Election Season in the Middle East
A series of elections in the MENA region in 2018 have the potential to reshape national politics and regional dynamics, as well as operating and investment environments. In one of this edition’s feature articles, we look at the implications of President Al Sisi’s de facto unopposed re-election in Egypt in April. Here, we take a closer look at four other important elections approaching. In Lebanon and Iraq, a popular vote is unlikely to reverse the progression of sectarian conflict and the entrenchment of undemocratic politics in the region. In Libya, both presidential and parliamentary elections due in 2018 are in doubt, whilst long delayed, but competitive, municipal elections will finally take place in Tunisia.
On May 6, Lebanon will hold its first general election in nearly a decade. In a demonstration of the intransigence of Lebanon’s main political actors, coupled with the country’s resilience, in the intervening period the country survived almost one year without a government and more than two years without a president.
Initially scheduled for 2013, the general election has been postponed on three occasions, ostensibly due to the poor security situation arising from the conflict in neighbouring Syria, political crisis and disagreements over a new electoral law. The new law, finally ratified last June, will be based on a form of proportional representation, which could fragment the support of Lebanon’s more established parties, such as that led by the incumbent prime minister Saad Hariri. However, despite the unpredictable nature of the new law, it is still expected to reproduce a sectarian distribution of seats, currently most likely to benefit the Iran-backed Hezbollah.
Regional partners and rivalries are again expected to come to the fore on May 6. Saad Hariri’s recent selfie with the Saudi Crown Prince Muhammed Bin Salman, following his forced resignation during a visit to Saudi Arabia in November 2017, which was later retracted, is a clear statement of alignment. The country remains a strategic site for Saudi Arabia’s regional contest with Iran, whose proxy party Hezbollah faces little opposition in light of regional geopolitical developments. Lebanon’s Christian demographic is broadly split between supporters of Michel Aoun, the current president and Hezbollah’s preferred candidate, and Samir Geagea, the leader of the Lebanese Forces movement.
All parties have developed campaign messaging based around the symbolic language of dissatisfaction with the status quo, making reference to civic ideals, concerns about corruption, and better governance, in an effort to co-opt the popular dissatisfaction that swept through the streets in mass protests in 2015. While non-traditional, independent candidates made significant gains in the municipal elections that took place in May 2016, they are expected to achieve less success against the voter mobilising campaigns of Lebanon’s established parties.
On May 12, Iraqis will head to the polls in the first general election since the rise and fall of the Islamic State and Iraqi Kurdistan’s independence referendum, which have further entrenched sectarian competition in an already deeply divided country. Hopes that popular dissatisfaction with Iraq’s governing elite would result in cross-sectarian transformation of the status quo were dispelled by the time electoral alliances were registered in January. The Nasr alliance led by current prime minister Haider Al Abadi, a nationalist Islamist, quickly collected the support of 29 parties and may be able to manage a narrow plurality in May. Iraq’s main secularist party, the Civil Democratic Alliance, has fragmented into four parts since the 2014 election in which it managed to win five seats. Civil society activists have ignited a boycott movement against the business as usual politics of Iraq, through social media. Muqtada Al Sadr, leader of a Shi’ite popular movement, has attempted to co-opt disaffected secularists pushing for reform and better governance through the formation of a new party, Istiqama, which purports a technocratic platform and will stand in alliance with the Iraqi Communist Party and the Republican Party.
However, Iraq’s political parties are considerably more fractured than in 2014 and with the emergence of a diversity of parties and lists, some genuinely reformist and others repackaged and headed by familiar faces, May 12 will likely be followed by a long period of negotiations and coalition building. A fragile coalition government will increase the difficulty of passing critical legislation such as the 2018 budget, tackling corruption and improving security, which are all necessary precursors for the growth of the Iraq economy.
With the country divided between two governments and hundreds of armed groups operating with near impunity, there is uncertainty over the viability of the 2018 presidential and parliamentary elections in Libya. Rival stakeholders are yet to demonstrate a genuine will for political compromise, while agreement on fundamental issues is outstanding. Holding elections under these circumstances heightens the risk of political violence, as losing factions are likely to reject the outcome of the vote.
