Who would have thought that an unemployed man setting himself on fire in Tunisia could lead to the overthrow on one dictator and the possible disposition of another? With Tunisia’s Ben Ali gone, it looks like it is now Egypt’s Mubarak’s turn. Mubarak has been ruling Egypt under emergency power since Anwar Sadat's assassination. His rule has been lackluster at best, with high corruption, economic malaise, and lack of basic freedoms. Yet, like all dictators, he managed to win all Presidential elections with above 80% of the votes. As his departure appears more likely than not, what are the consequences?
1. From an economic point of view, Egypt is a middle weight, with an economy of $217 billion (2010 figures), ranking 27th in global GDP. It has chronic high unemployment (officially around 10%) with high disparity between the privileged and those less so (Gini index 34.4). It has high public debt (80%) and inflation (13%). US aid to Egypt totals about $2 billion a year, most of it military. That helps Egypt decrease its defense spending. Egypt’s main exports include cotton, textiles, petroleum products and chemicals. Except for cotton, even if all of Egypt’s trade were to come to a sudden halt, it would not affect global trade that much.
2. The Suez Canal is Egypt’s ace. About 7.5% of the world’s sea trade passes through the canal, earning the country about $6 billion in revenue. Trade between Europe and Asia is especially dependent on the canal. Though under international treaty it should be used "in time of war as in time of peace, by every vessel of commerce or of war, without distinction of flag”, it was closed in 1967 during the Six-Day War. That is one reason why the price of oil rose sharply on Friday. I doubt that any rationale government would block off the canal since it is such an important source of revenue for the country. But humans are not always rationale.
3. The political implications of changes in Egypt are probably the most profound. What replaces Mubarak, should he depart, remains a key question. Will it be the military or someone like Mohammad El- Baradei? In that case, the foreign policy will not change and it will be business as usual. However, if a more religious group takes over, it could have different implications such as:
a. Israel. Will such a group renege on the peace deal with Israel? If so, the implications are obvious. Even if this does not come to pass, a hostile government in Egypt that works with Hamas in the Gaza can cause Israel lots of headaches.
b. Saudi Arabia and other oil rich countries. There is a fear that citizens of Saudi Arabia could revolt against their King, emulating Egypt, and this was another reason for oil’s spike on Friday. This is unlikely. These oil rich countries do suffer from some of the same problems as Egypt (chronic unemployment, rising youth population, lack of freedoms) but have the monetary resources to pay off its citizens' angst. In addition, since they are not dependant on US aid, they are much more likely to use force ruthlessly on the agitators. Don’t expect mass uprisings to dethrone Saudi King Fahd Aziz or Libya's Moammar Gadaffi quite yet.
c. Other Arab states such Yemen and Syria are much more susceptible. They suffer from all of Egypt’s problem, with little oil to buy off its citizens. Yemen already as an insurgency in its North, is facing a water and population crisis, and already has Al Queda established in the country. It is the one to keep an eye on. Keep in mind that even if a ship gets through the Suez Canal, it still has to negotiate the Bab el Mandeb strait and the Gulf of Aden between Yemen and Eritrea/Djibouti/Somalia. Not great for the shipping industry.