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Five (More) Risks from the Hamas-Israel War

CTC Intl — Mon, 22 Jan 2024 23:40:59 +0000

Since the 7 October attack by Hamas against Israel, the world has warned of expanding conflict and increased instability in the Middle East. Almost on cue, the Iranian-backed Houthi’s attacked US assets in the Red Sea, prompting American retaliation, and Iran boosted bellicose rhetoric.

The fear of contagion remains very real, and on the minds of every policy maker around the world.

But there are also less obvious threats that could grow out of the war. Some directly relate to the Middle East while others result from an opportunity for action while the world is focused on Ukraine and the Middle East. Still others are simply unintended consequences of a major conflict.

Turkey: Erdogan Rising

Turkish President Recep Tayyip Erdogan is nothing but resilient. Last year, some pollsters hopefully suggested Erdogan could lose the general election thanks to a failing economy and renewed repression.

They were wrong.

And now, Erdogan is glowing with contentment as he trumpets what he paints as Western complicity in the humanitarian crisis in Gaza.

On 24 November, Erdogan issued a video statement where he condemned Israel for “openly committing war crimes” against Palestinians by cutting off electricity, water, fuel and food.

He then looped in the international community, saying, “… international organizations and the global system are unfortunately giving a very bad test.”

He also slammed what he called the targeting of journalists, an ironic statement from a regime ranked as “not free” by Reporters Without Borders, saying, “Children and women are not the only civilians deliberately targeted by Israel. It also kills journalists who try to announce the humanitarian tragedy in Gaza to the world, despite all the difficulties.” He punctuated the point by saying, “Another aspect of the Gaza crisis that has upset us as much as the deaths of children has been the biased coverage of international media outlets.”

In other words, Erdogan is not wasting a good crisis. He is using the war to claim global moral high ground and to present himself as the leader of the Muslim world.

All of this may seem like a war of words, but it is far more than that. Under Erdogan, Turkey’s relations with the US and with Europe have strained, and the war is only intensifying those stresses. Erdogan gains strength from what he sees as Western hypocrisy, and the war makes it even less likely he will bend to international pressure. His distance from the West makes it even more likely he will stand alone and ignore global efforts to sway his actions, and it undermines his opponents pushing for reforms and improved human rights. Moreover, Erdogan is likely to sneer at condemnation of Turkish attacks on Kurds in Syria while the US supports Israeli bombings.

Inside Turkey, the Gaza war is boosting Erdogan’s shift from the West and toward whatever it is Erdogan is spouting. Turkish press reports that 76% of Turks support the Palestinians and only 5% back Israel in the Hamas war. Additionally, only days ahead of the Hamas attack, 77% of Turks said they see the United States as “an enemy.”

The risk is very simple: An emboldened Erdogan, already known for human rights violations, suppression of free speech and press, and election shenanigans, could emerge bolder, stronger, meaner. And the West has few diplomatic tools to counter that slide.

Korea, Serbia, Guyana, Taiwan: New Flaring Hotspots

The Israel-Hamas war could also precipitate bad actors to flex their muscles, either as a way to show dominance and relevance – as in the case with North Korea – or to take advantage of a distracted global community.

North Korea. On 27 December, North Korea’s Kim Jong Un spoke at a 2024 Worker’s Party planning meeting and announced plans to ramp up preparations for war with the United States.

According to Kim, the US has launched “unprecedented” confrontational activity, and that the Korean peninsula has “reached its limit.” The preparations reportedly include ramping the military-industrial sector, the nuclear sector, and the civil defense sector.

Observers note that Kim is also aware that 2024 is an election year in the US, which will likely further stretch America’s attention.

Serbia/Kosovo. In early October, analysts warned that the situation with Serbia and Kosovo remains highly volatile and could boil over into full fledged war at any moment.

Most Americans missed the September situation when 30 heavily armed Serbs barricaded themselves in an Orthodox monastery in northern Kosovo. That prompted a day-long gun battle and again highlighted the ongoing simmering tensions.

The Serbian government is under pressure, and mass shootings in the country are sparking questions about the ability of the government to provide security. To demonstrate its might, the Government of Serbia has started pandering to Serbian nationalists pushing for Serbia to “attack and reconquer Kosovo.”

The heightened rhetoric is raising fears of a revival of the 1998-1999 war in Kosovo that claimed more than 10,000 lives and left over 1 million homeless.

Venezuela/Guyana. Earlier this month, Venezuelan president Maduro announced plans to annex Essequibo, an oil-rich area claimed by both Venezuela and Guyana, and mobilized troops to support the effort. The move came after Guyana’s government raised a flag on a hill in Essequibo, which “indigenous” people lowered and replaced with the Venezuelan flag.

