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Will Gulf States Learn From Their Success in Handling the Pandemic?

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The economic fallout of the coronavirus pandemic for Gulf states has done far more than play havoc with their revenue base and fiscal household. It has propelled massive structural change to the top of their agenda in ways that economic diversification plans had not accounted for.

Leave aside whether Gulf states can continue to focus on high-profile, attention-grabbing projects like Neom, Saudi Arabia’s $500 billion USD 21st century futuristic city on the Red Sea.

Gulf rulers’ to do list, if they want to get things right, is long and expensive without the burden of trophy projects. It involves economic as well as social and ultimately political change.

Transparency and accurate and detailed public reporting go to the core of these changes.

They also are key to decisions by investors, economists, and credit rating companies at a time when Gulf states’ economic outlook is in question. Many complain that delays in GDP reporting and lack of easy access to statistics complicates their decision-making.

Nonetheless, if there is one thing autocratic Gulf governments have going for themselves, beyond substantial financial reserves, it is public confidence in the way they handled the pandemic, despite the fact that they failed to initially recognize crowded living circumstances of migrant workers as a super spreader.

Most governments acted early and decisively with lockdowns and curfews, testing, border closures, repatriation of nationals abroad, and, in Saudi Arabia, suspension of pilgrimages.

To be sure, Gulf countries, and particularly Saudi Arabia that receives millions of Muslim pilgrims from across the globe each year, have a long-standing history of dealing with epidemics. Like Singapore, South Korea, and Taiwan, they were better prepared than Western nations.

History persuaded the kingdom to ban the umrah, the lesser Muslim pilgrimage to Mecca, in late February, days before the first case of a Covid-19 infection emerged on Saudi soil.

Beyond public health concerns, Saudi Arabia had an additional reason to get the pandemic right. It offered the kingdom not only an opportunity to globally polish its image, badly tarnished by human rights abuses, power grabs, and the killing of journalist Jamal Khashoggi, but also to retain religious influence despite the interruption in the flow of pilgrims to the kingdom.

“Saudi Arabia is still a reference for many Muslim communities around the world,” said Yasmine Farouk, a scholar of Saudi Arabia at the Carnegie Endowment for International Peace.

It also allowed Saudi Arabia to set the record straight following criticism of its handling of the Middle East Respiratory Syndrome (MERS) in 2012 when the kingdom became the epidemic’s epicenter and in 2009 when it was hit by the H1N1 virus.

Saudi Arabia is also blamed for contributing to a public health catastrophe in Yemen with its frequent indiscriminate bombings.

A country in ruins as a result of the military intervention, Yemen has grappled for the past four years with a cholera epidemic on the kingdom’s borders.

Trust in Gulf states’ handling of the current pandemic was bolstered by degrees of transparency on the development of the disease in daily updates in the number of casualties and fatalities.

It was further boosted by a speech by King Salman as soon as the pandemic hit the kingdom in which he announced a raft of measures to counter the disease and support the economy as well as assurances by agriculture minister Abdulrahman al-Fadli that the crisis would not affect food supplies.

Ms. Farouk suggested that government instructions during the pandemic were followed because of “trust in the government, the expertise and the experience of the government [and] trust in the religious establishment, which actually was following the technical decisions of the government.”

To be sure, Ms. Farouk acknowledged, the regime’s coercive nature gave the public little choice.

The limits of government transparency were evident in the fact that authorities were less forthcoming with details of public spending on the pandemic and insight into available medical equipment like ventilators and other supplies such as testing kits.

Some Gulf states have started publishing the daily and total number of swabs but have yet to clarify whether these figures include multiple swabbings of the same person.

“It is likely that publics in the Middle East will look back at who was it that gave them reliable information, who was it who was there for them,” said political scientist Nathan Brown.

The question is whether governments will conclude that transparency will be needed to maintain public confidence as they are forced to rewrite social contracts that were rooted in concepts of a cradle-to-grave welfare state but will have to involve greater burden sharing.

Gulf governments have so far said little about burden sharing being allocated equitably across social classes nor has there been transparency on what drives investment decisions by sovereign wealth funds in a time of crisis and changing economic outlook.

Speaking to the Financial Times, a Gulf banker warned that the Saudi Crown Prince Mohammed bin Salman “needs to be careful what he spends on . . . Joe Public will be watching.”

Headed by Prince Mohammed, the kingdom’s sovereign wealth fund has gone on a $7.7 billion USD shopping spree buying stakes in major Western blue chips, including four oil majors: Boeing, Citigroup, Disney, and Facebook. The Public Investment Fund is also funding a bid for English soccer club Newcastle United.

