Showing posts with label Gulf. Show all posts
Showing posts with label Gulf. Show all posts
Monday 6 June 2022
Tuesday 7 July 2020
Kerala’s next crisis: How to deal with return of lakhs of ‘Gone to Gulf’ people
More than 5 lakh Keralites are expected to return from Gulf & state has to deal with plight of those losing jobs there and erosion of its remittance economy writes BOBBY GHOSH in The Print
Gone to Gulf.” That phrase came up a lot in conversations among grown-ups that I overheard as a schoolboy in Kerala during the early 1980s. My father, who managed a lobster-export business in the port of Kochi, was constantly griping about workers who quit on short notice — or none at all — to take up jobs in the Gulf cities of Muscat, Doha or Jeddah.
His friends — executives in rubber or coffee plantations, officials in the state-run shipyard or port authority — had the same problem: a constant exodus of workers, most of them “gone to Gulf.”
The jobs there were usually menial, and Dad harrumphed about Keralites giving up a gig at an air-conditioned lobster-processing plant “to get roasted in the desert sun.” He was astonished when his secretary, a university graduate he had marked for a bright future in the company, gave it up for a job pumping gas in Sharjah.
But neither Dad nor his friends could compete with the salaries being offered in the Persian Gulf countries. In their helplessness, they took empty comfort in making dire predictions of the day when Arab employers, having built all the palaces they could want, would finally send the foolish young Keralites back home, to beg for their old jobs.
Instead, years later, my father would join the exodus, agreeing to manage a small shipyard near Dubai, lured by the prospect of a final payday before retirement. He was not amused when I suggested that he had been inspired by that promising young secretary and “gone to Gulf” himself.
Four decades on, the dark auguries of Dad and his friends are coming true for many Keralites in the Gulf: Their Arab employers are laying them off in large numbers. And not just them, or there. The coronavirus pandemic has been devastating for foreign workers everywhere.
The official numbers have yet to be reported, but it’s safe to say that so far thousands have died and millions have lost their jobs. The impact on their families back home has been doubly debilitating: The loss of income from abroad — often from the sole breadwinner in the family — comes at a time of acute local hardship.
For economies that depend on this foreign income, the outlook for 2020 is bleak. The World Bank expects a 20% plunge in remittances to low- and middle-income countries. This plunge would be the steepest in history, far exceeding the 5% dip after the 2009 global financial crisis. The pain will be felt acutely in Kerala, which has an unhealthy addiction to remittances, and has failed to create alternative opportunities for its labour force.
This loss of income is likely just the start of a long cycle of despair. It will be years before countries that employ large numbers of foreign workers fully recover from the economic damage caused by the pandemic. Even when they do, they will have less room for migrants. Fewer Keralites will have the opportunity to join the ranks of the “gone to Gulf,” with profound economic implications for their families and their state.
Gulf’s localisation
In the petrostates of the Arabian Peninsula, the post-pandemic economic downturn will add impetus to long-standing programs designed to replace foreign workers with locals. Authorities in six member-states of the Gulf Cooperation Council (GCC) have for years been pressing employers — using catchphrases like “Saudization” and “Omanization” — to reduce their dependence on foreigners.
These initiatives have tended to wax and wane with the price of oil: When it is high, unemployed citizens can depend on generous government subsidies, allaying concerns about foreigners taking all the jobs. It helps that many of the jobs done by migrants are unattractive, menial and low-paying.
But years of low oil prices combined with the swelling ranks of unemployed locals have forced authorities to take localization programs more seriously. These programs are at the heart of ambitious economic and social reforms being pursued by new, young rulers like Saudi Arabia’s Crown Prince Mohammed bin Salman, Qatar’s Sheikh Tamim bin Hamad Al Thani and Oman’s Sultan Haitham bin Tariq Al Said.
This reformist zeal is bad news for countries at the other end of the migration chain. Since the fall in oil prices in 2014, remittances from the GCC have plateaued. (In the case of Saudi Arabia, they have fallen precipitously.)
This year, judging by the early indicators, they are projected to go off a cliff. Remittances from the United Arab Emirates to India are expected to drop 35% in the second quarter alone. The UAE is the GCC’s largest source of remittances, and India is their top recipient.
