WILL

ARAB
YOUTH
REVOLT
TURN
GLOBAL?

7 Metrics of Revolt
What Price
fuels Rise :
Arab for it
youth hurts
revolt? the
poor.
 What fuels Arab Youth Revolt?

Corruption
For it creates unequal opportunities, and
causes dissatisfaction.
 What fuels Arab Youth Revolt ?

Income Disparity
between the rich and the poor
 What fuels Arab Youth Revolt ?

Unemployment
for it creates anger against the ruling Government
What fuels Arab Youth Revolt?

Repression
of dissent for it creates desperation
 What fuels Arab Youth Revolt ?

External (NATO) support

by western alliance, NGO’s & individuals to install western
style democracies and help facilitate better trade deals.
 What fuels Arab Youth Revolt ?

Internet and mobile communication

Helping youth interact and learn about
why and how to revolt and win freedom
 7 Metrics of Arab Youth Revolt

•Price Rise
•Corruption
•Income Disparity
•Unemployment
•Repression
• External (NATO) Support
•Internet and mobile media support
 Food Price Rise

Global food prices and agriculture

commodity prices have spiraled
 Price Rise of Crude Oil

Oil prices have skyrocketed pushing up

energy and transportation costs
 Price Rise of Metals

Metal and nonmetal commodity

prices have been spiked since Nov 2010
 Manufacturing Goods Price Rise

The price rise has a cascading effect on

global manufacturing & distribution costs
 Price Rise is the prime metric of revolt

The poor have been hit the hardest by the

multiplier effect of commodity price hikes
 What Fuels Price Rise ?

When Demand Exceeds Supply

 What Fuels Price Rise ?

 Natural calamities and crop failure

 What Fuels Price Rise ?

Supply disruptions due war and unrest

 What Fuels Price Rise ?

Speculation in financial markets with Banks like Deutsche

Bank, JP Morgan, Goldman Sachs, buying up commodities
from physical traders and spiking prices for high profits.
 What Fuels Price Rise ?
As per Wall Street Journal a single trader backed by Wall
Street Banks cornered over 80% of the copper traded at
London Metal Exchange worth over $3 Billion in November

Cornering of commodity stocks in financial markets

 What Fuels Price Rise ?
 In November 2010 the US Federal Reserve
announced a $600 bn. Quantitative Easing
package, that would pump $75 billion per month
to boost liquidity in view of low U.S. demand.
Markets have boomed thereafter as the excess
liquidity found its way to the commodity markets

Liquidity infusion by US Federal Reserve

 What Fuels Price Rise ?

Investment by Pension Funds, Sovereign

Funds, individuals and hot money sources
routed through Wall Street Banks.
 7 Reasons of price rise
Demand exceeds supply causing commodity shortage

Supply disruptions due to crop failure and natural calamities

Supply disruptions due to war and unrest

 Demand surge due to speculation in commodity markets

Cornering of commodity stocks by Banks , hedge funds & traders.

The Federal Reserve monetary infusion.

Pension Funds, Sovereign Funds, High Net Individuals and the

‘Drug & Arms cartels’ investing in volatile financial markets.
 Food Riots first began in Mozambique

Sharp rise in food prices that followed hike in energy

and water prices by the Government first started riots
in Maputo in September 2010 as per a BBC report
 FAO warns of high food prices

The Poor Eat Wheat Not Meat

FAO predicted in November 2010 that Food prices could

rise by 20% in 2011 in food deficit countries. Speculators
picked up the cue and pushed up prices by 50% in a month
 Food riots hit Algeria, Tunisia , Egypt

As per Egypt Daily News Food riots had spread

to Algeria, Tunisia and Egypt by December 2010
 UN Warns Of More Food Riots

http://www.guardian.co.uk/business/2011/ma
y/27/food-riots-warning-by-un-as-
commodities-soar

Near drought conditions in Russia, Ukraine and parts of Europe

and extreme speculation in futures market caused UN to warn
of food riots in the developing world as per a Guardian report
 UAE freezes commodity prices

To arrest price hikes UAE took the desperate move

of freezing prices of 400 major commodities till
Dec 2011. This may lead to subsidized supplies and
increased speculation anticipating state buying.
 Price cartels spike food prices

