I

l

THE PERSIAN GULFand

SOUTH ASIA

ALSO FROM

CBNTRE FOR POLICY RESBARCH

REGIONAL COOPERATION ANDDEVELOPMENT IN SOUTH ASIAVol. 1: Perceptional, Milithry and Nuclear

Arms Raco ProblegrsVol. 2: Political, Social, Technological and

Resource Aspects

Eprron: BnnnlNr SsN Guprn

"Both volumes are rich in contqnt, eloquent in style, stimulatingand thought-provoking. They are pioneering additions in the fleldof regional coopcration and dcvelopment in South Asia." The

Hindustan Times, 13 July 1986.

"Since regional cooperation in Sorfth Asia is till now just apromiserather than an achievement. the authors of this two-volume workquite rightly concentrate on the tnajor problems that stand in theway of such cooperation. While dOing so, they have been able toproducc a collection which is worth any reader's time if he orshe has an interest in South Asian affairs either as a scholar or as aaittzen."*The Telegraph, 16 November 1986.

THE PERSIAN GULFand

SOUTH ASIA

Prospects and Problems ofInt e r-r e g io nal C o o p er at ion

EDITED BY

BHABANI SEN GUPTACentre for Policy Research, New Delhi

SOUTH ASIAN PUBLISHERSNew Delhi

Copyright O Centro for Policy ResearohNew Delhi, 1987

All rights reserved. No part of this pubficationbe reproduccd or traosmitted in any forin orby any means, without th€ writtetrpermission of the publishers.

SOUTH ASIAN PUBLISHERS PVT. LTD.36 Netaji Subhash lvlarg, Daryaganj, Ndw Delhi 110002.

rsBN 81-7003{?7-3

Published by South Asian Publi$ers Pvt. Ltd., 36 N€{qii Subhash Marg,Dafyaganj, New Delhi 110002 and printod at Prabhat Press,20/l Nauchandi Grounds, Meerut 250002. Printed in India.

Foreword

This volume brings to fruition the second phase of the Centre forPolicy Research Project on Regional Cooperation for Development.The papers edited and collected for this volrrme by my colleague,Ptofessor Bhabani Sen Gupta, were presented at athree-day seminarheld at the CPR in March 1986. A year earlier, CPR held a six-dayworkshop on Regional Cooperation for Development in SouthAsia.

The concept of regional cooperation has taken firm roots in SouthAsian minds, however slow and halting may be the steps taken bythe governments towards a goal that is now widely shared. Nogeopolitical region is self-contained; indeed, regional cooperationin the Third World is an integral fragment of the growing designfor South-South cooperation reaching out to North-South coopera-tion for worldwide development of the human condition. It is natu.ral therefore that CPR should reach out from South Asia to theadjoining regions of South-West Asia or the Persian Gulf andSouth-East Asia. With both regions South Asia has developedsturdy historical and contemporary linkages.

The seminar on Prospects and Problems of Development Coopera-tion betwecn South and South-West Asia sprang naturally fromour workshop on Regional Cooperation for Development in SouthAsia. We are now set for a tbird seminar to explore prospects ofinter-regional cooperation between SAARC and ASEAN, the tworegional cooperation organizations in South and South-East Asia.The papers presented at this seminar will form the fourth and ffnalvolume within the scope of the CPR project which will have run forthree-and-a-half years under the overall supervision of ProfessorBhabani Sen Gupta.

For our South Asia-South-West Asia seminar we tried to get

scholars from the Gulf region, but failed to get positive respoqses

I

vi FoREwoRD

to our invitations. From Pakistan, lowever, came lt{r M.B. Naqvi,an eminent journalist with long-tine association with the Pakistanand Gulf Economrisl. Bangladesh was represented by Dr ffnmayunKabir of the Bangladesh Institute of Strategic Studies. Indian parti-cipants came from Delhi and Bombay.

The ten papers presented in this volume cover almost all the

major aspects of the political ecotomy of the countries in thcPersian Gulf region and explore present and future prospects ofdevelopmental oooperation between these countries and South Asia'The ffrst two papers, written by Profbssor K.R. Singh' of the School

of International Studies, Jawaharlal ['{ehru University, and Professor

Bhabani Sen Gupta, respectively, examine security linkages between

South and South-West Asia and 4rgue for making these linkagestruly indigenous and strong. Profes$or Singh offers a constructivedesign for a "nonaligned security doctrine" erected on a consensus

of understanding among the countrles of the two regions. ProfessorSen Gupta wants India and Pakistan to jointly ensure that Pakistan

is not dragged into a wider war in the Gulf region involving one orboth superpowbrs. Mrs Gulshan Dietl, also of SIS-JNU, offers an

interesting portrait of the mutual perceptions of the GCC and the

superpowers. Since perceptions often determine the range of inter'statc relationsbip, bilateral as well ds multilateral, her essay indicat.es the reach and the constraints of the GCO nations' interactionwith both superpowers.

At a somewhat diferent but still Interconnected level, Mr JawidLaiq, a CPR Fellow, looks critically into the GCC countries' impetus

for regional cooperation. Mr Laiq'$ conclusion is that the most im.portant impetus is to ensure these oountries and their regimes fromintolerable pressures from internal 4nd external sources'

Dr Pradeep Bhargava also a CPR Fellow, in a pioneering paper,

examines the political economy afid state structure of the Gulfcountries including Iran and Saudi Arabia. His paper may raise

eyebrows especially where he questlons if the Islamic regime in Irancan be called "fundamentalist"; liowever, his description of the

domestic politics followed by Gdlf region regimes as "welfarestatism" is likely to fnd general acdeptance.

Picking up the Islamic theme, Mt Asghar Ali Engineer, Directorof the Centre for Islamic Studies, Eombay, probes a very importantquestion: is Islam a cobesive or a divisive factor in generating co'

FonswoRD vii

operation between the Grilf region, which is the home of Muslims,and South Asia, which is inhabited by Hindus, Muslims, Buddhistsand Christians. Mr Engineer's conclusion is that religion is nobarrier to cooperation between the two regions; within and betweennation-states it plays both cohesive and divisive roles; further, reli-gion's place in tbe human condition changes with the nature,momentum, and social and economic thrusts of development.

In three interconnected papers, Mr S.P. Seth, who came to CPRas a Fellow from Australia to work for tie Project, Dr V.L. Rao,of CPR, and Dr Girijesh Pant, of SIS-JNU, take a comprehensivelook at prospects and problems of economic cooperation betweenthe Gulf and South Asian countries. Despite their different appro-aches to the subject, they agree on one point that should interestall South Asian countries, namely, the Gulf states will remain fora long time substantially dependent on migrant labour from SoutlAsia, skilled as well as unskilled. Between them, the three papersoffer interesting insights on the transition of the Gulf countriesfrom feudalism to capitalism and the role modern institutionslike commercial banks are playing. These papers, then, need be

read along with Dr Bhargava's paper on the political economy ofthe Gulf states.

Mr Ajay N. Jha, a young researcher and scholar of SIS-JNU,has contributed a paper on the growing relationship between Indiaand the Gulf countries.

These papers, valuable as they are, do not tell the entire story ofthe CPR project, The CPR faculty gained a lot from a whole year'sresearch, study and discussion of the issues involved in inter-region-al cooperation between South Asia and the Persian Gulf countries.Oral participation at the seminar, not included in this volume, con-stituted an enriching intellectual experience. Overall, CPR's Region-al Cooperation for Development Project has made a signiffcantcontribution to the steadily growing pool of inquiry and understand-

ing of the objective and subjective realities that govern develop-mental cooperation between and amongAsian countries both at theregional and inter-regional levels. This volume should therefore be

read withthe two that emerged from the CPR workshop on SouthAsia, namely, Regional Cooperation and Development in South Asia,Vols. I and 2 (New Delhi, South Asia Publishers, 1986).

I wish to thank all my colleagues and scholars fromother institu-

tions in India wbo took part in the OPR seminar and gave us

paelousty of their knowledge and nvisdom.

Tbe fourth volume in this series will be plblished before the end

of 1987.

viii Fm,rwo*p

Centre for Policy Research

New Delhi 110021

December 1986

V.A. Per PaNeNoKsRDrREcroR

Contents

FoREwoRD

CoNxrusuroRs

I. K,R. SINGHSecurity Cooperation between South Asia andthe Gulf-Scarch for a New Framework

2. BHABANISENGUPTASouth Asia and the Iran-Iraq War

3. S.P. SETHThe Gulf Region and South Asia-Prospccts ofEconomio Oooperation

4, GIRIJESH PANTSouth Asian Migration to the Gulf-Problems andProspects

5. ASGHAR ALI ENGINEERIslam as a Oohesive/Divisivc Factor in Gulf-SouthAsia Cooperation

6. PRADEEPBHARGAVAPolitical Economy of the Gulf States

7. GULSHAN DIETLGulf Cooperation Council and the OutsidePowers-A Study in Mutual Perceptions

xt

28

36

68

98

lt0

135

x CoNTENTS

8. JAWID LAIQ

9.

10.

Gulf cooperation c ouncil-+-3oyal Insurance

against Prossures from Wittin and Without

V.L. RAOGulf International Banking

AJAY N. JHAIndia's Relations with the Gulf Oountries-Issues and

Responses

t70

209

242

Contributors

Pradeep Bhargava is Fellow at the Centre for Policy Research.His forthcoming books arc Political Economy of Sri Lanka(Navrang, New Delhi) and Political Economy of the Gulf States(South Asian Publishers, New Delhi).Gulshan Dietl is Associate Professor in the Qentre forWest Asian and African Studies, School of InternationalStudies, Jawaharlal Nehru University, New Delhi. She has

authored The Dulles Era: America Enters West Asia (LancerInternational, New Delhi).Asghar Ali Englneer is Director, Institute of Islamic Studies,Bombay, He is a well known activist in enlightened Islamicpolitics and edits a bulletin entitled Islamic Studies.Ajay N. Jha is a doctoral fellow in the Centre for WestAsian and African Studies, School of International Studies,Jawaharlal Nehru University, .New Delhi.Jawid Laiq is Fellow at the Centre for Policy Research, NewDelhi. tle got his grounding in political studies while doingfield research for London University among Indian planta-tion workers in Malaysia and Sri Lanka. Formerly he work-ed with the Economic and Political lTeekly, Indian Expressand now defunct New Delhi magazine. He was also a corres-pondent of Kuwait News Agency.Girijesh Pant is Associate Professor in the Centre for WestAsian and African Studies, School of International Studies,Jawaharlal Nehru University, New Delhi. He has publishedpapers in several scholarly journals.V.L. Rao is Rescarch Professor at the Centre for PolicyResearch, New Delhi where he holds the State Bank of Indiachair. He is a frequent contributor to economic journals and

l.

