Editor’s Note:

Today we provide for your consideration part one of our exclusive interview with British historian Robert Lacey, author of “Inside the Kingdom: Kings, Clerics, Modernists, Terrorists, and the Struggle for Saudi Arabia,” published in October. It updates the story of Saudi Arabia Lacey began telling in 1981 with the landmark book “The Kingdom.”

The interview focused on what he calls Saudi “Glasnost,” the current pace and scope of reforms in Saudi Arabia and about the conflict between progressive elements and the religious establishment. Mr. Lacey was interviewed by phone and email from his base in Jeddah, Saudi Arabia, by Patrick Ryan during December 2009.

“Saudi Glasnost”
A Conversation with Robert Lacey

[SUSRIS] Thank you for taking time to talk about your new book, “Inside the Kingdom: Kings, Clerics, Modernists, Terrorists, and the Struggle for Saudi Arabia” and your perspectives on recent developments. Let’s start with the struggle in the push and pull of modernity and traditionalism. Can you talk about the current conflict between progressives and the religious establishment?

[Robert Lacey] Well, we’re right in the middle of it at the moment. The creation of KAUST, King Abdullah’s new university that opened this fall, has had a great impact, more rapidly than anyone expected. The reactions for and against gender mixing — the educating of young men and young women side by side on this campus — has provoked some angry debate across the Kingdom.

What you see at the moment is the next stage. SUSRIS has covered Sheikh Al-Shethri, a senior cleric, speaking out against gender mixing, and how he was sacked by the King from his influential position on the Ulema, the Council of Senior Scholars. Since then we’ve seen Sheikh Al-Ghamdi, head of the Hai’a in Mecca, the Commission for the Promotion of Virtue and Prevention of Vice in the Kingdom, the Hai’a, speaking out for it and praising KAUST. He has been supported by Sheikh Abdul-Rahman Al-Sudais, a much more major figure, one of the imams of the Grand Mosque, who has preached a sermon in support of KAUST. On the other hand, Sheikh Salih Al-Fawzan, a senior member of the Ulema has written a letter in the opposite direction, supporting Al-Shethri — and Al-Fawzan has not been sacked.

The liberals here are taking great heart from the way in which conservative religious figures are fighting each other so bitterly. There’s the feeling that change is coming in this area. But like everything in the Kingdom, it is going to take time, and that makes a lot of sense in my opinion. The pattern in tradition-based societies where change goes too fast is often counter-revolution — and then change can go backwards.

Apart from the controversy over the launch of the KAUST and its coeducational policy, there is a very interesting experiment at the other end of the education spectrum, in kindergarten through grade 2. This fall there is a trial of mixed gender elementary schools in 15 private schools for girls that will accept boys, not in the same classrooms but in the same facilities. The experiment is something that has been little noticed — some private kindergartens have quietly been “mixing” for years — but it has the blessing of the new Minister of Education and is an indicator of reforms that lie ahead.

[SUSRIS] What is the impetus for the reforms you talk about?

[Lacey] As I say in my book — and this may be a difficult thing for Americans to take — 9/11 was the best thing that could have happened for the cause of reform in Saudi Arabia, since it showed the tragic consequences of yielding too much power to religious extremists. The Saudis are no better than anyone else at apologizing — you know how we all have friends who can’t actually say “sorry” but nonetheless demonstrate they are sorry through their behavior. Well, that is what is going on now — though, to be sure, these reforms are being primarily pursued for their own sake and for the needs of facing the future.

One of the big challenges, however, will arise when the current surge of higher education produces tens of thousands of new graduates. That’s just a few years away. Will the economy have the jobs for all these educated and innovative, alert, young people who are being taught — many of them in America — to think more independently? The economic cities, the new mega-cities, are supposed to provide the solution; they are supposed to be ready with the jobs for the graduates produced for the “knowledge society.” But for all sorts of reasons the economic cities won’t be ready any time soon. So there’s a danger that the explosion of qualified graduates is going to create dissatisfaction and redundancy. KAUST has surprised everybody with both the speed with which it was completed and the social impact it has had — but that puts the economic cities on their mettle. Either they buck up, or some alternative must be found — and I can’t see what that alternative might be.

[SUSRIS] If developments like KAUST and fights over questions like gender mixing have heartened liberals, do you see the progressive movement as having the initiative at this point?

[Lacey] In the ’80s and ’90s there was government-sponsored conservatism in Saudi Arabia. Now there is government-sponsored liberalism — Saudi ” Glasnost.” So the conservatives are currently on the back foot. But they consider they are fighting for crucial traditional values and they are fighting with pull and with passion. We saw their power this summer with the battle over cinema, and the shutting down of the Jeddah film festival, which had been operating for three years. Every discussion you have with people in Saudi Arabia is about what I call the speedometer. How fast should this car be travelling?

[SUSRIS] What about the “odometer”? How “far” should the car go?

[Lacey] That’s the heart of the matter. Let me tell you there was quite a lot of popular support here recently for the severe punishment handed out to the so-called sex braggart, who boasted about his sex life on television. A lot of Saudis thought he had gone too far. There are many aspects of western culture — particularly its overt sexuality — that most Saudis just don’t want to see happen in the Kingdom.

Take, for example, the appearance in July 2009 of the religious police in one of the north Jeddah beach resorts from which they were previously excluded. That was not imposed from the outside. The Hai’a were requested by senior members of the community who felt that young people were getting out of hand: boys trying to pick up girls, young women dressing provocatively, loud parties and, worst of all, young people who were arrogant and dismissive — the security staff couldn’t cope. So these residents asked to have a religious policeman in the guardhouse to enforce discipline — you don’t play around with the Hai’a. So here’s a change, apparently a step backwards, coming from wealthy and Westernized middle-aged men who don’t like what they see happening, especially around their daughters.

In Riyadh the religious police have declared war on the new fashion fad among young men — low slung jeans that reveal undershorts or even bits of bare backside. It may sound trivial, but it’s an overt and rebellious western fashion statement that offends many Saudis, and it’s often associated with heavy metal T-shirts that carry Satanic images. So the religious police are rounding up young men on the streets and taking them home, and from what I hear, many parents welcome the backup in their own domestic battles with their rebellious teenagers. Isn’t this the sort of thing that local police chiefs used to do quite routinely in small town America?

It’s a reminder that Saudi Arabians want to pick and choose. They are not rejecting the modern world, but they hold this dream that the Islamic holy land — Saudi Arabia — can preserve old fashioned family values. After all, when you look in the Saudi Basic Law — what we would call the Constitution — it’s written there very clearly, that the purpose of the state is to encourage virtue, to discourage vice and also to preserve family values. So if you are going to lay down moral and social “red lines” you have got to have something like the religious police to enforce them. The Hai’a are not some some passing trend or eccentricity in Saudi Arabia. Love ‘em or loathe ‘em, they are right at the heart of what the Kingdom is all about. They have been there from the very beginning. All Saudis complain about the religious police — who likes the school prefects? — but if you then ask them if they’d like to do away with the Hai’a, most of them say “Certainly not.”

[SUSRIS] What concerns are there about the long-term commitment to reforms, especially given the age of the King and the health concerns of the Crown Prince, who only recently returned from a year-long medical hiatus outside the Kingdom?

[Lacey] While the Crown Prince was abroad, the King appointed Prince Naif, the long-serving Minister of Interior, as the Second Deputy Prime Minister and I agree with those who say this puts him in position for the throne behind the Crown Prince. The prospect of “King Naif” has been greeted with dismay by many western observers and by Saudi progressives who fear he will try to set the clock back — but I think the fear is exaggerated.

I have interviewed Prince Naif. He is certainly cautious and suspicious of the Israel-American axis and many aspects of the west — and in that he accurately reflects the instincts of the average Saudi. But he is a thoroughly hard-headed and pragmatic man who gets results. He has a very sophisticated staff of advisers, many of them western-educated to a high level. He has had a particular job to do as Interior Minister, and he has delivered. When I came to the Kingdom thirty years ago, there was a standard question that every journalist asked: “How long do you give the House of Saud?” Well, nobody asks that any more. Prince Naif has been a big factor in keeping his family firmly in control of their realm

And it was Prince Naif, as I revealed in my book, who broke a deadlock among members of the Royal Family deliberating a new electoral system for succession, the Bayaa or Allegiance Institution. You might have expected that one of the inner circle Sudairi princes, like Prince Naif, who already have their own very strong power network inside the family, would have felt threatened by this electoral expansion on the question of succession. But I am told it was Naif who backed King Abdullah on the reform and pushed it through. He is a man who likes to get things done. Look at his role as Minister of the Interior at facilitating and supporting his son Prince Mohammed’s much-praised program for the rehabilitation of radicals. The basis of that program is the implicit admission that the Saudi-Wahhabi system helped produce these extremists and must now try to un-produce them. Prince Naif has since started his own personal equivalent of that, the ambitious new “Mind Security” program which has got very little attention in the West, but which he inaugurated this year and which directly targets religious extremism as a matter of Interior Ministry policy.

We should remember how 20 or 30 years ago Western observers feared the advent of Prince Abdullah. He seemed a dark and rather rough figure who had a considerable military power base in the Saudi Arabian National Guard. Few would have foreseen his role in social, political and economic reforms, his religious interfaith initiative, the national dialogue, more rights for women, a women deputy education minister being named. You would never have forecast these things for Prince Abdullah. In the same fashion, Naif may convey a “backwoods” image, but that is in the context of the whole family’s shrewd instinct for balance and their track record of survival. They are like a huge one-party state — not democratic, but highly skilled at reflecting and juggling different interest groups. Many religious conservatives are reassured to see Prince Naif so prominent in the Saudi power structure — and at the moment that is actually helping the acceptance of reform.

[SUSRIS] You first wrote about Saudi Arabia in 1982. “The Kingdom” was banned in the Kingdom. Tell us about the prospects for your new book in that respect, and what you see happening with media openness in a general sense.

[Lacey] Well, “Inside the Kingdom” has already been banned in Bahrain. I asked my publisher what they didn’t like about it and the answer was the Bahrainis hadn’t read it. Just the fact that it was about politics and Saudi Arabia and the Royal Family, meant they weren’t going to touch it — more Catholic than the Pope. As far as the Kingdom itself is concerned, we are waiting to hear if permission will be given to distribute it. We shall just have to see what happens. In Britain we have the concept of the “Loyal Opposition,” and I hope that the quite numerous criticisms in my book will be viewed as friendly and constructive dialogue.

On the question of media openness I would say that the voices being heard in the Kingdom these days surprise many visitors. We’re seeing a lot of it at the moment in the reporting and opinion on the Jeddah floods of a few weeks ago. The coverage has literally opened floodgates of critical discussion in the press, focusing on corruption, incompetence, and mismanagement in a very frank way.

The Saudi press is filled with young journalists who investigate human rights abuses, young girls being married to older men, abuse and exploitation of immigrant workers. The press does not criticize the government directly — that is taboo now and in the foreseeable future –- but in these areas of social concern and human rights abuses young Saudi journalists go for it as freely as their Western counterparts. I have Saudi friends who went off to Dubai and elsewhere in the Gulf to work there thinking there would be more press freedom. They have returned saying there is less freedom, that there’s more interference in the other Gulf states than there is in the Saudi press. That’s not to say that there are not the very well-defined “red lines” that people know they do not cross. But there’s a constant and very exciting level of semi-private social discussion in the tradition of the “dewaniya” where men, and sometimes women, gather to discuss and debate. People are getting more outspoken and I think that is permeating the whole society.

[SUSRIS] You mentioned the recent flooding in Jeddah that claimed over 100 lives. As a resident of that city and observer of the local reporting of the catastrophe what are your impressions of the reactions in the Kingdom?

[Lacey] I was caught in the rain on the very first day. It was indeed a ferocious and frightful downpour. When you see an underpass from a brand new highway — something built in the last year or so — turn into a swimming pool because there’s no drainage or because the drainage wasn’t working, that indicts a whole range of people from municipal officials to the private contractors. The weather may have been a “God given” catastrophe, but the lack of human preparedness and practical measures was a failing for which specific men were responsible.

The traditional response would be for the King to promise money to the victims — and he has. But he has also accepted responsibility himself, for the fact that it happened on his watch. The challenge is to make sure all those angry criticisms and fine words are translated into real action.

You may recall the fire at a Mecca girls school in 2002 which resulted in 14 deaths, some a result of overzealous religious guardians who got in the way because the girls were not wearing correct Islamic dress as they fled. That tragedy produced results in terms of new leadership in women’s education. The hope is that the Jeddah tragedy will, in a similar way, produce change — though that is by no means certain. A young friend living in Mecca tells me that in the weeks since the floods he has encountered conservative preachers who are taking the microphone to give short, informal sermons, just two or three minutes, after the mid-afternoon prayer. They seem to be delivering a quietist message in which they instruct people not to be angry at ‘others’ and to accept what has happened as fate. They don’t seem to be organized, but who knows where they are coming from?

Next – Saudi Arabia’s leadership in the region and the world and its relationship with the United States.

About Robert Lacey

Robert Lacey is the author of “Majesty,” the classic biography of Queen Elizabeth II. A distinguished journalist with a love of history, he wrote the series “Great Tales from English History,” and was co-author of the best-selling “Year 1000.” In 1979, he moved with his family to Saudi Arabia for eighteen months to research “The Kingdom,” his penetrating study of the country’s complex and often paradoxical culture, which was banned in Saudi Arabia. For the past three years, Robert has been based in Jeddah and Riyadh, gathering material for this sequel — a completely new book which relates the Saudi role in the years of terror.

Source: InsidetheKingdom.net

About the Book – “Inside the Kingdom: Kings, Clerics, Modernists, Terrorists, and the Struggle for Saudi Arabia”

Commentary from Robert Lacey — “The Saudi Enigma” – “Larry King Live blog”

“Nothing is easier than to denounce the evil-doer. Nothing is more difficult than to understand him.”

– Fyodor Dostoevsky — “The Possessed”

I chose these words to open my new book Inside the Kingdom, because I needed to understand the tragedy of 9/11 and the nation that produced no less than fifteen of the nineteen hijackers on those planes. Saudi Arabia has never been a spot that wins much favor in the west. How can you love a country that charges you $70 or more for a product that costs less than $10 to get out of the ground – and then gives you terrorists as well?

But I wanted to go beyond that – to find out how the culture and religion of a society could go so wrong as to produce such a poisonous boiling-over of intolerance and hatred. In theory Saudi Arabia should not exist – its survival defies the laws of logic and history. Look at its princely rulers, dressed in funny clothes, trusting in God rather than man, and running their government on principles that most of the world has abandoned with relief. Shops closed for prayer five times a day, executions in the street – and let us not even get started on the status of women. For many the Kingdom remains one of the planet’s enduring – and, for some, quite offensive – enigmas. [for more of this commentary Click Here]

..for the book:
“Inside the Kingdom: Kings, Clerics, Modernists, Terrorists, and the Struggle for Saudi Arabia“

Editor’s Note:

Frank talk. That’s what today’s item of interest from SUSRIS is about. Khaled Almaeena, Editor-in-Chief of Arab News and resident of Jeddah, has written an extraordinary letter to Prince Khaled Al-Faisal, Govenor of Makkah. In it he describes the anguish of the people of Jeddah in the aftermath of last month’s catastrophic flood that claimed over 100 lives in the Red Sea port city. He echoes much of the criticisms that have poured out in the weeks since the flood including a call from King Abdullah that “we cannot overlook the fact that there are errors or omissions from certain quarters” that must be “disclosed and dealt with firmly.” Almaeena, in his letter, cites the King’s call for transparency and accountability in dealing with the “degree of corruption, greed, nepotism and apathy in certain offices and institutions” that is said to have contributed to the lack of infrastructure and preparedness to deal with the deluge. He asks the Governor to lead a task force; calls for good governance; and challenges media to serve as a watchdog for “transparency and accountability and serving as a bridge between the government and the people.”

Letter to Makkah Governor
Khaled Almaeena

Your Royal Highness, this letter comes to you in a spirit of humility, deep regard and from a citizen’s sincere desire to help and assist his fellows. My wish is that you accept the letter and its contents in the same spirit in which it is written. We know that God has honored you by your appointment as governor of Makkah region. It is, as we know, the most sacred spot on the planet and one which was much beloved by your late father, King Faisal. In his life he accomplished much, which has lasted through the years. Among the accomplishments for which he is remembered and revered are the founding of the Organization of the Islamic Conference (OIC) and the Islamic Development Bank (IDB), which are still with us long after his martyrdom. Just as your father left his indelible stamp upon the region, so we hope for the same from you as the son of a great king.

The Makkah region strives to have modern, well-organized cities with a bureaucracy to serve the people and put the public good as its highest aim. At the moment, the people of Jeddah and the surrounding areas are hurt, sad, anguished and in both physical and mental pain. For people to lose their loved ones in front of their eyes, to see them snatched by swirling waters and disappear caused misery and trauma. What explanation can we give for these losses? How can we explain to the orphans, the widows, the widowers and the families of the missing?

Rains are meant to be a blessing but in our case here in Jeddah, they were a bane, surely the worst and most destructive we have seen for decades. Some loss of life and destruction of property were to be expected — but not on the scale that expands and worsens with each passing day. For long, we in Jeddah blamed everything for our problems but ourselves. It was as if we were totally oblivious to what was going on — and to what should have been going on. We were proud to call our city “Bride of the Red Sea” but we did nothing to make the bride safe, healthy and worthy of our love and esteem. We became a society wanting to be seen here and there, wearing our “bishoots” and expensive clothes, alighting from luxurious cars and posing for newspaper photographs. Whenever a new senior official was appointed, we rushed to offer our congratulations and throw lavish parties. We were concerned with ourselves and our vanities, forgetting the dangers that were being planted in and around the city.

The rains came and the floods exposed us all. They also exposed and laid bare the degree of corruption, greed, nepotism and apathy in certain offices and institutions. And sadly, by and large we in the media had been quiet; we had failed to report what was really happening. In his first reaction to the tragedy, however, Custodian of the Two Holy Mosques King Abdullah issued a wake-up call to the Kingdom. He also added two new words to our Saudi lexicon — transparency and accountability. In the light of this, there is only the truth to be told. South Africa had its Truth Commission, the United States its Warren Report and Britain its White Paper. What our investigative bodies find must be made known and publicized within the framework of our government and society. Just as King Abdullah’s words have been a balm to the people, this report and its findings should ease the minds of those who suffered and even those who were not directly affected by the tragedy. Those who are responsible in any way should be named and if they have a conscience, they will surely be deeply shamed. We cannot allow those who blatantly transgress rules and disregard morality for their own personal gains to be unpunished victors. Having said this, we must not rush madly into a witch-hunt or a blame game. Being able to fix blame is important — but does it necessarily solve a problem or ease the pain of those who lost family and friends? Far better to correct what was wrong so that it does not happen again. Jeddah at the moment is buzzing with rumors about who, what, why, how much and when. Transparency and accountability will go a long way toward dispelling the rumors and replacing them with facts and solutions.

Let us now look to the future. Let us admit that many of our local companies failed (for whatever reason) to provide the world-class projects that they were supposed to provide. In addition, many institutions and government departments did not rise to the occasion and perform as they should have done. I suggest that it may be time for us to ask and learn from others and take advantage of their experience and expertise. There is no shame in this; the shame would be in doing nothing. We can learn from others — for example from Singapore’s Disaster Management Center, its civil defense and city management. Their problems are similar to ours and they have dealt with them successfully. Let us follow their example.

A task force under your command — with powers transcending bureaucracy should be formed. The task force should be composed of concerned citizens and the youth. Yes, let us not forget the young men and women who went out and provided immediate relief to those in distress. They organized themselves, rolled up their sleeves and got down to the job of helping the distressed and homeless. They did not wait to be asked; they acted on their own initiative and showed us all they could do and what they were capable of. Many of them are also qualified to offer advice and expertise that will help in rebuilding the flood-damaged areas. These young people are an invaluable asset and they do not want to accept corruption as the normal way of life. What is needed is something similar to the Marshall Plan that helped rebuild Europe after the destruction of World War II.

But all this needs good governance. Efficient and trusted government mechanisms must do their part to provide not only an economic miracle but a social one as well. We need a partnership involving the bureaucracy, society at large, NGOs and the media. Such a partnership could provide solutions to the challenges we face — and there are many. To highlight those challenges, we need a strong, professional, responsible media that act as a watchdog. Of course, the media must be critical but simply being critical is not enough; it must also offer constructive criticism and new ideas. There is increasing recognition that healthy media are the key to maintaining transparency and accountability and serving as a bridge between the government and the public. It is of the greatest importance that the media uphold values and ethical standards. For it to do less is serious failure and amounts to abdication of its most important responsibility. Credibility is the media’s greatest asset and should not be lost or sacrificed.

Your Royal Highness, as I said earlier, many of our people are in pain. They are patient; they are loyal and they have waited. They now look to you to solve these problems, which have such a great impact upon their lives, their property and the future of their children. They see other societies traveling at full speed and they too want to be travelers on the highway of life and progress. They have been bystanders long enough. They have had enough. They look to you to inspire the changes that will produce a reformed society and lead us all into a new age.

Source: Arab News

About Khalid Al-Maeena

Khalid Al-Maeena is the Editor-in-Chief of Arab News, the largest English daily in the Middle East, for over fifteen years. He first joined the newspaper as Editor-in-Chief from June 1982 to February 1993 and rejoined as of March 1, 1998. He was an anchor on Saudi Television (STV) and hosted popular talk shows. He has also worked as a radio announcer and TV program director.

Editor’s Note:

The largest assembly of world leaders in United Nations history, 119, arrived in Copenhagen, Denmark to tackle the challenge of global warming at the 15th Framework Convention on Climate Change (COP15) this week. The convention wrapped up this morning with the parties “taking note” of the Copenhagen Accord and the lingering question of how many countries will sign on. The COP15 faced a breakdown until the accord, an eleventh hour non-binding agreement, was reached among the US, China, India, Brazil and South Africa. U.S. President Barack Obama praised the Accord, “For the first time in history, all major economies have come together to accept their responsibility to take action to confront the threat of climate change.” The Accord calls for a mitigation target to limit warming to not more than two degrees Celsius, which Obama noted was nonbinding but a first step.

The lack of a non-binding agreement was not the only important story to come out of Copenhagen. Oil producing countries had been expected to press their concerns that limitations on fossil fuels would cause them economic damage, but the failure to forge a stronger agreement appears to have muted those voices. Today Patrick Ryan provided perspective on those concerns in a posting on the SUSRIS Blog — a new venue which you should check out if you have not yet looked over the offerings of articles, videos and other resources available there.

Copenhagen and Oil

What a difference a week can make in Copenhagen. On December 11th, Spencer Swartz writing in the Wall Street Journal (”Oil Producers Worry About Carbon Deal“) checked the pulse of countries like Saudi Arabia as the world prepared to sit down in the interests of global climate health and hammer out restrictions that would dent fossil fuel demand.

“With some of the world’s fastest-growing oil consumers under pressure to cut carbon emissions, big petroleum-producing states are beginning to fret over a long-term drop in crude-oil revenue. For years, oil-producing states have worried about rich nations such as the U.S. cutting back on energy consumption through conservation or turning to nonoil alternatives such as ethanol and other biofuels. But Saudi Arabia and other big Gulf states now fear that emerging markets like China — the biggest driver behind the growth in world oil consumption — may also cut crude demand .. Those fears and the potential impact on future government revenue could erode Gulf Arab states’ support for any deal in Copenhagen, Gulf officials said.”

There were a number of markers laid out in advance of the conference. Remember “Climate-gate” — the revelation of emails at a British university that fueled climate change skeptics. The head of Saudi Arabia’s Copenhagen delegation seized on the emails as the Kingdom prepped for the conference. The Australian’s “Saudis rain on summit’s parade” summed up the brouhaha:

“Saudi Arabia has long been reluctant to agree to any action to reduce carbon emissions and has only recently gone along with the 192 other governments attending the Copenhagen talks in accepting scientific evidence of man-made climate change. But its chief Copenhagen negotiator, Mohammad al-Sabban, suggested in an interview with the BBC yesterday that there was now no longer any point in seeking an agreement to reduce emissions. ‘It appears from the details .. that there is no relationship whatsoever between human activities and climate change,’ he said. ‘Climate is changing .. but for natural and not human-induced reasons. So whatever the international community does to reduce greenhouse gas emissions will have no effect on the climate’s natural variability.’ His government might be prepared to take ‘no cost’ measures to control emissions but more drastic and painful action would be out of the question until there was ‘new evidence’ about what was causing climate change, he said.”

You may have missed the report in October that Saudi Arabia was pressing for “special financial assistance” if a new climate pact calls for substantial reductions in the use of fossil fuels. Sabban, quoted in an AP report (archived on SUSRIS.org) said OPEC’s calculations showed Saudi Arabia would lose $19 billion a year starting in 2012 under a new climate pact.

Earlier this month SUSRIS asked Daniel Yergin (Pulitzer Prize winning author of “The Prize: The Epic Quest for Oil, Money & Power”) at the Arab Global Forum in Washington about the concept of compensating oil producers who might be impacted by emission restrictions adopted at Copenhagen. Yergin said, “The notion of transferring resources to oil exporting countries, were there to be a global climate change regime, not high on the agenda there. On the other hand they ought to put it on the agenda.”

COP 15 (15th United Nations Climate Change Conference) ended, however, with pledges but no solid commitments for limitations on greenhouse gas emissions. What was achieved? Here’s the BBC’s take on it:

“The Accord, reached between the US, China, India, Brazil and South Africa, contains no reference to a legally binding agreement, as some developing countries and climate activists wanted. Neither is there a deadline for transforming it into a binding deal, though UN Secretary General Ban Ki-moon said it needed to be turned into a legally binding treaty next year. The accord was merely “recognised” by the 193 nations at the Copenhagen summit, rather than approved, which would have required unanimous support. It is not clear whether it is a formal UN deal.”

The result of a binding agreement left Swartz to ponder “What Ever Happened to OPEC’s Roar?” in his WSJ blog yesterday: “The world’s biggest oil producers in OPEC turned out to be among the quietest of the several hundreds of groups attending Copenhagen. What happened to public demands for many billions of dollars in financial compensation from consumer nations for using less oil down the road, a possibility prior to the conference? Not a whimper here.”

Saudi delegate Sabban was “pushed into the shade” and was virtually silent, according to Swartz. He suggested that failure at Copenhagen to reach a “bold pact” may have “made it a lot easier for OPEC officials to stay mum and even to apparently muzzle some who’d been the loudest prior to the conference.”

The Copenhagen Accord will be reviewed by 2015, after the next Intergovernmental Panel on Climate Change assessment of the global climate. Plans for post-Copenhagen 2009 reviews led Swartz to ominously warn that “OPEC will face the music at some point of a new, comprehensive and legally binding pact for capping carbon-emissions.”

Editor’s Note:

In November, Saudi Arabia became involved in the Houthi insurgency when rebels attacked and killed border guards precipitating a strong military response from the Kingdom. The conflict is documented on SUSRIS, in a special section, and on the SUSRIS Blog. Today we provide for your consideration an essay by George Joffe of the Department of Politics and International Studies at the University of Cambridge, courtesy of Bitterlemons. The Bitterlemons.org Web site is an excellent source for essays, interviews and articles on the Palestinian-Israeli conflict and related regional developments. You can find more at Bitterlemons-International.org including this week’s edition with the other articles on the topic.

Yemen troubles could stir wider confrontations
George Joffe

Just six short months ago, a sense of guarded euphoria spread through Europe and the Middle East in the wake of President Barack Obama’s Cairo speech. It seemed as if, at long last, an American president had understood the crying need for action over regional problems and the terrible damage done by years of abuse and neglect. Now, in the wake of the president receiving the Nobel Peace Prize–awarded, apparently, for what he is going to do rather than for what he has done–things look very different.

During this time, existing crises in the Middle East and North Africa–continuing violence in Iraq, tensions over Iran’s nuclear program or Jordanian King Abdullah’s “arc of Shi’ite extremism”, as well as the crisis in Palestine–have been joined by new ones that seem much more immediately threatening. Thus the domestic crisis in Iran has generated an intensified intransigence over the country’s nuclear program and corresponding American and Israeli impatience, now increasingly backed up by European states, the United Nations and even China and Russia. An attack on Iran, for instance, which seemed so remote in June is now back on the agenda. The crisis in Afghanistan and Pakistan–Obama’s “war of necessity”–is ever more threatening as western confidence in victory ebbs away.

In Iraq–even if the violence of the past has been dramatically reduced with only 122 deaths throughout the country in November, the lowest number since the American invasion in 2003–the long-running sore of the future status of Kirkuk, as part of Iraq or the capital of Iraqi Kurdistan, is bubbling toward a climax as the security forces of both the Kurds and the federal government in Baghdad confront each other. And in North Africa, Morocco is becoming increasingly irritated by Algerian insistence on a referendum for self-determination in the Western Sahara, while Algeria and Egypt square up over the issue of football. The ritual mutual vituperation there is intense, diplomatic links have been put in the deep freeze and Egyptian investment in Algeria is threatened.

Yet, surprisingly, none of these issues, except perhaps the crisis in Gaza, has as much potential for real violence in the immediate future as the situation in Yemen. There the veteran government of Ali Abdullah Saleh faces two rebellions; a recent recrudescence of separatist sentiment in the south that is shaping up as a real threat to the regime and the long-standing al-Houthi rebellion in the north of the country. It is the al-Houthi rebellion that increasingly seems to have the potential to become a cause of regional conflagration, bringing the two regional hegemons, Saudi Arabia and Iran, into conflict.

The rebellion began in June 2004, pitting a former parliamentary deputy, Husayn Badr Ed-Din al-Houthi and a few thousand supporters from the Sa’ada area, against the government. Al-Houthi was ferociously opposed to both al-Qaeda extremism because of its treatment of Shi’ites in Afghanistan and to the pro-American policies of the Saleh regime because of his intense distrust of both the United States and Israel. He created a new political movement called the Sha’ab al-Muminin (the Young Believers), acquiring significant religious status among the Za’idis of northern Yemen because of the fusion of Za’idi doctrine into his political beliefs.

Al-Houthi himself was killed the following September but, by then, the rebellion had grown and taken on a sectarian character because of Za’idi resentment of the repressive violence of the Yemeni army, which they saw as a predominantly Shafi organization even though the president himself is a Za’idi. The growth in support had also been driven by Yemeni dislike of America’s “war on terror” in which the Yemeni government was now enmeshed. As a result, in March 2005, rebellion broke out anew under the leadership of al-Houthi’s father, a Za’idi mullah.

Since then, the rebellion has smoldered on, repeatedly erupting in periods of intense violence that government forces are increasingly unable to control. Mediation in 2007 by the head of the al-Hashid tribal confederation (Yemen’s largest), who is also head of the Islah opposition in parliament, has been unsuccessful. Two similar attempts by Qatar in 2007 and 2008 also failed, while tens of thousands of residents in the Sa’ada area have been forced from their homes. The latest explosion occurred last May and still continues, with 150,000 persons displaced and the rebels now promising to extend the struggle into the north and the south of the country. In November, al-Houthi elements are said to have infiltrated across the Saudi border, bringing intense Saudi military retaliation to force them back, although nobody knows whether this will be permanently effective.

It is this that has given the conflict inside Yemen its increasingly threatening regional character. The Yemeni government, with little evidence, has long insisted that Iran has been behind the rebellion, providing it with material support. Now Saudi Arabia is hinting that this is the case, while Iran has suddenly begun to take an interest in the plight of the Za’idis, as fellow Shi’ites. All that is needed now is for Iran to decide to provide the material support that it has been long accused of doing, something the Ahmadinezhad government might well be tempted to do, to divert domestic opinion. Saudi Arabia would be bound to respond, as part of its wider challenge to Iranian radicalism throughout the “Shi’ite arc of extremism”. The al-Houthi rebellion, in short, is now set to become a metaphor for a much wider Middle East confrontation.- Published 17/12/2009 © bitterlemons-international.org.

George Joffe is affiliate lecturer at the Department of Politics and International Studies at the University of Cambridge.

[Reprinted with permission of "bitterlemons"]

Editor’s Note:

This week leaders from the six member states of the Gulf Cooperation Council met in Kuwait for the organization’s 30th Summit. Dr. Joseph Kechichian, in a Gulf News op-ed today, called the summit “yet another search for security and stability, both of which hang by a bare thread.” He noted that the “oft-repeated ‘one Gulf, one destiny, one nation’ slogan sounds good, but everyone knows that there are several Gulfs, fates and nations in the area, whose interests coincide as much as they diverge.” He added, “To assume that member-states are on the same wavelength would be optimistic, and it remains to be determined whether those attending the summit will manage to implement palpable new decisions.”

As we review the results of the Summit we are reminded of a thoughtful essay by Dr. Christian Koch of the Gulf Research Center published by Khaleej Times on the eve of the summit which sounded concerns about the effectiveness of the Council similar to those addressed by Dr. Kechichian. Koch questioned the record of accomplishments noting results did not match the “lofty statements about common challenges, mutual traust and good neighborliness.” He noted that King Abdullah of Saudi Arabia, during the 2006 summit acknowledged that more needed to be done by the group, “What has been achieved so far is still far below the expectations of our people.” Koch calls for the Council to undertake an assessment to define the way forward with a “bolder and more concrete strategic vision.”

Today we provide for your consideration Dr. Koch’s essay, “What about the GCC itself?” and thank him for permission to share his perspectives with you.

What about the GCC itself?

Regional security concerns predominate but the focus should be on developing the GCC

Christian Koch
Director of International Studies
Gulf Research Center

On December 14, 2009, the leaders of the six-member Gulf Cooperation Council (GCC) will gather for their annual summit meeting this time hosted by Kuwait. While the leaders will gather with much fanfare and press attention will be significant, much of the outcome of the meeting is predetermined. In fact, the final communiqué will almost certainly include references to the need for Iran to abide by its international commitments regarding its nuclear program and criticism of the failure of Israel to effectively engage in the peace process; it will almost certainly voice support for the fight against terrorism, as well as stress the right of Saudi Arabia to protect its border with Yemen and to take action against possible al-Houthi incursions there. In fact on all internal and regional issues, there exists a basic agreement among the GCC member states about the nature of the challenges being faced. This, in turn, allows the organization to display a common and united front.

What will be missing, however, is a clear agenda and agreement about the steps needed to face those challenges and resolve them. And this points to a fundamental problem. For what is certainly going to be missing from the summit communiqué is a focus on the internal development of the GCC as an organization and how institutional mechanisms can be implemented which ensure that the GCC is a responsive multilateral body ready to contribute effectively to conflict resolution and management in its immediate neighborhood.

After nearly 30 years of existence, the GCC has in fact failed to develop institutionally. Ever since its establishment in 1981, there have been numerous lofty statements about common challenges, the need for mutual trust, and good neighborliness. But this stands in contrast to the actual progress being achieved on the economic, political as well as security fronts. To be sure, important decisions have been made with regard to the implementation of a GCC customs union, a common market, a common currency, a Gulf Defense Pact, and an agreement on counter-terrorism cooperation, just to name the most important announcements. There has also been a greater frequency of meetings and exchanges of views among GCC ministers at all levels in recent years, thus allowing for greater convergence of ideas and generally more common positions.

Yet, it cannot be claimed that announcements have been followed by effective implementation. The customs union still does not function properly after seven years, how the Gulf Defense Pact is to be operationalized remains a big question, a planned counter-terrorism center has failed to receive the necessary backing, the GCC common currency currently only includes four members and even here it is not clear when the Gulf dinar is to come about, and political relations are conducted in personal ways rather than on a more permanent institutional level.

If one were thus to draw a balance sheet concerning the accomplishments of the GCC, the outcome of the assessment would be meager at best. While things look good on paper and appear to be moving in the right direction, implementation at all levels has lagged considerably behind the stated intentions of GCC leaders. Overall, GCC decisions continue to be defined by quantity more than quality. This was acknowledged by King Abdullah of Saudi Arabia during the 2006 summit meeting when he stated that: “What has been achieved so far is still far below the expectations of our people.”

More importantly, what appears to have been lost in the last two decades is the sense of purpose and spirit of the early 1980s that brought the Arab Gulf countries together. When the GCC was formed, it was not only a reaction to the regional turmoil that engulfed the region at the time which included the Iranian Revolution, the Soviet invasion of Afghanistan and the outbreak of the Iran-Iraq War in September 1980. In fact, a process had been in motion prior to these events that had resulted in such achievements as the Gulf Ports Union, the Gulf Organization of Industrial Consultancy (GOIC) and the Gulf Federation of Chambers of Commerce and Industry, among others. In essence, there existed a growing realization that joint action was the way forward and there was a broad spirit among all leaders to promote greater Gulf unity. That spirit, however, is now missing.

All of this should provide some pause for thought. More than holding annual summit meetings that follow a pre-determined agenda, it would be much more important to undertake a serious assessment of the GCC as an institution and define more clearly the forward path for cooperation. What is required is a bolder and more concrete strategic vision that outlines the steps necessary to achieve truly effective integration and allows the GCC as an organization to gain more power and relevance. For the moment, it is simply not very clear what value is being added by the GCC.

Curiously, there appears to be an opposite process in place with regard to the GCC when compared to that of the European Union. In the GCC states, the population firmly supports the further move towards closer cooperation while the leadership has so far refrained from carrying these aspirations forward. In the EU, the political will for integration exists but it often finds its obstacle in popular opinion. Given these circumstances, it would appear as even more imperative that GCC leaders take a time-out and assess the real progress and development that has been achieved and map out the way forward so that the GCC in the near future begins to reflects the needs of its people.

Naturally, one needs to be realistic and understand that the move towards integration is a process that needs to be organic and homegrown. Nothing can be imposed. Yet, it would make sense to convene an intergovernmental conference that discusses the ways and means to strengthen the GCC Secretariat, increase its capacity and make its functioning more effective. Such an intergovernmental conference should be convened prior to the 30th anniversary of the GCC in 2011. Further, as part of the process of self-evaluation, it might be worthwhile to consider forming a working group of GCC intellectuals that can undertake an independent review with the objective of making concrete policy recommendations. Such a review will likely acknowledge that the numerous security challenges that the annual GCC summit now concerns itself with not only make closer cooperation among its members more urgent than ever but also would be more amenable to a resolution if there is a common and united GCC policy in place. As a result, the sooner the process of a review is started, the better.

(Originally published in Khaleej Times, December 13, 2009)

Reprinted with permission of the author.
About Dr. Christian Koch:

Dr. Christian Koch is the Director of International Studies at the Gulf Research Center located in Dubai, UAE. Prior to his appointment, he worked as Head of the Strategic Studies Section at the Emirates Center for Strategic Studies and Research, Abu Dhabi. Dr. Koch received his Ph.D. from the University of Erlangen-Nürnberg, Germany with a thesis on the role of voluntary association in the political development of Kuwait. He also studied at the American University in Washington, D.C. and the University of South Carolina. Dr. Koch has published on various issues related to Middle East political development and Gulf strategic issues and is a regular contributor to regional newspapers and media. He is the editor of Unfulfilled Potential: Exploring the GCC-EU Relationship (Dubai: Gulf Research Center, 2004) and of the Gulf Yearbook (2005 to 2008 Edition) as well as co-editor of Gulf Security in the Twenty-First Century (Abu Dhabi: ECSSR, 1997) and A Window of Opportunity: Europe, Gulf Security and the Aftermath of the Iraq War (Dubai: Gulf Research Center, 2005). He has contributed numerous chapters to edited volumes including Elections in Asia: A Data Handbook (Oxford University Press, 2001); Der Irak: Ein Land zwischen Krieg und Frieden (Palmyra, 2003) und Der Islam in der Gegenwart (München: C.H. Beck, 5. Auflage, 2006). Dr. Koch also serves as a contributor to Jane’s Sentinel Publications on Gulf issues. He is a member of the advisory board of the German Orient Foundation since January 2007.

About the Gulf Research Center:

The Gulf Research Center (GRC) is an independent research institute located in Dubai , United Arab Emirates (UAE). The GRC was founded in July 2000 by Mr. Abdulaziz Sager, a Saudi businessman, who realized that in a world of rapid political, social and economic change, it is important to pursue politically neutral and academically sound research about the Gulf Cooperation Council (GCC) countries and disseminate the knowledge obtained as widely as possible. The GRC seeks to provide a better understanding of the challenges and prospects of the GCC countries.

187 Oud Metha Tower,
11th Floor, 303 Sheikh Rashid Road,
P.O.Box : 80758, Dubai. UAE.
Tel. No : +971-4-324 7770
Fax. No : +971-4-324 7771
Email: info@grc.ae

Editor’s Note:

The Saudi Gazette reported December 11, 2009 that Sheikh Ahmed Al-Ghamdi, head of the Hai’a, in Makkah – the Commission for the Promotion of Virtue and Prevention of Vice in the Kingdom – spoke in support of the “mixing of the sexes.” His comments came in the wake of the highly publicized firing of a senior cleric who challenged the coeducational policy at the Kingdom’s newly opened, showcase postgraduate campus, the King Abdullah University of Science and Technology at Thuwal. The KAUST campus’ coeducational studies policy is a concept not previously permitted in public institutions in the Kingdom. Today we provide for your consideration a report on the controversy.

Coed Saudi Campus is Focus of Reform Controversy
By Patrick Ryan
Published December 12, 2009

Two years ago King Abdullah broke ground on a world-class postgraduate research university along the Red Sea Coast north of Jeddah that would bear his name and spelled out his vision for what he considered to be the modern House of Wisdom, or Bayt Al-Hekma, an intellectual landmark of the “Golden Age of Islam.” He called for the King Abdullah University of Science and Technology, or KAUST, to become a bridge between cultures and nations, adding, “We hope that the university carries out its noble humanitarian message in a pure and clean atmosphere, taking the help of God and then that of enlightened intellectuals all over the world, without any bias or discrimination.”

