Washington Report on Middle East Affairs, June 1999, pages 119-122

Diplomatic Doings

MEPC Holds Daylong Seminar on UAE’s “Century in 30 Years”

“A Century In Thirty Years: Sheikh Zayed and the United Arab Emirates” was the topic of an all-day conference April 20 at the International Trade Center at the Ronald Reagan Building in Washington, DC, hosted by the Middle East Policy Council.

After a welcome by MEPC President Chas W. Freeman, Jr., former U.S. ambassador to Saudi Arabia, Sheikh Fahim Bin Sultan Al Qasimi, UAE minister of economy and finance, described the state of the United Arab Emirates at the close of the 20th century. He said that the UAE operates on the principle of a free economy, resulting in a remarkable degree of prosperity in just 30 years.

He noted that health care is free, that illiteracy is being eradicated, and that its infrastructure is vastly developed, going from one radio and television station and one newspaper in 1971 to being a major player in the field of telecommunications today. To underscore this, he stated that the UAE will soon launch its first satellite.

The first speaker on the panel dealing with the economy of the UAE was Fatima Al-Shamsi of the University of the UAE-Al Ain. Discussing “General Aspects and Determinants of Growth,” she used a series of charts to depict the remarkable expansion of the UAE’s economy and its prospects for the future.

Discussing “The Economics of National Autonomy,” Mary Ann Tetreault of Iowa State University described the UAE as a late developer, beginning its journey toward modernity 500 years after the process began in Western Europe. She noted, however, that the UAE is following the same path taken by the United States, Germany and Japan on the way to industrialization.

The makeup of the UAE as a federation makes its components more responsive to political and economic competition, she said, and this has played a part in the nation’s rapid progress. She emphasized that, for the long-term security of the UAE, it is very important to utilize non-oil investment. As an example, she noted that Kuwait is making more money on overseas investment than through sales of crude oil.

Tetreault warned that the UAE needs to work on its legal regimes and that its equity markets need development. As 40 percent of the country’s population is under 10 years old, she warned, it is important to remember that a rapidly growing population is sometimes a liability.

The final economic panelist was Alan Richards of the University of California-Santa Cruz, who spoke on “Golden Dhow in a Storm: The Financial and Banking System.” He characterized the UAE as an oligopoly with a competitive fringe, explaining that five banks in the country have 50 percent of total assets and 75 percent of total deposits.

In a separate presentation, U.S. Deputy Secretary of Commerce Robert N. Mallett reviewed the achievements of the UAE over the past 30 years, and the successful bilateral relationship it has developed with the United States during that time.

The second panel looked at socio-political issues. First to speak was Hasan M. Al-Naboodah of the University of the UAE-Al Ain, whose presentation was entitled “From Traditional Society to Modern State.” Al-Naboodah used slides to demonstrate changes that accompanied the evolution of the emirates from a pearl-diving economic backwater during the first half of the 20th century to the economic and petroleum products powerhouse that it is today.

Discussing “Diversity in Unity: Political Institutions and Civil Society,” Fatma Al-Sayegh of the University of the UAE-Al Ain said Abu Dhabi ruler and UAE President Sheikh Zayed wanted a federation structure for the seven emirates in order to create a modern government. She emphasized that he overcame a great deal of resistance to this plan, since many of the rulers wanted a less binding form of central government. Sheikh Zayed, she said, had enough foresight to insist on what would be best for the people over the long run.

Final morning speaker Joseph A. Kechichian of Kechichian & Associates, discussed the “Socio-Political Origins of Emirati Leaders.” Noting, as did Ms. Al-Sayegh, that unification of the seven emirates was not an easy task, he pointed out the history of the region was influenced by its domination at various times by Portugal, Ottoman Turkey, and Britain.

President Victor J. Fryling of the CMS Energy Corporation, which constructs large-scale electrical generating plants, described for a luncheon audience some of the joint-venture arrangements into which his company has entered with the UAE and other governments in the Middle East.

The conference’s third panel discussion, on foreign relations and defense, was moderated by Richard Murphy, former U.S. ambassador to Mauritania, Syria, the Philippines and Saudi Arabia. Hassan H. Al-Alkim of the University of the UAE-Al Ein, speaking on “UAE Policy Toward the Sub-Regional Powers,” said that the influence of Saudi Arabia can be detected in almost every aspect of the UAE’s foreign policy. Another major determinant of UAE foreign policy is posed by Iranian claims to, and occupation of, three islands belonging to two of the emirates constituting the UAE.

