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GCC Inflation - Early Signs of Unrest by Hamid Hamirani - 28-Feb-08
The same oil price increases that make GCC wealthy are also rapidly pushing the Middle East’s middle class toward poverty.

Strikes, demonstrations and riots from Morocco to the Persian Gulf are becoming commonplace as inflation causes prices for basic foods and other necessities to skyrocket.

In Jordan, the cost of some fuels shot up 76 percent overnight after the government had to remove almost all fuel subsidies.

Rising fuel had immediately doubled prices of food staples like eggs, potatoes and cucumbers.

The region’s strong reliance on food imports makes the Middle East especially susceptible to global commodity price increases, a condition made far worse by monopolies and corruption.

Two-thirds of Jordanians reportedly believe there is widespread corruption in the public and private sector, says Mohammed al-Masri, public opinion director for the University of Jordan’s Center for Strategic Studies.

"The middle class is less and less able to afford what they used to, and more and more suspicious,” al-Masri told The New York Times.

"For many basic products, we don’t have free market prices, we have monopoly prices,” notes Jordan’s former minister of national economy Samer Tawil.

"Oil, cement, rice, meat, sugar: these are all imported almost exclusively by one importer each here,” he said.

Governments in oil-rich countries have acted to increase wages and food subsidies for public sector employees.

Yet those who work in the private sector don’t benefit, and many analysts say that higher government spending is making regional inflation worse.

"Now we have to choose: We either eat or stay warm,” Jordanian retail worker Abdul Rahman Abdul Raheem observes. "We’re not really middle class anymore; we’re at the poverty level.”

The Jordanian 2007 inflation rate was officially reported as 5.4 percent, but government studies show middle-income families are spending far more on food while consuming less of it.

Even with subsidies that make buying necessities still in place, inflationary pressures of the past few months have taken a toll on all but the rich in Syria, where oil production is severely diminished.

"Many people believe that most of the government’s economic policies are adopted to suit the interests of the newly emerging Syrian aristocracy, while disregarding the interests of the poor and lower middle class,” says Damascus University political science professor Marwan al-Kabalan.

In Saudi Arabia — where inflation has been virtually non-existent for the past decade — public outcry over the current official 6.5 inflation rate has been huge, with the sharp contrast between new oil wealth and skyrocketing prices leading 19 prominent Saudi clerics to publicly warn against "theft, cheating, armed robbery and resentment between rich and poor.”

People living in Bahrain and the United Arab Emirates are experiencing double-digit inflation, causing the foreign-born workers who make up most of the area’s workforce to strike in recent months.

The purchasing power of the money they send home in currencies is pegged to the U.S. dollar and thus declining.

Protests over the cost of bread culminated in violence in Yemen, where at least a dozen protesters were killed; a confrontation between Lebanese Army soldiers and Shiite protesters triggered by rising bread prices killed seven more.

Thirty-four Moroccans are in prison for taking part in riots over food prices and even tightly controlled Jordan has seen nonviolent demonstrations and strikes.

It will likely only get worse.

The U.S. Department of Agriculture reports that record prices are forecast again in 2008-09 for wheat, corn, and soybeans, boosting expected producer returns to the highest level since the mid-1980s. Report Abuse | Email to a Friend | Reply to this Comment