Showing posts with label Saudi Arabia. Show all posts
Showing posts with label Saudi Arabia. Show all posts
Friday 17 December 2021
Wednesday 18 August 2021
Thursday 16 April 2020
How Saudi Arabia's religious project transformed Indonesia
The world’s largest Muslim-majority country was long considered a tolerant place. But thanks to Saudi money and influence, it has taken a sharply conservative turn. By Krithika Varagur in The Guardian
Half a million people, all dressed in white, radiated from the Hotel Indonesia roundabout in central Jakarta. Protesters clogged the streets for a mile in every direction; they went all the way up to the National Monument and beyond it to the presidential palace. It was 4 November 2016, and they had come on buses, planes and on foot, from all across Java and even from some other islands, to participate in the largest Islamist demonstration in Indonesian history.
“We came to the palace to enforce the law,” said the cleric Rizieq Shihab, to rapt silence. “Desecrators of the Qur’an must be punished. We must reject the leaders of infidels,” he said, referring to Basuki Tjahaja Purnama, the Chinese-Christian governor of Indonesia’s capital city, who is known as Ahok. “If our demands are not heard, are you ready to turn this into a revolution?” “We’re ready!” screamed the crowd, breaking into huge applause. “God is great!”, they shouted. There were cries of “Kill Ahok!”
It was an odd scene in Indonesia, which is the world’s largest Muslim-majority country but is not really a “Muslim nation”. Officially, it is a multifaith country that protects six religions equally, where race and ethnicity have been tacitly elided from political discourse. An overtly Islamist political protest like this had no precedent.
In theory, the rally was organised by the Islamic Defenders Front (FPI), led by Shihab, to accuse Ahok of blasphemy against Islam and call for his removal from office. But in practice, this was less about Ahok and more about displaying the piety and political power of Muslim Indonesians – and it worked. The city shut down all its major arteries that day. At the second protest, on 2 December, the president of Indonesia himself showed up, unannounced, and prayed with them.
FPI’s campaign was more successful than it could have dreamed. The following April, Ahok lost his bid for re-election as the governor of Jakarta; a month later, at the end of a show trial, he was sentenced to two years in jail for blasphemy. The 4 November rally turned out to be a turning point for political Islam in Indonesia. The next presidential election was waged largely on the terms set by the events of 2016: both candidates played up their Islamic credentials. Today, the vice-president of Indonesia is a man who was once the nation’s chief Muslim cleric.
But Shihab is not enjoying the fruits of his labour in Indonesia. He lives, instead, in Saudi Arabia. After the Jakarta gubernatorial election, he became embroiled in a sexting scandal; when an arrest warrant was issued, he fled to Mecca. Though it is almost 5,000 miles away from Indonesia, the kingdom is a natural choice of refuge for Shihab, because his Saudi ties date back three decades. He graduated from the Islamic and Arabic College of Indonesia, or Lipia, a university in Jakarta built, funded and fully subsidised to this day by Saudi Arabia. His studies at Lipia paved the way for further education in Riyadh, where he forged enduring networks with Saudi clerics.
As the largest Muslim-majority nation and a developing, postcolonial state, Indonesia has been a prime recipient of the full spectrum of Saudi proselytisation – known as dawa, the call to Islam. And while investments peaked in absolute terms at least a decade ago, as they did in most of the Muslim world, their effects continue to reverberate. Saudi investment in Indonesia has at turns fuelled jihadists, helped consolidate the country’s leading Islamist political party and produced dozens of influential ideologues. The Saudi soft-power apparatus in Indonesia is unrivalled, including Lipia, a large embassy and a powerful, standalone “religious attache”. Saudi charity has also paid for thousands of poor students to go to school and university, and helped rebuild devastated regions such as Aceh after the Boxing Day tsunami of 2004.
The influence of Shihab’s organisation and vision is just one example of how Saudi dawa has shaped modern Indonesia. Another is the Bali bombings of 2002, which killed 202 people, mostly tourists, in the world’s most deadly terror attack after 9/11, and which woke Indonesia up to the danger of terrorism within its borders. The attacks were planned by a circle of al-Qaida-affiliated jihadists based at the al-Mukmin Islamic boarding school in Central Java, which was founded with an initial endowment from the Saudi king in 1972.
Beyond such flagship investments, an equally pervasive legacy of Saudi proselytisation in Indonesia has been the rise of virulent religious intolerance. In addition to the commonplace harassment of Christian groups and the show trial of Ahok, its most prominent Christian politician, Indonesia is also now a country where there is a national “anti-Shia” league and mobs have driven Ahmadiyya Muslims from their homes into refugee camps.
It’s not for nothing that when Barack Obama, who spent five years in Jakarta as a child, returned to Indonesia in 2011, he remarked on the “more fundamentalist, unforgiving interpretation” of Islam he now observed in the archipelago. He attributed this to Saudi influence. What Obama was picking up on was the concept of Arabisasi – ambitious in theory and even more influential in practice.
Arabisasi was one of the first Indonesian words I learned after I moved to the country in 2016. It’s a neologism meaning, as you might expect, “Arabisation”. But the concept was used in reference to a whole class of developments in Indonesia: the rise of political Islam, blasphemy prosecutions, the growing popularity of hijabs and burqas, new mosques, louder mosques, new schools, the persecution of religious minorities. Above all, it referred to the relatively new, central role for Islam in the cultural and political life of a big democracy that was, until 1998, a tightly controlled military dictatorship. The underlying claim was that five decades of Saudi Arabia’s religious influence in Indonesia was responsible for all these things.
Regardless of how true or false this was, the phrase itself pointed to a generalised anxiety over “Saudi money”, in Indonesia and the world. It seemed to explain how a tropical archipelago supposedly famous for its tolerance was, by the time I got there, caught up in a culture war over everything from the acceptability of Santa hats to dating, a safe haven for hardline Islamists, and even the home of a few hundred people who joined Islamic State.
Saudi Arabia’s global export of Wahhabism – a puritanical and intolerant movement founded in the 18th century that foregrounds a literal reading of the Qur’an and seeks to eradicate “deviant” regional traditions – has been discussed frequently in the post-9/11 world, where religious conservatism is often considered synonymous with extremism and terrorism. But the actual effects of Saudi proselytisation are poorly understood. It’s not just “the Saudi government” that spreads Wahhabism; international Saudi actors include universities, an Islamic Affairs state ministry, several state-adjacent global charities such as the Muslim World League, one-off regional relief efforts and independent businessmen.
Given the obscure ways in which Saudi dawa has operated in the past, this change in rhetoric is notable. But there is very good reason to be sceptical about Vision 2030, which has been criticised for being economically unfeasible and for papering over human rights issues in order to burnish bin Salman’s image. It is hard to believe in the supposed reformist promise of the prince and Vision 2030 when, midway through the publicity campaign in 2018, the journalist Jamal Khashoggi was brutally murdered in a Saudi consulate.
It will take at least a few years to determine whether the Saudi role in Indonesia has truly shifted. What is certain, though, is that over the past half-century, Saudi dawa has never been one fixed thing. Maintaining an ossified image from 10 or even 20 years ago is the biggest obstacle to understanding how Saudi money – and Saudi soft power – work today.
Half a million people, all dressed in white, radiated from the Hotel Indonesia roundabout in central Jakarta. Protesters clogged the streets for a mile in every direction; they went all the way up to the National Monument and beyond it to the presidential palace. It was 4 November 2016, and they had come on buses, planes and on foot, from all across Java and even from some other islands, to participate in the largest Islamist demonstration in Indonesian history.
“We came to the palace to enforce the law,” said the cleric Rizieq Shihab, to rapt silence. “Desecrators of the Qur’an must be punished. We must reject the leaders of infidels,” he said, referring to Basuki Tjahaja Purnama, the Chinese-Christian governor of Indonesia’s capital city, who is known as Ahok. “If our demands are not heard, are you ready to turn this into a revolution?” “We’re ready!” screamed the crowd, breaking into huge applause. “God is great!”, they shouted. There were cries of “Kill Ahok!”
It was an odd scene in Indonesia, which is the world’s largest Muslim-majority country but is not really a “Muslim nation”. Officially, it is a multifaith country that protects six religions equally, where race and ethnicity have been tacitly elided from political discourse. An overtly Islamist political protest like this had no precedent.
In theory, the rally was organised by the Islamic Defenders Front (FPI), led by Shihab, to accuse Ahok of blasphemy against Islam and call for his removal from office. But in practice, this was less about Ahok and more about displaying the piety and political power of Muslim Indonesians – and it worked. The city shut down all its major arteries that day. At the second protest, on 2 December, the president of Indonesia himself showed up, unannounced, and prayed with them.
FPI’s campaign was more successful than it could have dreamed. The following April, Ahok lost his bid for re-election as the governor of Jakarta; a month later, at the end of a show trial, he was sentenced to two years in jail for blasphemy. The 4 November rally turned out to be a turning point for political Islam in Indonesia. The next presidential election was waged largely on the terms set by the events of 2016: both candidates played up their Islamic credentials. Today, the vice-president of Indonesia is a man who was once the nation’s chief Muslim cleric.
But Shihab is not enjoying the fruits of his labour in Indonesia. He lives, instead, in Saudi Arabia. After the Jakarta gubernatorial election, he became embroiled in a sexting scandal; when an arrest warrant was issued, he fled to Mecca. Though it is almost 5,000 miles away from Indonesia, the kingdom is a natural choice of refuge for Shihab, because his Saudi ties date back three decades. He graduated from the Islamic and Arabic College of Indonesia, or Lipia, a university in Jakarta built, funded and fully subsidised to this day by Saudi Arabia. His studies at Lipia paved the way for further education in Riyadh, where he forged enduring networks with Saudi clerics.
As the largest Muslim-majority nation and a developing, postcolonial state, Indonesia has been a prime recipient of the full spectrum of Saudi proselytisation – known as dawa, the call to Islam. And while investments peaked in absolute terms at least a decade ago, as they did in most of the Muslim world, their effects continue to reverberate. Saudi investment in Indonesia has at turns fuelled jihadists, helped consolidate the country’s leading Islamist political party and produced dozens of influential ideologues. The Saudi soft-power apparatus in Indonesia is unrivalled, including Lipia, a large embassy and a powerful, standalone “religious attache”. Saudi charity has also paid for thousands of poor students to go to school and university, and helped rebuild devastated regions such as Aceh after the Boxing Day tsunami of 2004.
The influence of Shihab’s organisation and vision is just one example of how Saudi dawa has shaped modern Indonesia. Another is the Bali bombings of 2002, which killed 202 people, mostly tourists, in the world’s most deadly terror attack after 9/11, and which woke Indonesia up to the danger of terrorism within its borders. The attacks were planned by a circle of al-Qaida-affiliated jihadists based at the al-Mukmin Islamic boarding school in Central Java, which was founded with an initial endowment from the Saudi king in 1972.
Beyond such flagship investments, an equally pervasive legacy of Saudi proselytisation in Indonesia has been the rise of virulent religious intolerance. In addition to the commonplace harassment of Christian groups and the show trial of Ahok, its most prominent Christian politician, Indonesia is also now a country where there is a national “anti-Shia” league and mobs have driven Ahmadiyya Muslims from their homes into refugee camps.
It’s not for nothing that when Barack Obama, who spent five years in Jakarta as a child, returned to Indonesia in 2011, he remarked on the “more fundamentalist, unforgiving interpretation” of Islam he now observed in the archipelago. He attributed this to Saudi influence. What Obama was picking up on was the concept of Arabisasi – ambitious in theory and even more influential in practice.
Arabisasi was one of the first Indonesian words I learned after I moved to the country in 2016. It’s a neologism meaning, as you might expect, “Arabisation”. But the concept was used in reference to a whole class of developments in Indonesia: the rise of political Islam, blasphemy prosecutions, the growing popularity of hijabs and burqas, new mosques, louder mosques, new schools, the persecution of religious minorities. Above all, it referred to the relatively new, central role for Islam in the cultural and political life of a big democracy that was, until 1998, a tightly controlled military dictatorship. The underlying claim was that five decades of Saudi Arabia’s religious influence in Indonesia was responsible for all these things.
Regardless of how true or false this was, the phrase itself pointed to a generalised anxiety over “Saudi money”, in Indonesia and the world. It seemed to explain how a tropical archipelago supposedly famous for its tolerance was, by the time I got there, caught up in a culture war over everything from the acceptability of Santa hats to dating, a safe haven for hardline Islamists, and even the home of a few hundred people who joined Islamic State.
Saudi Arabia’s global export of Wahhabism – a puritanical and intolerant movement founded in the 18th century that foregrounds a literal reading of the Qur’an and seeks to eradicate “deviant” regional traditions – has been discussed frequently in the post-9/11 world, where religious conservatism is often considered synonymous with extremism and terrorism. But the actual effects of Saudi proselytisation are poorly understood. It’s not just “the Saudi government” that spreads Wahhabism; international Saudi actors include universities, an Islamic Affairs state ministry, several state-adjacent global charities such as the Muslim World League, one-off regional relief efforts and independent businessmen.
Rizieq Shihab, the leader of the Indonesian hardline Muslim group FPI. Photograph: Adek Berry/AFP/Getty
Dawa literally means to call or invite, but in practice it covers the wide range of proselytisation activities available to any Muslim person or institution. Today, there is official Saudi dawa in two dozen countries, and unofficial activity in many more. Its effects are not straightforward. For instance, Saudi dawa typically ends up promoting not Saudi Wahhabism, but Salafism, a linked but discrete 20th-century revivalist movement, originating in Egypt, that seeks to return to the traditions of earliest Islam. Saudi proselytisation tends to cultivate a learned Salafi class of scholars and ideologues who then go on to shape their local religious landscapes. Another common outcome is the violent intolerance of Shia and Sufi Muslims, as well as minority sects such as the Ahmadiyya and other religions such as Christianity. The most notorious effect has been the spread of Salafi-jihadism, which has found a base in some of the communities supported by Saudi dawa.
The Saudi dawa project has been an effort to systematically shape the Muslim world, and Muslims in the world, in its image. In its ambition and global reach, it is unparalleled. It is also chaotic and full of contradictions: Saudi efforts both support and work to counter Muslim Brotherhood-affiliated political Islamists, or simultaneously fund shady charities and counter-extremism centres that work within miles of each other.
Saudi Arabia didn’t single-handedly cause the conservative turn in Indonesia, not by a long shot. But what I learned in three years was that it has indeed contributed to it in all sorts of ways. When I travelled through much of the Indonesian archipelago, from Aceh to Sulawesi, I was surprised by the Saudi campaign’s scale and precision in its targeted outreach to regional leaders. What struck me, too, was the characteristic Saudi vision of combining aid and proselytisation. The line between the two was always blurred.
Islam came to the Indonesian archipelago around the 13th century, likely through Arab traders, and the powerful rulers of Java and Sumatra gradually converted from Hinduism or Buddhism to Islam. The islands of what is now Indonesia belonged to a larger archipelagic Muslim medieval world that included parts of modern-day Thailand, Malaysia, Singapore, the Philippines and Cambodia.
Indonesia is still home to the world’s largest Buddhist temple – Borobudur, in Central Java – many Hindu temples, millions of Christians who converted under colonial rule, and rich mystical and animist traditions. Many of these elements have coloured Indonesian Islam, which is not liberal exactly, but is still tolerant of many folk practices. To give just one example, there is a shrine in Central Java, on Mount Kemukus, which Muslim pilgrims climb to have sex with other pilgrims, who are complete strangers, above a graveyard, to bring good luck. The rite, which includes elements of Javanese myth and esoteric Hindu Tantra, could only exist in Indonesia.
After Indonesia became independent in 1945, “Indonesian Islam” faced a high-stakes test: would the new country be Islamic? Would it enforce sharia? Ultimately, the founding fathers decided that it would not. But out of these vigorous postcolonial debates emerged a man named Mohammad Natsir, who would go on to almost single-handedly establish Saudi influence in the archipelago. Natsir was a pious Islamic scholar from Sumatra who became the first prime minister of independent Indonesia. In 1958, he joined an unsuccessful rebellion against the founding president Sukarno and went into exile deep in the Sumatran jungle for three years. When he emerged, he was promptly jailed. And when he was finally allowed to return to civil society in 1966, he was ignored and shunned by the new Suharto military dictatorship, which had just come to power through a violent, CIA-backed coup.
But Natsir didn’t retire from public life. He was distressed by how Muslims were being denied a political voice in a new nation whose citizenry was about 90% Muslim. He resolved to target Indonesian hearts and minds, instead of their votes. “We are no longer preaching by means of politics, but engaging in politics through preaching,” he said. What he meant was that he would cultivate grassroots Islamic activism instead of pushing for Islamic laws and political institutions. Saudi Arabia was delighted to help him do exactly that.
