AUC Forum Considers Arab States of the Gulf

by Lynn Mahoney

Recent changes within the Arab states of the Gulf and their neighbors were examined at the American University in Cairo’s Forum, “Changing Economies: The Gulf States Five Years After the War,” held May 30, 1996 at the Union Club in New York City. Elias K. Hebeka, executive vice president of operations–worldwide, Revlon, Inc. and AUC trustee, presided over the panel which included three of America’s leading experts on the Gulf region.

In his overview, Dr. John Duke Anthony, president and CEO of the National Council on U.S.-Arab Relations, stressed that although there are obvious similarities among the Arab states of the Gulf—all are oil-producing countries ruled by monarchical regimes which have a direct impact on the U.S. economy—there also are striking differences between the northern and southern Gulf states.

There are striking differences between the northern and southern Gulf states.

The elites in the northern Gulf states, Saudi Arabia, Bahrain, and Kuwait, are linked by a similar ancestral background. They have enjoyed a longer period of independence, a better modernization experience, and have extensive dealings with the United States.

By contrast, the southern Gulf states of Oman, Qatar and the United Arab Emirates are less cohesive in their cultural background and tend to look toward Iran and South Asia for a shared heritage. Dr. Anthony concluded, “It is in the southern Gulf that we need, as Americans, to work harder, develop knowledge and understanding…in order to bring our country up to par in dealing with our interests and concerns.”

Fareed Mohamedi, director of global oil markets at the Petroleum Finance Company, Ltd., described the current condition in the Gulf as “the holiday is over.” This “holiday,” Mr. Mohamedi explained, was a political and economic deal forged between the rulers and the ruled. In return for a political monopoly, the rulers gave the people strength in the form of oil revenues, secure jobs in the government, education, housing and health care. While civilians were granted deals and contracts by the government, it led to the growth of a foreign labor force which is now becoming a problem in the region.

“The Holiday is Over”

According to Mr. Mohamedi, the economic holiday started to unravel in the 1980s with the decrease in oil prices, and it was further affected by Iraq’s invasion of Kuwait in 1990, which had a demoralizing impact on the region. This invasion, he observed, demonstrated to the general public that the ruling families had to rely on Western military intervention for protection, thereby “breaking the deal.” When rulers started to spend more to buy back political loyalty, in some cases they exacerbated the problem, leading to unrest. To alleviate this situation, according to Mr. Mohamedi, there should be better management—which is already happening in some countries. Governments should try to borrow wisely, reduce subsidies, and allow for more economic space in the private sector.

Gary Sick, White House Middle East adviser during the Carter administration who now is a senior research fellow at Columbia University, said that during the 1960s and 1970s, when the Gulf countries opened their doors to the outside world, some “experts” predicted there would be shattering regional changes accompanied by the demise of some ruling families. As it turned out, the Arab states of the Gulf have proved stable and resilient, while Iran experienced a revolution.

Dr. Sick suggested that, like the 1960s, the 1990s also could raise the curtain on a new era of changes. Factors for change, in addition to the Gulf war, are the break-up of the Soviet Union and the emergence of new republics that significantly impact the region. The recent rail linkage between Turkmenistan and Iran now connects these new republics to Iran and the Gulf, giving Iran the hope that it can acquire new trading partners and change its future. Dr. Sick discussed unemployment among nationals of some of the Gulf states and cautioned that this could become a catalyst for social and political unrest. “I feel the countries in this region are only going to be able to deal with their problems by opening up more space for their own populations—politically, economically and socially,” Dr. Sick concluded.

The AUC Forum is a semi-annual panel discussion on Middle East topics, held in New York since October 1992. The next Forum will be in November 1996. For further information contact Mary Judith Sundstrom at the American University in Cairo, 866 United Nations Plaza, Suite 517, New York, NY 10017-1889, (212) 421-6320.