,

J.

6.

4.

5.

1

xu CoNIRIBUTORS

newspapers on

banking.various aspects of int€rnational trade and

9.

8 . S. P. Set& was Fellow at the Centre for Polioy Research, New

Delhi. IIe was formerly Assistant Editor, Times of India and

is currently a freelance schcilar and journalist operating from

Australia.Bhabani Sen Gupta is currently Research Professor at the

Centre for Policy Research, New Delhi, and a columnist forleadiog newspapers in India. He has been Senior Fellow and

Head of the Disarmament Studies Division, School of Interna'

tional Studies, Jawaharlal Nehru Uoiversity, New Dclhi;Senior Fellow at the Schoot of International Affairs, Columbia

Univcrsity, New York; a Rockfeller Fouadation Fellow for

the Study of Intcrnational Oonflict; and a Consultant to the

Human Rights Commission and the UN Disarmament Com-

mission. He has authored several books iacluding Nuclear

Weapons? Policy Options fdr India (Sage, New Delhi" 1983)'

The Afshan Syndrome: Havt to Live with Soviet Power (Yikas,

New Delhi, 1982) and has ddited Sofiet Perspective of Con-

temporary Asia(South Asiad Publishers, New Delhi' 1984) and

Regional Cooperation and 'Development in South lda, Vols.

I and 2 (South Asian Publlshers, New Delhi' 1986).

K.R. Singh is Professor and Chairman, Centre f,or West

Asian and African Studics, School of International Studies,

Jawaharlal Nchru university, New Dethi' r{e has authored

several books including, The Indian Ocean: Big power pre'

sence azd local response (South Asian Books, Columbia)Iran-quest for security (likas, New Delhi) ar.d The Persian

Gulf and Arms Control (Strbtegic Defence, Australia).

10.

1. Security Cooperation between South Asiaand the Gulf: Search for a New tr'ramework

K.R. SINGH

Regions per se are never tbreatened. Threats are posed to the regimes

in power, to the political, economic and social systems in a given

state, or to the territorial integrity and sovereignty of the state in agiven rigion. These threats can be posed either by forces within the

region itself, from outside the region or by a combination of the

two. Before the security framework is defned, the nature of these

threats need to be correctly assessed. Thereafter appropriate

counter-measures can be evolved.

Many of the regimes in the Third World are threatened either by a

coup d'etat or by a revolution. There is a basic difference between the

two. Change of regime by a 'palace' coup might replace one ruling

elite or its faction by another without bringing about a basic change

in the nature of the state system. Such palace coups occurred inPakistan when General Yahya Khan replaced General Ayub Khan

or when Abdul Salam Aref replaced Abdul Karim Qassem in Iraq,

These were not revolutionary changes, thougb cach of them threat-

ened the regime in power. However, some regime changes denote

basic reorientation of the state policy. Such revolutionary changes

were brought about in Iraq in 1958, Afghanistan in 1978 and lranin 1979. Tbey not only brought about the downfall of monarchiesbut also altered the socio-economic ethos of those states.

Absence of agreed ground rules for a smooth transition of power

is partly responsible for these dramatic changes. Over a number ofyears, a regime gets equated with a particular systemic pattern.When a smooth transition is hindered, the cumulative force bringsabout a revolution. Not only are these regimes overthrownbut the changeover is also accompanied by basic changes in thestate system. Revolutions in Iraq, Afghanistan and Iran not onlychanged the regimes from a monarchy to a republic but these

2 Tnr PrnshN Gur.r eNo SourHl Asre

changes also paved the way for Baalh sociallsm in lraq, communismin Afghanistan and Islamic fundamEntalism in Iran.

The elite of the concerned state as well as several regional andoutside powers benefit from the ptevailing system. Hence, possi-

bility of systemic change is seen as 4 threat to their combined secu'rity and is resisted. For example, tle West and the Gulf Coopera-tion Council (GCC) countiies, espdcially Saudi Arabia, are linkedwith common political, economic lnd strategic bonds. The West

wants an assured supply of oil at a feasonable price as well as seeks

a favourable means of recycling the petrodollars. This can be best

assured by maintalning the status qtro in these states. The regimesof the GCC states also benefit the West's concern for oil andpetrodollars. Hence there is a strat$gic consensus between the two.Oonsequently, the GCC states not harm the basic strategicintcrests of the West. In return, the West has a strategic interest inguaranteeing the survival not only of these regimes but also of thesystems that they help to

Despite the strategic linkage, cannot always be averted.Once the change is brought the new elite, after it settlesdown, also seeks new equations in ihe region and beyond it. Thiscycle of status quo and revoluti transformation continues be-

that would help accommodatecausc of lack of adequatethe existing system to new changes bnd popular aspirations. Several

societies in the Thlrd World that not well equipped for these

changes, as well as their respectivo igreat power partners, feel thattheir security is threatened by these challenges. The so-calledthreats from socialism and Nasseiism in the past and religiousfundamentalism today arise partly from that syrdrome,

The third source of insecurity is the threat to the territorial inte-grity and sovereignty ofa given state. This type of tbreat is posed

due to two main causes; emergencd of new ccntrifugal forces in a

state due to weakness in national i{tegration, and historical claimsand counter-claims among the states thomselves. Thus, threats toterritorial integrity and trational sovBreignty can arise from within thecountry itself, originate from abroad and be fueled from there or can

be the result of a oombination of bbth these factors. The Kurdishffovcment and the Dhofar rebelliori illustrate this point.

The Kurdish movement is a legdcy from the past. The disinte-gration of the Ottoman Empire and the creation of new states inthe post-World War One period gai,e hopes to the Kurds that they

K.R. SINGg 3

too might be able to have a homeland of their own. But, while thepartition of the Ottoman Empire resulted in the carving out ofstates like Iraq and Syria, the Kurds did not benefit from it. Onthe contrary, the partition of thc Ottoman Empire further sub-divided them. Before the First World War, the Kurds were livingin two states; tbe Ottoman Empire and lran. Now they are spreadover four states; Iran, Turkey, Iraq and Syria.

All through thesc years, thc Kurds have been agitating for therecognition of their separate entity but have been denied that exceptin Iraq where their scparate ethnic idontity has been recognizedu[der an agreement between the Iraqi Government and the rc-presentatives ofthe Iraqi Kurds. Turks refuse to recognize themand call them moutrtaio Turks. Kurds have also been used as pawus

in the chess-board of regional rivalry. Iran and lraq both uscdthem at one time or another to put political and military pressureagainst the adversary. That has sustained the Kurdish movementall through these decades.

?hough the Kurds have learnt the art of using the Iraq-Iranrivalry to their best advantage, they also know that neither Iraqnor Iran would allow them to form a separate state because anindepeudent Kurdish state, howsoever small, would poso a threatto the national integrity of all the four regional powers; Iran, Iraq,Syria and Turkey. Thus, while the Kurdish movement is kept aliieby all parties and supported by one regional power or the otheragainst the adversary, it would never be allowed to emerge as anindependent force capable of challenging any of these states. Hence,it will remain a source of perpetual destability and yet will be unableto achieve its objectives under present circumstances.

The Dhofar movement has its local base in Oman and supportbases among the neighbouring and foreign powers. It had its rootsin the demand for autonomy and a better deal for the people ofDhofar, an outlying provioce near the border of South Yemen.Gradually the movement acquired Marxist overtones and spread tosome areas in tbe eastern part also, especially in the Djebel Akhdarregion near the Gulf. The movement enjoyed base facilities inSouth Yemen and was supported by tbe Chinese and the Soviets.By 1971-72,the movement had acquired serious proportions. Neigh-bouring Arab states of th€ Gulf and Iran as well as UK began tosupport Oman ffnancially and militarily to contain the movgment.In fact, Iranian troops took active part in anti-insurgency operations

4 THE hRstAN GULF AND Sotml ASIA

in oman. Also, by 1972, China, wishing to improve its relations

with the Gulf states, especially with lran, withdrew its open support

from the Dhofar movement. By thp end of the seventies, thanks tothe Kuwaiti diplomatic eflorts, Sotrth Yeriren also showed political

restraint. Consequently, the Dhofar movement has been effcctively

contained. Dhofar and Kurdestaq movements prove that while inthe case of Dhofar, effective regipnal cooperation and adequate

socio-economic inputs helped to st4bilize the region, policy of ex-

ploiting the Kurdish movement f6r short-term political objectives,

has sustained and often helped to irrtensify the Kurdish movement'

Great power aspiration to domipate a state or a region either forits natural resources and wealth or for strategic reasons also

threatens the territorial integrity and national sovereignty of a

developing state. Recent history oF the Third World is a witness toit. These areas were brought under colonial dominance and great

power hegemony either because of their geopolitical importance ortheir economic advantages. Today, the Gulf is a major target ofgreat power rivalry because of itq huge oil resources and also be-

cause of its geopolitical location. During tbe days of colonialism,

these areas were either occupied bf European powers or were sub-ject to unequal treaties. Today, the dominance is sugar-coated

under terms like strategic consengrrs, Targets, however, romain the

same.

RBcroNe.u CooPsnertoN AND SBcIJRITY

Ill-effects to these threats in their wide spectrum, can be avoided,

to a large extent, through cooperation not only within the region

but also between two or more regions. However, to attain such a

cooperation, three things are essgntial. Firstly, there has to be an

effcctive understanding among all the members of the region. Sub-

sequently, there has to be an undefstanding among the regions con-

cerned on the interdependense of tfeir security and on a framework

to protect it. Lastly, the regions should generate adequate capabilityto efectively help each sfher in providing the necessary help inensuring their mutual security without increasing their dependence

upon great powers.When one analyses these three preconditions of cooperation for

security between South Asia and the Gulf, one finds that thero are

serious diffiqulties in their practioall implementation. The very first

K.R. Srrcn 5

variable and in a way the most ciucial one-unity of understandingamong the members of each region-is lacking in both the regions.In South Asia, despite the great fanfare with which the SAARC waslaunched, there is neither a climate nor a framework of regionalunderstanding on security matters. Despite long and protractednegotiations, Indo-Pak relations have not improved substantially.To the traditional points of dispute like the Kashmir questionand thc arms buildup, new factors like the punjab problem havebeen added thereby leading to greater mistrust. India's relationswith Sri Lanka have also been deteriorating largely due to the ill-treatment of Tamil minorities in Sri Lanka and its domestic reper-cussions in lndia,

There is nothing encouraging in the Gulf either. The traditionalIraq-Iran rivalry has taken a more virulent form and oncc again isthreatening to turn into an Arab-Iranian rivalry. Except for Syriaand to some extent Libya, almost all the Arab states are supportingIraq today, The lraq-Iran conflict has also accelerated the processof unity among the monarchies in the region. These states in theArabian peninsula have grouped themselves into the Gulf Coopera-tion Council (GCC). It should, however, be noted that the GCCconstitutes only a sub-system of the Gulf and hence the name GulfCooperation Council itself is a misnomer.

