Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?

Analysis Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?
Palestinian civilians in Gaza have seen their homes devastated, main, since the Israel-Hamas conflict began on Oct. 7, which now threatens to drag troubled Arab states including Syria, bottom left, Lebanon, bottom, and Iraq, right, into a wider regional war. (AFP)
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Updated 24 October 2023
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Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?

Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?
  • Bulk of impact expected to be felt by economies already grappling with crises, notably Syria, Lebanon and Iraq
  • Geographical distance from the war zone potentially offers room for maneuver for some Arab countries

LONDON: Western media may be warning of “drastic implications” for the global economy should the conflict in Gaza spill over into neighboring countries, but Middle East analysts predict that the economic brunt of a wider conflagration will be borne by crisis-ridden regional countries.

A number of developments are being seen as an omen of things to come. From Lebanon, Hezbollah and allied Palestinian factions have been trading daily cross-border fire with Israel. A US Navy ship has intercepted missiles launched by the Houthi militia in Yemen. Two American bases in Syria have come under fire. And in Iraq, drones and rockets have fired at US forces.

Several countries, including Saudi Arabia, Kuwait, the US, the UK, Germany, France and Canada, have encouraged their nationals to avoid travel to Lebanon or leave while flights remain available.

Forecasting a 60-percent chance of “prolonged conflict” and the potential for the “increasing involvement” of regional actors, including Iran-backed militias, Ali Metwally, a London-based expert, says the economies of Iraq, Lebanon and Syria are most at risk.

“If Hezbollah were to enter into a conflict with Israel, Lebanon would likely suffer significant economic consequences due to its close association with the group and the potential for direct military engagement,” he told Arab News.




 Palestinian girl carries a blankets as she walks past the site of a deadly explosion at al-Ahli hospital, in Gaza City. (AFP)

Lebanon’s tourism and hospitality sectors, major contributors to its service-oriented economy, would suffer the most while its supply chains would face disruption from “any damage to or closure of the port of Beirut,” causing “shortages of essential goods” and “fueling the current hyperinflation.”

Given the financial collapse of 2019 and the resulting paralysis suffered by Lebanese banks, Metwally speculated that any further shocks would only serve to scare off the remaining depositors and investors.

Similarly, Syria, which has been a proxy battleground since the onset of civil war in 2011, has endured high input costs and inflation rates, fuel and medicine shortages, a collapsed currency, devastated infrastructure, and water scarcity for the better part of a decade.

This, according to the UN, has left more than 90 percent of the population below the poverty line and 15 million Syrians in need of humanitarian assistance. Ongoing EU and US sanctions — which also limit the capacity for even those governments that have restored diplomatic ties with Syria to invest in its reconstruction — have only served to exacerbate this.

Were a wider conflict to be introduced into this mix, Metwally said, vital aid flows may be cut off because of a “possibility that the international community would redirect aid efforts from rebuilding and stabilizing Syria to addressing the new conflict, leaving the country with fewer resources for post-war reconstruction.”

Metwally’s concerns are echoed by Ammar Abdulhamid, a US-based political analyst, who said that a wider war “means that the two countries — Syria and Lebanon — will become battlegrounds, and whatever leadership exists in both countries will be decimated. The two states will collapse as such, not just their economies.”




From Lebanon, Hezbollah and allied Palestinian factions have been trading daily cross-border fire with Israel. (AFP)

Noting the likelihood of various Iraqi militias and groups taking sides in any ensuing crisis, Metwally pointed out that the country has no shortage of internal strife, with “sectarian tensions” a continuing concern.

Since “Iraq is heavily reliant on the oil sector in revenue generation and employment, higher security concerns could lead to attacks on oil infrastructure or hinder the movement of oil through critical shipping routes, lowering Iraq’s oil revenue and widening the fiscal deficit of the country after a decent period of surplus.”

Considering all it has been through, Iraq has found a degree of stability unprecedented in the last two decades, and the economy has been gradually recovering since 2021, according to a World Bank report.

INNUMBERS

• $270.36bn Iraq’s GDP (2022).

• $22.4bn Syria’s GDP (2019).

• $20.48bn Lebanon’s GDP (2021).