This September King Abdullah presided over the inauguration of KAUST and of more breaking ground — the introduction of a coeducational campus in the conservative Kingdom. Men and women at KAUST working together on the high-tech campus without restrictions are contrary to the interests of traditional elements in the religious establishment. “Coeducation is a sedition and an absolute evil,” said Sheikh Sulaiman Al-Douish in a communiqué following KAUST’s opening. His condemnation was echoed by fellow cleric Sheikh Abdul Aziz Al-Toraifi, according to Habib Trabelsi, writing in SaudiWave.com. Al-Toraifi called gender mixing at the campus “an evil act.” Trabelsi said the reaction was cast by some as a war between the “guardians of virtue” and the “agents of America,” the religious establishment hardliners versus the “liberal current.”

The war of words grew increasingly vicious within days with positions being staked out on web sites, columns and television interviews. One such appearance by Sheikh Saad Al-Shithri, a recent appointee of King Abdullah to the influential Council of Senior Scholars stoked the controversy. Al-Shithri called for the separation of the sexes at KAUST in an appearance on an “Islamic” channel called “Al Majd,” according to Faisal Abbas on Huffington Post, saying mixing “is not allowed as it could lead to greater sins and vice.” Abbas noted the senior cleric said sexual harassment, rape and blackmailing were examples of the evils that could occur in a mixed environment.

The cleric’s criticisms of the King’s university drew a sharp response from the editor of the Saudi daily Al Watan, Jamal Khashoggi according to Abbas. Khashoggi accused Al-Shithri of attempting to interrupt “the progress of the nation,” and, Abbas reported, providing ammunition for those who reside in the “caves of Afghanistan” who have labeled the country’s leadership as “infidels.” Khashoggi said of Al-Shithri and the hardliners, “This is a strategy for the conservatives to control the university or at least to have a major say in it. This is the old trick for them to have the upper hand to sabotage reforms.” Other articles in the Saudi press criticized Al-Shithri’s views, some pointing out that mixing was not inconsistent with the teachings of Islam.

On October 4th the Saudi Press Agency reported that Al-Shithri was out, sacked from the Council of Senior Scholars by King Abdullah. The abrupt and very public disposition of the cleric was a move calculated to send a message, according to Thomas Lippman, author and adjunct scholar at the Council on Foreign Relations. He told SUSRIS the King wanted to make sure the religious scholars, the Ulema, understand they “are employees of the state and therefore had better toe the line.”

This week Sheikh Ahmed Al-Ghamdi, head of the Hai’a, in Makkah – the Commission for the Promotion of Virtue and Prevention of Vice in the Kingdom – spoke in support of the “mixing of the sexes” during an Okaz interview cited by the Saudi Gazette. “Mixing was part of normal life for the Ummah and its societies.. ..The word in its contemporary meaning has entered customary jurisprudential terminology from outside.” Al-Ghamdi said, “Those who prohibit the mixing of the genders actually live it in their real lives, which is an objectionable contradiction, as every fair-minded Muslim should follow Shariah judgments without excess or negligence. In many Muslim houses – even those of Muslims who say mixing is haram – you can find female servants working around unrelated males.” Al-Ghamdi went on to praise KAUST as an “extraordinary move and huge accomplishment to be added to the Kingdom of Saudi Arabia’s record and the history of the Islamic Ummah. It is a great step which the Ummah can look up to in recapturing its role in civilization and its scientific honor.”

Talking about the surprising position taken by a leading Hai’a figure, historian Robert Lacey, author of “Inside the Kingdom: Kings, Clerics, Modernists, Terrorists and the Struggle for Saudi Arabia,” told SUSRIS: “The cynics will say, of course, that after decades of enforcing excessive segregation, this is a fine time for the religious police to discover that the social mixing of the sexes is okay, after all. But it is better late than never, in my opinion. And this is how the Kingdom works: the King takes the lead and the elite follow. The larger question is whether the message will be accepted at the grass roots. The logic of what Sheikh Al-Ghamdi is saying is that all Saudi campuses should now allow social mixing, but I am not sure that will happen any time soon. A lot of the traditionalist websites have come out very strongly against Al-Ghamdi’s statement and he is being denounced as a traitor – or that ultimate insult ‘a government sheikh’.”

The message transmitted by Al-Shithri’s sacking appears to have been received, at least in some quarters but certainly not universally among the clerics. “Despite his position, the Sheikh is not, in fact, a heavyweight religious figure,” said author Lacey. “He is no Salman Al-Awdah. He is following a trend not setting it. But I think his change of direction is significant. Sometime ago he and his men were involved in quite a notorious ‘sting’ operation to send out a message that the religious police were intent on enforcing segregation. Now he seems to be giving out a contrary message, so it shows the way that a certain wind is blowing – and it clearly heralds a bitter division in the conservative religious ranks that is likely to grow.” Lacey said the arguments by the Sheikh and the other religious scholars who have spoken out in support of KAUST, were more significant in that they shadowed the tactics the King used to outflank the conservatives.

According to Lacey, King Abdullah is not saying, “‘Mixing of sexes on campus is the modern way.’ He is saying, ‘This is the traditional way, derived from the best precedents in the Islamic past.’ He is playing the fundamentalists at their own game – as he has done with his entire KAUST campaign, arguing that he is not so much building a 21st century university as going back to the great old days of the Bayt al-Hekma, the House of Wisdom, and the finest traditions of Islamic learning.”

The launch of KAUST may have provided the venue for the current skirmish but as Lippman told SUSRIS, “The issue with KAUST is not really about the university, it’s about who is going to set the agenda for the country – the royals or the Ulema. We now have the answer, which has been the same answer since the battle of Sibila,” referring to the decisive defeat of religious rebels by Saudi Arabia’s founder, King Abd al-Aziz, in 1929.

The pace and breadth of reform will likely continue to prove controversial and as Lacey noted, “It is a very profound battle for the allegiance of Saudi Arabia, and we shall have to see whose interpretation of history prevails.”

Editor’s Note:

Today we provide for your consideration an evaluation of the impact of Dubai World’s announced debt “standstill” on the Saudi economy provided by Jadwa Investment of Riyadh on December 8, 2009. We thank Jadwa Head of Research Mr. Paul Gamble and Chief Economist Brad Bourland for sharing this important assessment with SUSRIS.

Saudi Arabia unaffected by Dubai debt woes

The debt problems in Dubai will have little impact on Saudi Arabia. Saudi banks have minimal exposure to the affected companies in Dubai and the direct impact on the Saudi economy will be small. Confidence about the unique dynamics of the Saudi economy meant that the stock market was largely unscathed.

On the first day of trading since Dubai World announced a standstill on its debt repayments, the TASI fell by only 1.1 percent, albeit on very low volumes. On Sunday, the TASI rose before falling back on Monday after another sharp fall on the Dubai stock market. Saudis are permitted to invest in the Dubai stock market and vice versa. It is therefore possible that some Emirati investors cut their holdings of Saudi shares to cover losses at home. However, this would not be significant enough to have an impact on the market as their holdings are small (non-Saudi GCC investors accounted for 1.2 percent of total trade by value on the Saudi stock market in November). Non-Emirati GCC investors were responsible for just over 5 percent of total trades by value on the Dubai Financial Market in September (latest data).

Saudi banks have very little exposure to Dubai World. The SAMA governor put the exposure at just 0.2 percent of total assets. Of Dubai World’s total liabilities of $59 billion, only those of its property companies, Nakheel and Limitless (worth a combined $26 billion) are being restructured. It is possible that some Saudi banks hold the sukuk issued by Nakheel, but this will only be a very small proportion of their total investment portfolios.

We do not expect serious direct fallout on the Saudi economy. Companies working on projects in Dubai may see some impact and questions are likely to be raised about the projects that Dubai government-backed enterprises are working on in the Kingdom. The only project being undertaken by one of the affected real estate companies is Limitless’ $12 billion Al Wasl real estate development in north Riyadh, which is currently at the infrastructure construction stage. UAE developer Emaar, while owned by the government of Dubai, is not part of Dubai World. We therefore do not think that work on the King Abdullah Economic City, being undertaken by its local subsidiary, Emaar Economic City, will be affected. Other Emaar projects in the Kingdom (Khobar Lakes and Jeddah Gate, both in early stages of construction) are potentially more vulnerable to developments in the UAE real estate market.

No data is available on Saudi real estate ownership in Dubai. Anecdotally, we do not think that Saudi investors are heavily exposed. Furthermore, investors in individual units have already seen property prices fall sharply and therefore almost certainly suffered the bulk of their losses before the debt standstill. The same applies for those Saudi companies that financed developments in Dubai.

More generally, Saudi businesses in Dubai will be exposed to a likely renewed downturn in the local economy. Prior to the standstill there had been signs that confidence was returning (notably, property prices had risen and the exodus of expatriate workers during the summer was far lower than had been expected), but this process has been set back. As a result of the renewed troubles in Dubai, the IMF has said it is likely to revise down its real GDP growth forecast for the UAE as a whole from 3 percent to around 2 percent.

A final potential implication of what happened in Dubai for Saudi companies is in the sukuk market. Saudi companies have been looking at sukuk as an alternative source of finance, given the reluctance of commercial banks to lend. A $3.5 billion sukuk issued by Nakheel, due to mature in mid-December, is set to be the first major sukuk default. This will provide a serious test for the mechanism for resolution of legal issues around sukuk and if not handled smoothly and equitably could complicate sukuk issuance for local companies. Investors will also insist on clarity of government support for part- or fully-owned government companies after the government of Dubai distanced itself from the debts Dubai World, contrary to the assumption of many investors.

For comments and queries please contact the author:

Paul Gamble
Head of Research
pgamble@jadwa.com

or:
Brad Bourland
Chief Economist
jadwaresearch@jadwa.com
Phone +966 1 279-1111
Fax +966 1 279-1571

P.O. Box 60677, Riyadh 11555 
Kingdom of Saudi Arabia

Editor’s Note:

Today we provide for your consideration the November bulletin from Jadwa Investment in Riyadh. It provides solid insights into the performance of the Saudi Stock Exchange, or Tadawul (TASI); a revised forecast for the Kingdom’s budget — expected to see a record surplus; an overview of Saudi economic performance; an insightful explanation of the change in the formula for oil pricing and a brief look at the oil market. We thank Jadwa Chief Economist Brad Bourland for sharing this valuable report with SUSRIS readers. [The Jadwa Monthly Bulletin for November was released prior to Dubai's announcement of a $60 billion debt "standstill."]

Jadwa Investment – Monthly Bulletin

TASI continues to lag

The TASI continues to underperform global markets despite reasonable third quarter results and improving economic conditions. Annual earnings per share growth in the third quarter fell by 33.8 percent, the largest decline since the final quarter of last year. In quarter-on-quarter terms earnings growth also deteriorated, to -18.9 from 11.7 in the second quarter. This decline reflects seasonal factors, given that the third quarter includes the peak holiday season, very hot weather and, at present, Ramadan. Nonetheless, since the end of October the TASI has underperformed the US S&P 500 and the MSCI emerging markets index by around 5 percentage points.

Only three sectors recorded year-on-year earnings per share growth: insurance, utilities and retail. The large growth in the insurance sector reflects the expansion of operations and move into profitability of many of the new insurance companies that have been launched over the last few years. The utilities sector is dominated by the Saudi Electricity Company, which generally has a strong third quarter, as the summer is the peak time for energy consumption, notably by air conditioners. For retail the growth in part reflects a reduced burden from inflation, which was rapidly eroding consumers’ disposable incomes in the third quarter of 2008, though the growth is concentrated in two companies; others recorded large declines in earnings.

Petrochemicals was the worst performing sector, owing to the impact of the global recession on demand and prices. Ethylene prices were 30 percent lower in the third quarter of this year than in the third quarter of 2008, when they hit an all-time high. Profits at Sabic were down by 50 percent in year-on-year terms, though this was better than most analysts’ expectations. With the prices of most petrochemical products well above their levels for the fourth quarter of last year, the sector is likely to be one of the fastest growing in the final quarter. The two smallest sectors on the TASI, hotels and resorts and media and publishing were the second and third worst performers in the third quarter.

Earnings per share in the third quarter were 18.9 percent lower than in the second quarter. The worst performing sector was hotels and tourism. While this sector benefits from the seasonal trend, it was affected by one company booking large revenues from a one-time land sale in the second quarter. The sharp decline in earnings per share by cement companies is because this industry is more affected than most by seasonal conditions given that hot weather makes cement difficult to work with (as it sets very quickly) and affects the working hours for those operating outdoors. The best performing sectors on a quarterly basis were the same as those that reported the strongest year-on-year results.

Initial market response to the third quarter results was favorable and the TASI maintained its upward momentum during the first three weeks of October (when the bulk of the results were announced). Subsequently the market has fallen back and has again failed to respond to an upward trend in global markets. We think the following factors are currently holding back the Saudi market:

• Tough credit environment: Concerns about the fallout from high profile financial difficulties at two local businesses remain. Banks increased provisioning for bad debts by SR1.7 billion in the third quarter and remain cautious about lending; credit to the private sector was up in September, but only by 0.5 percent.
• Corporate selling: We think that some companies have taken advantage of recent gains in the market to sell in order to raise funds. Corporations were large net buyers in October, with total purchases of SR4.17 billion versus total sales of SR2.36 billion, but we have questions over the comprehensiveness of this data. Furthermore, publically available data show that some large shareholders are gradually reducing stakes in listed companies.
• Weak dollar: Low US interest rates and the prospect of currency gains are encouraging international investors to borrow in dollars to finance investments in higher yielding assets, including many emerging market stock markets, but the exchange rate peg and restrictions on foreign investment mean these flows are having little impact on the Saudi market. In addition, dollar weakness has reawakened concerns about inflation in the Kingdom.
• Tensions with Yemeni rebels: The TASI has moved sideways since an armed incursion into Saudi territory by Yemeni rebels in early-November. Although the tensions are not notably affecting the operations of listed companies or the economy in general, it seems likely that they have unsettled some investors.

A lack of confidence continues to hold back the Saudi market. At present, the market has a far greater response to falls than rises on global markets. Economic conditions are improving, but without greater investor confidence the market will struggle to make significant gains over the remainder of the year.

Economy watch: Budget surplus expected this year

With around a month of the year left and oil prices (WTI) holding above $75 per barrel, we have nudged up our forecast for oil prices this year. As a result, we now expect the Kingdom to record a budget surplus and smaller than previously expected current account deficit.

So far this year WTI has averaged $60 per barrel. With WTI above $75 per barrel for the past month and likely to remain around this level for the remainder of the year, we have raised our oil price forecast and adjusted our economic forecasts accordingly. Based on the assumption that WTI averages $75 per barrel for the remainder of the year, we have increased our oil price forecast to $62 per barrel from $58 per barrel (for Saudi crude the rise is to $60.8 per barrel from $55.7 per barrel, in part reflecting a lower discount to WTI).

The key change to our forecast caused by the higher oil price is that we now expect a budget surplus (of SR46 billion; 3.4 percent of GDP), compared to a budgeted deficit of SR65 billion. We estimate that the budget was based on an oil price of $48 per barrel and production of 8.1 million barrels per day. Oil prices are much higher than this assumed level yet the surplus is only expected to be relatively small. We think this is because spending is running well ahead of target. It is important to note that not all public sector spending is captured in the budget numbers. For example, spending by Aramco reduces the amount of oil revenues transferred to the government budget and is not classed as government spending.

Although we expect the government to have greater revenues, we have not altered our projection for government spending. This is because the government was already spending very aggressively in order to stimulate the economy and was comfortable financing this by drawing down reserves, if necessary. The additional revenues we are anticipating are not large enough to impact on the five-year spending program the government is currently pursuing. Government spending has been the main stimulus to the economy so far this year, but activity outside of those firms directly benefitting from this has been sluggish owing to problems accessing credit.

Higher oil export revenues have improved the outlook for the current account. Nonetheless, we still expect a slight current account deficit this year (of 0.8 percent of GDP). This will be the first deficit since 1998, but at such a small size it does not pose a problem for the Kingdom. A modest downward adjustment to our import forecast has also contributed to the slimmer current account deficit forecast. Imports were down by 16 percent over the first eight months of the year compared with the same period of 2008. For August alone, the decline was 29 percent; the largest monthly import total of last year was recorded in August, largely due to very high commodity prices. Non-oil exports are down by 22 percent over the first eight months of the year compared with January to August 2008.

We have also lifted our oil price forecast for 2010 to $75 per barrel from $70 per barrel, reflecting the higher base. As a result of this higher forecast we now expected the current account to be in surplus and a budget surplus of over 8 percent of GDP.

In brief: Economy

Year-on-year inflation is likely to have hit its bottom for the year of 3.5 percent in September. The current rate is the lowest since June 2007 and September was the tenth month out of the last 12 in which the inflation rate fell. We expect inflation to pick up in the coming months owing to the impact of the plunge in commodity prices and the fall in the dollar on the annual comparison. For example, although food prices (as measure by the IMF index) are 26 percent below their peak of last year, they are 2 percent above their level of one year earlier. The same trend, although of a different magnitude, is also true for transportation costs and the dollar (and therefore import prices).

Exchange rate forwards (which measure what the market expects the exchange rate to be in one year) recently hit their highest level in over a year. This may be an early sign of renewed pressure on the exchange rate peg. Some of the arguments used by those betting against the peg in late-2007 and early-2008 are again becoming more relevant. Notably, the US has consistently emphasized that interest rates will remain exceptionally low for a sustained period. In contrast, the Saudi economy is strengthening and will pick-up further next year, creating a divergence in interest rate needs between the Kingdom and the US. In addition, recent dollar weakening is adding to inflationary pressures. If pressure against the peg does materialize it will probably not be until the second half of next year. We do not foresee any change to the riyal’s peg to the dollar.

Although SAMA net foreign assets fell again in September, the Kingdom’s overall reserve position was broadly unchanged. Movements in SAMA net foreign assets are generally determined by oil revenues. However, last month they slipped by $1.9 billion to $380.5 billion despite healthy oil prices. This was the result of the deposit of funds at the IMF. Since the end of July the Kingdom has subscribed to two new allocations of special drawing rights (SDRs; the IMF’s unit of account) undertaken to raise the value of funds the IMF has to lend. These have increased the Kingdom’s holdings of SDRs to $11 billion from $748 million in July. SDRs are categorized as official reserves rather than SAMA foreign assets.

Rising remittance outflows illustrate that the number of expatriate workers in the Kingdom has continued to increase. Pakistan is the only country of the Kingdom’s main labor suppliers that breaks down remittance receipts by country of origin. Remittances into Pakistan from Saudi Arabia for the first 10 months of the year averaged $141 million per month, 20 percent higher than in the same period of last year. Data is available for the Philippines, but not broken down by country. This shows that the growth in total expatriate remittances to the Philippines has fallen significantly this year, to just 3.7 percent in the first eight months compared with the same period of 2008, versus a rise of 13.7 percent for the whole of 2008.

Oil market watch: Kingdom changes oil pricing formula

The Kingdom has modified its oil pricing formula. The move is technical and will not have a notable impact on total oil revenues. However, it may reduce modestly the volatility of oil revenues and should assist with the pricing strategy of Saudi Aramco.

Saudi Arabia does not sell its oil exports at a single price. Rather, 17 different prices are charged, depending on the grade of crude and where the consumer is based. Saudi Arabia sells five different grades of crude oil. Furthermore, it prices its oil to benchmark prices in four locations: North America, North West Europe, Mediterranean and the Far East (though one grade is only sold to the Far East).

In each case discounts or premiums to a benchmark price are set around three weeks in advance for sales that take place the following month. The Kingdom announced earlier this month that from January it will change its pricing benchmark for sales to North America from WTI, which it has been using since 1994 to the Argus Sour Crude Index (ASCI; which was launched in May 2009). This reflects a variety of issues afflicting WTI that have become more problematic in recent years.

Although WTI is one of the most widely used oil price benchmarks, it is a light sweet (meaning low sulfur content) crude oil and its price is just the price of light sweet oil delivered at Cushing, Oklahoma, a key oil supply hub. This leaves the WTI price vulnerable to factors specific to that location. Recently, WTI has been affected by a shortage of storage and pipeline capacity and refinery maintenance, which have periodically altered its relationship with other crude benchmarks such as Brent. WTI generally trades at a small and reasonably consistent premium to Brent, but over the past 18 months the premium has been volatile. With Aramco setting its pricing formula in advance, this volatility complicates pricing strategy. In addition, a lack of physical storage space has at times caused a sharp divergence to open between spot and forward prices.
Another rationale for changing the benchmark is that the bulk of Saudi crude now sold to North America is sour. ASCI is comprised of a basket of three US Gulf Coast sour crudes, while WTI is a sweet crude and therefore less representative of the Saudi export blend. Previously, Aramco had to include a projection for the differential between the price of sweet and sour crudes when setting its prices.

Finally, WTI futures contracts are the most active financial instrument for oil and the investment flows it attracts may introduce additional volatility. Derivatives contracts are not yet available on the ASCI (though several are planned), so changing the benchmark could potentially reduce the impact of financial flows on the price Saudi Arabia receives for its oil.

Using the new benchmark will eliminate some of volatility caused by local developments at Cushing and perhaps by investor use of financial contracts on WTI. The Kingdom sells around 1 million barrels against the new benchmark out of current production of 8.2 million barrels per day and global consumption of 85 million barrels per day. It will not have a noticeable impact on international oil prices and we have not altered our oil revenue forecasts.

In brief: Oil market

Oil prices have stabilized over the past month at just below the 13-month high of over $80 per barrel they hit in late October. Supply (both from Opec and non-Opec) and demand have both risen and the dollar has been relatively stable (as oil prices are denominated in dollars, investors buy oil to preserve the value of their dollars when it is falling against other currencies). We anticipate that all these trends will continue over the remainder of the year and accordingly have revised up our oil price forecast (WTI) for 2009 to $62 per barrel from $58 per barrel.

Oil demand continues to pick up in line with the improving global economy. According to the International Energy Agency, oil demand rose in the third quarter, the first quarterly rise since the third quarter of 2007, and is set to go up further in the fourth quarter, resulting in the first year-on-year growth in demand since the second quarter of 2008. Asia (particularly China) and the Middle East remain main source of demand growth. For the whole of 2009, the IEA projects oil demand of 84.8 million barrels per day, a decline of 1.5 million barrels per day on 2008 (in April the IEA was projecting a decline of 2.6 million barrels per day).

The Kingdom’s oil production has continued to gradually rise. Unofficial estimates put it at 8.2 million barrels per day in October, up from a seven-year low of 8 million barrels per day in April. Production has been creeping up throughout Opec (compliance with agreed quotas was around 65 percent last month) though this has yet to affect oil prices, which have been in excess of the $75 per barrel level considered “fair” by the Kingdom for virtually all of the last five weeks. Aramco has indicated to some customers in Asia that it will increase shipments in December, pointing to a further increase in production. However, we do not expect a formal change to Opec’s production quotas at its late-December meeting in Angola.

Oil and oil product stocks have generally fallen slightly, but remain high on an historical basis. Stocks in the OECD dropped to 60 days in September from 60.9 days in August, though this places them 3.8 days higher than in September 2008. US data, which is more up to date, show that crude and gasoline stocks are broadly unchanged since the end of September and distillate stocks have slipped marginally from their long-term high of early-October. The high level of stocks remains a concern to Opec and has the potential to weigh on prices should other factors become less supportive.

For comments and queries please contact the author:

Paul Gamble
Head of Research
pgamble@jadwa.com

or:

Brad Bourland
Chief Economist
jadwaresearch@jadwa.com
Phone +966 1 279-1111
Fax +966 1 279-1571
P.O. Box 60677, Riyadh 11555
Kingdom of Saudi Arabia

http://www.jadwa.com

Editor’s Note:

This week as millions of Muslims are in Saudi Arabia for the Hajj we are pleased to provide a series of articles that provide background information and perspective on the annual pilgrimage. This article which originally appeared in the online edition of The Christian Science Monitor, is part four of a five part Hajj “diary” series by reporter Faiza Saleh Ambah. You can find more articles, links and resources at a SUSRIS Special Section on “Hajj 2009.”

The Reluctant Pilgrim’s Grudging Return Home
By Faiza Saleh Ambah
Part 5

MECCA, SAUDI ARABIA – At the goodbye circling of the Grand Mosque, the final rite of the hajj, a Jordanian woman holding hands with her husband turns around for a last look at the Kaaba. Tears fill her eyes.

I know how she feels.

“Is that it? Aren’t there any more rites we can do?” I ask my cousin Allal. He laughs, but he understands.

In the middle of our final walk around the Kaaba, the geographic and spiritual center of Muslim prayers the world over, my cousin Allal succumbs too.

“God you are the Generous. God you are the Mighty. God, you who are capable of all things, help us defeat our enemies. Help us defeat our laziness. Strengthen our faith and bring us back soon to visit your house,” he says before his voice breaks from emotion.

I repeat after Allal, but my mind and eye wander, distracted by the colors, smells, and languages around me. In the mass of circling pilgrims, I see two Sufis in white turbans, their eyes closed, chanting in Turkish accents, “God is Great, God is Great, God is Great.”
Tradition says that the Kaaba was built by Adam and rebuilt by Abraham and the descendants of Noah. It is known as the House of God and is the center of our circumambulations. At one point, the crowd circling the large cube slows as we make our way around four Lebanese women causing a traffic jam. They have stopped to pray, kneeling on the marble skirt that surrounds the Kaaba, and just in front of a shrine that contains the footsteps of Abraham. Their husbands are standing and holding hands, forming a human chain around them.

On my left a group of Malaysians in purple and white outfits perform their Tawaf [the circling of the Kaaba] prayers in a singsong of heavily-accented Arabic, shuffling their feet to the rhythm. I join in with them, but Allal turns around and gives me a “keep up with me” look as we finish the last of our seven turns. Am I missing the point? I wonder. Isn’t being a spoke in this colorful wheel of humanity part of the point?

An hour later, squeezed in the back of the car returning to Jeddah, everyone around me is sleeping. But I am too scared to nod off. I have become very comfortable in this sanctified world of the past five days. I’ve been free of worries about money, how I look, jealousy, and envy. I don’t want to expose my self to the real world again.

When we arrive at my parents house, there’s a goat running around the garden. “You haven’t slaughtered it yet?” Allal asks the driver, and I look away from the goat with a splotch of green dye on its head, knowing it will be sacrificed soon.

The sacrifice represents the lamb with which Abraham’s son Ishmael was replaced at the last moment. We will dine on part of it, and the rest will go to feeding the poor.

Allal joins us for dinner and my sisters and I appear in our jeans and T-shirts. It’s the first time our hair has been uncovered since last Friday.

The television in the living room is broadcasting a scene from Mina in front of the Jamaraat pillars, and Allal can’t help but give a final lecture. “Do you realize the importance of stoning the devil? The 70 stones we threw at the devil mean the next 70 times he tries to whisper in our ear he’s already defeated.”

I smile because I’ve got 100 whispers from the devil to go before he reaches me; I was throwing pebbles in bunches on the third and final day.

A quarter of the sacrificial lamb is set at the dinner table but I don’t have any. Though I’m not a vegetarian, I’m disturbed by the sacrifice.

“It is symbolic of following God’s orders, whether or not you know what’s behind them, because God’s words always have wisdom behind them that we don’t understand,” my sister Reem says.

“In the sacrifice, it’s not the meat nor the blood that reaches God, but our piety, explains Taghreed.

It feels strange to sit around with my sisters, Reem’s long wavy hair still wet from washing, looking just like we did a week ago, but feeling that we’re not the same.

“What did you get out of the hajj?” I ask

“It made me realize that we are only here on this earth temporarily. Our real destination is the hereafter,” says Reem. “If you have fun going out with men, or to New Year’s parties, you want to have more parties and you forget God. But the hajj made very clear to me that we’re in transit. I want to prepare, from now, for the hereafter. Some people use drugs, or relationships in their search for God, but there’s a more direct way. Praying and continuously remembering Him.”

“Is the hajj something you can take with you?” I ask.

“We can leave the hajj with the experience of it inside us. We now know that being close to God works and makes you feel at peace,” says Taghreed. “We barely slept, we were up at dawn everyday praying, but the presence of God was energizing, instead of tiring.”

Alone in my room I stare at the mirror. I’m still not sure why we had to go around the Kaaba seven times, or the significance of reenacting Hagar’s search for water between the hills of Safa and Marwa. But I do feel different – more than the sum of my appearance, job, money, and education. I feel more centered and balanced, my backbone straighter. My inner space is larger and richer.

I want something to mark and remind me of this feeling, something I can wear or keep with me. I fumble around in my purse looking for a way to keep the hajj with me. I find only the badge which let me in and out of our camp in Mina and consider wearing it like a necklace, but discard the idea. I guess I won’t be able to use props. I’m going to have to remind myself – with a little help from above.

Last in a series.

Previously published by the Christian Science Monitor and reprinted with permission.

Editor’s Note:

“The Sun Never Sets on Dubai World” according to the banner across its Web site home page, but on Wednesday an eclipse darkened the skies over “Dubai’s flag bearer in global investments.” The holding company announced a $60 billion “standstill” asking for a six-month delay in repaying debt.

The announcement shocked the global financial nervous system sending markets into declines by Friday over renewed fears that economic recovery could be hurt by a further credit squeeze. Banking analyst David Williams at London’s Fox-Pitt Kelton told AP, “What we need for the economic momentum to continue is for banks to feel confident about lending, and clearly what has happened in the last 48 hours is not a step in the right direction.”

Analysts and investors seemed to catch their breath by later in the day Friday. AP reported Raymond James’ chief investment strategist Jeffrey Saut as saying, “People will dig into this over the weekend, but I think balance sheets have healed enough to withstand a shock like this.” On Sunday the UAE central bank announced it would stand behind Dubai banks providing a “liquidity facility” to reassure investors. The short term impact of the Dubai debt announcement may have been partially obscured by the long holiday weekend for U.S. markets and it will not be apparent until Monday. “The consequences of the financial crisis are going to play out for a while,” according to CEO Mohamed El-Erian of global bond trading leader Pimco. He told the New York Times, “Dubai could be the beginning of a series of sovereign debt issues or crisis.. ..What Dubai is going to do is make people think more intensely about the lagging implications of last year’s crisis. It’s going to be a wake up call to the people who thought that the financial crisis was just a flesh wound.”

What does the Dubai World shockwave mean for the financial profile of the Gulf region and, of particular interest to SUSRIS readers, of Saudi Arabia? Today we are pleased to present answers to that question and more from John Sfakianakis, Chief Economist Banque Saudi Fransi – Credit Agricole Group. We thank Mr. Sfakianakis for sharing his analysis “Dubai: after the plunge” with SUSRIS.

Dubai: after the plunge

Summary

• Concerns about Dubai’s potentially crippling default on enormous debts to global creditors have rattled investor confidence across the oil-exporting Gulf region.
• Dubai’s reputation has been impacted in a major way and it will be difficult for the emirate to recover from the negative backlash in the medium to long term.
• However, we believe that Abu Dhabi will come to the rescue.. ..but like all rescues it would have a price. In that case it may well be first of all a political price.
• Abu Dhabi is bound to suffer from the contagion from Dubai for the short term, but we expect the UAE capital will be in a position to overcome any risk profile pressure.
• Credit quality deterioration simply is not an issue in Saudi Arabia, Abu Dhabi and Qatar and we expect that in the short term, investors will calm down and begin to differentiate between “good” and “bad” bets in the Gulf region.

Assessing the regional fallout of Dubai’s credit disaster

Concerns about Dubai’s potentially crippling default on enormous debts to global creditors have rattled investor confidence across the oil-exporting Gulf region, prompting corporate issuers in the region to postpone or cancel bond issuances (e.g. Gulf Investment Bank) in the wake of the news.

We estimate Dubai’s debt upward of $80 billion. At the heart of the issue is whether state-run Dubai World, which holds more than $50 billion in liabilities, will be able to pay back its creditors. The conglomerate that runs flagship Dubai companies such as DP World, asked banks this week for a “standstill” agreement as it negotiates to extend maturities of debt, including the $3.52 billion in Islamic bonds due next month from Nakheel, the famed palm tree island developer. The bond at the centre of Dubai’s restructuring efforts, the December 2009 Islamic bond from Nakheel, has lost a third of its value since the announcement, the price having collapsed to 72 points from 111 beforehand.

Dubai’s announcement, which happened on Wednesday, sent shockwaves through European equity markets on fears that many banks could face massive writedowns on Dubai debt. Currency and bond markets across the globe were also exposed to developments that have become the source of the biggest destruction of confidence in Dubai’s history. To make matters more interesting the ports operator, DP World announced that it will be excluded from the debt standstill and restructuring of Dubai World and its subsidiaries. The company, the world’s fourth-largest ports operator, is 77% owned by Dubai World. DP World is considered the best asset within Dubai World. We think this move is clearly to differentiate the good assets of Dubai from the bad ones, and DP World is a good asset.

Credit default swaps across the region rose, including in Saudi Arabia, Qatar and Abu Dhabi which, unlike Dubai, hold rich hydrocarbon reserves. Dubai’s five-year CDS spreads are at three-month highs and there is further upside risk. Dubai, with sparse oil reserves, built its fortunes on real estate and financial services in recent years, borrowing heavily to finance megaprojects including three man-made islands shaped as palm fronds.

Regional bond sales have been impacted as spreads have widened. Gulf Investment Bank, owned by the Saudi Arabian Monetary Agency (SAMA) and the Public Investment Fund of Saudi Arabia, have decided to postpone the dollar bond sale. We are informed that other corporates in the region were preparing to tap the international bond market. We think that there will be a temporary lull but renewed activity will begin in the first quarter of 2010 as risk is readjusted for the entire region.

Credit quality deterioration simply is not an issue in Saudi Arabia, Abu Dhabi and Qatar and we expect that in the short term, investors will calm down and begin to differentiate between “good” and “bad” bets in the Gulf region. The Dubai debt debacle comes shortly after Qatar, the world’s top exporter of liquefied natural gas, sold $7 billion in bonds this month, subscribed mainly by investors in the United States and the United Kingdom. Orders for the bond issue, described as the largest by an emerging-market government, topped $28 billion – underpinning the genuine faith many international investors have in the region.

We think that in the future, global investors will need to differentiate between those Gulf economies that are debt-burdened and those whose leverage levels are incredibly low by global standards. Saudi Arabia, the world’s biggest oil exporter, has among the lowest levels of public debt in the G20, with domestic debt levels at 13.4% of GDP last year, compared with 81% in India and 50% in the United States. It also holds enormous foreign assets of SR1.46 trillion at the end of October, most of which is invested in low-risk, liquid investments.

Differentiating regional risk profiles

In view of these nuances, the region is often wrongly sold to the world as uniform when in fact the six states comprising the Gulf Cooperation Council (GCC) followed very different development models. Even within the UAE, Dubai and capital Abu Dhabi – holder of the majority of the state’s crude oil reserves – had followed two extremely different development paths this decade. Dubai built its economy using high leverage, with revenue streams that were tenuous. Dubai’s volatile real estate and services sectors did well during the boom years but fell victim to the global financial crisis, which triggered a slump in asset values, especially real estate. It should not be ignored that Dubai was above all an interesting real estate play which benefited the early entrants but turned out to be a bubble that burst. This approach differs heavily from Abu Dhabi, which was bringing in hundreds of billions of dollars in surpluses during this decade’s oil boom, but investing it in a more calculated, moderate pace that has mainly avoided the creation of asset bubbles. Despite the real estate development story in Abu Dhabi the authorities did not permit the development of a bubble. Dubai is now in a bind as its debt is more than nine time its 2008 revenues. That pattern is unsustainable.

Once the dust settles, we believe that there will be a flight to quality, with foreign funds favouring Saudi Arabia, Qatar and Abu Dhabi. Abu Dhabi is bound to suffer from the contagion from Dubai for the short term, but we expect the UAE capital will be in a position to overcome any risk profile pressure. Abu Dhabi controls 90% of the UAE’s oil reserves which are the fourth largest in the world. Despite the global financial crisis, the Abu Dhabi Investment Fund is one of the world’s largest sovereign wealth funds. Clearly, we think Abu Dhabi’s investment program and low key leadership offers reasonable reassurances about the country’s direction to avoid far fewer excesses.

The fate and handling of Dubai’s sovereign risk is impacting the way international markets perceive GCC sovereign risk. The Saad-Algosaibi debt default saga in Saudi Arabia, while shaking the credibility of regional borrowers, did not bring lending to Saudi entities in general to a halt. Rather, the situation forced creditors to reassess the risks involved with lending to different entities and categorise them accordingly. Corporates that are showing signs of transparency will begin to reap the benefits of finance from within the region and outside. However, state entities will continue to receive the bulk of trust from international lenders. In a similar way, Dubai’s debt problems will compel creditors to re-categorize sovereign risk. Dubai entities will have to work hard to bring back confidence in the state-enterprise model of Dubai which was based on high leverage and constraint income.

If there is anything we have learned so far from the global financial crisis is that leverage and debt without a strong revenue base cannot sustain an economy. We find Saudi Arabia to be leading the pack in terms of sovereign strength despite the corporate saga that lingers. Moreover, Saudi Arabia and Abu Dhabi never witnessed the real estate excesses that have punished Dubai in the past year.

There was never a real estate bubble in Saudi Arabia and if anything the property market is severely undersupplied. The government has made sure to pay down government debt during the boom years and budgetary spending has been counter-cyclical – careful during periods of high oil prices and aggressive during cycles of depressed oil prices.

We view Qatar as being equally strong as a sovereign, with a solid revenue base to back up its expansion. The excesses witnessed in the property sector were far more contained and used far less leverage, with most, if not all was locally generated. Hence we see very little risk that Qatar can generate going forward.

After the dust settles: what’s next for Dubai

Dubai’s reputation has been impacted in a major way and it will be difficult for the emirate to recover from the negative backlash in the medium to long term. The lack of transparency surrounding how the emirate plans to pay back debts reaching maturity has compounded investors’ perception of risk. Until the Dubai World announcement, investors had expected Abu Dhabi would provide Dubai with adequate funds to pay back its creditors. Just an hour before the debt restructuring news, Dubai announced it had sold $5 billion in bonds to two banks in Abu Dhabi in which the government holds substantial stakes. But the government quickly clarified these funds had nothing to do with the Dubai World debt restructuring.

Earlier this year, the UAE central bank, based in the UAE capital, subscribed for $10 billion in Dubai sovereign bonds, a portion of which went toward enabling state-linked developers pay outstanding dues to contractors. That move eased investor worries about a potential default by Dubai, but also raised questions about what Abu Dhabi would demand in return. The two emirates, although being part of the same federation, are run by separate ruling families.

The entire debt repayment scenario has now been thrown into question. The Nakheel bond is, after all, the most high-profile of Dubai’s debts and was regarded by many as a litmus test for how effectively Dubai – and Abu Dhabi – would treat maturing debts. Markets, puzzled about why the $5 billion raised by Dubai this week was not going to Nakheel bond creditors, will be watching for news on how the debt restructuring develops and what conditions Abu Dhabi could set for providing funds to pay outstanding loans.

Dubai ruler Sheikh Mohammed bin Rashid Al-Maktoum, also prime minister of the UAE, removed this month key executives who helped shape modern Dubai, including replacing the governor of the Dubai International Financial Centre, Omar bin Sulaiman, and removing the chairmen of Emaar Properties, Dubai World and Dubai Holding from the board of the Investment Corporate of Dubai, a body charged with managing the emirate’s wealth. At the newly reshuffled board of ICD, two of the ruler’s sons were brought in as directors. The change of guard will have to be tested and the results and management style would be watched closely by the international investor community. Moreover, the larger question of succession would be kept at the back of the international investors’ minds.

There has been little public announcement about the conditions attached to Abu Dhabi aid to Dubai and what level of autonomy the emirate would have to forego in exchange for the financial bailout. We believe that in the end, Abu Dhabi will be willing and able to provide adequate funds to enable Dubai to meet its debt obligations. We are not of the view that Abu Dhabi wants to have a “sick cousin” that would jeopardize the well-being of the Federation. Abu Dhabi wants to see Dubai’s economy return to a healthier state as many Abu-Dhabi based businessmen have invested in the property sector and the economy of Dubai at large. Abu Dhabi will have three avenues to pursue: pay, buy and bail out. This funding, however, will come at a cost not measured in money. Politics in this region is more powerful than simple monetary transactions. But in the end, Dubai will not be able to cover its debts on its own and the de-leveraging process could last not a few months but a few years.

Bailing out Dubai could be good for the Federation but nothing is for free. Will Abu Dhabi ask for additional control over Dubai? Will this make Dubai less autonomous? As there is no free lunch and all services have to be paid back the price that Dubai might have to pay back to Abu Dhabi is some of its autonomy. Dubai would have to yield to the conditions of its rich neighbour in order to save face among global creditors. It is very difficult for Dubai not to prevent Abu Dhabi from gaining additional influence, both at the level of the Federation as well as bilaterally. And the Dubai leadership’s language has changed and become more supportive of the Federation. The most vivid of all was the comments of Dubai’s ruler who said in earlier in November that people who speculated about relations between Dubai and Abu Dhabi should “shut up,” at an investors’ conference in Dubai. The ruling lines of both emirates are “the same family, not only that but the same tribe, the Bani Yas tribe,” he said. They “ruled many many tribes in the Arabian Peninsula for hundreds and hundreds of years.” It is important to note that it was only in 1996 that Dubai integrated its armed forces into the UAE’s military command. The sense of Dubai’s autonomy was also evidenced after the UAE’s establishment in 1971 where there were border check points, for many years, between Abu Dhabi and Dubai even if both were part of the Federation.

Dubai’s economy, meanwhile, is poised to face another backlash from the debt troubles, which are likely to shake investor confidence in its real estate sector once again and send prices that have already halved in the last year down further. Although Dubai’s property developers, controlled by the state, are trying to control real estate prices by holding back the release of additional apartment units onto the market it could be that prices could very well depreciate further. The emirate could also be forced to introduce further delays to infrastructure projects currently in the pipeline.