At the moment there are three main atcors in the Gulf. They arethe GCO states, Iraq and lran. They have conflictual rclations. TheBaalhist Iraq, though it has come closer to dhe GCC, because of theIraq-Iran War and the so called threats of Islamic fundamentalism,was till recently treated as a serious threat to the security and eventerritorial integrity of the states of the Arabian peninsula. Untilthe downfall of the Shah and more so before the tide of the Iraq-Iran War began to turn against lraq, Iraq was considered by mostexperts of the Gulf as the greatest single source of threat to regiotralstability, both politically and militarily, and was used as one of thcjustifications for arms transfer in the region. Today, Iraq is pro-jected as a front-line Arab state by the GCC state. Will this per-ception survive the end of the lraq-Iran War? Iran, under theShah, was regarded as a pillar of regional stability, especially bythe Arab monarchies. Today, Iran is considered as a dangerousenemy both by Iraq and by the GCC members. Thus, intra-regionalunderstanding, vital for maintaining and promoting regional secu-rity, is lacking in both regions.

6 Tss PERSTAN Gur-r nxp Sourtrr Asn

One would arguc that since

the members of the region, talk

areas of Saudi Arabia. But wouldasaiust South Yemren or lran' orin Saudi Arabia or the GCC

These uncertainties raise

is no understanding betweco

the possibility of cooperatim

be deployed in actual combatto preserve regime stability

? It is not known.

between the two regions would be fiar fetched. Logically, that wouldbe true despite the understanding some of the membem ofeach of these two regions"between Pakistan, fran and

such understanding existed

Pakistan and tle GCC in generalunder the CENTO. Today,

Saudi Arabia in particularhave arrived at that The earlier framework of co-operation among these states was uoon the Western defencepact. The presentt framework of security understanding also falls

undcr that patterr though these st&tes claim to be nonaligned. Asnoted earlier, the systcmic linka$e between these states and the

West is a strong binding force betgeen them.The CENTO as well as the preseot aligrurent of forces in these two

regions were influenced in the p4st, and continue to be influencedeven today, by the great power rivlalry within the framework of abipolar world order. Moreover, both of them are directed against

the Soviet threat as perc€ived by tbe USA and these regionalpowers. Such a framework of cooperation between regional powers

and great powers, in the context .of the Cold War rivalry, wasrcsisted in tbe paot and will contlnue to be resisted in future byother states in the region. It wil be difficult to envisage India'scooperation for the security of the area in an environhent in whichPakistan and Saudi Arabia are linked up, in a strategic understand-ing, with the USA and Chiaa. lledce, if effective and credible intra-regional and intcr-regional coopQration has to be brought about,

eforts should be directed to loo$en tbe strong linkages between

some of the regional powers and great powers, conceived in the

context of cold war rivalries.Anotler point that needs to tfe noted is that the extent' scope

and nature of cooperation betweed these powers in the area has tobe clearly defined to avoid confusibn and misunderstanding. Therc

are reports of large number 'of Plakistani troops in Saudi Arabiabut neither the number of such trdops nor the nature of their workis spelled out bY either ofthe gov Reportedly these troopsare stationed near the frontiers of South Yemen and in outlying

doubts.abqlt the prospectr of

K.R. Srrcn 7

cooperation between South Asia and the Gulf. In fact, the presentalignments of forces in South Asia and the Gulf and their linkageswith great powers further divide the regional powers and lead togreater insecurity.

The acoelerated arms race in the area, especially in the Gulf, hasadded to the sense of insecurity. Regional powers are spending ondefence at an alarming rate (see Table l). Yet, regional conflictshave drained tbe strength of these local powers. No state thatdepends for its security upon great powers cau be called trulyindependent and sovereign. Hence their so called security policybased upon the notion of military superiority, has in essence, erodedtheir independence and sovereignty without adding to their overallsecurity. Any effort to add to that military strength only height-ens the sense of insecurity.

If a political process leading to real regional cooperation can be

worked out it will be obvious that these states can take care of themilitary threats to their security from forces outside the region tillsuch time as the international factors come to their rescue. A glanceat the military and paramilitary strength of these countties, even

small statcs of the Gulf, reveals that the conventional militarycapability of many of them has not only inoreased considerably butalso can compar€ favourably with that of any medium power (see

Table 2). Politico-military capabilities of these tegions, however, is

cancelled out due to intra.regional rivalries and factions. At the

moment, these forces are deployed in confrontation with each otherin the region and hence instead of ensuing the security ofthe region

lead to its insecurity. Situation can alter dramatically if these forces,

instead of confronting each other in the region, are redeployed so

as to confront the outsiders.

DEFTNING REcIoN FoR SBcuRrrY CooPnnetrou

It is essential to define the concept of a 'region' for the typc ofcooperation that is euvisaged. At the moment' region is broadly

a politico-geographical entity governed by two main factors; geo'

graphical cootiguity and political acceptability' Other equaily

important factors like water resource management, economic oapa-

bility, maritime interests, socio-cultural linkages, etc' are by and

large, ignored while forming these regions. The disadvantage of a

region bas"d primarily upon politico-g€og;raphical factor alone is

8 Tsn PsPsteN GULF AND Sour$ AslA

TABLE I' DTFBNCE E:<Ps!'IDrruRB AND ARIVIED FoRcEB

OF fi{E GULf STATES

Couniry Defenceexpenditue

$ billion

Armcd forcesco0o)

Para-militarYforces('000)

Bahain 1978

1983

Ira,D 1978

198s

Iraq 1978

1985

Kun'ait 1978

1985

Oman 1978

198 5

Qatar 1978

1984

SaudiArabia 1978

1985

UAE 1978

1985

0.043

0.332

9,94

t3.877

1.66

13.831

o ,322

| ,43

0..767

2.076

0.051

0. 165

9.6t

t7 .78

0.66r

2.043

2,t

2,8

413.0

305.0

212.0

512 .O

t2.o

12.O

19.2

21.5

4.0

6.0

58.0

52.Oa

29.5

43 .0

na

2.18

?4,0

570.0

79 .O

654.0

na

na

J.'

3.5

4l .5

33.5

na

na

na

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that it not only ignores other viable avenues of regional coopcra-tion but also tends to creatc antagonistic groups within the same

A legign defined primarily on tbe basis of contiguity, in a tradi-tionally accepted geographical division of the globe, will not alwaysbe appropriate as a unit for regional security. This definition ofregion will become all the more inappropriate if two or more tradi-tionally defined adjacent regions think of pooling their resources forevolving a framework of common security. Regions traditionallycalled as South Asia and the Gulf per se are not appropriate units €''

.

for evolving a common security framework.If one iakes South Asia as a regional division one finds that

while it gives the impression ofa cohesive geographical entity, few

of its members can interact with the others fruitfully in securitymatteri, unless they individually and collectively interact with thecentral power, India. As has been noted earlier, South Asian states

have not only differbnt security perceptions but many of them arepursuing antagonistic policies. Thus, they cannot, at least for thetime being, hope to evolve a South Asian framework of security.

Their geopolitical positions, however, make it easier for themto interact separately with sub-systems outside South Asia. Bangla-desh, though treated as a part of South Asia, is equally close toBurma and South East Asia. Pakistan, since the partition andespecially after 197 l, is openly searching for a West Asian identityand has deliberately tended to devslsp stronger political, economicand strategic ties with states of West Asia than with those of SouthAsia. lndia, thanks to its central location, has the unique geogra-phical advantage of the capability to interact fruilfully with boththe flanks of Southern Asia. Some of the members of South Asia,like Nepal, Bhutan, Sri Lanka and the Maldives are so isolatedthat they cannot hope to effectively participate in any other regionalsub-system except South Asia. Moreover, the roles of the islandstates in security matters would differ drastically from those of theisolated mountain kingdoms. It is also difficult to envisage a situationwherein Nepal".Bhutan or Bangladesh can effectively participate intbe'security framework of the Gulf or vice versa.

The Gulf also cannot be treated as an independent unit for pur-poies of security. Its security is linkcd not only with some states ofSouth Asia but also with those of the Levant and North East

Africa. The Gulf aod South Asia dlso interact directly and indirectly

14 THB PsR$ew Gurp ,q,No Sours Asrl

with at least threo great powers; tfte USA, the USSR and China.Hence, for all practical purposes, dhe framework for regional secu-rity cannot be based upon the traditional concepts like South Asiaand the Gulf but upon the new cofcept of treating the Arabian $ea,its extension as well as its littoral as one composite region.

Crt,c.NcNc GEo-srRATEGrc Srnucfunns oF THB REcroN

The study ofthe question ofconducted under four main

in this broad region can be

0 Security in the area fallingarea south of the Soviet CentralPlateau to the Caspian Sea and

the northern tier, i,e. theAsia extending from the Pamir

of the immediate littoral ofthe Arabian Sea. It would coverof Pakistan, Iran and lraq.

and the northern Parts

(ii) Security ofthe littoral of ttrre region extending from SouthIndia to East Africa includingthe Bab al-Mandeb. It will

Gulf, the Red Sea littoral and

the western coast of India,southern parts of Pakistan, Iran, Iraq, the whole of the ArabianPeninsula, the Horn of Africa and will extend to the African coastdown to Kenya.

(iiD Security of the island repu lics of the region, especially SriLanka, the Maldives and tho Seychelles.

(iv) Peace, security and freeddm of navigation in thc ArabianSea and its natural projections, i.ej tle Gulf and the Red Sea.

Before one seeks to evolve a frahework of security for this regionit will be important to evaluate it$ strategic enviornment and thepossibilities of changes thorein. fhis area had enjoyed a stablestructure for a long time, at least sihce the beginning of this century.However, serious structural cbanggs have taken place in the strate-gic environment of this area since [he last decade. lts ramificationsneed to be carefully studied before a framework of regional securitycooperation can be thought aboutl

Till recently, the strategic struc ure of this area could be des-cribed as constituting four horizpntal parallels, These were Jheiouthern periphery of the Soviet Cehtral Asia, tho northern tier or thearea immediately adjoining the Soviet Ccntral Asia, the southern tieror the Arabian Sea/Gulf littoral, afd lastly the Arabian Sea propermerging into the Indian Ocean. Tbe Anglo-Russian rivalry duringthe nioeteenth cdntury consolidatdd these parallels. Britain was the

K. R. Sntau 15

undisputed sea power and the Russian presence was uncontested inCentral Asia. The area under study, stretching from the PamirPlateau to the Caspian Sea and sandwitched between the land power

and the sea power, was divided into two distinct spheres of in-fluence. Russia was conceded special interest in the northern tier.Britain retained its dominant role in the soutbern tier. The 1907

agreement between these two powers gave a seal of diplomaticapproval to this division of the area into spheres of influence'

Of course, the people of the area were not consulted. But when

Iran was occupied during the Second World War by the USSR inthe north and by Britain and the USA in the south, that concept

was reiterated in practice.Attempts were, however, made by both the parties to extend

their spheres of influence in each others zone of influence. TheSoviets tried to assert their position in northern Iran in World Wars

I and II but had to backout under tremondous diplomatic pressures.

