Question

Impact of COVID-19 PANDAMIC, on Middle Eastern economies.

Answer 1

It will take years to get an accurate estimate of the full effect of COVID-19. When the infection rate inevitably subsides, governments around the world can begin a gradual process of restarting the global economy. They are currently attempting to plan it, despite lacking any clear precedent for what is required. Nobody now seems quite sure whether we will be able to return to the status quo ante, or whether we will see the course of global growth forever altered in attempting to get back to normal in fits and starts.

Major oil producers' disjointed response began almost immediately, and lasted until early April. No major producer wanted to be the first to cut its own output as prices began to fall, lest it would lose market share to others. Even with no customers on the horizon, all continued to pump. Russia and Saudi Arabia were collaborating under an unofficial OPEC+ agreement to help control oil supply, and ultimately prices, the last time oil markets had undergone such precipitous declines.

Similar to the price war of 2014, Russia – Saudi sniping directly involved the United States, whose unconventional producers, particularly those using hydrofracturing, are among the targets. Not only did price cuts drain their profit margins at a more rapid pace than their Saudi or Russian rivals — unorthodox manufacturing methods mean higher production costs, which are uneconomical as price cuts — but COVID-19 froze private debt markets on which they would rely for operating resources.

It's hard not to think that this whole thing is a sobering fact for an administration that has long claimed the "climate supremacy" of America. He told the American people, almost immediately after President Trump took office, that the position of the United States as producer of oil and natural gas would give it unprecedented geopolitical power. Alternatively, COVID-19 served to remind the world that oil is a commodity traded internationally, subject to factors beyond even the US president's influence. In the short-term, it is notable that U.S. domestic producers as a whole will have their roughest operating year on record.

It does have significant implications for how the region views U.S. leadership in a wider sense, regardless of the merits of the debate. Take the debt burden of middle-income middle-eastern and north-african states as an example, which has always been a problem but is now even more severe due to the global macroeconomic background during a pandemic. Unfortunately, the aggressive approach of the administration may not have a corollary focused on benefits that might alleviate the circumstance. The international system won't last without major economic and political changes beyond COVID-19. Even so than post-9/11 or the global financial crisis of 2007–2008, the foundations of our modern political culture have been profoundly shaken. The international community now has an opportunity to recognize the pillars upon which to restore the order.