The banker suggested that Saudi nationals would not appreciate “millionaire footballer salaries being paid for by VAT (value added tax) on groceries.” He was referring to this month’s hiking of sales taxes in the kingdom from five to 15 percent.

The fragility and fickleness of public trust was on display for the world to see in Britain’s uproar about Dominic Cummings, a close aide to Prime Minister Boris Johnson, who violated lockdown instructions for personal reasons. Mr. Johnson is struggling to fight off demands for Mr Cummings’ dismissal.

To be sure, senior government officials and business executives in the Gulf have cautioned of hard times to come.

A recent Dubai Chamber of Commerce and Industry survey of CEOs predicted that 70 percent of the United Arab Emirates’ companies would go out of business in the next six months, including half of its restaurants and hotels and three-quarters of its travel and tourism companies.

Saudi Finance Minister Mohammed Al-Jadaan warned earlier this month that the kingdom would need to take “painful” measures and look for deep spending cuts as a result of the collapse of oil prices and significantly reduced demand for oil.

Aware of sensitivities, Mr. Al-Jadaan stressed that “as long as we do not touch the basic needs of the people, all options are open.”

There was little transparency in Mr. Al-Jadaan’s statements on what the impact would be on employment-seeking Saudi nationals in a labor market where fewer migrant workers would be available for jobs that Saudis have long been unwilling to accept.

It was a missed opportunity considering the 286 percent increase in the number of Saudis flocking to work for delivery services.

The increase was fueled by an offer by Hadaf, the Saudi Human Resources Development Fund, to pay drivers $800 USD a month, as well as a newly-found embrace of volunteerism across the Gulf.

The surge offered authorities building blocks to frame expectations at a time when the kingdom’s official unemployment rate of 12 percent is likely to rise.

It suggested a public acknowledgement of the fact that well-paying, cushy government positions may no longer be as available as they were in the past as well as the fact that lesser jobs are no less honorable forms of employment.

That may be the silver lining as Gulf states feel the pressure to reinvent themselves in a world emerging from a pandemic that potentially will redraw social, economic, and political maps.

Author’s note: This story was first published in Inside Arabia

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africaas well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.

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Saudi Arabia and Iran want to be friends again

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Eventually the ice-cold relationship between Iran and Saudi Arabia began to melt. The two countries sat at the negotiating table shortly after Biden came to power. The results of that discussion are finally being seen. Trade relations between Iran and Saudi Arabia have already begun to move. Although there has been no diplomatic relationship between the two countries since 2016, trade relations have been tense. But trade between Iran and the two countries was zero from last fiscal year until March 20 this year. Iran recently released a report on trade with neighboring countries over the past six months. The report also mentions the name of Saudi Arabia. This means that the rivalry between the two countries is slowly normalizing.

Historically, Shia-dominated Iran was opposed to the Ottoman Empire. The Safavids of Persia have been at war with the Ottomans for a long time, However, after the fall of the Ottomans, when the Middle East was divided like monkey bread, the newly created Saudi Arabia did not have much of a problem with Iran. Business trade between the two countries was normal. This is because the rulers of Saudi Arabia and Iran at the time were Western-backed. That is why there was not much of a problem between them. But when a revolution was organized in Iran in 1979 and the Islamic Republic of Iran was established by overthrowing the Shah, Iran’s relations with the West as well as with Saudi Arabia deteriorated. During the revolution, Ayatollah Khomeini called for the ouster of Western-backed rulers from the Middle East. After this announcement, naturally the Arab rulers went against Iran.

Saddam Hussein later invaded Iran with US support and Saudi financial support. After that, as long as Khomeini was alive, Saudi Arabia’s relations with Iran were bad. After Khomeini’s death, Akbar Hashemi Rafsanjani and Mohammad Khatemi tried to mend fences again. But they didn’t get much of an advantage.

When the Bush administration launched its invasion of Iraq in 2003, Iran’s influence in Shiite-majority Iraq continued to grow. Since the start of the Arab Spring in 2011, Iran’s influence in the region has grown. Saudi Arabia has been embroiled in a series of shadow wars to reduce its influence. It can be said that Iran and Saudi Arabia are involved in the Cold War just like the United States and the Soviet Union. Behind that war was a conflict of religious ideology and political interests. Diplomatic relations between Saudi Arabia and Iran came to a complete standstill in 2016. Iranians attack the Saudi embassy in Tehran after executing Saudi Shiite cleric Sheikh Nimar al-Nimar.  Since then, the two countries have not had diplomatic relations.

Finally, in April this year, representatives of the two countries met behind closed doors in Baghdad. And through this, the two countries started the process of normalizing diplomatic relations again. The last direct meeting between the two countries was held on September 21.

