Nouriel Roubini: Severe unrest in the Middle East has historically been a source of oil-price spikes, which in turn have triggered three of the last five global recessions. The Yom Kippur War in 1973 caused a sharp increase in oil prices, leading to the global stagflation of 1974-1975. The Iranian revolution in 1979 led to a similar stagflationary increase in oil prices, which culminated in the recession of 1980-1981. And Iraq’s invasion of Kuwait in August 1990 led to a spike in oil prices at a time when a US banking crisis was already tipping America into recession.
Oil prices also played a role in the recent finance-driven global recession. By the summer of 2008, just before the collapse of Lehman Brothers, oil prices had doubled over the previous 12 months, reaching a peak of $148 a barrel – and delivering the coup de grâce to an already frail and struggling global economy buffeted by financial shocks.
We don’t know yet whether political contagion in the Middle East will spread to other countries. The turmoil may yet be contained and recede, sending oil prices back to lower levels. But there is a serious chance that the uprisings will spread, destabilizing Bahrain, Algeria, Oman, Jordan, Yemen, and eventually even Saudi Arabia.
What are the chances of this scenario developing? Geopolitical analyst Mahdi Darius Nazemroaya lays it out in The Return of Pan-Arabism Amidst Upheaval: An end to Balkanization?
Nazemroaya: The Arab people ultimately constitute a major challenge to Washington and its cohorts.
Nazemroaya explains the challenge in terms of a dilemma. The West promotes democracy, but democracy does not always work toward the perceived interests of the West, as was recently seen in the election of Hamas, which the West then repudiated.
Nazemroaya also spells out how the challenge is becoming magnified as the Arab people unite in their demands. This is not the demand for a new caliphate and a return to medieval times, as some would have it. Rather, it is a demand to participate in the modern world.
The future of petroleum cannot be appreciated independently of the outcome of the Pan-Arab situation, since that is were the oil is. A fortiori, neither can the future of geopolitics. For example, the US and West are concerned with developing conditions in MENA (Middle East and North Africa), but not so much in the Ivory Coast, even thought the humanitarian concerns are comparable. Could that be because there is no oil in the Ivory Coast, and the Ivory Coast is peripheral to Western interests?
Nazemroaya: The interests of the U.S. government, Brussels, and Israel are to keep the Arabs divided in separate “feeble states.” There is, however, a new dynamic that is emerging in the Arab World. This new dynamic emerging from the upheavals and protests potentially challenges the Yinon Approach [divide and conquer], which is being applied against the Arab people.
Pan-Arabism is a new dynamic, which constitutes a potent force. The trend of decades of divisions can eventually be reversed. Nor will the issue of Palestine be left in the hands of outside powers for much longer. The plurality of Arabdom was constructed on the basis of inclusiveness and multi-culturalism.
The Arab identity is a very open and inclusive one that has a wide embrace. According to the Arab League’s 1946 definition or description: “An Arab is a person whose language is Arabic, who lives in an Arabic speaking country, [and] who is in sympathy with the aspirations of the Arabic speaking peoples.”  This has brought different civilizations, ethnicities, creeds, traditions, and lands together and united them under one roof, from the pre-Arabized Levantine peoples to the pre-Arabized Egyptians, Nubians, and Berbers.
Pan-Arabism gives a political will to this inclusive Arab identity and paves the way for a political project amongst the Arab peoples. Thus, regardless of the initial successes or failures of these revolts, the Arab march towards unity as a political and popular project is an eventual assurance. Nor can its tides be contained for long as a new geo-political and sociological reality begins to take shape for the Arab Nation.
This is an evolving dynamic that is only in its beginning stages. So far, the West is rater nonplussed by it, as indicated by the inability to mount a coherent response. This suggests events that are raging out of control and unpredictable in outcome.
This situation is going to be around for some time. The Arab nations have predominantly young populations that are suffering from political repression and high unemployment. Now they are demanding a better life. The West needs to get on the right side of this and to be out in front of it instead of behind the curve. Political choices made now are going to have far-reaching economic consequences, and political expediency that does not confront the real issues is doomed to failure.