Dawa literally means to call or invite, but in practice it covers the wide range of proselytisation activities available to any Muslim person or institution. Today, there is official Saudi dawa in two dozen countries, and unofficial activity in many more. Its effects are not straightforward. For instance, Saudi dawa typically ends up promoting not Saudi Wahhabism, but Salafism, a linked but discrete 20th-century revivalist movement, originating in Egypt, that seeks to return to the traditions of earliest Islam. Saudi proselytisation tends to cultivate a learned Salafi class of scholars and ideologues who then go on to shape their local religious landscapes. Another common outcome is the violent intolerance of Shia and Sufi Muslims, as well as minority sects such as the Ahmadiyya and other religions such as Christianity. The most notorious effect has been the spread of Salafi-jihadism, which has found a base in some of the communities supported by Saudi dawa.
The Saudi dawa project has been an effort to systematically shape the Muslim world, and Muslims in the world, in its image. In its ambition and global reach, it is unparalleled. It is also chaotic and full of contradictions: Saudi efforts both support and work to counter Muslim Brotherhood-affiliated political Islamists, or simultaneously fund shady charities and counter-extremism centres that work within miles of each other.
Saudi Arabia didn’t single-handedly cause the conservative turn in Indonesia, not by a long shot. But what I learned in three years was that it has indeed contributed to it in all sorts of ways. When I travelled through much of the Indonesian archipelago, from Aceh to Sulawesi, I was surprised by the Saudi campaign’s scale and precision in its targeted outreach to regional leaders. What struck me, too, was the characteristic Saudi vision of combining aid and proselytisation. The line between the two was always blurred.
Islam came to the Indonesian archipelago around the 13th century, likely through Arab traders, and the powerful rulers of Java and Sumatra gradually converted from Hinduism or Buddhism to Islam. The islands of what is now Indonesia belonged to a larger archipelagic Muslim medieval world that included parts of modern-day Thailand, Malaysia, Singapore, the Philippines and Cambodia.
Indonesia is still home to the world’s largest Buddhist temple – Borobudur, in Central Java – many Hindu temples, millions of Christians who converted under colonial rule, and rich mystical and animist traditions. Many of these elements have coloured Indonesian Islam, which is not liberal exactly, but is still tolerant of many folk practices. To give just one example, there is a shrine in Central Java, on Mount Kemukus, which Muslim pilgrims climb to have sex with other pilgrims, who are complete strangers, above a graveyard, to bring good luck. The rite, which includes elements of Javanese myth and esoteric Hindu Tantra, could only exist in Indonesia.
After Indonesia became independent in 1945, “Indonesian Islam” faced a high-stakes test: would the new country be Islamic? Would it enforce sharia? Ultimately, the founding fathers decided that it would not. But out of these vigorous postcolonial debates emerged a man named Mohammad Natsir, who would go on to almost single-handedly establish Saudi influence in the archipelago. Natsir was a pious Islamic scholar from Sumatra who became the first prime minister of independent Indonesia. In 1958, he joined an unsuccessful rebellion against the founding president Sukarno and went into exile deep in the Sumatran jungle for three years. When he emerged, he was promptly jailed. And when he was finally allowed to return to civil society in 1966, he was ignored and shunned by the new Suharto military dictatorship, which had just come to power through a violent, CIA-backed coup.
But Natsir didn’t retire from public life. He was distressed by how Muslims were being denied a political voice in a new nation whose citizenry was about 90% Muslim. He resolved to target Indonesian hearts and minds, instead of their votes. “We are no longer preaching by means of politics, but engaging in politics through preaching,” he said. What he meant was that he would cultivate grassroots Islamic activism instead of pushing for Islamic laws and political institutions. Saudi Arabia was delighted to help him do exactly that.
Thousands of Indonesian Muslims had assembled a mass pray for tsunami-hit Aceh province at Istiqlal Mosque in Jakarta in 2005. Photograph: Bay Ismoyo/AFP/Getty
When the Saudi monarch King Faisal first visited Indonesia in 1967, he was deeply impressed by Natsir. At the time, Faisal was developing his vision of a Saudi foreign policy driven by al-tadamon al-Islami, or “Islamic solidarity.” He opened the kingdom’s taps to Natsir, who promptly created Dewan Dakwah Islamiyah Indonesia (DDII), the Indonesian Islamic Dawa Council, which became the chief conduit for Saudi money into Indonesia. Natsir’s personal diplomacy won him an open-ended tazkiya, or recommendation letter, from Mecca to accept donations from any Saudi source.
Today, DDII is housed in an eight-storey, star-shaped building in Cikini in Central Jakarta, called the Dawa Tower. It still has offices in 32 of the 34 provinces of Indonesia. But active Saudi funding has dried up, and its revenues now come from the properties it owns through its charitable endowment. More than four decades after its founding, DDII has “both lost and won”, says Ulil Abshar-Abdalla, a Muslim intellectual who lives in Jakarta. The organisation itself is less influential and well-funded than in the 1980s and 1990s – but its ideas are now ensconced in the mainstream.
While DDII has always been administered by Indonesians, another important node of Saudi influence in Indonesia is staffed entirely by Saudis: Lipia university in South Jakarta. Lipia is the most visible outpost of Saudi dawa in Indonesia, and it is one of the greatest accomplishments of the peak dawa era worldwide. It is a bricks-and-mortar university completely administered by Saudis, and to this day overseen by the Saudi embassy. The university’s website entices applicants today with free tuition, a monthly allowance and opportunities to pursue graduate degrees in Saudi Arabia. The classes are all conducted in Arabic. There is barely any Indonesian text visible on campus, even on signs. There are female students, but they study on a separate level from the male students and watch video lectures that are live-streamed from the male classrooms downstairs. Lipia has lately been trying to recruit more female instructors to change this, but as of 2019 they were still outnumbered at least three to one.
As one might expect, the books of Muhammad ibn Abd al-Wahhab, the founder of Wahhabism, have always been a key part of Lipia’s curriculum. But the curriculum was never purely Wahhabi, and in the 1990s, Lipia became a hotbed of Muslim Brotherhood-oriented political Islamists (as opposed to pure Salafis, who are apolitical). That’s why the university became a prime recruiting spot for the Prosperous Justice party (PKS), which is modelled on the Muslim Brotherhood and is Indonesia’s most successful Islamist political party. Some of Lipia’s most influential alumni are members of the modern PKS, including former party president Hidayat Nur Wahid. Lipia’s evolution makes it a microcosm of the multifaceted Saudi dawa project, harbouring both political Islamists and quietist Salafis – as well as plenty of poor students who just jumped at the chance for a scholarship.
One of the unlikeliest places where Salafism has thrived is Batam, a rather seedy resort island in a special duty-free economic zone, just across the bay from Singapore. The island has little to recommend it beyond tax-free shopping and cheap bars, but in the last 10 years it has also become home to a prominent Salafi radio station called Hang Radio and multiple Salafi boarding schools. I visited one of the schools, Pesantren Anshur al-Sunnah, in Batam’s main Salafi neighbourhood of Cendana, in 2017. Its facilities are bare bones, but it educates more than 150 students from Indonesia, Malaysia and Singapore. The school’s director, who studied in Medina on a scholarship, would only speak to me through a partitioned room, because he would not be in the presence of a woman who is not a relation.
In Batam’s busy downtown, Hang Radio runs an impressive office and recording studio. The station is decades old, but it took a religious turn in 2004 when its owner, a local businessman named Zein Alatas, became a Salafi in a fit of mid-life piety. Now, it broadcasts 20 straight hours of religious content every day, including sermons by visiting clerics. In 2016, the island rejected 418 passport applications from residents who were suspected of intent to join Isis; Hang Radio was cited by local authorities as a factor behind the convicts’ increasingly radical views.
Today, Saudi dawa in Indonesia is decreasing in absolute terms; the Philippines is now its major target in south-east Asia, according to annual reports of the Saudi Ministry of Islamic Affairs, Dawa and Guidance. But Indonesian institutions have adjusted. After DDII’s Gulf funding dried up, it was replaced in part by politicians such as Prabowo Subianto, a military general turned cabinet minister, who funded DDII throughout the 2000s. It is through such resilient institutions that Saudi influence survives. Every Saudi national could leave Indonesia tomorrow and there would still be a vibrant Salafi ecosystem in place.
Yet even though many Indonesian Salafis are standing on their own feet, there is still a tendency among Indonesian Muslims to idealise the traditions of the Gulf. Despite their great numerical advantage – there are more Muslims in the archipelago than in all the Gulf states combined – ideas rarely flow in the opposite direction. Indonesia’s Sunni Muslim establishment has, over the last few years, tried to project “Islam Nusantara”, or “Islam of the Archipelago”, on the world stage, but it remains ideologically muddled, and leans on platitudes such as “moderation” and “tolerance”.
As a result, Saudi Arabia’s image retains great power in both the religious and non-religious spheres. Indonesian Salafi clerics frequently cite Saudi scholars in their rulings, and nearly all ordinary Muslims save up to visit Mecca and Medina. Within Indonesia’s thriving Islamic-capitalist consumer economy, products depicting Mecca’s Kaaba shrine, from clocks to calendars, are ubiquitous. I once bought iced tea from a woman in Manado, in North Sulawesi, whose hijab was simply embroidered with the word “Saudi” in cursive script: kingdom as brand and logo.
When the Saudi monarch King Faisal first visited Indonesia in 1967, he was deeply impressed by Natsir. At the time, Faisal was developing his vision of a Saudi foreign policy driven by al-tadamon al-Islami, or “Islamic solidarity.” He opened the kingdom’s taps to Natsir, who promptly created Dewan Dakwah Islamiyah Indonesia (DDII), the Indonesian Islamic Dawa Council, which became the chief conduit for Saudi money into Indonesia. Natsir’s personal diplomacy won him an open-ended tazkiya, or recommendation letter, from Mecca to accept donations from any Saudi source.
Today, DDII is housed in an eight-storey, star-shaped building in Cikini in Central Jakarta, called the Dawa Tower. It still has offices in 32 of the 34 provinces of Indonesia. But active Saudi funding has dried up, and its revenues now come from the properties it owns through its charitable endowment. More than four decades after its founding, DDII has “both lost and won”, says Ulil Abshar-Abdalla, a Muslim intellectual who lives in Jakarta. The organisation itself is less influential and well-funded than in the 1980s and 1990s – but its ideas are now ensconced in the mainstream.
While DDII has always been administered by Indonesians, another important node of Saudi influence in Indonesia is staffed entirely by Saudis: Lipia university in South Jakarta. Lipia is the most visible outpost of Saudi dawa in Indonesia, and it is one of the greatest accomplishments of the peak dawa era worldwide. It is a bricks-and-mortar university completely administered by Saudis, and to this day overseen by the Saudi embassy. The university’s website entices applicants today with free tuition, a monthly allowance and opportunities to pursue graduate degrees in Saudi Arabia. The classes are all conducted in Arabic. There is barely any Indonesian text visible on campus, even on signs. There are female students, but they study on a separate level from the male students and watch video lectures that are live-streamed from the male classrooms downstairs. Lipia has lately been trying to recruit more female instructors to change this, but as of 2019 they were still outnumbered at least three to one.
As one might expect, the books of Muhammad ibn Abd al-Wahhab, the founder of Wahhabism, have always been a key part of Lipia’s curriculum. But the curriculum was never purely Wahhabi, and in the 1990s, Lipia became a hotbed of Muslim Brotherhood-oriented political Islamists (as opposed to pure Salafis, who are apolitical). That’s why the university became a prime recruiting spot for the Prosperous Justice party (PKS), which is modelled on the Muslim Brotherhood and is Indonesia’s most successful Islamist political party. Some of Lipia’s most influential alumni are members of the modern PKS, including former party president Hidayat Nur Wahid. Lipia’s evolution makes it a microcosm of the multifaceted Saudi dawa project, harbouring both political Islamists and quietist Salafis – as well as plenty of poor students who just jumped at the chance for a scholarship.
One of the unlikeliest places where Salafism has thrived is Batam, a rather seedy resort island in a special duty-free economic zone, just across the bay from Singapore. The island has little to recommend it beyond tax-free shopping and cheap bars, but in the last 10 years it has also become home to a prominent Salafi radio station called Hang Radio and multiple Salafi boarding schools. I visited one of the schools, Pesantren Anshur al-Sunnah, in Batam’s main Salafi neighbourhood of Cendana, in 2017. Its facilities are bare bones, but it educates more than 150 students from Indonesia, Malaysia and Singapore. The school’s director, who studied in Medina on a scholarship, would only speak to me through a partitioned room, because he would not be in the presence of a woman who is not a relation.
In Batam’s busy downtown, Hang Radio runs an impressive office and recording studio. The station is decades old, but it took a religious turn in 2004 when its owner, a local businessman named Zein Alatas, became a Salafi in a fit of mid-life piety. Now, it broadcasts 20 straight hours of religious content every day, including sermons by visiting clerics. In 2016, the island rejected 418 passport applications from residents who were suspected of intent to join Isis; Hang Radio was cited by local authorities as a factor behind the convicts’ increasingly radical views.
Today, Saudi dawa in Indonesia is decreasing in absolute terms; the Philippines is now its major target in south-east Asia, according to annual reports of the Saudi Ministry of Islamic Affairs, Dawa and Guidance. But Indonesian institutions have adjusted. After DDII’s Gulf funding dried up, it was replaced in part by politicians such as Prabowo Subianto, a military general turned cabinet minister, who funded DDII throughout the 2000s. It is through such resilient institutions that Saudi influence survives. Every Saudi national could leave Indonesia tomorrow and there would still be a vibrant Salafi ecosystem in place.
Yet even though many Indonesian Salafis are standing on their own feet, there is still a tendency among Indonesian Muslims to idealise the traditions of the Gulf. Despite their great numerical advantage – there are more Muslims in the archipelago than in all the Gulf states combined – ideas rarely flow in the opposite direction. Indonesia’s Sunni Muslim establishment has, over the last few years, tried to project “Islam Nusantara”, or “Islam of the Archipelago”, on the world stage, but it remains ideologically muddled, and leans on platitudes such as “moderation” and “tolerance”.
As a result, Saudi Arabia’s image retains great power in both the religious and non-religious spheres. Indonesian Salafi clerics frequently cite Saudi scholars in their rulings, and nearly all ordinary Muslims save up to visit Mecca and Medina. Within Indonesia’s thriving Islamic-capitalist consumer economy, products depicting Mecca’s Kaaba shrine, from clocks to calendars, are ubiquitous. I once bought iced tea from a woman in Manado, in North Sulawesi, whose hijab was simply embroidered with the word “Saudi” in cursive script: kingdom as brand and logo.
Students from an Islamic boarding school attend a Qur’an recitation during Ramadan in Medan. Photograph: Anadolu Agency/Getty Images
Amid this general good will, Saudi Arabia has started to tweak the way it presents itself in Indonesia. The first Saudi ambassador I met in Jakarta, Osama bin Mohammed al-Shuaibi, in 2017, had a stern manner. Dressed in the traditional flowing thawb and checked red headdress, he grew angry when I asked him about the role of Wahhabism in Saudi diplomacy, and railed against what he saw as Iran’s meddling overseas. But his successor Esam Althagafi, whom I met a week after his appointment in 2019, was both more forthcoming and more westernised. He wore a crisp navy suit and tie, and spoke perfect English.
“The way we see it, Indonesia is a member of Vision 2030,” al-Shuaibi told me, referring to the plan by Muhammad bin Salman, the 34-year-old Saudi crown prince, to diversify the kingdom’s economy away from oil and develop sectors such as health, culture and tourism. “We’re looking at the country’s economy,” al-Shuaibi said. “Not just religion.” He even entertained my questions about Saudi proselytisation – while his predecessor was guarded, the new ambassador admitted that it was at the heart of the two countries’ relationship. ”But today, we have nothing to hide,” he said. “Everything we do here, from Qur’an competitions to Ramadan iftars, is at the request of Indonesian Muslim groups.” Of course, Islamic affairs remain a priority, al-Shuaibi told me. But he pointed out that the Saudi embassy was now ploughing resources into Arabic language programmes in Indonesia, positioning itself, in that respect, alongside cultural organisations such as the British Council and the Alliance Francaise.
