For Middle East, US shutdown looks petty

The partisan nature of US politics has repercussions around the world

Ripples from the US government shutdown, now into its third day in the United States, have spread around the world, as markets struggle to understand how long this unusual situation will last. With more than 800,000 government staff told to stay home without pay, there will be worries about the knock-on effects in the real economy. But the question for the Middle East is whether the ripples will soon reach these shores?

For now, the shutdown has had little effect in the UAE. The official Twitter account of the US embassy in Abu Dhabi announced that consular operations in both Abu Dhabi and Dubai, as well as the issuance of visas, will continue as normal.

Inevitably, there will be. A shutdown involving that many workers – for days or weeks, or even longer – will unquestionably reduce demand for goods and services. In some cases only slightly, in others more profoundly.

Already there has been a drop in worldwide oil prices, which will naturally affect the revenues of the Gulf states, including the UAE. But the drop was small, a fraction of a per cent, which is well within the normal range.

The most worrying part of the equation is sentiment. When the world’s largest economy sneezes, the rest of the world soon catches a cold. The irresponsibility of the US Congress will worry markets around the world, especially as the debt ceiling approaches later this month. It is extremely unlikely that the US could default on its debt – but coming after this crisis, not everyone will be willing to bet it is impossible.

For this region, such a lack of bipartisan focus is deeply concerning.

The US is a big player in the region’s politics: in the questions over Iran’s nuclear programme, the continuing crisis in Syria, the endless talks between Israelis and Palestinians and in other issues.

Despite the protestations of politic observers in the US who claim the current crisis is mere political horse trading and will soon be resolved, it raises questions about whether Congress truly understands the importance of America’s role and the interconnected nature of the world we live in.

Confidence and growth is only just beginning to return to many economies following the far-reaching effects of the economic crisis of 2008, but that confidence remains fragile. What is most needed now is a stable dollar and certainty. What cannot be countenanced is a period of political stasis that could potentially derail worldwide growth.