World View: Russia Faces Economic Cliff on Monday, January 12

Russia expects major losses from S&P action

This morning’s key headlines from

  • Qatar may be turning against Hamas and the Muslim Brotherhood
  • Russia faces economic cliff on Monday, January 12

Qatar may be turning against Hamas and the Muslim Brotherhood

Hamas leader Khaled Mashaal
Hamas leader Khaled Mashaal

Last summer’s Gaza war between Israel and Hamas tore open a gash between Arab and Mideast countries, with Qatar, Turkey and Iran strongly supporting the Muslim Brotherhood and its offshoot Hamas, versus Egypt, the Palestinian Authority and Saudi Arabia opposing Hamas, hence supporting Israel. The differences were expressed with extreme vitriol, especially after Hamas was thoroughly defeated by Israel in the war. But Saudi Arabia managed to convince Qatar to a reconciliation prior to the big Arab summit meeting last month.

Hamas’s defeat is only a small part of their problems. Hamas used to have a headquarters office in Damascus, Syria. But in 2011, Syrian President Bashar al-Assad started exterminating innocent Sunni women and children, forcing a split between al-Assad and Hamas’s leader, Khaled Mashaal. After months of rumors, Mashaal and Hamas HQ moved to Doha, Qatar, allowing Mashaal to direct the summer Gaza war from afar.

Now, thanks to the reconciliation, there are reports that Qatar is throwing Mashaal out of Doha. Hamas is denying the reports, but other reports are saying that if Mashaal stays in Doha, then he has to agree to keep a very low profile, and not do anything to embarrass Doha. A Hamas official was quoted as saying, “Hamas was asked at least not to engage in any high-profile political activities that may be interpreted as Qatar still supporting the Muslim Brotherhood, particularly after the Egyptian–Qatari reconciliation.”

If Mashaal leaves Doha, then he has three choices: Ankara, Turkey; Tehran, Iran; or Khartoum, Sudan, the capitals of the three countries that still support Hamas. Iran is a particularly problematic choice, because Hamas still strongly opposes al-Assad while Iran supports al-Assad, and because Hamas is Sunni Muslim while Iran is Shia Muslim, so they have little in common except their common hatred for Israel.

Current speculation is that Mashaal and Hamas headquarters are headed for Ankara. Daily Sabah (Ankara) and Asharq Al Awsat (Riyadh)

Russia faces economic cliff on Monday, January 12

Russia is on a long-term holiday that started two weeks ago and ends on Monday, January 12. At that time, the banks and the stock exchange will reopen, and it’s feared that both the ruble and the Moscow stock exchange will fall sharply. Russia’s economy is being hit hard by multiple problems: Russia’s main source of income has been deeply slashed because oil prices have been collapsing. The inflation rate has grown from 6.5% to 11.4% in a few months, with food prices growing at 15.4%.

The invasion and occupation of eastern Ukraine and annexation of Crimea are much more expensive than expected. Now that Russia has “bought” eastern Ukraine, it’s stuck with it, and has to provide aid. Russia has almost no spare industrial capacity, and badly needs massive investment and new technologies that are not forthcoming. Western sanctions have made it impossible for Russian companies to borrow money, forcing them to drain their reserves. Capital is flowing out of Russia as Russians with dollar-denominated accounts and assets move them to other countries, fearing that their accounts might be frozen.

Russia’s president Vladimir Putin may have no choice but to impose capital controls, which would prevent anyone’s dollar reserves to move out of Russia to foreign banks. But the people who would be hurt most would be Russia’s elite oligarch class who, up till now, have been Putin allies. If Putin is forced to impose capital controls, it may be a game changer in that he may lose the support of his biggest allies.

The only good news was an announcement that the price of vodka will decrease from $7 per liter to $6 per liter. This will be accomplished by lowering taxes on vodka. Lowering taxes is not something that the Russian government can afford, but it’s thought that, with cheap vodka, the people will be happier. Jamestown and Guardian (London)

KEYS: Generational Dynamics, Qatar, Hamas, Khaled Mashaal, Muslim Brotherhood, Israel, Egypt, Saudi Arabia, Turkey, Palestinian Authority, Syria, Bashar al-Assad, Russia, Vladimir Putin, Ukraine, Crimea
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