Amid this general good will, Saudi Arabia has started to tweak the way it presents itself in Indonesia. The first Saudi ambassador I met in Jakarta, Osama bin Mohammed al-Shuaibi, in 2017, had a stern manner. Dressed in the traditional flowing thawb and checked red headdress, he grew angry when I asked him about the role of Wahhabism in Saudi diplomacy, and railed against what he saw as Iran’s meddling overseas. But his successor Esam Althagafi, whom I met a week after his appointment in 2019, was both more forthcoming and more westernised. He wore a crisp navy suit and tie, and spoke perfect English.
“The way we see it, Indonesia is a member of Vision 2030,” al-Shuaibi told me, referring to the plan by Muhammad bin Salman, the 34-year-old Saudi crown prince, to diversify the kingdom’s economy away from oil and develop sectors such as health, culture and tourism. “We’re looking at the country’s economy,” al-Shuaibi said. “Not just religion.” He even entertained my questions about Saudi proselytisation – while his predecessor was guarded, the new ambassador admitted that it was at the heart of the two countries’ relationship. ”But today, we have nothing to hide,” he said. “Everything we do here, from Qur’an competitions to Ramadan iftars, is at the request of Indonesian Muslim groups.” Of course, Islamic affairs remain a priority, al-Shuaibi told me. But he pointed out that the Saudi embassy was now ploughing resources into Arabic language programmes in Indonesia, positioning itself, in that respect, alongside cultural organisations such as the British Council and the Alliance Francaise.
Given the obscure ways in which Saudi dawa has operated in the past, this change in rhetoric is notable. But there is very good reason to be sceptical about Vision 2030, which has been criticised for being economically unfeasible and for papering over human rights issues in order to burnish bin Salman’s image. It is hard to believe in the supposed reformist promise of the prince and Vision 2030 when, midway through the publicity campaign in 2018, the journalist Jamal Khashoggi was brutally murdered in a Saudi consulate.
It will take at least a few years to determine whether the Saudi role in Indonesia has truly shifted. What is certain, though, is that over the past half-century, Saudi dawa has never been one fixed thing. Maintaining an ossified image from 10 or even 20 years ago is the biggest obstacle to understanding how Saudi money – and Saudi soft power – work today.
Wednesday 11 March 2020
Tuesday 4 December 2018
Opec: why Trump has Saudi Arabia over a barrel
David Sheppard and Ed Crooks in The FT
Reneé Earls has lived her whole life in west Texas, and watched oil booms come and go, but she has never seen anything like the buzz of activity in the industry today. “We are a hopping spot,” she says. “If you’re not working here, that’s because you’re not looking for a job, or you are unemployable . . . If you have a skill and want to work, you can name your price.”
Reneé Earls has lived her whole life in west Texas, and watched oil booms come and go, but she has never seen anything like the buzz of activity in the industry today. “We are a hopping spot,” she says. “If you’re not working here, that’s because you’re not looking for a job, or you are unemployable . . . If you have a skill and want to work, you can name your price.”
Ms Earls is chief executive of the chamber of commerce in Odessa, in the heart of the Permian basin, the shale formation stretching from west Texas into New Mexico that is the red-hot centre of the latest US oil boom. Production in the region rose by 1m barrels a day in the year to August, contributing to a record-breaking 2.1m b/d increase in US output that has made the country the world’s largest crude producer.
The shale boom has not only transformed once rundown towns deep in the west Texas desert; it is increasingly reshaping the landscape of international politics. The emergence of the US as a born-again energy superpower — one of the key factors in the recent fall in oil prices — has led politicians in Washington to weigh how it might reshape some of its oldest alliances, raising uncomfortable questions for the oil producers of the Middle East .
For Saudi Arabia, the US’s chief ally in the Arab world, the past two months have delivered a stark lesson in how its relationship with Washington has been redefined by the Texas oil revolution.
On Thursday and Friday ministers from Opec, the oil cartel that controls roughly a third of global production, and its allies including Russia and Kazakhstan, will meet in Vienna to decide how to respond to the 30 per cent plunge in oil prices to around $60 a barrel over the past two months. With US output surging, and Russia and Saudi Arabia also producing at close to record levels, traders are convinced the market will be awash with oil next year.
Previously such a fall would have prompted Opec and its allies to agree to cut production. But for Saudi Arabia, which remains the world’s top oil exporter and the cartel’s de facto leader, that decision has been complicated by the murder of Jamal Khashoggi.
The gruesome killing of the Saudi Arabian journalist and Washington Post columnist, a critic of the royal family, has revealed fissures in its prized relationship with the US.
US president Donald Trump has maintained his backing for Riyadh and Crown Prince Mohammed bin Salman, the country’s day-to-day ruler widely known as MBS, despite reports that the CIA has concluded that he ordered the operation against Khashoggi at the kingdom’s consulate in Istanbul. But his stance comes with conditions attached, one of which lies at the heart of the kingdom’s wellbeing: the oil price.
In statements, tweets and private communications Mr Trump has made clear his support for lower oil prices and his opposition to Riyadh moving to cut production, heaping pressure on a royal court shaken by the international backlash against the Khashoggi killing. The pressure from the White House has come despite Saudi Arabia raising production this summer to help make sure the market remained well supplied as the US reimposed sanctions on Iran. Riyadh’s position as Tehran’s chief rival in the region reflects a core part of the Trump administration’s foreign policy.
“The priority for Saudi Arabia is shoring up MBS’s position, and the key part of that is securing Trump’s backing,” says Derek Brower, a director of RS Energy Group. “Trump has clearly linked his support for MBS with several things . . . but it’s oil that seems to be at the top of his agenda.”
For the Trump administration, the calculation is straightforward. Lower oil prices mean cheaper petrol, providing a boost for consumers. The president has hailed the recent fall in prices as a “tax cut”, giving him some good news after a stock market wobble triggered by his confrontation with China over trade.
For Saudi Arabia, that creates a dilemma. Khalid al-Falih, its energy minister, has pushed ahead with plans to drum up support for cutting oil production by more than 1m b/d, but observers think he will be constrained by the need to appease Mr Trump.
Bob McNally, a consultant who has advised US administrations on oil policy, says Riyadh’s position is precarious. “If they orchestrate a high-profile Opec-plus cut that boosts Brent crude back up towards $70 they risk Trump’s wrath,” he says. “[But] if Riyadh bends entirely to Trump’s will and keeps production at record levels, an inventory glut will return and the bottom will fall out of crude prices.”
Ellen Wald, author of a history of Saudi Arabia’s oil industry, says the “ultimate success” for Riyadh from this week’s meeting would be “to quietly let people know that a cut is happening to raise the price, without drawing attention to the activity of Opec specifically.”
Yet history suggests that kind of mixed message risks pleasing no one — angering Mr Trump while not doing much to raise prices.
The stakes for Saudi Arabia are higher than just a single decision on output. Its alliance with the US has long been underpinned by oil supplies, with the resultant petrodollars recycled back into the American economy through the purchase of military hardware.
After a fall in prices in 2014, Riyadh renewed its attempts to diversify and modernise both its economy and wider society, aiming to reduce its dependence on oil revenues. But for the programme to have a chance of success, Saudi Arabia needs a higher oil price in the short term to help fund the changes.
The shale boom is eroding the foundations of one of the pillars of the alliance. US net oil imports, which peaked at about 13m b/d in 2005, have dropped to about 2.4m b/d this year. By the end of next year, they could be running at just 330,000 b/d, according to the US Energy Information Administration.
Saudi Arabia’s crude supplies remain crucial to the world economy, and to US consumer fuel prices. But Amy Myers Jaffe, a senior fellow at the Council on Foreign Relations, says the US economy is much less vulnerable to a spike in prices than it was even a decade ago.
The evidence of the crude price fall four years ago and subsequent recovery is that the impact of changes on the American economy is now roughly neutral. “The US is not in the position it was in 2007-08, when we were facing a rising oil price that put strain on the current account deficit and the dollar,” she says. “That’s a big change.”
As politicians start to grasp the implications of that shift, it is strengthening the argument that the US no longer needs to shackle itself to Riyadh.
“The atmosphere in Washington has certainly changed following the killing of Jamal Khashoggi,” says Helima Croft, a former CIA analyst who now runs RBC Capital Markets’ natural resources analysis. “Politicians see the surge in US oil production and are wondering aloud whether the alliance is as necessary as it once was.”
Those questions are also starting to drive activity in Congress. Last week, the Senate voted 63-37 to advance a resolution demanding that the president end US armed forces’ activity “in or affecting Yemen”, where Saudi Arabia’s war against Iran-aligned Houthi rebels has exacerbated what aid groups describe as the world’s worst humanitarian crisis.
Legislation that would allow the US to impose criminal penalties on members of Opec and their allies for acting as a cartel has also been making progress. For Saudi Arabia, which has extensive assets in the US including the largest refinery in North America, that legislation is a genuine threat.
Tim Kaine, the Democratic senator from Virginia who was a co-sponsor of the bipartisan legislation on Yemen, suggested the Khashoggi death had been the last straw for some. “It was really important for the Senate to send a message to Saudi Arabia: ‘you do not have a free pass’,” Mr Kaine told National Public Radio last week. “The president’s signal of complete impunity is not in accord with American values.”
In the autumn of 2014, the Saudi government tried to reassert its authority in the oil market against the nascent threat from shale. As a global glut of crude swelled up, Riyadh declined to cut production, in the belief it could drown the Texas producers in a sea of cheap oil.
But shale proved far more resilient than Saudi Arabia — the only country with significant spare production capacity — had hoped. Two years on Opec members returned to restricting output, with the help of Russia and other non-member producers, to lay the foundations for a recovery in prices.
As the oil price has fallen this autumn, the memories of that episode have been resurfacing. But Jason Bordoff of Columbia University’s Center on Global Energy Policy says there is at least one crucial difference. “We now know how resilient shale can be. We saw how companies could cut costs and become more efficient to keep producing. That complicates Opec’s decision-making,” he says. “This time around, Opec knows it can’t kill shale, but maybe just wound it.”
Ms Earls says the people of Odessa have been watching as oil prices have plunged in the past two months. Fundamentally, though, they “still feel very confident”, she adds, because of the producers’ long-term commitment. The Permian Strategic Partnership, an industry-backed group that works with communities to help develop badly-needed infrastructure including roads, houses and schools, estimates a further 60,000 jobs will be createdby 2025, a huge increase for an area that had a population of about 330,000 last year.
The rate at which new wells are brought into production in the Permian was already expected to slow, in part because of a shortage of pipeline capacity. If the fall in prices is sustained, it could mean the industry slows further across the US, raising questions too for the White House.
The gains to consumers from lower fuel prices will be offset by the hit to investment. The oil-dependent economies of Texas and North Dakota would bear the brunt of the hit, but it would also extend to other industries such as steelmaking, which has benefited from the boom in pipeline construction.
Bernadette Johnson, vice-president of market intelligence at Drillinginfo, a research group, says there are several oil producing regions, such as the Denver-Julesburg Basin of Colorado, Wyoming and Nebraska, where a fall in US crude from $60 to $50 would make a significant difference to the economics.
“The companies think that it may just be a temporary thing, and that prices will rebound,” she says. “If the oil price stays where it is, we will see companies start to react.”
Yet while there may be a temporary slowdown, there is a general confidence in the US industry that its growth can continue. US officials say they are not concerned about the impact of lower oil prices, arguing that the industry will be able to continue to grow thanks to technological improvements and efficiency gains. Others are more sceptical, noting that US production contracted in 2016 when prices were at their nadir.
Will Giraud, executive vice-president of Concho Resources, one of the leading producers in the Permian Basin — where production is approaching 3.7m b/d — told investors last month: “I think there are several more years of very high growth, and it’s likely that the Permian gets into the 5m-6m or maybe even 7m b/d of production and then sustains that for a decent period.”
In the face of rampant US shale output, Saudi Arabia looks like it may still decide that angering Mr Trump is a price worth paying for a production cut that props up the oil price, whatever the heightened risks from the Khashoggi affair. But regardless of what the Saudis decide, the flow of oil from places such as Odessa will keep quietly eroding one of the old certainties that underpinned their relationship with the US. As Mr Brower at RS Energy puts it: “The pressures that Saudi Arabia are under are already immense.”
Saturday 27 October 2018
In death, Khashoggi did what all his columns could not.
Irfan Husain in The Dawn
SCHADENFREUDE is a wonderful German word used to express mirth at somebody else’s woes, just as Charlie Chaplin used to giggle when a passerby slipped on a banana peel and fell on his backside.
This is how the world currently feels towards Saudi Arabia’s Crown Prince Mohammed bin Salman (or, as he likes to be called, MBS) as he wriggles in the spotlight following Jamal Khashoggi’s brutal murder. Riyadh’s early denials caused only open derision and disbelief among even supporters of the kingdom.
The problem with one person wielding absolute power and control is that when something goes badly wrong, it becomes hard to pretend he knew nothing about it. So when all we got from Riyadh for the first fortnight were blanket denials about any knowledge or responsibility for the gruesome events in its consulate in Istanbul, we responded with hoots of open incredulity.
Recently, the Saudi government released a chilling photograph of Jamal Khashoggi’s son, Salah, shaking hands with MBS while King Salman stands beaming in the background. Salah is clearly grief-stricken, while MBS has a cold, hard expression. Khashoggi’s son had been under a travel ban for a year.
While Turkey’s President Erdogan has been piling on the pressure, few expect King Salman to sideline his favourite son anytime soon. The best that can be expected is for him to be relieved of some of the portfolios he has accumulated.
Ever since Khashoggi’s assassination made headlines around the world three weeks ago, the story has completely monopolised the 24/7 news cycle. Apart from the shock and horror over the sickening nature of the crime, journalists and politicians alike saw an opportunity to flay the ruling family of what is widely seen as a rotten kingdom.
Turkish intelligence sources have revealed that the audio tape they possess of the torture Khashoggi suffered includes a segment that indicates that his fingers were chopped off while he was still alive. This, apparently, was the reason a bone saw was part of the Saudi hit-squad’s kit, and this savage amputation was intended to send out a signal to other dissidents who dared to use their fingers to write against the crown prince. Apparently, in backward tribal societies, any offending organ is hacked off to teach everybody a lesson.
Given the massive fallout from the crime, why did the Saudis think they would get away with it? The bumbling antics of the killers to cover their tracks would not have fooled Inspector Clouseau of Pink Panther fame. We had a joker who pretended to be Khashoggi walk out of the consulate in the journalist’s clothing, but wearing joggers instead of the black leather shoes Khashoggi actually wore as he entered the consulate.
The reason MBS and his inner circle went ahead with their ham-fisted plot was that they didn’t think their cover-up would be questioned. Used to eliminating domestic opponents without having to justify themselves to anybody, they genuinely thought the rest of the world was an equally lawless zone. Also, MBS — and Saudi money — had been welcomed with open arms around the globe, so he probably thought his actions, no matter how grotesque, would be swallowed.
But three weeks later, the furore continues unabated despite the hundreds of millions of dollars the kingdom has spent on public relations. Even Republican senators who once supported Riyadh without reservations have been revolted at Khashoggi’s murder. One threatened to “sanction the hell out of Saudi Arabia”.
All this bad publicity has taken the sheen off the grand investment conference in Riyadh dubbed ‘Davos in the desert’. Many important political figures from the US, the UK and France bailed out, while key business leaders decided to stay at home. The reality is that MBS is currently toxic, and nobody wants to be associated with him.
It is ironic that tens of thousands of Yemeni lives failed to achieve what one journalist’s death did: call the world’s attention to a cruel, repressive regime that has no respect for human rights. In death, Khashoggi did what all his Washington Post columns could not: shine a revealing spotlight on MBS and his nasty, wilful ways.
But at the end of the day, money talks and bulls---t walks. Although Germany has blocked future arms sales, the US and the UK have no such sanctions in mind. In fact, Trump has clearly said that Saudi arms sales are too important to forego. Western greed is what MBS is counting on. For well over seven decades, US-Saudi relations have been built on the sale of oil and arms, and despite global revulsion over Khashoggi’s killing, politicians and arms manufacturers have little shame or morality.
So after a few weeks, it will probably be business as usual.
SCHADENFREUDE is a wonderful German word used to express mirth at somebody else’s woes, just as Charlie Chaplin used to giggle when a passerby slipped on a banana peel and fell on his backside.
This is how the world currently feels towards Saudi Arabia’s Crown Prince Mohammed bin Salman (or, as he likes to be called, MBS) as he wriggles in the spotlight following Jamal Khashoggi’s brutal murder. Riyadh’s early denials caused only open derision and disbelief among even supporters of the kingdom.