Now why are these two countries interested in normalizing relations? At one point, Mohammed bin Salman said they had no chance of negotiating with Iran. And Khomeini, the current Supreme Leader of Iran, called Mohammed bin Salman the new Hitler. But there is no such thing as a permanent enemy ally in politics or foreign policy. That is why it has brought Saudi Arabia and Iran back to the negotiating table. Prince Salman once refused to negotiate with Iran, but now he says Iran is our neighbor, we all want good and special relations with Iran.

Saudi Arabia has realized that its Western allies are short-lived. But Iran is their permanent neighbor. They have to live with Iran. The United States will not return to fight against Iran on behalf of Saudi Arabia. That is why it is logical for Iran and Saudi Arabia to have their ideological differences and different interests at the negotiating table. Saudi Arabia has been at the negotiating table with Iran for a number of reasons. The first reason is that Saudi Arabia wants to reduce its oil dependence. Prince Salman has announced Vision 2030. In order to implement Vision 2030 and get out of the oil dependent economy, we need to have good relations with our neighbors. It is not possible to achieve such goals without regional stability, He said.

Saudi Arabia also wants to emerge from the ongoing shadow war with Iran in Iraq, Syria, Yemen and Lebanon to achieve regional stability. The war in Yemen in particular is now a thorn in the side of Saudi Arabia. The Saudis are unable to get out of this war, nor are they able to achieve the desired goal. Saudi Arabia must normalize relations with Iran if it is to emerge from the war in Yemen. Without a mutual understanding with Iran, Yemen will not be able to end the war. That is why Saudi Arabia wants to end the war through a peace deal with the Houthis by improving relations with Iran.

Drone strikes could also have an impact on the Saudi Aramco oil field to bring Saudi Arabia to the negotiating table. Because after the drone attack, the oil supply was cut in half. The Saudis do not want Aramco to be attacked again. Also, since the Biden administration has no eye on the Middle East, it would be wise to improve relations with Iran in its own interests.

Iran will benefit the most if relations with Saudi Arabia improve. Their economy has been shaken by long-standing US sanctions on Iran. As Saudi Arabia is the largest and most powerful country in the Middle East, Iran has the potential to benefit politically as well as economically if relations with them are normal.

While Saudi Arabia will normalize relations with Iran, its allies will also improve relations with Iran. As a result, Iran’s political and trade relations with all the countries of the Saudi alliance will be better. This will give them a chance to turn their economy around again. The development of Iran’s relations with Saudi Arabia will also send a positive message to the Biden administration. It could lead to a renewed nuclear deal and lift sanctions on Iran.

Another reason is that when Saudi Arabia normalizes relations with Iran, it will receive formal recognition of Iran’s power in the Middle East. The message will be conveyed that it is not possible to turn the stick in the Middle East by bypassing Iran. Relations between Saudi Arabia and Iran need to be normalized for peace and stability in the Middle East.

But in this case, the United Arab Emirates and Israel may be an obstacle. The closeness that Saudi Arabia had with the UAE will no longer exist. The UAE now relies much more on Israel. There will also be some conflict of interest between Saudi Arabia and the UAE. Prince Salman wants to turn Saudi into a full-fledged tourism and business hub that could pose a major threat to the UAE’s economy and make the two countries compete.

Furthermore, in order to sell arms to the Middle East, Iran must show something special. Why would Middle Eastern countries buy weapons if the Iranian offensive was stopped? During the Cold War, arms dealers forced NATO allies to buy large quantities of weapons out of fear of the Soviet Union. So it is in the Middle East. But if the relationship between Iran and Saudi Arabia is normal, it will be positive for the Muslim world, but it will lead to a recession in the arms market.

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Turkey and Iran find soft power more difficult than hard power

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The times they are a changin’. Iranian leaders may not be Bob Dylan fans, but his words are likely to resonate as they contemplate their next steps in Iraq, Iraqi Kurdistan, Lebanon, and Azerbaijan.

The same is true for Turkish President Recep Tayyip Erdogan. The president’s shine as a fierce defender of Muslim causes, except for when there is an economic price tag attached as is the case of China’s brutal crackdown on Turkic Muslims, has been dented by allegations of lax defences against money laundering and economic mismanagement.

The setbacks come at a time that Mr. Erdogan’s popularity is diving in opinion polls.

Turkey this weekend expelled the ambassadors of the US, Canada, France, Finland, Denmark, Germany, Netherlands, New Zealand, Norway, and Sweden for calling for the release of philanthropist and civil rights activist Osman Kavala in line with a European Court of Human Rights decision.

