Middle East Analysis
Politics:
The London-based daily Asharq alawsat reports that former Iranian President Khatami has strongly criticized the man who replaced him, Mr. AhmadiNejad for his fiery statements. He has also criticized the extreme fundamentalists. The paper also reports that the new president of the unified Iraqi Kurdistan, Mr. Barzani, has claimed that he will work toward annexing regions that he claimed had undergone ‘forced Arabization’ under Saddam Hussein. This sounds ominous for peace in the Kirkuk and perhaps the Mosul areas.
Looks like the last issues of contention for the new Iraqi cabinet are the Ministries of Defense and Interior, which I expect the Shi'a Arabs and the Sunni Arabs to split, leaving the Kurds in control of the Foerign Ministry. I wonder if they use Game Theory in Iraq...perhaps unconsciously.
Persian Gulf Finance:
Oil prices declined again today, partly a result of the Iranian President sending a 'conciliatory' message to President Bush. Probably some of the recent political risk premium is being reduced as fears of imminent military confrontation seem to recede, for now.
Arab Stock Markets continued their decline at the start of the current week (5/06/06), led mainly by Gulf Stock Exchanges. At one point on Saturday the Saudi market registered a decline of 9.6%, although it recouped most of it before closing. However, that may have contributed to the decline of markets across the region. Local media estimate that the Saudi market has lost US$ 380 billion worth of capitalization since last February. The Dubai market is estimated to have lost about US$ 25 billion in market value during the same period. The Cairo Exchange also lost, and some market observers attribute the decline to a ‘domino effect’ of the decline in Persian Gulf exchanges. Some of these markets have allowed resident foreigners to deal in the market, under the assumption that more demand would keep prices high, but that has not helped offset legitimate market forces and keep markets buoyant.
In Kuwait, the market also continued its decline, and many traders, including frustrated Investment Bankers, have been looking for scapegoats. There has been blame for everybody within sight of angry speculators, from the Exchange management, to the Investment (Mutual) funds, to the Kuwait Investment Authority (KIA). The KIA, which was supposed to invest the country’s foreign exchange surplus in sound international markets, is now an integral part of the speculative game. It has been dragged over the past decade into the domestic stock market by political pressures. Clearly that has been a mistake, for the original goal of the KIA was to diversify the sources of income away from the oil-based domestic economy. Now the KIA is involved in the domestic economy in the worst possible way: many look at it as a rich source that would keep the stock market liquid and keep shares artificially high. What was supposed to be a professional organization is now a pawn in domestic politics.
A 'Peanuts' Scandal:
In a new twist in a new brewing financial scandal, the Bank of Algeria has blamed the Kuwaiti side in a Kuwait-Algerian Investment Fund for the ability of the Algerian Chief Executive to abscond with almost US$ 20 million (peanuts as far as the average size of financial scandals in the Gulf region go). The Kuwaiti side would be the Kuwait Government in this case. The daily al-Qabas reports that the Algerian Bank has complained that the Kuwaiti side owns 75% of the Fund, and it was responsible for nominating and appointing the Algerian CEO. Now, in the likely event that this man has other prominent partners-in-crime in either of the two countries, Kuwait (where he was apparently selected) and Algeria, there is no way that he will be extradited to either country. Not if the past is any guide. The Fund in question was established in 1998 as a partnership between the Kuwait Investment Authority (KIA) and the Algerian Ministry of Finance. The man himself originally came from a Luxembourg subsidiary of Kuwait Investment Company, which might mean that the Algerian claim of some Kuwaiti complicity is probably correct. This Mr. Ibrahimi is now enjoying his gains in Paris.
This is definitely not in the same league as the huge Kuwait Investment and Oil scandals of the 1980s and early 1990s, all of whose big fish are still completely free to enjoy their gains. Still, small rotten fish smell just as bad as big rotten fish.
On that doubtful culinary note, I bid you…..cheers
Mohammed
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