Indeed, India should have experienced a slowing of money flows over the past few years. It bucked the trend in large part due to massive flooding in Kerala in 2018 and 2019, which led to spikes in remittances as Keralites in the Gulf sent home larger-than-usual sums to help with relief and reconstruction.
But that streak is about to be snapped. Unlike previous natural disasters, the pandemic is depleting the flow of money from abroad.
What happens now
Many tens of thousands have already lost jobs to the pandemic’s economic impact, and it may be months before an accurate count is available. Emirates, the Dubai-based airline and one of the UAE’s largest employers, will eventually trim 30,000 from its rolls. (Dubai, it is worth remembering, was already experiencing its fastest pace of job losses in a decade before the pandemic struck.) Unsurprisingly, hundreds of thousands of Indians have registered for special repatriation flights from the UAE.
Among Keralites who have lost white-collar jobs in Dubai, panic has set in. Few have any expectation of finding work back home, much less work that will sustain the lifestyle they enjoyed in the Gulf. “Those who have lost their jobs but have EMIs (equated monthly installments) to pay are stuck,” says Mangottil. “People are applying for jobs that pay half their previous salaries.” When hope is finally extinguished, they will swell the ranks of returnees to Kerala.
What awaits them allows for little optimism. Top state officials, already working flat out to contain the coronavirus spike, have not yet articulated a strategy for dealing with the returning migrants. The government has announced some self-employment schemes, involving small loans and subsidies. But these were conceived before the pandemic, when the returnees numbered in three or four digits, not six.
The glass-half-full view is that the returnees will bring world-class skills and reserves of experience not easily found in Kerala. S.D. Shibulal, co-founder of the tech giant Infosys and one of the state’s more successful entrepreneurs, reckons that a nascent knowledge industry “offers good opportunities for returnees to invest.”
Putting what the World Bank’s Ahmad calls the “skills dividend” to use, however, will be a challenge for a state where socialist policies and powerful unions have created a reputation for hostility toward business. Kerala ranks 21st among 29 states in the Indian government’s ease-of-doing-business rankings.
Changing that perception will require more than efficient management of natural calamities. Competition for investment is fierce among Indian states and will grow fiercer as investments shrink with a slowdown in the global economy. Even if returning Keralites feel inclined to invest in business, there’s no guarantee they will restrict themselves to their home state.
Some officials argue that it would be short-sighted to focus too much on the returnees and lose sight of Kerala’s competitive advantage in the global labour market. Exporting workers is what the state does best. If demand shrinks in the Gulf, it will eventually pop up elsewhere: It’s a matter of pointing the outflow of migrant Keralites in the right direction. Government energies, these officials argue, are better expended on ensuring that the next generation of leavers has the right skills to compete and succeed wherever opportunities arise.
Even before the pandemic, says Tharoor, “Kerala’s big question has always been, How do we get enough people working abroad and sending money home?” That question is now being asked by the governments of dozens of countries that depend on remittances. The past few months have made finding the answer much more urgent.
Gone to Gulf.” That phrase came up a lot in conversations among grown-ups that I overheard as a schoolboy in Kerala during the early 1980s. My father, who managed a lobster-export business in the port of Kochi, was constantly griping about workers who quit on short notice — or none at all — to take up jobs in the Gulf cities of Muscat, Doha or Jeddah.
His friends — executives in rubber or coffee plantations, officials in the state-run shipyard or port authority — had the same problem: a constant exodus of workers, most of them “gone to Gulf.”
The jobs there were usually menial, and Dad harrumphed about Keralites giving up a gig at an air-conditioned lobster-processing plant “to get roasted in the desert sun.” He was astonished when his secretary, a university graduate he had marked for a bright future in the company, gave it up for a job pumping gas in Sharjah.
But neither Dad nor his friends could compete with the salaries being offered in the Persian Gulf countries. In their helplessness, they took empty comfort in making dire predictions of the day when Arab employers, having built all the palaces they could want, would finally send the foolish young Keralites back home, to beg for their old jobs.
