Saudi Arabia forced to introduce taxes as oil revenues plummet

Saudi Arabia residents have long enjoyed a tax-free existence supplemented by heavy subsidies on some products. With the steep decline in oil prices and revenues this is all changing.

Last June, the Saudi government agreed with the six-member Gulf Cooperation Council(GCC) to levy a 5 percent tax on certain goods. The GCC countries have already agreed to implement selective taxes on tobacco, and soft and energy drinks this year. The decline in oil revenue has led the Saudis to attempt to broaden its investment base so that it will rely less on oil revenue in the future.

The Saudi government is also trying to cut back on expenditures. It has frozen several major building projects and imposed a wage freeze on civil servants. Even cabinet ministers' salaries were cut. The government also cut fuel and utilities subsidies. Last year there was a record $97 billion deficit. The kingdom aims to balance its budget by 2020. The official Saudi Press agency said that the cabinet "had decided to approve the unified agreement for value-added tax" that would be implemented throughout the Gulf Cooperation Council (GCC) and that a royal decree had been prepared. The International Monetary Fund (IMF) had urged the GCC countries to adopt revenue-raising measures that included excise and value-added taxes as a means of helping them to adjust to low oil prices.

The value-added tax on tobacco and its products will be a whopping 100 percent according to an article in Al Arabiya. Dr Mohammed Yamani, who chairs an NGO that helps smokers quit smoking said that the tax should reduce the number of smokers saying: “The move is a positive and important step toward combating the unhealthy habit." 14 percent of Saudi teenagers and 7 percent of Saudi women smoke. Yamani said the tax on tobacco and products would be imposed in the second quarter of 2017. The same level of taxation is to be imposed on sodas and energy drinks.

There has been talk of taxes on remittances of expats to their home countries but so far no action has been taken. A sharp decline of oil revenue has taken place as the price of oil more than halved from over $114 dollars a barrel in 2014 to a little over $55 dollars a barrel now.

Former Yemeni president in talks with US, UK, and UAE diplomats

Representatives of Al Abdullah Saleh, the former president of Yemen are talking with diplomats from the United States, Britain, and the United Arab Emirates in negotiations that may help end the war in Yemen, according to a member of Saleh's party.

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Saleh himself along with his son are sanctioned by the UN so he will not personally be at the talks. Saleh and his son are still powerful in Yemen with many of the Yemeni armed forces loyal to Saleh. Saleh has allied his group with the Houthi rebels. Without his support the Houthis would likely not have advanced nearly as far as they have especially in the south of the country. Perhaps, Saleh is contemplating changing his allegiance again in order to have more power within any new government. While he was president, Saleh often fought with the Houthis whose stronghold is in the north of Yemen. The Houthis are Shia while the majority of Yemenis are Sunni Muslims.

The exiled president Mansour Hadi, was vice-president under Saleh and took power in a deal brokered by the Gulf Cooperation Council(GCC) with the support of the US. Saleh and his cronies were shielded from prosecution for any crimes committed during the Arab Spring demonstrations in which many protesters were killed by Saleh's security forces. Later, Hadi was elected president but was the sole candidate. Saleh has continued to influence Yemeni politics and when the Houthi's occupied the capital, Saleh provided support with troops loyal to him. He has continued that support since the Houthis took power after failing to negotiate a new government acceptable to them. Hadi escaped from Sanaa to Aden where he tried to set up a government but was forced out of the city to exile in Ryadh Saudi Arabia. Recently some ministers have returned to Aden. The airport is now open again.

Adel Shuja, a leader of Saleh's Congress party said:"There are negotiations in Cairo between the leaders of the Congress party and diplomats from the United States, Britain and the UAE in order to find a peaceful solution to the crisis in Yemen...These negotiations have made significant progress so far."

These negotiations are taking place just as local forces, loyal to the exiled government, have made gains in the south taking over the port city of Aden and reopening the airport at Aden. The loss of the port happened within just a few days suggesting that perhaps Saleh had ordered his forces to withdraw.