Trade cartels pushed up prices of onions in India

wheat, barley and maize in Egypt Tunisia and Kenya
and processed foods and livestock in South Korea ,
Asia Pacific and the middle east.
 Regulator trader nexus drives up prices

Profiteering in the financial markets feeds the network of

politician & regulators who allow unchecked speculation at
commodity markets and trading cartels in local markets.
 Corruption is a key factor

Corruption is a prime cause of social unrest

 Corruption is hurting globally

Corruption is causing unrest not only in the

Arab world , but also in Africa, India, China,
Mexico, Indonesia, Russia, Italy, and Greece .
 What Is Corruption ?
Corruption is defined by Transparency International as the
abuse of entrusted power for private gain.
Entrusted power is not only the power a
citizen confers to a public office holder.
It is the power that future generations have vested in all of us, in
our stewardship role for the planet. Hence the youth are so agitated
about the abuse of power and corruption as it affects their future.

http://www.transparency.org/news_room/in_focus/2011/gcr_climat
e_change#downloads
Reasons of corruption

Financial markets have

created ‘super profits’
which is protected by a
new class called
‘facilitators’
‘Facilitators’ help protect super profits

They include politicians & bureaucrats

They include regulators &

administrators

They include middle men who help deal

making

They include people from media, police,

 The Corruption Gravy Train Feeds
And Nurtures ‘Facilitators’ Legally.

Facilitators are ‘priority’ like shareholders. They are today

provided for, through legal Banking channels, to ensure
financial markets can be run with high profits.
 How Corruption Became OTC
Corruption is no longer clandestine
and under the table

Bribery has been transformed into

professional deal making

It is now institutionalized like a “Over

The Counter” OTC trade
 How corruption became institutional

Bribes today are paid out as fees, commissions, stocks,

options, donations to political parties, NGOs, schools and
educational institutes , and as consultancy assignments,
research grants and even as bailout money.

It is professionally managed as any investment by Swiss

Banks, Wall Street Banks , hedge funds and some of the
best financial and legal brains in the world.
 Corruption can’t be regulated

Corruption as a business deal can be perfectly

legal, because the vetting process to a private
business deal can never be regulated and people
framing such deals are experts in law.

Corruption is now is too complex and sophisticated

to stop or track and can’t be stopped easily.
 Even if caught facilitators help easy
‘out of court settlements’

As per Guardian UK, US regulators in March

2010 facilitated an out of court settlement of a
modest $50million with Wall Street Bank
Wachovia , now a part of Wells Fargo for
channelizing 378.4 billion dollars of hot money
from a Mexican cocaine cartel during 2006 to
2008. Wachovia escaped without admitting guilt.
 One Way To Reduce Corruption

One way to reduce the corruption is to

make financial markets efficient.

If Financial markets become transparent

and competitive , the super profits from
market volatility will vanish and the
recycling of the gravy from the corruption
gravy train will be much less.
 How oil markets work
Production Price of Crude Oil : $ 5 to $10 per barrel

Oil producers like a margin of $50 to $60 per barrel to run their economies
( of this around $10 per barrel goes directly to the ruling elite )

Refinery, blending, storage & transportation costs : $5 to $10 per barrel

Margins for facilitating the deals $5 to $15 per barrel : Negotiated kickbacks

Financial markets super profits $ 10 to $ 25 per barrel : oil majors + big banks

Retail consumer price at pump $ 75 to $120 per barrel

Now see the spin offs when 85 to 90million barrels of oil is produced daily !
The Economics of oil
How Banks Regularize Dirty Money
 Arab nations have a larger share of profits
when oil prices are moderate

Oil producing economies have 2/3 of the oil pie when crude prices
are moderate . Production costs considered at lower end of the band.
 Banks & Oil Cos gain in volatile markets

Oil producing economies have 1/2 of the oil pie when crude prices are
volatile . Production costs considered at higher end of spectrum.
Financial market players and facilitators gain most in volatile markets.
The commodity traders make most money
from such volatility

But when markets are volatile and oil price is high

it is the financial markets and facilitators who gain
most. As per a recent FT report the Switzerland
based commodity traders Trafigura, Glencore, Vitol,
Mercuria, Gunvor reported super profits in the first
quarter of 2011 following the Arab revolt, besides
the big Wall Street Banks and Oil companies.
How the Arab people got poor

Arab nations are net importers of food, metals and manufactured

goods, whose impact was much greater than the gains from oil.
 Oil Prices Hold The Key

Oil prices are still the key factor in global

inflation as its effect on transportation
and manufactured goods has a multiplier
effect on prices.
OPEC can still save Arab Land

If OPEC ramps up its oil production

significantly for the next 3 summer
months and oil prices stabilize,
global inflation will taper off and
‘ Price Rise’ the key metric of Arab
revolt will be neutralized.
 Repression and food security

Food and security are the primary needs of humans.