Neither Turkey nor Iran can afford the setbacks that often are the result of hubris. Both have bigger geopolitical, diplomatic, and economic fish to fry and are competing with Saudi Arabia and the UAE as well as Indonesia’s Nahdlatul Ulama for religious soft power, if not leadership of the Muslim world.

That competition takes on added significance in a world in which Middle Eastern rivals seek to manage rather than resolve their differences by focusing on economics and trade and soft, rather than hard power and proxy battles.

In one recent incident Hidayat Nur Wahid, deputy speaker of the Indonesian parliament, opposed naming a street in Jakarta after Mustafa Kemal Ataturk, the general-turned-statemen who carved modern Turkey out of the ruins of the Ottoman empire. Mr. Wahid suggested that it would be more appropriate to commemorate Ottoman sultans Mehmet the Conqueror or Suleiman the Magnificent or 14th-century Islamic scholar, Sufi mystic, and poet Jalaludin Rumi.

Mr. Wahid is a leader of the Muslim Brotherhood-linked Prosperous Justice Party (PKS) and a board member of the Saudi-run Muslim World League, one of the kingdom’s main promoters of religious soft power.

More importantly, Turkey’s integrity as a country that forcefully combats funding of political violence and money laundering has been called into question by the Financial Action Task Force (FATF), an international watchdog, and a potential court case in the United States that could further tarnish Mr. Erdogan’s image.

A US appeals court ruled on Friday that state-owned Turkish lender Halkbank can be prosecuted over accusations it helped Iran evade American sanctions.

Prosecutors have accused Halkbank of converting oil revenue into gold and then cash to benefit Iranian interests and documenting fake food shipments to justify transfers of oil proceeds. They also said Halkbank helped Iran secretly transfer US$20 billion of restricted funds, with at least $1 billion laundered through the US financial system.

Halkbank has pleaded not guilty and argued that it is immune from prosecution under the federal Foreign Sovereign Immunities Act because it was “synonymous” with Turkey, which has immunity under that law. The case has complicated US-Turkish relations, with Mr.  Erdogan backing Halkbank’s innocence in a 2018 memo to then US President Donald Trump.

FATF placed Turkey on its grey list last week. It joins countries like Pakistan, Syria, South Sudan, and Yemen that have failed to comply with the group’s standards. The International Monetary Fund (IMF) warned earlier this year that greylisting would affect a country’s ability to borrow on international markets,  and cost it an equivalent of up to 3 per cent of gross domestic product as well as a drop in foreign direct investment.

Mr. Erdogan’s management of the economy has been troubled by the recent firing of three central bank policymakers, a bigger-than-expected interest rate cut that sent the Turkish lira tumbling, soaring prices, and an annual inflation rate that last month ran just shy of 20 per cent. Mr. Erdogan has regularly blamed high-interest rates for inflation.

A public opinion survey concluded in May that 56.9% of respondents would not vote for Mr. Erdogan and that the president would lose in a run-off against two of his rivals, Ankara Mayor Mansur Yavas and his Istanbul counterpart Ekrem Imamoglu.

In further bad news for the president, polling company Metropoll said its September survey showed that 69 per cent of respondents saw secularism as a necessity while 85.1 per cent objected to religion being used in election campaigning.

In Iran’s case, a combination of factors is changing the dynamics of Iran’s relations with some of its allied Arab militias, calling into question the domestic positioning of some of those militias, fueling concern in Tehran that its detractors are encircling it, and putting a dent in the way Iran would like to project itself.

A just-published report by the Combatting Terrorism Center at the US Military Academy West Point concluded that Iran’s Islamic Revolutionary Guards Corps (IRGC) faced “growing difficulties in controlling local militant cells. Hardline anti-US militias struggle with the contending needs to de-escalate US-Iran tensions, meet the demands of their base for anti-US operations, and simultaneously evolve non-kinetic political and social wings.”

Iranian de-escalation of tensions with the United States is a function of efforts to revive the defunct 2015 international agreement to curb Iran’s nuclear program and talks aimed at improving relations with Saudi Arabia even if they have yet to produce concrete results.

In addition, like in Lebanon, Iranian soft power in Iraq has been challenged by growing Iraqi public opposition to sectarianism and Iranian-backed Shiite militias that are at best only nominally controlled by the state.

Even worse, militias, including Hezbollah, the Arab world’s foremost Iranian-supported armed group, have been identified with corrupt elites in Lebanon and Iraq. Many in Lebanon oppose Hezbollah as part of an elite that has allowed the Lebanese state to collapse to protect its vested interests.