Source: Statista

In 2022, it earned approximately $115 billion in oil revenues, thanks to a rise in energy prices in the wake of Russia’s war on Ukraine and consequent Western sanctions on Russia. Buoyed by this oil bonanza, the Iraqi government allocated $153 billion for the 2023 budget.

While Abdulhamid thinks Iraq’s geographical distance from Palestine potentially offers it “some room to maneuver,” Metwally remains concerned that “any diversion” of financial resources to address security issues could strain the government’s budget, reducing its supply of essential public services.

Abdulhamid acknowledged the budgetary buffer but said the Islamic Revolutionary Guard Corps, “acting through its proxies and loyalist militias, will siphon most of that and will try to use Iraqi wealth as its war chest. As such, should the war last too long (several months), the potential for intercommunal and inter-regional conflict will increase as Iraq’s economy implodes. Iran will follow suit.”




The economies of Iraq, Lebanon and Syria are most at risk, experts say. (AFP)

Should this happen, both said some effect would be felt by even the most robust regional economies, including the Gulf countries currently benefiting from an oil price windfall. Metwally said while the risk was currently low, were oil shipments in the Arabian Gulf and Red Sea to be disrupted, oil revenues of these countries could take a hit.

Abdulhamid said the fate of other countries in the region, especially the Gulf states, will depend largely on “how much the US is willing to help them secure their borders.” He added: “There are certain parties, especially Iran and its proxies, but also Russia and China, who stand to benefit from a prolonged bloody conflict in Gaza because they can score points against Israel, the US, and Europe.”

While the analysts may all agree on who will bear the brunt of an economic hit, there is less consensus on the prospects of the conflict widening. Abdulhamid is convinced that the fighting will be contained, stressing that “everyone has a lot to lose, but there is a limited possibility of the parties blundering into it.”

Likewise, Syrian-Canadian analyst Camille Alex Otrakji does not believe that war is inevitable despite the uptick in belligerent rhetoric. “It is highly probable that Israel, the US, Iran and Hezbollah are constantly fine-tuning and re-evaluating a broad spectrum of contingency plans, encompassing both defensive and proactive offensive strategies,” he said.

“However, the extent to which each party is prepared to escalate remains a puzzle to international observers.




According to the UN,  more than 90 percent of the population lives below the poverty line and 15 million Syrians are in need of humanitarian assistance. (AFP)

“Expressions of confidence and resolve are substantial on all fronts, coupled with claims of unquestionable monopoly on moral clarity. Yet, all the players are constantly issuing warnings to the other side: ‘If you choose to enter this conflict, be prepared to bear an immeasurable cost,’ a sentiment often stemming from a shared desire to avoid further proliferation of the conflict.”

Nevertheless, Otrakji offered what he described as a sample of “the disturbing scenarios circulating so far,” wherein any attempt by Israel to capture Gaza would result in Hezbollah targeting Israeli cities with tens of thousands of high-precision missiles, which in turn would lead to Israel and the US aiming to destroy Damascus — creating a power vacuum in Syria.

“Should the US enter the conflict, Iran’s allied militias, spanning from Iraq to Yemen, could launch attacks on US bases throughout the Middle East,” he said. Summing up, Otrakji said: “Whenever Israeli Prime Minister Netanyahu or one of Washington’s prominent strategic thinkers heralds the dawn of ‘the new Middle East,’ the old Middle East resurges with a resounding reminder of its enduring complexities.”


Weapons experts: US-supplied bomb used in Israeli strike of Gaza ‘safe zone’

Weapons experts: US-supplied bomb used in Israeli strike of Gaza ‘safe zone’
Updated 7 sec ago
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Weapons experts: US-supplied bomb used in Israeli strike of Gaza ‘safe zone’