We think that Abu Dhabi plays a key role in supporting debt-ridden Dubai. Dubai’s leveraged property play has come to an abrupt and crashing end. Going forward Dubai needs to show resolve but also willingness to admit to greater transparency. Dubai also needed to better time the announcement of its the debt restructuring. Dubai is in dire straits and Abu Dhabi will come to the rescue but like all rescues it would have a price. As for the international investor base, it should become apparent to them that Dubai is not core of the GCC and there is far greater depth to the region that remains untapped.

John Sfakianakis, Chief Economist BSF – Credit Agricole Group
Johns@alfransi.com.sa

Certification:
The views expressed in this report accurately reflect the personal views of the undersigned analyst(s). In addition, the undersigned analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report.

John Sfakianakis

Calyon – Credit Agricole CIB

Editor’s Note:

“The Sun Never Sets on Dubai World” according to the banner across its Web site home page, but on Wednesday an eclipse darkened the skies over “Dubai’s flag bearer in global investments.” The holding company announced a $60 billion “standstill” asking for a six-month delay in repaying debt.

The announcement shocked the global financial nervous system sending markets into declines by Friday over renewed fears that economic recovery could be hurt by a further credit squeeze. Banking analyst David Williams at London’s Fox-Pitt Kelton told AP, “What we need for the economic momentum to continue is for banks to feel confident about lending, and clearly what has happened in the last 48 hours is not a step in the right direction.”

Analysts and investors seemed to catch their breath by later in the day Friday. AP reported Raymond James’ chief investment strategist Jeffrey Saut as saying, “People will dig into this over the weekend, but I think balance sheets have healed enough to withstand a shock like this.” On Sunday the UAE central bank announced it would stand behind Dubai banks providing a “liquidity facility” to reassure investors. The short term impact of the Dubai debt announcement may have been partially obscured by the long holiday weekend for U.S. markets and it will not be apparent until Monday. “The consequences of the financial crisis are going to play out for a while,” according to CEO Mohamed El-Erian of global bond trading leader Pimco. He told the New York Times, “Dubai could be the beginning of a series of sovereign debt issues or crisis.. ..What Dubai is going to do is make people think more intensely about the lagging implications of last year’s crisis. It’s going to be a wake up call to the people who thought that the financial crisis was just a flesh wound.”

What does the Dubai World shockwave mean for the financial profile of the Gulf region and, of particular interest to SUSRIS readers, of Saudi Arabia? Today we are pleased to present answers to that question and more from John Sfakianakis, Chief Economist Banque Saudi Fransi – Credit Agricole Group. We thank Mr. Sfakianakis for sharing his analysis “Dubai: after the plunge” with SUSRIS.

Emerging Market Focus
November 27, 2009

Dubai: after the plunge

Summary

• Concerns about Dubai’s potentially crippling default on enormous debts to global creditors have rattled investor confidence across the oil-exporting Gulf region.
• Dubai’s reputation has been impacted in a major way and it will be difficult for the emirate to recover from the negative backlash in the medium to long term.
• However, we believe that Abu Dhabi will come to the rescue.. ..but like all rescues it would have a price. In that case it may well be first of all a political price.
• Abu Dhabi is bound to suffer from the contagion from Dubai for the short term, but we expect the UAE capital will be in a position to overcome any risk profile pressure.
• Credit quality deterioration simply is not an issue in Saudi Arabia, Abu Dhabi and Qatar and we expect that in the short term, investors will calm down and begin to differentiate between “good” and “bad” bets in the Gulf region.

Assessing the regional fallout of Dubai’s credit disaster

Concerns about Dubai’s potentially crippling default on enormous debts to global creditors have rattled investor confidence across the oil-exporting Gulf region, prompting corporate issuers in the region to postpone or cancel bond issuances (e.g. Gulf Investment Bank) in the wake of the news.

We estimate Dubai’s debt upward of $80 billion. At the heart of the issue is whether state-run Dubai World, which holds more than $50 billion in liabilities, will be able to pay back its creditors. The conglomerate that runs flagship Dubai companies such as DP World, asked banks this week for a “standstill” agreement as it negotiates to extend maturities of debt, including the $3.52 billion in Islamic bonds due next month from Nakheel, the famed palm tree island developer. The bond at the centre of Dubai’s restructuring efforts, the December 2009 Islamic bond from Nakheel, has lost a third of its value since the announcement, the price having collapsed to 72 points from 111 beforehand.

Dubai’s announcement, which happened on Wednesday, sent shockwaves through European equity markets on fears that many banks could face massive writedowns on Dubai debt. Currency and bond markets across the globe were also exposed to developments that have become the source of the biggest destruction of confidence in Dubai’s history. To make matters more interesting the ports operator, DP World announced that it will be excluded from the debt standstill and restructuring of Dubai World and its subsidiaries. The company, the world’s fourth-largest ports operator, is 77% owned by Dubai World. DP World is considered the best asset within Dubai World. We think this move is clearly to differentiate the good assets of Dubai from the bad ones, and DP World is a good asset.

Credit default swaps across the region rose, including in Saudi Arabia, Qatar and Abu Dhabi which, unlike Dubai, hold rich hydrocarbon reserves. Dubai’s five-year CDS spreads are at three-month highs and there is further upside risk. Dubai, with sparse oil reserves, built its fortunes on real estate and financial services in recent years, borrowing heavily to finance megaprojects including three man-made islands shaped as palm fronds.

Regional bond sales have been impacted as spreads have widened. Gulf Investment Bank, owned by the Saudi Arabian Monetary Agency (SAMA) and the Public Investment Fund of Saudi Arabia, have decided to postpone the dollar bond sale. We are informed that other corporates in the region were preparing to tap the international bond market. We think that there will be a temporary lull but renewed activity will begin in the first quarter of 2010 as risk is readjusted for the entire region.

Credit quality deterioration simply is not an issue in Saudi Arabia, Abu Dhabi and Qatar and we expect that in the short term, investors will calm down and begin to differentiate between “good” and “bad” bets in the Gulf region. The Dubai debt debacle comes shortly after Qatar, the world’s top exporter of liquefied natural gas, sold $7 billion in bonds this month, subscribed mainly by investors in the United States and the United Kingdom. Orders for the bond issue, described as the largest by an emerging-market government, topped $28 billion – underpinning the genuine faith many international investors have in the region.

We think that in the future, global investors will need to differentiate between those Gulf economies that are debt-burdened and those whose leverage levels are incredibly low by global standards. Saudi Arabia, the world’s biggest oil exporter, has among the lowest levels of public debt in the G20, with domestic debt levels at 13.4% of GDP last year, compared with 81% in India and 50% in the United States. It also holds enormous foreign assets of SR1.46 trillion at the end of October, most of which is invested in low-risk, liquid investments.

Differentiating regional risk profiles

In view of these nuances, the region is often wrongly sold to the world as uniform when in fact the six states comprising the Gulf Cooperation Council (GCC) followed very different development models. Even within the UAE, Dubai and capital Abu Dhabi – holder of the majority of the state’s crude oil reserves – had followed two extremely different development paths this decade. Dubai built its economy using high leverage, with revenue streams that were tenuous. Dubai’s volatile real estate and services sectors did well during the boom years but fell victim to the global financial crisis, which triggered a slump in asset values, especially real estate. It should not be ignored that Dubai was above all an interesting real estate play which benefited the early entrants but turned out to be a bubble that burst. This approach differs heavily from Abu Dhabi, which was bringing in hundreds of billions of dollars in surpluses during this decade’s oil boom, but investing it in a more calculated, moderate pace that has mainly avoided the creation of asset bubbles. Despite the real estate development story in Abu Dhabi the authorities did not permit the development of a bubble. Dubai is now in a bind as its debt is more than nine time its 2008 revenues. That pattern is unsustainable.

Once the dust settles, we believe that there will be a flight to quality, with foreign funds favouring Saudi Arabia, Qatar and Abu Dhabi. Abu Dhabi is bound to suffer from the contagion from Dubai for the short term, but we expect the UAE capital will be in a position to overcome any risk profile pressure. Abu Dhabi controls 90% of the UAE’s oil reserves which are the fourth largest in the world. Despite the global financial crisis, the Abu Dhabi Investment Fund is one of the world’s largest sovereign wealth funds. Clearly, we think Abu Dhabi’s investment program and low key leadership offers reasonable reassurances about the country’s direction to avoid far fewer excesses.

The fate and handling of Dubai’s sovereign risk is impacting the way international markets perceive GCC sovereign risk. The Saad-Algosaibi debt default saga in Saudi Arabia, while shaking the credibility of regional borrowers, did not bring lending to Saudi entities in general to a halt. Rather, the situation forced creditors to reassess the risks involved with lending to different entities and categorise them accordingly. Corporates that are showing signs of transparency will begin to reap the benefits of finance from within the region and outside. However, state entities will continue to receive the bulk of trust from international lenders. In a similar way, Dubai’s debt problems will compel creditors to re-categorize sovereign risk. Dubai entities will have to work hard to bring back confidence in the state-enterprise model of Dubai which was based on high leverage and constraint income.

If there is anything we have learned so far from the global financial crisis is that leverage and debt without a strong revenue base cannot sustain an economy. We find Saudi Arabia to be leading the pack in terms of sovereign strength despite the corporate saga that lingers. Moreover, Saudi Arabia and Abu Dhabi never witnessed the real estate excesses that have punished Dubai in the past year.

There was never a real estate bubble in Saudi Arabia and if anything the property market is severely undersupplied. The government has made sure to pay down government debt during the boom years and budgetary spending has been counter-cyclical – careful during periods of high oil prices and aggressive during cycles of depressed oil prices.

We view Qatar as being equally strong as a sovereign, with a solid revenue base to back up its expansion. The excesses witnessed in the property sector were far more contained and used far less leverage, with most, if not all was locally generated. Hence we see very little risk that Qatar can generate going forward.

After the dust settles: what’s next for Dubai

Dubai’s reputation has been impacted in a major way and it will be difficult for the emirate to recover from the negative backlash in the medium to long term. The lack of transparency surrounding how the emirate plans to pay back debts reaching maturity has compounded investors’ perception of risk. Until the Dubai World announcement, investors had expected Abu Dhabi would provide Dubai with adequate funds to pay back its creditors. Just an hour before the debt restructuring news, Dubai announced it had sold $5 billion in bonds to two banks in Abu Dhabi in which the government holds substantial stakes. But the government quickly clarified these funds had nothing to do with the Dubai World debt restructuring.

Earlier this year, the UAE central bank, based in the UAE capital, subscribed for $10 billion in Dubai sovereign bonds, a portion of which went toward enabling state-linked developers pay outstanding dues to contractors. That move eased investor worries about a potential default by Dubai, but also raised questions about what Abu Dhabi would demand in return. The two emirates, although being part of the same federation, are run by separate ruling families.

The entire debt repayment scenario has now been thrown into question. The Nakheel bond is, after all, the most high-profile of Dubai’s debts and was regarded by many as a litmus test for how effectively Dubai – and Abu Dhabi – would treat maturing debts. Markets, puzzled about why the $5 billion raised by Dubai this week was not going to Nakheel bond creditors, will be watching for news on how the debt restructuring develops and what conditions Abu Dhabi could set for providing funds to pay outstanding loans.

Dubai ruler Sheikh Mohammed bin Rashid Al-Maktoum, also prime minister of the UAE, removed this month key executives who helped shape modern Dubai, including replacing the governor of the Dubai International Financial Centre, Omar bin Sulaiman, and removing the chairmen of Emaar Properties, Dubai World and Dubai Holding from the board of the Investment Corporate of Dubai, a body charged with managing the emirate’s wealth. At the newly reshuffled board of ICD, two of the ruler’s sons were brought in as directors. The change of guard will have to be tested and the results and management style would be watched closely by the international investor community. Moreover, the larger question of succession would be kept at the back of the international investors’ minds.

There has been little public announcement about the conditions attached to Abu Dhabi aid to Dubai and what level of autonomy the emirate would have to forego in exchange for the financial bailout. We believe that in the end, Abu Dhabi will be willing and able to provide adequate funds to enable Dubai to meet its debt obligations. We are not of the view that Abu Dhabi wants to have a “sick cousin” that would jeopardize the well-being of the Federation. Abu Dhabi wants to see Dubai’s economy return to a healthier state as many Abu-Dhabi based businessmen have invested in the property sector and the economy of Dubai at large. Abu Dhabi will have three avenues to pursue: pay, buy and bail out. This funding, however, will come at a cost not measured in money. Politics in this region is more powerful than simple monetary transactions. But in the end, Dubai will not be able to cover its debts on its own and the de-leveraging process could last not a few months but a few years.

Bailing out Dubai could be good for the Federation but nothing is for free. Will Abu Dhabi ask for additional control over Dubai? Will this make Dubai less autonomous? As there is no free lunch and all services have to be paid back the price that Dubai might have to pay back to Abu Dhabi is some of its autonomy. Dubai would have to yield to the conditions of its rich neighbour in order to save face among global creditors. It is very difficult for Dubai not to prevent Abu Dhabi from gaining additional influence, both at the level of the Federation as well as bilaterally. And the Dubai leadership’s language has changed and become more supportive of the Federation. The most vivid of all was the comments of Dubai’s ruler who said in earlier in November that people who speculated about relations between Dubai and Abu Dhabi should “shut up,” at an investors’ conference in Dubai. The ruling lines of both emirates are “the same family, not only that but the same tribe, the Bani Yas tribe,” he said. They “ruled many many tribes in the Arabian Peninsula for hundreds and hundreds of years.” It is important to note that it was only in 1996 that Dubai integrated its armed forces into the UAE’s military command. The sense of Dubai’s autonomy was also evidenced after the UAE’s establishment in 1971 where there were border check points, for many years, between Abu Dhabi and Dubai even if both were part of the Federation.

Dubai’s economy, meanwhile, is poised to face another backlash from the debt troubles, which are likely to shake investor confidence in its real estate sector once again and send prices that have already halved in the last year down further. Although Dubai’s property developers, controlled by the state, are trying to control real estate prices by holding back the release of additional apartment units onto the market it could be that prices could very well depreciate further. The emirate could also be forced to introduce further delays to infrastructure projects currently in the pipeline.

We think that Abu Dhabi plays a key role in supporting debt-ridden Dubai. Dubai’s leveraged property play has come to an abrupt and crashing end. Going forward Dubai needs to show resolve but also willingness to admit to greater transparency. Dubai also needed to better time the announcement of its the debt restructuring. Dubai is in dire straits and Abu Dhabi will come to the rescue but like all rescues it would have a price. As for the international investor base, it should become apparent to them that Dubai is not core of the GCC and there is far greater depth to the region that remains untapped.

John Sfakianakis, Chief Economist BSF – Credit Agricole Group
Johns@alfransi.com.sa

Certification:
The views expressed in this report accurately reflect the personal views of the undersigned analyst(s). In addition, the undersigned analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report.

John Sfakianakis

Calyon – Credit Agricole CIB

Editor’s Note:

This week as millions of Muslims are in Saudi Arabia for the Hajj we are pleased to provide a series of articles that provide background information and perspective on the annual pilgrimage. This article which originally appeared in the online edition of The Christian Science Monitor, is part four of a five part Hajj “diary” series by reporter Faiza Saleh Ambah. You can find more articles, links and resources at a SUSRIS Special Section on “Hajj 2009.”

A Hajj Diary: Pelting the Pillars, Again
Faiza Saleh Ambah
Part 4

MINA, SAUDI ARABIA – Our walk around the Kaaba Sunday night signals the end of our sanctified state, but not of the hajj. We perform dawn prayers Monday at the Grand Mosque in Mecca and head back to Mina for the two days of stoning the pillars representing the devil.

My sisters change into their regular clothes under their black abaya robes. I find myself clinging to the sanctity my white robes represent, but add a black and white head scarf.

Sunday’s deaths at the pillars give us pause. We want to continue our rites, but spend the day at the camp, waiting for the crowds to ease.

Monday evening, my sister Reem runs into our tent waving a set of pens and exclaims: “We won. We won.”

After sunset prayers, religious quiz contests are held in the men’s and women’s prayer rooms. Her team came second. Reem’s winning answer: a quote by the Prophet about what to say after prayers.
About an hour before midnight, my cousin Allal storms into our tent’s living room. “Get up, girls. Get ready. It’s time.”

Like soldiers preparing for battle, we put on our face masks, strap on our waist pouches, and count our pebbles – we need 21 today, seven for each of the Jamaraat pillars.

We’re told that tradition dictates that we go from the smallest obelisk to the largest. They represent the devil’s three appearances before Abraham. Pilgrims throw pebbles to send away Satan in the same way Abraham is said to have done.

There’s a sense of excitement and adventure and danger as we move slowly behind a camp employee carrying a banner with the name of our camp, The House of Faith. “If he drops the banner, I’ll pick it up and continue walking,” jokes Reem. “You guys just follow me.”

It’s close to midnight when we arrive at the bridge, lit up with fluorescent lights where we will stone the pillars at the second open-air level. Pilgrims with small red and white Turkish flags stitched on their vests speed by us trying to stay with a group led by a man shouting through a bullhorn. By the side of the bridge eight Albanians strike a pose like soccer players for the camera.

I feel a thrill when we get close to the first pillar. I spot a narrow opening in the crowd, grab the hand of my nephew Saleh, and move in. The crowd in front of me is four meters deep. I say, “In the name of God,” and jump up to free my arm so I can throw a pebble. After the third throw my pouch is empty. My pebbles must have fallen out while I was jumping. Saleh is out of ammo too, and starts picking up pebbles from the ground, and I join him.

We hurry to the second pillar, weaving through the crowd. I get so close my stomach is pressing against the wall surrounding the pillar. I can see the pilgrims on the ground level throwing their stones. Yesterday, my stones hit people in the back of the head. Today, it’s my turn to be pelted. I smile. I am happy I’ve gotten this close.

I push my way out of the crowd and meet up with Reem and Taghreed. We’re all smiling, as if our team’s just won the stoning championships. “We got him,” I say, referring to the devil.

We head back to our camp, pushing against the tide moving toward the pillar area. The main road is packed with vehicles. A bus stops across from the stairs that lead to the pillars, blocking a motorcycle and a police car accompanying a V.I.P. in a Mercedes with tinted windows.

Two policemen on the street start hitting the bus with their hands. “Move. Move now. ” It doesn’t budge.

I wait to see what happens. Such displays of defiance of authority are rare in Saudi Arabia.

“I’m discharging pilgrims,” the bus driver shouts back. I’ll move when they get out.”

I smile at his determination and walk off to join my sisters.

We’re strolling along beside people sleeping under trucks, in the baggage compartment of buses, under plastic sheeting, and in one-man pup tents. We move forward, and almost step on a man and his wife sitting on floor mats, chatting and sipping tea. About a dozen Filipinos are eating dinner – noodle soup with coconut shavings – on mats spread out on the road. A file of young men with long beards walks past chanting, Allah akbar (God is great). We’re across the street from them but Taghreed joins in, chanting until they pass.

I look at her as she watches their receding backs. Though everyone here is going about their business, I sense that we are all connected by the experience.

Reem stops by a stall selling long robes and buys one for Saleh. I buy some prayer beads. Taghreed asks for cigarettes but can’t find any.

She bites into her apple. “That was really fun. I feel exhilarated. I feel as if a huge load’s been lifted off my shoulders.”

I’m not sure if it’s the disjointed sleep, or the changed eating habits, or being in the same tight space as 2 million praying pilgrims, but I, too, have started to feel lighter, with an unexpected warmth in my chest.

Next: Our last trip to Mecca

Previously published by the Christian Science Monitor and reprinted with permission.

Editor’s Note:

This week as the Hajj is about to begin we are pleased to provide a series of articles that will provide background information and perspective on the annual pilgrimage in Saudi Arabia. This article originally appeared in the online edition of The Christian Science Monitor. This article is part three of a series that will be provided in SUSRIS over the coming days as we mark this year’s Hajj in Saudi Arabia. You can find more articles, links and resources at a SUSRIS Special Section on “Hajj 2009″.

A Hajj Diary: A Pilgrim Fends Off Temptation with Pebbles and Prayers
By Faiza Saleh Ambah
Part 3

MINA, SAUDI ARABIA – I haven’t listened to music, watched television, or read a novel since last Thursday. My hajj so far has been three days of sermons, lectures, and rites; a bit like religion camp.
After dawn prayers Saturday in Mina, the 10 of us squeeze into the four-wheel drive heading for Arafat, where we will spend the day in prayer until sunset. We’re seated in the back and I ask my sisters Reem and Taghreed if, like me, they find our guide attractive. Reem’s answer is a smile. She intones the Talbiya (the oft-repeated hajj prayer): “Here I am God. Here I am. Answering your call. Here I am, God, at your service..”

“What? You mean I shouldn’t even think that?” I ask.

“You can think it, but then take it out of your mind,” Taghreed says. “And not share it,” adds Reem.

I look out the window. The three-lane road from Mina to Arafat is covered with men and women in white walking, riding double-decker buses, or sitting on top of buses where the baggage is supposed to go. Cops in fluorescent vests and face masks keep traffic circulating and huge police tow trucks are parked at intervals.

The line of people moving toward Arafat stretches as far as I can see and the five-mile journey takes us a little over an hour and a half.
The Plain of Arafat is where Adam and Eve were reunited after leaving Eden. This is meant to be the apogee of the hajj. We are to spend the day supplicating God and begging for His forgiveness. By the end of the day, all our sins will be forgiven.

At the camp in Arafat, our tents are the real thing – cloth, pitched in sand, with rugs on the floor and low cushions lining the walls. In keeping with the spirit of things, minarets are printed on the inside of the tent.

My nephew Saleh and I go exploring. Men in the back of a large truck are tossing off boxes of free water and free meals. A couple of adolescents are calling out “Sabeel ” (charity), and offering apples and tangerines. A Pakistani pilgrim makes a beeline for a handicapped African man on crutches and slips money into his hand.

An old woman sits on a collapsed cardboard box begging in the middle of the road.

I walk behind a group of women with small Iraqi flags sewn on the back of their white head scarves. Hajjis From Iraq is stitched underneath it in black.

We head for the Namira Mosque, where the prophet gave his last sermon. It’s so crowded with people that the two- or three-block walk takes us half an hour.

The Day of Arafat is officially over at sunset, and so shortly before the last rays paint the sky everything comes to a halt. People lay their mats on the road and start praying, their hands in the air. The rows of petitioners spread out on the asphalt road are so tightly packed that even walking past them is difficult.
Saleh and I navigate our way back with the help of the three huge balloons flying several hundred yards in the sky marking the three largest camps.

I go with my sisters to the prayer tent where a Saudi scholar is giving that day’s sermon and prayer session.

“Today is the day to ask God for everything you want, in detail, nothing is too small or too insignificant. He hears everything you say. He will answer all your prayers. He has promised. He loves you. He wants to make your every wish come true but He wants you to ask.”

A chorus of “amens” goes up as many of the women raise their hands in supplication. Some are crying.

“There are three conditions,” she continues. “You must be patient. Your hajj should not be made with money gained unlawfully or sinfully. And you must believe in His good intentions. You must have faith in Him.”
She tells the story of a woman who tried to conceive through artificial insemination 19 times. On the Day of Arafat, she spread her prayer rug and insisted. “God, I want a child. I want to be a mother. You are going to give me a baby because I’m asking you here in Arafat, on the day of Arafat.”

The lecturer starts weeping when she gets to the part about the woman becoming pregnant several months later. I, too, am crying, touched by the idea of a God who loves us. So is my sister Taghreed and all the other women in the tent.

I’m still weeping when the sermon ends. I want so much to believe everything this woman is saying but something stubborn inside me gets in the way. Maybe it’s the devil whispering in my ear. But I’m getting ahead of myself, that’s the next stage of the journey.

After sunset prayers the whole procession moves to Muzdalifah. We spend some time under the stars, eating, praying, and picking up stones the size of chick peas for the stoning of the pillars. This ritual commemorates Abraham’s stoning of Satan when the latter tried to tempt him to disobey God.

By two in the morning, we’ve reached Mina and the area with the three pillars, which are under a bridge. It’s getting crowded. A group of Egyptian pilgrims is chanting the Talbiya, their voices echoing under the steel beams. A group of about 50 follows a pilgrim guide carrying a large blue banner, a smaller group follows an old man carrying a stick with an orange scarf tied at the end. I see a woman coming in the opposite direction separated from her group. “China’s Pilgrims” is written on her colored skirt.

Hundreds of pilgrims have died in stampedes here – in 2001, 1998, and 1994 – and as we get closer to the large pillar we will stone, the crowds get tighter, and tenser. I know this is the most dangerous part of the hajj. The sound of a distant ambulance echoing under the bridge scares a group of Malaysians, and they start running towards the pillar.

Reem and I do some of our own pushing and get as close to the pillar as we can.

“In the name of God. God is great,” we say and fling our first pebble. I cringe as my stone lands on the back of the head of a pilgrim in front of me. There’s no room to move my arm to throw. So do the next two. I jump up to free my arm for the next tosses and the last four fall in the general area of the pillar.

We push back through the throng, and return to our tent in Mina to sleep for a few hours. Sunday morning I’m awakened by my cell phone – my mother is calling to see if we are OK. It’s the first of many urgent calls. Family and friends tell us the news: 244 people were crushed to death in a stampede near the pillars six hours after we left. Fifty-four Indonesians and 36 Pakistanis are among the dead, we hear later in the news reports.

I feel a deep sadness and find myself asking God to be kind to them. But I feel it’s so unfair that they should die this way.

To control the size of the crowds, in recent years the Saudi government has set quotas for the number of pilgrims from each country. There were 10,000 security forces on duty in the area. But it wasn’t enough.
“God chose for them to die during hajj. Their time had come. They will go straight to heaven,” Reem tells me.

After sunset prayers Sunday a former Egyptian movie star turned preacher gives that day’s religious sermon in the women’s prayer room.

“You are all newborns today. All your sins have been erased. You have been given a miraculous chance and should try to maintain this pure state. From now on you should live according to God’s orders. Not your husband’s, not your children’s, not your workplace. On the day of judgment, nothing will count except your relationship with God.”

Later, alone in my room, I get a call on my cell phone from a male friend. He starts to flirt. I find myself going cold and changing the subject. I’ve never been in a sanctified state before and I find, to my surprise, that I don’t want to lose it. There’s something very pleasant about it. Something more attractive than even my friend. I feel a lightness, a sense of security, a warm feeling. Maybe this is what if feels like to start a relationship with God. And if everybody here is to be believed, it lasts longer than marriages, kids, work, beauty, youth, and money.

Tomorrow: We circle the Kaaba.

Previously published by the Christian Science Monitor and reprinted with permission.

Editor’s Note:

This week as the Hajj is about to begin we are pleased to provide a series of articles that will provide background information on the annual pilgrimage in Saudi Arabia. This article, from VOA News, provides perspective on the pilgrimage from an American viewpoint, as about 12,000 are making the Hajj this year. Also check the SUSRIS Special Section “Hajj 2009″ on the SUSRIS web site.

Thousands of American Muslims Travel to Saudi for Hajj
VOANews.com

One of a Muslim’s duties, according to the five pillars of Islam, is to make a pilgrimage to the holy city of Mecca at least once during his or her lifetime. An estimated three million Muslims have traveled to Mecca to perform the Hajj. This year, 12,000 American Muslims are performing this particular pillar of Islam.

Millions of Muslims, including thousands from the US, are making the annual pilgrimage to Mecca, called the Hajj.

American Muslims start their journey by chanting their commitment to the pilgrimage.

“We say, ‘here I am Allah, here I am Allah, at your service.’ So whatever Allah wants us to do, is what we want to do and we want to use this as a way to commit ourselves to Allah the rest of the year and the rest of our lives as well,” Safi Khan, a Pakistani American, explains.

His wife Samira is a medical technician. She says, for her, pilgrimage is a way to move closer to God. “It is very uplifting spiritually to see all the people from different backgrounds getting together focusing on one thing, that is to worship one God,” she said.

During the Hajj, the pilgrims will circle the Kaaba, considered by Muslims the house of God. Muslims believe that God ordered the Prophet Abraham to build a house of worship on this site.

Baqir Imrani is a high school teacher performing the Hajj for the fifth time. This year he is praying for a universal cause.

“My prayer is: world peace for every one especially the Muslims, because they seem to suffer the most now,” he said. “So hopefully we will wake up and take the right steps to bring peace in our own lands and contribute to bring the world peace.”

The journey requires elaborate preparation as well as documents, a good amount of money and vaccinations.

Saudi authorities say that because the Hajj is a religious event, they are not banning anyone because of the H1N1 flu. But they have urged countries to follow precautions, such as age restrictions and vaccinations.

Adel El Farmawani is a travel agent for Muslim pilgrims in the U.S. He says some pilgrims will stay in double rooms, others in rooms that accommodate four.

“The average cost for the five star Hajj program is about eight thousand dollars and the four star program is about 5,000,” he said.

Sheikh Irfan Kabeer Eldin is the group’s religious leader. He instructs the pilgrims on how to perform the Hajj. “I give talks to tell them how to do each step of the Hajj,” he said.

As they board the plane, the pilgrims continue to chant. When they approach their destination, the airport at Jeddah, the women will be wearing white dresses and head covers, while the men will be wearing two pieces of unsewn white cloth to reflect human equality and unity before God.

After the pilgrimage, American Muslims will join Muslims around the world in Eid Al Adha, the four day feast celebrating the end of the Hajj.

Source: VOA

Editor’s Note:

This week as the Hajj is about to begin we are pleased to provide a series of articles that will provide background information and perspective on the annual pilgrimage in Saudi Arabia. This article originally appeared in the online edition of The Christian Science Monitor. This article is part two of a series that will be provided in SUSRIS over the coming days as we mark this year’s Hajj in Saudi Arabia. You can find more articles, links and resources at a SUSRIS Special Section on “Hajj 2009″.

A Hajj Diary: On Hajj, Battling Sin and Doubt
By Faiza Saleh Ambah
Part 4

FRIDAY, JAN. 29, MINA, SAUDI ARABIA – For the next five days I’m asked to concentrate only on God. “We’re not going to talk about guys, or gossip or anything,” Reem warns me. “I’m going to take advantage of the next five days and I don’t want the two of you to distract me,” she says, but I think she means mainly me.

Consider hajj a short board meeting, says my cousin Allal. “Concentrate on prayers and God and trying to be a better person during the next five days and forget everything else.”

As we head to our rooms to get ready for ihram (state of hajj-related sacredness; also the pilgrims’ garb), she looks closely at my hands. “Is that nail polish? And on your feet too?” She shakes her head in consternation and fetches cotton and nail polish remover.

“Hurry up, we don’t have much time.”

As I pass the cotton over my nails, I try to get into the right frame of mind. Alone in my room, I pack my purse, removing my lipstick, perfume, and blush. Then I cut my nails, bathe, and wash my hair. As I go through my ihram preparations I try purposefully to shed the worldly and concentrate on the Godly.

I look in the mirror as I put on my white head scarf, T-shirt, pantaloons, and white robe and talk myself into a spiritual immersion to accompany the physical transformation.

Suddenly the smile of a man I recently had dinner with comes to mind. I shoo the image away but continue to trip over my thoughts as I try to clear my mind of everything but God.

“It’s all right,” says Reem. “Just do your best and try to get your thoughts back on track.” Soon it’s time for the hajj intention prayer before we set off. “You remember how, don’t you?” she asks.

I don’t answer and she lays out a prayer rug in front of us. “Repeat to yourself what I say out loud.”

The Koranic verses are as familiar to me as the voice of my mother and father. But the prostrations are not. With a sideways glance, I follow Reem’s choreography closely, checking to see whether she will go down halfway, her hands on her knees, or if it’s time for us to prostrate fully with our forehead on the floor.

I make it without major mistakes.

The sun is gentle as we set off for Mina, where we will spend the night. On the way, I see cars and buses and pickup trucks loaded with men in the ihram. I feel close to those strangers, and it reminds me of the feeling of belonging when I was a child and we would go to the beach with my uncles in a caravan of five cars. We reach Mina several hours later and are led to our first-class accommodation; luxurious prefabricated structures with open tent-like awnings for ceilings and portable bathrooms with sink, shower, and toilet. With my cousin and his wife’s family there are 10 of us sharing four rooms and a living room with a computer, television, telephones, and Internet access. But these lodgings are atypical.

A dozen pilgrims often share one room and many sleep outdoors on mats if the weather permits. After a nap, I decide to go out exploring with my nephew. Taghreed, a heavy smoker who left her cigarettes behind on purpose, gives me money when I head out. “Marlboro Lights please,” she says, then gives me a ‘Don’t cross me’ look.

My nephew Saleh and I put on our badges, which get us back into our camp and help us find it if we get lost, and head off. The tiny city of Mina, a valley partly enclosed by a range of mountains, is like a huge picnic ground. There’s a festive air to the city, which comes alive one week out of the year, as cars compete for space on the roads and bridges and highways with the huge crowds. Families spread colored mats on the sidewalks and other open areas as they read, relax, sleep, and eat. A man on a bicycle sells blue face masks, which a lot of the police officers and hajjis are wearing this year. A peddler hawks Hajj Mats with Inflatable Pillow Made in China to passersby. I hear Urdu, Hindi, Turkish, Arabic, and English as we stroll.

After sundown prayers, mosques around the city are broadcasting Koranic verses, sermons, and information about the hajj. The message: If you make it through the next three to five days without sinning or harming yourself or anyone, you will have accomplished a successful hajj. There’s an aura of anticipation in our camp; tomorrow everyone will get a chance to have their sins forgiven and have their prayers answered, and they want to get it right. In the women’s lecture room, in a tent near ours, the Islamic scholar is asked about cigarettes. Harmful, she says. And men who look at you? Try to avoid their gaze, she advises.

Back in my room, I hear a preacher talking over the loudspeakers about the meaning of the Day of Standing Together Before God, or Yawm al-Wukuf, which takes place the next day. “God will forgive us all our sins. We will be as sinless as the day we were born,” are the last clear words I hear before he breaks down weeping. Soon I hear a second broadcast from another mosque.

I ask Taghreed what she’s going to pray for the following day, but I can hardly hear her for the cacophony of the competing sermons blaring from the loudspeakers.

The lectures are over after the final evening prayers and Taghreed finishes her list of names of family and friends she wants to pray for. Reem, who’s already done, contemplates what she’s going to ask for herself. “Tomorrow I’m going to forgive everyone who has ever harmed me because I expect God to forgive me everything,” she says.

An Egyptian sheikh comes over to talk to us and I ask him about the significance of the Day of Standing Together Before God. “This is God’s favorite time and place. He has asked us to come to Him with our prayers at Mount Mercy in Arafat on the ninth day of this month. He has said he will forgive all our sins on this day.”

“Why?” I ask. “What’s so special about tomorrow?”

“When you love someone, you do as he says, and we love God and follow what he asks us to do. We don’t have to understand before we do it, we will understand later. It’s a matter of putting faith over curiosity and human nature.”

The sheikh’s answer sounds familiar. You will only know once you believe.

I am hoping that despite my doubts and curiosity, I will be considered enough of a believer to reap rewards at the plain of Arafat, though I’m not sure exactly what. As an outward sign of my good intentions, I refuse to kill the large mosquitoes that are sticking their noses through my robe and biting my calves, so that I don’t break my ihram.

Previously published by the Christian Science Monitor and reprinted with permission.

Editor’s Note:

This week as the Hajj is about to begin we are pleased to provide a series of articles that will provide background information and perspective on the annual pilgrimage in Saudi Arabia. This article originally appeared in the online edition of The Christian Science Monitor on January 30, 2004. This article is part one of a series that will be provided in SUSRIS over the coming days as we mark this year’s Hajj in Saudi Arabia. You can find more articles, links and resources at a SUSRIS Special Section on “Hajj 2009″.

The Pilgrimage to Mecca: One Woman’s Journey
A Saudi journalist prepares to participate in a 1,300-year-old Muslim ritual
By Faiza Saleh Ambah
[Part 1 of 5]

JEDDAH, SAUDI ARABIA – Tomorrow, I leave to perform a central pillar of Islam, the five-day hajj. But I must confess that as Saudis go, I’m not particularly religious.

Spending a week with two million Muslims from more than 120 countries, performing rituals more ancient than Islam itself, in the largest single gathering at one place for one purpose in the world, appeals more to the journalist than the Muslim in me.

I am wary of, but no less excited by, the idea of an appointment in the desert with God. Pilgrims performing the hajj, which starts Jan. 30 (the eighth day of the last month of the Muslim lunar year), seem to be answering a call, keeping a promise. “Here I am lord, at your service, here I am,” is the chant that announces the start of the pilgrimage.

As a Muslim with more questions than certainties, I wonder at the meaning of the daily rituals that make up the pilgrimage: the seven circuits around the Kaaba (the cube-shaped stone structure in the middle of the Grand Mosque) in Mecca, the reenactment of the search for water by Ishmael’s mother Hagar, the march to and from the desert, and the vigil on Mount Mercy on the plains of Arafat, where the last verses of the Koran were revealed.

My sisters Reem and Taghreed, devout and practicing Muslims for years, don’t share my uncertainties. “We don’t know the exact reasons for everything. But we don’t have to. God told us to perform those specific rituals so we do them,” Reem tells me. They both ask me to keep an open mind and perform the hajj with sincere intentions, which should erase all my sins and leave me as pure as the day I was born.

Taghreed – a perennial student living in Paris – is very devout, but wants to get closer to God and is hoping that the strenuous and physically demanding hajj will boost her faith. “God said following my orders will bring us closer. And he’s asked us to perform the hajj if we’re able to.”

Reem, a divorcée with her own business in Dubai, has a more checkered past and wants to consolidate a new, more devout persona.

She looks critically in the mirror as she tries on the white head scarf and long white robe she will wear, checking to ensure that the contours of her body are not showing.

“I want a fresh start. Performing the hajj properly will erase all my sins and give me a clean slate.” She smiles and puts out her cigarette. “It’s like going through a detoxification program, and going to the hajj will motivate me to stay clean.”

Before we set off, we will bathe, wear our special ihram clothes, state our intention to perform the hajj at one of the five entry points into the sanctified area where the rituals are performed, and enter a sanctified state called ihram. During the ritual, which reenacts the pilgrimage made by Muhammad in 632, sexual abstinence is imposed, and killing or even harming anyone or anything, including insects and plants, is forbidden.

As an outward sign of this state of consecration, women usually wear white scarves and long robes and are banned from beautifying themselves or trying to attract male attention. Men wear white towels, one around the waist and one slung over the left shoulder, leaving the right shoulder exposed. They must also be bareheaded and unshod, but slippers and sandals are acceptable. The reason, says my cousin Allal – a businessman who has studied with Islamic scholars – is that all men will be equal before God physically as well as spiritually. Over dinner he give us a lecture about the meaning of hajj. This is also a dress rehearsal for the day of judgment, he warns. “Like a quiz before the test, to prepare us. Those who are not there will not be prepared.”

In preparation for this journey, which every able-bodied Muslim is supposed to perform at least once in his or her lifetime, I am reading “One Thousand Roads to Mecca” an anthology of 10 centuries of travelers writing about the hajj, edited by Michael Wolfe.

The appearance of the hajj has changed dramatically, with jets flying people in, buses and cars replacing camels, and Internet access and surveillance cameras set up all over the four cities in which the hajj is performed. Yet the actual ritual has remained unchanged in more than 1,300 years.

The past few nights, I’ve drifted to sleep with the tales of various accounts by converts, Arab Muslims, spies, and fake- Muslim adventurers in my head. I’m starting to realize that though hajj is a community ritual, it is also a very personal journey, and like almost everything else in life, you get out of it only as much as you put in.

For that reason, I will try to perform these rituals with an open mind and an open heart. I might not share my sisters’ devotion, but I will at least try to grasp and convey it.

Next: My first day on the hajj

Editor’s Note:

This exclusive interview originally appeared in SUSRIS on January 23, 2005 and is reprinted today to mark the eve of this year’s Hajj. You can find these reports and more articles, links and resources at a SUSRIS Special Section on Hajj 2009.

The annual Hajj, the annual pilgrimage of Muslims performing one of the basic duties of their faith – a joyous profession of their faith, will begin this week, in Saudi Arabia. Today we are pleased to mark the Hajj with an interview with Dr. David E. Long. For more on the Hajj we suggest you also read Dr. Long’s essay “The Hajj and Its Impact on Saudi Arabia and the Muslim World,” which was reprinted yesterday (links below).

A career foreign service officer before retiring to become a consultant on Middle East affairs, he is author of numerous books on the Middle East and his “Kingdom of Saudi Arabia” is among the definitive texts on the subject.

The Hajj in Perspective:
A Conversation with David Long

SUSRIS: Thank you, Dr. Long for taking time today to talk with us about the Hajj. What is the Hajj and why do people do it?

Dr. Long: The Hajj is one of the five pillars or the foundation of Islam and therefore it is the obligation of everyone who is physically and financially able to do so to make the Hajj once in their lifetimes. Pilgrimages to Makkah actually predate Islam, but the Hajj is considered by all Muslims to be divinely inspired by God as set down in the Qur’an and the Sunna. It is one of the Five Pillars of Islam, the others being: the profession of faith – “there is no God but God and Mohammed is the messenger of God”; Zakat or charity; prayer five times a day, and fasting during Ramadan. The rites are based on the instructions Muhammad gave in his Farewell Hajj just before he died. They have remained virtually unchanged to this day

SUSRIS: What role has Saudi Arabia played in hosting the pilgrims?

Dr. Long: That is a fascinating question. There was great fear when the Saudis took Makkah and annexed the Hijaz that they would do things that were not in line with the established practices. The fear first arose when the puritanical Islamic revival movement of Muhammed Ibn Abu Wahhab spread from Najd throughout Arabia, beginning in the 18th century.

Ibn Abu Wahhab preached that all sorts of innovations had been introduced into Islam since the time of Mohammed; his reform movement was basically a movement to get back to the original Islam. The centerpiece of his reform movement was Tawhid, or monotheism. The religious establishment who ran the Hajj feared that if the people followed the reform movement, it would cost them both economically and influence they held with the people. For example, one of the things that the movement called for was banning the practice of seeking intercession with God through Muslim saints by making pilgrimages to their tombs – very lucrative for those who controlled the tombs. Mohammed Ibn Abu Wahhab considered intercession heretical as it denigrated the sovereignty and omnipotence of God.