Instead, years later, my father would join the exodus, agreeing to manage a small shipyard near Dubai, lured by the prospect of a final payday before retirement. He was not amused when I suggested that he had been inspired by that promising young secretary and “gone to Gulf” himself.
Four decades on, the dark auguries of Dad and his friends are coming true for many Keralites in the Gulf: Their Arab employers are laying them off in large numbers. And not just them, or there. The coronavirus pandemic has been devastating for foreign workers everywhere.
The official numbers have yet to be reported, but it’s safe to say that so far thousands have died and millions have lost their jobs. The impact on their families back home has been doubly debilitating: The loss of income from abroad — often from the sole breadwinner in the family — comes at a time of acute local hardship.
For economies that depend on this foreign income, the outlook for 2020 is bleak. The World Bank expects a 20% plunge in remittances to low- and middle-income countries. This plunge would be the steepest in history, far exceeding the 5% dip after the 2009 global financial crisis. The pain will be felt acutely in Kerala, which has an unhealthy addiction to remittances, and has failed to create alternative opportunities for its labour force.
This loss of income is likely just the start of a long cycle of despair. It will be years before countries that employ large numbers of foreign workers fully recover from the economic damage caused by the pandemic. Even when they do, they will have less room for migrants. Fewer Keralites will have the opportunity to join the ranks of the “gone to Gulf,” with profound economic implications for their families and their state.
Gulf’s localisation
In the petrostates of the Arabian Peninsula, the post-pandemic economic downturn will add impetus to long-standing programs designed to replace foreign workers with locals. Authorities in six member-states of the Gulf Cooperation Council (GCC) have for years been pressing employers — using catchphrases like “Saudization” and “Omanization” — to reduce their dependence on foreigners.
These initiatives have tended to wax and wane with the price of oil: When it is high, unemployed citizens can depend on generous government subsidies, allaying concerns about foreigners taking all the jobs. It helps that many of the jobs done by migrants are unattractive, menial and low-paying.
But years of low oil prices combined with the swelling ranks of unemployed locals have forced authorities to take localization programs more seriously. These programs are at the heart of ambitious economic and social reforms being pursued by new, young rulers like Saudi Arabia’s Crown Prince Mohammed bin Salman, Qatar’s Sheikh Tamim bin Hamad Al Thani and Oman’s Sultan Haitham bin Tariq Al Said.
This reformist zeal is bad news for countries at the other end of the migration chain. Since the fall in oil prices in 2014, remittances from the GCC have plateaued. (In the case of Saudi Arabia, they have fallen precipitously.)
This year, judging by the early indicators, they are projected to go off a cliff. Remittances from the United Arab Emirates to India are expected to drop 35% in the second quarter alone. The UAE is the GCC’s largest source of remittances, and India is their top recipient.
Indeed, India should have experienced a slowing of money flows over the past few years. It bucked the trend in large part due to massive flooding in Kerala in 2018 and 2019, which led to spikes in remittances as Keralites in the Gulf sent home larger-than-usual sums to help with relief and reconstruction.
But that streak is about to be snapped. Unlike previous natural disasters, the pandemic is depleting the flow of money from abroad.
Kerala’s Gulf handicap
Kerala, which has ancient ties to the Gulf, will likely feel the pinch more than other Indian states. It receives nearly a fifth of remittances to the country, most of it from the GCC, whose members are home to between 2 million and 2.5 million Keralites. Although the state government doesn’t publish annual remittance figures, they are thought to consistently account for over a third of Kerala’s GDP.
This dependence leaves the government of Chief Minister Pinarayi Vijayan handicapped even as it grapples with the impact of the pandemic. Kerala was the first Indian state to record a case of Covid-19 — a student who had returned from university in Wuhan, the Chinese ground zero of the crisis. Vijayan, a Marxist who had won acclaim for his adroit administration during the floods in the previous two years, moved quickly to flatten the curve.
Now the pandemic is spiking again, in Kerala as well as across India. With a loss of state revenues due to the effects of the lockdown, Vijayan could really use another surge in remittances from the Gulf. But this time, it is the diaspora that is in distress, and he must deal with the plight of Keralites who are losing their livelihoods in the GCC as well as the anxieties of their families at home.
