Talks aimed at transferring US nuclear technology to Saudi Arabia serve as an indicator of where the Saudi-Iranian rivalry is heading as well as the strength of the informal Saudi-Israeli alliance against Iran.
The possible transfer could spark a new arms race in the Middle East and constitutes one explanation why Saudi responses to President Donald J. Trump’s recognition of Jerusalem as the capital of Israel were muted and limited to rhetorical statements.
Mr. Trump’s decision was perhaps most challenging for the Saudis, who as custodians of Islam’s two holiest cities, would have been expected to play a leading role in protecting the status of the city that is home to the faith’s third holiest site. Saudi Arabia was represented at this week’s summit of Islamic countries in Istanbul that recognized East Jerusalem as the capital of Palestine by its foreign minister, Adel al Jubeir, rather than the king, crown prince or another senior member of the ruling family.
The difficulty for the Saudis is not only their close cooperation with Israel, willingness to increasingly publicly hint at what long was a secret relationship, and their position as the US’ closest friend in the Arab world, who reportedly was willing to endorse a US Israeli-Palestinian peace plan in the making that would fail to meet the minimum demanded by Palestinians and Arab public opinion.
With Mr. Trump backing Saudi efforts to counter Iranian influence in a swath of land stretching from Asia to the Atlantic coast of Africa despite mounting US criticism of the kingdom’s conduct of its military intervention in Yemen, Riyadh has a vested interest in maintaining its close ties to Washington. While having been put in an awkward position, international condemnation of Mr. Trump’s Jerusalem move has also increased Saudi leverage.
Mr. Trump’s support for Saudi Arabia as well as his transactional approach to foreign policy that aims to further US business interests holds out the promise of tipping the Middle East’s military balance of power in favour of the kingdom.
In the president’s latest effort, his administration is weighing allowing Saudi Arabia to enrich uranium as part of a deal that would ensure that bids by Westinghouse Electric Co. and other US companies to build nuclear reactors in the kingdom are successful. Past US reluctance to endorse Saudi enrichment and reprocessing of uranium has put purveyors of US nuclear technology at a disadvantage.
Saudi Arabia agreed with the US in 2008 not to pursue enrichment and reprocessing but has since backed away from that pledge. “They wouldn’t commit, and it was a sticking point,” said Max Bergmann, a former special assistant to the undersecretary of state for arms control and international security.
Testifying to Congress in November, Christopher Ford, the US National Security Council’s senior director for weapons of mass destruction and counterproliferation, refused to commit the Trump administration to the US restrictions. The restrictions are “not a legal requirement. It is a desired outcome.” Mr. Ford said. He added that the 2015 international agreement with Iran that severely restricts the Islamic republic’s nuclear program for at least a decade, made it more difficult for the United States to insist on limiting other countries’ enrichment capabilities.
Saudi Arabia plans to construct 16 nuclear power reactors by 2030 at a cost of an estimated $100 billion. Officially, Saudi Arabia sees nuclear power as a way of freeing up more oil for export in a country that has witnessed dramatic increases in domestic consumption and contributing to diversification of its economy. It would also enhance Saudi efforts to ensure parity with Iran in the kingdom’s ability to enrich uranium and its quest to be the Middle East’s long-term, dominant power.
Saudi Arabia has large uranium deposits of its own. In preparation of requesting bids for its nuclear program, Saudi Arabia in October asked the US, France, South Korea, Russia and China for preliminary information. In addition to the United States, the kingdom has in recent years concluded a number of nuclear-related understandings with China as well as with France, Pakistan, Russia, South Korea and Argentina.
Mr. Trump’s apparent willingness to ease US restrictions services his campaign promise to revive and revitalize America’s nuclear industry and meet competition from Russia and China. Saudi contracts are crucial for Westinghouse, a nuclear technology pioneer whose expertise is used in more than half of the world’s nuclear power plants. Westinghouse declared bankruptcy in March because of delays in two US projects.