On 27 December, the United Kingdom sent a warship to support Guyana’s claim, prompting Maduro to deploy 5,000 soldiers and to dispatch “planes and vessels for military exercises.”

The moves counter an agreement in mid-December, where both sides agreed to avoid using force and to settle the matter amicably.

According to Energy Intelligence, part of the escalation by Venezuela may be due to “an overall pushback by some nations to the US-led, rules-based international order.”

The enormous oil reserves and nationalism of Venezuela make it extremely possible that the conflict could intensify, drawing in the US, the UK, and other US allies.

China/Taiwan. The question of whether China would take advantage of the war in Ukraine to invade Taiwan has been circulating for years. With the Hamas-Israel war, speculation has increased.

Could China use the latest Middle East conflict as additional cover?

A Taiwan invasion would bring significant logistical and economic issues, but it’s not off the table. According to the Director General of the Communist Party, China “has not given up its intention to invade.”

More Terrorism

Instability often begets instability.

Terrorist groups could also attempt to use the war to demonstrate their own authority or to attempt to gain legitimacy by aligning with Hamas.

The US Department of State has named more than 60 groups as terrorist organizations, and the vast majority are either Shia or Sunni Muslim and include anti-Israeli efforts in their goals. Many of these groups have lacked significant operations over the last several years, but the Hamas attacks could kindle renewed efforts by the groups. The attention – and in some cases, sympathy – Hamas has engendered could spawn supporters or copy-cats interested in expanding their reach and legitimacy.

The Iranian-backed Houthis have already launched terrorist attacks on Western assets in the Red Sea, prompting a military response from the US and bringing the Houthi’s back into international attention.

Moreover, with the West focused on Hamas, organizations like the Taliban and ISIS may believe they are under less scrutiny, allowing them to plan and train with limited interruption.

Iran and Hezbollah Gains

Iran, always the opportunist, is likely enjoying the volatility and instability sparked by the war in Gaza.

Although the country so far has not gained the big wins many predicted, it is almost certainly biding its time and weighing its options.

Tehran has not pushed Hezbollah, its Lebanon-based terrorist group, to launch an all-out attack, but it certainly has backed skirmishes by the group at an escalating pace. Hezbollah’s drone attack on the US Erbil Air Base prompted the US to order air strikes against the group, further raising concerns of expanded conflict in the Middle East. And after the assassination of a senior Islamic Revolutionary Guard Corps commander in Syria, Iran warned, “The Israeli regime will undoubtedly pay the price for this crime.”

This week, Israel warned that it is losing patience with Hezbollah and is threatening to take action to stop Hezbollah attacks on the border.

The humanitarian crisis in Gaza is raising questions about Israeli and Western morals and motivations, with many in the Arab world grudgingly moving toward supporting Iran and Hezbollah. Lebanese citizens impacted by Israeli attacks against Hezbollah are now blaming Israel for the displacement, and some see Hezbollah – and Iran – as their protectors. Some Lebanese now say that without Hezbollah, they would face the same fate as the Palestinians in Gaza.

Iran continues to push other Arab countries to reverse their warming relations with Israel and to claim itself as champion for the Palestinian struggle for self-determination. For Iran, any loss to Israel is a win, and the global concerns about the war work in Iran’s favor.

Long-term devastation in Gaza could continue to boost Iran’s standing in the region, weaken and isolate Israel, and further divide the Middle East.

Alliance of Non-Western Actors

As the crisis deepens and the world raises questions about the humanitarian impact of Israeli response to the Hamas attacks, and the role of the US in supporting that response, the constellation of non-Western allies seems to be moving toward each other.

Russia, China, North Korea, Serbia, Sudan, Syria, Venezuela, Iran, Turkey and others see themselves gaining moral authority in the face of the war, and are increasingly holding talks regarding alliances and the future world order.

In early December, Finland’s Defense Minister cautioned that the new cooperation between Russia, China, North Korea and Iran presents a very real danger for Europe, calling it “a weather system of security policy that is unfortunately troublesome.”

Expanding collaboration among these actors not only provides them with additional strength, but also undermines the ability of Western countries to implement sanctions or other actions to curb bad intentions by those countries.

Continuing Risks…and Opportunities

Risks will continue to multiply as the Gaza war continues, with new threats blooming daily.

Understanding the risks, preparing for the worst, and protecting businesses, people, supply chains is critical to any corporation operating globally.

Intelligence provides not only indications of risk, but also possible opportunities. As with all crisis, there will be winners and losers, and those who use intelligence to drive decisions will come out much further ahead than those who bury their heads in the sand.