Repressive regimes can keep people quiet as long as
they are able to guarantee cheap food and secure living
conditions under the autocratic regime.
 Where Extreme Loyalty Is A Virtue

Compliance in the Arab world is usually achieved by making

extreme loyalty a virtue. Order, obedience and fear, are
invoked in the name of the supreme leader . With prices
going out of control, the order was destroyed .
 Repressive regimes face challenges

As the order was destroyed the Arab states and other dictatorships
started facing major challenges, that saw a increase of violence and
repression. New models of dictatorship may evolve over time.
 Repressive regimes will innovate

Regimes are likely to change methods of enforcement of law

and order to tough policing on transparent but extremely
stringent laws administered speedily by local authorities.
The benevolent dictator will ultimately replace the autocrat.
 High Income Disparity

Income disparity is a major reason of dissatisfaction and dissent.

In several oil rich nations the top 1 % of the population own,
control or have access to 99% of the nations wealth. As per the
Economist in Qatar one of the wealthiest nations of the world the
richest receive 13 times of the poorest .
 Unemployment sparks unrest

In places like Egypt it was unemployment

and sharp wheat price hike that created the
major spark for revolt. Being the largest
importer of wheat Egypt was the hardest hit
after the crop failure in Russia and Putin’s
ban on wheat exports.
 Unemployment for women

Saudi Arabia and Bahrain among the richest oil states have
2% and 5% literacy rates for women. The unemployment
Saudi
rate for Saudi women holding university degrees is 78%
as compared to 16.9 % for male graduates.
 Unemployment for youth

Since 2005 Saudi Arabia, Kuwait and UAE

have been investing heavily in education and
training . Despite investing over SR 150
billion in 2009 on education, 39% of Saudi
youth aged 20-24 and 20.3% of those aged
from25-29 were unemployed.
 Private sector employs expats

Migrant workforce enjoying global life style drives the

core of the booming middle east oil economy from
segregated expat enclaves . The private sector employs
only 10% of the local youth primarily because of poor work
culture, low skill and knowledge base of the locals.
 External Support for democracy

Western troops on ground

in Libya reports Guardian
to support rebel forces
Active support by G7 Governments both tactical
as well as monetary helps the Arab revolt gain
momentum in a bid to usher in democracy.
 External Support for Libyan war

Support has also included the continued

heavy bombardment of Libya by NATO to
wreck Qaddafi forces.
 Investors Flee To London from Mid East

Billion of dollars of investment headed for the

Middle East have been re-routed to London and
Paris ever since the revolt broke out in Egypt
 Refugee influx

Every day thousands of ravaged war widows

and children create intense pressure on other
neighboring states and parts of Europe .
 G8 Promises monetary support

G8 nations promise monetary aid

through the World Bank for Egypt,
Tunisia and other nations who would
be willing to adopt the western style
of democratic Government as per
Wall Street Journal.
 Quid pro quo benefits

A friendly Arab state would ensure commercially

profitable trade deals. Both in the oil trade and
as sellers of consumer products and arms , Anglo
French Company’s would gain in the long run.
 The internet and mobile support

The people’s support to the revolt is much more

potent than the NATO support and has been
facilitated by co-ordination on the internet and
mobile phones, that cannot be curtailed.
 The internet and mobile support

The educated Arab youth know that they are

equipped with information and technology and
can force changes on their closed society.
 Local wireless support

Scores of local wireless stations operate

across the world providing routes to
communicate freely despite censorship.
 Is Revolt Viral ?

Will the Arab Revolt Spread ?

 It will depend on the metric

Nations who have issues on the 7

metrics of revolt could face unrest.