Weapons experts: US-supplied bomb used in Israeli strike of Gaza ‘safe zone’
  • A sliver of munition seen in a video of the blast site circulating online was a tail fin from a US-made Joint Direct Attack Munition
  • Former US Army explosive ordnance disposal technician: ‘it’s 100 percent a JDAM kit’ made in the United States
JERUSALEM: Israel’s deadly strike on Al-Mawasi, one of the bloodiest attacks in more than nine months of war in Gaza, used massive payload bombs provided by the United States, according to weapons experts.
The bombing of the Israeli-declared “safe zone” transformed the tent city on the Mediterranean coast into a charred wasteland, with nearby hospitals overrun with casualties.
According to the health ministry in the Hamas-run territory, the barrage killed at least 92 people and wounded more than 300.
The Israeli military said it targeted two “masterminds” of the October 7 attacks by Hamas that triggered the war. It said a top commander, Rafa Salama, was killed in the strike, but uncertainty remains over Hamas military chief Mohammed Deif.
AFP videos of the attack showed a white mushroom cloud billowing over a busy street, leaving behind a huge crater strewn with the wreckage of tents and a building blown to bits.
Here is what we know about the weaponry used in the attack:
Two weapons experts said that a sliver of munition seen in a video of the blast site circulating online was a tail fin from a US-made Joint Direct Attack Munition (JDAM). AFP could not independently verify the video.
The GPS-aided kit converts unguided free-fall bombs — so-called “dumb bombs” — into precision-guided “smart” munitions that can be directed toward single or multiple targets.
The United States developed the kit to improve accuracy in adverse weather after Operation Desert Storm in 1991.
The first JDAMs were delivered in 1997 and, according to the US Air Force, have a 95 percent system reliability.
Trevor Ball, a former US Army explosive ordnance disposal technician, concluded from images of the Al-Mawasi strike “it’s 100 percent a JDAM kit” made in the United States.
He said that given the types of bombs compatible with the guidance system and the size of the fin fragment, the JDAM was most likely used with either a 1,000 or 2,000 pound (450 or 900 kilogram) payload.
He said the fragment could also be compatible with the BLU-109 “bunker buster” warhead, which is designed to penetrate concrete.
Ball said it was not possible to definitively determine where the payload itself was made without “very specific fragments of the bomb body.”
Repeated use of such large bombs in the densely populated Gaza Strip has sparked humanitarian outcry and heaped pressure on US President Joe Biden to reconsider the munitions supplied to Israel.
On July 12, Israel’s main military backer announced it was ending a pause on supplying 500-pound bombs, though Biden said the 2,000-pound type would be withheld.
The White House has repeatedly voiced frustration over the civilian death toll in Gaza as Israel attempts to eradicate Hamas.
US Secretary of State Antony Blinken told two top Israeli officials on Monday that the civilian toll was “unacceptably high,” his spokesman said.
Israeli officials said their “precise strike” in Al-Mawasi hit an open area that housed a Hamas compound and not a civilian camp.
When contacted by AFP regarding the weapons used, the Israeli military declined to comment.
Based on Israel’s stated target, Wes Bryant, a retired US Air Force master sergeant and strike and joint targeting expert, said it would have been feasible to avoid collateral damage in the surrounding area.
“My assessment is that any civilians killed in this strike were in the compound — not in the surrounding vicinity. So the IDF either failed to assess presence of civilians, or... deemed the risk to civilians proportional to the military advantage of taking out the Hamas leaders.”
The strike left Al-Mawasi a scene of “absolute destruction” with no water, electricity or sewage treatment, the Islamic Relief charity said.
It condemned Israel for its willingness “to kill innocent men, women and children in pursuit of its end goals.”
Hamas said that by arming Israel, the Biden administration is “legally and morally responsible” for spawning a “major humanitarian catastrophe.”
It said US-supplied weapons used by Israel included GPS-guided bombs, dumb bombs, bunker busters and JDAMs.
After repeated high-casualty strikes in recent days, a Hamas official said the group was withdrawing from indirect talks for a truce and hostage release deal with Israel.
The war was sparked by Hamas’s October 7 attack on Israel, which resulted in the deaths of 1,195 people, mostly civilians, according to an AFP tally based on Israeli figures.
Israel responded with a military offensive that has killed at least 38,664 people in Gaza, also mostly civilians, according to the Hamas-ruled territory’s health ministry.

