“Is that a fiddle I hear there somewhere drifting through those fired dry sands?”–Raphie Frank
Another week with Barack Obama as U.S. President and radical Islam grows even stronger. Egypt, America’s largest and most important ally in the Middle East, is aflame as revolutionary forces marched and even burned President Hosni Mubarak’s Ruling Party headquarters.
As I write to you the streets of Cairo are ablaze following a week of mass demonstrations in which thousands of people have attacked the police and ignored curfews. The people want to end the 30-year dictatorial rule of Mubarak, but radical elements are quickly bending the protests their way in an all out effort to turn the land of the Pyramids into the home of martyrs.
If the extremists in Egypt can do what they did in Iran, then the Middle East — home to two-thirds of the world’s oil reserves — will turn to Islamic law.
Egypt sits at the crossroads between Europe and the Middle East. Not only does it have the largest Arab population but also the strongest conventional army in the region. Since the fall of the Shah in Iran, Egypt has provided the glue that held the Middle East together. It was Egypt that was the first Arab nation to recognize Israel and it is always Cairo at center stage in any Middle East peace process.
Political analyst Simeon Mitropolitski sums up what is at stake:
“Egypt offers a completely different political and social model, something between the Iranian and the Taliban versions of Islamic state. In 1954 this organization was banned and shortly afterward it was accused of trying to assassinate President Nasser, a champion of alternative secular social and political model.”
Regardless of what is at stake, Egypt is burning and the Obama administration has once again been caught off guard.
On Monday, Washington was desperately trying to fly more than 2,400 U.S. citizens out of Egypt. It appears that no contingency plan was made for this revolt. Again, American intelligence services appear to be anything but intelligent.
So far the State Department has put a remarkable positive spin on events, just like they did when the Shah was toppled. But wishful thinking isn’t going to create a new Egypt built on Thomas Jefferson’s ideals. It is far more likely that America and the world will have to deal with an Islamic-ruled Egypt, if not now then in a few short years.
One of the most immediate worries is the Suez Canal, a waterway that opens into the Red Sea and which is a choke point for much of the world’s oil supply. Egypt’s primary export is cotton. The world isn’t going to fall apart because of a cotton shortage. Yet whoever rules Egypt also has their hands on the Suez spigot. This could have an immediate short-term impact on oil deliveries — the price of crude has surged more than $6 per barrel in just the past two trading days.
Rioting in Cairo could spread fast. Many businesses have shut down operations. Egypt’s stock market (EGX) has been closed after it fell 16 percent last week.
Outside of Egypt the financial center of the Middle East, Abu Dhabi, has been hit the hardest. On the Dubai exchange shares plummeted to a one-year low. If unrest grows and the Suez Canal closes it won’t be some far off stock exchange falling, it will be the New York Stock Exchange. But there is something far more worrisome than a 25 percent correction in the Dow Jones Industrial Average or even $5 per gallon gasoline. Rather think of the ramifications if Egypt, a center post of America’s war on terror, falls into the hands of the enemy.
Forget Robert McNamara’s incorrect domino theory that was projected for Southeast Asia in the 1960s. If Egypt crumbles there really will be a cascade of giant dominoes headed straight for the West and riding atop each one of them will be a crazed terrorist with a bomb strapped to his back.
It is still too soon to say what will arise from this revolt, but it could center on the growing power of Egypt’s Muslim Brotherhood (MB). According to the Business Insider:
“The MB would be calamitous for U.S. security. What’s more, their current defenders don’t really argue that point, as much as they seem to dismiss it as not important or something we can live with. The MB supports Hamas and other terrorist groups, makes friendly noises to Iranian dictators and torturers, would-be uncertain landlords of the critical Suez Canal, and opposes the Egyptian-Israeli agreement of 1979, widely regarded as the foundation of peace in the Mideast. Above all, the MB would endanger counterterrorism efforts in the region and worldwide. That is a very big deal.”
This leaves the United States at the mercy of another Iranian crisis, but this time around is far worse.
True, Iran was a major oil exporter and Egypt is not. However the world was consuming only half as much oil when the Shah fell compared to today. More importantly, during the Iranian revolution Saudi Arabia had enough spare oil production capacity to replace all of Iran’s oil exports. In fact, the House of Saud increased oil output from 8 million barrels per day to more than 12 million barrels per day. That is something that Saudi Arabia can no longer do.
If another Islamic Revolution gains traction in Egypt how much longer will there even be a Saudi Arabia as we know it? Egypt has been a great counter-balance against extremism in the Middle East for almost 40 years. It has provided critical support to Arab oil producers like Saudi Arabia and Kuwait and it has been the primary reason there has been peace between Israel and the Arab world.
The Middle East is a bigger tinderbox than ever and once again Obama has shown that, under his leadership, the world continues to become a less safe place. Is it his fault that Egypt is burning? No. But it is his fault that he and his Secretary of State, Hillary Clinton, didn’t see it coming and weren’t able to force Mubarak to reform his dictatorial rule before it was too late. Now the world will have to pay the consequences.
Action To Take
Double down on your oil investments. Canadian oil sands can only benefit from the trouble that is brewing in the Middle East. If you have not yet bought shares in Suncor Energy (NYSE, SU, $41) I urge you to do so. The price of the stock has doubled in the past two years. I expect that it could double again over the next year.
Yours in good times and bad,
Myers’ Energy & Gold Report