The state expects more than 500,000 Keralites to return, many of them in the special repatriation flights organized by the Indian government. This figure is almost certainly an underestimate. Many others will make the return journey months from now, as companies and governments cut more jobs in the Gulf. “It will be a long time before we know how many Keralites have come home,” says S. Irudaya Rajan, who researches migration and remittance flows at the Center for Development Studies in Thiruvananthapuram, Kerala’s capital.
Speaking to me privately, some Kerala government officials say they are not especially alarmed about the localization efforts of the Gulf states. The demand for Kerala’s best and brightest, they say, will resume after the pandemic. Just because the authorities want jobs to be filled by locals doesn’t mean there are sufficient numbers of locals who can fill them.
But Shashi Tharoor, a member of India’s parliament from the state, allows that business may never return to usual. “It’s not just about Arabs taking jobs, but the jobs themselves disappearing for good,” he says.
Junaid Ahmad, the World Bank’s country director in India, likens Kerala’s challenge to that of post-conflict countries, where governments must reintegrate former fighters into society, by training and providing them with economic opportunities. Vijayan has to do the same for the returning Keralites, Ahmad says, “but instead of working with a peace dividend, he has to do this despite a loss in remittances.”
What’s more, he has to do it under extreme pressure at a politically inopportune moment. Diaspora groups are a powerful lobbying force in the state, and Vijayan faces elections in less than a year.
The remittances trap
The recalibration of Kerala’s remittance-dependent economy will take longer. The migration of Keralites to the Gulf began in the 1970s; it was already a steady stream when I was a schoolboy in Kochi. By the turn of the century, nearly 1.5 million Keralites lived and worked in the GCC.
Kerala was uniquely positioned to cater to the seemingly insatiable demand for foreign workers from the petrostates. A long maritime history had made Keralites culturally prone to seeking their fortune abroad, and a series of business-unfriendly governments, not all of Vijayan’s Marxist stripe, had prevented the development of a robust private sector at home. (The company that employed my father in Kochi had left Kerala before I finished high school.)
Kerala’s proud record for near-total literacy gave its citizens a leg-up over other Indians — not to mention Pakistanis, Bangladeshis and others — seeking jobs in the Gulf. Despite their better education, the overwhelming majority of Keralites did jobs that indeed required being “roasted in the desert sun,” as Dad put it. In the classic migration pattern, young men endured great physical hardship and forewent luxuries to save up, remit money home and bring over friends and relatives. The steady exodus allowed the state government to get away with its poor economic management; jobs in the Gulf made up for unemployment and remittances fueled consumption. The running joke was that Kerala had a “money-order economy.”
But the money coming from the GCC was rarely put to the most efficient use: Much of it went into personal consumption — families bought gold and property, built homes. Bungalows popped up in formerly poor villages throughout the state.
This spending yielded little employment outside the construction sector, and even there much of the work involved back-breaking labour, hardly in keeping with the aspirations of educated Keralites. In an ironic echo of migration patterns in the Gulf, Kerala began to attract low-cost labour from other Indian states. The remittances were never used to build a significant industrial base, or to develop an information-technology sector comparable to its neighbours. In the absence of a sizeable private sector, “there were no other investment possibilities,” says Reuben Abraham, CEO of the IDFC Institute, a public-policy think tank.
Still the remittances kept growing. In time, Keralites began to climb the value chain abroad, from blue- to white-collar jobs, from construction to banking, insurance and other services. This ascent, in addition to the size of the settled diaspora, meant that although other Indian states sent more workers to the Gulf annually, Keralites were able to send more money home.
Now, Keralites risk becoming victims of their own success: It is those white-collar jobs that are most likely to be localised. “Saudis and Emiratis are not going to work on construction sites,” says Rajeev Mangottil of VPS Healthcare, a large Keralite-owned company that runs a chain of hospitals in the GCC. “Foreigners who are working in offices are very vulnerable right now.”
