JUST IN: The petromonarchies send an SOS to Trump in the face of the economic cataclysm | International
In a major development, the following story has emerged from the international scene.
The list of hostages from Donald Trump and Benjamin Netanyahu’s war in Iran is extensive. Thousands of kilometers away, two continents – Asia and Europe – are experiencing an unprecedented price increase since the Russian invasion of Ukraine in 2022. Around the corner, half a dozen countries in the Persian Gulf that have suffered the attacks firsthand – the United Arab Emirates, Iraq, Bahrain, Qatar, Kuwait and Saudi Arabia – are seeing their oil and gas exports severely restricted by the double closure of the Strait of Hormuz. An economic blow of biblical proportions that is already causing the first requests for help from the United States, the greatest historical ally of this group of petrostates and, at the same time, the trigger of unpredictable scope and consequences. The Trump Administration, through the mouth of Scott Bessent, recognized on Wednesday that “several” Gulf countries – including the United Arab Emirates, as The Wall Street Journal reported – have already knocked on the door of the White House to Request a currency swap that will supply you with dollars in the short term. Although the Emirates themselves reject the “rescue” label, this first movement denotes an unprecedented tension of liquidity in hard currency in the face of a crisis caused by the Republican magnate himself. An SOS, in short, not common in nations that have huge reserves, large sovereign funds and multimillion-dollar investments abroad. Also in the United States, where Trump himself has been grandly feted – the luxurious Boeing 747 given by the Qatari royal family remains in the archive of horrors – and have promised multimillion-dollar disbursements that now remain in the air. “The request is, above all, preventive: if a swap line is established, it is less likely that it will be used, since the markets will not put excessive pressure on exchange rates,” Azad Zangana, head of analysis, explains by email. for the Persian Gulf from the consulting firm Oxford Economics. That Washington is considering the request is also to its own benefit. “The wallets [de inversión] of Gulf sovereign wealth funds lean toward dollar-denominated assets and using those assets to cover short-term fiscal needs risks disrupting markets [financieros] “Americans,” explains Paul Donovan, chief economist at Swiss investment bank UBS, in a note to clients. “Swap agreements allow Gulf economies to obtain liquidity without causing market disruption. However, in the longer term, the need for reconstruction and rearmament suggests that they will consider the sale of assets.” They will draw on their checkbook, yes, but not now. Since the start of the war, Pimco, the largest fixed income fund on the planet, has already lent more than 10 billion dollars (8.54 billion euros) to the countries in the area, according to data compiled by Bloomberg. Financial earthquakeThe closure of Hormuz is causing a real economic earthquake in the petrostates of the Gulf, for which the International Monetary Fund (IMF) already projects a generalized recession from which only Saudi Arabia escapes – with a considerable hiccup, of course. Nothing like this could have been predicted a couple of months ago, when the region was facing a year of record exports and prosperity. Everything changed on February 28, when the first missiles over Iran began to generate a shock only comparable to that of the 2020 pandemic. Because it is there. drying up their sales of crude oil and natural gas: except for the pipelines that allow a small fraction of Saudi, Emirati and Iraqi exports to be redirected, the bulk of their fuels are not being able to reach their usual markets And because to this export blow is added the sudden halt in tourism and mass events, with which several countries in the region – with the Emirates, Qatar and Saudi Arabia at the head – have been trying to diversify their operations for some time. economies. “The closure of Hormuz is a stress test for them,” writes Yousuf Hamed Al Balushi, a researcher at the Gulf International Forum think tank, in a monograph published this week “It is a structural test, which examines progress. [en las últimas décadas]”If the blockade of Hormuz continues for months, they will have to make fiscal adjustments and resort to their sovereign reserves,” he predicts. The UN figures are even more explicit than those of the IMF: the five big names in the area, without even counting Iraq, will see between 103,000 and 168,000 million dollars evaporated from their economies. The equivalent, at the midpoint of the range, to everything that Spain earns from tourism in a year.Many realitiesThe Gulf, However, it is far from being considered a homogeneous block. Despite having an oil pipeline that allows it to transport part of the crude oil trapped in Hormuz through Turkey, Iraq – the only republic of all of them: the rest are petro-monarchies – is, by far, the poorest, with a per capita income that is one-sixth that of Saudi Arabia and twelve times less than that of Qatar. Although much richer than Iraq – its GDP per capita is quintuple―, Bahrain has seen its crude oil and aluminum exports sink to practically zero. Its reserve cushion in hard currency is scarce compared to that of its neighbors. And it also has one of the highest public debts in the world: almost 150% of GDP. A problem that, although structural, makes the seams burst when, as now, the cost of financing soars. In a second subgroup are Qatar and Kuwait, also tremendously hit by the collapse. of gas and oil exports – and, in the first case, due to the cuts in air connectivity, which have slowed visitor arrivals and damaged its large flag airline, Qatar Airways – but with a little more room for maneuver thanks to the accumulated savings. They can, in short, allow themselves to last a little longer without the export manna. But not much: Doha will see its economy sink by 8.6% this year, compared to the 6.1% growth that the IMF projected. just six months ago, and Kuwait’s GDP will fall by 0.6%, compared to the 5.1% it calculated then. The United Arab Emirates – paradoxically the country that first approached Washington to ask for help – and Saudi Arabia seem somewhat better equipped, and they are both managing to redirect part of their flows through three pipelines that lead to ports in the Mediterranean, the Red Sea and the Gulf of Oman. But even there, the wounds are deep: the Fund has taken a cut of 1.9% and 0.9%, respectively, on its growth forecast for this year. Even if Hormuz reopens soon, the scars will be long-lasting [en la financiación de estos países] to offset the geopolitical risk, which in turn will increase long-term borrowing costs and reduce the attractiveness of the region as a destination for foreign direct investment,” predict technicians from the United Nations Development Program (UNDP) in their latest regional review. “This structural change in risk perception could persist for years, complicating their ambitions to diversify their economies and finance large social programs.”
Analysis and Perspective:
This report highlights significant developments in the international landscape that could reshape diplomatic relations in the coming weeks.
As the situation continues to evolve, analysts are closely watching for further developments.
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Source: This article was originally published in another language by Internacional en EL PAÍS and has been translated and adapted for our global English-speaking audience. Read the original article here.