Understanding global risks to Middle East is key to effective regional leadership
The Middle East @ Risk report, released today by the Global Risk Network of the World Economic Forum in collaboration with the Gulf Research Center, builds on global view of Global Risks 2007 to provide an assessment of the Middle East's vulnerability to selected global risks.
The Middle East is often seen as a focal point of risk, particulary geopolitical risk. But that is also true that two of the great intersecting risks of the early 21st century - energy security and climate change - and of risks relating to global economic imbalances: Middle Eastern external surpluses far exceed those of China. Global risks, drawn from Global Risks 2007, will not play out identically across a varied region with such different specific strengths and vulnerabilities.
However, the region shares a number of global risks and a number of solutions to those global risks. The region is interconnected by webs of investement and religious affiliation as well as physical infrastructure of pipelines and sources of water. "Many of the mitigation measures to deal with the consequences of these global risks stem from the region; indeed mitigation measures can only be managed and controlled by acting in frameworks of regional cooperation", said Charles Emmerson of the World Economic Forum. "Building the capacity to manage and control global risks begins with understanding what they are, how they interrelate and how they are making the world a more complex place".
The report looks at the potential consequences of several major global risks on the Middle East, and a 'deep dive' into four: a global asset price collapse, a Chinese economic hard landing, a retrenchment from globalisation and geostrategic instability. None of these are predictions, but plausible scenarios for the future.
The first of these looks at how the Middle East could be affected by a major correction in global financial markets. Global markets are currently buoyed by unprecedented external surpluses in certain Middle Eastern countries - but were the markets to fall seriously this could import inflation, reduce savings for the future and raise questions about the role of the dollar. The second looks at the relationship between China and the Middle East in the context of a possible slowdown in the Chinese economy. The third raises the possibility of an erosion of the structures of globalisation, and asks how the Middle East region is responding. The final 'deep dive' looks at the prospects of geostrategic instability, expressing the hope that the increased leadership role shown by some Middle Eastern countries will allow a wide-ranging dialogue to defuse tensions over Iran's alleged nuclear weapons programme.
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