The Middle East is often characterized by profound uncertainties. Many Middle Eastern countries experience alliances and dissolutions, war and peace, popular uprisings, and military coups. It’s important for investors to understand how the events in the Middle East news affect the region’s economy, currency, and investment opportunities.
11 IMPORTANT THINGS TO KNOW ABOUT POLITICAL RELATIONSHIPS IN MIDDLE EASTERN COUNTRIES
- Saudi Arabia and Iran Have a Contentious Relationship
- Iraq and Iran Have a Supportive Relationship
- Iraq and Saudi Arabia’s Relationship Is Slowly Improving
- Syria and Saudi Arabia Are Enemies
- Despite Historical Enmity, Egypt and Iran are Now Allies
- Lebanon Has a Tentative Alliance with Saudi Arabia
- Egypt and Saudi Arabia Waver as Allies
- Bahrain Has Broken with Iran and Qatar to Align with Saudi Arabia
- Syria and Iran Remain Allies
- UAE Is One of the Safest Middle Eastern Countries
- Arab Nations Consider Israel an Outsider
If you look at a map of the Middle East, you’ll notice the Middle East is part of Asia and the fertile crescent. You can also observe the Suez Canal, the Mediterranean Sea, the Strait of Hormuz between the Persian Gulf and the Gulf of Oman, and the North African countries above sub-Saharan Africa. Typically, a list of Middle Eastern countries will include Middle Eastern and North African countries.
How many Middle Eastern countries are there? Officially, there are 17: Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, United Arab Emirates, and Yemen. However, many Middle Eastern political science experts dispute this list of Middle East countries. Some political scientists believe that maps of the middle eastern countries should include Palestine, but Israel, the US, Canada, Mexico, Switzerland, Japan, South Korea, Australia, New Zealand, and most of Europe do not recognize Palestine as a sovereign state.
Other political scientists contend that a Middle East countries map should be larger, including more North African countries to differentiate the upper part of Africa from lower sub-Saharan Africa. They argue that a Middle East map should include Algeria, the Comoros Islands, Libya, Morocco, Mauritania, Palestine, Somalia, Sudan, and Tunisia.
The highest populations of the Middle Eastern countries are in Saudi Arabia, Iraq, and Iran. Maps of the Middle Eastern countries show that Saudi Arabia has the most territory, Iran has the second most, and Iraq ranks third. News about Middle East current events typically focuses on these three nations.
Although the population of the Middle Eastern countries is small, with only 411 million people living in the region, Middle Eastern countries control 80 percent of the world’s oil reserves and have considerable wealth and influence. In fact, Qatar is the wealthiest country on Earth, with a GDP of $527.02 billion. Kuwait, with a GDP of $297.59 billion, is fourth, and the United Arab Emirates comes in fifth with a GDP of $74,410.
11 Important Things to Know About Political Relationships in Middle Eastern Countries
Let’s take a closer look at each of the relationships between these Middle Eastern countries.
1. Saudi Arabia and Iran Have a Contentious Relationship
Every Arab state’s friendship and enemies list stems from the relationship between Saudi Arabia and Iran. Tensions between Middle Eastern countries arise as a proxy war between these two larger nations.
Their animosity is historic. After the death of the prophet Mohammed in 632, Islam experienced a theological schism as devastating as the one that would later occur in Europe between Catholicism and Protestantism. That centuries-old division over the prophet’s legitimate successor as caliph still manifests in the Islamic split between the Saudi Arabians and the Iranians.
In the Arab Gulf region, Saudi Arabia champions the cause of the Sunnis while Iran that of the Shias. The Saudi royal family believes in monarchical Wahhabism but Iran’s Ayatollah Khomeini advocates autocratic theocracy.
Passionate about their theological interpretations, each nation sees the other as betraying the Muslim faith. There is no room for religious compromise, diplomatic ties, or economic cooperation. The United States has built up Saudi Arabia’s military while the Soviet Union has helped build Iran’s military. Saudi King Salman bin Abdulaziz Al Saud signed a letter of intent with President Trump to spend $110 billion in 2017 and $350 billion over the next decade.
Meanwhile, Iran’s relationship started with the Soviet Union seizing Iranian territory, but during the Cold War in 1946, the US pressured Stalin to relinquish it. Despite that unfriendly beginning, Iran’s nuclear program results from Russia supplying them with nuclear scientists and technical specifications in the 1990s.