The problem with one person wielding absolute power and control is that when something goes badly wrong, it becomes hard to pretend he knew nothing about it. So when all we got from Riyadh for the first fortnight were blanket denials about any knowledge or responsibility for the gruesome events in its consulate in Istanbul, we responded with hoots of open incredulity.
Recently, the Saudi government released a chilling photograph of Jamal Khashoggi’s son, Salah, shaking hands with MBS while King Salman stands beaming in the background. Salah is clearly grief-stricken, while MBS has a cold, hard expression. Khashoggi’s son had been under a travel ban for a year.
While Turkey’s President Erdogan has been piling on the pressure, few expect King Salman to sideline his favourite son anytime soon. The best that can be expected is for him to be relieved of some of the portfolios he has accumulated.
Ever since Khashoggi’s assassination made headlines around the world three weeks ago, the story has completely monopolised the 24/7 news cycle. Apart from the shock and horror over the sickening nature of the crime, journalists and politicians alike saw an opportunity to flay the ruling family of what is widely seen as a rotten kingdom.
Turkish intelligence sources have revealed that the audio tape they possess of the torture Khashoggi suffered includes a segment that indicates that his fingers were chopped off while he was still alive. This, apparently, was the reason a bone saw was part of the Saudi hit-squad’s kit, and this savage amputation was intended to send out a signal to other dissidents who dared to use their fingers to write against the crown prince. Apparently, in backward tribal societies, any offending organ is hacked off to teach everybody a lesson.
Given the massive fallout from the crime, why did the Saudis think they would get away with it? The bumbling antics of the killers to cover their tracks would not have fooled Inspector Clouseau of Pink Panther fame. We had a joker who pretended to be Khashoggi walk out of the consulate in the journalist’s clothing, but wearing joggers instead of the black leather shoes Khashoggi actually wore as he entered the consulate.
The reason MBS and his inner circle went ahead with their ham-fisted plot was that they didn’t think their cover-up would be questioned. Used to eliminating domestic opponents without having to justify themselves to anybody, they genuinely thought the rest of the world was an equally lawless zone. Also, MBS — and Saudi money — had been welcomed with open arms around the globe, so he probably thought his actions, no matter how grotesque, would be swallowed.
But three weeks later, the furore continues unabated despite the hundreds of millions of dollars the kingdom has spent on public relations. Even Republican senators who once supported Riyadh without reservations have been revolted at Khashoggi’s murder. One threatened to “sanction the hell out of Saudi Arabia”.
All this bad publicity has taken the sheen off the grand investment conference in Riyadh dubbed ‘Davos in the desert’. Many important political figures from the US, the UK and France bailed out, while key business leaders decided to stay at home. The reality is that MBS is currently toxic, and nobody wants to be associated with him.
It is ironic that tens of thousands of Yemeni lives failed to achieve what one journalist’s death did: call the world’s attention to a cruel, repressive regime that has no respect for human rights. In death, Khashoggi did what all his Washington Post columns could not: shine a revealing spotlight on MBS and his nasty, wilful ways.
But at the end of the day, money talks and bulls---t walks. Although Germany has blocked future arms sales, the US and the UK have no such sanctions in mind. In fact, Trump has clearly said that Saudi arms sales are too important to forego. Western greed is what MBS is counting on. For well over seven decades, US-Saudi relations have been built on the sale of oil and arms, and despite global revulsion over Khashoggi’s killing, politicians and arms manufacturers have little shame or morality.
So after a few weeks, it will probably be business as usual.
Sunday 24 December 2017
Who pays for Manchester City’s beautiful game?
Nick Cohen in The Guardian
Even though I come from the red side of Manchester, I want Manchester City to win every game they play now. Hoping City fail is like hoping a great singer’s voice cracks or prima ballerina’s tendons tear. Journalists have written and broadcast millions of words about the intensity of Manchester City’s game and the beauty of its movement. You watch and gasp as each perfect pass finds its man and each impossible move becomes possible after all.
Everything that can be said should have been said. But here are words you never hear on the BBC or Sky and hear only rarely from the best sports writers. Manchester City’s success is built on the labour extracted by the rulers of a modern feudal state. Sheikh Mansour, its owner, is the half-brother of Sheikh Khalifa, the absolute monarch of the United Arab Emirates: an accident of birth that has given him a mountain of cash and Manchester City the Premier League’s best players.
An absolute monarchy is merely a dictatorship decked in fine robes. The usual restrictions of free speech, a free press, the rule of law, an independent judiciary and democratic elections still apply in the Emirates federation of seven sultanates. Critics are as likely to disappear or be held without due process as they are in less glamorous destinations. The riches that supply Pep Guardiola’s £15m salary and ensure the £264m wage bill for the players is met on time do not just come from oil. The Emirate monarchies, Qatar and Saudi Arabia rely on a system of economic exploitation you struggle to find a precedent for.
In the UAE as a whole, only 13% of the population are full nationals. In the glittering tourist resort of Dubai, citizenship rises slightly to 15% and in the Abu Dhabi emirate to 20%, but everywhere a subclass of immigrants does the bulk of the work. The obvious comparison is with apartheid: Arab nationals sit at the top, white expats have some privileges, as the coloureds and Asians had in the last days of the South African regime, while the dirty work – from construction to cleaning – is done by despised immigrants from south Asia.
But comparisons with apartheid or the Israeli occupation of the West Bank or America’s old deep south miscarry because the Arab princelings import their working class rather than rule over subdued inhabitants. It’s like Spartans bringing in Helots. Or if images of stern Spartan militarists feel incongruous when imposed on the flabby bodies of Gulf aristocrats, Eloi importing Morlocks. Timid labour reforms are meant to have improved the lot of the serfs. In law, employers can no longer keep them in line with the threat of deportation to India or the Philippines if they do not please a capricious boss. In practice, absolute monarchies repress the lawyers and campaigners who might take up their cases. Now, as always, activists are silenced and workers fear the cost of speaking out.
You should be able to praise Manchester City’s football and condemn it owners. Or, if that is asking too much, you should at least be able to talk about its owners or mention the source of their wealth. If only in passing. If only the once. Instead, there is silence. With Mansour building a global consortium of clubs, Qataris owning Paris Saint-Germain and Emirate money poised to buy Newcastle United, rich dictatorial states are engaging in competitive conspicuous consumption. They are creating the world’s best clubs and may one day take them off into an oligarchs’ league. You are not “bringing politics into football” when you worry about Sheikh Mansour. You are recognising that the future of football is political.
The silence about the fate of the national game covers much of national life. Everywhere you look, you are struck by the arguments that are not being made.
Mainstream Conservatives refuse to join Tory rebels in speaking out against the dangers of Brexit. They like to boast that they are stable and commonsensical types, with no time for dangerous experiments. When confronted with the reckless nationalism of the Tory right, however, they prefer the safe option of keeping quiet until public opinion shifts. Many Labour MPs and leftwing journalists deplore Corbyn and the far left. I speak from experience when I say they talk with great eloquence in private, but will not utter a squeak of dissent in public until Corbyn’s popularity among party members falls. They, too, will speak out when, and only when, they can be certain that it is too late for speaking out to make a difference.
We think of ourselves as more liberated than our ancestors, but the same repressive mechanisms silence us. In the 18th and 19th centuries, few wanted to say that gorgeous stately homes and fine public buildings had been built because the British looted Indians and enslaved Africans. Today, it feels equally “inappropriate” – to use a modern word that stinks of Victorian prudery – to say that a beautiful football club has been built on the proceeds of exploitation.
Football supporters reserve their hatred for owners such as the Glazers, who bought Manchester United with borrowed money and siphoned off the club’s profits to pay down the debt. If billions are available to turn Manchester City or Paris Saint-Germain into world-class clubs, the fans do not care where the money came from. Nor do neutrals who love football for its own sake. For them, it is as miserablist to talk about Manchester City’s owners on Match of the Day as to talk about the factory farming of turkeys at the Christmas lunch table.
Honest sports writers fear the accusation that they are joyless puritan nags whose sole pleasure is ruining the pleasure of others. In Britain’s vacuous politics, Conservatives fear accusations of ignoring the will of the people on Brexit. Labour MPs fear their activists rather than their voters. In both the Tory and Labour cases, the worst that can happen to MPs is deselection. Mail or Express journalists who came out against Brexit would, I imagine, risk their jobs or being moved on to a different story. But no leftwing paper would sack a columnist who criticised Corbyn. The worst they would endure is frosty words from line managers and twaddle on Twitter.
We do not live in Abu Dhabi. The police do not pick up dissidents. Jailers don’t torture them. Yet peer pressure and trivial fears are enough to suppress necessary arguments. If you do not yet have a New Year resolution, it’s worth resolving to treat both with the contempt they deserve.
Wednesday 6 September 2017
'Reputation laundering' is lucrative business for London PR firms
Oppressive foreign regimes are often such valuable accounts that they are considered worth the risk of a backlash
Mark Sweney in The Guardian
From foreign governments of dubious repute and dictators looking for an image overhaul to propaganda videos and fake Wikipedia entries – if there is a PR brief of dubious ethical nature that needs a fix then more often than not it is one of London’s big-name agencies that gets the call.
Bell Pottinger’s public vilification and expulsion from its own trade body for running a social media campaign to stir up racial tension in South Africa for the wealthy Gupta family has lifted the lid on the secretive and highly lucrative business of representing controversial clients.
Over more than three decades in the business Tim Bell, Margaret Thatcher’s favourite PR man, who left Bell Pottinger last summer, has amassed something of a who’s who of what could charitably be called sensitive clients.
These have included the Pinochet Foundation and the governments of Bahrain and Egypt, and there was a $500m (£384m) contract to make fake al-Qaida videos in Iraq for the US government.
“You say words like Pinochet and ‘oh my god that is bad news’, but I don’t accept that,” Lord Bell said. “There are two sides to every story and you have to handle it so your side is prevalent. I don’t know why they are [considered] risky clients. They are only risky if what you are trying to promote an idea that isn’t sound.”
He cited Alexander Lukashenko, the Belarusian president who has been called Europe’s last dictator, as an example of when taking on such clients went wrong. “There are lots of people I regret having got involved with. Lukashenko went well for six months then changed his mind [about the strategy], behaved differently and I resigned the account.”
Foreign governments with oppressive regimes are often such valuable accounts that they are considered worth the risk of a potential PR backlash.
The Portland agency, founded by Tony Blair’s former adviser Tim Allan, has previously advised Vladimir Putin and worked with Kazakhstan, Jordan and Morocco.
A contract with Qatar, which has been heavily criticised for its record on human rights, is focused on building a government affairs function. Portland declined to comment but Allan has previously said such work is about “openness and engagement” and that opening up secretive nations is “not an affront to democracy”.
Late last year the PR guru Matthew Freud picked up a hugely valuable brief from Saudi Arabia, which has executed more than 150 people in each of the last two years.
The account, led by deputy Crown Prince Mohammed bin Salman, was pitched to a number of corporate PR firms in London. The PR agency Freuds declined to comment but at the time of winning the business said it was focused on a “programme of economic, educational and cultural modernisation to help diversify the economy and create a sustainable and prosperous future for Saudi’s young people.”
A senior PR executive said: “Tyrants, dictatorships and governments that may not be democratic, or are sliding into one-party states, tend to come to places like London, New York and Washington effectively for reputation laundering. If you are cynical about it, that is what it is.”
A number of senior PR executives agree that Bell Pottinger working for the Gupta family, which has been accused of benefiting financially from its close links to the South African president, Jacob Zuma, is not in itself a PR crime.
But stoking racial tension in a country that has struggled to achieve balance in a post-apartheid era is a particularly egregious strategy to have pursued, and not one that is rife among the dark arts employed by UK agencies.
“I think that Bell Pottinger’s work is an outlier,” said Danny Rogers, editor-in-chief of PR Week. “They are accused of creating fake news and blogs, a serious transgression. It is not typical of what the British PR industry does. Work varies from what you would consider to be institution-building and opening communications by governments to the extreme end of the sort of work Bell Pottinger was doing for the Guptas.”
Francis Ingham, director general of the trade body PRCA for the last decade, said the UK industry was “overwhelmingly ethical and professional”.
“There is always the occasional rogue element and our role is to punish them,” he said.
Ever the risk-taker, Lord Bell, after leaving the agency he co-founded, immediately looked for more of the same, setting up Sans Frontières, the same name as the arm of Bell Pottinger that handled sometimes controversial geo-political work.
Bell, who has also represented clients including the News UK chief Rebekah Brooks and the entertainer Rolf Harris, said the Bell Pottinger scandal would prompt the industry to take cover for a while but then it would be business as usual.
“There will be a lull for a while, then people will forget the controversy and people will come back,” he said.
Yet, even the hard-bitten Bell admitted there were some clients beyond the pale even for him. He turned down representing Zimbabwe’s president, Robert Mugabe, as well as the Labour party (“I wouldn’t have done a good job”).
“I wish we hadn’t taken the Guptas,” he said. “And I would like to have worked for BP, to have handled the Deepwater Horizon incident. As long as there is controversy about things there will be controversial characters. You can’t spend your life regretting what you do.”
Mark Sweney in The Guardian
From foreign governments of dubious repute and dictators looking for an image overhaul to propaganda videos and fake Wikipedia entries – if there is a PR brief of dubious ethical nature that needs a fix then more often than not it is one of London’s big-name agencies that gets the call.
Bell Pottinger’s public vilification and expulsion from its own trade body for running a social media campaign to stir up racial tension in South Africa for the wealthy Gupta family has lifted the lid on the secretive and highly lucrative business of representing controversial clients.
Over more than three decades in the business Tim Bell, Margaret Thatcher’s favourite PR man, who left Bell Pottinger last summer, has amassed something of a who’s who of what could charitably be called sensitive clients.
These have included the Pinochet Foundation and the governments of Bahrain and Egypt, and there was a $500m (£384m) contract to make fake al-Qaida videos in Iraq for the US government.
“You say words like Pinochet and ‘oh my god that is bad news’, but I don’t accept that,” Lord Bell said. “There are two sides to every story and you have to handle it so your side is prevalent. I don’t know why they are [considered] risky clients. They are only risky if what you are trying to promote an idea that isn’t sound.”
He cited Alexander Lukashenko, the Belarusian president who has been called Europe’s last dictator, as an example of when taking on such clients went wrong. “There are lots of people I regret having got involved with. Lukashenko went well for six months then changed his mind [about the strategy], behaved differently and I resigned the account.”
Foreign governments with oppressive regimes are often such valuable accounts that they are considered worth the risk of a potential PR backlash.
The Portland agency, founded by Tony Blair’s former adviser Tim Allan, has previously advised Vladimir Putin and worked with Kazakhstan, Jordan and Morocco.
A contract with Qatar, which has been heavily criticised for its record on human rights, is focused on building a government affairs function. Portland declined to comment but Allan has previously said such work is about “openness and engagement” and that opening up secretive nations is “not an affront to democracy”.
Late last year the PR guru Matthew Freud picked up a hugely valuable brief from Saudi Arabia, which has executed more than 150 people in each of the last two years.
The account, led by deputy Crown Prince Mohammed bin Salman, was pitched to a number of corporate PR firms in London. The PR agency Freuds declined to comment but at the time of winning the business said it was focused on a “programme of economic, educational and cultural modernisation to help diversify the economy and create a sustainable and prosperous future for Saudi’s young people.”
A senior PR executive said: “Tyrants, dictatorships and governments that may not be democratic, or are sliding into one-party states, tend to come to places like London, New York and Washington effectively for reputation laundering. If you are cynical about it, that is what it is.”
A number of senior PR executives agree that Bell Pottinger working for the Gupta family, which has been accused of benefiting financially from its close links to the South African president, Jacob Zuma, is not in itself a PR crime.
But stoking racial tension in a country that has struggled to achieve balance in a post-apartheid era is a particularly egregious strategy to have pursued, and not one that is rife among the dark arts employed by UK agencies.
“I think that Bell Pottinger’s work is an outlier,” said Danny Rogers, editor-in-chief of PR Week. “They are accused of creating fake news and blogs, a serious transgression. It is not typical of what the British PR industry does. Work varies from what you would consider to be institution-building and opening communications by governments to the extreme end of the sort of work Bell Pottinger was doing for the Guptas.”
Francis Ingham, director general of the trade body PRCA for the last decade, said the UK industry was “overwhelmingly ethical and professional”.
“There is always the occasional rogue element and our role is to punish them,” he said.
Ever the risk-taker, Lord Bell, after leaving the agency he co-founded, immediately looked for more of the same, setting up Sans Frontières, the same name as the arm of Bell Pottinger that handled sometimes controversial geo-political work.
