The recent unrest that is spreading across the Middle East and North Africa is far from benign and is set to deepen into ‘regional civil war’, according to David Murrin, CIO of Emergent Asset Management and author of Breaking the Code of History.
Murrin asserts, “The first stage of any empire is regionalisation. This is driven by rapidly expanding demographics that force a nation to expand and to find more effective and efficient ways of expressing its collective influence and power. At the forefront of this is the very fabric of the society’s values and nature of its leadership. Thus a region will find itself in civil war as the conservation leadership and values are challenged by new more effective ways of galvanising the population to ultimately expand its influence for the resources vital for sustainability. Classic examples are the English civil war where the established catholic monarchy was challenged by the protestant parliamentarians. In America the new industrialised north challenged the values of the old conservation agricultural south. In all cases the new expansive energy prevails.”
“In the Middle East the two protagonists are the conservative Sunni powers, who are being challenged by the more revolutionary Shias, led by Iran. However, like many civil wars, the energy of confrontation may penetrate more deeply than a single layer. In the case of the Sunni regimes, who have been part of the American web of power and control, they now face their own civil wars as to how to more effectively manifest Sunni power, both nationally and collectively, so that this side of the regional equation can be most effectively represented when facing the Shia challenge. This ongoing conflict within a conflict driven by Sunni revolutionary energy will continue until it embraces Saudi Arabia with its shrinking middle class, and in all probability will manifest a new, more radical, Islamic leadership. One of the greatest risks of this is to the status of the petrodollar, the very foundation of US economic power.
On a large scale, Murrin holds that the catalyst for this phase of dramatic change has been twofold: Firstly, the demographic condition of the said nations; and secondly the decline of American power, which means that affiliation with what was once the global hegemony has now become less attractive. Hence the control that America once exerted over the region is now dissipating rather rapidly. One thing that is certain is that the West will be the main loser in this regional civil war, as affiliations of the Sunni powers with America will decline as they seek to find their own fully independent expressions of Islamic power. This will leave Israel ever more vulnerable to its neighbours, with an increasingly enfeebled US sponsor being less able to protect it from harm.
Murrin continues, “The crisis will lead to an ‘energy shock’ for the West in the wake of their loss of influence in the region, and will accelerate stagflation, with oil prices continuing to rise as high as $200 China, on the other hand, will become a closer trade ally with the oil-rich Sunni regions in addition to its current strong links with Iran, which, despite the expectations of many, has become the only stable country in the region having already clearly established its mode of leadership and collective values.”
“Importantly, the problems we are seeing in the Middle East will expose how poorly placed the Western economies are. The crisis will burst the QE2 bubble and shatter the illusion of recovery that the US is trying to portray.” Sending equity markets into a destructive bear decline of some 30%.
As a pioneer of geopolitical investment thinking, Emergent has clear strategies to avoid geopolitical risk. Emergent’s geopolitical investment standpoint allowed it to predict the Middle Eastern crisis a long time ago, taking this into account in its ‘6 year plan’, avoiding North Africa as an investment region, despite being a strong proponent of the Sub-Saharan region.
“The Islamic North will ultimately bifurcate with the predominantly Christian Sub-Saharan region.” Emergent holds that the Sub-Saharan countries, especially those within SADAQ, are stable in contrast to the unrest in the North fired by the rivalry between the Sunni and Shia branches of Islam.
Amongst Murrin’s other short term predictions, he expects the next country to experience mass protests is likely to be Saudi Arabia, whose diminishing middle class has made them more vulnerable to dissent. He believes the Shekel is set to depreciate rapidly by up to 40% in the next year. As well as this, he warns the unrest will have serious implications for Western foreign policy since the leadership that will come to reign in the region will not be pro-Western.