view of post-9/11 events, the attacks on New York and elsewhere contributed significantly to the cheap debt conditions which contributed to the global financial crisis in 2008/09, and still have a legacy in the “quantitative easing” programs virtually every central bank in the world espouses to help get their economies out of the COVID-19 recession.

They have also fed the growing trade tensions between the US and China.

One other legacy of the attacks is also worth noting. The febrile atmosphere of post-9/11, when the whole Middle East was regarded virtually as an enemy by Washington, provided the first impetus to the revolution in American oil production techniques. Consequently, the US would become self-sufficient in crude production, but global energy markets would be destabilized and economies of the Middle East affected.

In economics, finance and energy, as in politics, the Al-Qaeda attacks on the US on Sept. 11, 2001, were transformational events. Two decades on, the global economy is still living with the consequences.

Twitter: @FrankKaneDubai


Oil demand expected to reach pre-pandemic levels despite omicron fears: Aramco CEO

Oil demand expected to reach pre-pandemic levels despite omicron fears: Aramco CEO
Updated 20 sec ago

Oil demand expected to reach pre-pandemic levels despite omicron fears: Aramco CEO

Oil demand expected to reach pre-pandemic levels despite omicron fears: Aramco CEO

Dhahran: Aramco’s CEO is optimistic about oil demand growth next year despite fears over the new COVID-19 variant omicron. 

Oil demand will be over 100 million barrels per day in 2022, reaching pre-COVID19 levels, Amin Nasser told Arab News during a media briefing at the company's headquarter today.

On COVID-19’s new strain, he said that “the markets overreacted,” adding that the impact of omicron on demand cannot be measured without a full medical assessment.  

Nasser’s remarks came during a ceremony in Dhahran to kickoff development of the unconventional gas field Jafurah. 


Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap

Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap
Updated 28 min 51 sec ago

Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap

Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap

The EU’s Economic Sentiment Indicator slipped marginally by 1.1 points to reach 116.5 in November, the European Commission said.

The drop was attributed to a noticeable fall in consumer confidence, although among other sectors such as industry and services it remained the same. At the same time, confidence in the retail trade and construction sectors improved.

Germany, the Netherlands and Spain were among the countries that experienced a downward trend in their economic sentiment, with the latter undergoing the largest decline.

On the other hand, France had the biggest improvement in economic sentiment during the month. Italy and Poland were another two countries that had more favorable sentiment.

Inflation in Western Europe

Annual inflation rate in Spain reached 5.6 percent in November, according to preliminary estimates in a press release issued by Spain's National Statistics Institute. 

The inflation rate predicted for November will be the highest since September 1992. The increase was mainly driven by higher food prices.

In addition, the monthly inflation rate is expected to reach 0.4 percent in November.  

Meanwhile, Germany’s consumer prices are expected to rise in November by 5.2 percent from a year ago, data from Germany’s Federal Statistics Office showed. This is higher than October's 4.5 percent.

Energy costs surged by 22.1 percent while food prices went up by 4.5 percent, according to preliminary estimates.

The monthly inflation rate is expected to be a negative 0.2 percent in November.

Mexico’s unemployment

The Mexican jobless rate decelerated to 3.9 percent in October from 4.2 percent in the prior month, according to the country’s official statistics agency, INEGI.

The number of unemployed persons eased to 2.3 million, declining by 288,000 from a year earlier, the INEGI report showed.

On a seasonally adjusted basis, the jobless rate remained at 3.9 percent.


Egypt and Jordan agree to more than double the electric capacity between them

Egypt and Jordan agree to more than double the electric capacity between them
Updated 49 min 49 sec ago

Egypt and Jordan agree to more than double the electric capacity between them

Egypt and Jordan agree to more than double the electric capacity between them

Egypt and Jordan have agreed to strengthen the electrical interconnection between them in a plan that could see them exchange energy with the rest of the region.

The two governments have settled on a deal that will see the current capacity of 500 megawatts increased to up to 2000 MW, with Jordanian Minister of Energy and Mineral Resources Saleh Al-Kharabsheh saying it “benefits both sides.”

“Our relationship with Egypt is distinguished, as the electrical connection between Jordan and Egypt began in 1999, and there is an exchange of electrical energy with capacities of up to 500 megawatts, and the new agreement may raise this capacity to 1,000 or 2,000 megawatts in the future,” Al-Kharabsheh said, at a press conference in the Jordanian capital of Amman.

“It is possible that Jordan and Egypt will eventually be able to exchange electrical energy between the countries of the region and link it to each other and with other countries such those in Europe or through Egypt to the African continent, which helps encourage and strengthen cooperation between the two countries,” he continued.

Speaking alongside Al-Kharabsheh, the Egyptian Minister of Electricity and Renewable Energy Mohamed Shaker said his country has managed to raise its electrical capacity enough to be able to export.

He added that Egypt plans to increase the percentage of renewable energy from its electrical capacity to 42 percent in 2035.

Shaker also explained that Cairo is studying a new link line with Europe through Greece and Cyprus, explaining that strengthening the link with Jordan opens the way for the exchange of capabilities.

 


16 more fintech firms enter Saudi market in Q3 of 2021

16 more fintech firms enter Saudi market in Q3 of 2021
Updated 29 November 2021

16 more fintech firms enter Saudi market in Q3 of 2021

16 more fintech firms enter Saudi market in Q3 of 2021

RIYADH: Saudi Arabia issued licenses to 16 fintech companies in the third quarter of 2021, Sabq quoted Saudi Central Bank governor as saying at an event on Monday.

Fahad Almubarak said 13 of those companies work in the field of payments and electronic wallets, and three firms are engaged in insurance and finance sector.

Saudi Arabia witnessed a 37 percent rise in the number of fintech firms entering the market and also recorded an increase in venture capital investments that exceeded SR680 million ($181 million).

Capital Market Authority chairman Mohammed Elkuwaiz said fintech companies develop technical ideas that challenge the current situation, which has an added value because it offers a product that did not exist before, Sabq paper reported.

Fintech in Saudi Arabia has competitive advantages over other countries, and 90 percent of transactions in the Saudi financial market are automated and have been conducted electronically for more than 10 years, Argaam reported.


Chinese developers to face $1.3bn of bond payments in December

Chinese developers to face $1.3bn of bond payments in December
Updated 29 November 2021

Chinese developers to face $1.3bn of bond payments in December

Chinese developers to face $1.3bn of bond payments in December

RIYADH: China’s developers face around $1.3 billion of bond payments in December, following a month of investors’ sentiment stabilising toward the property sector.

In November, the total bond payments was $2 billion, with no defaults reported, according to Bloomberg. 

Investors' scrutiny regarding principal and interest payments lingers as the cash crisis hits the real estate industry. 

China’s Evergrande group unit and Kaisa group’s grace periods are ending by mid-December on coupons of a total of $171 million.