With the commencemetrt of the Cold War, this coexistence was

maintaincd in Afghanistan but not in other areas of the nortberntier like Turkey, Pakistan and lran. Attempts were made to alterthis correlationship of forces, especially after the visit of John

Foster Dulles to this region in 1953. When Iran joined the Baghdad

Pact, or CENTO as it was called after the 1958 coup d'eat in Iraq'the sea power was not only able to extend its sway right upto the

southern periphery of Central Asia but coul{ also threaten the

Soviet heartland from the military basis in Iran, Turkey and

Pakistan. Though the 1958 coup d'etat broke Iraq away from the

sea power's influence, and subsequently put it under the influenceof the land power, the change had only a limited impact upon thebasic structure of the four horizontal parallels because of lack ofdirect land access. These parallels, though dented, did notdisintegrate.

As noted earlier, these horizontal parallels continued to be thebasis of the Western strategy for that region even after the Second

World War. The so called northern-tier concept of John FosterDulles, which led to tbe formation of the Baghdad Pact/CENTO,was parfly based upon it. The subsequent US strategies and poli-cies, as enunciated in the Eisenhower Doctrine of 1957, also reflect-ed that framework. Even the US naval strategy in the IndianOcean since the early sixties, the Nixon Doctrine of 1969 and tbesubsequent strengthening of lran under the Shah followed the logic

16 Tnr PER.sIAN Gur-n eno Souru Aste

of those geo-strategic structures. As long as they were secure theUSA could afford to take a low trlosture vis-a-vis this region.

These horizorrtal parallels, that had given the area a strategicstability, though by a balance of forces brought about by the greatpowers, began to disintegrate aftdr 1978. The Afghan coup d'etatand the subsequent entry of large number of Soviet troops there inDecember 1979 not only eliminalted one of the flanks of the nor-thern tier but al$o brought the Sbviet forces very close to the vul-nerable southern tier in Baluchistarr/I\tlakaran coast. Several regionaland Western scholars also began predicting that the Soviet forces inAfghanistan were not only capablle of moving but were intendingto move further south through Ealuchistan towards the Strait ofHormuz, with the intention of threatening the oil lanes of the Gulf.

The Iranian revolution of 1979 and the ouster of the Shah re-moved the predominant influence of the sea power not only fromthe northern tier but even from an important part of the southerntier. Since Iran was seen as the liingpin of the sea power strategyin the area, the change was seen ds a serious setback to the Westerninterests ia the region. After the gverthrow ofthe Shah, a virulentpropaganda attack was launched against the West in general andthe USA in particular. That was further intensified during the hos-tages crisis. Also, during that period, the policy of the Iraniangovernment to allow the Tudeh P0rty to operate freely, while sup-pressing other dissent movements in lran, was seei as a sign of con-tinuing rapprochement between thc revolutionary Iran and theSoviet Union.

Thus, a strong impression wag created, and for good reasons,that though Iran had not formally joined the Soviet bloc, events, inIran and Afghanistan had dealt a final blow to the concept of stra-tegic stability based upon horizonitat parallels. Under the new align-ment of forces, it seemed that these horizontal parallels were beingreplaced by the newly created verltical parallels.

These new parallels have not odly broken the earlier geo-strategicstructure of the region but have &lso introduced totally new vari-ables. One of the significant changes that has been brought aboutis that, unlike the earlier horizontal parallels, the regional poworsof the vertical parallels are following antagonistic policies. This istrue about India and Pakistan, Pdkistan and Afghanistan, Iran andIraq, Iraq and Syria, Saudi Arabib and South Yemen, Somalia andEthiopia, etc. These antagonisms not only create further destability

K. R. SDICH l7

in the region as a whole but also cnable the great powers to play

the game of divide and rule more efectively, much to the disadvant-

age of the regional powers.

Other regional factors like the Iraq-Iran war, the emergence ofSyria-lran axis, new spurt to the Kurdish and the Baluchi move-

ments. threat of Islamic fundamentalism, €tc. havc added to thisfear of destabilization. No wonder, the USA began to gct alarmed'

The new tbrust of the RDF/CENTCOM strategy can be explained

as a l)art of the wider response of the USA to the newly created

regional uncertainties.Iu 198G-81, it seemed that the land power was flnally on the verge

of acquiring its long desired goal of access to the warm waters inthe Indian Ocean, The US reactions, especially the CarterDoctrine,can be explained in that context. In his State of the Union Address

in January 1980, that followed the events in Iran and Afghanistan'President Carter wamed that any attempt by any outside force togain control of the Persian Gulf region would be regarded as an

assault on the vital interests of the United States of America and

that such assaults would be repelled by any means necessary, in-cluding military force. The Carter Doctrine differed significantly

from the Eisenhower Doctrine. Unlike the earlier Bisenhower Doc-.

trine, the Carter Doctrine, which remains the basis of the US stra'tegy for the region till today, does not even envisage the token neces-

sity of an invitation by a regional power for direct US militaryintervention in the aera.

At one time, it did appear that the USSR, which had a vital say

in the affairs of Afghanistan, would.also be able to influence events

in lran. The hostages crisis made matters worse for the USA' How-ever, unlike Afghanistan, there was never a direct Soviet influencein Iran. Whatever indirect influence it had exterted got eroded afterthe Iranian Government crushed the Tudeh Party, Tbe virulence inthe US-Iranian relations was reduced following the settlement ofthe hostages crisis and, though the rhetoric of anti-Americanism .

was maintained, largely for home consumption, the new elite in Iranrefrained from taking such steps as would have harmed the long-term strategic interests of the West. In fact, the West, and morespecifically Europe, significantly improvcd its relations with Iran.

Today, a new set of vertical parallels have emerged in the areastretching from India to the Red Sea and beyond. Also, the sea

oower has lost its former hold over the southern tier. These new fac-

l8 Tsr hsnx Gutr aNo Asrl

tors bave influenced the strategic Qnvironment of South West Asia.

New linkages are being strengtheted in the vertical parallels likebetween Pakistan and Saudi Ar4bia and, though the West has

helped to strengthen such linkagep, the sea power .has adopted astrategy of self-reliance that is ln direct contrast to the earlierstrategy based upon the Nixon Doctrine. Hence, the RDF/CENTCOM strategy has come (o stay, at least for some time tocome,

The newly evolved strategic enVironment has addcd a new dimen-sion to the sea power strategy in the area. Earlier, it was condi-tioned by the requirements of fbctors liks control over the majorsealanes, possible deployment ofl the SLBM system, and to $ome

extent, upon balancing the convehtional naval presence of the rivalpower. Subsequcntly, after 1974, it got influenced by the possible

threat to the free flow of oil frbm the region due to oil blockadeimposed by the oil producing countries themselves. The responsewas gunboat diplomacy and the threat to occupy the oil producingbelt, especially the Saudi oil corei It was a politico-military threat,more political than military, though the ultimate military optionwas not ruled out. That policy took into account the fact that thc

. then prevailing horizontal parallels and strong US-Iran links gave

tho sea power a high degree of frFedom of action in the southerntier.

Now that the old parallels no longer exist, tho sea power has tocvolve new equations. The sea pqwcr strategy today d€pends uponthe minimum support from the southef n tier states. Bulk of the milit-ary capability is designed to be projected from beyond the region. ThcCENTCOM strategy, therefore, 4€presents the lack of faith of thesea power in the possible resolrrce mobilization from the area

itself; something that was taken for granted as long as the Shah

was ruling over lran. Today, Paltistan and Saudi Arabia cannot bcgiven the role of Iran under the Shah because the Saudi oil coreitself might become one of targets. Moreover, Pakistan, despite thewillingness of its ruling elite today, cannot replace lran under thcShah in ffnancial resources and 4ilitary hardware. This has led notonly to a more direct involvemest of the sea power in the area butalso to its enhanced presence on the high seas and the strengthen-ing of the Diego Garcia base. It has also led to the policy of main-taining transit and storage facilities in select points on the ArabiaoSea littoral as a part of the new strategy.

K.R. StNcs 19

These reorientations have led to basic changes not only in thepower equations but also in the strategies of the great powers. These

changes will have to be noted by regional powers before they evolve

their own security doctrine. In the fifties and the sixties, thearea was

seen as a launching pad for the possible sea power offensive against

the land power. In the strategic perception ofthe sea power in thefifties and the sixties, the western flank of the region was linked tothe NATO by Turkey and to the US VI Fleet in the Mediterranean,while the eastern flank rested upon lran and Pakistan' Attemptswere made not only to boost their military capabilities by politically

supporting the regimes in power, by large-scale arms transfer andeconomic aid programme, Modern bases and comounication facili-ties were also created in these countries. Their navies were also

suitably strengthened. The US Navy' began to operate more fre-quently in the Indian Ocean after 1963 and almost replaced the

erstwhile naval power, Britain, :rfter the British deolared the East

of thc Suez policy. Diego Garcia, techuically a joint Anglo-American base, is mostly operated by the USA.

The main thrust of the Western strategy in the area in the fiftiesand the sixties was to neutralize the USSR, Situation changed inthc seventies. Whilc the basic objectives remained as before, a new

dimension was added to it. The fear of the energy crisis made the

USA aware of the growing dependence upon the Gulf Oil. Therepeated threats by Arab oil producers, including Saudi Arabiaundcr King Faisal, to use oil as a political weapon, and the oilembargo against the USA, as a friend of Israel, following the

October War, as well as the monthly cut-back in oil production bythe OPEC members at that time posed a direct threat, both imme-diate and long term, to the economy of the West in general andthe USA in particular. It had a tremendous impact in shaping thesubsequent US strategy vis-a-vis the Gulf.

