In various ways, 2022 was arguably a positive year in much of the Middle East and North Africa (MENA) region. The COVID-19 pandemic subsided in many states and the intensity of violence ebbed in several conflict zones. Competition between regional powers receded and gave way to an increase in diplomacy and rapprochement. However, with a global economic recession looming and the fallout of the Russia-Ukraine war rippling beyond Europe, prospects for peace and prosperity in the region appear bleak in 2023. In this Council Views, some of our experts survey the region’s socio-political and economic landscape and offer their outlooks for the year ahead.
Refugee and Humanitarian Crises Keep MENA on Edge in 2023
The Middle East enjoyed some respite from conflict in 2022, thanks in part to intra-regional efforts at peace-building –– such as Turkey’s rapprochement with the United Arab Emirates and Iraq’s mediation of tensions between Saudi Arabia and Iran –– and in part to the de-escalation of protracted conflicts in Syria, Yemen, and Libya.
The global system has also shifted its focus and resources towards the war in Ukraine, which has challenged the rules-based international order in unprecedented fashion and compelled states in the Middle East to re-calibrate their foreign policies: firstly, to balance their relations with Western states and Russia; secondly, to establish the foundational principles for collective security structures that are independent of external actors. However, the calm in the Middle East could be a deceptive one.
The region is still at risk of conflict relapse as a result of ongoing humanitarian crises and the absence of a lasting settlement to the wars that have plagued the region over the past decade. While a combination of fatigue and geopolitics has reduced the bloodletting, there are still several factors that make the region vulnerable to a return to acute conflict.
As of 2022, the war in Syria has resulted in the displacement of more than 13 million people, with 14.6 million people requiring humanitarian aid. In Yemen, the number of people requiring humanitarian aid has reached 23.4 million, and in Libya, the number stands at 2.4 million. In Iraq and Syria, the so-called Islamic State is experiencing a resurgence, and geopolitical tensions have escalated as a result of the uprising in Iran. These are conditions that are conducive to large-scale conflicts and do not bode well for long-term stability.
In Iraq and Syria, the so-called Islamic State is experiencing a resurgence, and geopolitical tensions have escalated as a result of the uprising in Iran. These are conditions that are conducive to large-scale conflicts and do not bode well for long-term stability.
A Difficult Year Ahead for Oil-importing Countries
The global economy faces the prospect of an economic slowdown in 2023. This would have a major impact on oil-importing countries of the Middle East and North Africa, including revenues in key sectors such as tourism and remittances from workers abroad. Reduced revenues, in turn, would require cuts in social spending and increase the prospect of renewed social unrest.
Egypt, Jordan, Tunisia, and Lebanon are already dealing with high levels of public debt, exceeding 80 percent of their GDPs. All are net energy and food importers, making them highly susceptible to the impact of the Russia-Ukraine war on global energy and food markets. Lebanon is already reeling from a financial crisis that has strangled its economy and seen the value of its currency fall to less than 5 percent of its 2019 rate against the dollar. The high levels of public debt and the specter of inflation mean that oil-importing countries have limited policy space to borrow money or increase the money supply. They must therefore explore other options for dealing with a global economic slowdown.
Oil-importing countries should consider structural reforms that they have long put off, including replacing energy price subsidies with means-tested cash transfers and unshackling the private sector, allowing it to drive economic growth and job creation. These policy alternatives have long been proposed by international organizations and development experts, but have been opposed by vested interests within the countries. A looming economic or financial crisis might help create enough policy momentum to finally undertake key reforms necessary for long-term growth and sustainable development.
The Looming Threat of Food Insecurity
The MENA region faces several acute food security challenges in 2023. Already highly over-reliant on other parts of the world to meet its food needs—importing around 50 percent of consumption—the region’s weak, distorted, and non-resilient supply chains make it more vulnerable to rising global prices and external shocks, such as the COVID-19 pandemic and the war in Ukraine. Additionally, climate change and environmental strains such as increased frequency of extreme weather, higher temperatures, rainfall deficits, and water stress are severely affecting many countries in the region, including Iraq, Jordan, and North African and Gulf countries. While the sowing season for the 2023 grain crops has already started, the region is registering significant rainfall deficits and above-average temperatures, which will potentially affect local harvests.
The region’s myriad conflicts are also impacting its food security. Conflict-riven Syria and Yemen lead the global list for countries with the most acute food insecurity and malnutrition. Meanwhile, economic hardships and a looming recession continue to erode people’s purchasing power, impacting large shares of the populations in Tunisia, Egypt, and Lebanon, among others. According to the latest Wave of the Arab Barometer, more than half of the people in nine out of the 10 surveyed countries had concerns about food shortages. Hence, MENA governments would be wise to pay special attention to this issue and plan accordingly in order to mitigate a foreseeable crisis.
Reset Diplomacy Takes Hold and Re-shapes the Region
Since the blockade against Qatar was lifted in January 2021, MENA politics has largely been defined by the effort to de-escalate, normalize, and reset relations between regional states after more than a decade of post-Arab Spring competition and conflict. In 2023, this process will bear greater impact on regional alliances and conflict zones, on relations with external powers, and on intra-regional economic cooperation.