But when the Al Sauds annexed the Hijaz and took over the administration of the Hajj in 1925-1926, it soon became apparent that the fears were unfounded. From that time to this, the Saudi regime has gone all out to make sure it was available to all those who were able to attend. As a token of this responsibility, King Fahd assumed the title Khatim al-Haramain (Custodian of the Two Holy Places, i.e. Makkah and al-Madinah).

The job has not always been easy. Not only are the administrative tasks of providing services to over two million pilgrims enormous, but there have been all sorts or political divisions and problems that posed dilemmas for the Saudis.

For example, during the period of Nasserism and secular Arab nationalism there were many people who wanted to use the Hajj as a platform for political protest and the Saudis absolutely forbade that. They said it was not a time for politics; the Hajj was purely religious and they wanted to keep it that way. They would not allow protest over secular political issues — even if they agreed with them — that they did not feel were legitimately in the context of religious celebration.

After the 1979 revolution, Iranian provocateurs stirred up trouble at the Hajj. It was partly religious but it was mostly political. It was an attempt to undermine the Islamic world’s acceptance of Saudi custodianship, to undermine their reputation for running Hajj. But it backfired; it did not work, in fact, just the opposite. On the whole, I think that the record of the Saudis has been fairly good in terms of their striving to help people meet the obligation to come to the Hajj without being subjected to political protest.

Now that’s on the political side. The administrative problems the Saudis have had to encounter have in many ways been even more daunting. In the beginning, the Saudi Government was far less advanced than the former Hijazi government and not capable of administering such a huge task. What they came up with, I think, was pretty ingenious: a public utility concept — my term not theirs – similar to public utilities in the United States. The Hajj is administered primarily by the private sector but it is closely regulated by the government, which even collects the fees from the Hajjis and remits it to the private Hajj service sector to insure that the pilgrims are being fairly treated. Had the government tried to nationalize Hajj administration, there would likely have been chaos. But instead, they allowed private guilds (somewhat like guilds in medieval Europe) that had been guiding pilgrims for centuries, to continue to administer the Hajj but under strict supervision.

The principal guild consists of mutawwiffin (sing. mutawwif). They are sort of like family-run religious tour guide companies, if you will. Collectively, the mutawwiffin are responsible for pilgrims from every country in the world. For example, there is a mutawwif responsible for all the pilgrims coming from the United States. Closely associated with the mutawwifin are the Wukala’ (sing Wakil), or Agents. Located in the port city of Jiddah, they are responsible for meeting pilgrims arriving by air or sea, seeing them safely off to Makkah and seeing them off on the return trip home. (With the creation of an all-weather road system, an increasing number once again travel overland by car or bus.)

There is another guild in Makkah, the Zamazimah (sing. Zamzami). Historically, their task was to provide pilgrims with the holy water of Zamzam, a well inside the Haram Mosque. That has become a major undertaking with the great increase in numbers. Can you imagine when you have two million people who want to drink Zamzam water that’s a pretty big task? They do that, but their skill has expanded and that is why they are called Zamazimah. In fact they bottle Zamzam water — the real Zamzam water — send it all over the world. It is a non-profit foundation to raise money for worthy causes.

Finally, to meet, guide and see off the Hajjis that visit al-Madinah, the guild of Adilla (sing. Dalil) are located in al-Madinah where they meet, guide and see off the Hajjis that visit that city.

Compare the Hajj to a city of two million people. Over two million people attend the Hajj each year. Think about it – providing transportation, sanitation, health care, food, and drink. What happens if somebody gets lost and speaks an uncommon language? There are some pilgrims in their 60s and 70s who have saved up for a lifetime to make the Hajj. The chances of a medical emergency among this group are high, particularly in the summer months when the temperature can reach 135 degrees Fahrenheit, and they are usually outside or living in a tent. Throughout the area, the government has installed high overhead sprinklers to lower the chances of heat stroke. These are not conditions on the magnitude of the South Asia tsunami, but they must be dealt with on a yearly basis. It is truly a mind-boggling task.

SUSRIS: Your analogy of a population, an overnight collection, of two million people, equivalent to a US metropolitan region is interesting. Can you give us a sense of the magnitude of the event?

Dr. Long: I think that puts it in the right perspective. When you have that many people, there are bound to be glitches here and there. What is amazing is that there aren’t more. For example, let’s talk about transportation. Let me walk you through the Hajj.

When pilgrims near Makkah, whether by air, land or sea, they must enter a ritual state of purification called Ihram. It includes wearing Hajj garments — women do not wear veils – and refraining from cutting hair or nails, or having sex. Those in Ihram are easily recognizable by the garments they wear – two seamless pieces of white terry cloth for men and a long white robe for women. Women do not wear veils.

Upon reaching Makkah, one goes to the great Haram Mosque. The first rite is the Tawaf, the seven-fold circumambulation of the Kaaba, the dark stone cubic building in the center of the main mosque area. One then takes a drink of holy Zamzam water and then makes seven one way trips between Safa and Marwah, which are two little hills that are now incorporated into the mosque complex. That commemorates when Hagar was frantically looking for water for her infant son, Isma’il. In response, according to Islamic tradition, God struck open a rock and out came the water of Zamzam.

The logistics of moving the pilgrims through these rites are not particularly difficult. They are done ad seriatim as people arrive, not all at the same time. Afterwards, all the pilgrims travel east of Makkah to the Plain of Arafat. The choicest place to be is a small hill called the Mount of Mercy, but as all two million arrive, a tent city to accommodate them, replete with shops, first aid stations, fire stations, sanitations facilities, communications and transportation, stretches for miles across the plain.

It is at the Plain of Arafat that the Hajj culminates at sunset on Standing Day, the ninth day of the Muslim lunar month of Thul-Hijjah (which occurs eleven days earlier each year on the solar calendar – this year on January 20). Everyone – all two million plus– must say prayers at Arafat at sunset on that day else the Hajj is forfeited.

Following prayers, everyone must travel back toward Makkah to another location, Mina for the beginning of the Eid al-Adha (The Great Feast of the Sacrifice), which is celebrated throughout the Muslim world. The trek is called the Rush (Nafrah), but it takes about 12 hours to get everyone there. Think about two million people leaving from the same place at the same time, and going to the same place. Think about the Super Bowl or a World Series game, and what kind of traffic jam that causes. Multiply that by twenty, but instead of going north, south, east and west think of them all going in the same direction and out of piety many of them want to walk. We’re talking about the biggest traffic jam ever.

So transportation, the problems they have to address are mind-boggling. They have everything from taxicabs to big buses that come down from Turkey and Central Asia with the Hajis living in them. Think of all the fender benders and that’s just one thing.

SUSRIS: And they are from all corners of the globe?

Dr. Long: Yes, from all corners of the globe. And speaking over 100 languages or dialects and a large number of them up in years. But the gargantuan logistical task does not end there. During the Eid al Adha each family is supposed to sacrifice an animal. Of course many insist on a sheep, nothing smaller. For years, hundreds of thousands of sheep were slaughtered, and after families took what they could use, the rest was simply buried because of the lack of processing facilities for sheep sacrificed one day of the year. But the goal of the Eid is to give up something valuable, not blood sacrifice, and so now it is possible to purchase a sheep, have it slaughtered in the correct way and have the meat distributed worldwide to the needy. It is both practical and a suitable act of piety.

These are just some of the logistical problems that confront the Saudis. It is a Herculean job. One of the things that makes it all work is the attitude of the people. The Hajj is an incredibly and deeply joyous time — not the sort of the manufactured happiness of New Year’s Eve West where everyone goes out and tries to pretend they are having a great time. People from all over the Muslim world who attend are overflowing with good will.
One can feel it feel it even watching on Saudi television where it is broadcast. Watching the broadcast, one can hear a spontaneous chanting of the Talbiyyah, a ritual prayer repeated throughout the Hajj. First will come one or two voices, then a dozen, and then thousands are chanting it. Even for those not physically present, it is hard not to have chills run up and down your back

SUSRIS: How does the role of Saudi Arabia as the custodian of the two holy places and the role as host for the pilgrimage effect the thinking of the people and government of Saudi Arabia?

Dr. Long: The attitude toward the Hajj in Saudi Arabia may be somewhat analogous to being a Catholic living in Rome. You might take it for granted, but at the same time it permeates your whole life. Proximity to the Muslim holy places can indeed be taken for granted by Saudis, particularly those who live in Makkah and al-Madinah and nearby towns and cities. But on the other hand, Islam in all its dimensions is just a part of one’s daily life in a way that is difficult to duplicate in many other places throughout the Muslim world.

One of the issues now facing Saudis and others from the Gulf is that physically there are only so many people who can do this each year and they are about to max out. They have spent literally millions of dollars expanding the capacity of the holy cities and the holy mosques to accommodate these people. You remember when I said the two little hills that were incorporated into the complex — Safa and Marwah. You’ve seen pictures of the Prophet’s Mosque in Al-Madinah. These are huge places, and they can accommodate over a million people at the same time — that is just mind-boggling.

But still, the government has had to say to people who live in Saudi Arabia and neighboring states that they cannot go to the Hajj more than once every five years. Because there are so many people living in Saudi Arabia, there are three million people living in nearby Jeddah — what if they all showed up? It is a difficult dilemma for the government to limit local attendance at the holy places during the Hajj, but it must be done to make room for those attending for the first and perhaps last time in their lives.

SUSRIS: A news report said this year’s visa quota for the Hajj was 1.2 million.

Dr. Long: Yes they do limit visas. They have to. The people in the Arabian Peninsula don’t need a Hajj visa.

They have to do this in order to accommodate people because it is a religious obligation and they take it very seriously. Again that is another logistic problem they have to address. Security is the same way. As people found out back during the Arab nationalist era and as the Iranians discovered after the Islamic revolution, there is a backlash against people who try to use the Hajj for political purposes. This is a very holy celebration and anybody who tries to stir up trouble is subject to a backlash, a feeling against them.

SUSRIS: Does Saudi Arabia exercise any special place in the Islamic world since it is the home of the holy sites?

Dr. Long: I think that it would be precise to say that Saudi Arabia feels a special responsibility to the rest of the Muslim world as the birthplace of Islam and the location of its two holiest places. They do place great importance on their relations with other Muslim states, and to increase good relations throughout the Muslim world they created the OIC [Organization of the Islamic Conference]. It is probably fair to say that they do exercise a special place in the Islamic world, but it is not an ‘imperial’ thing. They feel that as the keepers of the holy places and the birthplace of Islam they have to be concerned about the hearts and minds of Muslims. But that doesn’t translate into Saudi hegemony over anything because it wouldn’t be Saudi hegemony, it would be God’s hegemony over the world in an Islamic context.

SUSRIS: How does the Hajj fit into the changing security posture in the Kingdom – given the Al Qaeda attacks of recent years?

Dr. Long: People should always be mindful of the security situation anywhere they go. But there are two other considerations here: one, any terrorist group that seeks legitimacy from some Muslim constituency would be foolish indeed to commit an act of violence at such a holy celebration. Those who have tried in past years have found it overwhelmingly counterproductive. One must assume that they seek to recruit followers and it is not going to win hearts and influence people to kill your own people during the holiest gathering of the year.

SUSRIS: Is there potential for some activity to embarrass the Saudis as the hosts.

Dr. Long: There is always that potential but as the Iranians found out the odds that it would be totally counterproductive and backfiring are huge. The terrorists in Saudi Arabia have found out that the people turned against them when they started killing Muslims. One of the reasons they went for the Interior Ministry last month was to isolate them in the minds of people as the enemy rather than as Muslims.

Al-Qaeda is expounding a cause, but no matter how fanatical they might be, they cannot succeed by alienating the very people you are supposedly trying to protect from the outside enemy. There may be some organization with a kind of Jim Jones mentality that does something really irrational, but Al-Qaeda does not appear to me to be that irrational. They may be zealots but they think rationally. You can’t rule it out but I would find it incredible that they would be so stupid.

SUSRIS: So the security challenges are just the physical accommodation of over two million people.

Dr. Long: Nothing of the magnitude of the Hajj is that simple, and of course, the Saudis are going to have to worry about political security. But Hajj administration is such a gigantic undertaking that they will have plenty of other, more mundane forms of security to worry about.

SUSRIS: What is it about the Hajj that people should understand? How should people put it in the context of world events?

Dr. Long: There are many ways you can do that. The first that comes to mind is that the Hajj creates an opportunity for non Muslims and people who don’t know much about Islam — particularly those people who have a totally negative view of Muslims as terrorists and the other images that are prominently displayed in the media — that this is a gathering of 2 million faithful people in a joyous time in the 21st century. With all the strife and all the suffering going on in the world it is just absolutely amazing.

It shows as much as anything can, the collective heart of the largest religious group in the world — 1.2 billion people, more of them than anyone else. That in itself is not the lesson, the lesson is to get along in this world with anybody you need a sense of perspective. This is a great way of gaining perspective by looking at how so many people do an act of piety and religious obligation in an atmosphere of joy every year regardless of what’s going on in Iraq, or anywhere, and I think that would be a lesson to contemplate.

SUSRIS: That’s a great observation. Thank you, Dr. Long for sharing your insight on the Hajj

About the Author:

David E. Long is a consultant on Middle East and Gulf affairs and international terrorism. He joined the U.S. Foreign Service in 1962 and served in Washington and abroad until 1993, with assignments in the Sudan, Morocco, Saudi Arabia, and Jordan. His Washington assignments included Deputy Director of the State Department’s Office of Counter Terrorism for Regional Policy, a member of the Secretary of State’s Policy Planning Staff, and Chief of the Near East Research Division in the Bureau of Intelligence and Research Bureau. He was also detailed to the Institute for National Strategic Studies of the National Defense University in Washington, 1991-92, and to the United States Coast Guard Academy, 1989-91, where he served as Visiting Professor of International Relations and in 1990-91 as Acting Head of the Humanities Department.

A native of Florida, he received an AB in history from Davidson College, an MA in political science from the University of North Carolina, an MA in international relations from the Fletcher School of Law and Diplomacy and a Ph.D. in International Relations from the George Washington University.

In 1974 -1975, Dr. Long was an International Affairs Fellow of the Council on Foreign Relations and concurrently a Senior Fellow at the Georgetown University Center for Strategic and International Studies. While on leave of absence from the State Department, he was the first Executive Director of the Georgetown University Center for Contemporary Arab Studies, 1974-1975. In 1982-1983, he was a Senior Fellow of the Middle East Research Institute and Adjunct Professor of Political Science at the University of Pennsylvania, and in 1987-1989, he was a Diplomat in Residence and Research Professor of International Affairs at Georgetown.

Dr. Long has been an adjunct professor at several Washington area universities, including Georgetown, George Washington and American Universities and the Johns Hopkins University’s School of Advanced International Studies. He has also lectured extensively in the United States and abroad on topics relating to the Islam, the Middle East and terrorism.

His publications include The Government and Politics of the Middle East and North Africa (co-editor with Bernard Reich, 4th ed. 2002), Gulf Security in the Twenty-First Century (co-editor with Christian Koch, 1998), The Kingdom of Saudi Arabia (1997), The Anatomy of Terrorism (1990), The United States and Saudi Arabia: Ambivalent Allies (1985), Saudi Arabian Modernization (with John Shaw, 1982), The Hajj Today: A Survey of the Contemporary Makkah Pilgrimage (1979), Saudi Arabia (1976) and The Persian Gulf (1976, revised 1978).

Editor’s Note:

This week as the Hajj is about to begin we are pleased to provide a series of articles that will provide background information and perspective on the annual pilgrimage in Saudi Arabia. “The Hajj and Its Impact on Saudi Arabia,” by David E. Long, was originally provided in SUSRIS’ on-line companion the Saudi-American Forum and is reprinted here as the Hajj begins in Saudi Arabia. We thank Dr. David Long — diplomat, scholar and author — for sharing his expertise with our readers. You can find more articles, links and resources at a SUSRIS Special Section on “Hajj 2009″.

The Hajj and Its Impact on Saudi Arabia and the Muslim World
David E. Long

Executive Summary

Each year, 2 million Muslims perform the Hajj, or Great Pilgrimage to Makkah. One of the Five Pillars of Islam, the Hajj is required of all believers once in their lifetimes provided they are physically, mentally and financially able.

For the duration of the Hajj and the traditional visit to al-Madinah afterward, the Saudi government must insure that the Hajjis are provided with adequate housing (mainly in tents), food, water, health and sanitation, ground transportation, and public safety and security.

The government has spent billions of dollars on Hajj infrastructure from the two special Hajj air terminals which are the largest structures under a single roof in the world, to the extensive preventative and curative health and sanitation facilities at all the major Hajj locations. The Saudi government has also maintained a strict policy banning political activity so that militants do not desecrate this peaceful and joyous occasion. It is a task of almost unimaginable proportions.

Each year, 2 million Muslims perform the Hajj, or Great Pilgrimage to Makkah, the birthplace of the Prophet Muhammad and where the Qur’an was first revealed to him. One of the Five Pillars of Islam,1 the Hajj is required of all believers once in their lifetimes provided they are physically, mentally and financially able. Sura (Chapter) 3: 90-91 of the Qur’an states: “And the Pilgrimage to the Temple (the Hajj) is an obligation to God from those who are able to journey there.” Although it is not technically a part of the Hajj, most Hajjis then visit al-Madinah, 450 kilometers to the north. In 622 AD, Muhammad and his followers fled to al-Madinah from mounting persecution in Makkah. The flight, known as the Hijrah, marks the beginning of the Muslim, or Hijriyyah calendar.2 Many of the chapters (suras) of the Qur’an were written down in al-Madinah.

Although many religions have pilgrimages, the Hajj is virtually unique in its worldwide participation and sheer size. It is hard for anyone who has not been in the Kingdom during the Hajj to appreciate its full scope. How can a country with a relatively small population such as Saudi Arabia maintain such a good record in administering it each year? The following is a brief overview of administrative, political, economic, and social significance of the Hajj on Saudi Arabia and indeed the entire Muslim world. But first, for those not familiar with the rites of the Hajj, it would be instructive follow the pilgrims through the rites.

The Religious Significance of the Hajj

The Hajj takes place each year during the month of Dhu al-Hijja, the last month of the Muslim calendar. It is virtually impossible to describe the deep emotions generated during the Hajj, even by watching it on Saudi television which annually records it. Each rite has a special significance. The principal rites are Ihram, Tawaf, Sa`y, Wuquf, Nafrah, Rajm, and the `Id al-Adha:3

Ihram is a ritual cleansing and consecration and declaration of intent to perform the Hajj, performed before entering Makkah. Afterwards, pilgrim don special Irham garb of white terrycloth representing the equality of all believers before God, regardless of race, gender, age or social standing. Men wear two coverings for the upper and lower body, and women wear white robes but need not cover their faces.

Tawaf, performed on arrival in the great Haram Mosque in Makkah, is completed by circling seven times around the Ka`bah, located in a great open area in the Haram Mosque. The Ka`bah is considered the spiritual and geographical center of Islam, toward which Muslims face in prayer. Tradition has it that the Ka`bah, a dark stone structure, was originally built by the Prophet Ibrahim (Abraham) and his son Ismail (Ishmael) as a place of worship of the one true God, and symbolizes monotheism which is at the heart of Islam. Each year just before the Hajj, the Ka`bah is covered with a new black velvet and gold drape called the Kiswah. Following the Arrival Tawaf, pilgrims say prayers at the Maqam Ibraham, a station near the Ka`bah, and also drink water from the holy well of Zamzam. Tradition has it that God created the well by striking a stone so that Hajar (Hagar) and Ismail might drink when they were about to die of thirst.

Sa`y consists of seven laps on foot between two elevations formerly adjacent to the mosque but now a part of the mosque complex. It commemorates Hagar’s frantic search for water. Sa`y and Tawaf together are called the Umrah (Lesser pilgrimage) and can be performed any time during the year but do not meet the obligation of Hajj.

Wuquf is performed in a ceremony of “Standing” on the Plain of Arafat, about 20 kilometers east of Makkah beginning at noon on the ninth day of Dhu al-Hijjah, called Yawm al-Wuquf, “Standing Day.” The favored spot to stand is Jabal al-Rahma, the Mount of Mercy, a rocky hill rising about 150 feet above the plain and crowned by a tall white stone obelisk. According to Islamic tradition, the Wuquf is the Hajj – the supreme hours. Everyone must literally be present at `Arafat at maghrib (sunset) or the Hajj is forfeited.

Nafrah: The word literally means “the Rush” in Arabic. As the sun finally disappears over the horizon, in its wake some 2 million Hajjis surge forth from `Arafat to Mina, some 17 kilometers away. They travel by bus, car, truck, and for many as an act of piety, by foot. With so many people, the Nafrah is one of the most chaotic and stressful exercises in this or any other religious observance. The first stop is Muzdalifa about seven kilometers west, where Sunset and Evening prayers (Salat al-Maghrib and al-`Isha) are traditionally said, and a special prayer can be said at a roofless mosque called al-Mash`ar al-Haram (the Sacred Grove). Because of the great crowds, now only the earliest to depart `Arafat usually arrive in Muzdalifa in time for Maghrib prayer, and many say them before leaving Arafat. After midnight and saying Early Morning prayer (Salat al-Fajr), the Hajjis travel on to Mina, a small town about ten kilometers farther west, where they will stay for three days.

Rajm: In Mina, Hajjis perform Rajm over the next three days, the ritual throwing of seven stones at three pillars, called Jamras which represent Shaytans (devils). The tenth through the twelfth of Dhu al-Hijja is also the `Id al-Adha (the Feast of the Sacrifice) which includes the sacramental sacrifice of a blemishless animal, usually a sheep. The `Id is celebrated not only at the Hajj but also throughout the Muslim world where it is a joyous time to visit family and friends.

On the thirteenth, Hajjis return to Makkah for a Farewell Tawaf and are free from all Ihram restrictions. At that point, the Hajj is technically over, and Hajjis are free to travel home or on to visit al-Madinah. There the pace is more relaxed and people can take more time to see the sights, principally the Prophet’s Mosque.

The Impact of the Hajj on Saudi Public Administration

Due to tremendous advances in transportation and communications technology, the Hajj has changed more in the past eight decades since Saudi Arabia formally became guardians of the Holy Places in 1926 than it had in the previous 1300 years of Islamic history.4 In 1927, an estimated 300 to 350 thousand attended with only about 150,000 from outside the Kingdom. In 1972, there was a total of 1,042,007 Hajjis, including 353,460 Saudis, 209,208 non-Saudi residents, and 479,339 from abroad. Today, an estimated 2 million perform the Hajj.

The unprecedented increase in the numbers of pilgrims has greatly increased the complexity of Hajj administration. Just to make room for foreign Hajjis, the Saudi government has restricted attendance by Saudis, many of whom formerly often attended every year, to once every five years, and has negotiated visa quotas for foreign Hajjis with their countries of origin.

Another huge logistical problem is how to dispose of the remains of the thousands of sheep annually sacrificed at Mina. For years, families were allowed to keep only what they consumed during the `Id and the rest was buried in huge pits. In recent years, however, an abattoir has been constructed to preserve the meat, and Hajjis may now purchase a sheep from an Islamic bank to be sacrificed in accordance with Islamic practice, with the meat then distributed to the poor throughout the Muslim world. Increasing numbers of Hajjis are choosing this option, which combines piety with charity.

Providing Zamzam water for so many Hajjis is a major task. Traditionally, the Zamzamis roamed the Haram Mosque providing water to all who asked. But with so many pilgrims today, they must now store the water well in advance, replenish portable containers and paper cups in numerous, strategically located places around the mosque, and continuously refill them as needed. A charitable foundation also bottles Zamzam water for sale throughout the world.

To meet these administrative needs, the Saudi government has established a combination of public services and government regulated privately administered Hajj services:

The Hajj Private Service Industry

For centuries, Hajj administration was largely in the hands of ancient, family-organized guilds that arranged for food, lodging and transportation, and also guided pilgrims through the Hajj rites: Wakils, or Agents, who guided them to Makkah, usually from the nearby port city of Jiddah; the Mutawwifs (from the word Tawaf), who guided Hajjis through the Hajj rites; Zamzamis, who distributed Zamzam water; and Dallils, or Guides, who guided visitors to al-Madinah. Lacking the resources to take over these tasks, King Abd al-Aziz (“Ibn Saud”) left them in the hands of the guilds. As the Hajj was the backbone of the economy of the Hijaz, the guilds had traditionally charged literally whatever the Hajj traffic would bear. However, the Saudi government, which takes its responsibility as custodian of the Two Holy Places very seriously, strictly regulates the guilds in order to insure that the Hajjis not be overcharged. Today, the guilds function much as public utilities. To the present day, the principal responsibility for providing personal services to the Hajjis rests with the Mutawwifs, who act essentially as religious tour guide companies for designated countries of origin. They are responsible for looking after the Hajjis under their care from the time they leave home for Saudi Arabia until they return home again.

The Hajj service industry also includes other regulated private sector enterprises. Overland bus transportation is provided by a combination of foreign and Saudi public and private companies. Of the 11,5000 buses in service in the 2002 Hajj, the Saudi Transportation Syndicate, made up of several private companies, provided 7,000, and the Saudi Arabian Public Transportation Company (SAPTCO) provided 600. SAPTCO is a publicly traded, government-managed company whose board of directors is chaired by the Undersecretary of Communications. It was created 24 years ago to provide bus scheduled intercity and international service and chartered service for the Hajj and Umrah. The rest of the buses come from foreign countries.6

In 1945, Saudi Arabia established Saudi Arabian Airlines (Saudia) as a national air carrier. In addition to providing domestic and international air service, it was also given the mission to provide service “for Moslems on pilgrimage to the Holy Cities of Islam in Saudi Arabia.”7 In the 2003 Hajj, Saudia plans to carry 893,702 Hajjis on 1,754 flights from 70 international destinations.8 Most Hajjis will enter the Kingdom at Jiddah, the main Hajj port of entry, where two special Hajj air terminals await them, the largest structures under a single roof in the world.

Public and private Islamic foundations also are involved in operations such as providing and distributing sacrificed meat and Zamzam water. The Ministry of Awqaf (Islamic foundations; sing. Waqf) also acts as a repository for those who wish to donate charitable contributions as a part of their Hajj experience.

Hajj Public Services

In addition to government-regulated and government-owned Hajj service companies, Saudi Arabia must also provide extensive direct government services for the Hajj. Overall services are coordinated by the Hajj Ministry and the inter-agency Central Hajj Committee. Public safety, public security and traffic control are provided by the Ministry of Interior, and were a special crisis to arise, it can also call on the National Guard. It is responsible for regulating entry and exit from the Kingdom at all land, sea and air ports of entry, and insuring their safe overland travel to and from Makkah and al-Madinah. For the most part, overland traffic is spread out over a number of weeks, but during the Nafrah, all 2 million Hajjis set out at the same time for the same place. It has become one of the greatest traffic gridlocks in the world. Despite Herculean efforts by the traffic police, supplied with the most up-to-date equipment; the journey from Arafat to Mina can take over 12 hours. By comparison, consider a dozen Super Bowl games getting out at the same time and place, everyone all heading in the same direction.

Public health is another Herculean task. Modern health services were originally created in the 19th century because of fear in Europe and America over the spread of cholera. Asian Hajjis brought cholera to Makkah, and North African Hajjis spread it from there to Europe and America. The Western powers pressured the Ottoman sultan to create an international organization called the Paris Office of Hygiene to oversee the health and sanitation aspects of the Hajj. After World War II, the newly formed World Health Organization assumed this responsibility after absorbing the Paris Office. In 1956, the Saudi Ministry of Health assumed responsibility for Hajj health and sanitation and now operates extensive preventative and curative health and sanitation facilities at all major Hajj locations.9 The Saudi Red Crescent Society also participates, operating first aid and other facilities.

Of lesser magnitude but equally important, personnel in Saudi Embassies and Consulates abroad must be augmented each year to process foreign Hajj visa applications. At home, the Foreign Ministry also plays host to VIPs making the Hajj, including cabinet ministers, heads of state and other important personages.

Hajj Infrastructure

The government has also spent billions of dollars on Hajj infrastructure. This has included major expansions of the two holy mosques in Makkah and al-Madinah. The Haram Mosque can now comfortably accommodate a million worshipers, and during the Hajj, twice that number pack into it. There are also two new levels to increase capacity for performing the Sa`y. The Prophet’s Mosque in al-Madinah has also been expanded, although the crowds are smaller there during the Hajj.10 In Mina, the space for throwing stones at the three Jamras has been increased to three tiers.

To accommodate overland transportation at the Hajj, the Saudi government has constructed hundreds of miles of all weather, four lane highways, particularly between Arafat and Mina. It has also installed created a fully computerized traffic control system. Each year, portable tent cities are set up at `Arafat and Mina to provide housing, food, water, health and sanitation, transportation, telecommunications, public safety, banking facilities, markets – indeed all amenities of a city of 2 million people. All in all, nearly every Saudi government agency and ministry becomes involved one way or another in making the Hajj an administrative success.

The Political Significance of the Hajj

The Saudi government has always maintained a strict policy banning political activity under the pretext of attending the Hajj, welcoming Muslims regardless of their political persuasion. Nevertheless, over the years there have been a number of political activists that have tried to use the occasion to press their political agendas. During the height of Arab socialism, radical Arab nationalists made periodic attempts to embarrass the Saudi regime by disrupting the Hajj, but none of them were successful. In an attempt to challenge Saudi Arabia’s role of leadership in the Muslim world and discredit its custodianship of the Islamic holy places, the Khomeini regime in Iran sent provocateurs to disrupt 1982 Hajj in an attempt. Tensions mounted in subsequent years, until 1987 when 400 people were killed and Saudi security services had to be called in to quell violent agitation by Iranian Hajjis.11 Muslims throughout the world condemned the agitation as a desecration of the Hajj.

Since then, the Hajj has remained a peaceful and joyous occasion as it was intended to be. However, in the wake of the attacks on September 11, 2001, the threat of violent political activity has increased as militant Muslims put forward the claim that anti-American and anti-Zionist demonstrations would be in the name of Islam, not politics.

The Economic Impact of the Hajj

Prior to the oil era, the Hajj was the economic backbone of the Saudi economy. With vast oil wealth, the government no longer depend on Hajj revenue, but it is still a major source of income for the private sector. In addition to the Hajj service industry, the Hajj is a major season for the consumer retail season as well, somewhat analogous to the Christmas season in the United States. Hajjis from third world countries in particular buy items that are hard to get or highly taxed at home, such as medicines and luxury items such as perfumes and jewelry. For the 2003 Hajj, about 1500 young Saudis have been hired and trained to accompany the Hajjis on their sacred journey. According the project director, the aim of the project is to create employment for Saudi youth while helping guests and serving in the worship of God.12

In recent years, Islamic religious tourism has been expanded far beyond the Hajj. Many Muslims from all over the world now perform the Umrah year round. The fasting month of Ramadhan is particularly busy season, as many Saudi residents also flock to the Holy Places. At the month draws to an end, Muslims celebrate the anniversary of the first revelation of the Qur’an. On this lailat al-qadir, or “night of power,” some three million people perform tarawih prayers in the Haram Mosque, more than at the Hajj.13

With year round visits now to the two Holy Places, there are no published figures that break out gross revenues generated by the Hajj, but they are estimated to be in the billions of dollars, including annual government expenditures.

The Social Impact of the Hajj

In its size and global scope, the Hajj is the greatest single ritual celebration, not just of Islam, but of any religion anywhere. As one of the Five Pillars of Islam, it is an obligation for one-fifth of world’s population. During the month of Dhu al-Hijjah, virtually the entire population of Saudi Arabia is intimately touched by the Hajj, whether directly in its administration, its service industry, as a purveyor of personal goods and services, or indirectly by observing it on television. The `Id al-Adha, observed at the end of the Hajj, is celebrated throughout the Muslim world as a time of worship and fellowship with family and friends.

Unlike the impact of the Hajj on many foreign visitors, whose journey is a mystical, once in a lifetime experience, the Saudi experience while visiting the Islamic Holy Places, during the Hajj or at any other time of year, is a local, accessible reality. The sites are the physical and geographical manifestation of the birth of Islam. This blending of the highly sacred and the familiar commonplace has permeated Saudi society to such an extraordinary degree that it can be felt in virtually every human endeavor from politics to business to simple recreation.

Notes:

1. The other pillars are the Shahada, or Profession of Faith: “There is no god but God and Muhammad is the Prophet of God”; Salah: regular prayer five times a day while facing Makkah; Zakat: charitable giving; and Sawm: fasting from sunup to sundown during the Muslim month of Ramadhan.
2. The Muslim, or Hijriyyah calendar, designated “AH,” began on July 16, 622. Its lunar years are eleven days shorter than the solar year, resulting in the Hajj beginning earlier each solar year.
3. It is important to note that this description is highly abbreviated. The actual rites are somewhat more complicated and include numerous variations and details.
4. The Saudis were actually in control of Makkah in 1925, and allowed to perform the Hajj, though numbers were greatly reduced.
5. Long, The Hajj Today, p. 135. Figures are derived from collating multiple sources.
6. The Saudi Arabian Information Resource, 18 December 2002,
(http://www.saudinf.com/main/y5068.htm ).
7. Saudi Arabian Airlines, “The Story of Saudi Arabian Airlines,” (pamphlet, 1970), pages unnumbered.
8. Ibid. 6 January 2003, ( http://www.saudinf.com/main/y5159.htm ).
9. See David E. Long, The Hajj Today, (Albany, NY: SUNY Press, 1979), pp. 76-87.
10. Greg Noakes, “The Servants of God’s House,” Aramco World, January/February 1999, pp. 48, ff.
11. John L. Esposito, “The Iranian Revolution: A Ten Year Perspective,” in John L. Esposito, ed., The Iranian Revolution: Its Global Impact, (Miami: Florida International University Press, 1990), pp. 34-35.
12. Saudi Arabian Information Resource, 14 January 2003, ( http://www.saudinfo.com/main/y5204 )
13. Noakes, Loc. cit.

About the Author:

David E. Long is a consultant on Middle East and Gulf affairs and international terrorism. He joined the U.S. Foreign Service in 1962 and served in Washington and abroad until 1993, with assignments in the Sudan, Morocco, Saudi Arabia, and Jordan. His Washington assignments included Deputy Director of the State Department’s Office of Counter Terrorism for Regional Policy, a member of the Secretary of State’s Policy Planning Staff, and Chief of the Near East Research Division in the Bureau of Intelligence and Research Bureau. He was also detailed to the Institute for National Strategic Studies of the National Defense University in Washington, 1991-92, and to the United States Coast Guard Academy, 1989-91, where he served as Visiting Professor of International Relations and in 1990-91 as Acting Head of the Humanities Department.

A native of Florida, he received an AB in history from Davidson College, an MA in political science from the University of North Carolina, an MA in international relations from the Fletcher School of Law and Diplomacy and a Ph.D. in International Relations from the George Washington University.

In 1974 -1975, Dr. Long was an International Affairs Fellow of the Council on Foreign Relations and concurrently a Senior Fellow at the Georgetown University Center for Strategic and International Studies. While on leave of absence from the State Department, he was the first Executive Director of the Georgetown University Center for Contemporary Arab Studies, 1974-1975. In 1982-1983, he was a Senior Fellow of the Middle East Research Institute and Adjunct Professor of Political Science at the University of Pennsylvania, and in 1987-1989, he was a Diplomat in Residence and Research Professor of International Affairs at Georgetown.

Dr. Long has been an adjunct professor at several Washington area universities, including Georgetown, George Washington and American Universities and the Johns Hopkins University’s School of Advanced International Studies. He has also lectured extensively in the United States and abroad on topics relating to the Islam, the Middle East and terrorism.

His publications include The Government and Politics of the Middle East and North Africa (co-editor with Bernard Reich, 4th ed. 2002), Gulf Security in the Twenty-First Century (co-editor with Christian Koch, 1998), The Kingdom of Saudi Arabia (1997), The Anatomy of Terrorism (1990), The United States and Saudi Arabia: Ambivalent Allies (1985), Saudi Arabian Modernization (with John Shaw, 1982), The Hajj Today: A Survey of the Contemporary Makkah Pilgrimage (1979), Saudi Arabia (1976) and The Persian Gulf (1976, revised 1978).

Editor’s Note:

The word “Hajj” means “to set out for a place.” Three million people are setting out for a place next week. That would be the holy city of Mecca in Saudi Arabia to perform pilgrimage rituals that form one of the five pillars of Islam — a religious duty of every able bodied Muslim to accomplish at least once in a lifetime.

SUSRIS has been pleased in past years to bring you the insights and perspectives of many writers about the Hajj including Dr. David Long — diplomat, scholar and author of “The Kingdom of Saudi Arabia” — who said of the Hajj: “Although many religions have pilgrimages, the Hajj is virtually unique in its worldwide participation and sheer size. It is hard for anyone who has not been in the Kingdom during the Hajj to appreciate its full scope. How can a country with a relatively small population such as Saudi Arabia maintain such a good record in administering it each year?”

This week SUSRIS will provide a collection of articles and interviews on the Hajj to help answer that question and more, including the challenges posed by security issues, the spread of the H1N1 virus and increased tensions with Iran. These SUSRIS items and other resources will be compiled in a new SUSRIS Special Section called, “Hajj 2009″ [links below]. Today we start with reports from various agencies on Hajj preparations.

• Top Saudi cleric warns against politicising hajj – France24 – [Oct 31]

“Saudi Arabia’s top cleric has warned against politicising the hajj amid a war of words between Riyadh and Tehran over the annual pilgrimage to the holy city of Mecca .. Iranian President Mahmud Ahmadinejad and Supreme Leader Ayatollah Ali Khamenei alleged that Saudi Arabia, a predominantly Sunni Muslim country, might abuse the mainly Shiite Muslim pilgrims from Iran during the hajj .. Ahmadinejad warned that Tehran would “take the appropriate measures” if Iranian pilgrims are restricted, while Khamenei raised the issue of alleged “insults and mistreatment against some Shiite Muslims”..”

• 956,697 Pilgrims Arrived in Saudi Arabia – SaudiEmbassy.net – [Nov 14]

“The Director-General of Passports Maj. Gen. Salem Al-Blaihed reported today that 956,697 pilgrims have arrived in Saudi Arabia from abroad as of Friday evening. Of those, 903,741 pilgrims arrived by air, 39,323 by land, and 13,633 by sea..”

• Foreign Gunmen Posing as Haj Pilgrims Arrested [Nov 16]

“The Saudi armed forces have arrested gunmen, who attempted to infiltrate into Saudi territories together with a group of Al Houthi rebels, posing as Haj pilgrims. These gunmen, caught in their Ihram dress, belong to Afghanistan, Ethiopia and Somalia.. ..A huge cache of weapons and ammunition was seized from them following a shootout,” they said adding that the gun claimed that they were pilgrims heading for Makkah to perform the annual pilgrimage of Haj..”

• World Muslims to mark climax of hajj on Nov. 26 – al Arabiya – [Nov 18]

“As Muslims prepare for the annual pilgrimage, or hajj, season, Saudi Arabia’s Supreme Court announced late Tuesday that Arafat Day, when pilgrims stand in prayer on Mount Arafat marking the climax of Hajj, will fall this year on Nov. 26. The court ruled that a number of people had witnessed the Zul Hijjah crescent and “as a result, Nov. 18 will be the first day of Zul Hijjah .. while Eid al-Adha will be on Nov. 27.”..”

• Buses to Makkah With Fewer Than 25 Pilgrims Banned – GulfNews – [Nov 19]

“Vehicles with fewer than 25 Haj pilgrims will be prohibited from entering Makkah, in a new measure adopted by Saudi Arabia. The decision is aimed at increasing road safety and reducing congestion during this year’s pilgrimage..”

• Reality Check: The Hajj – Foreign Policy – [Nov 20]

“It’s the greatest yearly pilgrimage on Earth. But these days, the annual trek to Saudi Arabia’s holy sites is as much about politics as it is religion.. ..Throughout the 1980s, Iranian pilgrims tried to use the hajj as an opportunity to propagate Islam à la Khomeini. That conflict culminated in full-scale riots in 1987, when Saudi security forces opened fire on demonstrators. The clashes resulted in 402 deaths, not to mention some 600 wounded. That’s a nightmare that the Saudis, presumably, would do anything to avoid..”

• Hajj pilgrims unfazed by swine flu threat – Dawn.com – [Nov 21]

“Days before a forecast three million Muslim pilgrims pack Mecca to begin the holy ritual of the hajj, the spectre of a possible outbreak of swine flu seems to be fazing few of them. There might be posters in the streets, plastered on hotel facades and in their lobbies warning about the (H1N1) flu, but not many of the hundreds of thousands of pilgrims already jamming Islam’s holiest city are wearing face masks and many say they are not worried..”

• Swine flu kills first hajj pilgrims in Saudi Arabia – Dawn.com – [Nov 22]

“Swine flu has killed four pilgrims in Saudi Arabia for the annual hajj, health authorities said on Saturday only a few days before the massive Muslim gathering reaches its peak..”

Editor’s Note:

The 18th annual Arab-US Policymakers Conference (AUSPC) was held in Washington, D.C. on October 15-16, 2009. The conference addressed a host of issues under the theme, “Fresh Visions, Old Realities, New Possibilities: The Impact of Leadership Change on Arab-U.S. Relations.” Among the panels was the “Ambassador’s Roundtable” which featured remarks from U.S. Ambassador to Saudi Arabia James Smith, and five former American ambassadors to the Kingdom, as well as Saudi Ambassador to the United States Adel Al Jubeir. Today we are pleased to present a transcript of Ambassador Smith’s remarks, provided by the National Council on U.S.-Arab Relations, for your consideration.

Ambassador James Smith
Ambassador of the United States to the Kingdom of Saudi Arabia
18th Arab-U.S. Policymakers Conference
Washington, DC

Well I’m the new guy, I know that because I am still an optimist. I want to thank Dr. Anthony for the opportunity to come meet you. I’ve been at post a month. I flew in Tuesday night. I’m leaving on the ten o’clock tonight. It is getting very close to my bedtime but I will get through this.