Several leading fgures in the USA began to argue that, ifneedbe, the USA should not hesitate in occupying these oil felds. TheUS Secretary of Defence, James Schliesinger, in a TV interview inWashington on 6 January 1974, warnod the Arabs that they were

running the risk of having force used against them if they utilizedthe power of oil embargo to cripple the largest mass of the itrdust-rialized world. Blueprints were prepared to oocupy the Saudi oilcore. The US task force in the Indian Ocean was further streng-tbened. Similar reactions were seen in 197819 following the

T-

20 Tm Pmsrex Gur,r mp Sourjn Asn

revolutionary chaoges in Iran ancl {he possibility of Islamic funda-mentalism spreading to other stated in the Gulf. The lraq-Iran warhas added more to this general thrbat perception, so much so thatthe enhanced US military presende in the area is not unwelcomedto some of the leading members of the GCC. Today, the US taskforce guards the sea lanes from thN Gulf and the Saudi-US AWACSmonitor the environment from the

While the USA felt threatened the new challenges in the regionand took countcrmeasutes to its perceived ioterests in thercgion on its own or with itsalso taking similar steps. The

onal supporters, the USSR was

han revolution soon began togenerate its o*n domestic . Moreover, the backlash ofIslamic restrgence in lran was felt Afghanistan also. The Sovietsgot themselvcs invited in in December 1979 and have

Today, tle Afghan Govern-stayed on in that country ever

ment is surviving largely thanks thc active involvement of theSoviet armed forces in

Today, the area no longer only an arena of great powerrivalry but has bccome the very of their strategy. This has

added an altogether new dimension not only to the great powerinterest in the area but also to the local responses. Earlier one

could even propose a strategy of allliance with one power agaiust

the other. Now, one will havc td evolve a strategy to keep boththe powers out ofthe area. Fortudately, this strategy ffts with thepolicy of nonalignrnent that is bding openly preached by all thelocal powcrs.

Nolqer-rotpo SEcURITY DocrntNn

Developments as discussed abovo have focussed the spotlight onthe need to evolve a nonaligned sepurity doctrine. Though the non-aligned states believe in steering blear of the Cold War rivalries,their attitude towards their own decurity is largely influenced bythe constraints of the Cold War and the bipolar global model.Thus, assumptions that conflicts c4nnot bc resolved and that thereis no solution outside the frame$,ork of bipolar world have tiedsevcral of these states to one gredt power or the other. It is so

corlmotr to hear that but for tho great powcr presence in a given

area, regional power would feel in$ecure. This not only leads to apsychological dependence upon thd great powers but also legitimizes

K.R. SNGH 2l

their presence and policies vis-a-vis a given arca in the ThirdWorld.

Earlier, in the fifties and the sixties, the Third World was dividedinto two broad groups; states that were aligned to one bloc or tleother and the nonaligned states. Now, virtually all developingstates claim to belong to the nonaligned movement (NAM) in spiteof their overt or covert linkages with one power bloc or the other.Thus NAM itself has started reflecting the trcnds ofthe bipolarworld, That has added new dimensions to the security perceptioosof these states. It has not only increased their di:pendence upongreat powers but has also enhanced their feeling of insecurity. Ifthe ill-etrects of this dependence has to be reduced, these statesshould evolve a framework for regional cooperation as well as co-operatien betweeu diferent regions in the light of ncw approachesto security that are based upon the ethos of the nonaligned move-ment.

The new security consetrsus among these nonaligned states ne€dsto be based upon two basic postulates. Firstly, security and stabilityof each state rests not only upon non-conflictual relations with itsimmediate neighbours but also upon the stability of the area as awhole. Secondly, such a security and regional stability can bcarrived at only after all the member statcs havc evolvcd a frame.work of understanding that will not only lead to mutual cooperatioobut also hclp to isolate them from the ill-efects of the existingbipolar world order. Such a consensus can be based upon ttrcacceptance of the following principles:

(i) Respect for the stability of the regime and the system in agiven state.

(iD Inviolability of territorial integrity. The OAU has alreadyincorporated that principle.

(iii) Avoidance of politico-military llnkages with great powers

that are conceived in the context of great power rivalry orthe intra-regional rivalry,

(iv) Concerted efforts by all members to remove the regionalthreats to security. If necessary, special institutional frame-works should be created within the NAM to facilitate con-flict resolution and crisis management.

(v) Conscious efforts to strengthen socio-eoonomic and cultural

22 Tnn PrnsLc,N Gurr lNo Sourh Asu

ties among these states so as to nurture a better environmentfor regional and intra-regional cooperation.

While the acceptance of these broad principles by the NAM willpave th€ way for a political envitonment conducive to regionalcooperation, some concrete steps m|st also be spelled out towardsachioving that objoctive. Two framdworks of regional cooperationfor maintenance of peace and need to be further evaluatec.They are the concept of tary disengagement as a partof NAM's effort at crisis t and conflict resolutionmechanism, and the need to creale appropriate regional maritimeauthorities to look after and safeguard the maritime interests ofthese powers.

One of the causes of the failurc, or the inability, of the NAM toplay an efective role in crisis management and conflict resolution,especially among its members, is tbs absence of a viable and accept-able framework for implementing itb resolutions. Hence, the NAMresolutions, though accepted almbst unanimously, are seldom

implemented. The latest is the iuability of the NAM to fnd a

viable and mutually acceptable solution to the lraq-lran War. Thus,if the NAM can evolve a suitable fr[mework for implementing itsresolutions, it will greatly stretrgthen its hands in reducing tensionin the Third World. This disengagehent framcwork suggested here

is an attempt in that direction.Disengagement, in this speciffc c<intext, is treated as a broader

interaction of military as well as political processes in reducingtensions. These processes are simultaneous and interdependent.While military disengagement is physical separation of the troopsand weapon systems in a given arda that are engaged or are likelyto be engaged in armed confronta{ion, political disengagement is.a process tbat not only helps towards military disengagement butalso in preparing an cnvironmeDt conducive to a detente therebyleading not only to crisis managemeint but even conflict resolutionper se.

Military disengagement is morc than ceasefire or troops with-drawal. Its essence lies in a situation that oot only dis-

engages the troops and weapon but also creates structuresthat can even preempt the resum$tion of armed conflict. Thus, itincludes concepts like a zone. zones of arms limita-tion, mechanism for suPervision, v and mutual inspection,

K.R. SINcn 23

etc. These steps not only lead to but are also the outcome of politi-

cal detente. Thus the political dimension of disengagement is

equally important.-Il a framework of political and military disengagement can be

evolved, the NAM will be equipped with a viable mcchanism not

only for crisis management but also for preempting a conflict from

escalating into a crisis. If the NAM can evolve a suitable frame-

work of disengagement it can be offered as a viable means for

containing, if not resolving, the present Iraq-Iran War' If it had

been available earlier, the NAM could have prcvented the border

clashes between Iraq and Iran before September 1980 from escalat-

ing into a full-scale war. Conflicts between developing countries

cannot be wished away. However, if the NAM can succeed in

creating a viable and mutually acceptable mechanism for conflict

resolution, outside the framework of the present bipolar world

order, it will contribute a great deal to the creation of an environ'

ment of peace and stability in the South.The second framework of regional cooperation, especially about

maritime affairs, is based upon the newly acquired rights under the

recently accepted law of the sea. There is no doubt that the littoralstates have acquired new maritime rights. The territorial sea limitis extended to 12 nautical miles and the exclusive economic zone to200 nautical miles. Moreover, these states have also acquired exten-

sive rights of exploitation of mineral resources in their continental

shelves that might extend deep ioto tbe adjoining seas, depending

upon the depth of the water. Thus, the littoral states, even of the

Third World, have acquired legal rights over vast areas that tillrccently were treated as parts of the higb seas. Not enough attentionhas been given in thc Third World to meet the challerges posed bythese new laws.

One of the results ofthe new law of the sea is that large parts ofthe adjoining seas will be directly or indirectly subject to the laws

promulgated by the littoral states and the institutious created toenforce those laws, This is particularly true about fishing in the

state's exclusive economic zone, seabed mining in the continental

Shelf, questions relating to pollution control, etc' These will affect

not only the great powers but also regional powers. While the great

powers and traditional maritime powers are equipped to meet these

new challenges, the countries of the developing world have still to

24 Trn PsRshu Gur-n lnp SouTH AslA

evolve suitablo mochanisms to enjdy the full benefrts arising out ofthese new laws.

Another point tfiat needs to be noted in this context is that whilc

these states have the right to enjoy the benefits of these new laws

thcy also have corresponding obllgations to the community that

bas granted them those rights and the benefits that flow from them'

Hence, to ebjoy for themselves and to create suitable environment

wberein othe6 can also cnjoy full benefits ofthe law ofthe sea,

these maritime states have to perlform certain duties as part ofthat obligation. These duties can be performed more efectively ifthese states cooperate on a regional basis. Some of these duties are

as follows:l) Survey the sca lanes in their rpgion and make available up-to-

date maps. Today, few developing states have these facilities.

2) Reducing the danger to navigntion by marking the sea lanes,

especially through areas where th9 littoral states are exploitingresources in the continental shelf. fhis is becoming urgent because

several of these areas are already b4ing saturated with oil rigs, plat-

forms, oil pipelines, oils terminals, etc

3) Acquiring the capability to conduct mine-countermeasureoperations and, if necessary, to escort international shipping fromthe zone of national sovereigoty aod littoral priority to major sea

lanes of the Ocean. Recent threa{ posed by mines in the Red Sca

and also the possible threat of attack on tankers havevividly drawn attentiou to the ges.

Several of the developing states claim the benefts of the new

law of the sea have not done much to meet these obligations. Un-doubtedly, several of them have large sums on acquiringfighting ships but few of them ve cared to acquire basic ships

like survev vessels and This is especially true aboutthe countries of the Gulf whose ecofiromic survival itself depends toa large extent, upon their ability to their sea lanes free.

If one analyses those dctails as gilven in Table 2 (under Navy) andTable 3, one finds that except foi Iran no other state has €venbothered to acquire survey vessels. Only Iran and lraq had acquir-ed mine countermeasure (MCM) ships by 1975. Saudi Arabiaacquired them by 1980. Even todfy, except for these three states,no other Gulf states operates MCM systems through all of themdepend heavily upon opea sea lanes in tbe area for their economicsurvival.

K.R. Sncn 25

. TABLE 3. GULF: CAPABIIIT! To KEp SEA,LANES OPEN.

Cowrtr! Year ghey MCM ships MCM MR, MRressels diidi- C-aaslal-fi--7 heli- airuaft heli-

coprcr copter

Bahrain 1975

1980

1985

Iran 1975

1980

1985

Iraq 7975

1980

1985

Kuwait 7975

1980

1985

1975

1980

1985

t97s

1980

r985

J

),7

a

-666210,, a ra

-3JJ

4-4-

Oman

Qatar

SaudiArabia 1975

1980

I985

UAE 1975

r980

1985

-4-4

AWACS

I

9)urcEi Military Balance (Lotdot) s*d, Jme's Fighting Ships (London).