Kerala, which has ancient ties to the Gulf, will likely feel the pinch more than other Indian states. It receives nearly a fifth of remittances to the country, most of it from the GCC, whose members are home to between 2 million and 2.5 million Keralites. Although the state government doesn’t publish annual remittance figures, they are thought to consistently account for over a third of Kerala’s GDP.
This dependence leaves the government of Chief Minister Pinarayi Vijayan handicapped even as it grapples with the impact of the pandemic. Kerala was the first Indian state to record a case of Covid-19 — a student who had returned from university in Wuhan, the Chinese ground zero of the crisis. Vijayan, a Marxist who had won acclaim for his adroit administration during the floods in the previous two years, moved quickly to flatten the curve.
Now the pandemic is spiking again, in Kerala as well as across India. With a loss of state revenues due to the effects of the lockdown, Vijayan could really use another surge in remittances from the Gulf. But this time, it is the diaspora that is in distress, and he must deal with the plight of Keralites who are losing their livelihoods in the GCC as well as the anxieties of their families at home.
The state expects more than 500,000 Keralites to return, many of them in the special repatriation flights organized by the Indian government. This figure is almost certainly an underestimate. Many others will make the return journey months from now, as companies and governments cut more jobs in the Gulf. “It will be a long time before we know how many Keralites have come home,” says S. Irudaya Rajan, who researches migration and remittance flows at the Center for Development Studies in Thiruvananthapuram, Kerala’s capital.
Speaking to me privately, some Kerala government officials say they are not especially alarmed about the localization efforts of the Gulf states. The demand for Kerala’s best and brightest, they say, will resume after the pandemic. Just because the authorities want jobs to be filled by locals doesn’t mean there are sufficient numbers of locals who can fill them.
But Shashi Tharoor, a member of India’s parliament from the state, allows that business may never return to usual. “It’s not just about Arabs taking jobs, but the jobs themselves disappearing for good,” he says.
Junaid Ahmad, the World Bank’s country director in India, likens Kerala’s challenge to that of post-conflict countries, where governments must reintegrate former fighters into society, by training and providing them with economic opportunities. Vijayan has to do the same for the returning Keralites, Ahmad says, “but instead of working with a peace dividend, he has to do this despite a loss in remittances.”
What’s more, he has to do it under extreme pressure at a politically inopportune moment. Diaspora groups are a powerful lobbying force in the state, and Vijayan faces elections in less than a year.
The remittances trap
The recalibration of Kerala’s remittance-dependent economy will take longer. The migration of Keralites to the Gulf began in the 1970s; it was already a steady stream when I was a schoolboy in Kochi. By the turn of the century, nearly 1.5 million Keralites lived and worked in the GCC.
Kerala was uniquely positioned to cater to the seemingly insatiable demand for foreign workers from the petrostates. A long maritime history had made Keralites culturally prone to seeking their fortune abroad, and a series of business-unfriendly governments, not all of Vijayan’s Marxist stripe, had prevented the development of a robust private sector at home. (The company that employed my father in Kochi had left Kerala before I finished high school.)
Kerala’s proud record for near-total literacy gave its citizens a leg-up over other Indians — not to mention Pakistanis, Bangladeshis and others — seeking jobs in the Gulf. Despite their better education, the overwhelming majority of Keralites did jobs that indeed required being “roasted in the desert sun,” as Dad put it. In the classic migration pattern, young men endured great physical hardship and forewent luxuries to save up, remit money home and bring over friends and relatives. The steady exodus allowed the state government to get away with its poor economic management; jobs in the Gulf made up for unemployment and remittances fueled consumption. The running joke was that Kerala had a “money-order economy.”
But the money coming from the GCC was rarely put to the most efficient use: Much of it went into personal consumption — families bought gold and property, built homes. Bungalows popped up in formerly poor villages throughout the state.
This spending yielded little employment outside the construction sector, and even there much of the work involved back-breaking labour, hardly in keeping with the aspirations of educated Keralites. In an ironic echo of migration patterns in the Gulf, Kerala began to attract low-cost labour from other Indian states. The remittances were never used to build a significant industrial base, or to develop an information-technology sector comparable to its neighbours. In the absence of a sizeable private sector, “there were no other investment possibilities,” says Reuben Abraham, CEO of the IDFC Institute, a public-policy think tank.