Bell, who has also represented clients including the News UK chief Rebekah Brooks and the entertainer Rolf Harris, said the Bell Pottinger scandal would prompt the industry to take cover for a while but then it would be business as usual.
“There will be a lull for a while, then people will forget the controversy and people will come back,” he said.
Yet, even the hard-bitten Bell admitted there were some clients beyond the pale even for him. He turned down representing Zimbabwe’s president, Robert Mugabe, as well as the Labour party (“I wouldn’t have done a good job”).
“I wish we hadn’t taken the Guptas,” he said. “And I would like to have worked for BP, to have handled the Deepwater Horizon incident. As long as there is controversy about things there will be controversial characters. You can’t spend your life regretting what you do.”
Saturday 1 October 2016
Saudi Arabia is the flagging horse of the Gulf – but Britain is still backing it as an answer to Brexit
Patrick Cockburn in The Independent
Why does the British Government devote so much time and effort to cultivating the rulers of Bahrain, a tiny state notorious for imprisoning and torturing its critics? It is doing so when a Bahraini court is about to sentence the country’s leading human rights advocate, Nabeel Rajab, who has been held in isolation in a filthy cell full of ants and cockroaches, to as much as 15 years in prison for sending tweets criticising torture in Bahrain and the Saudi bombardment of Yemen.
Yet it has just been announced that Prince Charles and Camilla, Duchess of Cornwall, are to make an official visit to Bahrain in November with the purpose of improving relations with Britain. It is not as though Bahrain has been short of senior British visitors of late, with the International Trade Minister Liam Fox going there earlier in September to meet the Crown Prince, Prime Minister and commerce minister. And, if this was not enough, in the last few days the Foreign Office Minister of State for Europe, Sir Alan Duncan, found it necessary to pay a visit to Bahrain where he met King Hamad bin Isa al-Khalifa and the interior minister, Sheikh Rashid al-Khalifa, whose ministry is accused of being responsible for some of the worst human rights abuses on the island since the Arab Spring protests there were crushed in 2011 with the assistance of Saudi troops.
Quite why Sir Alan, who might be thought to have enough on his plate in dealing with his area of responsibility in Europe in the era of Brexit, should find it necessary to visit Bahrain remains something of mystery. Sayed Ahmed Alwadei, director of advocacy at the Bahrain Institute for Rights and Democracy, asks: “Why is Alan Duncan in Bahrain? He has no reasonable business being there as Minister of State for Europe” But Sir Alan does have a long record of befriending the Gulf monarchies, informing a journalist in July that Saudi Arabia “is not a dictatorship”.
The flurry of high level visits to Bahrain comes as Rajab, the president of the Bahrain Centre for Human Rights, awaits sentencing on next week on three charges stemming from his use of social media. These relates to Rajab tweeting and retweeting about torture in Bahrain’s Jau prison and the humanitarian crisis caused by Saudi-led bombing in Yemen. After he published an essay entitled “Letter From a Bahrain Jail” in the The New York Times a month ago, he was charged with publishing “false news and statements and malicious rumours that undermines the prestige of the kingdom”.
This “prestige” has taken a battering since 2011 when pro-democracy protesters, largely belonging to the Shia majority on the island, were savagely repressed by the security forces. Ever since, the Sunni monarchy has done everything to secure and reinforce its power, not hesitating to inflame Sunni-Shia tensions by stripping the country’s most popular Shia cleric, Sheikh Isa Qassim, of his citizenship on the grounds that he was serving the interests of a foreign power.
Repression has escalated since May with the suspension of the main Shia opposition party, al-Wifaq, and an extension to the prison sentence of its leader, Sheikh Ali Salman. The al-Khalifa dynasty presumably calculates that US and British objections to this clampdown are purely for the record and can safely be disregarded. The former Foreign Secretary Philip Hammond claimed unblushingly earlier this year that Bahrain was “travelling in the right direction” when it came to human rights and political reform. Evidently, this masquerade of concern for the rights of the majority in Bahrain is now being discarded, as indicated by the plethora of visits.
There are reasons which have nothing to do with human rights motivating the British Government, such as the recent agreement to expand a British naval base on the island with the expansion being paid for by Bahrain. In its evidence to the Select Committee on Foreign Affairs, the Government said that UK naval facilities on the island give “the Royal Navy the ability to operate not only in the Gulf but well beyond in the Red Sea, Gulf of Aden and North West Indian Ocean”. Another expert witness claimed that for Britain “the kingdom is a substitute for an aircraft carrier permanently stationed in the Gulf”.
These dreams of restored naval might are probably unrealistic, though British politicians may be particularly susceptible to them at the moment, imagining that Britain can rebalance itself politically and economically post-Brexit by closer relations with old semi-dependent allies such as the Gulf monarchies. These rulers ultimately depend on US and British support to stay in power, however many arms they buy. Bahrain matters more than it looks because it is under strong Saudi influence and what pleases its al-Khalifa rulers pleases the House of Saud.
But in kowtowing so abjectly to Saudi Arabia and the Gulf kingdoms, Britain may be betting on a flagging horse at the wrong moment. Britain, France and – with increasing misgivings – the US have gone along since 2011 with the Gulf state policy of regime change in Libya and Syria. Saudi Arabia and Qatar, in combination with Turkey, have provided crucial support for the armed opposition to Bashar al-Assad. Foreign envoys seeking to end the Syrian war since 2011 were struck by British and French adherence to the Saudi position, even though it meant a continuance of the war which has destabilised the region and to a mass exodus of refugees heading for Western Europe.
Whatever the Saudis and Gulf monarchies thought they were doing in Syria, it has not worked. They have been sawing off the branch on which they are sitting by spreading chaos and directly or indirectly supporting the rise of al-Qaeda-type organisations like Isis and al-Nusra. Likewise in their rivalry with Iran and the Shia powers, the Sunni monarchies are on the back foot, having escalated a ferocious war in Yemen which they are failing to win.
In the past week Saudi Arabia has suffered two setbacks that are as serious as any of these others: on Wednesday the US Congress voted overwhelmingly to override a presidential veto enabling the families of 9/11 victims to sue Saudi Arabia. In terms of US public opinion, the Saudi rulers are at last paying a price for their role in spreading Sunni extremism and for the bombing of Yemen. The Saudi brand is becoming toxic in the US as politicians respond to a pervasive belief among voters that there is Saudi complicity in the spread of terrorism and war.
The second Saudi setback is different, but also leaves it weaker. At the Opec conference in Algiers, Saudi Arabia dropped its long-term policy of pumping as much oil as it could, and agreed to production cuts in order to raise the price of crude. A likely motivation was simple shortage of money. The prospects for the new agreement are cloudy but it appears that Iran has got most of what it wanted in returning to its pre-sanctions production level. It is too early to see Saudi Arabia and its Gulf counterparts as on an inevitable road to decline, but their strength is ebbing.
Why does the British Government devote so much time and effort to cultivating the rulers of Bahrain, a tiny state notorious for imprisoning and torturing its critics? It is doing so when a Bahraini court is about to sentence the country’s leading human rights advocate, Nabeel Rajab, who has been held in isolation in a filthy cell full of ants and cockroaches, to as much as 15 years in prison for sending tweets criticising torture in Bahrain and the Saudi bombardment of Yemen.
Yet it has just been announced that Prince Charles and Camilla, Duchess of Cornwall, are to make an official visit to Bahrain in November with the purpose of improving relations with Britain. It is not as though Bahrain has been short of senior British visitors of late, with the International Trade Minister Liam Fox going there earlier in September to meet the Crown Prince, Prime Minister and commerce minister. And, if this was not enough, in the last few days the Foreign Office Minister of State for Europe, Sir Alan Duncan, found it necessary to pay a visit to Bahrain where he met King Hamad bin Isa al-Khalifa and the interior minister, Sheikh Rashid al-Khalifa, whose ministry is accused of being responsible for some of the worst human rights abuses on the island since the Arab Spring protests there were crushed in 2011 with the assistance of Saudi troops.
Quite why Sir Alan, who might be thought to have enough on his plate in dealing with his area of responsibility in Europe in the era of Brexit, should find it necessary to visit Bahrain remains something of mystery. Sayed Ahmed Alwadei, director of advocacy at the Bahrain Institute for Rights and Democracy, asks: “Why is Alan Duncan in Bahrain? He has no reasonable business being there as Minister of State for Europe” But Sir Alan does have a long record of befriending the Gulf monarchies, informing a journalist in July that Saudi Arabia “is not a dictatorship”.
The flurry of high level visits to Bahrain comes as Rajab, the president of the Bahrain Centre for Human Rights, awaits sentencing on next week on three charges stemming from his use of social media. These relates to Rajab tweeting and retweeting about torture in Bahrain’s Jau prison and the humanitarian crisis caused by Saudi-led bombing in Yemen. After he published an essay entitled “Letter From a Bahrain Jail” in the The New York Times a month ago, he was charged with publishing “false news and statements and malicious rumours that undermines the prestige of the kingdom”.
This “prestige” has taken a battering since 2011 when pro-democracy protesters, largely belonging to the Shia majority on the island, were savagely repressed by the security forces. Ever since, the Sunni monarchy has done everything to secure and reinforce its power, not hesitating to inflame Sunni-Shia tensions by stripping the country’s most popular Shia cleric, Sheikh Isa Qassim, of his citizenship on the grounds that he was serving the interests of a foreign power.
Repression has escalated since May with the suspension of the main Shia opposition party, al-Wifaq, and an extension to the prison sentence of its leader, Sheikh Ali Salman. The al-Khalifa dynasty presumably calculates that US and British objections to this clampdown are purely for the record and can safely be disregarded. The former Foreign Secretary Philip Hammond claimed unblushingly earlier this year that Bahrain was “travelling in the right direction” when it came to human rights and political reform. Evidently, this masquerade of concern for the rights of the majority in Bahrain is now being discarded, as indicated by the plethora of visits.
There are reasons which have nothing to do with human rights motivating the British Government, such as the recent agreement to expand a British naval base on the island with the expansion being paid for by Bahrain. In its evidence to the Select Committee on Foreign Affairs, the Government said that UK naval facilities on the island give “the Royal Navy the ability to operate not only in the Gulf but well beyond in the Red Sea, Gulf of Aden and North West Indian Ocean”. Another expert witness claimed that for Britain “the kingdom is a substitute for an aircraft carrier permanently stationed in the Gulf”.
These dreams of restored naval might are probably unrealistic, though British politicians may be particularly susceptible to them at the moment, imagining that Britain can rebalance itself politically and economically post-Brexit by closer relations with old semi-dependent allies such as the Gulf monarchies. These rulers ultimately depend on US and British support to stay in power, however many arms they buy. Bahrain matters more than it looks because it is under strong Saudi influence and what pleases its al-Khalifa rulers pleases the House of Saud.
But in kowtowing so abjectly to Saudi Arabia and the Gulf kingdoms, Britain may be betting on a flagging horse at the wrong moment. Britain, France and – with increasing misgivings – the US have gone along since 2011 with the Gulf state policy of regime change in Libya and Syria. Saudi Arabia and Qatar, in combination with Turkey, have provided crucial support for the armed opposition to Bashar al-Assad. Foreign envoys seeking to end the Syrian war since 2011 were struck by British and French adherence to the Saudi position, even though it meant a continuance of the war which has destabilised the region and to a mass exodus of refugees heading for Western Europe.
Whatever the Saudis and Gulf monarchies thought they were doing in Syria, it has not worked. They have been sawing off the branch on which they are sitting by spreading chaos and directly or indirectly supporting the rise of al-Qaeda-type organisations like Isis and al-Nusra. Likewise in their rivalry with Iran and the Shia powers, the Sunni monarchies are on the back foot, having escalated a ferocious war in Yemen which they are failing to win.
In the past week Saudi Arabia has suffered two setbacks that are as serious as any of these others: on Wednesday the US Congress voted overwhelmingly to override a presidential veto enabling the families of 9/11 victims to sue Saudi Arabia. In terms of US public opinion, the Saudi rulers are at last paying a price for their role in spreading Sunni extremism and for the bombing of Yemen. The Saudi brand is becoming toxic in the US as politicians respond to a pervasive belief among voters that there is Saudi complicity in the spread of terrorism and war.
The second Saudi setback is different, but also leaves it weaker. At the Opec conference in Algiers, Saudi Arabia dropped its long-term policy of pumping as much oil as it could, and agreed to production cuts in order to raise the price of crude. A likely motivation was simple shortage of money. The prospects for the new agreement are cloudy but it appears that Iran has got most of what it wanted in returning to its pre-sanctions production level. It is too early to see Saudi Arabia and its Gulf counterparts as on an inevitable road to decline, but their strength is ebbing.
Saturday 14 May 2016
Corrupt elites will fight hard to stop the dismantling of the looting machines from which they draw their vast wealth
States that get all their revenues from selling their oil, gas and minerals could easily turn into kleptocracies where the majority stay poor
Patrick Cockburn in The Independent
READ MORE
This is the essay on corruption that Cameron didn't want you to read
Burgis explains the devastating outcome of a government acquiring such great wealth without doing more than license foreign companies to pump oil or excavate minerals. This “creates a pot of money at the disposal of those who control the state. At extreme levels the contract between rulers and the ruled breaks down because the ruling class does not need to tax the people – so it has no need for their consent.”
He writes primarily about Africa south of the Sahara, but his remarks apply equally to the oil states of the Middle East. He rightly concludes that “the resource industry is hardwired for corruption. Kleptocracy, or government by theft, thrives. Once in power, there is little incentive to depart.” Autocracy flourishes, often same ruler staying for decades.
Most, but not all, of this is true of the Middle East oil producers. A difference is that most of these have patronage and client systems through which oil wealth funds millions of jobs. This goes a certain way in distributing oil revenues among the general population, though the benefits are unfairly skewed towards political parties or dominant sectarian and ethnic groups.
In Iraq there are seven million state employees and pensioners out of a population of 33 million who are paid $4bn a month or a big chunk of total oil income. Often these employees don’t do much or, on occasion, anything at all, but it is an exaggeration to imagine that Iraq’s oil money is all syphoned off by the ruling elite.
I remember in one poor Shia province in south Iraq talking to local officials who said that they had just persuaded the central government to pay for another 50,000 jobs, though they admitted that they had no idea what these new employees would be doing.
Reformers frequently demand that patronage be cut back in the interests of efficiency, but a more likely outcome of such a change is that a smaller proportion of the population would benefit from the state income.
READ MORE
Saudi is about to attempt its own version of Mao's Great Leap Forward
This could be the result of Deputy Crown Prince Mohammed bin Salman’s radical plans to transform the way Saudi Arabia is run and end its reliance on oil by 2030. He may well find that the way Saudi society works has long gelled and face strong resistance to changing a system in which ordinary Saudis feel entitled to some sort of job and salary.
The “resource curse” is not readily reversible, because it eliminates other forms of economic activity. The price of everything produced in an oil state is too expensive to compete with the same goods made elsewhere so oil becomes the only export. Migrants pour in as local citizens avoid manual labour or employment with poor pay and conditions.
A further consequence of the curse is that the rulers of resource rich states – like many an individual living on an unearned income – get an excessive and unrealistic idea of their own abilities. Saddam Hussein was the worst example of such megalomania, starting two disastrous wars against Iran and Kuwait. But the Shah of Iran was not far behind the Iraqi leader in grandiose ideas, blithely ordering nuclear power stations and Concorde supersonic passenger aircraft.
Muammur Gaddafi insisted that Libyans study the puerile nostrums of the Green Book, and those failing that part of the public examinations about the book, were failed generally and had to re-take all their exams again.
Can “the looting machine” in the Middle East, Africa and beyond be dismantled or made less predatory?
READ MORE
Catholic leaders are undoing the good work of Pope Francis on migrants
Its gargantuan size and centrality to the interest of ruling classes probably makes its elimination impossible, though competition, transparency and more effective bureaucratic procedures in the award of contracts might have some effect. The biggest impulse to resistance locally to official corruption has come because the fall in the price of oil and other commodities since 2014 means that the revenue cake has become too small to satisfy all the previous beneficiaries.
The mechanics and dire consequences of this system are easily explained though often masked by neo-liberal rhetoric about free competition.
In authoritarian states without accountability or a fair legal system, this approach becomes a license to loot. Corruption cannot be tamed because it is at the very heart of the system.
Patrick Cockburn in The Independent
A shooper at the Olaya mall in the Saudi capital of Riyadh. Ordinary citizens may be hit by efforts to tackle global corruption and patronageGetty
Can corruption be controlled by reform or is it so much the essential fuel sustaining political elites that it will only be ended – if it ends at all – by revolutionary change?