2.6 TEn PnnsnN GULF AND SoulrH AsrA

The Gutf countries have, of lite, acquired a substantial escort

capability based primarily upon fdst patrol boats armed with long-

rango guided anti-ship missiles ljke the Exocet, Harpoon and the

Slyx. Table 2, howcver, shows thdrt, of these states only lran, under

the Shah, showed an awareness oli a balanced naval development.

Iraq was constrained by its geo-physical limitations. Other states,

especially of the GCC, have started acquiring that capability onlyin the eightics. Today, the Gulf [s over-saturated with these so'

phisticated long-range standoff m issilcs whether surface-to-surface

or air-to-surface. Their indiscri4inate use would cause havoc inthese narrow and shallow waters. fhe tanker war tlat is going on inthe Gulf is an indication of that on a small scale.

The Gulf is a shallow area that is getting congested not only withintemational shipping but also with mechanical structures related

to the oil industry. Shipping and oil industry need to be properly

organized on a regional level if ftiture complications have to be

avoided. Thus there is need to organize a Gulf Maritime Authority(GMA). Such an organization caq be entrusted with the followingtasks:

1) Conducting periodical survey of the sea lanes.

2) Preparing and distributing niaritime maps of the areas.

) Marking sea lanes and piloting in the zones of respectivesovereignty and beyond it.

4) Coordinating the MGM capdbility in the region.

Items one to three can be coordinated tbrough the GMA and

the respective coastguard and police authorities of the littoral

with the respective navies of the and, if need be, the navies

of the ncighbouring regions.There is a great scope of and inter-regional coopera-

tion in these fields. Indian ise io maritime survey, map

making and mine co operations, etc. can be usefulinputs iD the develoPment of capabilities in the adjoining

ively demand that the adjoining high seas be free from the navalence, $uch steps can also help

regions also. If the regionalfreedom of navigation in thc

presence of the great Powers.promote the fcalization of thepeace zone.

can coordinate in guaranteeingsense than they can morc effect-

of the Indian Ocean as a

of strategic consensus forThe above mentioned flve

K.R. SrNcs 27

the NAM as well as mechanism for their practical implementationwill not only ensure mutual respect aod help build conffdenceamong the states in tbe area but also contain if not resolve some ofthe intra-regional disputes, They will also belp to redefine the termsof linkage between regional powers and the great powers whichwill help to reduce the ill-effects of great power rivalry vis-a-vis the

region.These principles, in fact, extend the South'South cooperation

from a purely economic level to cooperation at all levels. Such anew approach to South-South cooperation will help to stabilizethe area politically, economically and strategically and, thus, contri-bute to its overall security. Finatly, even the great powers should

welcome such a development because regional stability within the

framework of such a strategic consensus among regional powers

will assure these great powers that their legitimate interests in the

area are not being harmed either because of intra-r€gional rivalriesor because of linkages between regional powers and great powers.

Thus the quest for a new security doctrine for the NAM can alone

provide a right environment and an appropriate frame of reference

for cooperation between South Asia aod the Gulf.

2. South Asia and th$ Iran-Iraq War

BHABANI SEN GUPTA

The second cold war merged the geopolitical borders of South'West

and Soutb Asia. The origin of Cqld War II are still controversial.

In time, wheo a consensus emergFs on this hotly debated question,

the origin will probably be tr{ced to the American defeat inVietnam. Every inconclusivc defch.t or victory in war sows the sced

of another war. Even as most Almericans wilted at the profound

shock of the Vietnam defeat, some prepared for a global reassertion

of US military power. Vietnam, Angola and Mozambique establish-

ed in the perceptions of strateglc thinkers in America a symboliclinkage between Soviet power and third world revolutionary change.

Arms control and limitation aqcords and negotiations between

Washington aud Moscow got seripusly tied upwith "linkage" in the

late 1970s.

For the United States, the fall of the Shah of Iran and the loss ofIran as a sentinel of Amcrican Fnd Westertr interests in the vitalregions of the Persian Gulf and the Middle East was a disaster even

worso than the defeat in Vietnam, President Jimmy Oarter ordereda massive rebuilding of US milltary strength during the Iraniancrisis of 1978-79. SALT-II died with the fall ofthe Shah. The Saur

revolution in Afghanistan in Aprll 1978 was taken mistakenly as an

ominous signal of what might happen to Iran, Pakistan and a host

of fragile Arab countries loaded iwith the new-found oil wealth.The Soviet military interventiop in Afghanistan heraldcd the arri-

val of acopalyse. The US saw thq move as the first step in a Soviet

military lurch into lran. Thc Cariter Doctrine committed the US tothe defence of "vital intcrests" in the Persian Gulf by militarymeans, if necessary. The Rapid peployment Force was stationedon land and in the waters witSin striking distance of the Gulf.Pakistan became a front-line stdte for the containment of Soviet

BHABANT SsN GuprA, 29

power. A search was mounted for a strategic consensus on tbe secu-rity of the Persian Gulf region as well as Pakistan. Afghanistan andPakistan merged the geopolitical regions of South Asia and South-West Asia. From 1980 on, both superpowers have had to see thetwo regions interlinked with one another for security and stabilityas well as in the uncertain drift to change. When Leonid Brezhnev

offered his Persian Gulf peace plan during his visit to Ncw Delhi inDecember 1980 he unambiguously linked Afghanistan and Pakistanto it.

In the six years that have passed since the Soviet intervention inAfghanistan, the process of intermeshing of the two adjacent geo-political regions have gathered steady, if complex, momentum. It isno longer possible to decouple the strategic relationship betweenPakistan and the United States from American security engage-

ments in the Persian Gulf. The Soviet military presence inAfghanistan had added considerable edge to the stake of SaudiArabia and other Arab states of the Gulf region in the stability ofa pro-US regimc in Pakistan and in the war-worthiness of theAfghan mujaheedin. The Saudis have financed the Pakistani pur-chase of 40 F-16 fighters from the US underthe l98l-87 aid package.

Riyadh and other Arab governments of the Gulf bave been extend-ing substantial help for the upkeep of the Afghan refugees inPakistan as well as for their continued resistance to the Soviets andthe Afghan Marxist regime. The lslamic fundamentalists among therefugees and their political patrons in Pakistan, the Jamat-i-Islamiparty, look up to the Saudis for political as well as monetary backing.In other words. thc Arab states of the Gulf are a factor in theAfghanistan crisis which no political settlement can ignore.

Iran is also involved in Afgbanistan, but in a different manner.About half a million Afghans are reported to have taken refuge inIran. An indefinite number of Afghaos engage the Soviet-Kabulforces in guerrilla war, operatiog from Iran or within Afghanistanwith lranian assistance and patronagc. However, the Iranian regimeis against yielding to the United States and the Saudis a role inAfghan resistance to the Saur revolution and the Soviet militarypresence. Nor does Tehran support the CIA-run programme ofarms aid to the mujaheedin through the territory of Pakistan. InJune 1986, when leaders of three Afghan resistance groups went toWashington, had a highly publicized meeting with President Reagan,and canvassed for direct supply by the US of more sophisticated

30 Tsn PBnsr,l,N Gur,r eNo SqurH ASIA

weapons to the Afghau rebels,ated with the Iranian brand

of two other groups, affili'Islamic fundamentalism, oPenlY

opposed a larger American t in the Afgban resistancc.

lndeed, Iran acts as a brakeArab states in the Gulf region.

Pakistan's involvement with the

Pakistan's involvement with [he security of some of the Arabstates is much more than About 30,000 Pakistani trooPsprotect the regimes and their in three Arab states in the

Gulf, as many &s 20,000 in Arabia alone. These trooPs have

been trained in the use of some of the most sophisticated weapons

systems tbe Saudis have bought the US in recent years. How-cver, Pakistan is wary of any which Tehran may Per-ceive to be against its interests. unlike the Arab States ofthe Gulf Cooperation Council, hf,ve long held lraq to be the aggres-

sor in tbe lran-lraq war and, US and Saudi pressure, has

remained neutral towards both Islamabad has had tomaintain its distance from Ba in order to please both theIranians and at one time the Public opinion, too, restrains

Islamabad from getting inv in the war on the side of lraq.The Arab countries of the on their part, have kept Pakistan

cal institutions. Pakistan wasoutside of the region'sneither invited to join the GCC nor showed any interest in joiningit. Unlike Oman and Bahrain, Pfkistan has not given base facilitiesto the United States. Pakistan sets a bigh premium on friendlyrelations with Iran which is an immediate neighbour. Iran-Pakistanrelations are good, but are neveftheless strained by Pakistan's pre-vading military ties with the Unlted States. The rulers of Pakistanare fearful ofthe Iranian brand pf fundamentalism whioh is propa-gated by the minority Shia sect. Shia intellectuals in Pakistan are

more vocally and passionately anti-American than their SunnicountrymeD.

Any aggravation of the seculity crisis in the Persian Gulf regionis likely to sharpen the dilempas and contradictions built intoPakistan's involvement with the security and stability of the ArabStates. The 30,0@ Pakistani trpops serving in Saudi Arabia, tbeUAE and Oman have been plabed under the military command ofthe states that have hired thefi. Ifowever, if Saudi Arabia gets

involved in the Iran-Iraq war, that is, if this apparently endless

bilateral war widens into a Gulf XVar, it is uncertain if the Pakistaniswitl join the fighting on behalf of their employers. If they do, they

BHABANT SsN Gupra 3l

will be fighting against lran, and this will not only lead to an im-mediate collapse of the good relations now existing betweenPakistan and lran, but may also create a sizeable domestic politicalupheaval within Pakistan. Most Pakistanis would not like to seetheir country ffghting a war on the side of Saudi Arabia againstIran. Pakistan shares a border with lran, and not with any of theGulf Arab countries. The Baluchis of Iran can be goaded to linkup with the Baluchis of Pakistan to form a larger Baloch stateenjoying far greater autonomy than now.

The recent escalation of the lran-Iraq war and the gains madeby the Iranian forces seem to have already sharpened tbe dilemmasof Pakistan. Launching a surprise offensive in the second week ofFebruary 1986, Iranian forces crossed the strategic Shatt-al Arabriver after a major anphibian operation. The lrauian objective was tothreaten the Iraqi port of Basra. By 10 February, the Iranian forcesgained a foothold in Iraqi territory; particularly in the island ofUmn-al-Rassa, where lraqi oil installations are located. Shortlythereafter, Iranian forces took the Iraqi port of Fao, close to theKuwaiti border. The BBC reported that the Iranian forces had captur-ed the Iraqi missile bases, while a Voice of America broadcast saidthat the Iranian advance was causing..a lot of concern" in Kuwait.