Still the remittances kept growing. In time, Keralites began to climb the value chain abroad, from blue- to white-collar jobs, from construction to banking, insurance and other services. This ascent, in addition to the size of the settled diaspora, meant that although other Indian states sent more workers to the Gulf annually, Keralites were able to send more money home.
Now, Keralites risk becoming victims of their own success: It is those white-collar jobs that are most likely to be localised. “Saudis and Emiratis are not going to work on construction sites,” says Rajeev Mangottil of VPS Healthcare, a large Keralite-owned company that runs a chain of hospitals in the GCC. “Foreigners who are working in offices are very vulnerable right now.”
What happens now
Many tens of thousands have already lost jobs to the pandemic’s economic impact, and it may be months before an accurate count is available. Emirates, the Dubai-based airline and one of the UAE’s largest employers, will eventually trim 30,000 from its rolls. (Dubai, it is worth remembering, was already experiencing its fastest pace of job losses in a decade before the pandemic struck.) Unsurprisingly, hundreds of thousands of Indians have registered for special repatriation flights from the UAE.
Among Keralites who have lost white-collar jobs in Dubai, panic has set in. Few have any expectation of finding work back home, much less work that will sustain the lifestyle they enjoyed in the Gulf. “Those who have lost their jobs but have EMIs (equated monthly installments) to pay are stuck,” says Mangottil. “People are applying for jobs that pay half their previous salaries.” When hope is finally extinguished, they will swell the ranks of returnees to Kerala.
What awaits them allows for little optimism. Top state officials, already working flat out to contain the coronavirus spike, have not yet articulated a strategy for dealing with the returning migrants. The government has announced some self-employment schemes, involving small loans and subsidies. But these were conceived before the pandemic, when the returnees numbered in three or four digits, not six.
The glass-half-full view is that the returnees will bring world-class skills and reserves of experience not easily found in Kerala. S.D. Shibulal, co-founder of the tech giant Infosys and one of the state’s more successful entrepreneurs, reckons that a nascent knowledge industry “offers good opportunities for returnees to invest.”
Putting what the World Bank’s Ahmad calls the “skills dividend” to use, however, will be a challenge for a state where socialist policies and powerful unions have created a reputation for hostility toward business. Kerala ranks 21st among 29 states in the Indian government’s ease-of-doing-business rankings.
Changing that perception will require more than efficient management of natural calamities. Competition for investment is fierce among Indian states and will grow fiercer as investments shrink with a slowdown in the global economy. Even if returning Keralites feel inclined to invest in business, there’s no guarantee they will restrict themselves to their home state.
Some officials argue that it would be short-sighted to focus too much on the returnees and lose sight of Kerala’s competitive advantage in the global labour market. Exporting workers is what the state does best. If demand shrinks in the Gulf, it will eventually pop up elsewhere: It’s a matter of pointing the outflow of migrant Keralites in the right direction. Government energies, these officials argue, are better expended on ensuring that the next generation of leavers has the right skills to compete and succeed wherever opportunities arise.
Even before the pandemic, says Tharoor, “Kerala’s big question has always been, How do we get enough people working abroad and sending money home?” That question is now being asked by the governments of dozens of countries that depend on remittances. The past few months have made finding the answer much more urgent.
Wednesday 7 November 2012
The UK's Protection racket in the Middle East
The Gulf protection racket is corrupt and dangerous folly
Sooner or later the Arab despots David Cameron is selling arms to will fall, and the states that backed them will pay the price
Illustration by Helen Wakefield
On the nauseating political doublespeak scale, David Cameron's claim to "support the Arab spring" on a trip to sell weapons to Gulf dictators this week hit a new low. No stern demands for free elections from the autocrats of Arabia – or calls for respect for human rights routinely dished out even to major powers like Russia and China.
As the kings and emirs crack down on democratic protest, the prime minister assured them of his "respect and friendship". Different countries, he explained soothingly in Abu Dhabi, needed "different paths, different timetables" on the road to reform: countries that were western allies, spent billions on British arms and sat on some of the world's largest oil reserves in particular, he might have added by way of explanation.