Citing Iran’s unwillingness either to negotiate over the islands or to allow the question to be submitted to the World Court, Professor Al-Alkim noted that the UAE, like any small country with a larger, aggressive neighbor, recognizes that it cannot obtain security through the use of its own facilities alone. He said also that there have been periods when, for the UAE, Iraq was the apparently aggressive neighbor, and others when it stood as a bulwark against a seemingly intransigent Iran.

He noted that “winds of change” are sweeping Iran in the wake of a Saudi-Iranian rapprochement and a new American approach to that country. However, he said, a GCC-Iran rapprochement and normalization of relations with Iran “require settlement of the islands issue.” He predicted a stronger UAE-Iraq relationship.

Speaking on “The UAE and the Broader Middle East: The Case of Palestine,” President Khalil Jahshan of the National Association of Arab Americans cited the UAE’s demonstration of “stability and confidence that is uncharacteristic of the region as a whole” and praised “UAE policy toward Palestine especially.”

He said the “credible and moderate” foreign policy of the UAE has included “unqualified and consistent support for Arab unity and solidarity” and, “with almost 10 percent of the world’s petroleum reserves, the UAE has pursued a very generous foreign aid policy.”

Jahshan said, “The UAE has been clearly and vocally uncomfortable with the suffering of the Iraqi people and was one of the first states of the Gulf to support the lifting of the sanctions against Iraq.” Citing also the UAE’s “strong and unwavering commitment to Arab rights,” Jahshan said, “the UAE has stood by Palestine through thick and thin during civil war in Lebanon, the Israeli invasion, and the intifada.

“The UAE does not endorse Arab-Israeli peace at any price,” Jahshan said. He noted that the UAE has accused the U.S. of failing to act as an honest broker in the peace process, and that the UAE perceives American requests for normalization of relations with Israel as premature. Jahshan cited the refusal of the UAE to attend the abortive U.S.-sponsored Middle East Economic Conference in Doha two years ago, after Israeli Prime Minister Binyamin Netanyahu had frozen the Oslo land-for-peace process, as evidence of UAE President Sheikh Zayed bin Sultan’s consistent refusal to succumb to threats or pressure.

In a talk entitled “Between Pax Britannica and Pax Americana,” E. Gregory Gause of the University of Vermont said “the leadership of the UAE would not be willing to accept the kind of status now that they accepted 30 years ago under Pax Britannica.” He said that “during the Iran-Iraq war the UAE tried to maintain relationships with both parties while adhering to the GCC for the sake of regional balance.”

He said the UAE “also has been careful to cultivate strong security relations with other Western powers besides the U.S., notably France and Britain.” Gause added that “UAE foreign policy has been one of conciliation,” noting that Sheikh Zayed “expressed absolutely no reservation about Bahrain’s and Qatar’s desire to remain outside the UAE” while seven other Gulf emirates joined the federation. Regarding other issues with Iraq and Saudi Arabia, Gauss said, “the UAE has been willing to go more than half way.”

For example, Gause pointed out, although the UAE possesses up to 10 percent of the world’s oil reserves, it produces only 4 percent of world output, demonstrating its willingness to hold back for the benefit of all producers. However, Gause warned against expecting any flexibility on the part of the UAE regarding its dispute with Iran over the three islands. “They are the exception which proves the rule regarding UAE conciliatory policies with its neighbors,” Gause said.

Responding to questions, Professor Al-Alkim criticized U.S. double standards (in its dealings with Israel versus other regional states) and expressed the hope “that the U.S. will keep its hands off the Gulf.”

Khalil Jahshan said the U.S double standard has not been in U.S interests and does not contribute to stability in the Gulf.

Still in the discussion period, UAE Ambassador to the U.S. Mohammad Hussein Al-Shaali noted that “we cannot guarantee our security on our own, but at the same time the U.S. cannot act alone.” He added that “the U.S. has a large interest in the region, but should realize that this interest depends upon finding regional support.”

In the final session, AMIDEAST president William Rugh, who was U.S. ambassador to the UAE and also to Yemen, paid tribute to Sheikh Zayed’s strong and consistent leadership. Calling him “a singular figure of immense charisma,” Rugh explained: “Anyone who has lived in the UAE knows of the enormous respect in which he is held, not just in the UAE but in the region and in the Arab world.”

—Michael Lee and Richard Curtiss

MEPC Holds Oil Policy Discussion

“Policy Implications of the Price of Oil” were discussed by a distinguished panel assembled by the Middle East Policy Council (MEPC) in Washington, DC on March 30. The discussion was moderated by former U.S. Ambassador to Saudi Arabia Chas. W. Freeman, Jr., president of MEPC.