On 12 February 1986, the United States issued a unilateral warn-ing to Iran that if its ofensive meant action against any oftheArab states other than lraq, it would be harming American interests.It was a thinly veiled threat that tlre US would take action todefend the Arab states of the Gulf. The US warning once againexposed the dilemmas of the Arab states. They did not particularlyrelish the idea of being protected by a superpower that was alsothe protcctor of Israel. At the same time, none of the Arab states,nor the members of Gulf Oooperation Council as a whole, areconfident of taking on Iran as a military power.

The Arab states therefore took the issue to the Sccurity Oouncilafter lraq had turned down yet another GCC appeal to Baghdadand Tehran to put a stop to the war. Iran boycotted the SecurityCouncil session. It also rejected the Council's resolution demand-ing an immediate cease fire, even though the Security Oouncil forthe ffrst time recognized Iraq as an aggressor. The BBC reportedon 4 March that rhe GCO had created a ,.special force to be deploy-ed wherever needed." With Iranian forces a merc iix miles from theKuwaiti border, thc GCC decision was immediately interpreted as

-t-----

32 THs PERsIAfi Gur,r eNo Soqrs Asn

a move on the part of the Ar[b states to rush to Kuwait's

defence if Iran determined to pfrnish Kuwait for the considerable

help it had exteuded to lraq in thp last five years. In this gathering

crisis in the Perdian Gulf, the strclngest ever US naval forc€ to pay

a friendly visit to any South Alsian Port called at the port ofKarachi. Five warships and a iumber of submarines, led by the

nucleat-powere d catier Enterprlisp, anchored at Karachi and nearly

6,000 American navy meo landedl in Pakistan for a few days of rest

and recreation.Warsbips of great naval po*ers do not call at foreign ports

merely for the sport of friendship. The actual significance of these

calls is military and strategic. As Admiral Robert Hanks, a former

chief of strategic operations of tbe US Navy, wrote in the winter

1978 issue of Strategic Reriew (Wasbington DC), "Among the

varied facets of American pow{r which can be applied to aid "'political stability (in the Indiad Ocean region)-diplomatic and

economic, for example-one of the most useful is the naval prcsen-

ce. The periodic visit of a walship with the Stars and Stripes

fluttering from its stern has communicated in the past and willsignal in the future interest in, and support of, friendly nations.

That presence, suitably advertised, also serves to transmit a cau-

tionary message to others who might be contemplating adventur-

ism."The presence of nearly halfia-dozen US warships led by tbe

Enterprise in Pakistani waters dt Karachi was, then, an unmistak-

able manifestatlon of the place Pakistan occupied in American

strategic designs for military opebations in the Pcrsian Gulf region.

The warships would not have called Karachi unless the Americans

regarded the situation in the Gulf potentially gravc. From 1980

onwards, numerous American ddcunents have ascribed to Pakistan

a major but unspecified role i$ a war in the Gulf. Pakistan has

refused to give military bases to ltle US' However, the Pakistan's

military may have made some sdcret commitment to place facilities

at US disposal in the event of Ut military intervention in the Gulfregion. If any such interventio{ does take place, it will not bc to

check any Soviot "adventurism", but the spread of lranian military

power beyond the frontiers of Ir{n. However, US intervention will

almost certainlY draw an appr$priate Soviet response. Iran may

turn to Moscow for military sJupport which most probably the

Kremlin will extend promptly Fnd affectively. If Iran is stubborn

BHABANT SsN Gupra 33

eaougb to staud on its own feet, the Soviets will almost certaiolyintervene in southern Iran and occupy the portions of the countrythat are adjacent to this border, if the US intervenes in lran,

The US presence at Karachi port led to protests from Pakistan'spolitical parties and sections of the press. It triggered a majorcontroverqy, particularly because it happened at a crucial stage inthe negotiations being conducted by the UN mediator, DeigoCordovez, for a comprehensive political settlement of the Afghanissue.

Neither the military regimc in Pakistan nor the US governmentseems to be ready to sign an accord with Moscow, by and large

on Moscow's tcrms on Afgbanistan as long as the shadows of awider war on the Gulf region lengthen. At the same time, it wouldbe foolhardy for Pakistan to get involved in a wider Gulf war onbehalf of the Saudis without repairing its relations with Afghanistanand the USSR, assuming that the rulers of Pakistan do determinethat their interest lies with the Saudis and the US ratber than withfran. Pakistan's dilemmas arc therefore complex and are getting

sharper as the Iran-Iraq war continues, escalating atrd waning byturn, but sbowing no sign of coming to an end,

A wider Gulf war will have an unpredictable impact on theMiddle East, Europe, Iapan, indeed the whole world, and may lead

to the first direct collision of the superpowers since the World WarII. Its lmpact on South Asia will also be traumatic. The worstsufercr will bc Pakistan. A wider war will push up the price ofpetroleum as oil installations will be bit and oil flows seriouslyimpeded. Pakistan will be denied tbe monetary help it has been

receiving from Saudi Arabia, Kuwait and other Arab countries.There will be mad rush homeword of the three million Pakistanisworking in the Arab countries, thereby deprivitg Pakistan of the

$3 billion repatriated annually by this huge work force' Pakistanrelations with Iran will turn belligerent and it may invite heavypenalities from the Soviet Union too. Its cleaved and fragmentedinternal policy will come uncler unprecedented pressure. There will bo

anti-American uprisings more serious than the l98l burning of the

US embassy in Islamabad.To be sure, the other Soutl Asian countries, including India, will

also be badly atrected, A crisis of oil supplies will hit all these

countries. A Pakistan caught in the cross-ffre of a war in which notonly the Arabs are pitted against lran but the US is pitted against

34 Tsn Pensrew Gutr eNo

the USSR in a local conflict inadvantage to India, It willand dismantle tbe prevailingwill not inflict physical damage onbe significant, and a radicalthe Gulf area will have a serious

the final outcome of a war ofbe detrimental to Indian securityable finally to ovetpower Iraqnation in the Gulf and the middleimpact on India and on the Inreversely, what would be thethere isa cotrsequent expansioo ofIf tbe war spreads.to a third Gulfintervention, and Pakistan is obuse, how would that affect India's

It is in the interest of both Indiawar does not turn into a Gulf warably Soviet, intcrvontion, But it iseither country or both towar. Numerous Indian, Pakistani,matic initiatives to persuade thebegin to negotiate a comprehensihave proved to be barren. Thesucceed in the future where they

However, India and Pakistan ac

damage to both and to Southinterest that Pakistan does notor in a wider war in the Persiinvolved if its facilities are notsoldiers stationed in SaudiAnd Pakistan cad refuse to placeeven if the US undertakes aif its relations with India are nothreatened from India and Indiavital natioaal interest that the warnot suck Pakistan in, the policybe carcfully deflned and executed

This is not a situation in whichin the juice of its own blunders. tever the scenario of Pakistan's

Asn

e third world, cannot be of anythe whole of South Asia

of power. A wider Gulf wardia, but economic damage willin the strategic realignmett in

on Indian security, Evenbetwcen Iran and Iraq maypolitical interests. If Iran is

emerge as the most powerfulwbat would be the event's

's security environment? Andif Iran is finally defeated andS influence in the Gulf region?untry and leads to US militaryto place facilities for American

environment?Pakistan that the lran-Iraq

US, and, then inevit-ond the diplomatic means of

the two belligerents to halt theIslamic and nonaligned diplo-

lligerents to stop fighting andgood-neighbourly relationship

countries are not likely tofailed so far.together, can limit the war'sIt is in Pakistan's and India'sinvolved in the lran-Iraq warGulf. Pakistan will not get

by the US and if the Pakistaniare not drawn into the war.

at America's disposalintervention in the Gulf onlv

if Pakistan docs not feelPakistan. If it is in India's

the Persian Gulf region doesns of this premise have to

a high sense of purpose.can allow Pakistan to stcw

Bnes$Ir SsN GUPrA 35

involvement in a Gulf war, India is deeply affected' ff the United

States drags Pakistan into a Gulf war, and the Soviet Union inter-

venes on behalf of Iran, India's relations with the US will revert to

the old pattern of hostility. Little will survive of SAARC' If Iran

can defeat lraq, Pakistan may be swept by a deeply anti-US Islamic

fundamentalism. The waves of that fundamentalism will not stop

at Pakistan's borders with India. If Iran loses tbe war to the

United States, despite Soviet support, American power will be

supreme in the Persian Gulf and the Middle East, and that will not

te in the security and national interests of the Indian State' If Iran

wins with Soviet support, most of the region geopolitically termed

the Northern Tier will fall under Soviet influence. This will circum-'

scribe the role India wishes to play in South Asia.

India and Pakistan must therefore talk to each other on the pro'

bable scenarios of the war in the Gulf in the coming months' As

the probable scenarios are fabricated, the two countries will realize

how their interests are linked together in favour of keeping South

Asia meticulously out of the Gulf war. This is an issue that com-

pels tbe attention of strategic thinkers and analysts in both count'

ries. If thcy do not get alert to the issue, the two governmeots willnot talk. Goveroments are notoriously myopic when it comes totaking a longer-than-now view of military conflicts. Besides, many

Indians would derive short-sighted vicarious pleasurd from a mis'

fortune overtaking Pakistan because of its military dependencies on

the United States.

3. The Gulf Region South Asia:Prospects of Cooperation

S.P. SETH

Durirg the colonlal period, the region was of considerablestratcgic importanc€ to the as a gateway of their Indian

I over most of this area (withEmpire. Hencc thdy extendednominal autotromy for tbe local rulers) to prevent any hostile

its presence thcre, and therebyEuropoan power frompose a threat to tle 'jewel in the '. After World War II, theGulf region became important f matry more countries whichdepended on its extensive oil For India and other SouthAsian countries t$e region has importance because ofgeographical proxlmity. For thecient in oil, its inportance todate

viet Union, which is self-sufr-more geostrategio oonstituting

as it does, its southern underbelly.r

countries in the Gulf region are, re, self-evideat. Oil's rela-tive cbeapness, plentiful supply,a enience in handling, trans-portation and storage made it an energy source for industrialexpansion, especially in the WestWar II period. Oil prices remained

Japan, in the post-Worldbirly stable during the decades

of flfties and sixties. For it was still priced under g2 abarrel during this period,s And was despite the formation ofthe Organization of, the Petroleum1960.