A deal that would lift US restrictions in return for acquiring US technology could enmesh Saudi Arabia in bitter domestic political battles in Washington evolving around alleged Russian interference in the election that brought Mr. Trump to office. Controversial Trump campaign aide and short-lived national security advisor Michael Flynn sought to convince Israel to accept the kingdom’s nuclear program as part of his efforts to promote Russian nuclear interests in the Middle East.
Mr. Trump’s willingness, against the backdrop of uncertainty about his readiness to uphold US adherence to the 2015 agreement with Iran, could unleash an arms race in the Middle East and North Africa. Mr. Trump recently refused to certify to Congress that Iran was compliant with the agreement.
Dropping restrictions on Saudi enrichment could not only fuel Saudi-Iranian rivalry that has wreaked havoc across the region, but also encourage other recipients of US nuclear technology to demand similar rights. The United Arab Emirates and Egypt have accepted restrictions on enrichment in their nuclear deals with US companies as long as those limitations were imposed on all countries in the Middle East.
Saudi Arabia has long been suspected of having an interest in ensuring that it would have the ability to develop a military nuclear capability if ever deemed necessary. For decades, Saudi cooperation with nuclear power Pakistan has been a source of speculation about the kingdom’s ambition.
Pakistan’s former ambassador to the United States, Husain Haqqani, asserted that Saudi Arabia’s close ties to the Pakistani military and intelligence during the anti-Soviet jihad in Afghanistan in the 1980s gave the kingdom arms’ length access to his country’s nuclear capabilities.
“By the 1980s, the Saudi ambassador was a regular guest of A. Q. Khan” or Abdul Qadeer Khan, the controversial nuclear physicist and metallurgical engineer who fathered Pakistan’s atomic bomb,” Mr. Haqqani said in an interview.
Similarly, retired Pakistani Major General Feroz Hassan Khan, the author of a semi-official history of Pakistan’s nuclear program, has no doubt about the kingdom’s interest.
“Saudi Arabia provided generous financial support to Pakistan that enabled the nuclear program to continue, especially when the country was under sanctions,” Mr. Khan said in a separate interview. Mr. Khan was referring to US sanctions imposed in 1998 because of Pakistan’s development of a nuclear weapons capability. He noted that at a time of economic crisis, Pakistan was with Saudi help able “to pay premium prices for expensive technologies.”
The Washington-based Institute for Science and International Security (ISIS) said in a report earlier this year that it had uncovered evidence that future Pakistani “assistance would not involve Pakistan supplying Saudi Arabia with a full nuclear weapon or weapons; however, Pakistan may assist in other important ways, such as supplying sensitive equipment, materials, and know-how used in enrichment or reprocessing.”
The report said it was unclear whether “Pakistan and Saudi Arabia may be cooperating on sensitive nuclear technologies in Pakistan. In an extreme case, Saudi Arabia may be financing, or will finance, an unsafeguarded uranium enrichment facility in Pakistan for later use, either in a civil or military program,” the report said.
The report concluded that the nuclear agreement with Iran dubbed the Joint Comprehensive Plan of Action (JCPOA) had “not eliminated the kingdom’s desire for nuclear weapons capabilities and even nuclear weapons… There is little reason to doubt that Saudi Arabia will more actively seek nuclear weapons capabilities, motivated by its concerns about the ending of the JCPOA’s major nuclear limitations starting after year 10 of the deal or sooner if the deal fails,” the report said.
Rather than embarking on a covert program, the report predicted that Saudi Arabia would, for now, focus on building up its civilian nuclear infrastructure as well as a robust nuclear engineering and scientific workforce. This would allow the kingdom to take command of all aspects of the nuclear fuel cycle at some point in the future.
“The current situation suggests that Saudi Arabia now has both a high disincentive to pursue nuclear weapons in the short term and a high motivation to pursue them over the long term,” the Washington Institute said.
Battling for the Future: Arab Protests 2.0
Momentous developments across Arab North and East Africa suggest the long-drawn-out process of political transition in the region as well as the greater Middle East is still in its infancy.
