Top 3 underrated risks in 2022

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3 To Watch: 

1. Mid-East: Three underappreciated risks to track in 2022: Israeli annexation of West Bank; cessation of KSA-Iran talks; successful Houthi attack against civilian target in KSA.
2. Libya: Postponement of election results in less drama than expected – but window of opportunity to find new pathway limited.
3. GCC: Economic shutdowns unlikely despite surging Covid-19 cases due to high vaccination rate and desire to maintain economic rebound.

Note: This edition of 3 To watch was distributed in full on January 11.

1. Top 3 underrated risks in 2022 | Neil Quilliam, Managing Director

Every January it is customary to consider the greatest business risks that we all face in the year ahead. There are plenty of them and coming up with a top ten is fairly easy. It is more challenging though to consider the most underappreciated risks and give them the oxygen they deserve. Although we could not reach unanimity among the team, we think the three underrated risks worth watching in 2022 will be:

• Israeli annexation of West Bank areas
• Cessation of talks between Saudi Arabia and Iran
• A successful Houthi drone or missile strike against a civilian target in the kingdom.

Why This Matters:

Although talk of Israel’s annexation of the West Bank died down after the signing of the Abraham Accords, there remains an outlying risk that Prime Minister Naftali Bennett  – in spite of warming relations with Jordan’s king Abdullah II – will press ahead with the move. Some parties within the governing coalition continue to espouse annexing parts of the West Bank, including the Jordan Valley. The PM may pursue the annexation option to shore up support and keep the coalition together, especially when facing growing domestic and regional challenges.

The implications would be significant:

• First, it would be considered by Jordan to be a formative step in operationalising the Israeli right-wing solution to the Palestine Question known as ‘Jordan is Palestine’ and cause a political earthquake;
• Second, it would undermine – though not break – Israel-UAE relations;
• Third, it would set back firmly any prospect of Saudi Arabia joining the Abraham Accords;
• Finally, it would provide Iran with a public relations boost and leverage to foment discontent in neighbouring Arab countries and legitimise its anti-Israeli posture.

Saudi-Iranian talks played a key role in de-escalating regional tensions in 2021. There is a persuasive logic that Riyadh and Tehran will continue discussions throughout 2022 – though it is unclear where their final destination point will be. Given that JCPOA re-entry talks will likely drag on until June and Houthi attacks against Saudi Arabia will intensify, the Saudi leadership will at some point tire of engagement and bring an end to negotiations.

If it happens with little fanfare, then we can expect an uptick in small-scale Iranian operations against Saudi interests in the Gulf. However, should it occur because of a Houthi strike against civilian targets, which results in Saudi national (or other) fatalities, then we should expect a new phase in the Yemeni war and a much more active Saudi diplomatic push against Iran at the UN and in other fora.