The answer varies according to which countries one is talking about, but in many - particularly those relying on the sale of natural resources like oil or minerals - it is surely too late to expect any incremental change for the better. Anti-corruption drives are a show to impress the outside world or to target political rivals.
The anti-corruption summit in London this week may improve transparency and disclosure, but it can scarcely be very effective against politically well-connected racketeers, busily transmuting political power into great personal wealth.
This is peculiarly easy to do in those countries in the Middle East and Africa which suffer from what economists call “the resource curse”, where states draw their revenues directly from foreign buyers of their natural resources. The process is described in compelling detail by Tom Burgis in his book, The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth. He quotes the World Bank as saying that 68 per cent of people in Nigeria and 43 per cent in Angola, respectively the first and second largest oil and gas producers in Africa, live in extreme poverty, or on less than $1.25 a day. The politically powerful live parasitically off the state’s revenues and are not accountable to anybody.
Can corruption be controlled by reform or is it so much the essential fuel sustaining political elites that it will only be ended – if it ends at all – by revolutionary change?
The answer varies according to which countries one is talking about, but in many - particularly those relying on the sale of natural resources like oil or minerals - it is surely too late to expect any incremental change for the better. Anti-corruption drives are a show to impress the outside world or to target political rivals.
The anti-corruption summit in London this week may improve transparency and disclosure, but it can scarcely be very effective against politically well-connected racketeers, busily transmuting political power into great personal wealth.
This is peculiarly easy to do in those countries in the Middle East and Africa which suffer from what economists call “the resource curse”, where states draw their revenues directly from foreign buyers of their natural resources. The process is described in compelling detail by Tom Burgis in his book, The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth. He quotes the World Bank as saying that 68 per cent of people in Nigeria and 43 per cent in Angola, respectively the first and second largest oil and gas producers in Africa, live in extreme poverty, or on less than $1.25 a day. The politically powerful live parasitically off the state’s revenues and are not accountable to anybody.
READ MORE
This is the essay on corruption that Cameron didn't want you to read
Burgis explains the devastating outcome of a government acquiring such great wealth without doing more than license foreign companies to pump oil or excavate minerals. This “creates a pot of money at the disposal of those who control the state. At extreme levels the contract between rulers and the ruled breaks down because the ruling class does not need to tax the people – so it has no need for their consent.”
He writes primarily about Africa south of the Sahara, but his remarks apply equally to the oil states of the Middle East. He rightly concludes that “the resource industry is hardwired for corruption. Kleptocracy, or government by theft, thrives. Once in power, there is little incentive to depart.” Autocracy flourishes, often same ruler staying for decades.
Most, but not all, of this is true of the Middle East oil producers. A difference is that most of these have patronage and client systems through which oil wealth funds millions of jobs. This goes a certain way in distributing oil revenues among the general population, though the benefits are unfairly skewed towards political parties or dominant sectarian and ethnic groups.
In Iraq there are seven million state employees and pensioners out of a population of 33 million who are paid $4bn a month or a big chunk of total oil income. Often these employees don’t do much or, on occasion, anything at all, but it is an exaggeration to imagine that Iraq’s oil money is all syphoned off by the ruling elite.
I remember in one poor Shia province in south Iraq talking to local officials who said that they had just persuaded the central government to pay for another 50,000 jobs, though they admitted that they had no idea what these new employees would be doing.
Reformers frequently demand that patronage be cut back in the interests of efficiency, but a more likely outcome of such a change is that a smaller proportion of the population would benefit from the state income.
READ MORE
Saudi is about to attempt its own version of Mao's Great Leap Forward
This could be the result of Deputy Crown Prince Mohammed bin Salman’s radical plans to transform the way Saudi Arabia is run and end its reliance on oil by 2030. He may well find that the way Saudi society works has long gelled and face strong resistance to changing a system in which ordinary Saudis feel entitled to some sort of job and salary.
The “resource curse” is not readily reversible, because it eliminates other forms of economic activity. The price of everything produced in an oil state is too expensive to compete with the same goods made elsewhere so oil becomes the only export. Migrants pour in as local citizens avoid manual labour or employment with poor pay and conditions.
A further consequence of the curse is that the rulers of resource rich states – like many an individual living on an unearned income – get an excessive and unrealistic idea of their own abilities. Saddam Hussein was the worst example of such megalomania, starting two disastrous wars against Iran and Kuwait. But the Shah of Iran was not far behind the Iraqi leader in grandiose ideas, blithely ordering nuclear power stations and Concorde supersonic passenger aircraft.
Muammur Gaddafi insisted that Libyans study the puerile nostrums of the Green Book, and those failing that part of the public examinations about the book, were failed generally and had to re-take all their exams again.
Can “the looting machine” in the Middle East, Africa and beyond be dismantled or made less predatory?
READ MORE
Catholic leaders are undoing the good work of Pope Francis on migrants
Its gargantuan size and centrality to the interest of ruling classes probably makes its elimination impossible, though competition, transparency and more effective bureaucratic procedures in the award of contracts might have some effect. The biggest impulse to resistance locally to official corruption has come because the fall in the price of oil and other commodities since 2014 means that the revenue cake has become too small to satisfy all the previous beneficiaries.
The mechanics and dire consequences of this system are easily explained though often masked by neo-liberal rhetoric about free competition.
In authoritarian states without accountability or a fair legal system, this approach becomes a license to loot. Corruption cannot be tamed because it is at the very heart of the system.
Tuesday 22 March 2016
Thursday 10 March 2016
Barack Obama says Saudi Arabia needs to learn to share region with Iran
Mark Landler in The Times of India
President Barack Obama believes that Saudi Arabia, one of America's most important allies in the Middle East, needs to learn how to "share" the region with its arch enemy, Iran, and that both countries are guilty of fuelling proxy wars in Syria, Iraq and Yemen.
In a series of interviews with the magazine Atlantic published on Thursday, Obama said a number of US allies in the Persian Gulf — as well as in Europe — were "free riders," eager to drag the United States into grinding sectarian conflicts that sometimes had little to do with US interests. He showed little sympathy for the Saudis, who have been threatened by the nuclear deal Obama reached with Iran.
The Saudis, Obama told Jeffrey Goldberg, the magazine's national correspondent, "need to find an effective way to share the neighbourhood and institute some sort of cold peace". Reflexively backing them against Iran, the president said, "would mean that we have to start coming in and using our military power to settle scores. And that would be in the interest neither of the United States nor of the Middle East."
Obama's frustration with much of the Arab world is not new, but rarely has he been so blunt about it. He placed his comments in the context of his broader struggle to extract the United States from the bloody morass of the Middle East so that the nation can focus on more promising, faster-growing parts of the world, like Asia and Latin America.
"If we're not talking to them," he said, referring to young people in those places, "because the only thing we're doing is figuring out how to destroy or cordon off or control the malicious, nihilistic, violent parts of humanity, then we're missing the boat."
Obama also said his support of the Nato military intervention in Libya had been a "mistake," driven in part by his erroneous belief that Britain and France would bear more of the burden of the operation. He defended his refusal not to enforce his own red line against Syria's president, Bashar Assad, even though Vice-President Joe Biden argued internally, the magazine reported, that "big nations don't bluff."
The president disputed criticism that he should have done more to resist the aggression of President Vladimir Putin of Russia in Ukraine. As a neighbour of Russia, Obama said, Ukraine was always going to matter more to Putin than to the United States. This meant that in any military confrontation between Moscow and the West, Russia was going to maintain "escalatory dominance" over its former satellite state.
"The fact is that Ukraine, which is a non-Nato country, is going to be vulnerable to military domination by Russia no matter what we do," he said. "This is an example of where we have to be very clear about what our core interests are and what we are willing to go to war for."
Obama, who has spoken regularly to Goldberg about Israel and Iran, granted him extraordinary access. The portrait that emerges from the interviews is of a president openly contemptuous of Washington's foreign-policy establishment, which he said was obsessed with preserving presidential credibility, even at the cost of blundering into ill-advised military adventures.
"There's a playbook in Washington that presidents are supposed to follow," Obama said. "And the playbook prescribes responses to different events, and these responses tend to be militarized responses." This consensus, the president continued, can lead to bad decisions. "In the midst of an international challenge like Syria," he said, "you are judged harshly if you don't follow the playbook, even if there are good reasons."
Although Obama's tone was introspective, he engaged in little second-guessing. He dismissed the argument that his failure to enforce the red line in Syria, or his broader reticence about using military force, had emboldened Russia. Putin, he noted, invaded Georgia in 2008 during the presidency of George W Bush, even though the United States had more than 100,000 troops deployed in Iraq.
Similarly, the president pushed back on the suggestion that he had not been firm enough in challenging China's aggression in the South China Sea, where it is building military installations on reefs and islands, some of which are claimed by the Philippines and other neighbours.
"I've been very explicit in saying that we have more to fear from a weakened, threatened China than a successful, rising China," Obama said.
The president refused to box himself in as a foreign-policy thinker.
"I suppose you could call me a realist in believing we can't, at any given moment, relieve all the world's misery," he said.
But he went on to describe himself as an internationalist and an idealist. Above all, Obama appeared weary of the constant demands and expectations placed on the United States.
"Free riders aggravate me," he said.
He put France and Britain in that category, at least as far as the Libya operation was concerned. Prime Minister David Cameron of Britain, he said, became distracted by other issues, while President Nicolas Sarkozy of France "wanted to trumpet the flights he was taking in the air campaign, despite the fact that we had wiped out all the air defences."
Only on the threat posed by the Islamic State did Obama express some misgivings. He likened the extremist group to the Joker in "The Dark Knight," the 2008 Batman movie. The Middle East, Obama said, was like Gotham, a corrupt metropolis controlled by a cartel of thugs.
"Then the Joker comes in and lights the whole city on fire," Obama said. "ISIL is the Joker," he added, using an acronym for the Islamic State.
Still, Obama acknowledged that immediately after the terrorist attacks in Paris and San Bernardino, California, he did not adequately reassure Americans that he understood the threat, and was confronting it.
"Every president has his strengths and weaknesses," he said. "And there is no doubt that there are times where I have not been attentive enough to feelings and emotions and politics in communicating what we're doing and how we're doing it."
President Barack Obama believes that Saudi Arabia, one of America's most important allies in the Middle East, needs to learn how to "share" the region with its arch enemy, Iran, and that both countries are guilty of fuelling proxy wars in Syria, Iraq and Yemen.
In a series of interviews with the magazine Atlantic published on Thursday, Obama said a number of US allies in the Persian Gulf — as well as in Europe — were "free riders," eager to drag the United States into grinding sectarian conflicts that sometimes had little to do with US interests. He showed little sympathy for the Saudis, who have been threatened by the nuclear deal Obama reached with Iran.
The Saudis, Obama told Jeffrey Goldberg, the magazine's national correspondent, "need to find an effective way to share the neighbourhood and institute some sort of cold peace". Reflexively backing them against Iran, the president said, "would mean that we have to start coming in and using our military power to settle scores. And that would be in the interest neither of the United States nor of the Middle East."
Obama's frustration with much of the Arab world is not new, but rarely has he been so blunt about it. He placed his comments in the context of his broader struggle to extract the United States from the bloody morass of the Middle East so that the nation can focus on more promising, faster-growing parts of the world, like Asia and Latin America.
"If we're not talking to them," he said, referring to young people in those places, "because the only thing we're doing is figuring out how to destroy or cordon off or control the malicious, nihilistic, violent parts of humanity, then we're missing the boat."
Obama also said his support of the Nato military intervention in Libya had been a "mistake," driven in part by his erroneous belief that Britain and France would bear more of the burden of the operation. He defended his refusal not to enforce his own red line against Syria's president, Bashar Assad, even though Vice-President Joe Biden argued internally, the magazine reported, that "big nations don't bluff."
The president disputed criticism that he should have done more to resist the aggression of President Vladimir Putin of Russia in Ukraine. As a neighbour of Russia, Obama said, Ukraine was always going to matter more to Putin than to the United States. This meant that in any military confrontation between Moscow and the West, Russia was going to maintain "escalatory dominance" over its former satellite state.
"The fact is that Ukraine, which is a non-Nato country, is going to be vulnerable to military domination by Russia no matter what we do," he said. "This is an example of where we have to be very clear about what our core interests are and what we are willing to go to war for."
Obama, who has spoken regularly to Goldberg about Israel and Iran, granted him extraordinary access. The portrait that emerges from the interviews is of a president openly contemptuous of Washington's foreign-policy establishment, which he said was obsessed with preserving presidential credibility, even at the cost of blundering into ill-advised military adventures.
"There's a playbook in Washington that presidents are supposed to follow," Obama said. "And the playbook prescribes responses to different events, and these responses tend to be militarized responses." This consensus, the president continued, can lead to bad decisions. "In the midst of an international challenge like Syria," he said, "you are judged harshly if you don't follow the playbook, even if there are good reasons."
Although Obama's tone was introspective, he engaged in little second-guessing. He dismissed the argument that his failure to enforce the red line in Syria, or his broader reticence about using military force, had emboldened Russia. Putin, he noted, invaded Georgia in 2008 during the presidency of George W Bush, even though the United States had more than 100,000 troops deployed in Iraq.
Similarly, the president pushed back on the suggestion that he had not been firm enough in challenging China's aggression in the South China Sea, where it is building military installations on reefs and islands, some of which are claimed by the Philippines and other neighbours.
"I've been very explicit in saying that we have more to fear from a weakened, threatened China than a successful, rising China," Obama said.
The president refused to box himself in as a foreign-policy thinker.
"I suppose you could call me a realist in believing we can't, at any given moment, relieve all the world's misery," he said.
But he went on to describe himself as an internationalist and an idealist. Above all, Obama appeared weary of the constant demands and expectations placed on the United States.
"Free riders aggravate me," he said.
He put France and Britain in that category, at least as far as the Libya operation was concerned. Prime Minister David Cameron of Britain, he said, became distracted by other issues, while President Nicolas Sarkozy of France "wanted to trumpet the flights he was taking in the air campaign, despite the fact that we had wiped out all the air defences."
Only on the threat posed by the Islamic State did Obama express some misgivings. He likened the extremist group to the Joker in "The Dark Knight," the 2008 Batman movie. The Middle East, Obama said, was like Gotham, a corrupt metropolis controlled by a cartel of thugs.
"Then the Joker comes in and lights the whole city on fire," Obama said. "ISIL is the Joker," he added, using an acronym for the Islamic State.
Still, Obama acknowledged that immediately after the terrorist attacks in Paris and San Bernardino, California, he did not adequately reassure Americans that he understood the threat, and was confronting it.
"Every president has his strengths and weaknesses," he said. "And there is no doubt that there are times where I have not been attentive enough to feelings and emotions and politics in communicating what we're doing and how we're doing it."
Wednesday 30 December 2015
Recession, retrenchment, revolution? Impact of low crude prices on oil powers
Guardian writers: Shaun Walker in Moscow Dominic Rushe in New YorkChris Stein in Lagos Chris Stephen in Tunis Sibylla Brodzinsky in Caracas Hugh Miles in Cairo and Saeed Kamali Dehghan
A glut of oil, the demise of Opec and weakening global demand combined to make 2015 the year of crashing oil prices. The cost of crude fell to levels not seen for 11 years – and the decline may have further to go.
There have been four sharp increases in the price of oil in the past four decades – in 1973, 1979, 1990 and 2008 – and each has led to a global recession. By that measure, a lower oil price should be positive for the world economy, with lower fuel costs for consumers and businesses in those countries that import crude outweighing the losses to producing nations.
But the evidence since oil prices started falling from their peak of $115 a barrel in August 2014 has not supported that thesis – or not yet. Oil producers have certainly felt the impact of the lower prices on their growth rates, their trade figures and their public finances but there has been no surge in consumer spending or business investment elsewhere.
Economist still reckon there will be a boost from a lower oil price particularly if it looks as if the lower cost of crude will be sustained.
Dhaval Joshi, an economist at BCA, a London-based research company, said: “A commodity bubble has deflated three times in the past 100 years: the first was after world war one; the second was after the 1980s oil shock; the third is happening right now.”
For the big producer countries, this is a major headache, the ramifications of which are only starting to be felt. Oil powers base their spending plans on an assumed crude price. The graphic below shows just how far below water their budgets are.
Joshi says crude prices may fall by a further 35% to reach its long-term trend. That would mean an oil price closer to $25 a barrel - and fiscal crises in some of the world’s most pivotal economies.
Saudi Arabia
The Ras Tanura oil production plant in Saudi Arabia’s eastern province. Photograph: Bilal Qabalan/AFP/Getty Images
Low oil prices are not just squeezing Saudi Arabia’s domestic budget, imposing austerity on a kingdom not used to it: it is taking its toll on Saudi support for foreign projects too.