I was particularly intrigued with the theme of the conference “Fresh Visions, Old Realities, and New Possibilities.” Because in the run up to going to post, I had about three or four months of study time, and in that time I had consultations with all of the previous ambassadors going back to about 1988, including Ford Fraker who is not here today. I must tell you I have great respect for this group of gentlemen to my left, they were generous both with their time, their thoughts, and their ideas. And one thing that I found that was very intriguing was that each of them was there at a unique time. The last fifteen years every two to three years has been marked by an era of its own. I’m going to limit my comments this morning to defining what I see this era like, the era I am stepping into.

The first thing I would tell you is that it is not 2001. It is not 2003. And it is not 2004. So if you are an American and you formed an opinion about Saudi Arabia or Saudis in the aftermath of 9/11, it is time to rethink your position. If you are a Saudi and you formed an opinion about the United States and Americans in the aftermath of 9/11 it is time to rethink your opinion. That was eight years ago.

Ours is an era of hope and expectation. Admiral Fallon, I think, was spot on when he defined the window of opportunity created by President Obama. It’s also a window of opportunity created by His Majesty King Abdullah who led the Arab Peace Initiative, the Inter-Faith Dialogue, a whole range of modernization initiatives culminating with the inauguration of KAUST. If you were not there last month you missed something because it was stunning — not just the optics but the image of what this represents as a top-end graduate degree granting institution in Saudi Arabia.

This is an era of hope and opportunity. President Obama is probably the only person in the world who could have gone to Cairo and given the speech he did. He went through one by one the geostrategic challenges of the day. We have to think of the words that our President used which are listen, respect, trust. Because this is a much more nuanced, complicated and, I would argue, more important relationship than it has ever been in the past. But someone said it’s just a speech, you have to deliver on the promise of Cairo. And whose responsibility is that? It is mine, and it is yours.

I say yours because as you come to visit me as a business man, as an educator, or as a think tank individual, I will share that responsibility with you. If you are trying to work a business opportunity I will describe the King’s vision of where he is trying to take this economy and create jobs. We will help him solve his problem as we are trying to build the relationships between our two peoples. And I will share that responsibility with you and together we will figure out how to deliver on the promise of Cairo.

But there are unique challenges that we face in the diplomatic presence in Saudi Arabia. It is the byproduct of what happens when you build walls — because we have been building walls since 9/11 — physical walls. Saudi Arabia has been an unaccompanied post for five years. So you come on one year rotations and it takes you four months to learn your job and then you do it for six months and then you rotate out. You continue to build walls and fences. You were there to represent the American people to the people of Saudi Arabia and you find yourself migrating into only three cities. And in fact you migrate into single buildings in individual cities instead of everywhere. And it is actually worse than that, because of the single year rotation policy you migrate into single sections of individual buildings in three cities.

We have got to figure out how to start taking down walls. I see my biggest challenge over the next two years is how to figure out developing friendships without fences, relationships without barriers, even if you can’t change the physical dynamic we have got to get out and represent the American people to the people of Saudi Arabia. I would argue that this description of our diplomatic presence is a microcosm of the relationship between our people and until we can increase the number of students going back and forth, increase the number of businessmen forming relationships, increasing the trade missions, then you will have people who formed an opinion in 2001 that hasn’t changed and it is wrong. Thank you.

Source: NCUSAR.org

Editor’s Note:

The Middle East Institute recently released a special edition of “Viewpoints” addressing the “important developments in Saudi Arabia’s domestic and external affairs since” the watershed year of 1979. It was that year, according to Thomas Lippman in a “Viewpoints” essay, that “Saudis now remember .. as a difficult year because of distressing political events at home and overseas: the Iranian Revolution, the extremist takeover of the Great Mosque in Mecca, Shi‘ite rioting in the Eastern Province, and the Soviet invasion of Afghanistan.

The compilation of insights on these developments is a great service by MEI to those who follow Middle East affairs in general and the US-Saudi relationship in particular. We are pleased today to provide information about the “Viewpoints” Special Edition, including the introduction and the table of contents. A link to the complete report and related material are also provided for your consideration.

Link: Complete “Viewpoints”

The Kingdom of Saudi Arabia, 1979-2009: Evolution of a Pivotal State
The Middle East Institute
October 14, 2009

Taken together, the events of 1979 both inside and outside the Kingdom were harbingers of things to come — of an economy still heavily dependent on oil rents; a social contract anchored in lavish subsidies and welfare services that are increasingly difficult to sustain; deeply conservative religio-cultural mores that cannot be insulated from the forces of globalization; and the vexing issues of managing domestic political dissent while maintaining a “special relationship” with the United States in the face of a diffuse radical Salafist movement worldwide and the expansion of the Islamic Republic of Iran’s regional power and influence. This collection of 21 essays, the fifth of six special editions of MEI Viewpoints commemorating the momentous events of 1979, seeks to shed light on some of the important developments in Saudi Arabia’s domestic and external affairs since then.

The year 1979 was among the most tumultuous, and important, in the history of the modern Middle East. The Middle East Institute is marking the 30th anniversary of these events in 2009 by launching a year-long special series of our acclaimed publication, Viewpoints, which offers perspectives on these events and the influence that they continue to exert on the region today. Each special issue of Viewpoints will combine the diverse commentaries of policymakers and scholars from around the world with a robust complement of statistics, maps, and bibliographic information in order to encourage and facilitate further research.

The Kingdom of Saudi Arabia, 1979-2009: Evolution of a Pivotal State – “Viewpoints” Special Edition – Middle East Institute – Oct 14, 2009

Though its national origins date from the mid-18th century, the current (third) Kingdom of Saudi Arabia is relatively new. Its establishment in 1932 marked the culmination of several decades of successful military and political efforts led by the Kingdom’s founder, ‘Abd al-‘Aziz bin ‘Abd al-Rahman Al Saud.

Popular misconceptions of Saudi Arabia abound. They are marked by static, sometimes distorted images of the country and its people: the varied Saudi landscape misrepresented in sharp dichotomous snapshots of oil rigs and vast stretches of empty desert; the diverse Saudi population miscast either as backward camel herders and desert dwellers or portly princes luxuriating in opulent palaces; and the misidentification of Wahhabism and contemporary jihadism, and thus the mischaracterization of Saudis as terrorists or as purveyors of terrorism.

Most people other than Saudis themselves are unaware of — much less able to fathom — the magnitude of the changes that have occurred inside the Kingdom, and the stunning rapidity with which they have occurred. Much of this change has taken place over the past three decades — not all of it the handiwork of Saudis themselves, and by no means all of it positive.

Today, the Kingdom of Saudi Arabia has a population of more than 28 million, 82% of whom live in urban areas. The Kingdom dominates the Arabian Peninsula economically, politically, and militarily. The Saudi presence and influence radiates across the region and throughout the world in the form of investment capital, media, foreign aid, the championing of Muslim causes, and the conduct of diplomacy. Saudi Arabia, which possesses about 20% of the world’s petroleum reserves, is the largest petroleum exporter and plays a leading role in OPEC.

The breathtaking pace of Saudi Arabia’s modernization and ascent on the world stage has come at a cost. It has unleashed social forces that cannot easily be controlled. And it has fuelled fears and grievances that have proved impossible to ignore, yet difficult to manage.

The year 1979 is an important marker. The clutch of events that took place in the wider region during that year — the Iranian Revolution, the signing of the Camp David Treaty, the second “oil shock,” the launching of General Zia ul-Haq’s Islamization program in Pakistan, and the Soviet invasion of Afghanistan — profoundly shaped Saudi Arabia’s subsequent regional and international role, and fed back into Saudi social and political relations in ways that continue to be felt.

The year was not without momentous events within Saudi Arabia’s borders as well. On November 20, 1979, Juhayman Sayf al-‘Utaybi and several hundred armed Salafists — including Saudis, Egyptians, Kuwaitis, Yemenis, and Iraqis — seized the al-Masjid al-Haram (Grand Mosque) in Mecca, the holiest site in Islam, as thousands of worshippers were gathering for the dawn prayer. The same month, Shi‘ite protests erupted in the oil-rich eastern region of the country. The disturbing simultaneity of these challenges to the legitimacy of the Saudi system of rule led, among other things, to the restructuring of relations between the political leadership and the ‘ulama’ and to the securitization of the state.

Taken together, these events both inside and outside the Kingdom were harbingers of things to come — of an economy still heavily dependent on oil rents; a social contract anchored in lavish subsidies and welfare services that are increasingly difficult to sustain; deeply conservative religio-cultural mores that cannot be insulated from the forces of globalization; and the vexing issues of managing domestic political dissent while maintaining a “special relationship” with the United States in the face of a diffuse radical Salafist movement worldwide and the expansion of the Islamic Republic of Iran’s regional power and influence.

This collection of 21 essays, the fifth of six special editions of MEI Viewpoints commemorating the momentous events of 1979, seeks to shed light on some of the important developments in Saudi Arabia’s domestic and external affairs since then.

The Kingdom of Saudi Arabia, 1979-2009: Evolution of a Pivotal State – “Viewpoints” Special Edition – Middle East Institute – Oct 14, 2009

The Kingdom of Saudi Arabia, 1979-2009: Evolution of a Pivotal State
A Special Edition of “Viewpoints”

I. Media, Culture, and Society

The Rise of a Media Kingdom, by Noha Mellor

Diwaniyyas, Intellectual Salons, and the Limits of Civil Society, by Toby Matthiesen

A Rentier Social Contract: The Saudi Political Economy since 1979, by Steffen Hertog

The Freedoms Saudi Women Really Want, by Natana J. DeLong-Bas

Obstacles to Equality for Saudi Women, by Eleanor Abdella Doumato

II. Religion, Politics, and the State

Tawhid or Jihad: What Wahhabism Is and Is Not, by David E. Long

Saudi Arabia’s Religious Counter-Terrorist Discourse, by Roel Meijer

Liberal Enclaves: A Royal Attempt to Bypass Clerical Power, by Andrew Hammond

The Neo-Reformists: A New Democratic Islamic Discourse, by Saud al-Sarhan

Saudi-Shi‘ite Political Relations in the Kingdom, by Toby Jones

Reforming the Judiciary in Saudi Arabia, by Joseph A. Kéchichian

Tribes and the Saudi Legal System: An Assessment of Coexistence, by Sebastian Maisel

From Generation to Generation: The Succession Problem in Saudi Arabia, by Nabil Mouline

III. Regional and International Relations

Saudi Arabia: Victim or Hegemon? by George Joffé

Saudi Arabia and Iran: Less Antagonism, More Pragmatism, by Paul Aarts and Joris van Duijne

How Salafism Came to Yemen: An Unknown Legacy of Juhayman al-‘Utaybi 30 Years On, by Laurent Bonnefoy

Saudi-Russian Relations: 1979-2009, by Mark N. Katz

Cooperation under the Radar: The US-Saudi Arabian Joint Commission for Economic Cooperation (JECOR), by Thomas W. Lippman

Saudi-American Relations, by F. Gregory Gause, III

Saudi Wahhabi Islam in the Service of Uncle Sam, by Askar H. Enazy

The United States and Saudi Arabia: Challenges Ahead, by Rachel Bronson

The Kingdom of Saudi Arabia, 1979-2009: Evolution of a Pivotal State – “Viewpoints” Special Edition – Middle East Institute – Oct 14, 2009

About The Middle East Institute

The mission of the Middle East Institute is to promote knowledge of the Middle East in America and strengthen understanding of the United States by the people and governments of the region.

For more than 60 years, MEI has dealt with the momentous events in the Middle East — from the birth of the state of Israel to the invasion of Iraq. Today, MEI is a foremost authority on contemporary Middle East issues. It provides a vital forum for honest and open debate that attracts politicians, scholars, government officials, and policy experts from the US, Asia, Europe, and the Middle East. MEI enjoys wide access to political and business leaders in countries throughout the region. Along with information exchanges, facilities for research, objective analysis, and thoughtful commentary, MEI’s programs and publications help counter simplistic notions about the Middle East and America. We are at the forefront of private sector public diplomacy. Viewpoints is another MEI service to audiences interested in learning more about the complexities of issues affecting the Middle East and US relations with the region. The views expressed in these Viewpoints are those of the authors; the Middle East Institute does not take positions on Middle East policy.

To learn more about the Middle East Institute, visit the website at http://www.mei.edu.

Editor’s Note:

This report provides a VOA update to the fight against Houthi rebels by Saudi and Yemeni forces and a link to a video report featured today on Al Jazeera TV’s “Inside Story” via YouTube. Additional reports on the fighting with Yemeni rebels along the Saudi border are compiled on a SUSRIS Special Section (link below).

VIDEO – Rebellion in Yemen – Inside Story – Al Jazeera

As Saudi Arabia mobilises its forces on the Yemeni border, Iran demands that outside forces stay out of the war between the government and Houthi fighters in Yemen. Is a local insurrection turning into a war between the region’s strongest powers? Are we seeing the birth of another proxy war in the Middle East? and who is likely to come out on top?

Report from Yemen and panel among Yemeni, Saudi and Iranian specialists — Abdel-Ghani al-Iryani, Hussein Shobokshi and Sadegh Zibakalam.

Yemen and Saudi Arabia Continue to Battle Houthi Rebels
By Edward Yeranian
Cairo
15 November 2009

Yemen says it has recaptured ground from the Houthi rebels in the northern Saada province, while Saudi Arabia says its paratroopers are conducting mop-up operations along the border.

Saudi TV reports that Saudi special forces units and paratroopers are continuing mop-up operations against Houthi rebels in the region of Jebel Dukhan along the border with Yemen. The report said a number of armed rebels were captured.

The report also said Apache helicopters and long-range artillery were used by Saudi forces in the most recent operations.

The Yemeni military says it has recaptured territory from the Houthi rebels in Saada province, along its side of the border. Yemeni warplanes struck rebel positions in both Saada and Amran provinces, overnight.

Eyewitnesses report Yemeni armed forces moved reinforcements from the capital Sanaa into the flashpoint town of Harf Sufyan, where heavy combat took place.

Meanwhile, a top advisor to Yemeni President Ali Abdallah Saleh complained Iran has been aiding the Houthi rebels. Ali Mohammed al-Anisy warns Iran to “stop interfering in internal Yemeni affairs.”

In Tehran, Iranian parliament speaker Ali Larijani lambasted Saudi Arabia for attacking the rebels “and killing people during Hajj season,” while complaining that the United States was “probably involved in the military campaign, too.”

A group of Yemeni opposition parties criticized the government Saturday for allowing Saudi Arabia to allegedly “violate Yemeni sovereignty.”

Political Science Professor Ahmed Abdul-Karim Saif, of the University of Sanaa, says the Yemeni political parties “are playing a poker game with the government,” but he “doubts if Saudi Arabia is really violating Yemeni sovereignty.”

Saif also said material Iranian involvement in the conflict with the Houthi rebels is probably limited, as well, saying, “..remotely, yes, but directly there is a very minor role played by Iran because of logistic issues, and this is a very political dispute. It has nothing to do with religion. But, religious discourse is exploited to legitimize the war or legitimize the different political stances of different parties.”

As combat continues, civilians on both sides of the border continue to suffer. Thousands on the Saudi side were evacuated from villages in the combat zone in the past several days.

Saudi Civil Defense corps Colonel Hashim Dawoud Saiqal says his unit has been working to find shelter for the refugees. He says 3,900 people have been given shelter in the Liwa tent-city, while 9,850 have been lodged in furnished flats, and others in private homes. He adds that his men were able to carry out the evacuation in under 48 hours.

Professor Saif says civilians on the Yemeni side of the border are not so fortunate, since the Yemeni government has fewer resources to help the thousands of displaced people.

He says the conflict is likely to get worse and could degenerate into a full-scale regional conflict. He says more will be known after the upcoming visit of Iranian Foreign Minister Manouchehr Muttaqi to Riyadh.

Reprinted with permission of VOA

Editor’s Note:

This report provides a VOA update to the fight against Houthi rebels by Saudi and Yemeni forces and a link to a video report featured today on Al Jazeera TV’s “Inside Story” via YouTube.

Video – Rebellion in Yemen – Inside Story – Al Jazeera

As Saudi Arabia mobilises its forces on the Yemeni border, Iran demands that outside forces stay out of the war between the government and Houthi fighters in Yemen. Is a local insurrection turning into a war between the region’s strongest powers? Are we seeing the birth of another proxy war in the Middle East? and who is likely to come out on top?

Report from Yemen and panel among Yemeni, Saudi and Iranian specialists — Abdel-Ghani al-Iryani, Hussein Shobokshi and Sadegh Zibakalam

Yemen and Saudi Arabia Continue to Battle Houthi Rebels
By Edward Yeranian
Cairo
15 November 2009

Yemen says it has recaptured ground from the Houthi rebels in the northern Saada province, while Saudi Arabia says its paratroopers are conducting mop-up operations along the border.

Saudi TV reports that Saudi special forces units and paratroopers are continuing mop-up operations against Houthi rebels in the region of Jebel Dukhan along the border with Yemen. The report said a number of armed rebels were captured.

The report also said Apache helicopters and long-range artillery were used by Saudi forces in the most recent operations.

The Yemeni military says it has recaptured territory from the Houthi rebels in Saada province, along its side of the border. Yemeni warplanes struck rebel positions in both Saada and Amran provinces, overnight.

Eyewitnesses report Yemeni armed forces moved reinforcements from the capital Sanaa into the flashpoint town of Harf Sufyan, where heavy combat took place.

Meanwhile, a top advisor to Yemeni President Ali Abdallah Saleh complained Iran has been aiding the Houthi rebels. Ali Mohammed al-Anisy warns Iran to “stop interfering in internal Yemeni affairs.”

In Tehran, Iranian parliament speaker Ali Larijani lambasted Saudi Arabia for attacking the rebels “and killing people during Hajj season,” while complaining that the United States was “probably involved in the military campaign, too.”

A group of Yemeni opposition parties criticized the government Saturday for allowing Saudi Arabia to allegedly “violate Yemeni sovereignty.”

Political Science Professor Ahmed Abdul-Karim Saif, of the University of Sanaa, says the Yemeni political parties “are playing a poker game with the government,” but he “doubts if Saudi Arabia is really violating Yemeni sovereignty.”

Saif also said material Iranian involvement in the conflict with the Houthi rebels is probably limited, as well, saying, “..remotely, yes, but directly there is a very minor role played by Iran because of logistic issues, and this is a very political dispute. It has nothing to do with religion. But, religious discourse is exploited to legitimize the war or legitimize the different political stances of different parties.”

As combat continues, civilians on both sides of the border continue to suffer. Thousands on the Saudi side were evacuated from villages in the combat zone in the past several days.

Saudi Civil Defense corps Colonel Hashim Dawoud Saiqal says his unit has been working to find shelter for the refugees. He says 3,900 people have been given shelter in the Liwa tent-city, while 9,850 have been lodged in furnished flats, and others in private homes. He adds that his men were able to carry out the evacuation in under 48 hours.

Professor Saif says civilians on the Yemeni side of the border are not so fortunate, since the Yemeni government has fewer resources to help the thousands of displaced people.

He says the conflict is likely to get worse and could degenerate into a full-scale regional conflict. He says more will be known after the upcoming visit of Iranian Foreign Minister Manouchehr Muttaqi to Riyadh.

Reprinted with permission of VOA

Editor’s Note:

The turn around of the world economy from global recession was marked in September by the Organization of Economic Cooperation and Development (OECD) which said there were “clear signs of recovery” in all seven of the leading Western economies as well as in each of the “BRIC” (Brazil, Russia, India and China) countries. Leaders at the Group of 20 Summit in Pittsburgh in late September signaled the transition from crisis to recovery has been made but warned that a sense of normalcy should not lead to complacency and that repairs to the global economy remain incomplete.

In its September Monthly Bulletin Jadwa Investment in Riyadh noted the Saudi economy was “on the brink of recovery” and expected a “sustainable recovery to take hold in the fourth quarter.” It also noted that “as the external environment began to improve local business confidence was set back by high-profile troubles at two local companies,” a reference to the problems at the Saad and Ahmed Hassan al-Gosaibi groups — a situation discussed in Jadwa’s July Monthly Bulletin.

Today we provide for your consideration the recent Jadwa bulletin which provides an update on the improving Saudi economic situation and the lingering effects of a high visibility deal to repair the problems with the “troubled local company.” SUSRIS thanks Jadwa Chief Economist Brad Bourland for sharing these important bulletins with our readers.

Jadwa Investment – Monthly Bulletin
October 2009
Paul Gamble

Debt deal boosts banks

An improving global economy, rising oil prices and stimulatory government policy provide a healthy backdrop for the Saudi economy, but the private sector has not fully benefitted from this owing to weak bank lending and a broader lack of confidence. Short-term economic prospects appear brighter as a deal between a troubled local company and its local commercial bank creditors appears to have provided a much needed boost to confidence. The TASI has responded favorably and rising share prices will have a positive effect on consumer and business sentiment. Furthermore, the agreement has removed a source of uncertainty from local banks and could encourage a revival in lending. However, the apparent exclusion of foreign creditors from the deal is a setback to restoring the willingness of foreign financial institutions to lend to the Saudi private sector.

Leading economies across the world have started growing in response to unprecedented government stimulus and growth in emerging markets is also picking up. This healthier economic outlook has helped to lift oil prices to over $80 per barrel. Within the Kingdom, government spending appears to have been very strong and interest rates remain extremely low. Despite these highly supportive conditions economic performance has been subdued this year, in part due to a lack of bank lending. Commercial bank credit to the private sector went up in only two of the eight months to August. While declines in lending for up to three consecutive months have been recorded before, the length of this weakness is exceptional.

It is clear that lending has been effected by two distinct factors. For the months following the intensification of the financial crisis in September 2008, banks were more concerned with shoring up their balance sheets and were far less inclined to lend, not only to private sector companies but also to other banks. This was reflected by the large spread between the interbank rate (the rate that banks lend to one another) and the reverse repo rate (the rate that SAMA pays commercial banks for deposits). This spread stabilized in February and all things being equal we would have expected lending to recover in the second quarter. However, it was then that problems at two local companies became public, which caused banks to adopt a very cautious attitude to lending to the private sector (see the July Monthly Bulletin).

Latest data show that bank lending to the private sector jumped in August. The 1.9 percent increase was the highest since September 2008. However, the bulk of this new lending was for an individual project (the Rabigh independent power project) so we do not think the gain suggests a more generalized improvement in lending.

While total outstanding lending to the private sector is up by only SR8 billion over the first eight months of this year, deposits have grown by SR53 billion (new government deposits account for SR43 billion of this total). As a result, the loan-to-deposit ratio has been around 80 in the past few months, compared with over 90 in September 2008. Banks currently have SR67 billion in non-statutory deposits at SAMA earning just 0.25 percent and have built up their net foreign assets by SR48 billion so far this year. With this liquidity available, the lack of recent lending reflects banks being unwilling rather than unable to lend.

We think that the recent debt deal is likely to make banks more inclined to lend. No details of the deal have been released publically. All that is known for certain is that around the same time as reports of the agreement emerged, stock exchange data reveal that the owner of the troubled company cut his stake in local bank Samba from 7.8 percent to below 5 percent (the level at which individual holding have to be disclosed). The same day, the Public Pension Agency raised its stake in Samba by 2.6 percentage points.

The deal had a positive impact on stock market perceptions of the health of the banking sector. Banking shares jumped by 7.9 percent the first day the market was open after rumors of the deal emerged (September 26) and the banking sector has outperformed the market by 3 percentage points from that date. The TASI as a whole has outperformed both global emerging and developed markets over the same period, after many months of underperformance (the TASI’s 9.5 percent gain compares to a rise of 3.4 percent for the US S&P 500 and 6.6 percent for the MSCI emerging markets index).

This positive sentiment has been reinforced by the generally encouraging results reported by the banks for the third quarter. Profits rose in comparison with the third quarter of last year for six of the nine banks that have reported despite a rise in provisions. Only Saudi Hollandi Bank and Sabb recorded double-digit declines in profits. With many consumers and private sector business heavily invested in the stock market and retail investors dominating activity, rising share prices should lift confidence and encourage greater spending and investment.

While we think that a modest turnaround in domestic bank lending may now occur, lending from foreign banks is likely to remain constrained. Foreign banks became more risk averse after the financial crisis and have generally cut back their positions throughout the region. Many were unsettled by the high-profile troubles at two local businesses and were apparently excluded from the debt deal. Foreign bank credit is essential as local banks do not have large enough balance sheets to finance the vast amount of projects planned and underway in the Kingdom. There is a clear differentiation in credit markets now, with some top tier names still having fairly easy access to lending. For example, Aramco and French oil company Total recently had more than 30 expressions of interest from banks for the financing of a $12.8 billion refinery.

In brief: Economy

Food prices jumped in August in line with their usual trend in the first month of Ramadan. Food prices were up by 1 percent in August compared with an annual average monthly fall of 0.4 percent in the previous seven months of the year. Over the past eight years food prices have risen more than five times faster in the first month of Ramadan than the average rise for the other months of the year. In year-on-year terms food price inflation remaind relatively subdued, also at 1 percent. Overall inflation hit a two-year low of 4.1 percent in August before picking up to 4.4 percent in September, the month that the bulk of Ramadan occurred during.

Point of sales transactions (the closest approximation to retail sales available and an important guide to the health of consumers) showed encouraging growth in August. After two successive months of decline in year-on-year terms, point of sales transaction rose by 2.2 percent in August compared to August 2008. While this is very low when compared with the first three quarters of 2008 (when year-on-year growth averaged 34 percent), we think future months will see further gains in line with rising share prices and a gradual improvement in confidence.

Import volumes through the Kingdom’s ports were down by 14.8 percent over the first eight months of the year compared with the same period of last year. Import volumes are an important indicator of economic activity in the Kingdom, as raw materials, machinery, technology and consumer goods are all mostly imported. Part of the drop in import volumes is because stocks built up during the second half of last year are being drawn down (for example, imports of construction materials are 28 percent lower). Nonetheless, the decline reaffirms our view that economic growth will be much lower than last year.

The volume of non-oil exports through the Kingdom’s ports was 2.6 percent lower over the first eight months of the year than in the first eight months of 2008. Lower exports of refined products and “other products” account for the decline. In riyal terms, non-oil exports were down by 22 percent over the first seven months of the year compared to the January to July 2008 total. The difference between the two measures is the result of lower commodity prices.

Oil market watch: Oil prices hit new high for the year

Oil prices have hit new highs for the year owing to improvements in the global economy and a weakening dollar. WTI touched $81 per barrel on October 21, its highest level for almost exactly a year and 13 percent up on the end-September figure. Oil prices are now over 75 percent above their level at the start of the year. If they remain unchanged for the reminder of the year it would be their second largest annual gain since the 1970s (only 1999 was higher).

In part, the strengthening of the oil price reflects an upturn in the global economy. Growth has resumed and emerging markets that account for the main source of oil demand growth (notably China) are performing particularly well. The International Energy Agency has raised its projection for global oil demand for 2009 over the past few months, from a low of 83.3 million barrels per day in May to 84.6 million barrels per day in October.

Opec producers were clear that the health of the global economy would determine their near-term policy direction in the communiqué that accompanied their decision to hold production quotas unchanged at their mid-September summit in Vienna. Opec is happy with oil prices at their current level though it acknowledged that setbacks to the economic recovery could lead to a sharp fall given the role that financial investors (who can quickly withdraw their money) play in determining prices.

It is notable that Opec did not call for greater discipline from its members in adhering to existing production quotas, as it has done after all of its other meetings this year. Production had been edging up across Opec without seeming to affect prices, but it fell in September for the first time in four months according to independent estimates, due to lower output from Iran. Oil production has been rising modestly in Saudi Arabia. It was unofficially estimated at 8.2 million barrels per day last month, up from 8 million barrels per day in April.

While global economic conditions have improved, there are still large inventories and the rise in prices does not appear to reflect the fundamentals. Rather, investment demand seems to be playing an important role in pushing up oil prices. Oil prices (and those of several other commodities) are benefitting from a renewed weakening of the dollar. A strong inverse relationship has developed in recent years between oil prices and the dollar, with investors buying oil (a dollar-denominated asset) to offset weakness in the value of the dollar. Although this relationship broke down during the extreme turbulence of late last year and early this year, it has reasserted itself in the last few quarters.

Movements in oil prices are also currently relatively strongly correlated with stock markets, other commodities and indicators of financial conditions, even though historically there has been no relationship. These relationships reflect continued uncertainty among investors in an environment of high liquidity and very low interest rates and some analysts have raised concerns about the potential for new asset price bubbles. WTI is on target to average near $60 per barrel this year, the annual average was last at this level in 2005, when the global economy grew by 4.5 percent.

In brief: Oil market

Crude oil stocks have declined in recent months, but remain at high levels. Data from the US put oil stocks in mid-October at 10 percent below the 19-year high they reached in May. The decline is in line with the historical pattern and reflects greater consumption during the US driving season. Nonetheless, stocks are 8.5 percent higher than their five year average for mid-October. Stocks for the whole of the OECD fell to 60.7 days of future demand at the end of August from 61.4 days one month earlier and their recent peak of 61.8 days earlier this year. They are 3.7 days (6.4 percent) higher than in August 2008.

Unlike crude, stocks of oil distillate, which is used in heating and for machinery, have continued to rise in the US. Distillate stocks are up by 25 percent so far this year and are 40 percent higher than they were in mid-October of last year owing to the weakness of industrial production in the US. There has been a modest increase in distillate demand in the past few months in line with a rebound in industrial output, but the high inventories for both distillate and crude illustrate the fragility of oil market fundamentals.

Price differentials between heavy and light crudes produced by Saudi Arabia remain around their long-term lows. This is because Saudi Arabia and other Opec producers have concentrated their production cutbacks on heavy crude, which is generally less sought after than light crude as it is more expensive to refine. However, more refineries have been configured to handle heavy crude in recent years, so lower supply has caused prices to hold up relative to other blends of crude. The chart to left shows the difference between the discount or premium over WTI that Saudi Aramco charges to clients in North America for Arab Light and Arab Heavy; the lower the value on the graph, the smaller the differential.

New data published by the US Commodity Futures Trading Commission (CFTC) gives a more detailed picture of who holds oil derivatives, which could eventually determine the influence that investors have on oil prices. Rather than a simple breakdown of commercial and non-commercial holders of futures and options contracts, the new disaggregation features swap dealers and money managers (the latter category includes hedge funds). Data for October 13 shows that producers and users were net short on oil meaning that they were anticipating price falls, while all other holders were net long. It also shows that producers and users hold 37 percent of total contracts. CFTC plans to release back data at a similar level of detail, which should give a clearer indication of positions during the exceptionally sharp rise and then fall of oil prices in recent years.

Stock market watch: TASI rally could have further to go

Improving confidence and healthy company results have lifted the TASI. The market is up by 15.1 percent since the end of August after four months of moving sideways. Over this period it missed out on a sustained rally in global emerging and developed markets and it now looks reasonably attractively valued on a global basis. We therefore think that the TASI has the potential to narrow the performance gap with other markets over the remainder of the year, though we are cautious on the scale of the possible rise given that many emerging markets appear overvalued.

The revival in the TASI began in the final few weeks of Ramadan as investors responded to rapidly rising stock markets elsewhere in the world, amid signs that the global economic outlook was improving, and higher oil prices. As we note elsewhere in this report, the debt deal between a troubled local company and its local bank creditors helped bolster the market immediately after Eid. Now, generally positive third quarter results for listed companies (profits at Sabic came in well ahead of consensus estimates and profitability improved at most of the banks) are lifting the TASI.

Despite the recent rise, the TASI has underperformed other stock markets by a significant margin. Since the middle of May, when the high-profile news of troubles at two local businesses began to emerge, the TASI has climbed by only 11 percent, compared to a gain of 22.3 percent for the US S&P500 and 36.7 percent for the MSCI emerging markets index. This divergence is particularly notable given the close correlation in moves between these markets over the previous nine months.

On a valuation basis the TASI now looks relatively attractive against these markets. It is currently trading on a price-to-earnings ratio of 17.5, on a par with the S&P 500. Given the strong potential earnings prospects for Saudi companies, we think that a better comparison is with fast growing Asian economies. China, India, Indonesia Malaysia all currently trade on higher P/Es than the TASI, which is broadly in line with the emerging market average. It is still the most expensive market in the GCC, followed by Kuwait (with a P/E of 16.2) and Dubai (14.3), but this is in line with long-term trends given the home bias of the large local investor base. Furthermore some regional markets have also been held back by uncertainties in the financial sector owing to exposures to troubled businesses.

The recent gains have taken the TASI above our end-year fair value projection of 6,200. The TASI tends to overshoot fair value and we are not concerned about the sustainability of the recent rise. Indeed, the ongoing improvement in sentiment can lift the market further over the remainder of the year. The greatest risk to the rally appears to come from a correction in global stock markets. Emerging markets have experienced large investment inflows owing to the ability of many to better withstand the recession than developed countries. The MSCI emerging markets index is more than double its low of March this year. However, the forward P/E for emerging markets is well above its five year average, a crude indication that they may be overvalued, especially as the earnings environment is still not that attractive.

Source: Jadwa Investment

For comments and queries please contact the author:

Paul Gamble
Head of Research
pgamble@jadwa.com

or:

Brad Bourland
Chief Economist
jadwaresearch@jadwa.com
Phone +966 1 279-1111
Fax +966 1 279-1571
P.O. Box 60677, Riyadh 11555
Kingdom of Saudi Arabia

http://www.jadwa.com

Editor’s Note:

Saudi Arabian military forces continued operations against rebels in the southwest border area calling for Houthi fighters to retreat “tens of kilometers” from the Saudi border. Rebel commander Abdul Malik al-Houthi said the fighters were not backed by Iran and called for a ceasefire with Saudi Arabia telling Al Jazeera TV the fighting was “not in the interest of the two countries.” Iran, which has been named by Yemen as being behind the Houthi rebellion, called for a “collective approach.. to restore security, peace and tranquility” in Yemen according to Agence France-Presse. On Tuesday Iranian Foreign Minister Mottaki told reporters, others in the region — without naming Saudi Arabia — “must seriously hold back from intervening in Yemen’s internal affairs,” adding that, “Those who pour oil on the fire must know that they will not be spared from the smoke that billows.”

Today we provide an update, courtesy of Arab News, reported by Muhammad Humaidan, on the situation along the border and in the region.

Border secure against incursions
Muhammad Humaidan | Arab News

KHUBA: Airstrikes against infiltrators will continue until they move away from the Kingdom’s southern border, Prince Khaled bin Sultan, assistant minister of defense and aviation for military affairs, was quoted by Saudi Press Agency (SPA) as saying on Tuesday.

“We are not going to stop the bombing until the infiltrators retreat tens of kilometers inside their border,” Prince Khaled said during a visit to the Saudi armed forces in the southern province of Jazan.

Prince Khaled said that all areas along the Yemeni border have been cleared of infiltrators. “There is no intruder now along the Saudi border and it will be a death zone for those who dare to enter there,” he said. “The Border Guards are now in full control and they are supported by armed forces.”

He said the infiltrators had not requested for any talks with the Kingdom. Asked whether there was any agreement with Yemen to deal with these armed groups, Prince Khaled replied in the affirmative. “There are agreements and political contacts between the two countries.”

Prince Khaled refuted allegations that Saudi forces had entered Yemeni territory. “We have no enmity toward our brotherly neighbor Yemen and its trustworthy people. So I tell you to shake every hand that is extended to you and cut every hand that attacks you,” he told Saudi soldiers. Prince Khaled also said the Kingdom had fully secured its border against incursions.

The minister cautioned against those who spread allegations that contradict the Kingdom’s foreign policy. “Saudi Arabia will not interfere in the internal conflicts of any Arab country and will not side with countries fighting each other, except for making peace between them.” Prince Khaled confirmed that four Saudi soldiers were still missing. He, however, denied press reports that one of the missing soldiers had returned.

He earlier visited a group of Saudi soldiers on the border. Addressing the forces, the minister said the government was confident of their capabilities. He highlighted their role in protecting the Kingdom’s borders from intruders. “The flag of truth and justice will fly high,” he added.

Prince Khaled said the Saudi leadership was proud of the soldiers’ good work in cleansing the Jabal Dukhan border post of the infiltrators and regaining full control of the region. He said the quick action of Saudi forces had neutralized the infiltrators. “The Saudi people appreciate your actions. You are making history and we honor you. You will get the support of God,” the prince said.

Saudi forces are also engaged in providing shelter to people who have been evacuated from Jabal Dukhan and nearby villages. Brig. Hamoud Al-Hassani, director of Civil Defense in Jazan, said shelter camps in Uhd Masaraha had been provided with relief supplies and necessary facilities such as air conditioners.

Meanwhile, a number of families living in the shelter camps said they had been provided with enough food, clothing and other relief supplies by the Saudi authorities.

Foreign Minister Prince Saud Al-Faisal thanked GCC countries for supporting Saudi Arabia following the incursion. Addressing a meeting of GCC foreign ministers in Doha on Tuesday, he said Saudi forces have completed their operation against the infiltrators, adding that the incident would not affect Saudi-Yemeni relations.

Omani State Minister for Foreign Affairs Yousuf bin Alawi Abdullah, current chairman of the GCC Ministerial Council, reaffirmed that the six-member group would stand by Saudi Arabia in its efforts to protect its borders. “We are confident that Saudi Arabia is capable of securing its borders.” Abdullah also pledged GCC’s support for the security of Yemen.

Arab League Secretary-General Amr Moussa condemned the border aggression and demanded a speedy end to the internal problems in Yemen.

Syria also denounced the attack by intruders and said the Kingdom had every right to defend its sovereignty, an SPA report said.

— With input from Muhammad Al-Majid

Source: Arab News

Editor’s Note:

Saudi Arabian military forces continued operations against rebels in the southwest border area calling for Houthi fighters to retreat “tens of kilometers” from the Saudi border. Rebel commander Abdul Malik al-Houthi said the fighters were not backed by Iran and called for a ceasefire with Saudi Arabia telling Al Jazeera TV the fighting was “not in the interest of the two countries.” Iran, which has been named by Yemen as being behind the Houthi rebellion, called for a “collective approach.. to restore security, peace and tranquility” in Yemen according to Agence France-Presse. On Tuesday Iranian Foreign Minister Mottaki told reporters, others in the region — without naming Saudi Arabia — “must seriously hold back from intervening in Yemen’s internal affairs,” adding that, “Those who pour oil on the fire must know that they will not be spared from the smoke that billows.”

Today we provide an update, courtesy of Arab News, reported by Muhammad Humaidan, on the situation along the border and in the region.

Border secure against incursions
Muhammad Humaidan | Arab News

KHUBA: Airstrikes against infiltrators will continue until they move away from the Kingdom’s southern border, Prince Khaled bin Sultan, assistant minister of defense and aviation for military affairs, was quoted by Saudi Press Agency (SPA) as saying on Tuesday.

“We are not going to stop the bombing until the infiltrators retreat tens of kilometers inside their border,” Prince Khaled said during a visit to the Saudi armed forces in the southern province of Jazan.

Prince Khaled said that all areas along the Yemeni border have been cleared of infiltrators. “There is no intruder now along the Saudi border and it will be a death zone for those who dare to enter there,” he said. “The Border Guards are now in full control and they are supported by armed forces.”

He said the infiltrators had not requested for any talks with the Kingdom. Asked whether there was any agreement with Yemen to deal with these armed groups, Prince Khaled replied in the affirmative. “There are agreements and political contacts between the two countries.”

Prince Khaled refuted allegations that Saudi forces had entered Yemeni territory. “We have no enmity toward our brotherly neighbor Yemen and its trustworthy people. So I tell you to shake every hand that is extended to you and cut every hand that attacks you,” he told Saudi soldiers. Prince Khaled also said the Kingdom had fully secured its border against incursions.

The minister cautioned against those who spread allegations that contradict the Kingdom’s foreign policy. “Saudi Arabia will not interfere in the internal conflicts of any Arab country and will not side with countries fighting each other, except for making peace between them.” Prince Khaled confirmed that four Saudi soldiers were still missing. He, however, denied press reports that one of the missing soldiers had returned.

He earlier visited a group of Saudi soldiers on the border. Addressing the forces, the minister said the government was confident of their capabilities. He highlighted their role in protecting the Kingdom’s borders from intruders. “The flag of truth and justice will fly high,” he added.

Prince Khaled said the Saudi leadership was proud of the soldiers’ good work in cleansing the Jabal Dukhan border post of the infiltrators and regaining full control of the region. He said the quick action of Saudi forces had neutralized the infiltrators. “The Saudi people appreciate your actions. You are making history and we honor you. You will get the support of God,” the prince said.

Saudi forces are also engaged in providing shelter to people who have been evacuated from Jabal Dukhan and nearby villages. Brig. Hamoud Al-Hassani, director of Civil Defense in Jazan, said shelter camps in Uhd Masaraha had been provided with relief supplies and necessary facilities such as air conditioners.

Meanwhile, a number of families living in the shelter camps said they had been provided with enough food, clothing and other relief supplies by the Saudi authorities.

Foreign Minister Prince Saud Al-Faisal thanked GCC countries for supporting Saudi Arabia following the incursion. Addressing a meeting of GCC foreign ministers in Doha on Tuesday, he said Saudi forces have completed their operation against the infiltrators, adding that the incident would not affect Saudi-Yemeni relations.

Omani State Minister for Foreign Affairs Yousuf bin Alawi Abdullah, current chairman of the GCC Ministerial Council, reaffirmed that the six-member group would stand by Saudi Arabia in its efforts to protect its borders. “We are confident that Saudi Arabia is capable of securing its borders.” Abdullah also pledged GCC’s support for the security of Yemen.

Arab League Secretary-General Amr Moussa condemned the border aggression and demanded a speedy end to the internal problems in Yemen.

Syria also denounced the attack by intruders and said the Kingdom had every right to defend its sovereignty, an SPA report said.