In two stages, on April 29 and May 6, Tunisians will vote in their first municipal elections since the uprising in 2011, which unseated the governing autocrat president Zine El-Abidine Ben Ali. The vote, which has been postponed on several occasions, will see more than 57,000 candidates running in 350 municipalities across the country. Only two parties, Nidaa Tounes, a secularist party founded by President Beji Caid Essebsi, and Ennhadha, a prominent Islamist party, are fielding candidates in all municipalities. The municipal lists system includes for the first time requirements for a minimum number of female candidates and those with disabilities. With 860 independent lists, compared to 1,055 party lists, there are also positive signs of greater civic engagement, which it is hoped will counter voter apathy.
The municipal elections represent a further democratization of Tunisian society and the decentralization of Tunisian politics, with the objective of pushing decision-making down to the local level. It is hoped that the elections will address the country’s regional disparities and ensure that positive signs of national growth and investment spread throughout Tunisia.
No Challenge, No Change? Egypt’s Sham Election
On April 2 2018, following months of intimidation, a fierce media crackdown and rounds of arrests, the President of Egypt, Abdel Fattah Al Sisi, was re-elected. He secured 97 percent of the vote, in the absence of any credible competition. With predictable irony, writes Kate Benn, Al Sisi’s sole challenger, Mousa Mostafa Mousa, supported the incumbent’s campaign until the day before the close of nominations, when he announced his own candidacy. On social media, the election was described as a ‘circus’ and Egyptians widely mocked Mousa’s campaign and his own Ghad party’s endorsement of Al Sisi. Despite the assurance of re-election, the real prize at stake for Al Sisi was a large turnout to lend legitimacy to the vote. At just over 41 percent, however, turnout was a stark indictment of public apathy towards Al Sisi and his policies.
No motivation for change
With no plausible political alternative to the Al Sisi regime, there is no clear indication of how change in Egypt could arise. The real question now is how long Al Sisi will remain in power. Under current laws, Al Sisi’s second four-year term will be his last, but just as President Vladimir Putin of Russia and China’s Xi Jinping have circumvented electoral term limits, Al Sisi is expected to attempt the same. However, in the absence of any clear succession planning, intra-elite competition and mistrust is increasing in Al Sisi’s inner circle. Prior to April’s election, two retired generals, Sami Anan and Ahmed Shafiq, briefly attempted to run for the presidency, reflecting a ripple of discontentment in the military and potential indication of challenges to come in Al Sisi’s second term.
Internationally, Egypt is perceived as a linchpin of security in an unstable region. US President Donald Trump’s rhetoric towards Al Sisi has been positive and the UK Prime Minister, Theresa May, recently congratulated Al Sisi on his re-election. Egypt’s policies on curbing migration and its fight against an Islamic State insurgency in northern Sinai will remain justifications for ongoing US and European support.
Egypt’s relations with Saudi Arabia and the UAE have also grown under Al Sisi’s regime. The countries’ cooperation is based on containment of the Muslim Brotherhood and its regional allies, Qatar and Turkey, as well as backing a Sunni-led bloc, spearheaded by Saudi Arabia against Iran. However, recent political developments in Egypt have put Saudi Arabia on edge; against Saudi expectations, Egypt opted to support the Assad regime in Syria and also refused to take on a greater role in the war in Yemen. Whilst indicative of Egypt’s frustration at Saudi regional hegemony, the country’s dependence on the Gulf States, which have injected some USD 20 billion in the Egyptian economy since 2013, principally in large-scale projects, means it is unlikely to jeopardise these relationships during Al Sisi’s next four-year tenure.
One Belt One Road
Egypt is one of China’s key African partners in its One Belt One Road initiative, and it has been listed as one of China’s top five destinations for mergers and acquisitions. Egypt’s strategic location on the Suez Canal has made China the largest investor in the Suez Canal Corridor, in order to protect and promote its trade routes. With Beijing’s strategic objectives driving its investment in Egypt, there is little incentive, or need, for Al Sisi to adjust his current policy programme.
Economic reform – is it working?
In his second term, Al Sisi will remain focused on the acceleration of economic growth and the implementation of large projects under military supervision. In the wake of the 2011 uprising, which ousted former President Hosni Mubarak, investors fled and tourist figures dried up. Neither the Supreme Council of the Armed Forces, which ruled Egypt from the fall of Mubarak until 2012, nor the subsequent regime of President Mohammed Morsi, introduced serious measures to revive the economy. Consequently, Al Sisi inherited the economic turmoil that characterized the post-2011 period.
