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

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.

Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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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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Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

Saudi Arabia - terrorism 991 terrorists are to face trial. Another 1,200

may follow. 70 per cent are Saudis. Why Al Qa’ida 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.Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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.Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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.Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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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.

Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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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 Qa’ida 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 >25 million people on its doorstep.

Not to mention the difficulties in Somalia and problems of piracy. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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

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Thank you for your attention

Dr Noel BrehonyChairmanMenas Associates Ltd16-19 Southampton PlaceLondon WC1A 2AJ, UKT +44-(0)207-745-7190charles.gurdon@menas.co.ukwww.menas.co.uk

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