Saleh was able to rule Yemen for 33 years by playing off rival armed and tribal groups against one another. He may be at it again, even though before he relinquished power he was almost killed in an attack on the presidential palace and sought medical treatment in Saudi Arabia and the US. The Houthis will be unable to hold territory in the south without help from Saleh. However, they also had been in talks earlier in Oman with members of the Southern Movement who are active in the fight against them in Aden. Oman has been key to mediation between the warring groups. There may be a concerted effort on the part of both rebel groups to reach a political solution as they realize continued military actions are devastating the country without much hope of final military success for either side. There will probably be increased pressure to give the south more autonomy. The separatist Southern Movement that has been a key force opposed to the Houthis often clashed with the former Hadi government. They now have significant numbers of armed fighters who will demand some political power in any new government.

US officials meet with Yemeni Houthi rebel representatives in Oman

Anne Patterson, the Obama administration's top diplomat for the Near East, met last week in Oman with representatives of the Houthi rebels according to Marie Harf a State Department spokesperson.

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Oman has not joined with the Saudi-led coalition that is bombing Houthi-held areas in Yemen. This is the first official contact between US officials and the rebels who control much of the western area of Yemen including the capital Sanaa. While there were attempts to form a government agreeable to the Houthis, negotiations failed. President Hadi was under virtual house arrest in Sanaa after he resigned. He later was able to flee to Aden in the south where he declared he was still president. However, he was driven out and forced to flee to Saudi Arabia to the safety of Riyadh the capital. The Saudis together with many in the Gulf Cooperation Council are trying to force his reinstatement by attacking the Houthis, so far with no success. The conflict has led to a humanitarian disaster as people flee the fighting and even Yemen. Al Qaeda in the Arab Peninsula(AQAP) are capturing more territory as they clash with the Houthis and often find allies in local Sunni tribes. The Houthis are Shia and are supported by Iran.

The US takes the view that there can be only a political solution to the conflict and is trying to convince all parties including the rebels that they should take part in a peace process. President Hadi has demanded up to now that the Houthis give up at least some of the territories they have seized as a condition for his attending peace talks. Two main Houthi leaders and their strong supporter former president Saleh are sanctioned by the UN. It is not clear that they could even attend the talks.

The US is hardly neutral in the conflict as it has been providing intelligence and advice on targets to the Saudis. It has also continued drone attacks on AQAP even though the Saudis seem not to have bombed any AQAP-held areas. AQAP is one of the most effective forces fighting against the Houthis and are preventing them from advancing further to the east of Yemen. AQAP has virtually taken one province and its capital city. It is not clear whether the US mission was undertaken with the blessing of the Saudis. So far they have made no comment on developments. However, Secretary of State John Kerry and director of the CIA John Brennan met with their Saudi counterparts recently and Obama hosted a meeting with Saudi princes last month at Camp David. The US is no doubt worried that the Saudi military campaign may be hurting their political aim of re-instating President Hadi.

The big powers, such as the US and Saudi Arabia who helped put Hadi in power and supported him may have an unrealistic assessment of what their superior military and other powers can achieve in the situation. Even in areas in the south where the Houthis are facing fierce opposition it is often from forces of the Southern Movement, who are no friends of Hadi, and want a separate South Yemen as was the case in the past. AQAP has been able to take advantage of the situation to gain considerable influence and territory as it confronts the Houthis. No military solution seems possible without extensive intervention on the ground.

The leader of Oman, Sultan Qaboos bin Said, was instrumental in making arrangements for the talks. US officials helped to arrange for several Houthi representatives to fly to Muscat for the talks. As well as Anne Patterson, US Ambassador to Yemen Matthew Tueller also participated in the talks. The US hopes it may be able to broker a permanent ceasefire and then peace talks.

The released US journalist suffered a back injury and is in stable condition in an Oman hospital. His mother said she had talked to him and that he was doing well considering his ordeal. State Department spokesperson, Marie Harf, said that he had been released through mediation of Oman authorities. Oman is one Yemeni neighbour that is trying to play a positive role in this conflict rather than creating more havoc in Yemen.

Yemen president suggests peace talks be held in Saudi Arabia as political crisis continues

The "president" of Yemen, and US ally, Mansour Hadi proposed Ryadh, Saudi Arabia, as the site for UN-sponsored talks between Yemeni political groups and Houthi rebels.