As the region becomes less defined by Arab Spring-related competition, alliances are shifting. This has already manifested in several instances of rapprochement, but is also producing an important case of decoupling and divergence—although gradually—between Saudi Arabia and the United Arab Emirates (UAE), two stalwart allies of the previous era. The element of competition in their relations, such as in their policies towards Ethiopia and Yemen, is likely to be more conspicuous in the year ahead. In contrast, a gradual convergence between Riyadh and Doha, probably with Ankara as well, is set to take place. Turkey, Egypt, and the UAE are also likely to explore ways of achieving greater accommodation among themselves in Libya, while Turkey, Syria, and Russia are likely to launch a new, structured, trilateral process with the aim of restoring relations between Ankara and Damascus.
A downsizing of the United States’ (U.S.) regional security commitments, coupled with deepening discontent over U.S. regional policy, are also informing the process of reset and inviting regional states to broaden their external relations. Against the background of a war in Ukraine and emerging great power competition between the U.S., China and Russia, this growing tide of multipolarity is set to further bedevil U.S.-Middle East relations, with more crises and frictions on the horizon.
Finally, while the regional reset has been cast in economic-centric terms, the economic windfall has been modest at best. In 2023, the economy-first approach is likely to be even more prominent as regional powers try to bridge the gap between their economic needs and their foreign policies.
Optimism for Ending Yemen’s War Difficult to Muster for 2023
In the 1960s, Yemen was embroiled in a civil war that ended in its eighth year, when royalists and republicans reached a political reconciliation. As Yemen’s current civil war enters its eighth year in 2023, it is natural to hope that history will repeat itself. After the parties to the conflict signed an armistice agreement in April 2022, many were optimistic about the possibility of peace in Yemen. The Presidential Leadership Council (Council) was formed to ensure institutional power-sharing, with the potential to include the Houthis as part of a conflict-ending resolution.
In the middle of the year, however, hopes were shattered when clashes erupted in Shabwa governorate, exposing the fragility of the Council’s internal politics. For their part, the Houthis also refused to extend the truce into the latter third of the year and launched a military escalation by mobilizing their forces in the conflict zones and bombing oil ports in southeastern Yemen, which led to the near cessation of Yemeni oil production.
Despite a promising dialogue for a prisoner exchange between the Saudis and Houthis toward the end of 2022, most signs point to another bad year ahead. With the halt in oil exports, the economic situation in Yemen will likely worsen and lead to a further deterioration in the value of Yemen’s currency, especially amid broader global economic stagnation. This could easily intensify Yemen’s already dire humanitarian crisis. Additionally, movement in Houthi ground forces portend an escalation in the military fronts in Marib, Taiz, Lahj, and Abyan, which had all been in a semi-stalemate. Even Yemen’s territorial waters could become a fresh battleground after the Houthis recently demonstrated some naval capacity.
Although the new year should present a moment of promise, it is difficult to be optimistic that 2023 will deliver a breakthrough in this war-torn country.
Egypt’s Vulnerable Economy Faces Global Headwinds
In 2023, Egypt will likely be facing down the dual challenges of rising inflation and increasing food prices. The double hit of COVID-19 and the Russia-Ukraine war continues to wreak havoc on Egypt’s economy, which is heavily dependent on wheat imported from both countries, and is experiencing a foreign currency crunch that is impacting businesses across the country.
Of course, Egypt is not alone in confronting a challenging economic outlook. The International Monetary Fund (IMF) warned that the global economy will likely experience a difficult year ahead. But given the multiple socio-economic pressures that Egypt faces, 2023 may be particularly daunting. In the short term, a recent $3bn extended loan from the IMF combined with investments and grants from Gulf countries may stabilize the economy, but in the long term it remains to be seen if the economic reform program Egypt and the IMF put in place will lift the economy into a full and sustainable recovery.
A Shifting Balance of Power in Regional Competition
Heading into 2023, a major story in the Middle East remains the severe unrest in Iran. Protests against the government, arguably the largest since the Islamic Republic came to power in 1979, have stretched on for three months and entered the new year as forceful as ever. Together with ongoing Unite States-imposed sanctions and a lack of movement in negotiations to restore the Joint Comprehensive Plan of Action (JCPOA) nuclear accord, the Iranian state is likely to face a serious challenge to the projection of power beyond its borders. That is especially true given the deteriorating state of Tehran’s once-ascendent regional alliance network.
In Syria, the Assad regime begins the new year facing a severe economic crisis, a deteriorating humanitarian situation, and a resurgence of the Islamic State. In Lebanon, although Tehran’s ally Hezbollah exerts unparalleled political influence, it does so over a state in unprecedented economic and political decline. In Iraq, where Iran-aligned Shia forces have dominated the state for years, the country enters 2023 on the verge of civil war between various Shia factions. And in Yemen, the Houthi movement remains locked in a protracted civil war and steadily worsening humanitarian conditions on the ground.
At the same time, Iran’s Gulf adversaries are not only enjoying an economic boon as a result of high oil prices, but are mending their own regional divisions and diversifying relations. (Even Turkey, whose rivalry with Iran is intensifying, has reconciled with antagonists in the Gulf, as well as Egypt and Israel.) Given the harsh economic conditions of the post-pandemic environment coupled with the fallout from the War in Ukraine, energy-exporting states will likely leverage their windfall into enhanced regional influence through “bailout diplomacy” of their oil-importing neighbors. These two trends mark a shifting balance of power in the region, which could be meaningful in shaping the region in the year ahead.