Political and Economic Challenges for the GCC

1. Political and Economic Challenges for the GCC Noel Brehony Chairman Menas Associates www.menas.co.uk 15th December 2008

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

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

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

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

6. Saudi Arabia – Succession and reform • The ruling family – and succession arrangements. • Changing relationship between king, ruling family, Ulama, tribal leaders and others in the elite. • Decision making – ruling family and the Majlis al Shoura • Reform of economy, education, judiciary and incentives for investment and private sector. • Need for job creation. • Huge investment plans for upstream and downstream oil and gas and petrochemicals etc. • But concerns about capacity. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

7. Saudi Arabia – Economic challenges • Saudi budget based on oil price of $49 per barrel. Probably needs around $60 to cover all spending. • Saudi oil policy takes into account market and especially US interests. Problems within OPEC. • Investing to raise capacity to 12.5 million b/d. • Ambitious plans for downstream investment. • Highly successful economic reform programme but more needs to be done. Capacity issues. • Need for a more service based economy. • Managing recession. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

8. Saudi Arabia - terrorism • 991 terrorists are to face trial. Another 1,200 may follow. 70 per cent are Saudis. • Why Al Qa’ida established itself in Saudi Arabia. • Impact of terrorism 2003-2006. • The counter terrorist programme. • Eliminating the organised cells • Reforms in the Islamic sphere • Educational programme • Highly successful but problems remain. • Extremism will take years to eliminate. • Not enough being done to tackle societal causes. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

9. Kuwait - Al Sabah family and parliament • Al-Sabah first among equals though monopolises power. • Strains within family over succession. Sunni-Shia. • Parliament must approve major government measures. • Free elections. Political blocs but not parties. • Electoral system means that the “opposition” dominate. • Government can get only one vital measure passed per annum. • Constant problems between government and parliament • Frequent resignations of government and ministers. • Reform is needed but no one has a strategy. • Economic reform programme has been seriously delayed. • Oil wealth and investment income sufficient to prevent problems. • But there are difficulties with political Islamists and Shia . • Iraq and Iran are close neighbours. • Importance of relationship with US. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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

11. UAE – Federation and Abu Dhabi • UAE Federation works because Abu Dhabi and Dubai need each other and despite rivalry the key leaders get on well. Federal structure is useful to both. Very limited “parliaments” • Situation inside the two ruling families is stable with MbR and MBZ dominating but involving other relatives. • They have similar personalities: dynamic, decisive and work with small teams of trusted advisers. • Abu Dhabi with its oil wealth finances smaller emirates. But there are problems over priorities. • Abu Dhabi focuses on industrialisation and works with major international companies to make Abu Dhabi an Arab centre. • Major decisions on defence, security and foreign policy taken by Abu Dhabi – but in consultation. • Job creation for nationals. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

12. UAE – Challenges to the Dubai model? • Dubai sees itself as international city providing facilities and opportunities for investment. • In the past Dubai got others to invest but now uses debt to finance developments. Recession may hit Dubai quite hard. • Abu Dhabi will assist but will there be a political price? • Both need to generate more jobs for nationals and reduce the size of the expatriate population ( 90 per cent in Dubai) and treat the labour force better. • UAE will remain stable as long as the leaders in Abu Dhabi and Dubai get on. • Threats come from regional developments. Terrorism has not been a problem. Political Overview for 2009: MENA & South America; Charles Gurdon; www.menas.co.uk

13. Qatar – New parliament in 2009 • Qatar is well managed, highly prosperous and very ambitious. • There have been past problems within the large ruling family. Some potential for future problems. • Some tensions in society on Islamic issues • Constitutional reform – free municipal elections but elections for the Majlis al Shoura repeatedly postponed. No firm date yet. • The Majlis will provide for elections for 30 out of 45 seats. • Constitution gives it greater considerable powers, • Otherwise model for economic and social development. • Gas, North Field and Iran. • Now has better relations with Saudi Arabia but region still uncomfortable over Al Jazeera television. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

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

15. Iran • 75 million with substantial armed forces, an Islamic government and Shia present formidable challenge to GCC states. • Iranian nuclear ambitions – and the GCC nuclear research programme. • Iranian ambitions in the Middle East – Syria, Lebanon ( elections in May 2009) and Palestine. • Iranian role in the GCC? • Iranian activity in Iraq. • Concerns about a possible Israeli attack on Iran – and what Iran might do in return. • Saudi Arabia leads GCC efforts to deal with Iran diplomatically, counter its ambitions in the region and work with US and other allies to neutralise a potential Iranian threat. • Presidential elections in 2009. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

16. Iraq • Military surge has worked; central government is stronger; and some key measures have been passed. • But major problems still to be tackled: e.g. how to involve the Sunnis and what to do about the Kurds over Kirkuk. • Divisions within the Shia • Race to build up Iraqi army and deal with inter-communal problems before the US pull out starts. • Local elections in early 2009 • Iranian interference is still a problem. • Events in Iraq will have major influence on GCC. • GCC states seem uncertain of how to manage Iraq. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

17. Yemen – a looming problem for the GCC • Major economic problems in a desperately poor country. • Political system is starting to break down. • This could accelerate. • Al Qa’ida is present and has imported terrorists from Iraq and Saudi Arabia because it senses an opportunity in Yemen. • Big potential problem for GCC – a poor country of >25 million people on its doorstep. • Not to mention the difficulties in Somalia and problems of piracy. Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

18. GCC and the world • Importance of US defence and security relationship for all. • Backed up by UK, France and EU • Changing pattern of investment and trade towards Asia • But not as yet defence and security content to Asian relationships. • Defence and security will take priority as long as the regional threats remain. • But GCC will continue to diversify economic, trading and business links. • Saudi Arabia and the UAE also look to wider region including Somalia. • Saudi Arabia the most active in international Islamic politics Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk

19. Thank you for your attention Dr Noel Brehony Chairman Menas Associates Ltd 16-19 Southampton Place London WC1A 2AJ, UK T +44-(0)207-745-7190 charles.gurdon@menas.co.uk www.menas.co.uk Seminar Singapore 15 December, 2009; Noel Brehony; www.menas.co.uk