— With input from Muhammad Al-Majid

Source: Arab News

Editor’s Note:

Saudi Arabia launched strikes last week against rebels in the border area with Yemen in the southwest part of the Kingdom in response to an incident where armed Houthi rebels fired on Saudi border guards. The rebels have been fighting sporadic battles against Yemeni government troops over the past five years, but the conflict has intensified since August. Saudi Arabia’s engagement of the Houthi rebels is complicated by charges by the Yemeni government that the rebels are backed by Iran, a warning by Iran’s foreign minister against foreign intervention in the rebel battle, and underlying tensions between Tehran and Riyadh.

The counterattacks have continued into this week as reported by VOA in an article provided here for your consideration. Additional reporting is provided in video news items through the links provided below.

Saudi Arabia Says Troops Take Back Land From Yemeni Rebels
VOA

Saudi Arabia’s Defense Ministry says its forces have regained control of a mountain on the border with Yemen.

Assistant Defense Minister Prince Khaled bin Sultan told the Saudi Press Agency Sunday that the situation is calm at Mount Dokhan, after Saudi forces bombarded Shi’ite rebels based in Yemen for a fifth consecutive day.

He said three Saudi soldiers were killed and four others are missing after days of fighting on the country’s southeastern border.

The Saudi government says it is attacking rebels who have infiltrated its territory, but residents along the border say the military action has reached into northern Yemen.

Meanwhile, Yemen has reported that one of its fighter planes went down in a rebel stronghold in the country’s north. The government says the plane crashed due to “mechanical problems,” while rebels say they shot down the aircraft.

Yemeni President Ali Abdullah Saleh made no mention of Saudi Arabia when he addressed the fighting Saturday.

In a speech inaugurating Yemen’s first gas plant, he called the Zaidi rebels “traitors” and said the battle against them would not stop until they are wiped out.

The Shi’ite Zaidi rebels have been in conflict with Yemen’s government for five years, but the fighting has flared significantly in the past few months. The rebels, also known as al-Houthis, say the central government is not taking care of their communities’ needs.

Reprinted with permission of VOA

Related Videos:

• Saudi concern over Yemen’s Houthis – Al Jazeera via YouTube.com – Houthi fighters in Yemen say they’ve taken control of more territory on the border, a claim that has worried neighbouring Saudi Arabia. The claim comes after the Saudis said they had regained control of another area seized by the rebels last week. Al Jazeera’s Hashem Ahelbarra reports from Sanaa, the Yemeni capital.
• Leading cleric blames Iran for Yemen conflict – 05 Oct 09 – Al Jazeera via Youtube.com – Yemen’s most influencial cleric has accused Iran of fuelling the country’s bitter civil conflict. In an exclusive interview with Al Jazeera, he claims Iran is backing a rebel uprising in the country’s north. Shia fighters and the army are engaged in fierce fighting that’s dividing popular opinion in the country. From the Yemeni capital Sana’a, Al Jazeera’s Hashem Ahelbarra reports.
• Yemen rebels accuse government of breaking truce – 22 Sep 09 – Al Jazeera via Youtube.com – Rebel Houthi fighters in northern Yemen have accused the government of breaking the latest ceasefire, saying there has been no sign of any let up in violence around the city of Saada. But Yemen’s president, Ali Abdullah Saleh, said the rebels, who are mostly from the Shia Zaydi sect, had ignored the ceasefire offer and accused them of killing civilians and using “human shields”. This comes after the government claimed it had killed more than 140 fighters who had attacked its regional headquarters. Fighting between the rebels and government forces have flared since the army launched its latest operation in August in Saada and Amran provinces. The government says the rebels want to restore a Shia state that fell in the 1960s and accuse Shia power Iran of maintaining contacts with them. The rebels say they want autonomy and accuse Saleh, who is himself a Shia Zaydi, of despotism and corruption in a drive to stay in power, as well as introducing Sunni fundamentalism via his alliance with Saudi Arabia. Imran Khan reports.
• Yemen’s president says Iran supports Houthis – 9 Sept 09 – Al Jazeera via Youtube.com – Yemeni government forces have been fighting Houthi loyalists in the country’s north for weeks, vowing to crush them with an “iron fist”. Ali Abdallah Saleh, the president, now speaks exclusively to Al Jazeera, saying the recent lull in fighting was not a truce and blaming Iran for supporting the rebels. He says the military operations were halted only to allow aid agencies into the area where civilians are caught between the two sides. Tarek Bazley reports on the conflict which some fear could develop into a regional war.
• North Yemen locals weary after years of war – 07 Sept 09 – Despite the latest attempts at a ceasefire, there is still sporadic fighting in northern Yemen. Failure to stop the five year long war will increase fears of further destabilisation across the region. The Yemeni government claim Shia Muslim Huthi rebels are being backed by Iran. Neighbouring Saudi Arabia’s worried that Yemen is the main recruiting ground for Al Qaeda. Al Jazeera’s Hashem Ahelbarra has the latest from the Yemeni capital Sana’aa.
• Inside Story – Doubts over Yemen’s future – Sep 7 2009 – The five-year long fighting between government forces and Houthi fighters in the north of Yemen has cast a shadow on the future of this Arab country. Houthi fighters, who are Zaidi Shia Muslims, are seeking independence from a government which they say is corrupt and too close to Saudi Arabia. The latest round of fighting started in Yemen’s north last month and has continued primarily in Saada province. It is estimated that more than 100,000 people have been displaced in the fighting in Saada and UN aid agencies are warning that Yemen is on the brink of a humanitarian crisis. Just four hours after a truce was declared on Saturday, fighting had resumed with both sides claiming the other had broken the ceasefire. Is Yemen heading for another civil war? And how are regional powers influencing events in a country considered a breeding ground for extremist groups? Inside Story presenter Sohail Rahman is joined by Hakim Almasmari, the editor-in-chief of the Yemen Post, Tahar Qassim, the chairman of the Liverpool Arabic Centre, and Steven Park, the founder of Sema Group, a global security company.
• Yemeni rebels and government cease fire – 5 Sept 09 – Al Jazeera via Youtube.com – The Yemeni government has said that it has halted military operations against the Houthi fighters to allow aid to reach civilians trapped in the conflict zone. Up to 150,000 people are said to have been forced from their homes by intense fighting and are in need of urgent assistance. It was unsure, however, whether the truce would hold as the conflict between the Houthi group and the government has been going on for five years, and mistrust between both sides is deep. Al Jazeera’s Hashem Ahelbarra reports from the capital, Sanaa.
• Saudi Air Force Attack Ground Targets – video posted to YouTube.com

Editor’s Note:

Saudi Arabia launched strikes last week against rebels in the border area with Yemen in the southwest part of the Kingdom in response to an incident where armed Houthi rebels fired on Saudi border guards. The rebels have been fighting sporadic battles against Yemeni government troops over the past five years, but the conflict has intensified since August. Saudi Arabia’s engagement of the Houthi rebels is complicated by charges by the Yemeni government that the rebels are backed by Iran, a warning by Iran’s foreign minister against foreign intervention in the rebel battle, and underlying tensions between Tehran and Riyadh.

The counterattacks have continued into this week as reported by VOA in an article provided here for your consideration. Additional reporting is provided in video news items through the links provided below.

Saudi Arabia Says Troops Take Back Land From Yemeni Rebels
VOA

Saudi Arabia’s Defense Ministry says its forces have regained control of a mountain on the border with Yemen.

Assistant Defense Minister Prince Khaled bin Sultan told the Saudi Press Agency Sunday that the situation is calm at Mount Dokhan, after Saudi forces bombarded Shi’ite rebels based in Yemen for a fifth consecutive day.

He said three Saudi soldiers were killed and four others are missing after days of fighting on the country’s southeastern border.

The Saudi government says it is attacking rebels who have infiltrated its territory, but residents along the border say the military action has reached into northern Yemen.

Meanwhile, Yemen has reported that one of its fighter planes went down in a rebel stronghold in the country’s north. The government says the plane crashed due to “mechanical problems,” while rebels say they shot down the aircraft.

Yemeni President Ali Abdullah Saleh made no mention of Saudi Arabia when he addressed the fighting Saturday.

In a speech inaugurating Yemen’s first gas plant, he called the Zaidi rebels “traitors” and said the battle against them would not stop until they are wiped out.

The Shi’ite Zaidi rebels have been in conflict with Yemen’s government for five years, but the fighting has flared significantly in the past few months. The rebels, also known as al-Houthis, say the central government is not taking care of their communities’ needs.

Reprinted with permission of VOA

Editor’s Note:

The Group of Twenty key industrialized and developing countries completed a two-day Summit in late September agreeing to launch a new framework for strong, sustainable and balanced growth by this month. This past weekend G-20 finance ministers and central bankers agreed to keep stimulus measures in place until economic recovery was assured.

In the Summit communique the leaders, from the European Union and 19 countries that contain most of the world’s population and economic power, claimed success in pulling the global economy back from the “the edge of depression” faced when they last met in April. The Saudi Arabian delegation was led by Foreign Minister Prince Saud Al-Faisal, and included Minister of Finance, Dr. Ibrahim Al-Assaf and the Governor of the Saudi Arabian Monetary Agency (SAMA), Dr. Muhammad Al-Jasser.

The Summit communiqué called for reform of the global economic architecture including designation of the G-20 as the “premier forum for international economic cooperation” and the establishment of a Financial Stability Board to coordinate and monitor progress in strengthening financial regulation. The International Monetary Fund quota system will be revised to reflect “dynamic emerging markets and developing countries” and recognize those countries that are currently under-represented. In the energy sector the communiqué called for the phasing out of fossil fuel subsidies and promoting energy market transparency and market stability as part of a wider effort to avoid market volatility.

To get insights into Saudi Arabia’s role in the G-20 and measures at the Summit that affect the Kingdom we called upon Professor Jean Francois Seznec, a Visiting Professor at Georgetown University. He has over 25 years experience in international finance and banking, including a decade in the Gulf. He regularly shares his expertise on Middle East affairs through numerous articles and television and radio appearances, and previous SUSRIS interviews.

Saudi Arabia’s Role in Global Economic Leadership: The G20 Summit
A Conversation with Jean Francois Seznec

SUSRIS: The closing “Leaders’ Statement” at the Pittsburgh Summit of the Group of Twenty declared the G20 to be the “premier forum” for international cooperation. What does it say that Saudi Arabia — the only Middle East country, the only Arab country and the only Opec member — is among the 19 countries and the EU in the Group?

Seznec: It is recognition of Saudi Arabia on the world stage and recognition of the Kingdom’s importance as a major, stable, credible economic power. Such is not the case with other Arab countries. The fact that Egypt is not included is very telling. Although it is a very large country with a large number of well educated people it has not been chosen, which speaks to the lack of vision of the government. Saudi Arabia, however, is moving in a direction that appeals to the others in the Group, and the Kingdom’s view of the world is consistent with other G-20 members.

SUSRIS: The primary focus of the Pittsburgh G-20 Summit was to calibrate the recovery efforts the Group agreed to at the Washington and London Summits over the last 12 months. There was also agreement on issues of particular interest to Riyadh, such as the measure to “phase out and rationalize the medium term inefficient fossil fuel subsidies.” Energy and Finance Ministers were asked to produce their strategies by the next G-20 meeting. Some of the language gets a bit arcane but what do you see as the impact on Saudi energy policies from measures such as this?

Seznec: The word “arcane” is probably an understatement. There are two things here to consider. On the one hand there are probably a number of experts in Saudi Arabia who worry if there was a major effort to cut subsidies, to cut emissions in the world as well, that it would mean less crude oil consumption, with a negative impact on the Kingdom.

On the other hand some Saudis are quite in favor of these prospects given the direction the Saudi leadership wants to take the economy. They might favor worldwide subsidy and emission cuts. Saudi Arabia wants to move away from being seen as the “Central Bank” of oil –they tell everybody that they are not the “Central Bank” of oil.

They are increasing production capacity a little but in practice they are not exporting as much oil as all that. Don’t get me wrong; they are exporting a lot of oil. They are still the leading exporter, but they are using a lot of their oil for their own economic development. It is going into value-added production.

In the long run some in Saudi Arabia would like to transfer the mantle of being the largest exporter of crude oil to Iraq and Iran. That may be counterintuitive but they each have the ability to increase their production to around six million barrels per day and could together replace Saudi Arabia as the major crude producers. Such a shift would be part of Saudi Arabia’s drive to be a global leader in petrochemical production. They would be under less pressure from the world to produce more crude oil at any cost. In the long term it is much more important for their population and their economy not to be dependent on one commodity and not to be dependent on the vagaries of the world energy market.

In twenty years the world’s changing energy mix for transportation and so forth could mean a major decline in the use of crude oil. That would hurt those producers largely dependent on oil exports – Iraq and Iran – and not so much for Saudi Arabia. That is if they have moved, as they are doing now, to value-added production. It would hurt Iraq and Iran and would relegate them to third world country status. Meanwhile Saudi Arabia would become the Germany of the region.

SUSRIS: How would you assess the Kingdom’s progress in this area – the drive to diversify the economy?

Seznec: The Saudis have made great strides in diversifying its economy and they have been very successful. Consider some examples. The Petro Rabigh joint venture with Sumitomo is underway. They are moving forward with the Dow Chemical venture, the largest chemical project in the world, worth some $20 billion. There is the Maaden Ras Al Zawr diammonium phosphate, or DAP, fertilizer project north of Jubail in the Eastern Province. There’s the development of Sabic worldwide. These are among many examples of successes the Saudis are having in turning to value-added production.

The sale of chemicals from Saudi Arabia to the world today is probably in the neighborhood of $45 billion. That’s a lot of money. There were many years Saudi Arabia did not make that much money selling crude oil. That fact is often forgotten since the price of oil jumped to over $50 a barrel in recent years and the Saudis started making the kind of money they are making now.

So by 2015 as Petro Rabigh comes fully on stream, by 2018 as Dow Chemical comes fully on stream and all the new projects of Sabic are on stream you’ll see Saudi Arabia making in the area of $100 billion in the sale of chemicals. At that point they will not want to spend too much effort in increasing production of oil for export.

The Saudis will want to use what they have for themselves and let Iraq and Iran be the third world nations that are going to be dependent on oil going up and down.

SUSRIS: Let’s talk about the business component of the U.S.-Saudi relationship. We recently spoke with National US-Arab Chamber President David Hamod about American business participation in the Saudi “boom.” He said, “Saudi Arabia is still one of the best-kept secrets of the Middle East. Some American companies have lost ground to the competition, particularly from China, which has been expanding aggressively in this part of the world. But we see new-to-market U.S. companies coming to the Kingdom every day, and there are still many untapped opportunities for U.S. firms here.” What is your assessment of the health of the American business-to-business relationship in the Kingdom?

Seznec: It’s not as good as it should be. Indeed the prospects for business in Saudi Arabia are great but the opportunities are not as widely known as they should be. Nobody talks much about it.

The Kingdom is the most important market in the region. It’s one of the easiest to access because of the new WTO regulations; you don’t even need an agent anymore in Saudi Arabia. It’s now very easy to get visas, unlike the old days. U.S. companies are not taking sufficient advantage of the opportunities, and that’s because we tend to be quite insular here. We’re not as export oriented as the Europeans or the Chinese. However because of the financial crisis we’re going through that’s changing.

A lot of the medium sized companies have no choice but to look around and they see Saudi Arabia. It is frustrating that there’s not more business being done as there’s a beautiful market there for the U.S. In spite of the political issues and any tensions there might be over government policies the Saudis like to work with American companies. They really do. It’s more natural. The language is a lot easier. A lot of Saudis have been educated in the States. There’s a lot in common and business works very well there.

Hopefully we will see more business development especially of the middle-sized companies if they can make the effort. But it is expensive. That’s a problem for the middle-sized companies.

SUSRIS: What other observations do you have about the Pittsburgh G-20 Summit?

Seznec: I found the Summit “Leader’s Statement” very interesting. A lot of it isn’t the most exciting reading but if you drill down to page 13 of that statement there is a section called “Energy Security and Climate Change.” I could read the fingerprints of the Saudis in that section. It is a commitment by the G-20 to ensure market transparency and market stability in the energy business and I think that’s very important.

The Saudis feel strongly that a lot of the instability in the oil market has been due to speculation, especially speculation in the hedge funds and the large banks in the United States. Of course a lot of these people have gone bust – a lot of the hedge funds have had to shut down so that has cut some of the speculation. But I think the Saudis really wanted to have that language in there.

Speculation, it doesn’t say it in those words, but speculation is one of the causes of instability in the oil markets. The language in the statement says the G-20 should make all efforts to limit this by publishing complete, accurate and timely data on oil production and the Saudis already have something called the JODI — The Joint Oil Data Initiative. It is based in Riyadh, and has been there for a number of years. It hasn’t really done much so far, but they do publish a very good database, which is very useful. It’s promoted by an organization called the International Energy Forum, which was previously known as the Dialogue between Producers and Consumers. The Saudis have been concerned that it has not received sufficient attention. But of course when the prices are high the producers don’t really care and when the prices are low the Europeans don’t want to talk about it.

I’m sure the Saudis were very happy to see that the Joint Oil Data Initiative was in the Summit statement, that it is now part of the G-20 and is viewed by everyone as such.

SUSRIS: Thank you again for your time in addressing the G-20 Summit and the business aspects of the relationship between the U.S. and Saudi Arabia.

Seznec: You are very welcome.

About Jean-François Seznec

Dr. Seznec is a Visiting Associate Professor at Georgetown University. His research centers on the influence of the Arab-Persian Gulf political and social variables on the financial and oil markets in the region. He is focusing on the industrialization of the Gulf and in particular the growth of the petrochemical industry. He holds a MA from Columbia University [1973], a MA and his Ph.D. from Yale University [1994]. He has published and lectured extensively and is interviewed regularly on national TV, radio and newspapers, as well as by the foreign media.

Dr. Seznec has 25 years experience in international banking and finance of which ten years were spent in the Middle East, including six years in Bahrain as a banker. Dr. Seznec is a founding member and Managing Partner of the Lafayette Group LLC, a US based private investment company. He uses his knowledge of business in the Middle East and the United States to further his analysis of the Arab-Persian Gulf.

Editor’s Note:

Saudi Arabia launched air strikes against rebel positions in northern Yemen following attacks that killed two Saudi border security guards on Tuesday according to reports. Rebels claimed to have taken control of Jabal al-Dukhan in the mountainous region inside Saudi Arabia.

A rebel spokesman, quoted by Al Jazeera today, described the Saudi counterattack as strikes on six locations inside Yemen. Shi’ite rebels, known as Houthis after the family of their leader, have accused Saudi Arabia of backing Yemen against the insurgents, according to Reuters.

Last month Prince Naif, Saudi Arabia’s Interior Minister and Second Deputy Prime Minister, told reporters the Kingdom was deeply concerned with developments in Yemen. Arab News quoted him as saying, “We are cooperating with our Yemeni brothers at maximum levels to ensure Yemen’s security.”

This special report provides an overview of this week’s rebel attacks provided by Muhammad Humaidan writing for Arab News as well as links to related press reports on the fighting and its background.

Yemeni rebels attack border post in Jazan
Muhammad Humaidan / Arab News

JAZAN: A Saudi border guard was killed [Reuters reported on November 5 that the number was two killed] and 11 others were injured when armed infiltrators from across the Yemeni border fired on Saudi border guards. The incident took place at Dukhan Mountain close to the Khald border post in Al-Khoba sector of Jazan province on Tuesday, a Saudi official source said on Wednesday.

“The Kingdom affirms that it will preserve the homeland’s security, protect its borders and deter infiltrators and others from any side. The infiltrators used various weapons to fire at border guards,” the official source added.

After leading the funeral prayers for Turki Al-Qahtani, the border guard killed in the incident, Jazan Gov. Prince Muhammad bin Nasser said, “Al-Qahtani has been martyred fighting for his country and religion. A rebel group (in Yemen) has stretched its evil hand into Saudi territory. We wish the Yemeni government and its citizens lasting security and stability on its northern and southern borders. You all know that the Kingdom has been striving to preserve the stability of Yemen.”

The prince continued, “The Kingdom under no circumstances can allow anyone to cross the red line and interfere with the country’s security and stability.”

The governor also stated that the situation in Al-Khoba was under control and that the infiltrators would be dealt with firmly. “They should know that they would be punished for the hostile act they committed.”

The governor also offered condolences to the family of Al-Qahtani on behalf of Custodian of the Two Holy Mosques King Abdullah, Crown Prince Sultan, Second Deputy Premier and Interior Minister Prince Naif and all the citizens of Saudi Arabia.

Evacuated villagers in the region told Arab News that the infiltrators were Al-Houthi rebels fighting against the Yemeni government. All villages south of Al-Khoba, including Al-Mujaa, Al-Rouqi, Al-Maqbas, Qamadah, Al-Arrah, Al-Batoul, Khamran, Al-Muarasah and Al-Ghawiyah have been evacuated.

“Tuesday was a black day for us because we were attacked without provocation by Al-Houthi rebels. All members of my family have been evacuated. But we will not allow anyone to harm our country. After sending our women and children to safe locations, our men will return to their villages to defend them,” Isa Al-Hazazi of Al-Rouqi village told Arab News. Sheikh Muflih Al-Kaoubi, the chief of Al-Kaoub tribe, said “We will die for every inch of our land. Our villages are the theater of operations. We will stay with the soldiers and will not flee leaving the place for rebels.”

The injured Border Guards include Ali Sharahli, Musa Al-Qanaei, Sultan Hamzi, Musaed Hakami, Sami Alwan, Ali Al-Qauzi, Ayman Al-Abdali, Abdullah Al-Ashmani, Musa Ali and Nabil Rayani.

Residents of villages living in the area told Arab News Saudi security and military forces had cleaned up the area by flushing out the remaining infiltrators. They also reported sounds of intensive airstrikes from the border areas. Some sources said Jazan airport was closed for passenger traffic with incoming flights being diverted to nearby airports.

— With input from Muhammad Al-Majid

Source: Arab News

Editor’s Note:

Saudi Arabia launched air strikes against rebel positions in northern Yemen following attacks that killed two Saudi border security guards on Tuesday according to reports. Rebels claimed to have taken control of Jabal al-Dukhan in the mountainous region inside Saudi Arabia.

A rebel spokesman, quoted by Al Jazeera today, described the Saudi counterattack as strikes on six locations inside Yemen. Shi’ite rebels, known as Houthis after the family of their leader, have accused Saudi Arabia of backing Yemen against the insurgents, according to Reuters.

Last month Prince Naif, Saudi Arabia’s Interior Minister and Second Deputy Prime Minister, told reporters the Kingdom was deeply concerned with developments in Yemen. Arab News quoted him as saying, “We are cooperating with our Yemeni brothers at maximum levels to ensure Yemen’s security.”

This special report provides an overview of this week’s rebel attacks provided by Muhammad Humaidan writing for Arab News as well as links to related press reports on the fighting and its background.

Yemeni rebels attack border post in Jazan
Muhammad Humaidan / Arab News

JAZAN: A Saudi border guard was killed [Reuters reported on November 5 that the number was two killed] and 11 others were injured when armed infiltrators from across the Yemeni border fired on Saudi border guards. The incident took place at Dukhan Mountain close to the Khald border post in Al-Khoba sector of Jazan province on Tuesday, a Saudi official source said on Wednesday.

“The Kingdom affirms that it will preserve the homeland’s security, protect its borders and deter infiltrators and others from any side. The infiltrators used various weapons to fire at border guards,” the official source added.

After leading the funeral prayers for Turki Al-Qahtani, the border guard killed in the incident, Jazan Gov. Prince Muhammad bin Nasser said, “Al-Qahtani has been martyred fighting for his country and religion. A rebel group (in Yemen) has stretched its evil hand into Saudi territory. We wish the Yemeni government and its citizens lasting security and stability on its northern and southern borders. You all know that the Kingdom has been striving to preserve the stability of Yemen.”

The prince continued, “The Kingdom under no circumstances can allow anyone to cross the red line and interfere with the country’s security and stability.”

The governor also stated that the situation in Al-Khoba was under control and that the infiltrators would be dealt with firmly. “They should know that they would be punished for the hostile act they committed.”

The governor also offered condolences to the family of Al-Qahtani on behalf of Custodian of the Two Holy Mosques King Abdullah, Crown Prince Sultan, Second Deputy Premier and Interior Minister Prince Naif and all the citizens of Saudi Arabia.

Evacuated villagers in the region told Arab News that the infiltrators were Al-Houthi rebels fighting against the Yemeni government. All villages south of Al-Khoba, including Al-Mujaa, Al-Rouqi, Al-Maqbas, Qamadah, Al-Arrah, Al-Batoul, Khamran, Al-Muarasah and Al-Ghawiyah have been evacuated.

“Tuesday was a black day for us because we were attacked without provocation by Al-Houthi rebels. All members of my family have been evacuated. But we will not allow anyone to harm our country. After sending our women and children to safe locations, our men will return to their villages to defend them,” Isa Al-Hazazi of Al-Rouqi village told Arab News. Sheikh Muflih Al-Kaoubi, the chief of Al-Kaoub tribe, said “We will die for every inch of our land. Our villages are the theater of operations. We will stay with the soldiers and will not flee leaving the place for rebels.”

The injured Border Guards include Ali Sharahli, Musa Al-Qanaei, Sultan Hamzi, Musaed Hakami, Sami Alwan, Ali Al-Qauzi, Ayman Al-Abdali, Abdullah Al-Ashmani, Musa Ali and Nabil Rayani.

Residents of villages living in the area told Arab News Saudi security and military forces had cleaned up the area by flushing out the remaining infiltrators. They also reported sounds of intensive airstrikes from the border areas. Some sources said Jazan airport was closed for passenger traffic with incoming flights being diverted to nearby airports.

— With input from Muhammad Al-Majid

Source: Arab News

Editor’s Note:

The 18th annual Arab-US Policymakers Conference (AUSPC) was held in Washington, D.C. on October 15-16, 2009. The conference addressed a host of issues under the theme, “Fresh Visions, Old Realities, New Possibilities: The Impact of Leadership Change on Arab-U.S. Relations.” Among the panels was the “Ambassador’s Roundtable” which featured remarks from U.S. Ambassador to Saudi Arabia James Smith, and five former American ambassadors to the Kingdom, as well as Saudi Ambassador to the United States Adel Al Jubeir. Today we are pleased to present a transcript of his remarks, provided by the National Council on U.S.-Arab Relations, for your consideration.

H.E. Adel A. Al Jubeir
Ambassador of the Kingdom of Saudi Arabia to the United States
18th Arab-U.S. Policymakers Conference
Washington, DC
October 15, 2009

Thank you, Peter. [Introduction by Dr. Peter Gubser]

I was thinking about how we could get through the program with the distinguished panel we have. We have three options: we can speak fast, we can say very little, or we can do both. So I want to start out by saying thank you to John Duke Anthony and the National Council for hosting this wonderful event. Thank you, Peter, for the kind introduction, and thank you also to my colleagues the former U.S. ambassadors to Saudi Arabia. I am humbled to be speaking with such distinguished individuals at the podium with me.

I’ll try to make my remarks brief and I’ll try to speak not too quickly. The relationship between our two countries is a historic one. Last year we celebrated the 75th anniversary of formal ties between the Kingdom of Saudi Arabia and the United States. Our relationship began in the 1930s with the discovery of oil on a commercial basis. It evolved in the 1940′s with the first meeting between our two heads of state, the late King Abdulaziz and the late Franklin Delano Roosevelt aboard the USS Quincy at the Great Bitter Lake in Egypt. And the relationship took on a military dimension in the 1950s when the U.S. military sales program to Saudi Arabia was first established.

When we look at the history of our relationship, we see that with every passing decade the relationship grows broader, deeper, stronger, and it becomes more multi-faceted. If you allow me to skip to the present, when we look at our relationship today, we see exceptionally strong ties in counter-terrorism and terror financing. We have very strong commercial investment ties and strong political ties. We have institutional links between our two countries in a way that has not existed in the past.

Referring often to the power of accurate numbers, Ronald Reagan used to say “facts are stubborn things.” When we look at the amount of investment and trade between our two countries and peoples, and when we look at the volume of visitors to Saudi Arabia from the United States or visitors to the United States from Saudi Arabia, the numbers are at historic highs.

The number of Saudi students in the U.S. is in excess of 21,000 as we speak and growing. This is a testament to the strength of the relationship. It testifies also to the fact that it is these young men and women who will carry the relationship forward over the next three or four decades.

When you look at the interests that we have in the region — when you look at the challenges we face in Pakistan, Afghanistan, with Iran’s nuclear program, in Iraq and Lebanon, with the Israeli-Palestinian conflict, in Yemen, in the Horn of Africa, in Sudan; when you look at the challenges we face involving piracy and terrorism, the international financial crisis, energy situations and levels of trade and investment — I believe it is clear that the interests of our two countries to date, at this moment, are as aligned as they have never been before.

We speak to each other frankly, we consult with each other intensely, and we try to engage others in this dialogue in order to resolve problems. The Kingdom of Saudi Arabia has a history of trying to seek stability and security and peace in our region and in the world. It was King Abdullah’s peace initiative which became the Arab Peace Initiative in 2002 that set the stage for the resolution of the Arab-Israeli conflict. I believe that today there is a unanimous view among Arabs, Muslims, and millions of people from other countries the world over that the Arab Peace Initiative is the basis upon which the Israeli-Palestinian conflict will be resolved, God willing.

We appreciate and thank the Obama administration for its early and robust engagement in trying to resolve the Arab-Israeli conflict, and we look forward to working with it, helping to move it forward, and putting an end to this long-standing tragic conflict.

When we look at the issue of combating extremism, the Kingdom of Saudi Arabia has been in the forefront of countries trying to counter the mindset of extremism that seeks to hijack a noble faith and encourage people to use it to justify violence. Our religious scholars have taken very strong and public positions to counter this radicalism and it has had an impact. We believe we will continue to have an impact, God willing, in trying to eliminate this mindset from our midst.

The Custodian of the Two Holy Mosques launched an interfaith dialogue that involved different religions and cultures in order to use the universal values that are enshrined in all religions to promote understanding, co-existence, and peace because at the end of the day the universal values enshrined in all faiths are very similar. They have to do with compassion, with mercy, with peace. They have to do with co-existence, being honest, and taking care of the needy. The inter-faith dialogue is an attempt to try to use those universal values in order to build bridges between and among different people on our little planet rather than use religion in order to be divisive.

The King Abdullah University of Science and Technology, which is a new major research university, was recently inaugurated in Saudi Arabia – it represents an additional attempt to build bridges with the rest of the world. It is an institution whose students and faculty hail from almost sixty countries. It is an open research facility. It is connected to a large number of distinguished universities and research institutions around the world with which it shares research, professors, and students. This university is another way to connect with the rest of the world in line with the Kingdom’s vision of trying to establish and sustain international linkages that promote peace and stability and security.

To return to where I started, when we look back at the 75 years in which our two countries have had formal ties, I believe that the relationship today is very strong. I hope that the relationship, God willing, will continue to grow stronger for the benefit of both of our countries. And before I stop, I want to say that I hope I have not spoken too fast, or too long.

Thank you for this opportunity. I look forward to the discussions.

Source: NCUSAR.org

About Ambassador Adel A. Al Jubeir

Adel A. Al-Jubeir was appointed by the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz as Ambassador to the United States on January 29, 2007. Ambassador Al-Jubeir presented his credentials to President George W. Bush at the White House on February 27, 2007.

Mr. Al-Jubeir was born February 1, 1962 in Majma’ah (Riyadh Province), Saudi Arabia, and attended schools in the Kingdom, Germany, Yemen, Lebanon, and the U.S. He obtained a B.A. summa cum laude in political science and economics from the University of North Texas in 1982, and an M.A. in international relations from Georgetown University in 1984.

In 1987 Mr. Al-Jubeir was appointed into the Saudi Diplomatic Service and posted to the Royal Embassy of Saudi Arabia in Washington, DC, where he served as Special Assistant to the Ambassador. In 1990-91, he was part of the Saudi team that established the Joint Information Bureau at Dhahran during Operation Desert Shield/Desert Storm. He was a member of the GCC delegation to the Madrid Peace Conference in October 1991, and a member of the Saudi delegation to the Multilateral Arms Control Talks in Washington, DC in 1992. In December 1992 he was dispatched with the Saudi Armed Forces to Somalia as part of Operation Restore Hope.

Mr. Al-Jubeir was appointed Director of the Saudi Information and Congressional Affairs Office in Washington in 2000, and was named Foreign Affairs Advisor in the Crown Prince’s Court in the fall of 2000. In August 2005, the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz appointed Mr. Al-Jubeir to the position of Advisor at the Royal Court.

Mr. Al-Jubeir was Visiting Diplomatic Fellow at the Council of Foreign Relations in New York, 1994-95. He has lectured at universities and academic institutions in the U.S. and appeared frequently in the media. In 2006, he received an Honorary Doctorate in Humane Letters from the University of North Texas.

Source: Saudi Embassy

Editor’s Note:

The National Council’s annual Arab-US Policymakers Conference (AUSPC) was held in Washington, D.C. on October 15-16, 2009. The 900-plus conferees addressed a host of issues under the theme, “Fresh Visions, Old Realities, New Possibilities: The Impact of Leadership Change on Arab-U.S. Relations.” On Friday afternoon Ambassador Chas Freeman provided the conference finale with his presentation on the way forward in the relationship between the United States and the Arab world.

Source: NCUSAR.org

Recalculating the Obvious
Chas. W. Freeman, Jr.

Remarks at the 18th Annual Arab-U.S. Policymakers Conference
Washington, DC
October 16, 2009

When you look back, some years can be seen as having inflected history, moving men and events along paths they would otherwise not have taken. 2001, the year of 9/11 was such a time. This year is shaping up as another, not just for the decisions that will be made but for those that most likely will not be.

The second President Bush bequeathed his successor a set of thoroughly broken policies in the Middle East and the near total estrangement of the United States from former allies and friends in the Arab and Muslim worlds. President Obama has responded with rhetorical change we, or at least five Norwegians, can believe in. In his speech at Cairo, he clearly signaled that he recognizes the imperative of solving the Israel-Palestine conflict and repairing American relations with Arabs and Muslims if the United States is to enjoy peace abroad and tranquility at home. Still, to date, in the Middle East and elsewhere his administration has made only minimal changes to longstanding American policies that are conspicuous failures. The short-term stakes in getting these policies right are large. The long-term stakes are vastly larger.

When U.S. interrogators asked Khalid Sheikh Mohammed, the confessed mastermind of the 9/11 atrocities, why al Qa`ida had done the terrible things it did that day, he gave a straightforward answer. He said that the purpose was to focus the American people on the atrocities that America is committing by supporting Israel against the Palestinian people and America’s self-serving foreign policy that corrupts Arab governments and leads to further exploitation of the Arab Muslim people. In Osama Bin Laden’s annual address to the American people this September 11, he reiterated: “We have demonstrated and stated many times, for more than two-and-a-half-decades, that the cause of our disagreement with you is your support to your Israeli allies who occupy our land of Palestine.”

There is nothing at all ambiguous or unclear about these explanations of 9/11 by its planners and perpetrators. Few abroad dispute their essential validity. Yet here in America, they remain completely unreported outside the Internet. Any public reference to U.S. backing for Israel as a grievance that motivated the atrocities in New York and Washington eight years ago is vigorously disputed and suppressed as politically incorrect. This has created a large national blind spot to the seriousness of Arab Muslim reaction to a core American policy. It has left our country unable effectively to analyze the very real threat to our domestic tranquility that intermittent terrorist attacks represent. By leaving terrorist attacks on the United States and Americans abroad unexplained and disconnecting them from the trends and events in the Middle East that helped inspire them, this self-imposed mental block has distorted our threat perceptions and greatly hampered the development of a realistic national security strategy.

So it is necessary to begin by recapitulating the obvious. The 9/11 assault on the United States was carried out by Muslim extremists motivated in large measure by their resentment of U.S. support for Israel and its actions. The need to avenge 9/11 and deter a repetition of it led directly to the American invasion of Afghanistan. The so-called global war on terrorism that this invasion inaugurated provided a spurious but politically sufficient justification for the occupation of Iraq in 2003. Our labeling of Hamas as a “terrorist organization” inspired the joint U.S.-Israeli effort to reject and overturn the results of the 2006 elections in the occupied territories, even though these elections were universally judged to be free and fair. A similar view of Hezbollah caused the U.S. to encourage Israel in its savage mauling of Lebanon and to protect it from the huge international backlash against its more recent assault on Arab civilians in Gaza. Determination to avoid another 9/11 remains the strategic rationale for the ongoing war in Afghanistan and adjacent areas of Pakistan. Meanwhile, the insolent cruelties of the West Bank occupation and the siege of Gaza continue to inflame Arab and Muslim opinion.

Taken together, these developments have caused a growing number of Arabs and Muslims to posit a broad American crusade to humiliate them and their religion. Their estrangement from the United States and other non-Islamic societies has deepened. Al Qaeda has discredited itself through its excesses, but Islamic extremism has continued to metastasize. In Gaza, for example, political forces far more fanatical than Hamas are beginning to emerge from massive suffering. What began as a conflict between Jewish colonists and indigenous Arabs has become a worldwide struggle between Jews, Muslims, and their respective allies. As Israelís sole protector, the United States has become the target of sustained asymmetric warfare by terrorists who espouse extremist Muslim agendas. Governments allied with the United States or dependent on it, especially governments in Arab and Muslim countries, are targets too. The threat we Americans now face derives less from al Qa`ida than it does from widening Muslim rage at continuing humiliation and injustice.

A just and durable peace in the Holy Land that secures the state of Israel should be an end in itself for the United States. But the fact that the conflict there enfevers and radicalizes the Islamic body politic worldwide should make the achievement of such a peace an inescapable, central task of United States strategy. This is why it was right for President Obama to take time this June to deliver a message of reconciliation to Arabs and Muslims at Cairo. Despite all the other urgent tasks before him, he has focused on resolving the Israeli-Palestinian conflict. He has repeatedly expressed determination to stabilize Israelís relations with its Arab neighbors through a “two-state” solution. The Obama Administration’s initial efforts have, however, met with contemptuous rejection from Israel, feckless dithering from the Palestinians, and skepticism from other Arabs. This should not surprise us. It does not augur well.

The current government of Israel rejects trading land for peace. It sees itself as on the verge of achieving a level of colonization of Palestinian Arab land that will make anything resembling a Palestinian state physically impossible. In the exclusively Jewish state of Israel that its leading figures envisage, only Jews will be full citizens. Some Arabs will have limited rights but most will live in an archipelago of checkpoint-ringed ghettos. They will be free, should they wish, to call these ghettos a ‘state’ but once they leave Palestine, Israel will not allow them to return. Given this Israeli vision, the American attempt to arrange a settlement freeze so that negotiations can create a Palestinian state is, from the Israeli government point of view, at best an unwelcome distraction and at worst a hostile act. Mr. Netanyahu does not fear pressure from the United States to change course. He is confident that his American lobby will arrange for Congress to punish the president if the president tries to punish Israel for its intransigence.

An Israeli cabinet-directed assassination campaign has long focused on ensuring that there is no one to talk to on the Palestinian side. With a little help from their Israeli conquerors and us Americans, surviving Palestinian politicians remain hopelessly divided. Israel has not presented a proposal for peace to the Palestinians. Sadly, if it now did so, there would be no one with the authority to accept on behalf of the Palestinian people. The United States, meanwhile, is seeking to ease Palestinian suffering in ways that improve the political standing of collaborators with the Israeli occupation authorities. Will Palestinian leaders emerge who are willing to take whatever they can get from Israel and who are able somehow to call off the resistance to it? That seems to be the hope, if not the plan. It is not, of course, the trend.

The Obama administration is unwilling, at least for now, to put pressure on Israel. Instead, it has fallen back on the use of diplomacy as psychotherapy for Israel’s political pathologies. It is trying to induce better Israeli behavior by arranging Arab gestures that appease Israeli apprehensions and signal Arab acceptance of the Jewish state in their midst even before its borders are fixed or the status of both its captive Arab population and those who fled to the refugee camps in neighboring countries is resolved. American diplomats see these gestures as down payments on the normalization of relations with Israel that the Arab League proposed at Beirut in 2002 in the so-called “Arab Peace Initiative.” But the Arabs premised their willingness to accept Israel on Israel’s reaching an acceptable agreement with the Palestinians. With Israel now neither doing nor promising anything that might lead to an acceptable status for the Palestinians, the Arabs see no reason to appease it. Nor do they any longer feel obliged by friendship to accommodate what they judge to be ill-considered American requests.

Adding poignancy to the impasse are two dreadful ironies. The state of Israel was established to provide the world’s Jews with a homeland in which they might safely enjoy the pursuit of happiness free from continuing persecution by Gentiles. But the Jewish state has become the most dangerous place on the planet for Jews to live. And, with anti-Semitism now universally rejected in its traditional Christian heartland, Israelís actions and policies have become the only significant stimulus to anti-Jewish animus there and elsewhere. Meanwhile, the replacement of Zionist idealism, humanism, and secularism with the cynicism, racism, and religiosity of contemporary Israeli politics has precipitated a mounting moral crisis and loss of confidence among many committed to the Jewish state.

Although some settlers continue to arrive, one-fifth of Israel’s now reside abroad. Jewish emigration is accelerating. Meanwhile, the Arab population of Israel and the occupied territories continues to grow, as does the size of the Palestinian Diaspora. By 2015, barring mass deportation, half the people in Israel and the occupied territories will be Arabs. Thereafter, Jews will be a declining minority. The international community, including I daresay most of the Jewish Diaspora, does not accept the settler propositions that Jews can and should by divine right entrench their rule over the Arabs of the Holy Land or define them as morally inconvenient and deport them. An anti-apartheid-style campaign of ostracism, boycott, and disinvestment against this version of a Jewish state has already begun.

In combination, current trends portend the perpetuation of violent struggle by the Palestinians against their Israeli overlords, even as the Jewish state is isolated from without and corrodes from within. These trends lead to escalating antagonism between the United States and the Arab and Muslim worlds. Given the self-identification of many Jews with the state of Israel, these trends also risk a rebirth of anti-Semitism and a spillover of violence to the Jewish Diaspora.