Israel hits Gaza from land, sea and air as Hamas halts talks

Israel hits Gaza from land, sea and air as Hamas halts talks
Updated 43 min 59 sec ago
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Israel hits Gaza from land, sea and air as Hamas halts talks

Israel hits Gaza from land, sea and air as Hamas halts talks
  • Relentless bombardments come as prospects have dwindled for a truce and hostage release deal 
  • Israel's military offensive has killed at least 38,584 people in Gaza, according to its health ministry

GAZA STRIP: Israel hammered the Gaza Strip from the air, sea, and land Monday as the war in the Palestinian territory showed no sign of abating, with Hamas saying it was pulling out of truce talks.
Shells rained down on the neighborhoods of Tal Al-Hawa, Sheikh Ajlin, and Al-Sabra in Gaza City, AFP correspondents reported, while eyewitnesses said the Israeli army had shelled the Al-Mughraqa area and the northern outskirts of the Nuseirat refugee camp in central Gaza.
Paramedics from the Palestinian Red Crescent said they had retrieved the bodies of five people, including three children, after Israeli air strikes in the Al-Maghazi camp, also in the central Gaza Strip.
Meanwhile, eyewitnesses reported Israeli gunship fire east of Khan Yunis, in southern Gaza, and shelling and Apache helicopter attacks in western areas of the southernmost city of Rafah.
The Israeli military said in a statement that it was continuing its activity throughout the coastal territory, and said it had conducted raids in Rafah and central Gaza that killed “a number of” militants, as well as air strikes throughout the strip over the past day.
It also said its naval forces had been firing at targets in Gaza.
The relentless bombardments came as prospects dwindled for a truce and hostage release deal being secured any time soon.
Hamas said on Sunday it was withdrawing from ceasefire talks.
The decision followed an Israeli strike targeting the head of Hamas’s military wing, Mohammed Deif, which the health ministry in Hamas-run Gaza said killed 92 people.
Deif’s fate remains unknown, with Israeli Prime Minister Benjamin Netanyahu saying there was “no certainty” he was dead while a senior Hamas official told AFP that Deif was “well and directly overseeing” operations.
Speaking after the strike on Al-Mawasi, a second senior official from the militant group cited Israeli “massacres” and its attitude to negotiations as a reason for suspending negotiations.
But according to the official, Haniyeh told international mediators Hamas was “ready to resume negotiations” when Israel’s government “demonstrates seriousness in reaching a ceasefire agreement and a prisoner exchange deal.”
Last week, US President Joe Biden had suggested a deal might be close, saying at a NATO summit that both sides had agreed to a framework he had set out in late May.
Hamas on Monday lashed out at the US, accusing it of supporting “genocide” by supplying Israel with “internationally banned” weapons.
“We condemn in the strongest terms the... American disdain for the blood of the children and women of our Palestinian people... by providing all types of prohibited weapons to the ‘Israeli’ occupation,” a statement from the Hamas government media office said.
Talks between the warring parties have been mediated by Qatar and Egypt, with US support, but months of negotiations have failed to bring a breakthrough.
The war was sparked by Hamas’s surprise October 7 attack on southern Israel, which resulted in the deaths of 1,195 people, mostly civilians, according to an AFP tally based on Israeli figures.
The militants also seized 251 hostages, 116 of whom are still in Gaza including 42 the Israeli military says are dead.
Israel responded with a military offensive that has killed at least 38,584 people in Gaza, also mostly civilians, according to data provided by the Gaza health ministry.
The war and accompanying siege have devastated the Palestinian territory, destroying much of its infrastructure, leaving the majority of its 2.4 million residents displaced and causing a dire shortage of food, medicines and other basic goods.
Among the devastated facilities have been multiple schools. On Sunday, Israeli forces struck a UN-run school in Nuseirat camp that was being used as a shelter for displaced people but which the military said “served as a hideout” for militants.
The civil defense agency in Gaza said 15 people were killed in the strike, the fifth attack in just over a week to hit a school used as shelter by displaced Palestinians.


Four killed, several wounded by gunfire near mosque in Oman: local police 

Four killed, several wounded by gunfire near mosque in Oman: local police 
Updated 16 July 2024
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Four killed, several wounded by gunfire near mosque in Oman: local police 

Four killed, several wounded by gunfire near mosque in Oman: local police 

RIYADH: Four people were killed and several wounded by gunfire in the vicinity of a mosque in Oman’s Wadi Al-Kabir, the Omani Police said on X early Tuesday.

“All security measures have been taken to deal with the situation. Evidence-gathering and investigation procedures will continue,” the police said.