The kingdom this week announced swingeing budget cuts for 2016 to address an alarming deficit of 15% of GDP run up this year. Subsidies for water, electricity and petroleum products are likely to be cut, and government projects reined in.
But overseas beneficiaries will face some austerity too. For years, Saudi Arabia has used its oil wealth to support friends and allies around the world, including media organisations, thinktanks, academic institutions, religious schools and charities. Countries that have traditionally benefited from Saudi largesse include Jordan, Lebanon, Bahrain, Palestine and Egypt.
But now the IMF has raised the prospect that Saudi Arabia could go bankrupt in five years without changes to its economic policy, cuts in support to foreign allies seem inevitable.
Egypt’s black-hole economy is potentially the kingdom’s most expensive foreign policy commitment. In recent years, Saudi Arabia has donated billions in cash and oil products but, despite this, the Egyptian economy, battered by war, terrorism and political instability, is facing an acute foreign currency shortage.
Speculation is mounting that Saudi financial support to Egypt is starting to dry up – something the Egyptian authorities have denied – and that this is damaging the bilateral relationship.
There have been some signs of tension. In July, Egypt’s oil minister said he had no objections to importing crude oil from Iran, a move sure to ruffle the Saudis. In September, the Saudi journalist Jamal Khashoggi – known for his closeness to the Saudi state – raised eyebrows when he said the new Egyptian culture minister, Hilmi al-Namnam, who is well known for his secularism and dislike of Wahhabi Islam, should never have been appointed.
So far, the Saudi authorities have given few clear signs about how they are planning to respond to the oil price crisis, let alone lay out a long-term plan for a post-oil Saudi Arabia.
Options under consideration are thought to include cutting construction projects, energy subsidies and public sector wages, introducing new taxes and privatisations, and issuing debt.
Another possibility foreign observers have posited is that the Saudis will be forced to unpeg the riyal from the dollar, although given the potential this would have for uncontrollable knock-on effects on the rest of the economy, this seems likely to be a last resort.
Cuts impacting on ordinary Saudis are something the government will be keen to avoid to maintain political stability, so industry, the public sector and foreign allies are likely to bear the brunt of the economic burden.
Nigeria
Nigeria’s president, Muhammadu Buhari, swears in his cabinet in November. Photograph: Afolabi Sotunde/Reuters
The oil price slump has not prevented Nigeria’s new government from unveiling big spending plans – but analysts warn that the generosity is misplaced at a time when oil prices languish below $40 a barrel.
Nigeria is Africa’s top oil producer and the World Bank estimates crude sales fund about 75% of the country’s budget.
In its £19.8bn budget proposal, the government plans to increase spending by about one quarter over last year’s budget, and to pay for it by improving tax collection and cutting the cost of government.
The budget includes £1.65bn for cash transfers to poor Nigerians. The programme was a campaign promise of the president, Muhammadu Buhari, who was elected in March on a platform of cutting corruption and weaning Nigeria’s economy off its dependence on oil revenue.
But some analysts think the proposed budget is unrealistic during times of $40 oil.
“This brings a dose of reality to a people who have extremely high expectations,” said Bismarck Rewane, the chief executive of Financial Derivatives Co. He predicted the government would have to back down on some of its promises.
Nigeria is Africa’s largest economy, but most of the money is concentrated in the hands of a wealthy elite and about two-thirds of Nigerians live in poverty, according to the United Nations development programme.
Analysis Nigeria overtakes South Africa to become Africa's largest economy. Complicated statistical recalculation adds $240bn to the economy - the equivalent of finding six Ghanas within Nigeria, says Tolu Ogunlesi
Unemployment has climbed this year, hitting 9.9% in the third quarter, according to the National Bureau of Statistics.
Chuba Ezekwesili, research analyst at Nigerian Economic Summit Group, says despite the falling price of crude, the country has been able to avoid a jump in inflation by imposing limits on the availability of foreign currency.
While other major oil producing economies have let their currencies lose value along with oil prices, Nigeria has spent its reserves to prop up the value of the naira. But Ezekwesili says they can only do that for so long.
“They’re sort of delaying the inevitable,” he said. “I feel like eventually it has to give way, and by the time it does I feel the economy is going to be hurt because a lot of businesses can’t work under those conditions.”
Ezekwesili was also sceptical of the government’s ability to generate the revenue necessary to pay for programmes such as cash transfers to the poor. He doubts the government can accomplish its goals of streamlining its costs and generating more revenue by next year.
“One thing I’ve learned about policies in Nigeria is we tend to be very optimistic but it never really works out exactly as we want it to,” Ezekwesili said.
Russia
Oil extraction at a Gazprom field in Khanty-Mansiysk, Russia. Photograph: TASS/Barcroft Media
Vladimir Putin goes into 2016 with record approval ratings but the shakiest economic outlook since he took charge. In the 15 years he has been at the helm, 2015 was the first year that real wages registered a decline, something that did not happen even during the 2008-09 financial crisis.
Oil and gas exports make up about half of the Russian budget, and the rouble rate has been strongly linked to the price of oil.
Sanctions against Russia, particularly the ban on Russian banks seeking western credit, combined with falling oil prices in late 2014 to create a perfect storm that demolished the rouble, with the currency losing half of its value against the dollar, reviving memories of previous crashes. The currency regained some of its value by spring, but falling oil prices in autumn have caused it to fall back to lows similar to those it experienced in late 2014.
Rouble in freefall despite rate hike
Falling oil prices were one of the principal reasons for the collapse in the Soviet economy, and some economists are warning of history repeating itself. Riding on a wave of high oil prices for most of his presidency, the Russian president did not expect such a sharp downturn. Last October, Putin said that if the price of oil fell below $80 a barrel, the world economy would crash. A range of other top Russian officials made similar statements, in effect ruling out the possibility that oil could fall below $70.
Some analysts say the rouble is still overvalued, and the current oil price should theoretically push the rouble down further. This is necessary to balance the budget: the fewer dollars Russia receives for the oil it sells, the higher the exchange rate needs to be for the budget to receive the requisite amount of roubles. For the budget to balance at 65 roubles, not far off the current rate, the price of oil should be $70, a recent Bank of America Merrill Lynch report found.
For ordinary Russians, it could be a tough year ahead. Those who were used to travelling abroad have already had to scale back as the rouble made the cost of visiting foreign cities prohibitive; and rising food prices have made it harder to balance the books for many families.
The 2016 budget, fixed in October, requires oil to be at $50 in order to run a 3% deficit within “acceptable” rouble rate limits, meaning if the price does not rise soon, cuts will need to be made or reserves spent. The war in Syria is an extra cost, and the announced increases in military spending are not likely to be reversed.
US
Belridge, California, is one of the oldest and largest oilfields in the US containing tens of thousands of wells, many of which are being fracked. Photograph: Les Stone/Corbis
Filling up at the gas station hasn’t been this cheap in the US since the recession. The nationwide average price of a gallon of regular is now $2.02 (£1.36), down 58 cents from this time last year, according to auto club AAA, and expected to fall further.
Scared that North America’s oil boom threatens its grip, Opec, the oil cartel, stepped up production and forced a price war that has driven oil prices down to below $35 a barrel. US consumers have benefited from lower petrol prices to the tune of about $700 a year, according to the US government, and that money is fuelling consumer spending. According to a recent report from JP Morgan, 80% of that saving is being spent on goods and services.
But the collapsing price of oil has also cast a shadow over the US energy industry – formerly one of the country’s fastest growing employers. Fracking – the controversial process of extracting oil and gas from shale rock – has become less attractive to investors as the oil price has fallen, and tens of thousands of jobs have been lost as a result. This year, the International Energy Agency said low oil prices would “slam the brakes” on the US shale industry and the impact is already being felt across the country’s oil producing areas.
The US energy sector has cut more than 90,000 jobs this year, according to outplacement company Challenger, Gray & Christmas. And while the overall US unemployment rate has continued to fall, in Texas unemployment has risen since August, according to the Bureau of Labour Statistics. In North Dakota, home of the Bakken shale oil field, more than 17% of the mining jobs – which include oil and natural gas – have disappeared in the past year. More jobs look certain to be lost in the coming months.
North of the border in Canada, things are even worse. In Alberta, “the Texas of the north”, job layoffs and the downturn of the economy have been blamed for a 30% rise in suicides between January and June, compared with 2014. In Saskatchewan, another energy-dependent region, there have been 19% more suicides this year.
Daniel Pavilonis, senior commodity broker with RJO Futures, said the situation was only likely to get worse for those employed in the US energy sector. “There are oil tankers just sitting off the coast because we don’t need more supply. We have too much,” he said. “There’s oversupply and a lack of anybody trying to tighten production because they don’t want to lose market share.”
As a result he predicts oil prices will go lower, taking more jobs with it. But for most consumers, it’s a win. Unlike other global economic trends, the oil price fall actually benefits average Americans, said Pavilonis. “This is our money,” he said. “For most people, it’s a good thing.”
Venezuela
A mural depicts President Nicolás Maduro, who, having lost the Venezuelan National Assembly, has a battle to keep economy and his leadership afloat. Photograph: Luis Robayo/AFP/Getty Images
In most of the world, falling oil prices have caused significant reductions in petrol prices. But in the country with the world’s largest oil reserves, the oil glut could force a price rise.
“It’s probably the only place in the world where with oil prices so low, they may raise gasoline prices,” says Pedro Méndez, an informal taxi driver in Caracas, the Venezuelan capital, who fills the tank of his Ford Laser for less than a dollar.
But the lower the price of oil goes, the deeper Venezuela’s economy sinks. It’s near total dependence on crude exports for hard currency has seen the government of president Nicolás Maduro struggling to try keep the economy afloat.
The political effect is already being felt. Gripped by spiraling inflation, chronic shortages of basic goods and a quickly depreciating currency, Venezuelan voters this month gave the opposition an overwhelming majority in the new legislature, which takes office in January.
Each $1 drop in oil prices results in more than $685m in lost yearly oil income for PDVSA, the state-owned oil company, according to analysts.
And every drop in crude prices means less funding for the health, education and housing and other social welfare programmes that won Maduro’s predecessor, Hugo Chávez, widespread support for his self-styled “Bolivarian revolution”.
While dwindling oil revenue hurts the social programmes, Antonio Azpurua, a financial consultant with CFS Partners/LA Group, says it could be a blessing in disguise, allowing Venezuela to wean itself of its dependence on crude. “Venezuela needs to take advantage of low oil prices to build its industrial base,” he says.
With a super-majority in the National Assembly, the opposition could reverse some of Maduro’s populist measures, which have contributed to the current economic crisis. They could also choose to raise petrol prices.
Iran
Libya
Fuel depots and tankers have been targets for years in the struggle for control of Libya and its oil resources. Photograph: EPA
Plunging oil prices are threatening disaster in Libya, where civil war has left the population depending on fast-dwindling oil revenues to survive.
Libya has Africa’s largest oil reserves and in normal times this provides 95% of the country’s export revenues, keeping the economy afloat. But civil war between rival governments at either end of the country has shattered the economy, leaving the population almost wholly dependent on revenue generated overseas.
The crash in oil prices has halved revenues, and shortages of foodstuffs and medicines – even petrol – are starting to be felt.
This cash squeeze has triggered a three-way battle for control of what remains of the country’s oil wealth. Much of Libya’s largest group of oil fields, the Sirte Basin, is now held by Islamic State, which has interposed itself between forces of the rival governments. Most of what remains is in eastern Libya, held by the elected parliament based in Tobruk.
Tobruk is using its status as the internationally recognised government to battle in foreign courts for the right to income from other producing fields, opposing the state-owned National Oil Corporation, whose headquarters remains in Tripoli, held by a rival parliament.
Tobruk has set up a second National Oil Corporation, based in eastern Libya, and last month demanded international oil companies switch payments that currently go to Tripoli.
Countering that, Tripoli’s NOC chief, Mustafa Sanallah, convened a conference in London in October calling on oil buyers to stick with him. Two of the world’s largest oil buyers, Glencore and Vitol, have agreed, but the eastern government has vowed legal action.
London courts are likely to be the proving ground for this test of wills, with both governments already gearing up for a precedent-setting high court battle, due early next year, for control of the Libya Investment Authority, the country’s £65bn sovereign wealth fund.
But whoever wins control of what remains of the oil industry may find it a pyrrhic victory. John Hamilton, director of London’s Cross-border Information, says the glut of oil on world markets and turbulence around the few remaining oil ports means Libyan oil has already been “priced out” by many buyers.
A glut of oil, the demise of Opec and weakening global demand combined to make 2015 the year of crashing oil prices. The cost of crude fell to levels not seen for 11 years – and the decline may have further to go.
There have been four sharp increases in the price of oil in the past four decades – in 1973, 1979, 1990 and 2008 – and each has led to a global recession. By that measure, a lower oil price should be positive for the world economy, with lower fuel costs for consumers and businesses in those countries that import crude outweighing the losses to producing nations.
But the evidence since oil prices started falling from their peak of $115 a barrel in August 2014 has not supported that thesis – or not yet. Oil producers have certainly felt the impact of the lower prices on their growth rates, their trade figures and their public finances but there has been no surge in consumer spending or business investment elsewhere.
Economist still reckon there will be a boost from a lower oil price particularly if it looks as if the lower cost of crude will be sustained.
Dhaval Joshi, an economist at BCA, a London-based research company, said: “A commodity bubble has deflated three times in the past 100 years: the first was after world war one; the second was after the 1980s oil shock; the third is happening right now.”
For the big producer countries, this is a major headache, the ramifications of which are only starting to be felt. Oil powers base their spending plans on an assumed crude price. The graphic below shows just how far below water their budgets are.
Joshi says crude prices may fall by a further 35% to reach its long-term trend. That would mean an oil price closer to $25 a barrel - and fiscal crises in some of the world’s most pivotal economies.
Saudi Arabia
The Ras Tanura oil production plant in Saudi Arabia’s eastern province. Photograph: Bilal Qabalan/AFP/Getty Images
Low oil prices are not just squeezing Saudi Arabia’s domestic budget, imposing austerity on a kingdom not used to it: it is taking its toll on Saudi support for foreign projects too.
The kingdom this week announced swingeing budget cuts for 2016 to address an alarming deficit of 15% of GDP run up this year. Subsidies for water, electricity and petroleum products are likely to be cut, and government projects reined in.
But overseas beneficiaries will face some austerity too. For years, Saudi Arabia has used its oil wealth to support friends and allies around the world, including media organisations, thinktanks, academic institutions, religious schools and charities. Countries that have traditionally benefited from Saudi largesse include Jordan, Lebanon, Bahrain, Palestine and Egypt.
But now the IMF has raised the prospect that Saudi Arabia could go bankrupt in five years without changes to its economic policy, cuts in support to foreign allies seem inevitable.
Egypt’s black-hole economy is potentially the kingdom’s most expensive foreign policy commitment. In recent years, Saudi Arabia has donated billions in cash and oil products but, despite this, the Egyptian economy, battered by war, terrorism and political instability, is facing an acute foreign currency shortage.
Speculation is mounting that Saudi financial support to Egypt is starting to dry up – something the Egyptian authorities have denied – and that this is damaging the bilateral relationship.
There have been some signs of tension. In July, Egypt’s oil minister said he had no objections to importing crude oil from Iran, a move sure to ruffle the Saudis. In September, the Saudi journalist Jamal Khashoggi – known for his closeness to the Saudi state – raised eyebrows when he said the new Egyptian culture minister, Hilmi al-Namnam, who is well known for his secularism and dislike of Wahhabi Islam, should never have been appointed.
So far, the Saudi authorities have given few clear signs about how they are planning to respond to the oil price crisis, let alone lay out a long-term plan for a post-oil Saudi Arabia.
Options under consideration are thought to include cutting construction projects, energy subsidies and public sector wages, introducing new taxes and privatisations, and issuing debt.
Another possibility foreign observers have posited is that the Saudis will be forced to unpeg the riyal from the dollar, although given the potential this would have for uncontrollable knock-on effects on the rest of the economy, this seems likely to be a last resort.
Cuts impacting on ordinary Saudis are something the government will be keen to avoid to maintain political stability, so industry, the public sector and foreign allies are likely to bear the brunt of the economic burden.
Nigeria
Nigeria’s president, Muhammadu Buhari, swears in his cabinet in November. Photograph: Afolabi Sotunde/Reuters
The oil price slump has not prevented Nigeria’s new government from unveiling big spending plans – but analysts warn that the generosity is misplaced at a time when oil prices languish below $40 a barrel.
