Political and Economic Challenges for the GCC

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Political and Economic Challenges for the GCC

• Noel Brehony
• Chairman
• Menas Associates
• www.menas.co.uk
• 15th December 2008

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The principal challenges

• Internal challenges over
• Managing changes within society and the
  succession process.
• Political reform and Consultative Assemblies.
• Shia-Sunni relationships
• Wider changes in society
• Economic reform and job creation
• Managing recession
• Preventing terrorism
• Developing the GCC common market, currency etc.
• External challenges
• Iranian ambitions
• Political developments in Iraq
• State deterioration in Yemen
• Managing the defence and security relationships
  with the US and Europe
• Afghanistan and Pakistan and new relationships
  with Asia

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Saudi Arabia Succession and reform

• The ruling family and succession arrangements.
• Changing relationship between king, ruling
  family, Ulama, tribal leaders and others in the
  elite.
• Decision making ruling family and the Majlis al
  Shoura
• Reform of economy, education, judiciary and
  incentives for investment and private sector.
• Need for job creation.
• Huge investment plans for upstream and downstream
  oil and gas and petrochemicals etc.
• But concerns about capacity.

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Saudi Arabia Economic challenges

• Saudi budget based on oil price of 49 per
  barrel. Probably needs around 60 to cover all
  spending.
• Saudi oil policy takes into account market and
  especially US interests. Problems within OPEC.
• Investing to raise capacity to 12.5 million b/d.
• Ambitious plans for downstream investment.
• Highly successful economic reform programme but
  more needs to be done. Capacity issues.
• Need for a more service based economy.
• Managing recession.

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Saudi Arabia - terrorism

• 991 terrorists are to face trial. Another 1,200
  may follow. 70 per cent are Saudis.
• Why Al Qaida established itself in Saudi Arabia.
• Impact of terrorism 2003-2006.
• The counter terrorist programme.
• Eliminating the organised cells
• Reforms in the Islamic sphere
• Educational programme
• Highly successful but problems remain.
• Extremism will take years to eliminate.
• Not enough being done to tackle societal causes.

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Kuwait - Al Sabah family and parliament

• Al-Sabah first among equals though monopolises
  power.
• Strains within family over succession.
  Sunni-Shia.
• Parliament must approve major government
  measures.
• Free elections. Political blocs but not parties.
• Electoral system means that the opposition
  dominate.
• Government can get only one vital measure passed
  per annum.
• Constant problems between government and
  parliament
• Frequent resignations of government and
  ministers.
• Reform is needed but no one has a strategy.
• Economic reform programme has been seriously
  delayed.
• Oil wealth and investment income sufficient to
  prevent problems.
• But there are difficulties with political
  Islamists and Shia .
• Iraq and Iran are close neighbours.
• Importance of relationship with US.

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Bahrain Sunni-Shia tensions

• Shia majority with recent history of discontent.
• Welcomed King Hamed's reform programme
• But disappointed with changes made to it.
• Tensions within ruling family king, prime
  minister and crown prince.
• Parliament asserting itself
• Bahrain economy diversified early. Importance of
  Saudi relationship oil and investment.
• Urgent need for job creation and educational
  reform.
• Past suggests that Shia-Sunni tensions can be
  managed as long as Iraq and Iran do not
  interfere.
• Importance of US relationship.

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UAE Federation and Abu Dhabi

• UAE Federation works because Abu Dhabi and Dubai
  need each other and despite rivalry the key
  leaders get on well. Federal structure is useful
  to both. Very limited parliaments
• Situation inside the two ruling families is
  stable with MbR and MBZ dominating but involving
  other relatives.
• They have similar personalities dynamic,
  decisive and work with small teams of trusted
  advisers.
• Abu Dhabi with its oil wealth finances smaller
  emirates. But there are problems over priorities.
• Abu Dhabi focuses on industrialisation and works
  with major international companies to make Abu
  Dhabi an Arab centre.
• Major decisions on defence, security and foreign
  policy taken by Abu Dhabi but in consultation.
• Job creation for nationals.

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UAE Challenges to the Dubai model?