The omani force expressed condolences to the families of the victims and wished the injured a speedy recovery. 


US military confirms Houthi attacks on vessels in Red Sea

US military confirms Houthi attacks on vessels in Red Sea
Updated 16 July 2024
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US military confirms Houthi attacks on vessels in Red Sea

US military confirms Houthi attacks on vessels in Red Sea

WASHINGTON: Houthis launched multiple attacks in the Red Sea against MT Bentley I, which was carrying vegetable oil from Russia to China, and also attacked the Chios Lion tanker ship, the U.S. military said on X on Monday.
 

 


Israeli drone strike along Lebanon-Syria border kills Syrian businessman close to the government

Vehicles drive along a road, on the day of the parliamentary elections, in Damascus, Syria July 15, 2024. (REUTERS)
Vehicles drive along a road, on the day of the parliamentary elections, in Damascus, Syria July 15, 2024. (REUTERS)
Updated 16 July 2024
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Israeli drone strike along Lebanon-Syria border kills Syrian businessman close to the government

Vehicles drive along a road, on the day of the parliamentary elections, in Damascus, Syria July 15, 2024. (REUTERS)
  • Israel, which has vowed to stop Iranian entrenchment in its northern neighbor, has carried out hundreds of strikes on targets in government-controlled parts of Syria in recent years, but it rarely acknowledges them

BEIRUT: An Israeli drone strike on a car Monday near the Lebanon-Syria border killed a prominent Syrian businessman who was sanctioned by the United States and had close ties to the government of Syrian President Bashar Assad, according to pro-government media and an official from an Iran-backed group.
Mohammed Baraa Katerji was killed when a drone strike hit his car near the area of Saboura, a few kilometers or miles inside Syria after apparently crossing from Lebanon. Israel’s air force has carried out hundreds of airstrikes in recent years, mainly targeting members of Iran-backed groups and Syria’s military. But it has been rare to hit personalities from within the government.
The strike also came as Israel and Lebanon’s Hezbollah group have been exchanging fire on an almost daily basis since early October, after the start of the Israel-Hamas war.
An official from an Iran-backed group said that Katerji was killed instantly while in his SUV on the highway linking Lebanon with Syria. The official spoke on condition of anonymity because he wasn’t authorized to speak to the media.
The pro-government Al-Watan daily quoted unnamed “sources” as saying that Katerji, 48, was killed in a “Zionist drone strike on his car.” It gave no further details.
Rami Abdurrahman, who heads the Britain-based opposition war monitor Syrian Observatory for Human Rights, said that Katerji was killed while in a car with Lebanese license plates, adding that he was apparently targeted because he used to fund the “Syrian resistance” against Israel in the Golan Heights, as well as his links to Iran-backed groups in Syria.
Israel, which has vowed to stop Iranian entrenchment in its northern neighbor, has carried out hundreds of strikes on targets in government-controlled parts of Syria in recent years, but it rarely acknowledges them.
The US Department of the Treasury’s Office of Foreign Assets Control, or OFAC, sanctioned Katerji in 2018 as Assad’s middleman to trade oil with the Daesh group and for facilitating weapons shipments from Iraq to Syria.
The US Treasury declined Associated Press requests for comment. The sanctions imposed on Katerji were authorized under an Obama-era executive order issued in 2011 that prohibits certain transactions with Syria. A search of the OFAC database indicates that the sanctions were still in effect against Katerji and his firm at the time of his death.
OFAC said in 2018 that Katerji was responsible for import and export activities in Syria and assisted with transporting weapons and ammunition under the pretext of importing and exporting food items. These shipments were overseen by the US­ designated Syrian General Intelligence Directorate, according to OFAC.
It added that the Syria-based Katerji Company is a trucking company that has also shipped weapons from Iraq to Syria. Additionally, in a 2016 trade deal between the government of Syria and IS, the Katerji Company was identified as the exclusive agent for providing supplies to IS-controlled areas, including oil and other commodities.
Katerji and his brother, Hussam — widely referred to in Syria as the “Katerji brothers” — got involved in oil business a few years after the country’s conflict began in March 2011. Hussam Katerji is a former member of Syria’s parliament.