Al Sisi’s government deserves some credit for its commitment to economic reform; in November 2016, Egypt signed a USD 12 billion IMF loan agreement underpinned by tax increases and curbs on subsidies to encourage foreign investment. This was good news for bond investors overseas; the yield on five-year government bonds stands at 15 percent, a high in emerging markets. Foreign exchange reserves have been rebuilt and stand at USD 38 billion, which is driving foreign investor confidence, alongside political stability. However, in the face of anticipated subsidy cuts in June and July this year, these macro improvements do not reflect the living standards of ordinary Egyptians. A high population growth rate will also make it difficult for the government to develop social safety nets and adequate employment and education provisions.
Given high levels of absolute poverty, Egypt has been criticized for pouring investment into financially dubious mega-projects, including expansion of the Suez Canal and the building of a new administrative capital east of Cairo. However, economists and shipping analysts remain unconvinced that there is sufficient traffic and trade to meet the USD 8 billion Suez Canal project’s ambitious revenue targets, set at USD 13.2 billion for 2023. It is also unclear whether Egypt will be able to compete with Dubai and Singapore’s well-established records of efficiency in the trans-shipment industry. In 2015, Al Sisi similarly announced his grandiose plan for the new ultramodern capital of Egypt. The project has been mired in investor hesitancy and speculation that the new city will only be inhabited by Egypt’s elite. Al Sisi’s regime is currently too focused on making good use of these new multibillion-dollar investments as propaganda tools, rather than effective ways of reviving the Egyptian economy.
To this end, the private sector must become the main driver of economic development in Al Sisi’s second presidential term. The government needs to prioritise transparency of state-owned enterprises, reducing corruption, improving access to land, and increasing young people’s entry to the labour market. However, the Egyptian military is expected to maintain its sprawling and largely opaque business portfolio, which ranges from infrastructure development to pasta production. Details of Egypt’s defence budget, estimated to be around USD 4.4 billion, are a well-guarded secret. Although the government maintains that the military is responsible for less than 2% of Egypt’s GDP, other estimates suggest that this figure is as high as 30-40 percent; at the very least, the military’s grip on the economy has expanded and diversified since Al Sisi’s first election in 2014. Although Al Sisi has acknowledged the importance of the private sector in speeches, his policies have thus far favoured state involvement in the economy. Any investment in the country, or use of a local partner, will require due diligence support to understand the hidden extent of state involvement in target companies.
Guardians of stability?
Security and terrorism threats will remain core challenges in Sisi’s second term. One crucial aspect of Sisi’s security policy is his ‘Comprehensive Operation Sinai 2018’, a three-month military assault on a five-year long Islamic state insurgency in northern Sinai. Hundreds of Egyptians have been killed in a series of terrorist attacks in the Sinai since 2016, with the worst single atrocity killing 305 people. Three weeks after the start of Operation Sinai, the operation was extended indefinitely, undermining Al Sisi’s claim to have stabilised Egypt.
While Egypt’s macroeconomic environment is likely to stabilise over the coming year, and stability is attracting some foreign investment, the Egyptian regime’s record of financial mismanagement, endemic corruption, IMF-mandated austerity, high absolute poverty and unemployment, are not a guarantor of future stability. The underlying conditions for another uprising remain and Al Sisi has expressed little indication that he plans to change the narrative.
The White House’s Revolving Door: Tillerson’s Dismissal and the Qatar-GCC Crisis
The dismissal of Rex Tillerson as the US Secretary of State, and the nomination of the hawkish Michael Pompeo as his replacement, is not expected to re-escalate the Qatar-GCC diplomatic crisis, but it could prolong it, writes Saif Islam.
Since Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt severed ties with Qatar in June 2017, then-US Secretary of State, Rex Tillerson, invested considerable political will in trying to resolve the crisis. However, in March this year, US President Donald Trump suddenly dismissed Tillerson, nominating Michael Pompeo, Director of the Central Intelligence Agency (CIA), as his replacement. The dismissal was not directly linked to the ongoing crisis in the Gulf Cooperation Council (GCC), but the nomination of the hawkish Pompeo could result in a cutback in US mediation efforts, further delaying resolution of the now nearly year-long dispute.