The first to speak was Robert R. Copaken, senior Middle East energy analyst at the U.S. Department of Energy. He said that in brokering the March 23 OPEC oil-production cutback agreement, the Saudis were trying to halt the precipitous decline in oil prices and keep markets stable. He noted, however, that the Saudis also did not want oil prices to go too high, as this leads to increased competition. The Saudis wanted to regain and maintain a dominant market share, he said, especially in the United States. (Washington Report editor’s note: World petroleum prices have risen by nearly 50 percent since the OPEC agreement was reached.)

Copaken stated that as oil prices rebound in the wake of the production cutbacks, the incentive to cheat on the quotas will also rise, which could lead to problems in keeping the cutbacks in place for long, especially among the non-OPEC nations, who agreed to abide by the quotas only because prices had sunk to their lowest levels in a generation.

Copaken explained that the rapid population growth being experienced by nations in the Persian Gulf region is leading to an ever-increasing need for job creation in the area. The combination of low oil prices and a narrow tax base are in the process of threatening the governing regimes and their welfare states, according to Copaken. Both economic and political reforms are necessary to make the sort of long-term changes needed to see the nations of the Persian Gulf region through the current economic problems and future times of instability, Copaken emphasized.

He listed ways to achieve reform, such as increasing trade within the region, which at a current level of only 7 percent of all trade within the Middle East is far below internal trade in any other region of the world. Copaken also noted that the current level of balance of trade deficits in nations such as Saudi Arabia cannot be sustained, and that a service sector must be developed in the region.

The next speaker was Nathaniel R. Kern, president of Foreign Reports, Inc. He began by suggesting that the price for oil should be arbitrated between supply and demand. One of the dangers to remember in setting oil quotas, according to Kern, is the potential for mismanagement of the oil supply. He cited two examples of this in the region, the first of which occurred from 1982 to 1985, when the Saudis kept the selling price at $28, even as supplies grew and demand shrank. The second example was between 1955 and 1972, when the big oil companies kept the price per barrel at under $2, even as supply shrank and demand grew.

Kern applied these examples to the current OPEC supply quotas by saying that determining the price per barrel of oil is an issue when it comes to deciding when to restructure production quotas.

He closed by stating that by the year 2025 Saudi Arabia will have 37 million residents and that the nation must prepare for this.

Next to speak was Jim Steenhagen, managing director of Executive Services Group at the Petroleum Finance Company. He began by stating that oil prices below $18 per barrel will be around for the next several years. He added, however, that oil supply growth will be held in check during the rest of 1999 as a result of high Saudi excess capacity.

Steenhagen went on to say that the Persian Gulf oil supply will be held constant until 2001 or 2002 to avoid a price crash. However, new technology and access to new areas will affect oil prices, he said.

Steenhagen closed by stating that oil is primarily a government business, and that while the Caspian Sea basin is not as attractive to oil companies as the Persian Gulf, deals will continue to be signed in the Caspian and deep-water drilling will continue throughout the world.

The final speaker was Dr. Geoffrey Kemp, director of Regional Strategic Programs at the Nixon Center. He opened by stating that for the forseeable future the Persian Gulf is the strategic prize. Kemp saw the strategic impact of falling oil prices through the effect it has had on making the United States and the West in general more dependent on oil from the Persian Gulf region, because the cost of extracting a barrel of oil in many areas outside the Gulf exceeds the price being paid per barrel on world markets.

Kemp noted that another impact of falling oil prices has been a slowdown in the earlier push by oil companies to sign deals for Caspian Sea oil and gas. Kemp charged also that oil-producing nations want sanctions restricting oil sales by Iraq to continue for as long as possible so as to prevent the further swelling of oil supplies and a subsequent price drop from occurring.

—Michael S. Lee

Hannibal Club USA Holds Washington, DC Program

Was Hannibal Barca, born in 247 B.C. as the son of Carthage’s greatest general, Hamilcar Barca, a hero or a monster, and are “the greatest men in history the most evil”? These questions were posed by Towson University lecturer John Prevas, author of Hannibal Crossing the Alps, in his role as moderator of a March 14 program of the Hannibal Club USA.

