Soros tells Davos forum eurozone and Iranian crises bad news for the Arab Spring

Billionaire investor and philanthropist George Soros has warned that the eurozone economic crisis poses a ‘big danger’ to the direction of the Arab Spring protests, revolutions and civil wars that started suddenly a year ago and have toppled dictators in Egypt and Libya.

He told journalists at the World Economic Forum in Davos: ‘I see the Arab Spring as one of the more hopeful swings in the world today, and while it is still going on I believe it is a case of so far, so good. But I worry that Europe’s problems might seriously affect its trading partners in the Mena region.

Eurozone contagion

‘It is important this revolution in parts of the Arab world should be successful, because if they are not what follows is likely to be much less benign. Exports from Tunisia to Europe dropped by 10 per cent just in the month of last November. I am worried that the EU crisis would pose a threat to the very positive developments in politics and economics taking place in the Arab world.’

Not surprisingly Mr Soros is also concerned about the impact of high oil prices on the global economy with the IMF saying yesterday that oil prices may hit $140-a-barrel this year.

‘There is a tremendous tension with regard to Iran and the Iranian government is in dire straits,’ he said. ‘The Arab Spring is seriously affecting Syria and this will eventually endanger the Iranian regime, which is very divided and narrowly based among the country’s population. So Iranian politicians are looking to make up external threats, and that makes the situation very dangerous indeed.’

Twin crises for 2012

However realistically the Middle East is going to have to live with both a crisis in Europe and a showdown with Iran in 2012. Realistically there is also something of a split between the likely economic impact on the Oil States and the rest of the region.

The non-oil producers will feel the worst of a slowdown in trade and tourism from Europe while those exporting oil will get the considerable cushion of higher oil prices that can be spent on public works and salaries. UAE stock markets rallied the most for six months yesterday on news that Abu Dhabi is resuming $30 billion worth of projects put on hold three months ago and the release of 6,830 nationals from debt obligations totalling $544 million.

Then again if the military threat from Iran was crystalized into action that blocked the Strait of Hormuz the impact on trade flows and tourism to the Gulf States would be very bad. So long as this is just cat-and-mouse chasing up the oil price its economic impact for the Gulf States is probably mildly positive though the threat of escalation is very apparent.

Mr Soros takes the broad view of social and economic history for the whole of the Arab world but the reality will be more complicated with winners as well as losers. That is normally how history works out.