Cameron went to the Gulf as a salesman for BAE Systems – the private arms corporation that makes Typhoon jets – drumming up business from the United Arab Emirates, Saudi Arabia and Oman, as well as smoothing ruffled feathers over British and European parliamentary criticism of their human rights records on behalf of BP and other companies.
No wonder the prime minister restricted media coverage of the jaunt. But, following hard on the heels of a similar trip by the French president, the western message to the monarchies was clear enough: Arab revolution or not, it's business as usual with Gulf despots.
The spread of protest across the Arab world has given these visits added urgency. A year ago, in the wake of the uprisings in Tunisia and Egypt, it seemed the Gulf regimes and their western backers had headed off revolt by crushing it in Bahrain, buying it off in Saudi Arabia, and attempting to hijack it in Libya and then Syria – while successfully playing the anti-Shia sectarian card.
But popular unrest has now reached the shores of the Gulf. In Kuwait, tens of thousands of demonstrators, including Islamists, liberals and nationalists, have faced barrages of teargas and stun grenades as they protest against a rigged election law, while all gatherings of more than 20 have been banned.
After 18 months of violent suppression of the opposition in Bahrain, armed by Britain and America, the regime has outlawed all anti-government demonstrations. In western-embraced Saudi Arabia, protests have been brutally repressed, as thousands are held without charge or proper trial.
Meanwhile, scores have been jailed in the UAE for campaigning for democratic reform, and in Britain's favourite Arab police state of Jordan, protests have mushroomed against a Kuwaiti-style electoral stitchup. London, Paris and Washington all express concern – but arm and back the autocrats.
Cameron insists they need weapons to defend themselves. When it comes to the small arms and equipment Britain and the US supply to Saudi Arabia, Bahrain and other Gulf states, he must mean from their own people. But if he's talking about fighter jets, they're not really about defence at all.
This is effectively a mafia-style protection racket, in which Gulf regimes use oil wealth their families have commandeered to buy equipment from western firms they will never use. The companies pay huge kickbacks to the relevant princelings, while a revolving door of political corruption provides lucrative employment for former defence ministers, officials and generals with the arms corporations they secured contracts for in office.
Naturally, western leaders and Arab autocrats claim the Gulf states are threatened by Iran. In reality, that would only be a risk if the US or Israel attacked Iran – and in that case, it would be the US and its allies, not the regimes' forces, that would be defending them. Hypocrisy doesn't begin to describe this relationship, which has long embedded corruption in a web of political, commercial and intelligence links at the heart of British public life.
But support for the Gulf dictatorships – colonial-era feudal confections built on heavily exploited foreign workforces – is central to western control of the Middle East and its energy resources. That's why the US has major military bases in Kuwait, Qatar, the UAE, Oman and Bahrain.
The danger now is of escalating military buildup against Iran and intervention in the popular upheavals that have been unleashed across the region. Both the US and Britain have sent troops to Jordan in recent months to bolster the tottering regime and increase leverage in the Syrian civil war. Cameron held talks with emirates leaders this week about setting up a permanent British military airbase in the UAE.
The prime minister defended arms sales to dictators on the basis of 300,000 jobs in Britain's "defence industries". Those numbers are inflated and in any case heavily reliant on government subsidy. But there's also no doubt that British manufacturing is over-dependent on the arms industry and some of that support could usefully be diverted to, say, renewable technologies.
But even if morality and corruption are dismissed as side issues, the likelihood is that, sooner or later, these autocrats will fall – as did the Shah's regime in Iran, on which so many British and US arms contracts depended at the time. Without western support, they would have certainly been toppled already. As Rached Ghannouchi, the Tunisian leader whose democratic Islamist movement was swept to power in elections last year, predicted: "Next year it will be the turn of monarchies." When that happens, the western world risks a new backlash from its leaders' corrupt folly.
Wednesday 25 January 2012
The demise of the dollar
In a graphic illustration of the new world order, Arab states have
launched secret moves with China, Russia and France to stop using the US
currency for oil trading
Tuesday, 6 October 2009
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."
This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.
The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.
China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.
Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.
Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.
The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."
Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.
The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.
"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.
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