The Washington, DC program, which attracted some 200 people, many of them diplomats, military personnel and business people who had worked in Tunisia, featured a talk on Hannibal by Dr. William A. Knowlton, Jr., professor of behavioral science at the Industrial College of the Armed Forces at Fort McNair, who is also an adjunct professor at George Washington University in the U.S. national capital. At both institutions he lectures on Hannibal as part of his courses on leadership.

His talk provided ammunition for proponents and detractors of Hannibal, who accompanied his famous father’s military campaign at the age of 9, became a cavalry commander in his teens, and was elected at age 26 to be their commander by the soldiers of Carthage after his father and then his older brother-in-law both died in battle.

In Spain his father, who had commanded Carthaginian forces in the first Punic War (264-241 B.C.), which cost Carthage its possessions in Sicily, had his son swear an oath of undying hostility to Rome.

Hannibal’s campaigns in Spain then touched off the second Punic War, which lasted 16 years and ended in another Roman victory in 201. However, Hannibal, who spent virtually all of that long war campaigning in Italy, but without ever conquering Rome, never lost a battle. The defeat of Carthage resulted from a successful land advance on the city from the east by the Roman General Scipio Africanus, forcing Hannibal to leave Italy to return to North Africa.

After some years as a reforming statesman, which aroused the enmity of Carthage’s ruling oligarchy, Hannibal, his wife, and his daughter took poison to avoid capture by the Romans, probably in 183.

Dr. Knowlton is a twice-wounded and much-decorated combat veteran of the Vietnam War who was also an army ranger and military parachutist. He lived in Carthage, now a suburb of Tunis, the present-day capital of Tunisia, for two years from 1961 to 1963. He let audience members decide for themselves answers posed by moderator Prevas.

Participants in the afternoon event also learned that the Hannibal Club USA is part of a global network, launched from Tunis, with chapters in Europe and Asia. The goal of the American chapter is to serve as a business council, encouraging binational trade and investment; facilitate cultural programs and educational exchanges; and to hold programs to acquaint Americans with Tunisia’s long history, its rich artistic legacy, and its lively contemporary society. Persons wishing further information about the Hannibal Club USA may contact it at P.O. Box 33275, Washington, DC 20033-0275 or telephone (202) 295-3880.

—R. H. Curtiss

Greek Prime Minister Costas Simitis at Woodrow Wilson Center

On the eve of NATO’s 50th anniversary summit in Washington, DC, Greek Prime Minister Costas Simitis inaugurated the “Director’s Forum” at the Woodrew Wilson International Center for Scholars.

The center’s new director, former Rep. Lee Hamilton (D-IN), spoke of America’s debt to Greece for its idea of democracy and its historical legacy. “We in the U.S. cannot repay that debt, only acknowledge it,” Hamilton said.

The prime minister, who represented the Piraeus district outside Athens before assuming his current position more than three years ago, opened his remarks with an extensive discussion of economic progress in Greece. While acknowledging that problems still exist, such as “persistent unemployment, especially among Greek youth,” Simitis stated that Greece can now “participate as an equal” in the European economic union, of which it will become the 12th member “on the first day of the next century.”

Turning to international affairs, the prime minister noted that Greece is unique in being the only Balkan country to be a member of both NATO and the EU. In its latter role, Athens advocates a “rapprochement of Balkan states with the EU,” believing that the inclusion in the EU of Romania and Bulgaria, for example, would contribute to regional stability.

With regard to Kosovo, Simitis said that, as a neighbor of Yugoslavia, Greece “will not participate in military strikes.

“We are a member of NATO and the EU and, as such, we have rights and we have obligations,” the prime minister said. “But we are also a member state of the Balkans and we must be credible also toward our neighbors.”

Athens supports a negotiated solution to the crisis, Simitis said. It also is adamant that no borders be changed as part of a solution. “Kosovo is not the only place where a minority exists,” he observed, calling the “precedent of cessation” dangerous.

In response to a question, Simitis explained that the Balkan situation is a difficult one. Kosovo is closer to Greece than New York is to Washington, DC, he noted, adding that Americans may be too far away to understand the repercussions of 700,000 refugees in the Balkans. “The economies of the neighboring countries cannot survive” such an influx, Simitis said. “If there’s war and the war continues, then things will become more and more difficult for the countries involved.”

Another questioner, noting a poll that showed 95 percent of Greeks oppose the bombing of Yugoslavia, asked about the attitude toward NATO and the U.S. if the bombing continues for weeks or months. Simitis acknowledged that friendly feeling of Greeks toward the U.S. “has changed” and that “anti-NATO, anti-American feeling will get stronger” as the bombing continues.

—Janet McMahon