Geopolitical Weekly - The Business Impact -
- analyticalinsight
- Apr 12, 2015
- 4 min read
Updated: Nov 26, 2022
Analytical Insight provides a weekly overview of global geopolitical events and the potential impacts these events may have on business operations.
Global impact from Saudi's intervention in Yemen
Key Business Impacts
Global
Impact on oil pricing
Increased risk of war between regional sponsors of the Sunni-Shia conflict
Saudi Arabia
Increased threat to assets, cargo and personnel from terrorism
Increased threat to personnel and assets from potential civil unrest
Increased threat to sea cargo, including oil, during maritime disputes
Decrease in conducive nature of business environment
Increased threat of political instability
Egypt
Increased threat from civil unrest
Increased threat from political instability
Bahrain
Increased threat from terrorism
Turkey
Increased tensions with Iran
Background
The security and political situation in Yemen has been deteriorating since the Shia-led Houthi seized control on Sana’a and forced the hugely unpopular transition government, headed by President Hadi, to resign and flee. Saudi Arabia’s decision to commence airstrikes against Yemen indicates a significant shift in the ongoing Sunni-Shia regional conflict. It is likely that the ruling Al Saud family assessed the risks of intervention in Yemen as lower than non-intervention in the situation. The shift in dynamics from this situation will likely have effects across many parts of the Middle East and also the world.
Business Impact
Saudi Arabia
Increased threat from Terrorism - In a bid to mis-direct Saudi troops away from Yemen, Iran will likely see the Saudi intervention as justification for supporting terrorist activity from Shia militants in Saudi’s Eastern Provinces. Saudi’s pledge to rid Yemen of al-Qa’ida in The Arab Peninsula (AQAP) is also likely to increase retribution attacks by sympathetic domestic militants. Businesses with personnel or assets within Saudi Arabia should ensure their security mitigation efforts are updated to reflect the increased threat.
Increased threat from civil unrest – The increased threat from civil unrest in Saudi Arabia is twofold – initially there is a likely chance of Iran encouraging unrest in the Shia dominated Eastern Provinces in response to Saudi’s intervention in Yemen. In the short to medium term there is likely to be widespread civil unrest if the intervention fails and Saudi Arabia is forced to retreat from Yemen. Increased marine threat – It is likely that Iran will attempt to increase support for the Houthis, however with the closure of Yemeni airspace, any assistance will have to be via sea. Therefore intervention of Iranian ships by Arab coalition warships is likely in the short to medium term, prompting potential maritime skirmishes and unrest. Increased threat of political instability in the event of military failure - In the event the Saudi military are unable to achieve their objectives in Yemen, the failure may affect the public faith in the Al Saud family, especially the current Minister of Defence Mohammad bin Salman Al Saud, who is in contention for royal succession. The travel risk rating for Saudi Arabia remains HIGH
Egypt
Increased threat from civil unrest – In the event Egyptian military troops are unable to achieve their objective within Yemen, there will be an increased threat from localised civil unrest within Egypt. Increased threat of political instability in the event of military failure - As with Saudi Arabia, political stability may suffer as a result of a defeat within Yemen as the public lose confidence in the ruling party.
Bahrain
Increased risk from terrorism - The threat from terrorism in Bahrain may increase during the Saudi intervention as Iran seeks to mis-direct Saudi troops by instigating security situation within Bahrain.
Turkey
Increased tensions with Iran - the intervention in Yemen by Saudi Arabia is likely to provide Iran with justification to further its intervention within Iraq and increase support to Syria. An increase of support to either Iraq or Syria is likely to deteriorate the tense situation between Iran and Turkey.
Nigeria Election - Forecast Update
The All Progressives Congress (APC) has won the Nigerian election forcing ruling President Goodluck Jonathan to concede defeat. The situation in Nigeria is likely to decrease in the short to medium term as the factious country adjusts to the change in power.
The change in government is likely to present the following risks:
Rise of insurgency in the Niger Delta – There is an increased threat of violent outbreaks and increased insurgency in the southern Niger Delta. Former militant leaders located in the region have vowed support to Goodluck Jonathan and will likely seek to return him to power at any cost. An increase insurgency in this region will likely affect oil production and heavily affect the oil sector
Corruption probes – Muhammadu Buhari has previously pushed for anti-corruption campaigns in his former government roles. Businesses with direct contracts with the PDP may face contract cancellation and non-payment issues in the event of involvement in a corruption probe. It is likely that the APC will begin anti-corruption probes upon succession to power. Any anti-corruption drive is likely to lead to political stalemate as government officials seek to protect their assets gained through corrupt mean
Contract validity – The APC will need Western governments to endorse their win to ensure contracts signed with the APC are not weakened legitimately and legally in Western countries in the event of cancellation or non-payment
Impact from oil price Low global oil prices will force the new government’s spending to be curbed. The government depends greatly on its oil reserves for its budget. This is likely to lead to:
Currency risks - the niara has already suffered since the dramatic fall in price of oil in recent months
Inability to import food and petroleum goods - as the value of the naira falls, Nigeria will be less capable of importing much needed goods such as food and other staples
Violent unrest - unrest is likely as the public react to high domestic fuel prices. It is unlikely domestic fuel will be reduced in the short term as the new government will likely struggle to maintain a budget
View our Nigeria Country Risk Snapshot for more information on the other risks associated with in businesses operating in Nigeria.
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