Hezbollah did little to counter those perceptions when the group’s leader, Hassan Nasrallah, threatened Lebanese Christians after fighting erupted this month between the militia and the Lebanese Forces, a Maronite party, along the Green Line that separated Christian East and Muslim West Beirut during the 1975-1990 civil war.

The two groups battled each other for hours as Hezbollah staged a demonstration to pressure the government to stymie an investigation into last year’s devastating explosion in the port of Beirut. Hezbollah fears that the inquiry could lay bare pursuit of the group’s interests at the expense of public safety.

“The biggest threat for the Christian presence in Lebanon is the Lebanese Forces party and its head,” Mr. Nasrallah warned, fuelling fears of a return to sectarian violence.

It’s a warning that puts a blot on Iran’s assertion that its Islam respects minority rights, witness the reserved seats in the country’s parliament for religious minorities. These include Jews, Armenians, Assyrians and Zoroastrians.

Similarly, an alliance of Iranian-backed Shiite militias emerged as the biggest loser in this month’s Iraqi elections. The Fateh (Conquest) Alliance, previously the second-largest bloc in parliament, saw its number of seats drop from 48 to 17.

Prime Minister Mustafa al-Kadhimi brought forward the vote from 2022 to appease a youth-led protest movement that erupted two years ago against corruption, unemployment, crumbling public services, sectarianism, and Iranian influence in politics.

One bright light from Iran’s perspective is the fact that an attempt in September by activists in the United States to engineer support for Iraqi recognition of Israel backfired.

Iran last month targeted facilities in northern Iraq operated by Iranian opposition Kurdish groups. Teheran believes they are part of a tightening US-Israeli noose around the Islamic republic that involves proxies and covert operations on its Iraqi and Azerbaijani borders.

Efforts to reduce tension with Azerbaijan have failed. An end to a war of words that duelling military manoeuvres on both sides of the border proved short-lived. Azerbaijani President Ilham Aliyev, emboldened by Israeli and Turkish support in last year’s war against Armenia, appeared unwilling to dial down the rhetoric.

With a revival of the nuclear program in doubt, Iran fears that Azerbaijan could become a staging pad for US and Israeli covert operations. Those doubts were reinforced by calls for US backing of Azerbaijan by scholars in conservative Washington think tanks, including the Hudson Institute and the Heritage Foundation.

Eldar Mamedov, a political adviser for the social-democrats in the Foreign Affairs Committee of the European Parliament, warned that “the US government should resist calls from hawks to get embroiled in a conflict where it has no vital interest at stake, and much less on behalf of a regime that is so antithetical to US values and interests.”

He noted that Mr. Aliyev has forced major US NGOs to leave Azerbaijan, has trampled on human and political rights, and been anything but tolerant of the country’s Armenian heritage.

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Process to draft Syria constitution begins this week

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The process of drafting a new constitution for Syria will begin this week, the UN Special Envoy for the country, Geir Pedersen, said on Sunday at a press conference in Geneva.

Mr. Pedersen was speaking following a meeting with the government and opposition co-chairs of the Syrian Constitutional Committee, who have agreed to start the process for constitutional reform.

The members of its so-called “small body”, tasked with preparing and drafting the Constitution, are in the Swiss city for their sixth round of talks in two years, which begin on Monday. 

Their last meeting, held in January, ended without progress, and the UN envoy has been negotiating between the parties on a way forward.

“The two Co-Chairs now agree that we will not only prepare for constitutional reform, but we will prepare and start drafting for constitutional reform,” Mr. Pedersen told journalists.

“So, the new thing this week is that we will actually be starting a drafting process for constitutional reform in Syria.”

The UN continues to support efforts towards a Syrian-owned and led political solution to end more than a decade of war that has killed upwards of 350,000 people and left 13 million in need of humanitarian aid.

An important contribution

The Syrian Constitutional Committee was formed in 2019, comprising 150 men and women, with the Government, the opposition and civil society each nominating 50 people.

This larger group established the 45-member small body, which consists of 15 representatives from each of the three sectors.

For the first time ever, committee co-chairs Ahmad Kuzbari, the Syrian government representative, and Hadi al-Bahra, from the opposition side, met together with Mr. Pedersen on Sunday morning. 

He described it as “a substantial and frank discussion on how we are to proceed with the constitutional reform and indeed in detail how we are planning for the week ahead of us.”

Mr. Pedersen told journalists that while the Syrian Constitutional Committee is an important contribution to the political process, “the committee in itself will not be able to solve the Syrian crisis, so we need to come together, with serious work, on the Constitutional Committee, but also address the other aspects of the Syrian crisis.”

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