The two regional power players also have opposing oil pricing strategies. Since Saudi Arabia has the largest oil reserves, it sells in bulk at lower prices. Iran has smaller reserves, and it sells at a higher price.
2. Iraq and Iran Have a Supportive Relationship
Iraq and Iran fought for eight years, from 1980 to 1988, but Iraq broke off its relationship with Saudi Arabia and aligned with Iran after the US deposed Saddam Hussein. In 2014, after the Islamic State in Iraq and Syria (ISIS) decisively beat the Iraqi army in Mosul, Iraq asked Iran for help. Iran financed and trained 40 militia groups in Iraq to beat back ISIS. This aid continues because tens of thousands of ISIS fighters still threaten Iraq.
3. Iraq and Saudi Arabia’s Relationship Is Slowly Improving
Iraq and Saudi Arabia were allies when Saddam Hussein attacked Iran, but later when Nouri al-Maliki became the Iraqi Prime Minister from 2006 to 2014, he accused Saudi Arabia and Qatar of funding ISIS.
This enmity between Iraq and Saudi Arabia ended after the Iraqi assembly approved the Al-Abadi government on 8th September 2014 because he struck a conciliatory note with Saudi Arabia and the United States. The US then gave $1.5 billion for military training of Iraqi troops.
4. Syria and Saudi Arabia Are Enemies
Saudi Arabia’s hostility toward Syria stems from Syria’s great relationship with Iran. In 2012, the Saudi’s shut down their embassy in Syria’s capital, Damascus, in 2012. Then, during the Syrian civil war, they armed anti-Assad militia.
5. Despite Historical Enmity, Egypt and Iran are Now Allies
Once historical enemies, Iran and Egypt are now allies. Since Egypt’s Anwar Sadat and Iran’s Mohammad Reza Shah Pahlavi were close friends, Egypt did not support the Iranian revolution that overthrew the Shah and invited Ruhollah Khomeini back from France. Like Saudi Arabia, Egypt also supported Iraq’s invasion of Iran.
However, they became allies again because of a common enemy–the Muslim Brotherhood. Initially, Iran felt threatened by the influence of the Muslim Brotherhood to unite the common people–because after the people’s movement ousted dictator Hosni Mubarak, Mohamed Morsi, a Muslim Brotherhood leader won the free elections. Later, in 2013, after General Abdel Fattah el-Sisi ousted Morsi in a coup, Egypt and Iran became friends.
6. Lebanon Has a Tentative Alliance with Saudi Arabia
Although Saudi Arabia and Lebanon are allies, the Saudis fear that the Hezbollah will seize the country and switch to the Iranian side. However, some Saudi princes covertly embarrassed the Saudi royal family by engaging in profit-making ventures with the Hezbollah.
7. Egypt and Saudi Arabia Waver as Allies
Egypt and Saudi Arabia used to be allies before the Egyptian Revolution in 2011. But they became enemies after the Muslim Brotherhood ended the dictatorial rule of Hosni Mubarak and replaced autocracy with democracy. Saudi Arabia worried that democratic sentiments would affect their country, too.
Relationships warmed up again because democracy in Egypt was short-lived after General Abdel Fattah el-Sis seized power. They approved of how his government cracked down on the Muslim Brotherhood, labeling them as a terrorist organization, but lost faith in him after he supported Assad during the civil war in Syria.
Still, the Saudis did not break ties because el-Sisi supported Saudi Arabia after its broke ties with Qatar. Although Qatar had been a close ally, the Saudis felt betrayed by that country’s liberal attitude toward the Muslim Brotherhood uniting the disenfranchised ethnic groups of Middle Eastern countries.
8. Bahrain Has Broken with Iran and Qatar to Align with Saudi Arabia
Bahrain is a vulnerable country. It’s smaller than Saudi Arabia, not as rich and powerful, and it shares a border. While Saudi Arabia approved a Sunni Bahrain monarch, Bahrain’s majority Shia population troubled them. In 2011, during the Arab Spring, Shia protesters also rose in rebellion against monarchism and demanded democratic freedom, too.
Alarmed, King Hamad of Bahrain called upon Saudi Arabia for help. They immediately sent 1,000 Saudi troops to prevent Bahrain from falling under Iran’s influence. After the Saudi troops quashed the rebellion, the Bahraini government arrested thousands of people and destroyed 35 Shia mosques. Because the US Navy Fifth Fleet was in Bahrain, it did not oppose Saudi intervention.