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Hamas-Israel War Impacts Business: Supply Chain, Oil, Financial Markets, and Geopolitics

CTC Intl — Mon, 06 Nov 2023 20:12:04 +0000

[click_to_tweet tweet=\”Hamas-Israel War Impacts Business: Supply Chain, Oil, Financial Markets, and Geopolitics\” quote=\”The most immediate and horrific result of the Hamas-Israel war is massive human suffering, which is likely to worsen over the coming weeks and months, but the crisis will also negatively impact businesses around the globe. Preparing now, before the conflict escalates, and recognizing the risks can help avoid economic catastrophes for both businesses and households.\”]The most immediate and horrific result of the Hamas-Israel war is massive human suffering, which is likely to worsen over the coming weeks and months, but the crisis will also negatively impact businesses around the globe. Preparing now, before the conflict escalates, and recognizing the risks can help avoid economic catastrophes for both businesses and households.

People

The human cost of the war is already immense. Both Israelis and Palestinians are caught, and the situation will undoubtedly deteriorate before it improves.

There is also an impact on the workforce and on businesses that rely on workers in Israel and Gaza. Israeli businesses are now focused on the conflict, and Reuters reports that disruptions in operations are likely.

Companies in the travel industry, including airlines and cruise lines, anticipate difficult fourth quarters because of the war and tech companies already report “pauses in spending from a large number of primary brand-oriented advertising campaigns.”

That situation will worsen if the conflict continues or expands. Israel has already announced plans to call up 300,000 reservists, many of whom will come from US-based businesses, and the country is already seeing an influx of Israeli’s returning to help the war effort.

Supply Chain

The Middle East is home to some of the busiest shipping routes in the world, including the Suez Canal, the Red Sea, the Persian Gulf and the Strait of Hormuz.

Approximately 1.27 billion tons of cargo go through the Suez Canal every year, and 90 percent of Iran’s oil exports go through the Strait of Hormuz.

Any disruption to shipping lanes in the Middle East would directly impact the United States. According to the US Trade Representative, the US imports $84.9 billion from the Middle East, and exports approximately $71.8 billion to the Middle East annually. The US exports $31.8 billion in services to the Middle East and imports $23.5 billion in services annually from the Middle East. Leading services exports from the U.S. to the Middle East were in the financial services, travel, and transportation sectors.

Oil

Probably the most obvious impact of conflict in the Middle East is the price of oil. Some pundits note that Washington’s decision to remove Venezuela from the sanctions list is also a move to diversify American reliance on Middle Eastern oil. However, the global economy currently has no way to replace all Middle Eastern oil, and an intensifying conflict will result in higher oil prices.

US Defense Secretary Lloyd Austin warned last week that the US is “concerned” the war between Israel and Hamas could expand to a broader conflict throughout the Middle East. Syria, Lebanon and Egypt have already experienced some skirmishes.

The biggest risk in terms of oil is an expansion that involves direct conflict between Israel and Iran. If that happens, the US has warned oil could reach $150 per barrel.

And oil is critical not only for making gasoline, but also for making a multitude of other products. Ranken Energy explains that while oil is important for making gasoline – and that increases in prices of gas will raise transportation and manufacturing costs – it is also used to make a large number of other products. Petroleum products are used in everything from cosmetics to pharmaceuticals, from golf balls to sports cars. It is even used to make clothing.

All of these, and more, will be impacted by higher oil prices.

Finance

The Israel-Hamas war will also impact global finance.

The stock market will face increased volatility because of uncertainty. Higher oil prices could cause a global economic downturn, triggering layoffs and higher consumer prices.

Analysts are warning that an expanded war could significantly undermine the global economy, and it could push the US into a true recession.

Interest rates will likely rise, putting more pressure on American consumers and on any businesses that depend on financing.

Geopolitics & Alliances

The other wild card as the conflict unfolds is how it will impact newly-warmed relations between Arab countries and Israel. Saudi Arabia started normalization talks in March, but halted them with the start of the conflict.

Any decision by Arab countries to side with Hamas would further erode the geopolitical situation and cause additional pressure on international businesses.

Outside of Israel and Gaza, there is also an increased threat of terrorist attacks and instability by supporters of both sides and by opportunists looking to make gains while the international community is distracted with the Middle Eastern tensions and the war in Ukraine.

Opportunities

The companies that come out of the crisis unscathed will likely be those nimble businesses already making contingency plans. Diversification of supply chains, customers, and transportation networks is critical to surviving even in crisis.

Companies that specialize in security and intelligence will have immediate opportunity, while those focused on reconstruction and development are poised to make gains after the end of the conflict.

The hardest hit companies will be those that are not prepared.

As Maya Angelou said, hope for the best, prepare for the worst, and you will be unsurprised by anything in between.

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