The consequences of the Egyptian and Tunisian Revolution

Inspired by the successful revolution in Tunisia, the Egyptian Revolution started on January. Thousands of people demonstrated in the streets to protest against poverty, rampant unemployment, government corruption and autocratic governance of President Hosni Mubarak. After 18 days of protest, President Mubarak resigned.
After the turmoil in Egypt, a question still remains: do we have to fear some impacts on the global economy? Is there a threat for the rest of the world?

To answer to these questions, it is important to keep in mind the different arguments. Even if Egypt is not well integrated into the international financial system and Cairo is not a significant financial hub, the Egyptian Revolution can have major economic and financial implications. Although the country is not a major oil producer, the main way Egypt can impact the global economy is through oil. It is interesting to see that oil markets overreacted to the Egyptian uprising. Oil prices have risen around $100 U.S. per barrel. First with the Suez Canal which runs through Egypt, the country plays a key role for transporting oil from the Persian Gulf to Europe and elsewhere. The Egyptian crisis could create some disruptions in the operation of the canal and that might cause a rise in oil prices. That could have negative effects for oil-importing countries and bring inflationary pressures. After the 2008 crisis, the world has been weakened. Today, it is recovering health but it is not strong enough to endure a new shock. So Egypt is essential for the geopolitical stability in the Middle East.

According to the journalist, economic and financial factors are not responsible of the main impacts. Indeed, we have to keep in mind that only a minority of the entire world’s supply of oil passes through the Suez Canal. The traffic seems normal. Moreover, the Egyptian banks have been isolated from the international banking system. So the risk for the European banks is limited. In fact, oil markets are reacting to speculation that the crisis in Egypt could spread to the oil-rich Middle East. It can be explained by the regional geopolitical uncertainty. To better answer to the question, it is necessary to study the impacts on the rest of the region such as Saudi Arabia.

In this first article, the journalist explains why the Egyptian crisis could have some implications for the global economy. He gives different economic and political reasons. He also considers what happened on the financial markets. At the end, he expresses his opinion (“my personal view”, “for me”). So he asks a question and gives his own answer. After the reading of this article, we can make our personal opinion on the subject because the journalist gives us the different arguments to think about it. That is why this article is so interesting because we can understand the position of the journalist but we can also create our own way of thinking which can be different from his point of view.
Nevertheless, to conclude to the answer we have to study the implication for oil-importing countries. That is why I chose the second article. These articles complete each other. In the second one, the journalist gives his opinion. He uses modal verbs (should, would). He has to be cautious because it is a personal point of view and he cannot be adamant. He imagines what could happen if Arabia Saudi is the next one after Tunisia, Egypt. The second journalist tries to make us aware of the dangerousness of the situation for oil consuming countries, more precisely for the United-States of America and tries to find solutions.

For Arabia Saudi, it is no the good time for such a revolution because the House of Saud’s top echelon is ill. Moreover, anger over rising prices and high unemployment has erupted in Yemen, Morocco, Algeria and Saudi Arabia. Democracy was virtually a word unknown for many Saudi’s like ‘protest’, ‘civil rights’. If Saudis decide to imitate the Egyptian people, consequences will be disastrous because Saudi Arabia is the country with the largest oil reserves. So it is an essential player for supplying the market in oil. If this country is concerned by such protests, there will be a terrible oil shock with a sharp rise in oil prices and it would cause a new recession. Indeed, historical studies show that most of the recessions have been preceded by a Middle East shock. So a country like the United-States of America violently hit by the previous crisis should find other solutions like austerity measures or flexible-fuel vehicles. The American households are largely indebted so they could not endure sharp increase in oil prices. They need to change their habits and use less oil. In order to reduce their consumption, they have to make some efforts. It can be very simple. For instance, they can increase the number of passengers in each car in order to avoid the “one person per car”. It is also crucial to develop clean fuel or to focus our attention on alternative sources of energy. They can try solutions such as carpooling or the use of electricity instead of oil. North America should be resilient to oil shocks. In order to do it, they need to find and encourage other alternatives. A superpower like North America should not be dependent on oil producing countries.

According to me, the Egyptian revolution will have little impact on global economy but major consequences for Egypt itself. Tourists flee the country, hotels are empty, the pyramids were closed by the military to tourists. The upheaval in Egypt has killed tourism for a while whereas usually it is a major source of revenue. Nevertheless it could contribute to create a stronger political country. Markets need to worry less about rumors and speculation, they could benefit from stronger political context and should be focused on oil-rich countries.