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The Houthi rebels control the north of the country including the capital Sanaa. Hadi had earlier resigned from the presidency but after fleeing from Sanaa, where he was confined to his house by the Houthis, to the port city of Aden in the south, he "took back" his resignation and claimed to still be president of Yemen. The Houthis took power when UN-sponsored talks failed to come up with a political solution that was satisfactory to them. As a Shiite minority within a Sunni majority country, the Houthis hoped to control the formation of a government on their terms. When this did not seem to be working out, they seized power.

The Houthi rebels have wanted to hold the UN talks in Sanaa but Hadi had wanted to move the talks to Aden or Taiz both in areas of the south that the Houthis do not control. The alternative site now offered by Hadi would be in the headquarters of the Gulf Cooperation Council in Ryadh. This is the same group that negotiated for ex-president Abdullah Saleh to step down in favour of Hadi his vice-president. Saleh relinquished power in return for amnesty for any crimes he and his cronies committed during the Arab Spring protests in Yemen against his rule. Many protesters were killed by security forces. The deal was supported by Saudi Arabia and the US. Hadi later ran for president unopposed and was elected. He has been a staunch ally of the US.

Saleh was formerly supported by Saudi Arabia and the US. In 2011 he barely escaped with his life after an attack on his presidential compound and spent considerable time recovering both in Saudi Arabia and in the US. After returning to Yemen he has helped the Houthis, whom he formerly attacked while in power. All of this is anathema to the powers who believe that they should determine the political process in Yemen, the US, Saudi Arabia, and the Gulf Cooperation Council. A UN resolution was passed intended to punish Saleh and his Houthi allies:The United Nations Security Council imposed targeted sanctions on Friday on Yemen's former President Ali Abdullah Saleh and two senior Houthi rebel leaders for threatening the peace and stability of the country and obstructing the political process.Lithuanian U.N. Ambassador Raimonda Murmokaite, chair of the council's Yemen sanctions committee, said all 15 members had agreed to blacklist Saleh and Houthi rebel military leaders Abd al-Khaliq al-Huthi and Abdullah Yahya al Hakim. The three men are now subject to a global travel ban and asset freeze.

Now the UN is sponsoring dialogue between the Houthis, Saleh, and their opponents.

That Hadi should suggest Ryadh and the Gulf Cooperation Headquarters as a site for talks is ludicrous. He surely knows that this suggestion would be rejected. What the suggestion shows is that Hadi's power comes not so much from within Yemen as from outside. Both the Houthis and the General People’s Congress (GPC) rejected Hadi's proposal.The GPC is Saleh's political party. The party actually supported Hadi's bid for the presidency in 2012. Saleh still.has considerable influence in the army as well as in politics.

Hadi insists that talks must be moved from Sanaa, the capital, because it is an occupied city. He said: “It’s impossible for the negotiations to continue in Sana’a and some parties have refused to hold talks in Aden or Taiz. Therefore, the negotiations must be held in Riyadh." In response, a spokesperson for the Houthis noted: “Hadi’s call to move [the talks] to Riyadh is an attempt to obstruct the negotiations. We all know that Saudi Arabia considers Ansar Allah [the Houthis] a terrorist group, so how can we go there to participate in negotiations?..We participated in the National Dialogue Conference [NDC] in Sana’a and two of our representatives, Ahmed Sharaf Al-Deen and Abdulkarim Jadban, were assassinated. But we didn’t demand that the dialogue be moved. Would Hadi and the other parties agree to hold negotiations in Sa’ada or Tehran?”The Houthis are supported by Iran. Sa'ada is the main base of the Houthis in the north of Yemen. A GPC spokesperson said that the talks should take place somewhere in Yemen and noted that Hadi himself had insisted that the National Dialogue Conference called to chart Yemen's future transition to democracy had to be held in Yemen. Apparently, now he is more interested in pleasing his foreign backers.