So where does this leave the Obama Administration’s peace project? In Israel’s own estimation and that of the region, the Jewish state is at a turning point. Time is running out on the prospects for peaceful engagement between it, the Palestinians, other Arabs, and non-Arab Muslims. No peace is conceivable without the full use of American moral and economic leverage to bring Israel to the negotiating table. A decision by the Obama Administration to compel Israel to make the choices necessary to achieve mutually respectful coexistence with the Palestinians and other Arabs would, however, lead to immediate political crises in both Israel and the United States. The Administration speaks with determination but is it really prepared to risk this? It is too early to say.

Peace with the Palestinians would enable Israel for the first time to be accepted by 340 million Arabs and 1.2 billion non-Arab Muslims as a legitimate part of the Middle East. It would end the conflict in the Holy Land. It is the key to deradicalization of the Arab and Muslim worlds and to ending their violent backlash against the West. It is the prerequisite for the restoration of peace within the realm of Islam.

The alternative is the current Israeli government’s effort to impose a Jewish dominated state dotted with little Arab ghettos. This is a success that Israelis would almost certainly come bitterly to regret. Would a Jewish state seen by the world as embodying racism and religious bigotry retain the support of the Jewish Diaspora? Would the United States continue indefinitely to guarantee its security? The safety of such an Israel and its citizens would depend on the so-far undemonstrated ability of intimidation, ruthlessly sustained, to grind Arab resistance into acquiescence. Cairo and Amman would have to be kept within a Camp David framework that Egyptians and Jordanians, if allowed to vote, would even now overwhelmingly repudiate. Israelís right to exist as a state in the Middle East would almost certainly be reviewed in intermittent tests of arms, conducted, as in the case of the Crusader kingdoms in Palestine over decades, if not centuries. Israel would have to sustain military hegemony in perpetuity over larger, ever more populous and ever more modernized Arab and Muslim neighbors. If these conditions were not met, as they almost certainly could not be, this unilaterally imposed outcome would be an invitation to protracted Arab and Muslim struggle against Israel and its supporters abroad.

It is hard to see this as a formula that leads to anything but eventual disaster for Israel and its foreign backers, now essentially limited to the United States. Israel’s nuclear doctrine, based as it is on an amalgam of Armageddon with the heroic suicide at Masada, seems to recognize this. On the whole, for sensible people in Israel and for Americans, the peaceful emergence of a viable Palestinian state in the occupied territories and Gaza looks like a much better bet than self isolation.

In the meantime, the region presents other challenges even if none of them has the transformative potential of a peace or continued warfare in the Holy Land. Let me now turn briefly to these.

It is good that the end of the American misadventure in Iraq is in sight. But its termination is not likely to repair the injury it did to the standing of the United States in either the international or Muslim communities. The surge averted disaster; the withdrawal may yet deliver it. The post occupation order in Iraq is unlikely to emerge smoothly or without further stressing regional stability. In the land between the two rivers, the United States will leave behind a battleground of grievances. The Kurdish and Sunni Arab minorities, among others, must likely undergo still more suffering before things settle down. There will be no harvest of goodwill from the carnage in Iraq.

The same seems likely to be true of our eight-year intervention in Afghanistan. We began it with simple and straightforward goals: the apprehension of al Qaeda and the chastisement of its Afghan hosts. But these goals have been buried in a barrage of competing ideological and special interest objectives. The result is combat in a political vacuum, a war whose only apparent theme is now Western hostility to militant Islam. This has destabilized Pakistan and nurtured a particularly virulent form of terrorism there and in the Pakistani Diaspora. It has spurred a recent surge in financial contributions to the Taliban as an apparently heroic resistance to infidel trespasses on Islam.

What then to do about Afghanistan, where everyone admits the most likely outcome is now failure? If you ask a religious scholar or ideologue, you will hear a sermon. From an economist, expect a development scheme. Ask an NGO and prepare to receive a program proposal. People come up with the solutions they know how to put together. Ask a general what must be done, and you will get a crisp salute and the best campaign plan military science can devise.

The Obama Administration is now pondering yet another military-proposed campaign plan. This one features a pacification effort extending over as much as another decade. But al Qa`ida has relocated to Pakistan from Afghanistan. Neither the Taliban leadership nor anyone else in Afghanistan seems to want it back. The proposed pacification campaign is called a strategy but it is not. It strains to find a military way to transform Afghanistan, even though its authors, who are very smart soldiers, recognize there is none. Our civilian leadership finally shows signs of taking charge of policy rather than, in a strange evasion of civilian control of the military, delegating its formulation to the generals. What we need is a strategy backed by force, not the use of force as a substitute for strategy.

This brings me, at last, to Iran. Tehran had nothing to do with the assault on America on 9/11, but no nation has benefitted more from the American reaction to it than the Islamic Republic. Its revolution seemed to be flickering out when 9/11 happened. In short order, its greatest enemy, the United States, then eliminated its other enemies in both Kabul and Baghdad and embarked on a military rampage through the Islamic world that estranged Americans from our traditional allies there. But, wait! It gets even better from the Iranian point of view.

In Afghanistan, the Iranians have been able to sit on the sidelines and watch us exhaust ourselves in inconclusive warfare. In Iraq, Iran is the dominant foreign influence in Iraq’s newly sectarian politics. Of course, no one can say whether Baghdad will continue its de facto alliance with Tehran after the United States withdraws. Israel and the United States brushed aside efforts by Damascus to dilute its longstanding dependence on Tehran, thus cementing rather than eroding Iran’s influence in Syria. The 2006 Israeli savaging of Lebanon drove Iran’s client movement, Hezbollah, onto the commanding heights of Lebanese politics. This reduced Tehran’s need to go through Damascus to affect events in Lebanon or to reach northern Israel. Israeli and American efforts to ostracize and overthrow the elected Hamas government in Palestine meanwhile left it nowhere to go but into the arms of Iran. Assertively Shiite Iran has, for the first time, acquired the Sunni Arab following it had long sought. Current American policy seems clueless about how to reverse these Iranian gains.

Meanwhile, Tehran seems on track to acquire the ability to field its own deterrent to the threats of nuclear attack Iranians have serially heard from Saddam’s Iraq, successive Israeli governments, and George Bush’s America. David Ben Gurion wrote the book on how to build a clandestine nuclear weapons capability. He skillfully appeased President Kennedy’s passion for non-proliferation even as his government subverted and circumvented it. The ayatollahs have read and absorbed the Israeli playbook, minus, one hopes, the bit about Masada. Israelis, better than anyone, know how this script ends. It does not end in a war that secures Israelís nuclear monopoly in its region. It is time to start thinking about how to mitigate the undeniable dangers of an Iranian as well as an Israeli nuclear arsenal.

I must not close without a brief mention of the longstanding Arab friends of the United States and the West in the Gulf and Red Sea regions. Despite welcome new activism on the part of Saudi Arabia, Egypt and the countries of the Gulf Cooperation Council have to a great extent been bystanders as a strange combination of American diplomatic default and military activism has dismantled the regional order that once protected them. Iraq no longer balances Iran. The United States no longer constrains Israel, which has never behaved more belligerently. Iran has acquired unprecedented prestige and influence among Arabs and Muslims. The next stage of nuclear proliferation is upon the region. For the first time ever, Shi`ism dominates the politics of Arab states traditionally ruled by Sunnis. Islamist terrorism menaces Egyptian and Gulf Arab domestic tranquility as well as that of the West. The United States, once attentive to Arab security and other concerns, is now obsessed with our own issues and objectives in the region.

The Gulf Arabs have the financial resources but neither the institutions nor the will to mount the unified effort needed to cope with these challenges. They are adrift; not sailing to a new strategic strong point. The drift is taking them away from their traditional reliance on America and toward new partners. These are mainly the so-called BRIC countries of Brazil, Russia, India, and China, plus South Africa. But Egypt and the Gulf Arab states seem destined to remain on the strategic sidelines, not in the game. They will not step forward to take the lead in addressing the disputes of which I have been speaking. Hence the need for continuing American leadership.

So what is to be done? In the case of Israel-Palestine, a failure to decide is in fact a fateful decision. The avoidance of choice risks future tragedy for America as well as Israel and the Arabs.

The best thing the United States could do for Iraq now is to engage its neighbors. All should share our interest in supporting non-violent Iraqi solutions to Iraqi problems. We need to work with Turkey and Arab allies to enlist Syria, Iran, and others in this task and hold them to it.

In the region as a whole, the American effort to build a coalition of opposition to Iran has failed. We must now join our allies and friends in offering those who have come to depend on Tehran alternatives to doing so. Iran is a proud country that will not surrender to threats. Iranians remain obsessed with the affront they believe we pose to their national identity, independence, and honor among nations. Without a parallel normalization of US-Iranian relations, there is no hope of resolving the nuclear issue in a way that mitigates its menace. President Obama’s several messages to the Iranian people have opened a path to respectful Iranian-American dialogue that might lead to this. We must persist in inviting Tehran to walk this path with us.

Finally, in Afghanistan, we need a comprehensive strategy, not another campaign plan. We must leverage religious and tribal realities rather than seek to overturn them. Our objective should be to consolidate the exclusion of al Qa`ida from Afghan territory. To do this, we must work with Pakistan and in partnership with friendly Arab and Muslim countries, not at cross purposes with them, and we must support, not undercut, the Pashtun tribes. This, not a Western military presence on Afghan soil, is how we helped Afghans expel the Soviets from their homeland. This, ratified by a reconvened Loya Jirga and supported with generous economic assistance, is how we can keep al Qa`ida out of Afghanistan while we work to expel it from Pakistan.

President Obama’s message to the world’s Muslims at Cairo last June illuminated a different way forward than the road we appear to be on. We can yet take that way forward. It is time to do so.

About The Honorable Chas W. Freeman, Jr.

The Honorable Chas. W. Freeman, Jr. − Chairman of the Board, Projects International, Inc., a Washington, DC-based business development firm specializing in international joint ventures, acquisitions, and other business operations for its American and foreign clients; formerPresident, Middle East Policy Council; former Assistant Secretary of Defense for International Security Affairs (1993-94), earning the Department of Defense’s highest public service awards for his roles in designing a NATO-centered post-Cold War European security system and in reestablishing defense and military relations with China; former U. S. Ambassador to Saudi Arabia (during Operations Desert Shield and Desert Storm); Principal Deputy Assistant Secretary of State for African Affairs during the U.S. mediation of Namibian independence from South Africa and Cuban troop withdrawal from Angola; and author of The Diplomat’s Dictionary (Revised Edition) and Arts of Power: Statecraft and Diplomacy.

Editor’s Note:

Ambassador Adel Al Jubeir presented his credentials as Saudi Arabia’s top diplomat in the United States in February 2007 replacing Prince Turki Al Faisal who served two years in that post. He previously served as Foreign Affairs Advisor to then Crown Prince Abdullah starting in 2000 and was appointed Advisor at the Royal Court in August 2005 when Abdullah become King. Ambassador Al Jubeir has an extensive resume of challenging diplomatic posts (see below) including earlier service in Washington.

Today we are pleased to present for your consideration an interview Ambassador Jubeir gave to “US-Arab Tradeline,” a publication of the National U.S.-Arab Chamber of Commerce in which he focuses on the business relationship between the United States and Saudi Arabia. We thank the Chamber or permission to share this interview with you.

The IMF recently praised Saudi Arabia for the strength of its economy and its leadership role in stabilizing the world oil markets. What factors and/or changes in the government’s agenda account for this?

The Kingdom of Saudi Arabia seeks to pursue balanced and sustainable economic policies that promote investment, growth and job creation. If the Kingdom’s development policies since the mid-1970s are examined, it is clear they have been practical, rational and effective in bringing about economic development.

The first and second five-year plans focused specifically on infrastructure development; the Kingdom needed airports, roads, hospitals, desalination plants, electrical plants, etc. Subsequent plans focused on developing industries and human resources. SABIC and other companies are now examples of the Kingdom’s attempts to build industries that can use its energy resources as feedstock, providing it with a natural advantage to compete in the global market place.

With regard to energy, since the Kingdom possesses the world’s largest proven oil reserves and is the largest exporter of oil, it has a responsibility to manage its energy policy in a manner that serves both producers and consumers by maintaining capacity and working to ensure stable prices. Saudi Arabia believes that high prices affect the global economy negatively by slowing down economic growth, and hurt producers in the long-run by slowing demand growth for oil. Low prices, on the other hand, hurt producing nations by reducing their income and, in the long-run, hurt consuming nations by encouraging consumption. Saudi Arabia’s history of managing its economic affairs, including energy, clearly shows a consistent and rational approach.

In 2004, Saudi Arabia announced the 10×10 program, which will make Saudi Arabia one of the world’s 10 most competitive countries by 2010. How close is the Kingdom to this goal?

The Kingdom is very close. In fact, Saudi Arabia has been rated as the 13th most economically competitive country in the world according to the International Finance Corporation – World Bank annual ” Doing Business” report issued this month.

The World Bank has named Saudi Arabia a “systematic reformer” and ranked it number one in the Arab World in ease of doing business. What factors have led to this “ease,” and has this had an impact on U.S. direct investment in the Kingdom, especially regarding small to medium businesses?

Rational, sustainable and long-term policies. The Kingdom’s leadership is committed to developing the country and providing its citizens with a high standard of living, a social safety net, and economic opportunity. It is also committed to free trade.

Saudi Arabia recognizes the importance of global trade and the need to be competitive. As such, there is a clear focus on revitalizing every aspect of the Saudi economy – including regulation which makes the Kingdom a friendly place to invest and do business, and efforts to provide Saudi citizens with the ability to compete in the global market place. Over the past decade, new laws were introduced, the court system was restructured, taxation was eased on foreign investors, and investments were made in infrastructure, among other steps. The changes were comprehensive in nature, or what the World Bank referred to as “systemic.”

Saudi Arabia and the United States have very strong and unique historic ties dating back to the 1930s. Are most Americans aware of this relationship? How has this relationship changed in the aftermath of 9/11?

I believe most Americans are aware of the importance of the bilateral relationship. But more can be done to educate them further. With regard to 9-11, it was a painful moment for us when it was discovered that most of the hijackers came from Saudi Arabia. We believe that Osama Bin Laden intentionally selected Saudis for this heinous crime to give the operation a Saudi face and to create doubts in the minds of Americans about the Kingdom. Would American attitudes towards the Kingdom at the time be the same if most hijackers were not Saudi? I doubt it.

After 9-11, the relationship – at the popular level – suffered, while at the official level both governments recognized Bin Laden’s objective and committed to maintaining and strengthening the bilateral relationship. We both are the main targets for Al-Qaeda and we both work closely together to defeat it. And – God willing – we will.

When we look at the relationship today, our nations have very strong ties. In 2005, the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz and President George Bush established the Strategic Dialogue between our two nations to institutionalize the relationship. The Kingdom also initiated the “Custodian of the Two Holy Mosques Scholarship Program” to send Saudi students abroad for higher education. As a result, the number of Saudi students in the U.S. increased from a few thousand in 2005 to almost 20,000 today.

In other areas we see progress as well. Investments by American companies in the Kingdom are at record levels, as are Saudi investments in the U.S. So is the two-way traffic of travel by our citizens. For example, last year, more than 60,000 visas were issued to American citizens.

The number of Saudi military officers training in the U.S. has also increased substantially over the past few years, as have the number of joint exercises. Our countries also maintain several joint task forces to combat terrorism and terror finance.

Today, our countries face mutual challenges in the region, in the global economy and in the fight against terrorism, and their relationship has grown stronger as a consequence of their close cooperation.

Saudi Arabia has been a member of the World Trade Organization since 2005. Has this had an impact on its international standing?

Absolutely. We have seen foreign investment in the Kingdom increase substantially and we have seen markets open up for Saudi companies and products.

The Kingdom is building four economic cities across the country and launching KAUST in September. What opportunities does this open up to foreign investors?

The economic cities provide opportunities for infrastructure development and investment in industries and services.

KAUST will herald, God willing, a new era in higher education and scientific research in the Kingdom and in the world. The university is a scientific institution that is independent and international in outlook. It will have faculty, staff and students from around the globe. It has signed agreements with a number of distinguished international universities and research centers to collaborate on research projects and exchange knowledge. It will use science to improve life.

What are the best sectors for U.S. firms interested in Saudi Arabia?

The Kingdom believes in free trade and encourages investment by foreigners. It has the largest economy in the region, and is a member of the G-20. And it is one of the world’s top places to invest. There are opportunities in virtually every area – construction, power generation, energy, petrochemicals, manufacturing, finance, insurance, and services, to name a few.

What are your priorities as the Saudi Ambassador to the United States?

To work on further enhancing the strong and historic ties between our two nations in all areas, without exception, and to look after the welfare of our citizens, whether they are students, medical patients, businessmen or tourists.

This interview originally appeared in the Fall 2009 edition of “US-Arab Tradeline,” a publication of the National US-Arab Chamber of Commerce.

Ambassador Adel A. Al-Jubeir

His Excellency Adel A. Al-Jubeir was appointed by the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz as Ambassador to the United States on January 29, 2007. Ambassador Al-Jubeir presented his credentials to President George W. Bush at the White House on February 27, 2007.

Mr. Al-Jubeir was born February 1, 1962 in Majma’ah (Riyadh Province), Saudi Arabia, and attended schools in the Kingdom, Germany, Yemen, Lebanon, and the U.S. He obtained a B.A. summa cum laude in political science and economics from the University of North Texas in 1982, and an M.A. in international relations from Georgetown University in 1984.

In 1987 Mr. Al-Jubeir was appointed into the Saudi Diplomatic Service and posted to the Royal Embassy of Saudi Arabia in Washington, DC, where he served as Special Assistant to the Ambassador. In 1990-91, he was part of the Saudi team that established the Joint Information Bureau at Dhahran during Operation Desert Shield/Desert Storm. He was a member of the GCC delegation to the Madrid Peace Conference in October 1991, and a member of the Saudi delegation to the Multilateral Arms Control Talks in Washington, DC in 1992. In December 1992 he was dispatched with the Saudi Armed Forces to Somalia as part of Operation Restore Hope.

Mr. Al-Jubeir was appointed Director of the Saudi Information and Congressional Affairs Office in Washington in 2000, and was named Foreign Affairs Advisor in the Crown Prince’s Court in the fall of 2000. In August 2005, the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz appointed Mr. Al-Jubeir to the position of Advisor at the Royal Court.

Mr. Al-Jubeir was Visiting Diplomatic Fellow at the Council of Foreign Relations in New York, 1994-95. He has lectured at universities and academic institutions in the U.S. and appeared frequently in the media. In 2006, he received an Honorary Doctorate in Humane Letters from the University of North Texas.

Mr. Al-Jubeir is fluent in Arabic, English, and German.

Source: Saudi Embassy, Washington

Editor’s Note:

On June 4, 2009 the White House announced James B. Smith as nominee to follow Ford Fraker as U.S. Ambassador to Saudi Arabia. Smith, a retired U.S. Air Force brigadier general, was sworn in on September 16, 2009. Today we are pleased to present for your consideration an interview Ambassador Smith gave to “US-Arab Tradeline,” a publication of the National U.S.-Arab Chamber of Commerce in which he focuses on his new role as a key steward of the relationship between the United States and Saudi Arabia. We thank the Chamber for permission to share this interview with you.

As the new ambassador to Saudi Arabia, what are the first items on your agenda?

President Obama articulated a new beginning in his Cairo speech. As his representative in the Kingdom of Saudi Arabia, my agenda is to open the door to the possibilities in that speech. The relationship between the United States and Saudi Arabia is one of the most important in the world. Given the unique and dynamic nature of world events, it is incumbent on both nations to continue building on this important relationship. Business and trade constitute a central element of this relationship, and as Ambassador, I will actively promote trade and investment between Saudi Arabia and the United States. We will facilitate travel, cultural exchanges, and other delegations to both countries. We look forward to the inauguration of the King Abdullah University of Science and Technology this month, and I firmly believe that exchanges in science and technology can be a positive, meaningful basis for building our relationship. We must continue to cooperate closely on a wide range of regional security challenges, and close cooperation aimed at confronting violent extremism must be further strengthened. Harkening back to the President’s comments, my first task will be to listen, to engage with business and government leaders and to hear from people who bring new approaches to improving commerce and good relations between our countries.

What is your impression of the current U.S.-Saudi relationship? Have the historic ties between the two countries, dating back to the 1930’s, helped buffer the lingering impact of 9/11?

The relationship between Saudi Arabia and the United States has never been stronger; it has also never been more multi-faceted or important. The United States values greatly the cooperation we have had with Saudi Arabia on a wide range of issues. As I said in my remarks during confirmation, my experience in Saudi Arabia as a military officer and business executive has left me with a great respect for Saudi Arabia, its culture, and the vitality of our relationship. Over the coming months and years, we should have many opportunities to build on that friendship. The historic ties between our countries have been a source of strength for the bilateral relationship, and our shared goals will propel us forward together.

In 2008, trade agreements between Saudi Arabia and the U.S. resulted in a 14% growth in bilateral trade. How active a role will the U.S. Embassy play in continuing to strengthen trade relations between the two countries?

The U.S. Embassy has and will continue to play an active role in promoting bilateral commercial ties. We want to do more business with the Kingdom. Over the next 12 months, the U.S. Commercial Service at the Embassy has planned more than 12 trade missions from Saudi Arabia to the U.S. We are also working on organizing trade missions from the U.S. to the Kingdom. I expect our trade promotion activity will see a significant increase in coming months.

I also see this as a great opportunity to promote the efforts of women entrepreneurs in Saudi Arabia. Saudi Arabia is fortunate to have such outstanding businessmen and businesswomen, making a positive contribution to the future prosperity of the Kingdom. President Obama and his administration strongly support the Kingdom’s efforts to increase opportunities for women in business and other professions. My wife, Janet, who is a university professor, and I will do all we can to enhance the prospects for the next generation of entrepreneurs, both men and women.

The King Abdullah University of Science and Technology (KAUST) opened this September. Many American universities, research institutes and companies – Babson College, Woods Hole Oceanographic Institute, Stanford University, Boeing and Dow Chemical, to name a few, are partnering with KAUST. Will KAUST also open new doors for SMEs in Saudi Arabia?

The Inauguration of KAUST marks an important milestone for King Abdullah. The King has said that one of the aims of KAUST is to “promote the economic development and social prosperity of the people of the Kingdom and of the world.” Small and medium enterprises (SMEs) are one of the main foundations of economic growth and development. Commerce has played a central role in helping people achieve a better life throughout the Middle East. I am certain that SMEs will benefit from the new discoveries and innovation undertaken at KAUST.

In the aftermath of 9/11, when political and trade relations between the U.S. and Saudi Arabia were strained, many European and Asian companies stepped in. Can U.S. companies, in particular SMEs, regain their position, and if so, how?

Business opportunities continue to develop in Saudi Arabia – both for large and small companies – and U.S. firms continue to enjoy respectable market share in the Kingdom. However, just as in the United States, there is increasing competition from other countries. The U.S. Government offers a number of services to assist SMEs entering the Saudi market. For instance, with its network of offices across the United States, the U.S. Commercial Service of the U.S. Department of Commerce helps SMEs sell their products and services worldwide. (For more information, visit www. export.gov.)

What are the best sectors for U.S. exporters in Saudi Arabia?

Saudi Arabia offers opportunities for U.S. exporters in a wide range of sectors. Some of the most dynamic sectors include Oil and Gas Equipment and Services, Petrochemical, Security Equipment, Power Generation, Telecommunications and Information Technology, Medical Equipment, Architecture and Construction, Railroad Equipment and Services, Franchising, Automobiles & Parts & Services, Aviation (Civil and Defense), Pollution Control and Environmental Services, Mining, and Water Resources and Equipment. This list is not exhaustive, however. There are many export opportunities in other sectors, too.

Saudi Arabia is building four mega-economic cities across the Kingdom. What opportunities do these cities offer for foreign investment?

The Saudi leadership envisions the economic cities as engines for industrial growth, real estate development, sea port and dry port development, and educational advancement in the Kingdom. According to the Saudi Arabian General Investment Authority, these new cities will contribute $150 billion to the country’s GDP by the year 2020. In developing the cities, the government will play the role of regulator, facilitator and promoter with the private sector providing the capital, the land owners and the developers. The cities have the potential to offer diverse opportunities for foreign investors in sectors ranging from alternative energy to information technology and manufacturing.

Is there a feeling of confidence and growing entrepreneurship in the Saudi private sector?

During my last visit to Saudi Arabia in the summer of 2008, I was impressed with the growth of a new class of Saudi entrepreneurs. They are creative, aggressive, and motivated to succeed. This speaks well for Saudi Arabia’s ability to diversify its economy. Over the last decade, Saudi Arabia has made considerable progress toward expanding its economy in order to achieve sustainable growth, and the future looks bright. It has taken concrete steps to create an enabling business environment. According to the World Bank, in 2009, Saudi Arabia ranked among the top 25 worldwide in terms of the ease of doing business. The culture of entrepreneurship is on the upswing in the Kingdom.

The IMF recently praised Saudi Arabia for the strength of its economy, and The World Bank ranked the Kingdom number one in the Arab World for the ease of doing business. What factors have led to this success in the midst of a global economic crisis?

No country has been immune from the effects of the international financial crisis, though Saudi Arabia has been affected less than many other countries. I think Saudi Arabia deserves great credit for the financial discipline shown over the past decade; the reforms that the Kingdom’s economic leaders have implemented certainly contribute to its many successes. As the only Arab member of the G-20, Saudi Arabia has played an important role in supporting international efforts to stem the global financial crisis.

How will Saudi Arabia’s regional and global role change in the coming decade, and what impact will this change have on U.S.-Saudi relations?

It would be unwise for me to begin my tenure by predicting the future.. ..that’s a fool’s exercise. But it is obvious that Saudi Arabia will play a key leadership role in a myriad of regional issues. Most of the key global challenges facing the world and the United States will require consultation with the Saudi leadership. We have active dialogues on a wide range of key regional security challenges; indeed, on so many issues, we share common objectives. I accepted this assignment because of the importance the Administration places on the relationship between the United States and Saudi Arabia; I will do everything in my power to build on the very positive success of the last few years and to make the relationship even stronger.

About James Smith – U.S. Ambassador to the Kingdom of Saudi Arabia

James B. Smith was sworn in on September 16, 2009, as the U.S. Ambassador to the Kingdom of Saudi Arabia. Prior to his appointment, Ambassador Smith had served in a variety of executive positions with Raytheon Company involving corporate strategic planning, aircraft manufacturing, and international business development.

Ambassador Smith was a distinguished graduate of the United States Air Force Academy’s Class of 1974 and received the Richard I. Bong award as the Outstanding Cadet in Military History. He received his Masters in History from Indiana University in 1975, and is also a distinguished graduate from the Naval War College, the Air Command and Staff College and the National War College.

Ambassador Smith spent a 28 year career in the United States Air Force. Trained as a fighter pilot, he logged over 4000 hours of flight time in F-15s and T-38s. He served around the world in a variety of operational assignments and flew combat missions from Dhahran AB during Operation Desert Storm. He commanded the 94th Fighter Squadron, the 325th Operations Group and the 18th Fighter Wing (Kadena AB, Okinawa). In addition, he served in a variety of staff assignments involving coalition partners, and served as Air Force Chair and Professor of Military Strategy at the National War College. During his final assignment at U.S. Joint Forces Command, he led Millennium Challenge, the largest transformation experiment in history. He was promoted to Brigadier General in October, 1998, and retired from the Air Force on October 1, 2002.

A native of Brooks, Georgia, Ambassador Smith lives in Salem, New Hampshire, with his wife Dr. Janet Breslin-Smith.

Source: U.S. State Department

Editor’s Note:

In our exclusive interview with David Hamod today we talked about the launch of the King Abdullah University of Science and Technology in Saudi Arabia on September 23, 2009. Mr. Hamod, President and CEO of the National U.S.-Arab Chamber of Commerce, was among the invited guests for the inauguration of this landmark institution. While in the Kingdom he shared his thoughts on the commercial prospects for the cutting-edge technologies expected to result from KAUST research and development in this op-ed. We thank Mr. Hamod for permission to share it with you.

KAUST: A Catalyst for Small Business Growth?
David Hamod

In my travels around the Kingdom since the recent launch of the King Abdullah University of Science and Technology (KAUST), I have encountered considerable enthusiasm for this new “House of Wisdom” on the shores of the Red Sea. Saudis and non-Saudis alike recognize that this extraordinary experiment, made possible through the vision of the Custodian of the Two Holy Mosques, has the potential to transform the Kingdom into one of the world’s top destinations for academics looking to conduct scientific research at the graduate level.

What few have apparently realized, however, is that KAUST could also play a leading role in fostering partnerships between entrepreneurs around the world and Saudi Arabia’s business community.

The biggest obstacles for most small companies worldwide are two-fold: access to research facilities and access to capital. The former is essential for start-ups looking to develop cutting-edge technologies, and the latter is vital for production, market penetration, and commercial growth. KAUST, and investors in Saudi Arabia, offer access to all of these.

For small businessmen and businesswomen, particularly those leading early-stage technology start-ups, KAUST’s Innovation Clusters look like a dream come true. On a competitive basis, at little cost to these entrepreneurs, KAUST offers state-of-the-art research laboratories and offices.

But that’s just for starters.

KAUST also offers a business incubator designed to convert high tech research projects into commercial entities that will offer practical applications for the benefit of society. The incubator will assist with business plans, local service providers, accommodations, and other services intended to make the transition to KAUST as worry-free as possible.

Moreover, through the KAUST Industrial Collaboration Program (KICP), the university will introduce these start-ups to such world-class companies as Boeing and IBM — firms that are well positioned to help match up fledgling technologies with global applications. KICP promises to promote collaboration to foster pilot projects, create consequence companies, and build capacity in cooperation with some of the world’s best recognized business entities.

Access to such expertise is essential, but it represents only part of the equation. The other vital element needed is funding.

For worthy start-ups with a good track record, KAUST has established a Seed Fund that may invest up to $250,000. This is a remarkable contribution by any standard, but it pales in comparison to funding that should become available through Saudi Arabia’s private sector.

The Kingdom’s business community is known for its investment savvy but, historically, there were very few “pipelines” in Saudi Arabia that methodically carried entrepreneurs to local investors. With the establishment of KAUST, this may be about to change.

One can imagine a scenario in which chambers of commerce like mine, working in cooperation with the Council of Saudi Chambers of Commerce and Industry, help to identify entrepreneurs overseas who are good candidates for research & development opportunities at KAUST.

These same chambers, working with their member companies, would also be well positioned to provide more substantial seed money in support of those technologies that have promising commercial applications. Such funding is especially important now – at a time when banks around the world have largely shut off the supply of capital to small businesses and entrepreneurs.

KAUST is doing its part to recruit the best and the brightest from Saudi Arabia and around the world to engage in scientific research. With business community collaboration, converting such research to commercial applications for the marketplace holds the potential to create new cutting-edge companies, generate home-grown jobs, and help the Kingdom move toward the knowledge-based society envisaged by King Abdullah.

David Hamod, President & Chief Executive Officer of the National U.S.-Arab Chamber of Commerce, attended the opening of KAUST on September 23, 2009.

About NUSACC:

The National U.S.-Arab Chamber of Commerce (NUSACC), established 40 years ago, is America’s longest serving organization dedicated to U.S.-Arab business. NUSACC is widely regarded as the voice of American business in the Arab world and the premier portal to the United States for Arab commercial enterprises. With offices in New York, Houston, Los Angeles, and its headquarters in Washington DC, NUSACC is well positioned to fulfill its mission to “promote, support, and strengthen U.S.-Arab business and economic cooperation.”

Editor’s Note:

The launch of the King Abdullah University of Science and Technology (KAUST) in Thuwal, Saudi Arabia last month was witnessed by a host of distinguished visitors from around the world. On the list was David Hamod, President and CEO of the National U.S.-Arab Chamber of Commerce, who wrote in “U.S.-Arab Tradeline” – the Chamber’s quarterly newsletter – that “Saudi Arabia is looking ahead to a world that revolves around knowledge, not hydrocarbons.” He noted that, “For Saudis and Muslims all over the world, KAUST is intended to serve as a new House of Wisdom,” referring to the Bait al-Hikma, the intellectual center of the Islamic “Golden Age.” Hamod’s visit to the Kingdom included meetings with business people and officials as part of the NUSACC’s role as the “voice of American business in the Arab world.”

To get Mr. Hamod’s first hand impression of KAUST and his perspective on the business relationship between the United States and Saudi Arabia, we caught up with him by phone from Riyadh on October 9, 2009 for this SUSRIS exclusive interview.

Opportunities and Change in the Kingdom:
A Conversation with David Hamod

SUSRIS: Thank you for joining us today as you travel in Saudi Arabia. In “Tradeline” you said the King Abdullah University of Science and Technology, or KAUST, represented a vital step in the transition of Saudi Arabia to a knowledge-based society. What are your impressions of KAUST? Is KAUST a game changer?

HAMOD: What struck me most about the KAUST launch was the huge amount of pride the Saudis take in this institution, as well as the speed with which they pulled this all together – building an important research university from scratch in less than 1,000 days. KAUST is a very ambitious undertaking, but with a $10 billion endowment and the full support of the Custodian of the Two Holy Mosques, King Abdullah, it represents a remarkable opportunity for the Kingdom.

Is this university a “game changer”? I think this institution, as a new “House of Wisdom,” has tremendous potential. The Saudis have worked to bring the best and the brightest from around the world to KAUST. They have purchased some of the most sophisticated equipment available. Now it’s a question of pulling it all together in a way that produces rewarding experiences for the scholars, as well as cutting edge research. What we hope for, from a business perspective, are new technologies that can be developed at KAUST and brought to the marketplace. [See David Hamod’s Op-ed on KAUST as a catalyst for business.]

KAUST, according to King Abdullah’s vision, will be a “beacon” for scholars from around the world. It’s an extraordinary opportunity for intellectual exchange and learning, and for people around the globe to gain a better understanding of Saudi Arabia.

SUSRIS: The boom in Saudi Arabia has been characterized as bigger than the “first boom.” How so? What does this mean for the US-Saudi trade relationship?

HAMOD: The big difference between the boom of the 1970s and the new boom is that there is now a new generation of Saudi business leaders who have been educated at some of the best schools in the world, who have traveled extensively, and who have brought thoughtful new ideas to the table regarding what the Saudi Arabia of the future might look like. That translates into strategic, long-range construction and infrastructure projects that are consistent with 20- or 30-year plans. This rationalized approach takes advantage of economies of scale and is connected to the comparative and competitive advantages that Saudi Arabia has to offer, particularly in terms of downstream petroleum projects.

There is also a recognition that the population is growing quickly and that Saudi Arabia needs to prepare for the future in terms of health care, education, housing, food security, and a host of other ways. It seems to me that the Saudi leadership, consistent with the vision of King Abdullah, is tackling these issues in a thoughtful way.

In terms of the trade relationship, we have seen fairly consistent growth over the years. U.S. exports to Saudi Arabia in 2008 were about $12.5 billion, and by our Chamber’s best estimates, despite the downturn, we anticipate U.S. exports will roughly triple to $38 billion by 2012.

That’s a reflection of the growing market in Saudi Arabia — not only for the United States, but also for other countries of the world. There is a clear trend in Saudi Arabia, and in other countries in the Arab world, to “look East” to Asia in the aftermath of 9/11. The tragedy of September 11th did not necessarily cause the Arab world to turn to India, China, and other Asian markets, but it certainly served as a catalyst to do so.

SUSRIS: Do you agree with some specialists who feel that American businesses are not taking full advantage of the opportunities from the current boom?

HAMOD: I believe that there are major changes underway here that can be attributed, in part, to the work that the Ministry of Finance and the Saudi Arabian General Investment Authority have done to make the Kingdom a more attractive destination for trade and investment. In 2005, the World Bank and IMF ranked Saudi Arabia number 67 in the world in ease of doing business. Today, the Kingdom is number one in the Middle East and number 13 in the world. That is a remarkable improvement by any standard.

I believe that Saudi Arabia is still one of the best-kept secrets of the Middle East. Some American companies have lost ground to the competition, particularly from Asian nations, which have been expanding aggressively in this part of the world. But we see new-to-market U.S. companies coming to the Kingdom on a regular basis, and there are still many untapped opportunities for U.S. firms here.

In this respect, our Chamber needs to bring more U.S. companies to Saudi Arabia so that they can see the opportunities here with their own eyes. Last year, I had the privilege to lead delegations to this region for U.S. companies managing in excess of $2 trillion, and the success and stability of economies in this part of the world are still generating considerable interest among U.S. companies.

Saudi Arabia is very well positioned in this economic downturn because the Kingdom has resources on hand at a time when cash is king. The historically high oil prices have come down, which has led to the postponement of some projects, but the vast majority of projects are still moving forward full speed ahead. Unlike some countries in the Middle East, Saudi Arabia is deficit spending in the short term to bring many of these important projects to fruition.

The downturn also creates opportunities for Saudi Arabia to invest outside the Kingdom, and the Arab world beckons. Recent years have seen unprecedented levels of intra-Arab investment within the region, and I expect this trend to pick up as we move beyond the economic slowdown.

SUSRIS: At the recent Pittsburgh G-20 Summit the members specified the Group, of which Saudi Arabia is a member, as the “premier forum” for international economic cooperation. What does it say for Saudi Arabia to be the only Middle Eastern country, the only Arab country and the only member of Opec to belong to the G-20?

HAMOD: I think Saudis are enormously proud that the Kingdom has been invited to sit at the table and, in my opinion, that invitation is long overdue. The countries of the Arab world, and particularly those of the GCC, have played an increasingly important role in “lubricating” the international economy in recent years — either directly or indirectly. It no longer makes sense for a handful of countries to try to guide the international economic order without valuable input from Saudi Arabia and the G-20.

SUSRIS: In the context of Saudi Arabia what do you think about the prospects of some governments moving away from the dollar as the global reserve currency?

HAMOD: I’ve heard rumors about decoupling oil from the dollar and, to the best of my knowledge, these are only rumors. The rumors grow strong when the dollar gets weak, and vice-versa. The fact is, it would be difficult to separate the dollar from oil. The only GCC country that has taken steps in that direction is Kuwait, which now uses a basket of currencies. However, there is no compelling evidence, to the best of my knowledge, that Kuwait has fared substantially better than its neighbors as a result of its break with the dollar.

SUSRIS: How would you assess the health of the relationship between the Kingdom and the United States?

HAMOD: The Saudi-U.S. relationship is longstanding and runs the gamut of mutual interests. King Abdullah’s visit to Texas [Crawford Western White House] when he was Crown Prince helped to reinforce those strong relations. We subsequently made a transition from one U.S. president to another, but there have been no disruptions, in part because King Abdullah has made a special effort to get to know each president at a personal level.

Relations are in very good shape these days as evidenced by Saudi Arabia’s support of the U.S. dollar, the constructive role that Saudi Arabia is playing in the peace process, the surge in Saudi students now studying in the United States, and the positive overall tenor of the relationship.

At one level, there are excellent trade and investment opportunities in Saudi Arabia for U.S. companies, which is how we, as Americans, tend to look at the relationship. But at another level, as a result of the economic downturn, there are some excellent bargains available in the United States to savvy Saudi investors.

As far as the new Administration is concerned, I think the Arab world as a whole has rolled out the welcome mat for President Obama. My impression is that many of the Arab countries are looking to President Obama to change the tone of the U.S.-Arab relationship, which includes restoring dignity and minimizing humiliations that the Arab world has suffered in recent years. Some of these humiliations, like torture at Abu Ghraib prison, have been devastating for America’s reputation around the world. Other indignities, like the demeaning process that Saudis have been through to secure visas to the United States, have resulted in many thousands of Saudis forgoing visits to America.

Historically, the United States has been the favorite destination of the Arab world. Arabs like to take their vacations in our country. They like to send their kids to school in America. If they need medical care, they prefer to come to the United States. And from a commercial perspective, they like the American way of doing business. A lot of this goodwill evaporated after 9/11, however, and we are doing our best to restore that trust.

The relationship between the United States and the Middle East has a very solid foundation, and people in the Arab world are looking to President Obama to build on that foundation.

SUSRIS: What have you heard in reaction to President Obama winning this year’s Nobel Peace Prize?

HAMOD: People here are hopeful that the Nobel Prize will serve as a “down payment” for bringing peace to Palestine.

SUSRIS: What would you tell Americans about Saudi Arabia given what you know about stereotypes of Arabs and the Kingdom, and about the changes and reforms being made?

HAMOD: The only way a group of people can evaluate another group of people is to travel and spend time with each other, face-to-face. Stereotyping of the Arab world has been a problem for a long time, in part because many so-called “experts” on the Middle East have never set foot in the Arab world.

The fact is, we have seen some extraordinary changes taking place in this part of the world during the past decade. These changes are happening not because the United States or any other country is trying to force the Arab world to change. To the contrary, these changes are predominately coming from within — naturally, organically.

As a result, we see significant economic expansion that is affecting the quality of life of every family in the Arab world. We have also seen the important role that the Internet can play in changing the dynamics of a society, including our own in the United States. So when you package all of this together — the changing technologies, economic expansion, improvements in the quality of life — it makes for a substantially different region than anything people might have anticipated even 15 years ago.

SUSRIS: What should we expect to see over the horizon in the business component of the relationship?

HAMOD: Historically, the U.S. companies that have been most involved in Saudi Arabia are very large businesses. The trend that Saudi Arabia would like to see, I think, is a growing emphasis on small and medium sized enterprises, or SMEs, and entrepreneurship. From the perspective of our chamber, which is predominantly made up of these SMEs, this suggests some remarkable business development opportunities in the years ahead.

SUSRIS: Thank you for taking time to share your insights on U.S.-Saudi relations from Riyadh. Safe travel home.

About David Hamod

David A. Hamod is President and CEO of the National U.S.-Arab Chamber of Commerce (NUSACC), a position he accepted in 2004. Since its inception over 40 years ago, NUSACC has been the preeminent organization for fostering trade and investment between the United States and the 22 countries of the Arab world.