Only way out is to face and solve them

 In Europe Greece is Facing Unrest

Greece is facing unrest for price

rise, corruption, income disparity,
falling wages and unemployment
 Revolt in Greece is brewing

Greek unemployment and price

rise is spiraling out of control
 Greece Debt needs Restructuring

EC support to Banks has stopped debt

restructuring for the Greeks.
 Banks want national assets of Greece

Greeks are up in arms as Banks want it to sell its

national assets like Parthenon and the Aegean islands.
Would US sell the Statue of Liberty, India the Taj Mahal or
France the Eiffel Tower under debt they ask?
Angry Greece could Europe’s flashpoint

If Greece is left to drown it could bring

Europe to the edge like the Arab world
 Portugal, Ireland and Spain are next

Other Euro zone economies will

also erupt over the time
 Unemployment in Spain

Unemployment is a key factor for social unrest not only

in the Arab world but also in the neighboring Euro zone.
Thousands have taken to streets in Spain lately
protesting against unemployment which is over 21% .
 London Profits from Euro unrest

London profits from Euro

zone Capital Flight says
Reuters . Investors flee
from Spain and Greece.
 Asia on the revolt watch list

Corruption, Price Rise and income inequality

in India and China has started demonstrations
and unrest in several parts
 China too is uneasy

China has cracked down on demonstrations

and unrest but fears more protests in future.
 Corruption an election
game changer in India

After major scams erupted in India Anna Hazare

started a fast unto death against corruption . The
ruling party and allies were decimated in elections
in Tamilnadu that nurtured the corrupt politicians.
Income Disparity in the US could be a election
issue

The Gini coefficient for income disparity is a extremely high at

45 for the US as per Economic Policy Institute data as against
34 for the UK and 36.8 for India. Could be an election issue.
 Watch the 7 metrics

Nations who want a peaceful

existence in the information age
must watch the 7 metrics carefully.
Even democracies could face unrest
and revolt and electoral defeat in
its absence .
 Author Profile
A professional journalist and international business consultant I write for

CleanBiz Asia HK

Economic Times New Delhi

ISEdb Ohio

NewsCollective Stockholm/Mumbai

Suite 101 Vancouver

Technorati San Francisco

Follow me at www.twitter.com/ ecothrust

Or my column What Happens If ? In Economic Times

Other presentations by us
Business Risk management Series
http://www.slideshare.net/SandipSen/living-dangerously-managing-
risks-in-business-ba01ppt

Business Risk Case Studies Ba31

http://www.slideshare.net/SandipSen/business-risk-case-study-ba31

Business Risk Case Studies Ba32

http://www.slideshare.net/SandipSen/business-risk-case-study-b
a-32-1751378
 Business Risk Case Study – Ba 33
http://www.slideshare.net/SandipSen/
business-risk-case-study-ba33

Risk Managing Oil Explorations ERM 03

http://www.slideshare.net/SandipSen/cfakepath
risk-managing-oil-explorations-erm-03
.

Asia’s Rainy Day Economics BA 41

http://www.slideshare.net/SandipSen/asias-
rainy-day-economics-currency-wars-and-mar
ket-volatility
 W h a t i s Ca r bon ?

What is Carbon – ERM-01

http://bit.ly/bjDTl2
En e r g y R i sk M a n a g e m e n t Se r i e s
En e r g y R i sk M a n a g e m e n t Se r i e s
ER M 0 1
ER M 0 1

Countering Peak Oil – ERM-02

http://www.slideshare.net/SandipS
en/countering-peak-oil-erm-02

Risk Managing Turbulent Markets BA 41

http://www.slideshare.net/SandipSen/risk-managing-vol
atile-markets
References:
WSJ, Business Week, Bloomberg, Financial Times, Guardian, Telegraph,
mongabay .com, Reuters, Economic Policy Institute, Economist, WB data
and Ecothrust.

Our Blog : Economy to Ecology:

Our goal is to help promote clean, safe and better practices in economy and
ecology worldwide. Balanced, efficient and a little more sustainable.
Kindle Blog Ecothrust ASIN: B0029ZAUAY
For non kindle users : www.ecothrust.blogspot.com

Our Blog at Economic Times : What happens If

http://blogs.economictimes.indiatimes.com/Whathappensif/entry/can-nuclear-ris
k-mitigation-be

Follow us at twitter : www.twitter.com/ecothrust

Acknowledgements:
To Google, flickr photolibrary and other image sources.

For any queries or request for download, mail to Sandip Sen

sen.sandip@gmail.com