So does popular discontent in Syria despite eight years of devastating civil war and Egypt notwithstanding a 2013 military coup that rolled back the advances of protests in 2011 that toppled Hosni Mubarak and brought one of the country’s most repressive regimes to power.
What developments across northern Africa and the Middle East demonstrate is that the drivers of the 2011 popular revolts that swept the region and forced the leaders of Egypt, Tunisia, Libya and Yemen to resign not only still exist but constitute black swans that can upset the apple cart at any moment.
The developments also suggest that the regional struggle between forces of change and ancien regimes and militaries backed by the United Arab Emirates and Saudi Arabia is far from decided.
If anything, protesters in Algeria and Sudan have learnt at least one lesson from the failed 2011 results: don’t trust militaries even if they seemingly align themselves with demonstrators and don’t surrender the street until protesters’ demands have been fully met.
Distrust of the military has prompted an increasing number of Sudanese protesters to question whether chanting “the people and the army are one” is still appropriate. Slogans such as “freedom, freedom” and “revolution, revolution” alongside calls on the military to protect the protesters have become more frequent.
The protests in Algeria and Sudan have entered a critical phase in which protesters and militaries worried that they could be held accountable for decades of economic mismanagement, corruption and repression are tapping in the dark.
With protesters emboldened by their initial successes in forcing leaders to resign, both the demonstrators and the militaries, including officers with close ties to Saudi Arabia and the UAE, are internally divided about how to proceed.
Moreover, neither side has any real experience in managing the crossroads at which they find themselves while it is dawning on the militaries that their tired playbooks are not producing results.
In a telling sign, Sudan’s interim leader Abdel Fattah Abdelrahman Burhan praised his country’s “special relationship” with Saudi Arabia and the UAE as he met this week with a Saudi-Emirati delegation at the military compound in Khartoum, a focal point of the protests.
Saudi Arabia has expressed support for the protests in what many suspect is part of an effort to ensure that Sudan does not become a symbol of the power of popular sovereignty and its ability to defeat autocracy.
The ultimate outcome of the dramatic developments in Algeria and Sudan and how the parties manoeuvre is likely to have far-reaching consequences in a region pockmarked by powder kegs ready to explode.
Mounting anger as fuel shortages caused by Western sanctions against Syria and Iran bring life to a halt in major Syrian cities have sparked rare and widespread public criticism of president Bashar al-Assad’s government.
The anger is fuelled by reports that government officials cut in line at petrol stations to fill up their tanks and buy rationed cooking gas and take more than is allowed.
Syria is Here, an anonymous Facebook page that reports on economics in government-controlled areas took officials to task after state-run television showed oil minister Suleiman al-Abbas touring petrol stations that showed no signs of shortage.
“Is it so difficult to be transparent and forward? Would that undermine anyone’s prestige? We are a country facing sanctions and boycotted. The public knows and is aware,” the Facebook page charged.
The manager of Hashtag Syria, another Facebook page, was arrested when the site demanded that the oil ministry respond to reports of anticipated price hikes with comments rather than threats. The site charged that the ministry was punishing the manager “instead of dealing with the real problem.”
Said Syrian journalist Danny Makki: “It (Syria) is a pressure cooker.”
Similarly, authorities in Egypt, despite blocking its website, have been unable to stop an online petition against proposed constitutional amendments that could extend the rule of President Abdel Fattah el-Sisi until 2034 from attracting more than 320,000 signatures as of this writing.
The petition, entitled Batel or Void, is, according to Netblocks, a group that maps web freedom, one of an estimated 34,000 websites blocked by Egyptian internet service providers in a bid to stymie opposition to the amendments.
Mr. El-Sisi is a reminder of how far Arab militaries and their Gulf backers are potentially willing to go in defense of their vested interests and willingness to oppose popular sovereignty.
Libyan renegade Field Marshall Khalifa Belqasim Haftar is another, Mr. Haftar’s Libyan National Army (LNA) is attacking the capital Tripoli, the seat of the United Nations recognized Libyan government that he and his Emirati, Saudi, and Egyptian backers accuse of being dominated by Islamist terrorists.