The US ambassador to Yemen, Matthew Tueller, is now working out of Jeddah, Saudi Arabia, as the US closed the embassy in Sanaa in February. However, he visited Hadi in Aden and declared that Hadi was still the legitimate president of Yemen. Several Arab countries are planning on moving their embassies to Aden. The Houthis are likely to agree to participate in talks to solve the crisis even though they are proceeding with the plans outlined in their constitutional declaration when they took power. All sides except Al Qaeda in the Arab Peninsula and a few militant Sunni tribes would like a political solution. The separatists in the south may use the situation as a way of achieving more autonomy or even independence. The Houthis want to establish themselves as power brokers. Unless the US, Saudi Arabia, and the GCC are willing to compromise and accept the fact that they simply cannot impose their own will on Yemen, a long and costly civil conflict could ensue.

Conflict continues in Yemen

The National Dialogue Conference(NDC) in Yemen was held between March 18, 2013 and January 24, 2014. The Conference was a transitional dialogue sponsored by the Gulf Cooperation Council(GCC) subsequent to former president Saleh yielding power.

The NDC was plagued by problems from the beginning. Many in the southern separatist movement refused to join in the dialogue. There were problems with the Houthi separatists in the north as well who ultimately withdrew after two of their representatives were assassinated. The Dialogue members agreed that Yemen would become a federal system with six regions. Sanaa the capital and Aden the former capital of a separate southern state would also have special status. The federal system was rejected by southern leaders including Ali Ahmed who had been part of the NDC.

Many praised the dialogue including Marie Harf who was then a spokesperson for the US State Dept.: "The debates, discussions and compromises throughout the National Dialogue process are evidence of the will of the Yemeni people to work together constructively for the future of their country.” The Houthi leaders and the southern separatist leaders, both those who attended the NDC and those who did not, rejected the federal system proposed. Since that time, the Houthi's have extended their power from the north southward seizing the capital Sanaa and west to a port on the Red Sea. According to the Abaad Centre for Strategic Studies the Shia Houthi rebels now control up to 70 percent of the armed forces. The political transition, following on the transfer of power to vice-president and now president Mansour Hadi from former president Saleh, has failed.

 The Houthis are now threatening to take over the province of Marib that is rich in oil. Some analysts think that former president Saleh, who retains influence in the armed forces, allied with the Houthis in their advance outside areas in the north which they had held for a considerable time. The Houthis are a Shia minority in Yemen and are supported by Iran. It is unlikely that they could successfully rule the entire country which is majority Sunni. More likely, their aim is to be able to ensure that any Yemeni government recognizes their power and interest and is dependent upon their cooperation.

The situation is complicated by the strength of Al Qaeda in the Arab Peninsula (AQAP) in Yemen. The advance of the Houthis into Sunni territory has led some Sunni tribes to ally with AQAP in a unified front to resist and fight the Houthis. AQAP not only attacks the Houthis but has been in a continual guerrilla war with the Hadi government constantly launching attacks on the military and government facilities.

 An article in Al Jazeera by Sharif Nashashibi, a prominent journalist on Arab affairs, discusses the difficult scenarios the Gulf Cooperation Council could face in Yemen. One possibility is that the Houthis could extend their control in Yemen. Taking over the oil-rich province of Marib would help achieve this. Yemen would then come more into the Iranian orbit and away from the control of he GCC and Saudi Arabia.

 Given the increasing resistance to Houthi expansion a more likely scenario is a wider civil war, with Houthis, and government forces, fighting with Sunni tribes and AQAP. The southern separatists might choose to exploit this chaos to form their own independent state in the south. Saudi Arabia shares a long border with Yemen and violence within Yemen could cross the border. The Saudis have had sporadic conflict with the Houthis in the past. Sectarian tensions between Shia and Sunnis could also increase in countries such as Bahrain where the Sunnis rule but the Shia are the majority. Some parts of eastern Saudi Arabia could also see more conflict with Shia groups.

 The increased power of AQAP also poses a problem for Saudi Arabia which has itself fought a long internal battle to keep Al Qaeda forces at bay. The Islamic State portrays itself as a force that will combat Shia expansion and this could help it recruit adherents in Yemen. The GCC countries are reportedly suspending economic aid and also military aid to Yemen. This move may make the situation worse rather than better and increase the importance of Iranian aid.

Unlike countries such as Bahrain where the Shia are not a well-armed force and have little control of the government, the Houthis in Yemen are well-armed and have government support. Military intervention by the GCC in such a situation could be a complete disaster and no doubt a huge help to AQAP. No one in Yemen is seeking outside intervention.