Mr. Hamod has been a prominent and active member of the U.S. business community for more than two decades. In 1988, he founded Intercom International Consultants, a Washington-based consulting firm that has served as an advisor to numerous business groups, including more than 30 U.S. companies. As President of Intercom, Mr. Hamod served on the International Policy Committee of the U.S. Chamber of Commerce for more than a decade.

Prior to founding Intercom, Mr. Hamod worked for the Brookings Institution, International Business Machines (IBM) Corporation, Overseas Private Investment Corporation (OPIC), and The New York Times, among others.

Source: NUSACC

About NUSACC

The National U.S.-Arab Chamber of Commerce (NUSACC), established 40 years ago, is America’s longest serving organization dedicated to U.S.-Arab business. NUSACC is widely regarded as the voice of American business in the Arab world and the premier portal to the United States for Arab commercial enterprises. With offices in New York, Houston, Los Angeles, and its headquarters in Washington DC, NUSACC is well positioned to fulfill its mission to “promote, support, and strengthen U.S.-Arab business and economic cooperation.” www.nusacc.org

Editor’s Note:

On the bookshelf this month is Anthony Cordesman’s latest contribution to our understanding of Saudi Arabia’s defense and security challenges, in the form of “Saudi Arabia: National Security in a Troubled Region.” Dr. Cordesman, the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies (CSIS), has written over 60 books including a four volume series on the lessons of modern war. At CSIS, Cordesman has been director of the Gulf Net Assessment Project, the Gulf in Transition study, and principle investigator of the Homeland Defense Project. He directed the Middle East Net Assessment Project, acted as codirector of the Strategic Energy Initiative, and directed the project on Saudi Arabia in the 21st century.

Readers here have benefited from the numerous articles, interviews and reports that he has shared through SUSRIS and we look forward to reading his latest offering. Today for your consideration we provide the CSIS release about the new book and provide links to the many SUSRIS articles contributed by Dr. Cordesman.

Saudi Arabia: National Security in a Troubled Region
Anthony H. Cordesman

Anthony H. Cordesman

Saudi Arabia: National Security in a Troubled Region provides a comprehensive, up-to-date analysis of Saudi Arabia’s strategic security efforts, both within the country and as a stabilizing regional presence. In this meticulously researched book, acclaimed geopolitical scholar Anthony Cordesman, well-known for his role as ABC News’s national security analyst, takes readers inside the Saudi security structure for an unprecedented look at its internal and external forces, policymaking, and careful balancing of regional and East/West relationships.

In Saudi Arabia, Anthony Cordesman shows how the Kingdom is responding to an unstable Iraq, a potentially nuclear Iran, the needs of its fellow Southern Gulf states, and the ongoing threat of terrorism inside its borders. Cordesman also considers a number of socioeconomic and demographic factors that could bring dramatic changes within the Kingdom in the near future. Nonpartisan, unbiased, and based on the author’s unparalleled access to high-profile Saudi officials, the book offers a level of expertise and insight no other consideration of the subject can match.

Source: CSIS

Book Info: “Saudi Arabia: National Security in a Troubled Region” – Anthony H. Cordesman – Amazon.com

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About Anthony H. Cordesman

Anthony H. Cordesman holds the Arleigh A. Burke Chair in Strategy at CSIS and acts as a national security analyst for ABC News. He is a recipient of the Department of Defense Distinguished Service Medal. During his time at CSIS, he has completed a wide variety of studies on energy, U.S. strategy and defense plans, the lessons of modern war, defense programming and budgeting, NATO modernization, Chinese military power, the lessons of modern warfare, proliferation, counterterrorism, armed nation building, the security of the Middle East, and the Afghan and Iraq conflicts. (Many of these studies can be downloaded from the Burke Chair section of the CSIS Web site at http://www.csis.org/program/burke-chair-strategy.) Cordesman has directed numerous CSIS study efforts on terrorism, energy, defense panning, modern conflicts, and the Middle East. He has traveled frequently to Afghanistan and Iraq to consult for MNF-I, ISAF, U.S. commands, and U.S. embassies on the wars in those countries, and he was a member of the Strategic Assessment Group that assisted General Stanley McChrystal in developing a new strategic for Afghanistan in 2009. He frequently acts as a consultant to the U.S. State Department, Defense Department, and intelligence community and has worked with U.S. officials on counteterrorism and security areas in a number of Middle East countries.

Before joining CSIS, Cordesman served as director of intelligence assessment in the Office of the Secretary of Defense and as civilian assistant to the deputy secretary of defense. He directed the analysis of the lessons of the October War for the secretary of defense in 1974, coordinating the U.S. military, intelligence, and civilian analysis of the conflict. He also served in numerous other government positions, including in the State Department and on NATO International Staff. In addition, he served as director of policy and planning for resource applications in the Energy Department and as national security assistant to Senator John McCain. He had numerous foreign assignments, including posts in the United Kingdom, Lebanon, Egypt, and Iran, as well as with NATO in Brussels and Paris. He has worked extensively in Saudi Arabia and the Gulf.

He is the author of a wide range of studies on energy policy, national security, and the Middle East, and his most recent publications include (CSIS, 2010), Iraq and the United States: Creating a Strategic Partnership (CSIS, 2010), Saudi Arabia: National Security in a Troubled Region (Praeger, 2009), Iranian Weapons of Mass Destruction: The Birth of a Regional Nuclear Arms Race? (Praeger, 2009), Withdrawal from Iraq: Assessing the Readiness of Iraqi Security Forces (CSIS, 2009), and Winning in Afghanistan: Creating Effective Afghan Security Forces (CSIS, 2009).

Source: CSIS

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Full List of Anthony Cordesman’s Publications (Source: CSIS) [LINK HERE]

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Articles and Interviews on SUSRIS by and with Anthony Cordesman

• U.S. Strategy in the Gulf – Cordesman – SUSRIS – Apr 18, 2011
• Understanding Saudi Stability and Instability – Cordesman – SUSRIS – Mar 1, 2011
• AUSPC Panel: Defense Cooperation – SUSRIS – Oct 26, 2010
• US-Saudi Security Cooperation, Impact of Arms Sales – Cordesman – SUSRIS – Sep 17, 2010
• The New Saudi Arms Deal – Cordesman – SUSRIS – Sep 17, 2010
• Reality in the Gulf – Cordesman – SUSRIS – Jul 22, 2010
• Saudi Arabia and Gulf Security – Cordesman – SUSRIS – May 18, 2010
• Saudi Arabia: National Security in a Troubled Region – Anthony H. Cordesman – SUSRIS – Oct 10, 2009
• Gulf Threats, Risks and Vulnerabilities: Terrorism and Assymetric Warfare – Anthony H. Cordesman and Adam C. Seitz – SUSRIS – Aug 31, 2009
• Regional Defense: A Need for Credibility, Effectiveness and Transparency (AUSPC 2008)- Anthony Cordesman – SUSRIS – Dec 8, 2008
• Saudi National Security and the Saudi-US Strategic Partnership By Anthony Cordesman – SUSRIS – Dec 4, 2008
• Security Cooperation in the Gulf – SUSRIS – Nov 22, 2008
• The US, Israel, the Arab States and a Nuclear Iran – Cordesman – SUSRIS – Oct 10, 2008
• Conventional Armed Forces in the Gulf – Cordesman – SUSRIS – Aug 23, 2008
• President Bush’s Trip to the Middle East – Briefing by Anthony Cordesman and Jon Alterman of CSIS – SUSRIS IOI – May 14, 2008
• Security Challenges and Threats in the Gulf – SUSRIS – Mar 28, 2008
• The Gulf Arms Sales: A Background Paper – Anthony H. Cordesman – SUSRIS IOI – Feb 5, 2008
• Security Cooperation in the Middle East – Anthony Cordesman – SUSRIS IOI – Nov 27, 2007
• Saudi Military Modernization – A Conversation with Anthony Cordesman – Interview – Nov 23, 2007
• Weapons of Mass Preservation – Anthony H. Cordesman – SUSRIS IOI – Aug 20, 2007
• Iran, Oil, and the Strait of Hormuz – Anthony H. Cordesman – SUSRIS IOI – Mar 27, 2007
• Global Energy Security – Anthony H. Cordesman – SUSRIS IOI – Nov 15, 2006
• The Impact on Saudi Regional Stability – Anthony H. Cordesman – SUSRIS IOI – Aug 2, 2005
• Saudi Arabia and the Struggle Against Terrorism by Dr. Anthony Cordesman – SUSRIS IOI – Apr 11, 2005
• Why Reforge the U.S. and Saudi Relationship? An Interview with Anthony Cordesman – SUSRIS IOI – Sep 28, 2004
• The Prospects for Stability in 2004 — The Issue of Political, Economic and Social Reform – Anthony H. Cordesman – Part 1 – SUSRIS – Feb. 23, 2004
• The Prospects for Stability in 2004 — The Issue of Political, Economic and Social Reform – Anthony H. Cordesman – Part 2 – SUSRIS – Feb. 23, 2004
• The Prospects for Stability in 2004 — The Issue of Political, Economic and Social Reform – Anthony H. Cordesman – Part 3 – SUSRIS – Feb. 23, 2004
• The 9/11 Commission Report: Strengths and Weaknesses – Anthony H. Cordesman – SUSRIS – Jul. 29, 2004
• Developments in Iraq at the End of 2003: Adapting U.S. Policy to Stay the Course,” by Anthony H. Cordesman, GulfWire Perspectives, January 7, 2004
• “Four Wars and Counting: Rethinking the Strategic Meaning of the Iraq War,” by Anthony H. Cordesman, GulfWire Perspectives, December 5, 2003
• “Iraq: Too Uncertain to Call,” by Anthony H. Cordesman, GulfWire Perspectives, November 18, 2003
• Saudi Redeployment of the F-15 to Tabuk – Anthony H. Cordesman – SUSRIS – November 1, 2003
• “Iranian Security Threats and US Policy: Finding the Proper Response,” by Anthony H. Cordesman, GulfWire Perspectives, October 28, 2003
• “What is Next in Iraq? Military Developments, Military Requirements and Armed Nation Building,” by Anthony H. Cordesman, GulfWire Perspectives, August 22, 2003
• Saudi Government Counterterrorism: Counter Extremism Actions – Anthony H. Cordesman – SUSRIS -August 4, 2003
• “Saudi Arabia: Don’t Let Bin Laden Win!”, by Anthony H. Cordesman, Saudi-American Forum Item of Interest, May 16, 2003
• “Postwar Iraq: The New Old Middle East,” by Anthony H. Cordesman, GulfWire Perspectives, April 16, 2003
• “Iraq’s Warfighting Strategy,” by Anthony H. Cordesman, GulfWire Perspectives, March 11, 2003
• “Reforming the Middle East: President Bush’s Neo-Con Logic Versus Regional Reality,” by Anthony H. Cordesman, GulfWire Perspectives, February 27, 2003
• “The Great Iraq Missile Mystery,” by Anthony H. Cordesman, GulfWire Perspectives, February 26, 2003
• “Iraq Security Roundtable at CSFS: A Discussion With Dr. Anthony Cordesman,” Center for Strategic and Future Studies, GulfWire Perspectives, January 28, 2003
• “A Coalition of the Unwilling: Arms Control as an Extension of War By Other Means,” By Anthony H. Cordesman, GulfWire Perspectives, January 25, 2003
• “Is Iraq In Material Breach? What Hans Blix, Colin Powell, And Jack Straw Actually Said,” By Anthony H. Cordesman, GulfWire Perspectives, December 20, 2002
• “Saudi Arabia: Opposition, Islamic Extremism And Terrorism,” by Anthony H. Cordesman, GulfWire Perspectives, December 1, 2002
• “Planning For A Self-Inflicted Wound: U.S. Policy To Reshape A Post-Saddam Iraq,” by Anthony H. Cordesman, GulfWire Perspectives, November 24, 2002
• “The West And The Arab World – Partnership Or A ‘Clash Of Civilizations?’” By Anthony H. Cordesman, GulfWire Perspectives, November 12, 2002
• “Strategy In The Middle East: The Gap Between Strategic Theory And Operational Reality,” by Dr. Anthony H. Cordesman, GulfWire Perspectives, October 22, 2002
• “A Firsthand Look At Saudi Arabia Since 9-11,” GulfWire’s Interview With Dr. Anthony Cordesman In Saudi Arabia, GulfWire Perspectives October 10, 2002
• “Escalating To Nowhere: The Israeli And Palestinian Strategic Failure,” By Anthony H. Cordesman, GulfWire Perspectives, April 8, 2002
• “Reforging The U.S. And Saudi Strategic Partnership,” by Dr. Anthony H. Cordesman, GulfWire Perspectives, January 28, 2002

[GulfWire Articles are being added to SUSRIS. Please check Dr. Cordesman's SUSRIS page for updates.]

Editor’s Note:

King Abdullah of Saudi Arabia traveled to Damascus on Wednesday for a two-day summit with Syrian President Bashar Assad for discussions on international and regional issues and their bilateral relationship in his first visit to Syria since becoming King in 2005. He was accompanied by intelligence chief Prince Muqrin, Labor Minister Ghazi Al-Gosaibi, Finance Minister Ibrahim Al-Assaf, Culture and Information Minister Abdul Aziz Khoja and State Minister for Foreign Affairs Nizar Madani.

Diplomats in Damascus, according to Arab News yesterday, said an understanding between the Saudi and Syrian leaders could help forge a wider Arab stance helpful to boosting Middle East peace, promoting formation of a new government in Lebanon and assuaging Arab fears on Iran, an ally of Syria.

Today we provide for your consideration an article that appeared in Arab News today outlining the results of the summit, including agreement on backing a unity government in Lebanon as well as other diplomatic, political and economic cooperative measures.

Kingdom, Syria call for a unity govt in Lebanon
Arab News

RIYADH: Saudi Arabia and Syria called Thursday for the formation of a national unity government in Lebanon. They also backed the Yemeni government in its ongoing efforts to reinforce peace and stability across the country.

“With regard to Lebanon, the two sides emphasized the importance of achieving the unity and stability of the country through the strengthening of consensus among its groups and speeding up the formation of a national unity government,” said a joint communiqué issued at the conclusion of the state visit of Custodian of the Two Holy Mosques King Abdullah to Damascus.

The communiqué urged joint Arab and Islamic action to stop the continuous Israeli aggression on the Palestinians. The two sides stressed the need to lift the Israeli siege on Al-Aqsa Mosque and confront the measures taken by Israel to Judaize Jerusalem, it added.

Saudi Arabia and Syria stressed the need for ensuring the unity and Arab identity of Iraq and opposed interference in its internal affairs. They supported Yemen’s efforts to end an insurgency that has been threatening the country’s unity and security.

King Abdullah returned to Riyadh on Thursday at the end of a two-day visit. He held a final round of talks with Syrian President Bashar Assad before leaving Damascus, with discussions focusing on major regional and international issues.

“King Abdullah received President Assad at his residence in Ash-Shaab Palace in Damascus on Thursday and the two leaders completed their discussions, which they began Wednesday, on a number of topics,” the Saudi Press Agency said, adding that the talks were attended by Prince Abdul Aziz bin Abdullah, the king’s adviser.

The two countries agreed to strengthen political, cultural and media cooperation as well as hold a meeting of the Saudi-Syrian Joint Commission as early as possible. They also agreed to expand economic, commercial, customs and investment cooperation, the communiqué added.

A meeting of the Saudi-Syrian Businessmen’s Forum will be held in the first quarter of next year to boost joint ventures while the capital of the Saudi-Syrian Company for Industrial and Agricultural Investment will be increased.

King Abdullah arrived in Damascus on Wednesday at the head of a high-level delegation in what analysts said a historic visit by the Saudi leader to improve ties. The visit saw the signing of an agreement between the two countries to prevent double taxation and avoid tax evasion.

Finance Minister Ibrahim Al-Assaf, who signed the accord with his Syrian counterpart Muhammad Al-Hussein, said it would reduce tax burden on investors and businessmen in both countries.

Al-Assaf held a meeting with Al-Hussein on Thursday to discuss prospects of expanding economic cooperation between the two countries. “The two ministers agreed on studying the issue of fees imposed on Saudi and Syrian trucks that carry goods to both countries or pass by them,” said an official statement after the meeting.

Al-Assaf and Al-Hussein also explored prospects of cooperation in banking and insurance including establishment of a Saudi-Syrian bank and a joint insurance firm in Syria. They said the volume of trade, now only $2 billion a year, would begin growing in the coming days.

“We have decided to remove the hurdles to commercial exchanges, notably the taxes recently imposed by Syria on products exported to Saudi Arabia,” such as olive oil and ceramics, Hussein was quoted as saying. For his part, Al-Assaf spoke of Abdullah’s visit, his first after becoming the king in 2005, as “very important for strengthening economic relations.” The two leaders underlined their “commitment to pursue coordination and consultations at all levels on matters that interest both peoples,” the Syrian news agency SANA said, adding that they wanted to “remove the obstacles that have hindered their relations.” Analysts said the royal visit would have great impact on the region’s peace and stability. “It was a positive visit and the talks were held in an amiable atmosphere. Both the Syrian and Saudi sides expressed their satisfaction with the talks,” said Waddah Abd-Rabbo, the editor of the semi-official Syrian paper Al-Watan.

“The Saudi monarch’s visit is expected to open up new horizons between these two influential countries, who play an important role in the region and on the international level,” Abd-Rabbo said.

Assad’s political and media adviser Bouthaina Shaaban said Syrian-Saudi relations were making excellent progress. “There is a strong need to create an Arab atmosphere that can utilize the Arab capabilities to raise the voice of Arabs on regional and international forums.”

Source: Arab News

Editor’s Note:

Today we provide for your consideration the Arab News interview with author Robert Lacey on the opening of the King Abdullah University of Science and Technology last week. Lacey, who wrote about Saudi Arabia in “The Kingdom” (1981), is author of “Inside the Kingdom: Kings, Clerics, Modernists, Terrorists, and the Struggle for Saudi Arabia, set for release in October. SUSRIS thanks Arab News for sharing this interview with you.

The level of scientific research will improve: Robert Lacey
Siraj Wahab | Arab News

THUWAL: Among a galaxy of world leaders, Nobel laureates and well-known professors and scientists at Wednesday’s opening ceremony of King Abdullah University of Science and Technology (KAUST) was the British historian Robert Lacey. A distinguished journalist with a fascination for history, he is known very well in the Kingdom for his meticulous research on events that have shaped Saudi Arabia’s history.

He is an author of a number of international bestsellers, including “Majesty” and his earlier book on Saudi Arabia, “The Kingdom.”

Lacey’s new book, “Inside the Kingdom: Kings, Clerics, Modernists, Terrorists and the Struggle for Saudi Arabia,” will be published next month in London and New York.

In an interview with Arab News on the sidelines of the KAUST opening, Lacey said KAUST would undoubtedly raise the level at which scientific research is conducted in this country. Following are excerpts from the interview:

ARAB NEWS: What are your first impressions of KAUST?

LACEY: When I first saw KAUST from the highway, shimmering on the desert coast like a mirage beside the sea, the place seemed almost dream-like — and it is, of course, the product of one man’s dream.

ARAB NEWS: How will the creation of this university help in promoting educational reforms?

LACEY: Educational reform depends on the people who shape education — from the minister and his officials to the teacher in the classroom, and to every parent who wants better schools for their children and should try to make their voices heard. The king has shown the way. Now the question is — will everyone follow?

ARAB NEWS: How will this help raise the stature of King Abdullah?

LACEY: King Abdullah has already attained considerable international stature and respect: the interfaith dialogue, the domestic program to curb extremism, the national dialogues; the Arab Peace Initiative, membership of the World Trade Organization, the introduction of human rights organizations to the Kingdom, and now a standard-setting scientific university of international standard, built and staffed in record time. After the debacle of 9/11, the king has been the saving of Saudi Arabia’s reputation in the world.

ARAB NEWS: You have followed the developments in the Kingdom for a long time. Where does the Kingdom stand at the moment? Would it be right to say that the creation of KAUST marks a paradigm shift in the government’s thinking?

On the day following the KAUST opening, i.e. Thursday the Kingdom will be represented by the foreign minister at the G20 summit in Pittsburgh — the gathering of the world’s Top 20 economic powers.

That shows the growing stature of Saudi Arabia in the world. As for “a paradigm shift in the government’s thinking” — the Saudi government is not just the Council of Ministers. It is also the Shoura Council, the Grand Ulema Council, the local governors, the municipal councils, and all the judges and civil servants as well. Have all those people really “got it”? Have they understood? Do they agree? And do they sincerely support what King Abdullah is trying to achieve? Only history will tell.

ARAB NEWS: Will KAUST lead to substantial changes in way research is done in the Kingdom? Will this university help better the level of education at other universities, such as King Abdulaziz University in Jeddah and King Saud University in Riyadh?

LACEY: KAUST will undoubtedly improve the level at which scientific research is conducted in this country. Saudi researchers will have the unparalleled opportunity to work alongside and to learn from some of the finest scientists in the world. Let us hope that the lessons will be learned and spread widely.

ARAB NEWS: What were the expectations when King Fahd University of Petroleum and Minerals (KFUPM) in the Eastern Province was launched? Were those expectations met?

LACEY: I am afraid that I don’t have the information to answer this.

ARAB NEWS: How do you think KAUST will be different from KFUPM?

LACEY: Let us hope that the two universities will work together. KFUPM is already the highest-ranked Saudi college in the international league tables of higher education. The chance now exists for bright graduates from KFUPM to go on to KAUST, and for KAUST graduates to come back to teach at KFUPM, thus enriching both institutions.

ARAB NEWS: Since you have known the Kingdom better than almost any other foreign observer, what will be your message to those coming from outside and watching the creation of this university?

LACEY: I’d say, “Look out, Saudi’s cookin’!”

ARAB NEWS: What will you say to the skeptics, both within and without, who feel that KAUST will have no major impact on the attitude of the local population?

LACEY: They could be right.

Source: Arab News

About Robert Lacey:

Robert Lacey is the author of “Majesty,” the classic biography of Queen Elizabeth II. A distinguished journalist with a love of history, he wrote the series “Great Tales from English History,” and was co-author of the best-selling Year 1000. In 1979, he moved with his family to Saudi Arabia for eighteen months to research “The Kingdom,” his penetrating study of the country’s complex and often paradoxical culture, which was banned in Saudi Arabia. For the past three years, Robert has been based in Jeddah and Riyadh, gathering material for this sequel — a completely new book which relates the Saudi role in the years of terror.

KAUST Fact Sheet:

King Abdullah University of Science and Technology (KAUST) is being built in Saudi Arabia as an international, graduate-level research university dedicated to inspiring a new age of scientific achievement in the Kingdom that will also benefit the region and the world. KAUST will be merit-based and will recruit men and women from around the world.

About The Campus:

KAUST’s core campus, located on the Red Sea near Rabigh, will sit on more than 36 million square meters, encompassing a marine sanctuary and research facility around a unique coral reef ecosystem. The campus and surrounding community will incorporate a distinctive blend of traditional regional architecture and modern styles and amenities. Key features include:

• World-class research labs and facilities
• Seaside town with a wide variety of shops, apartments and single-family homes
• Parks, playgrounds, schools for children; golf course, yacht club, marina for adults
• Minimal environmental footprint

About Research:

KAUST will focus on research that applies science and technology to the problems of human need, social advancement, and economic development. Rather than organizing around academic disciplines, four strategic research thrusts will build KAUST’s research agenda:

• Resources, Energy and Environment
• Biosciences and Engineering
• Materials Science and Engineering
• Applied Mathematics and Computational Science

About Research Centers:

To support these thrusts, KAUST will establish multi-disciplinary Research Centers.

About Scholarships and Awards:

The KAUST Discovery Scholarship:

The KAUST Discovery Scholarship provides financial support to highly talented students from Saudia Arabia around the world.

About Faculty and Students:

KAUST will be a truly international school, recruiting the best professor and student researchers.

• Faculty will be non-tenured, with renewable or rolling two- to five-year contracts.
• Students will compose a diverse, international body representative of the highest standards of academic excellence.

Source: KAUST

Editor’s Note:

This week world leaders were in New York City for the opening of the 64th session of the United Nations General Assembly. Saudi Arabia was among the countries that participated in the UN festivities, as well as in the G-20 Summit in Pittsburgh on Thursday and Friday. Saudi Arabia issued a statement that opened with congratulations to the incoming General Assembly President Dr. Ali Abdussalam Treki of Libya.

The statement, which is provided today for your consideration, issues a call for cooperation in the spirit of the UN Charter in the face of a “multitude of issues, the plethora of dangers and.. ..successive crises” and to use the criterion of “international legitimacy, international law and universal justice.”

It discussed the Israeli-Palestinian conflict and addressed the prospects for the Arab Peace Initiative as a “collective comprehensive proposal to end the conflict” but also criticized Israel’s occupation, the treatment of Palestinians and the attempt “to impose normalization of relations on the Arabs before the completion of withdrawal and the establishment of peace.”

The Saudis complimented the Obama Administration for “commendable efforts.. ..to further the peace process” but offered that it was disappointed that more “tangible results” were not achieved. It asked “how can we be optimistic” given the efforts made by the United States and the international community to “include Israel to honor the commitments to which it previously bound itself.”

The statement went on to blame the “blind eye” given to Israel’s nuclear weapons program for other states justifying non-compliance with international resolutions by claiming a double-standard, and called for a Middle East free of nuclear weapons and other weapons of mass destruction.

Saudi Arabia, it said, contributed to cooperation in countering terrorism through its organizing of an international conference and called for joint work to create an environment that will make defeating terrorism possible. Furthermore the statement offered that King Abdullah’s pursuit of interfaith dialogue was an effort to build understanding and led to a UN General Assembly meeting last year to promote that objective.

In the global efforts to combat the economic crisis Saudi Arabia, according to the statement, the Kingdom joined in expansionist financial policies to stimulate demand and counter the recession’s effects. It also endorsed efforts “to remedy the flaws in the international financial system” and to protect the interests of developing countries, while mentioning that the UN recognized that Saudi Arabia “headed the list of donor countries funding humanitarian relief operations in 2008.” The Saudi statement also claimed the Kingdom was taking important steps to address climate change, food security and rising prices of basic commodities.

The Kingdom acknowledged the important function of the UN and the community of nations to address the challenges facing the world but called for reforms of the Security Council membership, to “improve geographical representation and promote transparency.”

The statement concluded with a reaffirmation of the Kingdom’s “commitment to the United Nations and the multilateral international order, since [the] international community direly needs to take a unified and mutually supportive stand in order to devise equitable solutions to worsening global problems through diligent respect for the values, traditions and principles enshrined in the conscience of mankind which are conducive to the promotion of constructive cooperation and the achievement of security, peace and prosperity for all nations.”

Statement of the Kingdom of Saudi Arabia at the sixty-fourth session of the
General Assembly of the United Nations September 2009

Mr. President,

I have pleasure in congratulating you on your election as President of the sixty-fourth session of the General Assembly of the United Nations. I am confident that your personal talents, as well as the international standing enjoyed by your country Libya, will be highly conducive to the success of this session.

On this occasion I wish to express my gratitude and appreciation to your predecessor, H.E. Mr. Miguel d’Escoto Brockmann of Nicaragua, for his wise direction of our previous session. I would also like to take this opportunity to emphasize our support and appreciation for the endeavours that H.E. the Secretary-General of the United Nations is making to strengthen the role of the International Organization in today’s world where there is a dire need to uphold the principles of international legitimacy and promote the values of international cooperation and full commitment to the purposes and principles of the Charter of the United Nations.

Mr. President,

Although it is customary for us to meet here every year in the General Assembly of the United Nations to deliver statements detailing the issues of concern to our countries, as well as the endeavours that our Governments have made and their positions on new developments, I hope that you will allow me to depart somewhat from this firmly established tradition.

The multitude of issues, the plethora of dangers and the successive crises that are facing every member of the United Nations should not obscure the fact that we are all in the same boat and the extent of our interrelationship, interdependence and mutual influence is greater than ever before. The time has come, therefore, for us to pause, ponder and reflect. The time has come for us to recall and renew our commitment to the basic purposes underlying the establishment of the United Nations and its Charter. You may recall that the basic purpose of that Charter was to spare humanity the destructive and tragic consequences of wars, and to provide prosperity to all through cooperation within the frame of legitimacy and the supremacy of international law.

The crises, perils, conflicts and issues with which mankind everywhere is currently faced can be solved effectively only on the basis of international legitimacy, international law and multilateral cooperation in meeting the requirements of universal justice. Any other provisional arrangements and partial solutions, which some refer to as “contrived” or “compromise” or “creative” solutions, will lead only to further perils and crises, aggravation of conflicts and failure to resolve issues and meet challenges in a collective and effective manner.

In any issue with which we are confronted, in any conflict that threatens us, and in any crisis that could have fearful consequences and implications for international peace and security, or for global sustainable growth and prosperity, regardless of the complexity of its details and the intricacy of conflicting interests and differing positions, proposed solutions and initiatives must be evaluated, positively or negatively, in the light of a single standard criterion, namely international legitimacy, international law and universal justice. Any deviation from this comprehensive and imperative criterion, regardless of the pretexts put forward to justify it, and regardless of the deceptive promotional halo of publicity with which it is surrounded, would be likely to exacerbate rather than solve the problem, and would seriously undermine our collective ability to effectively address the other problems and crises with which we are all confronted.

Mr. President,

Adherence to this criterion offers the easiest, best and most effective way to settle the Arab-Israeli conflict, which is rightly deemed to pose the most serious threat to peace and security in the Middle East, a strategic region the conflicts and problems of which have an impact on the world as a whole. The fact that this conflict has lasted for more than seven decades and is continuing to have disastrous effects on the entire region is attributable solely to a blatant deviation from the principles of international legitimacy, the rules of international law and the requirements of universal justice.

The Arab World, including the state of Palestine, has done its utmost to achieve a real and lasting peace. The Arab Peace Initiative, which is still on the table, constitutes a collective comprehensive proposal to end the conflict with Israel and conclude a peace agreement that would ensure security, recognition and normalization of relations for all the States of the region. The components of the Arab Peace Initiative are fully consistent with the above mentioned criterion on which they are based and centred, thereby embodying the Arab commitment to peace as a strategic option, and in accordance with the Charter.

Everyone is aware not only of the general outline of the desired solution but also of the reasons why peace has not yet been achieved. Peace cannot, and will not, be achieved as long as Israel continues its massacres and random bombardments of the Palestinian people. Peace will never be achieved through the holding of sham, protracted and fruitless bilateral or multilateral negotiations that discuss everything except the core issues of the conflict. The peace that is being sought will never be achieved by imposing sanctions and preconditions on a people suffering under occupation while, at the same time, exempting Israel from any consequences of its violation of the most fundamental rules and principles of international law. The desired peace will never be achieved by attempting to impose normalization of relations on the Arabs before the completion of withdrawal and the establishment of peace, as though we are expected to reward the aggressor for his aggression in a reverse logic that totally lacks any form of serious credibility.

All the initiatives, proposed solutions and international endeavours in this regard have invariably run up against a wall of rejection, obstruction, bad faith and procrastination on the part of Israel, which is continuing to take unilateral measures that are incompatible with international law and Security Council resolutions. Instead of an honest endeavour to achieve peace, we find that Israel is persisting in its daily humiliation of the Palestinian people and in its construction of settlements, walls and bypass roads, all of which violate international legitimacy, with a view to creating new facts on the ground. These settlements are changing the geographic and demographic nature of the Palestinian territories, especially in and around the city of Jerusalem, in flagrant violation of international law and of all the relevant Security Council resolutions, the commitments provided for in the Road Map and the undertakings made at Annapolis. The settlements that encircle most of the main Palestinian towns in the West Bank also usurp more than half of their water resources.

I had hoped that, at the beginning of this session of the General Assembly, we would be able to express satisfaction, hope and optimism at the achievement of tangible results. Unfortunately, no real results or notable signs of progress have been achieved in spite of the commendable endeavours of the United States of America, the evident personal desire of President Barack Obama and his team to further the peace process, and the ongoing efforts of the International Quartet. If all this international concern, all this international consensus and all these international endeavours have so far failed to induce Israel to honour the commitments to which it previously bound itself under the Road Map, how can we be optimistic?

Mr. President,

Departure from the principles of international legitimacy, the rules of international law and the requirements of universal justice remains the root cause of the risks of proliferation of weapons of mass destruction that are overshadowing the Middle East, including the Gulf region. This is attributable to the fact that, for decades, a blind eye was turned to the Israeli nuclear programme which, far from even being ostensibly designed to generate electric power, produces nothing but weapons of mass destruction. This original sin has motivated some states to push ahead with the development of nuclear capabilities, using the pretext of double standards to justify non-compliance with international resolutions in this regard.

Once again, we find that the easiest, most expeditious and most effective solution lies in declaring the entire Middle East, including the Gulf region, a zone free from all nuclear and other weapons of mass destruction.

Mr. President,

Protection of human rights, the rule of law, dissemination of a culture of peace and initiatives to promote dialogue among cultures and peoples should constitute basic components of any effective strategy to combat terrorism and extremism. Needless to say, respect for United Nations resolutions and the rules of international law is the only way to resolve chronic international conflicts and defuse focal points of tension, thus preventing terrorists from exploiting feelings of despair and frustration brought about by subjection to injustice, aggression and occupation.

With a view to contributing to the furtherance of international cooperation in the field of counter-terrorism, the Kingdom of Saudi Arabia convened an International Counter-Terrorism Conference in February 2005 which was attended by experts and specialists from more than 60 States and international and regional organizations. The “Riyadh Declaration,” which was issued by the Conference, affirmed the unanimous international resolve to oppose terrorism and extremism and made practical recommendations to combat terrorism, cut off its sources of funding, and achieve closer multilateral cooperation in this field.

The tremendous developments that have taken place in the transport, communications and information technology sectors have helped to facilitate and expand contact and interaction among all the peoples of the world with their various religions, beliefs, cultures and languages. As a result, there is no part of the human family, in all its rich diversity and fertile pluralism, which is now living in isolation without affecting or being affected by others. Although these developments have generally improved human life, extremist minorities within every religious and cultural community are seeking to exploit these tremendous technological developments to propagate notions of intolerance, exclusion, racism and hatred. Therefore, we all need to work together in an earnest manner under the auspices of the United Nations in order to create an environment conducive to promotion of the values of dialogue, tolerance and moderation and the furtherance of relations of cooperation and peace among cultures, peoples and States.

For these noble purposes, the Custodian of the Two Holy Mosques launched his sincere universal appeal for the pursuit of dialogue among all the followers of the religions and cultures constituting the heritage of mankind. This initiative adopted a political, as well as socio-cultural, twin-track approach. On the political track, the Extraordinary Islamic Summit convened in Makkah by the Custodian of the Two Holy Mosques reaffirmed the consensus of all the Islamic in rejecting violence, extremism and terrorism, and promoting the values of dialogue, tolerance and mutual respect. The General Assembly of the United Nations subsequently held a high-level meeting during its last session in 2008 with a view to securing the broadest possible political support at the highest level for all initiatives seeking to promote dialogue, mutual understanding and a culture of peace.

On the socio-cultural track, Muslim religious scholars representing all Islamic denominations and schools of thought also met at Makkah where they affirmed the true nature of the Islamic religion and its message based on tolerance, dialogue and peace. This was followed, on 16-18 July 2008, by the World Conference on Dialogue at Madrid which was attended by representatives of all the major religions. Diligent endeavours are currently being made to establish a global centre for dialogue, comprising representatives of all the main religions, which will operate in an independent manner totally free from any political interference.

Mr. President,

It has become evident that the environmental, economic, social and financial issues affect us all and no State can face them alone or single-handedly avoid the dangers and challenges that they pose. No region anywhere in the world has been unaffected by the implications of the US credit crisis, which has had an impact on the international financial system, thereby undermining the world economy and confronting it with serious challenges that have entailed a slow-down in global real growth rates.

As we have seen, concerted international efforts and the adoption of a serious and credible approach to multilateral action have begun to produce fruitful results in which we can discern the first signs of improvement and a return to stability and growth in the world economy. My country has approved the largest governmental budget in its history in which $400 billion have been allocated for investment in development projects over a five-year period with a view to the adoption of an expansionist financial policy aimed at closing the deflationary gap and stimulating demand to counter the repercussions of the global financial crisis.

The best lesson to be learnt from this experience is the overriding importance of making every possible effort to remedy the flaws in the international financial system and reach international agreement on ways to remedy the flaws in the world economy in such a way as to secure a financial system that offers equal opportunities to all the parties while, at the same time, providing appropriate liquidity for the developing countries and safeguarding their monetary reserves from the collapse of any of the major international currencies.

I do not think that it would be an exaggeration for me to say that my country, which is a developing country and, at the same time, a member of the G20 whose leaders recently held an important meeting, is not uttering empty words in this regard since the record clearly shows that its course of action is fully consistent with what it has advocated, and is continuing to advocate, in all international forums.

Notwithstanding the fact that it is a developing country experiencing rapid demographic growth that implies a need for steadily increasing financial resources to cover the costs of human development, infrastructure and indigenous capacity building, the Kingdom has made considerable endeavours to assist other more needy countries to an extent that far exceeds the target set for international development assistance. The report issued by the United Nations Office for the Coordination of Humanitarian Affairs confirms that the Kingdom of Saudi Arabia headed the list of donor countries funding humanitarian relief operations in 2008.

The Kingdom donated $1 billion to the Fund to Combat Poverty in the Islamic World, in addition to its contributions to the capital of 18 international financial bodies and institutions. The non-recoverable aid and soft loans provided by the Kingdom during the last three decades amounts to $100 billion, from which 95 developing countries benefited. This amount represents 4% of the Kingdom’s GNP, which is far higher than the target set by the United Nations.

In keeping with the concern that the Custodian of the Two Holy Mosques is showing for the large-scale promotion of education in the developing countries, the Kingdom announced its allocation of $500 million for education projects in those countries.

With regard to debt relief, the Kingdom has waived more than $6 billion in debts due to it from developing countries and has contributed its full quota to the Heavily Indebted Poor Countries (HIPC) Initiative of the International Monetary Fund. The Kingdom is renewing its appeal to the industrialized developed countries to honour their commitments in regard to direct aid quotas, debt relief in favour of the most needy countries and market access, without unjustifiable restrictions, for the exports of developing countries.

Mr. President,

The urgent issues with which the world is faced, such as climate change, food security and rising prices of basic commodities, necessitate cooperation by all components of the international community in order to devise equitable solutions that take into account the interests of all in conformity with the principle of common but differentiated responsibilities between the developed and the developing countries, as provided for in the United Nations Framework Convention on Climate Change. It would be unfair to burden some beyond their capacities while showing indulgence to others who have been more instrumental in exacerbating the problem and are more capable of bearing the burdens entailed by solutions thereto.

Shouldering its international responsibilities, the Kingdom of Saudi Arabia announced, during the last OPEC Summit in Riyadh, its donation of an amount of US$ 300 million for the establishment of a special fund for research on energy, the environment and climate change. My country has also contributed US$ 500 million to the World Food Programme to meet the rising costs of food, thereby assisting 62 developing countries in all parts of the world. The Kingdom will also be covering the costs of holding the Food and Agriculture Organization’s World Food Summit, which is due to be held on 16 November 2009.

In view of the importance of international cooperation in the energy sector, the Kingdom has diligently sought to build bridges of dialogue between producers and consumers by hosting the secretariat of the International Energy Forum in Riyadh. At the Jeddah Conference of Petroleum Producing and Consuming Countries, held under his patronage, the Custodian of the Two Holy Mosques launched his initiative known as “Energy for the Poor” for the purpose of helping the developing countries to meet the costs of obtaining energy.

In this context, the Kingdom of Saudi Arabia also announced its allocation of US$ 500 million to be made available, in the form of soft loans from the Saudi Fund for Development, for the funding of energy projects in developing countries.

Mr. President,

The far-reaching international changes and the magnitude of the challenges currently facing the international community necessitate a review not only of the working methods of the United Nations but also of the structure and functions of its existing organs, as well as enhancement of its ability to prevent and resolve conflicts and maintain international peace and security. The Kingdom supports the call for reforms to secure broader membership of the Security Council in such a way as to improve geographical representation and promote transparency in its work in a manner consistent with the need to maintain due credibility, avoid double standards and ensure respect for, and compliance with, its resolutions.

The important reforms in this field should include restriction of the use of the right of veto by requiring the Permanent Members to undertake not to avail themselves of this right in order to veto measures designed to ensure the implementation of resolutions previously adopted by the Security Council. There is also a need to achieve an optimal balance between the General Assembly and the Security Council, strengthen the role of the Economic and Social Council, and ensure closer coordination among United Nations funds, programmes and activities. We reaffirm our commitment to the United Nations and the multilateral international order, since our international community direly needs to take a unified and mutually supportive stand in order to devise equitable solutions to worsening global problems through diligent respect for the values, traditions and principles enshrined in the conscience of mankind which are conducive to the promotion of constructive cooperation and the achievement of security, peace and prosperity for all nations.

Source: Saudi Arabian Ministry of Foreign Affairs

Editor’s Note:

Today we provide for your consideration several articles marking the opening of the King Abdullah University of Science and Technology in Saudi Arabia. This article provides comments about the impact the university will have in the Kingdom including reference to US-Arab Tradeline, the newsletter of the National U.S.-Arab Chamber of Commerce. The Chamber’s President and CEO David Hamod was among the guests at the KAUST opening and in the cover note for the Tradeline focusing on KAUST he said he “was very impressed by the vital role that KAUST is expected to play in enhancing Saudi Arabia’s position as a knowledge-based society and in paving the way for generations to come. SUSRIS wishes to thank Arab News for sharing this article with you.

US magazine marks KAUST opening with special issue
Arab News

WASHINGTON: As a clear illustration of growing US-Arab business relations, the National US-Arab Chamber of Commerce (NUSACC) brought out a special edition of its magazine, US-Arab Tradeline, that highlights the opening of King Abdullah University of Science and Technology (KAUST) and emphasizes the growing commercial relationship between Saudi Arabia and the US, accordin