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Financial Storm Hits Gulf States
Margaret Coker and Chip Cummins, Wall Street Journal
Speculative Currency Trades Plunge Kuwait Into Bank Bailout
The global financial storm rolled across the Persian Gulf on Sunday, as Kuwait’s central bank guaranteed bank deposits and cobbled together a hasty bailout for one of the country’s largest banks.
The Kuwait intervention is the first bank rescue in the oil-rich Gulf, which until now had seemed relatively immune to the current crisis. It came as local markets across the region continued their steep selloffs. With oil prices down more than 50% from their July highs, the explosive, petroleum-fueled growth of the Gulf now looks suddenly vulnerable at the same time as international and local investors are pulling back sharply.
Saudi Arabia, in an apparent bid to ease the fallout of the global credit crisis on its citizens, said it would funnel some $2.3 billion in loans to low-income borrowers. And in Dubai, real-estate brokers in the Mideast boomtown said they are seeing signs of price weakness for the first time in years, as financing dries up and speculators bow out of the once red-hot market.
(27 October 2008)
The rise (and fall?) of petro-states
Sreeram Chaulia, Asia Timies
Even before armed hostilities between Russia and Georgia ended in August, the ultra-nationalist mayor of Moscow, Yuri Luzhkov, began investing
colossal sums in changing the ethnic geography of the Georgian breakaway state of South Ossetia in favor of Russia. In one public speech to Ossetians, he exuded the confidence and chutzpah that has come to symbolize the Russia of Prime Minister Vladimir Putin and President Dmitry Medvedev. Smug with the knowledge that oil and gas revenues had raised his country’s international stature, Luzhkov wooed his Ossetian audience with a startling claim, “Russia needs nothing. It has everything. It is the wealthiest country.”
The Kremlin’s assertiveness and strident defense of national interests in the Putin era is ascribed to the boom in world prices of natural gas and oil, which Russia exports in abundance. Russia reaped direct dividends from the steep increase in fossil fuel prices by accumulating foreign exchange reserves to the tune of US$560 billion by mid-2008. Indirectly, possession of the much-coveted strategic minerals enabled Russia to neutralize energy-hungry Western European countries, particularly Germany, so that the “West” was divided over taking an anti-Moscow foreign policy line.
Ever since fossil fuel prices inflated from 2004, the Middle East, Latin America and Africa saw their own versions of petro-states that turned into major regional powers to threaten American hegemony. Thanks to steady increases in the price of oil, Iran’s star rose astronomically in the most volatile area of the world.
Sreeram Chaulia is a researcher on international affairs at Syracuse University’s Maxwell School of Citizenship and Public Affairs, New York.
(28 October 2008)
As Dubai skyscrapers keep rising, buyers and developers eye world’s financial woes
Adam Schreck, AP
Dubai’s long, lucrative property boom is hitting rough times, with property-flipping speculators and hopeful foreign buyers increasingly worried as easy oil money and quick profits dry up.
It’s far from clear, though, if a bubble has truly burst or if the once red-hot market is simply cooling.
(27 October 2008)