Nashashibi believes that the best the GCC can hope for in this situation is to try and limit spillover effects from Yemen conflicts into their member countries. In Sanaa, the capital, there were large demonstrations on Saturday demanding the removal of Houthi fighters from the capital but of President Hadi as well. They also denounced an attack on a police academy on Wednesday that killed 38 people. The protests are called the Rejection movement and took place in other cities as well. The prospect for Yemen appears to be continued instability and an uncertain future.

Saudi Arabia donates $2.2 billion in oil products to help Yemen

At a donor's conference in Riyadh the Saudi Arabian minister for external affairs announced a gift of oil and oil products to Yemen worth $2.2 billion to meet domestic demand in the country. The Saudi deputy minister said the donation was necessary to keep Yemen running. Yemen has oil and gas resources of its own but much production has beenj shut down because of the security situation.

Unknown attackers just recently blew up a gas pipeline that fed liquefied natural gas to an export terminal. The pipeline had been repaired just a few days ago after previous sabotage had shut it down in August. A bomb was planted underneath the pipeline and exploded.

Saudi Arabia has called for aid to help Yemen which is in dire economic straits. Saudi Arabia and the Gulf Cooperation Council with the support of the U.S. brokered a deal that saw former president Saleh step down. His vice-president Hadi then took power and eventually was elected president unopposed. Hadi has the support of the Saudis, GCC, and the U.S. The U.S. has been active in actions against Islamic militants often linked to Al Qaeda in Yemen. However the economy is in ruins and there is a humanitarian disaster as many people have fled from areas of conflict.

Saudi Arabia asked for up to $11 billion in aid to support the country in its planned transition to democracy. The meeting is at the level of experts and ambassadors. In May Saudi Arabia pledged $3..25 billion in aid and other donors pledged a sum total of $4 billion. Yemen's Planning and Internaitonal Cooperation MInister said that Yemen requires $11 billion in aid. Mohamed al-Saadi said:“Our needs are $14 billion. The Yemeni government can cover some part, but there remains a gap of $11 billion.”

Wael Zakout World Bank manager for Yemen said:“We hope to raise U.S. $6 billion during the donor meeting to cover the transition period lasting until the middle of 2014..We will hold another donor conference after 2014 to raise the rest of the needed funds." The donors meeting will discuss reconstruction, humanitarian needs, as well as security.

Yemen faces separatist movements in both the north and south as well as conflict with Al Qaeda-linked Islamic radicals. There are plans for political dialogue and elections. There will be a meeting in New York of the Friends of Yemen next month. One can judge who is helping run Yemen by the locations of donor conferences! For more seethis article. I

Yemen: Troops loyal to ousted general surround airport in the capital.

Troops loyal to General al-Ahmar threatened to fire on incoming and outgoing planes. The General was fired by the government in a purge of some Saleh loyalists. Saleh was the former president who gave up power in a deal brokered by the Gulf Cooperation Council.

General al-Ahmar has refused to step down. The airport is surrounded by troops loyal to the general. A chief of the Hamdan tribe who are loyal to Saleh is said to be leading the group.

In a message to his troops the general said the presidential decrees would not be implemented unless the defense minister and the chief of staff left their posts. One wonders who is firing who!

These moves come as there are daily protests demanding that Saleh relatives resign from their positions. General al-Ahmar is a half-brother of Saleh. Of course president Hadi himself was Saleh's vice-president before running unchallenged for president!

The editor of a Yemeni newspaper claimed that Hadi had no other choice but to make the dismissals. He said:“He became president under one condition: he would be able to start a national dialogue a week after he takes power,” “It's been a month and a half and the opposition factions have refused to enter any dialogue with President Hadi unless military reforms take place immediately.” Hadi dismissed another Saleh relative, a nephew, who was head of the presidential guard. No doubt he will feel safer now! However the nephew also refused to quit even though he was offered another position in the military.

The head of the GCC backed Hadi in his moves. The GCC brokered the deal that led to Saleh's resignation. However Saleh still retains a great deal of influence in the new government. The GCC and the U.S. may find themselves enmeshed in tribal rivalries they may not be able to control. Restructuring of the army was one condition of the GCC deal.

