Mesopotamian Triangle: The Middle Eastern Crypto Race Has Started. Ep. I - Oil
When the article on the US trade war against Turkey was being prepared for publication, one of our experts said a puzzling phrase: “National cryptocurrency ... Iran, Saudi Arabia, and Turkey ... We will see who will be the first to create it.” This reservation expressed volumes: including the fact that the competition for leadership in the digital market is unfolding between Middle Eastern countries. And is this happening only in this market?
When we speak of a geopolitical confrontation, the US-Russia-European Union or European Union-China-US ligaments almost always come to mind. You might think that geopolitical preference is played for three. But this is certainly not the case; there are much more players and gambling tables. Today, any region gives reasons for thinking about a new turn in the fate of the world. Among others, Mesopotamia and the Persian Gulf stand out, because, at this point, the interests of many countries and corporations are concentrated, religions and political systems collide, and new ideas are born. Iran, Turkey, and Saudi Arabia - perhaps, it is in this triangle where the future of the digital economy based on a different vision of the world is being created.
Ep. 1: Oi — Heavy Gold Of Kings
Modern people got used to the fact that raw materials are an indisputable asset of a country, a guarantee of a decent existence. This is especially true for oil, which everyone got accustomed to perceiving as the blood of the modern economy. It is oil what we fill in the tanks of our cars, what we eat, and what we sleep on. Who owns black gold - owns the world. But is it the fact of the matter? And if not, what can supplement of the raw material rent?
Today, the planetary storerooms contain approximately 150 billion tons of crude oil or 1.6 trillion barrels. 70% of the reserves are concentrated in four countries of the Middle East: Iran, Iraq, Kuwait, and Saudi Arabia. Moreover, an important characteristic feature of this region is that a valuable resource is not only conveniently located there, but is also easily transported thanks to deep-water seaports. But even this natural wealth is not enough for sustainable economic development. According to Saudi journalist Jamal KASHKAJI who was killed on the territory of the consulate of his country in Turkey, the Middle Eastern monarchy has long been living on credit. Not so long ago, the kingdom borrowed $11 billion from Western banks, which was supposedly spent on the war in Yemen. In addition, very large-scale social projects have been launched in the UAE and Saudi Arabia, such as the construction of individual housing for young families. And they still need to finance free medicine, education, and pensions. Against the background of oil cheapening, budget money is not enough for everything. The only way out for the monarchy to maintain a high standard of living for the citizens and to remain in power is the diversification of the economy.
The situation is a bit different in Iran. The country has been living in sanctions for many years, and the situation has worsened in recent months. The authorities of the Islamic Republic admit a partial decline in oil exports but, in general, they are optimistic about the development of the economic situation. “If the Americans could stop the export of Iranian oil, the price of oil would have risen to $100,” the Iranian Vice-President Eskhak JAHANGIRI said. The figures say the opposite: Iranian oil exports amount to 2.5 million barrels per day but after the US measures come into force, it should fall to 1 million. Moreover, Washington is already talking close to 100% cessation of sales of raw materials from the Islamic Republic. But many millions of people cannot survive on black caviar and carpets.
The situation in Turkey is not easier. The United States has already triggered out a trade war against it, although the former empire is one of the oldest members of NATO. There is no oil in this country, but the raw material sector of the economy remains significant, if not the key one, in the formation of the state budget. Customs duties on Turkish steel rose by 50% in the American market, aluminum - by 20%, which knocked down the Turkish lira by 40%. After that, the country’s authorities seriously thought about what could support the economy in the case of increased US pressure.
The three strongest countries in the Middle East came to the same thing: oil is no longer able to cope with the task of the economic trigger since the global commodity market is very dependent on logistics, communications, and the military-political situation in the global field. And everyone has a vivid example before their eyes - Venezuela. This country is the indisputable leader in reserves of black gold: 302 billion barrels or 20% of all known oil on the planet. But because of the political position of the United States, refusals to purchase, and economic sanctions, blocking transportation, in particular, this South American country produces no more than 500 thousand barrels per day. Three times less than Iran that is under sanctions.
In other words, the raw material can no longer be considered a reliable asset; it means that it is necessary to look for a panacea in another place. And there is such a place - this is the Islamic financial market (IFMs). At the moment, its structure is as follows: 75% is Islamic banking, 15% is sukuk (Islamic financial instrument), 4% is Islamic investment funds, 2% is takaful (Islamic insurance), 1% is microfinancing, and 3% is for other instruments. Analysts suggest that by 2021, IFMs will reach $3.5 trillion, and by 2025 - $4-4.5 trillion.
In the second part, we will examine the features of the Islamic financial world in detail.