Tillerson was widely credited with moderating President Trump’s initial stance on the crisis, when the latter sided with Saudi Arabia and its allies, and accused Qatar of funding terrorist groups. Tillerson consistently called on the disputing parties – mainly the Saudi-led bloc – to deescalate tensions and work towards a resolution, while stressing the importance of GCC unity. He was also committed to ensuring US-Qatar relations remain robust. Speaking at the inaugural US-Qatar Strategic Dialogue in late January, Tillerson praised Qatar for making “significant progress to improve efforts to combat terrorism”. His refusal to side with the Saudi-led bloc sparked some rumours that the UAE was behind a lobbying campaign to dismiss Tillerson.
While Tillerson’s dismissal and Pompeo’s nomination are not directly linked to the Qatar-GCC crisis, these personnel changes could prolong the stalemate. As the CIA Director, Pompeo has not made any notable statements regarding the GCC crisis, and there is some uncertainty regarding how he will tackle this issue. Nevertheless, his hawkish foreign policy positions, particularly on the Muslim Brotherhood, Hamas and Iran, are aligned to the Saudi-led bloc’s strategic interests. He is believed to have forged good relations with prominent Saudi and UAE officials, including Mohammed Bin Salman, Saudi Arabia’s Crown Prince and de facto ruler. Trump has also nominated John Bolton as his new National Security Advisor, to replace Herbert McMaster. Bolton, another hawkish ideologue, is the chairman of Gatestone Institute, a right-wing think tank that has been heavily critical of Qatar, although McMaster has also previously accused Qatar of sponsoring radical Islamists.
Considering these factors, Pompeo’s nomination has likely pleased the Saudi-led bloc, leaving Qatari officials to assess the impact of the loss of a supposed ally in Tillerson. There remains a small possibility that, unlike Tillerson, Pompeo could push Qatar to accept some of the Saudi-led bloc’s 13 demands for the blockade to be lifted. These demands include scaling down diplomatic relations with Iran, closing the Turkish military base, severing ties to all militant groups, and shutting down the Al Jazeera media network. Qatar has repeatedly refused to acquiesce to these conditions, which it considers humiliating and an attack on its sovereignty.
A prolonging of the Qatar-GCC crisis will be felt in many boardrooms, banks and law firms. Aside from strategic sensitivities and security, logistical and trade challenges as a result of the embargo and heightened tension, the crisis has affected investment flows. There is still no sign of significant regional capital flows back into Qatar, and although it remains a major investment hub for Europe and the US, an open-ended crisis is damaging the country’s reputation as a stable place to do business. All parties to the crisis hold significant investments in London, for example, which requires a delicate balancing act between the UK’s economic priorities, and political decision-making alongside the new US appointees and Europe.
However, there is little indication that if Pompeo is appointed, the US will re-escalate the crisis, as the Saudi-led bloc is hoping. Since June 2017, Qatar has been trying to bolster its counter-terrorism credentials according to the US’s expectations, giving the latter little justification to overtly side with the Saudi-led bloc. Many US officials hold that isolating Qatar is counter-productive to the US’s strategic interests in the Middle East, particularly fighting terrorism and reducing Iranian influence. For example, Qatar hosts Al Udeid Air Base – the largest US military base in the Middle East – which supports operations in several countries including Syria, Iraq, Afghanistan and Somalia. The facility has been instrumental in the fight against Islamic State, and some US officials are believed to be concerned that the Qatar-GCC crisis is disrupting these operations. Similarly, as a result of the blockade, Qatar has been bolstering diplomatic and trade relations with Iran, which runs counter to the US’s plan to isolate Iran internationally.
There is also a sense that President Trump wants the crisis to be resolved. In mid-April, he hosted Qatar’s Emir, Tamim bin Hamad Al Thani, and stressed that the two countries “have been great friends in so many ways” and “are working very well together”. Two weeks before, he reportedly had a telephone conversation with Saudi Arabia’s King Salman bin Abdulaziz Al Saud, and stressed the importance of ending the rift as soon as possible.
The failure to resolve the crisis is largely a result of the Saudi-led bloc’s intransigence, or refusal to engage in talks until Qatar accepts its extraordinary demands. Substantial mediation and pressure from the US could influence the Saudi-led bloc to soften its stance, but unlike Tillerson, Pompeo is not expected to invest significant efforts in trying to find a resolution. President Trump’s proposed summit with GCC leaders at Camp David in May – which was meant to announce an end to the crisis – has been postponed to September, and there is uncertainty regarding whether it will be held at all. With Pompeo as the Secretary of State, the US foreign policy agenda is more likely to prioritise escalating tensions with Iran over settling the GCC dispute.