The three Arab states’ military and financial support of Mr. Haftar is but the tip of the iceberg. Mr. Haftar has modelled his control of much of Libya on Mr. El-Sisi’s example of a military that not only dominates politics but also the economy.
As a result, the LNA is engaged in businesses ranging from waste management, metal scrap and waste export, and agricultural mega projects to the registration of migrant labour workers and control of ports, airports and other infrastructure. The LNA is also eyeing a role in the reconstruction of Benghazi and other war-devastated or underdeveloped regions.
What for now makes 2019 different from 2011 is that both sides of the divide realize that success depends on commitment to be in it for the long haul. Protesters, moreover, understand that trust in military assertions of support for the people can be self-defeating. They further grasp that they are up against a regional counterrevolution that has no scruples.
All of that gives today’s protesters a leg up on their 2011 counterparts. The jury is out on whether that will prove sufficient to succeed where protesters eight years ago failed.
As Marsha Lazareva languishes in jail, foreign businesses will “think twice” before investing in Kuwait
IF THERE IS one thing to glean from the case of Marsha Lazareva, it’s that foreign businesses must now think very carefully before investing in Kuwait.
For more than a year, Lazareva, who has a five-year-old son and is one of Russia’s most successful female investors in the Gulf, has been held in the Soulabaiya prison by Kuwaiti authorities. Those authorities claim she ‘stole’ half a billion dollars, a claim she strenuously denies.
Human rights groups and prominent officials, including the former FBI director, Louis Freeh, and Jim Nicholson, former Chairman of the Republican Party and former US Ambassador to the Vatican, have called for her release and expressed concerns about the apparent absence of due process in a country where Lazareva has worked for over 13 years. Both Freeh and Nicholson visited Kuwait in recent weeks with Neil Bush, son of the late President George H. W. Bush. Bush has said Lazareva’s incarceration ‘threatens to darken relations between the U.S. and Kuwait, two countries that have enjoyed a long and prosperous relationship.’
Russian officials have been equally concerned. Vladimir Platonov, the President of the Moscow Chamber of Commerce and Industry, confirmed that a single witness gave testimony in Kuwaiti court, and only for the prosecution. ‘I myself worked in prosecution for more than eight years, and I cannot imagine any judge signing off on an indictment like this,’ he said. ‘One fact of particular note is that Maria was given 1,800 pages of untranslated documents in Arabic.’
Serious questions surrounding the safety and future viability of investing in Kuwait are now being raised. Through The Port Fund, a private investment company managed by KGL Investment, Lazareva has contributed hundreds of millions of dollars to local infrastructure and economic development projects during her time in the country. Until 2017, when a Dubai bank froze $496 million without cause, she had worked largely unobstructed.
But as things stand, more foreign investment is unlikely to be forthcoming. Jim Nicholson has said that the ‘imprisonment and harassment’ of Lazareva ‘threatens’ U.S. support. adding that the ‘willingness of the U.S. to do business with Kuwait’ is based on ‘its record as a nation that respects human rights and the rule of law’. Mark Williams, the investment director of The Port Fund and a colleague of Lazareva’s, has called on international investors to ‘think twice before doing business in this country’.
These comments will surely concern the Kuwaiti government, who said last year that FDI was ‘very crucial’ to the success of its Kuwait Vision 2035 road map. In September 2018, the FTreported that the government planned to reverse its traditional position as an investor in order to diversify its economy, carrying out a series of reforms designed to facilitate foreign investment and assist investors.
But despite these changes, which have propelled Kuwait to 96th—higher than the Middle East average—in the World Bank’s ‘Ease of Doing Business’ report, investors may be unwilling to take the risk so long as Lazareva remains in jail. Lazareva’s lawyers have accused Kuwait of violating international law by breaching a long-standing bilateral investment treaty with Russia. Lord Carlile of Berriew, QC has brought the case to the attention of the British public and the EU, writing in The Times that ‘there is no evidential basis to justify any claim of dishonesty, corruption or any other criminal wrong’. He added: ’Anyone thinking of doing business in Kuwait should read on with mounting concern.’
