The New York Times leads its front page with an interesting report that inflation is causing (um, more) turmoil in the Middle East. We’ve read all the stories about how our gas money is paying for a new wave of opulence in the region—as well as the purchasing of big stakes of our Wall Street titans—the Times says the downside is considerable.

Oil price increases have hurt the poor and middle class. Jordan eliminated its gas-price subsidies this month, sending the cost of fuel—along with staples like eggs and potatoes—up nearly double or more.
Many of the region’s economies peg their currencies to the dollar, which has tumbled, spurring inflation for economies that depend on imports for much of their good and services.

In Bahrain and the United Arab Emirates, inflation is in the double digits, and foreign workers, who constitute a vast majority of the work force, have gone on strike in recent months because of the declining purchasing power of the money they send home. The workers are paid in currencies that are pegged to the dollar, and the value of their salaries—translated into Indian rupees and other currencies&mdsah;has dropped significantly.

The Times says rich countries are making up for the increased inflation by jacking up salaries—which in turn worsens the inflation. The United Arab Emirates gave its government workers 70 percent raises this month, while Omanis had to settle for 43 percent. Poor, Omanis!

All this is causing some messy social consequences. Yemen, Morocco, and Lebanon have seen riots over food prices, while Jordan has seen demonstrations.

Off track a bit, an interesting tidbit caught our eye: The Times says a new survey in a Syrian state-owned paper found that 450 of 452 surveyed thought the government’s institutions are corrupt. We’d hate to see what an independent paper would have found.

In news on the length that banks will go to escape obligations they committed to before the credit bust, Wachovia is suing its client Providence Equity for effectively wanting to give the bank more money for less risk on a deal for Clear Channel’s TV holdings.

Providence signed the $1.2 billion deal in April and Wachovia committed to fund it. Since then, conditions have of course deteriorated, and Providence got Clear Channel to knock an impressive $100 million off the sale price.

But Wachovia, despite being promised higher interest rates, according to the NYT, doesn’t want anything to do with the $450 million to $500 million piece of the funding it committed to, and is suing Providence for changing the terms of the deal&mdasheven though they’re in Wachovia’s favor. The reason is Wachovia can’t turn around and sell that debt like it had originally planned, at least not for the price it expected. Since that kind of stuff is trading for 85 cents on the dollar, completing the deal would mean a loss of about $67.5 million to $75 million for Wachovia from the get-go.

The Wall Street Journal and NYT can’t quite figure out what Wachovia is wanting from this. The Times:

Some people inside the deal speculate that Wachovia may be seeking to create an escape hatch from the larger buyout. But it is unclear how Wachovia will accomplish that: The $25 billion deal is not contingent on the sale of the television stations.

Wachovia runs a high risk by suing its own client and killing the television stations deal. As part of financing the larger $25 billion deal, it also agreed to help finance a bridge loan if the smaller deal fell apart.

The WSJ gives us the better context:

The petition puts Wachovia in the awkward position of taking a client—Providence—to court and underscores the lengths to which banks will go in the current environment to get out of funding deals.

Wachovia’s threat comes as banks are facing increasingly strained balance sheets related to commitments they made during last year’s buyout boom. Banks are sitting on nearly $200 billion of leveraged debt that they have been unable to unload as a result of the turmoil in credit markets.

Sit back and pass the popcorn. There’s much more of this kind of thing to come.

The business papers all go high with a video-game duke-out in the making. Electronic Arts has bid $2 billion for Take Two, maker of games like Grand Theft Auto. Take Two has turned down the offer, saying the 50% premium is not enough. says the Financial Times.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.