Nigeria is Africa’s top oil producer and the World Bank estimates crude sales fund about 75% of the country’s budget.
In its £19.8bn budget proposal, the government plans to increase spending by about one quarter over last year’s budget, and to pay for it by improving tax collection and cutting the cost of government.
The budget includes £1.65bn for cash transfers to poor Nigerians. The programme was a campaign promise of the president, Muhammadu Buhari, who was elected in March on a platform of cutting corruption and weaning Nigeria’s economy off its dependence on oil revenue.
But some analysts think the proposed budget is unrealistic during times of $40 oil.
“This brings a dose of reality to a people who have extremely high expectations,” said Bismarck Rewane, the chief executive of Financial Derivatives Co. He predicted the government would have to back down on some of its promises.
Nigeria is Africa’s largest economy, but most of the money is concentrated in the hands of a wealthy elite and about two-thirds of Nigerians live in poverty, according to the United Nations development programme.
Analysis Nigeria overtakes South Africa to become Africa's largest economy. Complicated statistical recalculation adds $240bn to the economy - the equivalent of finding six Ghanas within Nigeria, says Tolu Ogunlesi
Unemployment has climbed this year, hitting 9.9% in the third quarter, according to the National Bureau of Statistics.
Chuba Ezekwesili, research analyst at Nigerian Economic Summit Group, says despite the falling price of crude, the country has been able to avoid a jump in inflation by imposing limits on the availability of foreign currency.
While other major oil producing economies have let their currencies lose value along with oil prices, Nigeria has spent its reserves to prop up the value of the naira. But Ezekwesili says they can only do that for so long.
“They’re sort of delaying the inevitable,” he said. “I feel like eventually it has to give way, and by the time it does I feel the economy is going to be hurt because a lot of businesses can’t work under those conditions.”
Ezekwesili was also sceptical of the government’s ability to generate the revenue necessary to pay for programmes such as cash transfers to the poor. He doubts the government can accomplish its goals of streamlining its costs and generating more revenue by next year.
“One thing I’ve learned about policies in Nigeria is we tend to be very optimistic but it never really works out exactly as we want it to,” Ezekwesili said.
Russia
Oil extraction at a Gazprom field in Khanty-Mansiysk, Russia. Photograph: TASS/Barcroft Media
Vladimir Putin goes into 2016 with record approval ratings but the shakiest economic outlook since he took charge. In the 15 years he has been at the helm, 2015 was the first year that real wages registered a decline, something that did not happen even during the 2008-09 financial crisis.
Oil and gas exports make up about half of the Russian budget, and the rouble rate has been strongly linked to the price of oil.
Sanctions against Russia, particularly the ban on Russian banks seeking western credit, combined with falling oil prices in late 2014 to create a perfect storm that demolished the rouble, with the currency losing half of its value against the dollar, reviving memories of previous crashes. The currency regained some of its value by spring, but falling oil prices in autumn have caused it to fall back to lows similar to those it experienced in late 2014.
Rouble in freefall despite rate hike
Falling oil prices were one of the principal reasons for the collapse in the Soviet economy, and some economists are warning of history repeating itself. Riding on a wave of high oil prices for most of his presidency, the Russian president did not expect such a sharp downturn. Last October, Putin said that if the price of oil fell below $80 a barrel, the world economy would crash. A range of other top Russian officials made similar statements, in effect ruling out the possibility that oil could fall below $70.
Some analysts say the rouble is still overvalued, and the current oil price should theoretically push the rouble down further. This is necessary to balance the budget: the fewer dollars Russia receives for the oil it sells, the higher the exchange rate needs to be for the budget to receive the requisite amount of roubles. For the budget to balance at 65 roubles, not far off the current rate, the price of oil should be $70, a recent Bank of America Merrill Lynch report found.
For ordinary Russians, it could be a tough year ahead. Those who were used to travelling abroad have already had to scale back as the rouble made the cost of visiting foreign cities prohibitive; and rising food prices have made it harder to balance the books for many families.
The 2016 budget, fixed in October, requires oil to be at $50 in order to run a 3% deficit within “acceptable” rouble rate limits, meaning if the price does not rise soon, cuts will need to be made or reserves spent. The war in Syria is an extra cost, and the announced increases in military spending are not likely to be reversed.
US
Belridge, California, is one of the oldest and largest oilfields in the US containing tens of thousands of wells, many of which are being fracked. Photograph: Les Stone/Corbis
Filling up at the gas station hasn’t been this cheap in the US since the recession. The nationwide average price of a gallon of regular is now $2.02 (£1.36), down 58 cents from this time last year, according to auto club AAA, and expected to fall further.
Scared that North America’s oil boom threatens its grip, Opec, the oil cartel, stepped up production and forced a price war that has driven oil prices down to below $35 a barrel. US consumers have benefited from lower petrol prices to the tune of about $700 a year, according to the US government, and that money is fuelling consumer spending. According to a recent report from JP Morgan, 80% of that saving is being spent on goods and services.
But the collapsing price of oil has also cast a shadow over the US energy industry – formerly one of the country’s fastest growing employers. Fracking – the controversial process of extracting oil and gas from shale rock – has become less attractive to investors as the oil price has fallen, and tens of thousands of jobs have been lost as a result. This year, the International Energy Agency said low oil prices would “slam the brakes” on the US shale industry and the impact is already being felt across the country’s oil producing areas.
The US energy sector has cut more than 90,000 jobs this year, according to outplacement company Challenger, Gray & Christmas. And while the overall US unemployment rate has continued to fall, in Texas unemployment has risen since August, according to the Bureau of Labour Statistics. In North Dakota, home of the Bakken shale oil field, more than 17% of the mining jobs – which include oil and natural gas – have disappeared in the past year. More jobs look certain to be lost in the coming months.
North of the border in Canada, things are even worse. In Alberta, “the Texas of the north”, job layoffs and the downturn of the economy have been blamed for a 30% rise in suicides between January and June, compared with 2014. In Saskatchewan, another energy-dependent region, there have been 19% more suicides this year.
Daniel Pavilonis, senior commodity broker with RJO Futures, said the situation was only likely to get worse for those employed in the US energy sector. “There are oil tankers just sitting off the coast because we don’t need more supply. We have too much,” he said. “There’s oversupply and a lack of anybody trying to tighten production because they don’t want to lose market share.”
As a result he predicts oil prices will go lower, taking more jobs with it. But for most consumers, it’s a win. Unlike other global economic trends, the oil price fall actually benefits average Americans, said Pavilonis. “This is our money,” he said. “For most people, it’s a good thing.”
Venezuela
A mural depicts President Nicolás Maduro, who, having lost the Venezuelan National Assembly, has a battle to keep economy and his leadership afloat. Photograph: Luis Robayo/AFP/Getty Images
In most of the world, falling oil prices have caused significant reductions in petrol prices. But in the country with the world’s largest oil reserves, the oil glut could force a price rise.
“It’s probably the only place in the world where with oil prices so low, they may raise gasoline prices,” says Pedro Méndez, an informal taxi driver in Caracas, the Venezuelan capital, who fills the tank of his Ford Laser for less than a dollar.
But the lower the price of oil goes, the deeper Venezuela’s economy sinks. It’s near total dependence on crude exports for hard currency has seen the government of president Nicolás Maduro struggling to try keep the economy afloat.
The political effect is already being felt. Gripped by spiraling inflation, chronic shortages of basic goods and a quickly depreciating currency, Venezuelan voters this month gave the opposition an overwhelming majority in the new legislature, which takes office in January.
Each $1 drop in oil prices results in more than $685m in lost yearly oil income for PDVSA, the state-owned oil company, according to analysts.
And every drop in crude prices means less funding for the health, education and housing and other social welfare programmes that won Maduro’s predecessor, Hugo Chávez, widespread support for his self-styled “Bolivarian revolution”.
While dwindling oil revenue hurts the social programmes, Antonio Azpurua, a financial consultant with CFS Partners/LA Group, says it could be a blessing in disguise, allowing Venezuela to wean itself of its dependence on crude. “Venezuela needs to take advantage of low oil prices to build its industrial base,” he says.
With a super-majority in the National Assembly, the opposition could reverse some of Maduro’s populist measures, which have contributed to the current economic crisis. They could also choose to raise petrol prices.
Iran
Iranians took to the streets to celebrate the nuclear deal which will mean they can more freely trade their oil. Photograph: Abedin Taherkenareh/EPA
Iran is rushing to implement the landmark nuclear accord in order to cash in on sanctions relief as early as next month, but the plummeting price of oil is tempering its expectations even though its economy has become less dependent on crude sales.
Tehran currently exports 1.1m barrels of oil per a but the Iranian oil minister, Bijan Zanganeh, has announced that the country is aiming to double that amount within six months of sanctions being lifted, hoping it will return to the pre-sanctions level of 2.2m.
Although the EU lifted Iranian sanctions in October after the Vienna nuclear agreement, the measures will only come into effect after what has become known as “implementation day”, the unknown date when the UN nuclear watchdog, IAEA, will verify that Iran has taken the necessary steps as outlined under the nuclear deal. Iran is expediting whatever it can to bring this date forward to as early as January.
In an effort to woo foreign investment in the post-sanctions era, Iran put a set of new lucrative oil and gas contracts, worth more than $30bn, on the market this month. But all these efforts have come at a time when global oil prices are falling as a result of a crude surplus of 2m barrels a day, a phenomenon Tehran blames on the Saudis.
“The drop in oil prices hurts all oil producers, not just Iran,” said Amir Handjani, president of PG International commodities trading services and a member of the board directors of RAK Petroleum.
“Saudi Arabia is very aware that Iran will be able to sell its crude unencumbered by sanctions on the international market very soon and will use all means at its disposal to make sure Iran doesn’t recapture the market share it lost over the past four years,” he said.
“Basically, Riyadh’s message to Tehran is simple: we can endure low oil prices for a while; can you?”
But the experience of years under sanctions has made the Iranian economy “incredibly resilient”, according to Handjani. Iran’s economy faced huge economic problems in recent years due to international sanctions imposed over Tehran’s nuclear programme. Plummeting oil prices only added to economic woes in a country with the world’s fourth-largest oil reserves.
“To be sure, low oil prices deny Tehran much needed revenue but unlike the Saudis, Iran’s economy is not solely dependent on oil exports. Oil revenue accounts for about 15% of Iran’s GDP,” Handjani told the Guardian. Sanctions have forced Iran to diversify its economy, he said. It has a large manufacturing base, IT sector, and robust agro-industries, which make its economy on the whole “much more balanced” than Saudi Arabia.
“The Iranian economy has absorbed so many shocks over the past 36 years, from war to sanctions, that the pain of low oil prices now, as it breaks from international isolation, pales in comparison.”
Without naming Saudi Arabia, Zanganeh said last week that it was clear which country had an excess of supply and that there was “no ambiguity about who they are”. On the occasion of unveiling new oil contracts, the Iranian minister said last month that his country was willing to play a major role in oil supply and was even ready to work with American companies. “The way for the presence of these companies in Iran’s oil industry is open,” he said at the Iran Petroleum Contracts Conference in Tehran.
The deputy managing director of the national Iranian oil company (NIOC) told the Guardian in September that the Iranian government was earning more from tax than oil for the first time in almost half a century as the country shifts its traditional reliance on crude to taxation revenues in the face of falling oil prices. Critics say Iran is unlikely to maintain that equation when the lifting of sanctions allows it to export more oil.
According to Opec, Iran on average was selling oil at $38.92 a barrel in November, $5.63 less than the average in October, which is the worst drop among the group’s members.
Iran is rushing to implement the landmark nuclear accord in order to cash in on sanctions relief as early as next month, but the plummeting price of oil is tempering its expectations even though its economy has become less dependent on crude sales.
Tehran currently exports 1.1m barrels of oil per a but the Iranian oil minister, Bijan Zanganeh, has announced that the country is aiming to double that amount within six months of sanctions being lifted, hoping it will return to the pre-sanctions level of 2.2m.
Although the EU lifted Iranian sanctions in October after the Vienna nuclear agreement, the measures will only come into effect after what has become known as “implementation day”, the unknown date when the UN nuclear watchdog, IAEA, will verify that Iran has taken the necessary steps as outlined under the nuclear deal. Iran is expediting whatever it can to bring this date forward to as early as January.
In an effort to woo foreign investment in the post-sanctions era, Iran put a set of new lucrative oil and gas contracts, worth more than $30bn, on the market this month. But all these efforts have come at a time when global oil prices are falling as a result of a crude surplus of 2m barrels a day, a phenomenon Tehran blames on the Saudis.
“The drop in oil prices hurts all oil producers, not just Iran,” said Amir Handjani, president of PG International commodities trading services and a member of the board directors of RAK Petroleum.
“Saudi Arabia is very aware that Iran will be able to sell its crude unencumbered by sanctions on the international market very soon and will use all means at its disposal to make sure Iran doesn’t recapture the market share it lost over the past four years,” he said.
“Basically, Riyadh’s message to Tehran is simple: we can endure low oil prices for a while; can you?”
But the experience of years under sanctions has made the Iranian economy “incredibly resilient”, according to Handjani. Iran’s economy faced huge economic problems in recent years due to international sanctions imposed over Tehran’s nuclear programme. Plummeting oil prices only added to economic woes in a country with the world’s fourth-largest oil reserves.
“To be sure, low oil prices deny Tehran much needed revenue but unlike the Saudis, Iran’s economy is not solely dependent on oil exports. Oil revenue accounts for about 15% of Iran’s GDP,” Handjani told the Guardian. Sanctions have forced Iran to diversify its economy, he said. It has a large manufacturing base, IT sector, and robust agro-industries, which make its economy on the whole “much more balanced” than Saudi Arabia.
“The Iranian economy has absorbed so many shocks over the past 36 years, from war to sanctions, that the pain of low oil prices now, as it breaks from international isolation, pales in comparison.”
Without naming Saudi Arabia, Zanganeh said last week that it was clear which country had an excess of supply and that there was “no ambiguity about who they are”. On the occasion of unveiling new oil contracts, the Iranian minister said last month that his country was willing to play a major role in oil supply and was even ready to work with American companies. “The way for the presence of these companies in Iran’s oil industry is open,” he said at the Iran Petroleum Contracts Conference in Tehran.
The deputy managing director of the national Iranian oil company (NIOC) told the Guardian in September that the Iranian government was earning more from tax than oil for the first time in almost half a century as the country shifts its traditional reliance on crude to taxation revenues in the face of falling oil prices. Critics say Iran is unlikely to maintain that equation when the lifting of sanctions allows it to export more oil.
According to Opec, Iran on average was selling oil at $38.92 a barrel in November, $5.63 less than the average in October, which is the worst drop among the group’s members.
Libya
Fuel depots and tankers have been targets for years in the struggle for control of Libya and its oil resources. Photograph: EPA
Plunging oil prices are threatening disaster in Libya, where civil war has left the population depending on fast-dwindling oil revenues to survive.
Libya has Africa’s largest oil reserves and in normal times this provides 95% of the country’s export revenues, keeping the economy afloat. But civil war between rival governments at either end of the country has shattered the economy, leaving the population almost wholly dependent on revenue generated overseas.
The crash in oil prices has halved revenues, and shortages of foodstuffs and medicines – even petrol – are starting to be felt.
This cash squeeze has triggered a three-way battle for control of what remains of the country’s oil wealth. Much of Libya’s largest group of oil fields, the Sirte Basin, is now held by Islamic State, which has interposed itself between forces of the rival governments. Most of what remains is in eastern Libya, held by the elected parliament based in Tobruk.
Tobruk is using its status as the internationally recognised government to battle in foreign courts for the right to income from other producing fields, opposing the state-owned National Oil Corporation, whose headquarters remains in Tripoli, held by a rival parliament.
Tobruk has set up a second National Oil Corporation, based in eastern Libya, and last month demanded international oil companies switch payments that currently go to Tripoli.
Countering that, Tripoli’s NOC chief, Mustafa Sanallah, convened a conference in London in October calling on oil buyers to stick with him. Two of the world’s largest oil buyers, Glencore and Vitol, have agreed, but the eastern government has vowed legal action.
London courts are likely to be the proving ground for this test of wills, with both governments already gearing up for a precedent-setting high court battle, due early next year, for control of the Libya Investment Authority, the country’s £65bn sovereign wealth fund.
But whoever wins control of what remains of the oil industry may find it a pyrrhic victory. John Hamilton, director of London’s Cross-border Information, says the glut of oil on world markets and turbulence around the few remaining oil ports means Libyan oil has already been “priced out” by many buyers.
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