What’s worth remembering is that Kuwait is an important, long-standing ally of the UK, and a country generally seen as stable and fair. It is equally a major non-NATO ally of the United States, where there are more than 5,000 international students of Kuwaiti origin in higher education. But these relationships, and the investment to which they have historically led, have been cast into doubt. And it now seems certain that relations will continue to sour so long as Marsha Lazareva languishes in Soulabaiya.
Economic reform in the Gulf: Who benefits, really?
For Gulf leaders, long-overdue economic reforms were never going to be easy.
Leaders like the crown princes of Saudi Arabia and the United Arab Emirates, Mohammed bin Salman and Mohammed bin Zayed, quickly discovered that copying China’s model of economic growth while tightening political control was easier said than done. They realised that rewriting social contracts funded by oil wealth was more difficult because Gulf Arabs had far more to lose than the average Chinese. The Gulf states’ social contracts had worked in ways China’s welfare programmes had not. The Gulf’s rentier state’s bargain—surrender of political and social rights for cradle-to-grave welfare—had produced a win-win situation for the longest time.
Moreover, Gulf leaders, struggling with mounting criticism of the Saudi-UAE-led war in Yemen and the fall-out of the killing of journalist Jamal Khashoggi, also lacked the political and economic clout that allowed China to largely silence or marginalise critics of its crackdown on Turkic Muslims in the troubled northwestern province of Xinjiang.
The absence of a welfare-based social contract in China allowed the government to power economic growth, lift millions out of poverty, and provide public goods without forcing ordinary citizens to suffer pain. As a result, China was able to push through with economic reforms without having to worry that reduced welfare benefits would spark a public backlash and potentially threaten the regime.
Three years into Mohammed bin Salman’s Vision 2030 blueprint for diversification of the economy, Saudi businesses and consumers complain that they are feeling the pinch of utility price hikes and a recently introduced five per cent value-added tax with little confidence that the government will stay the course to ensure promised long-term benefit.
The government’s commitment to cutting costs has been further called into question by annual handouts worth billions of dollars since the announcement of the reforms and rewriting of the social contract to cushion the impact of rising costs and quash criticism.
In contrast to China, investment in the Gulf, whether it is domestic or foreign, comes from financial, technology and other services sector, the arms industry or governments. It is focused on services, infrastructure or enhancing the state’s capacities rather than on manufacturing, industrial development and the nurturing of private sector.
With the exception of national oil companies, some state-run airlines and petrochemical companies, the bulk of Gulf investment is portfolios managed by sovereign wealth funds, trophies or investment designed to enhance a country’s prestige and soft power.
By contrast, Asian economies such as China and India have used investment fight poverty, foster a substantial middle class, and create an industrial base. To be sure, with small populations, Gulf states are more likely to ensure sustainability in services and oil and gas derivatives rather than in manufacturing and industry.
China’s $1 trillion Belt and Road initiative may be the Asian exception that would come closest to some of the Gulf’s soft-power investments. Yet, the BRI, designed to alleviate domestic overcapacity by state-owned firms that are not beholden to shareholders’ short-term demands and/or geo-political gain, contributes to China’s domestic growth.
Asian nations have been able to manage investors’ expectations in an environment of relative political stability. By contrast, Saudi Arabia damaged confidence in its ability to diversify its oil-based economy when after repeated delays it suspended plans to list five per cent of its national oil company, Saudi Arabian Oil Company, or Aramco, in what would have been the world’s largest initial public offering.
To be sure, China is no less autocratic than the Gulf states, while Hindu nationalism in India fits a global trend towards civilisationalism, populism and illiberal democracy. What differentiates much of Asia from the Gulf and accounts for its economic success are policies that ensure a relatively stable environment. These policies are focused on social and economic enhancement rather than primarily on regime survival. That may be Asia’s lesson for Gulf rulers.
Author’s note: first published in Firstpost
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