If Hadi moves too far he risks losing power entirely. Saleh's son Ahmed still heads the elite forces of the Republican Guard and a nephew is head of central security forces. While Hadi may be favored by the U.S. and GCC he risks plunging Yemen into a civil war if he moves against his own former comrades. In a February speech Hadi said he would make"radical reforms" in the army. He also vowed to fight Al-Qaeda. The U.S. has been happy to help Hadi with the latter task. For more see this article

Yemen: Protesters criticize U.S. Ambassador's statemement

     Attacks on protesters by Yemeni forces killed at least nine people on Saturday. The protesters marched from Taiz to the capital Sanaa. The protesters want Saleh and his cronies to be held accountable for their crackdown against protests that killed and wounded many. Instead Saleh, his family, and his cronies have been granted immunity from prosecution in a deal supported by Saudi Arabia and the U.S. The deal transferred power to Saleh's vice president Major General Hadi.
     The U.S. ambassador Gerald Feierstein told a press conference that the protest was “not peaceful,”  and was intended to “provoke a violent response.” Feierstein also said that “if 2,000 people decided to protest against the White House in the US, we do not consider it a peaceful act and will not allow this.”  The U.S. seems solidly behind the new regime that includes many of the old guard including members of Saleh's family.
   Saleh himself is said to be considering travel to the U.S. The U.S. has said he cannot come except for medical reasons. No doubt that will be the excuse anyway! The treatment of Saleh contrasts with the treatment of other dictators who have killed their own people such as Assad or Gadaffi. While Saleh's killings have not been as extensive they nevertheless have been real enough and yet the U.S. and the GCC have been anxious to ensure that he steps down with impunity and that the old guard guides any transition.
    Hadi is to run unopposed in the next presidential election. Much of the official opposition has been bought off by being granted a few places in the interim government. However, those who started the protests against Saleh are not fooled by what happened and are continuing their opposition in the streets. The U.S. has made it clear whose side they are on. For more see this article.

Of GCC state oil companies and geopolitics

This is from the Khaleej Times. Leave it to an investment banker to set forth the connections between Gulf oil and Big oil and the goings on in national oil companies. An article such as this is worth a dozen of the fluff stuff that passes for reporting in the mainstream press. The GCC is the Gulf States Co-operation Council a body that will merit nary a mention in the puff stuff of the western press.

Of GCC state oil companies and geopolitics
BY MATEIN KHALID

27 December 2007



GEOPOLITICS has shaped the creation, operations and worldview of Middle East owned oil companies ever since the earliest regional oil strikes in Dammam, Persia’s Masjid Suleiman and Kirkuk in the 1930s. Saudi Aramco, Kuwait Petroleum, National Iran Oil Company (NIOC), Algeria’s Sonatrach and Abu Dhabi’s ADNOC own 600 billion barrels of crude oil, half the world’s proven reserves.


Qatargas operates the world’s largest LNG export terminal and owns the world’s third largest offshore oil reserves after Russia and Iran. Middle East oil colossi will determine both the future of the oil and gas markets but also profoundly shape the region’s international relations.

Saudi Aramco, created out of the historic security alliance between the House of Saud and the United States, has acted as the dominant, moderating force in OPEC, the proverbial central bank of black gold. Saudi Arabia, as the swing producer in OPEC, saved the world from catastrophic oil shocks when the Shah of Iran lost his Peacock Throne in 1979, Saddam Hussein invaded Iran in 1980 and Kuwait in 1990, when Hugo Chavez, the Iraqi insurgents and the Niger Delta’s Ogoni rebels triggered speculative oil spirals in 2007.

Saudi Arabia is unique in the energy market because it is not only the world’s largest exporter and lowest cost producer, but also because the Kingdom alone can boost output at short notice. Yet Saudi oilfields, including Ghawar, are ageing. What if Saudi Aramco has overestimated its reserves and future spare capacity, as Houston investment banker Matt Simmons argues in his book, Twilight in the Desert? What if there is no Saudi swing producer to moderate a future oil supply shock?