• Dubai sees itself as international city providing
  facilities and opportunities for investment.
• In the past Dubai got others to invest but now
  uses debt to finance developments. Recession may
  hit Dubai quite hard.
• Abu Dhabi will assist but will there be a
  political price?
• Both need to generate more jobs for nationals and
  reduce the size of the expatriate population ( 90
  per cent in Dubai) and treat the labour force
  better.
• UAE will remain stable as long as the leaders in
  Abu Dhabi and Dubai get on.
• Threats come from regional developments.
  Terrorism has not been a problem.

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Qatar New parliament in 2009

• Qatar is well managed, highly prosperous and very
  ambitious.
• There have been past problems within the large
  ruling family. Some potential for future
  problems.
• Some tensions in society on Islamic issues
• Constitutional reform free municipal elections
  but elections for the Majlis al Shoura
  repeatedly postponed. No firm date yet.
• The Majlis will provide for elections for 30 out
  of 45 seats.
• Constitution gives it greater considerable
  powers,
• Otherwise model for economic and social
  development.
• Gas, North Field and Iran.
• Now has better relations with Saudi Arabia but
  region still uncomfortable over Al Jazeera
  television.

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Oman Well managed but uncertainties over
succession

• Sultan Qaboos in power since 1970. Has made Oman
  what it is today.
• Far thinking strategic approach but virtually
  absolute ruler.
• Succession arrangements are not clear.
• There are three potential successors but none
  have been favoured.
• The envelop may decide.
• Cautious political reform. Free elections to a
  toothless parliament leads to apathy.
• Oman has managed to sustain its oil and gas
  output despite doubts.
• Clear strategy for development and job creation
  but can it produce the 20,000 new jobs needed
  each year?
• Some discontent Ibadhi/Sunni but not serious.
  Unless oil and gas prices remain low for some
  time.
• Good relations with neighbours and important of
  security links to US and UK.

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Iran

• 75 million with substantial armed forces, an
  Islamic government and Shia present formidable
  challenge to GCC states.
• Iranian nuclear ambitions and the GCC nuclear
  research programme.
• Iranian ambitions in the Middle East Syria,
  Lebanon ( elections in May 2009) and Palestine.
• Iranian role in the GCC?
• Iranian activity in Iraq.
• Concerns about a possible Israeli attack on Iran
  and what Iran might do in return.
• Saudi Arabia leads GCC efforts to deal with Iran
  diplomatically, counter its ambitions in the
  region and work with US and other allies to
  neutralise a potential Iranian threat.
• Presidential elections in 2009.

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Iraq

• Military surge has worked central government is
  stronger and some key measures have been passed.
• But major problems still to be tackled e.g. how
  to involve the Sunnis and what to do about the
  Kurds over Kirkuk.
• Divisions within the Shia
• Race to build up Iraqi army and deal with
  inter-communal problems before the US pull out
  starts.
• Local elections in early 2009
• Iranian interference is still a problem.
• Events in Iraq will have major influence on GCC.
• GCC states seem uncertain of how to manage Iraq.

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Yemen a looming problem for the GCC

• Major economic problems in a desperately poor
  country.
• Political system is starting to break down.
• This could accelerate.
• Al Qaida is present and has imported terrorists
  from Iraq and Saudi Arabia because it senses an
  opportunity in Yemen.
• Big potential problem for GCC a poor country of
  gt25 million people on its doorstep.
• Not to mention the difficulties in Somalia and
  problems of piracy.

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GCC and the world

• Importance of US defence and security
  relationship for all.
• Backed up by UK, France and EU
• Changing pattern of investment and trade towards
  Asia
• But not as yet defence and security content to
  Asian relationships.
• Defence and security will take priority as long
  as the regional threats remain.
• But GCC will continue to diversify economic,
  trading and business links.
• Saudi Arabia and the UAE also look to wider
  region including Somalia.
• Saudi Arabia the most active in international
  Islamic politics

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Thank you for your attention

• Dr Noel Brehony
• Chairman
• Menas Associates Ltd
• 16-19 Southampton Place
• London WC1A 2AJ, UK
• T 44-(0)207-745-7190
• charles.gurdon_at_menas.co.uk
• www.menas.co.uk