Since Bahrain had aligned with its powerful neighbor, Saudi Arabia, Bahrain broke diplomatic relationships with Iran. They sweetened their alliance with Saudi Arabia by breaking diplomatic ties with Qatar. Earlier, Saudi Arabia has broken diplomatic ties with Qatar because they have become allies with Iran.
9. Syria and Iran Remain Allies
Syria’s friendship with Iran began after Hafez al-Assad, the father of the new president Bashar al-Assad, supported Iran during the Iraq-Iran war. Hafez al-Assad did not support Saddam Hussein’s invasion, much to the ire of Saudi Arabia, although both were part of the Ba’athist party. In Syria, the Ba’athist party prevented the majority of Sunni people from gaining political power.
During Syria’s Civil War, Iran donated billions of dollars, sent troops, and launched missiles to keep Bashar al-Assad’s government in power.
10. UAE Is One of the Safest Middle Eastern Countries
If you’re interested in a list of Middle Eastern countries and capitals because you’re planning a trip, UAE is one of the best middle eastern countries to visit, according to the 2018 Travel Risk Map. This is especially true if you spend some time at one of its emirates, Dubai.
11. Arab Nations Consider Israel an Outsider
Although an official Middle East map includes Israel, Arab nations view it as an outsider. The two biggest resentments the Islamic countries have against Israel are over Palestine and the Arabic territories lost during the Yom Kippur war.
In 1964, delegates at an Arab summit meeting created the Palestine Liberation Organization to free Palestine from land belonging to Israel through an “armed struggle” against Israeli civilians. Violence escalated after a PLO attack on Israeli people spurred Israeli armed forces to strike back.
Whenever tensions escalate–as in the recent example when violence erupted between Palestinians and Israeli armed forces after the US moved its embassy to Jerusalem– Arab governments make measured condemnations of Israel and the United States.
In 1973, Egypt and Syria led a coalition of Arab states against Israel during the Yom Kippur war, with Israel capturing Egypt’s Gaza Strip and the Sinai Peninsula, Jordan’s West Bank, and Syria’s Golan Heights.
How Do Middle Eastern Domestic and International Politics Affect Currency and Investing?
Although the currencies of the Kuwaiti Dinar (3.29 USD), Bahraini Dinar (2.65 USD), Oman Rial (2.60 USD), and Jordan Dinar (1.41 USD) are the most valuable in the world today, this wealth depends on economic stability in Middle Eastern countries. The Kuwait Dinar, for example, would not be as powerful as it is today if the United States had not led an international military intervention when Iraqi soldiers threatened Kuwait. Wealthy Middle Eastern countries continue to have strong currencies and offer investing opportunities because the industrialized world heavily depends on fossil fuels.
Despite lobbying by human rights defenders around the world for many human rights violations by rich Middle Eastern countries, the West avoids changing their foreign policy toward rich Middle Eastern countries to avoid conflict.
Here are two examples:
- Ronald Reagan’s administration did not stop aid to Iraq during the Anfal genocide between 1986 and 1989 when Ali Hassan al-Majid, Saddam’s cousin, bombed and gassed 180,000 Kurdish people.
- More recently, despite an obligation to take some kind of legal and moral action under US domestic law, the US did not voice any protest against Saudi Arabia for the murder of Jamal Khashoggi, a US resident whose three children are US citizens.
Investing in Middle East Currency
If you’ve been reading our Dinar Recaps, you know that one way of investing in the Middle East is through the Iraqi currency. We expect the Central Bank of Iraq to revalue the dinar to improve that country’s monetary value as the country rebuilds after the US invasion ousted the dictator Saddam Hussein.
However, you need to know that this is a long-term investment. Nobody knows when a dinar revaluation will occur, so it remains a buy-and-hold strategy: Buy dinars while they are cheap, hold them until the price goes up, then sell them at a higher price for a good profit.
Politics in Middle Eastern Countries
Although the richest Middle Eastern countries also rank among the richest countries in the world, the economies of the Arabian Peninsula are not keeping up with global economic progress. Arab countries remain divisive while Europe has a single currency, the Far East has regional trade agreements and free trade zones, and North America has North American Free Trade Agreement, an accord negotiated by Canada, Mexico, and the United States.
Many Middle Eastern countries continue to be a hotbed of violence that sends thousands of migrants from war-torn areas to seek refuge in European countries. Geologists predict the fossil fuel industry to run out within the next 53 years. Unless the Middle Eastern people in the Arabian Peninsula unite as an economic bloc, stop fighting with each other, and diversify their economic development, the entire region will go into a massive economic decline.