Iran’s NIOC, born out of nationalist Premier Mohammed Mossadegh’s epic battles with BP and a CIA- M16 countercoup that restored the Shah to power, has a pathological mistrust of Big Oil, particularly the Anglo- American firms. NIOC’s xenophobia was reinforced by the Iranian revolution, the tanker war with Baathist Iraq in the Gulf and the continual threat of American sanctions, military strikes and international banking freezes. Of course, NIOC has also been riddled with corruption and mismanagement on such a scale that its technological capabilities are obsolete, its foreign joint ventures threatened by a suspicious Majlis and White House’s sanctions, its domestic subsidies on gasoline making pollution, smuggling and billion dollar mullah slush funds in the Swiss Alps inevitable.

Kuwait Petroleum shares NIOC’s problem with parliamentary interference. The Kuwaiti Parliament has effectively torpedoed Project Kuwait, foreign investments in Kuwait’s northern oilfields and KPC has often become the victim of power struggles between the tribal / Islamist blocs in the legislature and the Al Sabah ruling clan. Kuwait Petroleum is still traumatised by the impact of Iraq’s invasion in August 1990 (Among Baghdad’s cassus belli was KPC overproduction and attempts to exploits two disputed oilfields!) and the exodus of thousands of Palestinian, Algerian and Yemeni oil engineers and managers from the emirate. Kuwait Petroleum was created after the emirate nationalised the concessions of British Petroleum and Gulf Oil.

Abu Dhabi’s ADNOC has proven the most reliable partner for international oil and gas companies, creating a network of joint venture companies with Big Oil from exploration, production, LNG to shipping and even equity stakes in foreign oil companies from Austria to Canada. Without a contentious Parliament like Kuwait, a xenophobic mindset like NIOC, a vast unexplored hinterland like Algeria’s Sonatrach, a history of corruption and terrorist sabotage like Nigerian General Petroleum, ADNOC has emerged as the most professionally managed, reliable, vertically integrated national oil company in the Middle East with access to the latest drilling, LNG, oilfield management enhanced recovery and downstream technologies.

Qatar is a classic case study of a Gulf emirate where international relations, military alliances and energy policies are inextricably intertwined. Qatar’s offshore North Field gasfield borders Iran, meaning the world’s third largest gas reserves and most extensive LNG export terminals are, in essence, located in the epicentre of a potential war zone. Qatar would not have been able to raise the $20 billion in Eurobonds it floated in the international capital markets in the 1990s had Doha not assured Western oilmen and bankers that its gas assets were not exposed to ruinous political risk. This meant that Qatar negotiated a security alliance with the United States, encouraged Exxon and Occidental Petroleum to invest untold billions in its LNG complex and hosted the Al Udeid Air Base, the Pentagon’s command and control hub for the American wars in Iraq and Afghanistan. In essence, Qatar’s Washington connection not only bought it the political risk insurance to attract the oil patch’s largest companies to help Qatargas replace Indonesia as the world’s largest LNG exporter but also enabled a micro- state to survive in a political chessboard dominated by Saudi Arabia and Iran, Doha’s two powerful regional rivals. Qatar’s acrimonious relations with Saudi Arabia did not prevent its leadership from using the leverage of its huge gasfields to emerge as a significant power broker in GCC and Arab politics. The Dolphin gas pipeline is the most successful cross border GCC energy project that, despite initial Saudi refusal to grant transit rights, is a mission critical for the emerging industrial constellations of Dubai, Abu Dhabi and Oman.

Dolphin Energy has, in essence, linked the economies of Qatar, the UAE and Oman, created a diplomatic triumvirate in the GCC that balances the historic dominance of Saudi Arabia and Iran in Gulf politics. Moreover, with no less than 910 million cubic feet of gas reserves, Qatar is courted by world leaders like Russia’s President Putin, whose secret service sent hitmen to Doha to assassinate Chechen warlords only a decade ago. Qatar has also created an Energy City that seeks nothing less than the creation of a spot market for LNG, a future major trend in the Gulf because of new chilling technologies for gas liquification and the construction of even bigger gas supertankers. Now that the International Court of Justice has resolved the Hawar Islands dispute between Qatar and Bahrain, the scope of Dolphin Energy could well encompass Manama. Gas pipelines, not a common currency or central bank, could well prove the most potent symbol of GCC integration.

Matein Khalid is a Dubai-based investment banker and economic analyst



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