Countries (OPEC) in

With the virtual replacement ofof energy for indugtrial and other

The posted price of oil (anoil majors-conglomerates ofpanies controlling bulk of the oilfixed the price ofoil and determinedto the produciog countries) wasthe oil producing oountries of a

by oil as a primary sourcethe stakes of oil-consuming

formula under which theand American oil com-

and its marketing -share of oil income flowins

ridiculously low thus depritingshare of income from a vital

$.P. Slnr 37

resource. This situation was allowed to prevail even when thedependencc of Japan and Western Europe on the Gulf oil wasoverwhelming. For instance, by mid-seventies, Japan and WerternEurope depended on Gulf oil for about 80 per cent and 65 percent of their total oil needs respectively; America's share of Gulf oilimports was relatively low at around 15 per cent ofits total oilneeds.a (According to Walter J. Levy, US dependence on Gulf oilamounted to 30 per cent of its total oil imports,)E

The phenomenon of low oil prices could not obviously last long.There were several factors militating against it. The post-war pro-cess of decolooization had set forth a new wave of nationalismprompting old colonies and semi'colonies, in due course, to assertsovereign control over their national resources. In the case of Arabcountries, this trend was further reinforced because of the dispos-session of Arab Palestinians from their home-land on the creationof the sovereign Jewish state of Israel. The resultant rise of pan-Arabism made it difficult even for conservative Gulf regimes(otherwise well-disposed to the West) to opt out of the Arab asser-tion of their common identity and destiny. An issue on which allArab countries tend to make a common cause (notwithstandingtheir varied tactical rcsponsos), is the question of seeking a home-land for the dispossessed Palestinians.E Their oil policies have, there-fore, been considerably influenced by thie factor, as evidenced bythe short-lived (but ineffectual) oil embargo of the sixties (duringthe six-day Arab-Israeli war of 1967), and relatively more effectivcexercise ofthe oil weapon by them during a similar 1973 conflict.

But the assertion of natiooal sovereignty and use of pan-Arabismcould not have produced results in the absence of favourable eco-nomic factors. While, during the fifties and sixties, oil supply hadexceeded demand.T tbe situation tended to reverse thereafter creat-ing an upward pressure on oil prices. As a result, in t973 and 1974,the OPEC cartel increased the oil prices four-fold. By 1978, supplyand demand for OPEC oil tended to balance at a price level threetimes that of 1972 in real terms.s Apparcntly this was not consider-ed enough and there was a further hike of OPEC oil prices ia 1979-8O from $13 to $32-$40 a barrel.e In the process, they disregardedthe delicate demaad-supply equilibrium already established in 1978.It was, of course, believed that the disruption of Iranian oil pro-duction and consequent reduction in oil exports from that country

-38 Tnn'PssIlu Gur-r llu

(following the revolution in lran) once again create a tigbt

oil supply situation oPerating to advantage of OPEC Producers.

This was not to be so; and the PEC oil Price hikes of 1979 and

1980, therefore, Proved cou uctive. The new enhanced PricevarietY of reasons. These being:level could not be maintained fqr

conservation measures adoPted major oil consuming countries;

countries (Mexico, EgYPt' and Sea); and de-regulation mea-

sures adopted bY the United to increase its oil Production'

Above all, economic recession in the industrialized West and the

United States (partly from oil prices) considerablY damP'

development of alternative

on imported oil suPPlies;

ened the world oil demand'market oil prices are nowfurther decline.ro

The oil bonadza of the 1

(especiatly its Gulf members,

but smaller. poPulations) such

before. For instance, between Icountries earned from a total ofof Saudi Arabia and Kuwaitbillion respectivoly.ll Anotherprice hikes of 1973 atd 1974

countries from a sheer $15.2

of energY to reduce dePendence

oil production in non-OPEC

creating an oil glut. The spot

$20 a barrel with forecasts of a

t oil-producing countries had de'

banks.1a They also spent liberally

created for the OPEC countries

their relatively large oil exports

wealth which was undreamt ofand 1983, Arab oil-exPorttng

ut $134?.31 billion; tbe sbare

was $378.06 billion and $tl6'2of looking at this is that the oilincreased the oil income of these

n to $ll0 billion in 1974'12

Since the accrual of such large occurred over a relativelY

short period to a group of co lacking in almost all other re-

sources, its dispersal was bound to be haPhazard. PredictablY' a

large proportion of it went to and West EuroPean banks'

By end-1983, for instance, the Gposited 9350 billion in the Won expanding their respective machines; most of it unwar'

ranted when viewed in terms of manpower (small PoPulationslacking in necessary skills) and tasks. To take one examPle;

Saudi Arabia, with its total def force of only 50,000 men, spent

$62.5 billion on arms pr alone between 1980 and 82.14 Toit has employed thousands of ad-technically man its defence

lb Saudi Arabia's militarYvisers, mainly from the Unitedexpenditure rose from over $9 ion in 1976 to $22 billion tn

198l-a level mdintained since The same is true for other Gulf

S.P. SBTH 39

countries where defence budgets and arms procurements have been

spectacularly stepped up following the oil bonanza of the seventies:

A large sum of petrodollars was spent on the import of luxurygoods, mostly from the industrial West (which includes the UnitedStates). And for these purchases, Gulf oil producers paid astrono-

mically inflated prices. According to Rehman Sobhan, for Arab oilproducers, the import prices of these goods increased by nearly 350

per cent; for Saudi Arabia the prices charged were more than 500

per cent between l9?3 and 1977' Similarly, the transfer of petro-

dollars to the West under the curious heading "invisibles", as listed

in the Bank of England statement, was said to be as high as $82

billion in 1982.16

This is not to suggest that the Gulf oil producers have not made

any productive use oftheir oil revenues. They have indeed embarked

on an ambitious programme of industrial development.l? Since they

have plentiful oil and gas supplies at low costs, this development

effort has been largely geared to energy-intensive industries, The

petroleum refning and petrochemicals are its most prominent exam-

ples. The export capacity ofthe first is erpected to increase from about

i million barrels per calendar day (b/cd) in 1980 to more than 2

million b/cd in 1986. And this may increase by another I millionb/cd ifall the projects already announced are implemented.rs ln the

case of petrochemicals, the regional lArab Gulf) production capacity

in ethelyne, for instance, is expected to increase from 410,000 (in1982) to about 3. 30 million tons and that of methanol to | .52

million tons by late 1990.1e

Of late, steel-making has also received attention, as important re'

seryes of iron ore exist in northern Iraq and Saudi Arabia. This has

become possible with the DR process for steel-making lwhere gas

can be used as a reducing agent to remove oxygen to produce sponge

iron, which then is melted and refined to make steel). Almost all

Arab culf countries have either established steel mills or are determin-

ing its feasibility. However, so far, Gulf steel industry meets only a

very.small percentage of the total regional steel demand (about l0per cent in 1982). But if all the projects under implementation or at

planning stage do get started, it will meet a major part of the

regional steel requirements'Aluminium is another industry which has interested the Gulf

countries. According to Dabdab and Mohyuddin, "The fortuitouscombinaiton of investment capital, low environmental sensitivity,

40 TsB Pgnsrlt..t Gur.r .lr.to ASIA

and low cost ene4gy has made an ideal platform for prirnaryaluminium smclters..."m In I the Gulf region had ao installed

um with about 40 per cent ofcapacity of 305,000 tons ofthe production output consumed onally and the balance export-

for aluminium is estimated toed. By 1995, tho regionalequal the present supply.

Cement indusfiy looks likesupply of raw materials, low

a good future with Plentiful

market; althougb the last factorencrgy and a large regionalIately bcen negatived to some

extent due to the slump in on industry. The installedrcgional production capacity ofmillion tons. With the slowdown

in 1983, was over 23.6construction activity, the Gulf

might emerge as a net exporter ofApart from oil and gas-based ustries aod other energy-intens-

dustrial activity. The dry docksive projects, there is not much ofand ship repair yards have, of come up; and so too has the8uper-phosphate fertilizer project and glass factory in Iraq based

on domestic availability of and sand. Oman's coppermetal complex has a projectedthere is small and medium-scale

pacity of 20,000 tons. Besides,

ufacturing activ ity, covering arange of products, under privatescope. The manufacturing seotorconstitute, on average, 12.5 perwhich is still quitc small,tl

The general argument in favourGulf oil states is that since oilmust create alternative sources ofoil wealth runs out. This rationaletbe major thrust of theirgeared to developing an industrialthe same non-reuewable resourcerefineries and petrochemioals. A

terprise, but it is still limited inthe Gulf economy has come to

t of the regional non-oil GDP

iudustrial devclopment in thea non-renewable resource, they

wealth well beforc therather weak, considering thatdevelopment strategy is itself

tied to and dependent onmaterial, as in th€ casc of oil

to Louis Turncr andJames Bedore, "Of the six most t variables that will affectthe ultimate proftability of such petrochemical and reffning pro-jects, four are curpently working the Middle East states.",sThey have listed them in the foance:

descending order of import-

1. Considerable over capacitypetrochemical aod refining i

in large parts of the world's

S.P. SsrH 4l

2. High construction costs of these projects compated to those

in Europc and North America.3, High operating costs, because of the shortage of local skilled

manpower.4. High tran$portation costs because of thc remoteness of the

- regioa from industrial markets.However, the Gulf oil countries do bave the advantage of plentiful

supply of oil and gas at low costs, and relative immunity to environ-mental considerations because of the thinly populated areas. Butobstaclcs seem more powerful. For the foreseeable future, the mostimportant obstacle appears to be the continuing overcapacity in refin-ing and petrochemical plants in the EEC countries, which are viewed

by Gulf statos as an important market outlet for tlese products.According to the South magazine, Saudi Arabia's US $10 billionpetrochemicals programme, has raised the spectre of protectionistaction by rival producers in tbe industrial world.e3

The Saudis are threatening retaliatory action by way of impos-ing heavy duty on their imports from the industrial world. Theycould even undercut the established petrochemical producers in theWest if they were to dump their products in the expanding Asianrnarkets. According to Ibrahim Bin Salamab, Vice-Chairman ofthc SABIC (Saudi Basic Industries Oorporation), "It is no secret

that the dcvcloping countrics of Asia are experiencing rapid growtland consequently have an increasing appetite for commodity petro-chemical produots-the dcmand for petrochemicals in developingcountries will increase at double the rate of developed countries,"'rSalamah insists that Saudi Arabia is keer not to disrupt the worldmarket (by starting a price war), since it too would suffer from acrash in prices. Unless the Gulf countries anrd capitalist Wcst canwork out some mutually agreed arrangements regarding the shareof the Gulf in the petrochemical markets leasier said than done,because any sizeable cut in the industrial world's petrochemicals

industry, with a view to accommodate the Gulf producers, wouldhave serious implications for employment in these countries), aprice war seems unavoidable. As for the devcloping countries,where the Saudis visualize an expanding market, its potential willremain limited because of foreign exchange constraints'

Oil refineries and petrochemicals apart, even industrialization inother areas is hampered due to shortago of skilled looal manpower,higb ffxed cost$ as proportion of total costs, and lack of economies

T-

42 Trtn PBRSIAN Gur,r lNp Sovrs Aste

of scale. It has also suffered ljntil verf recently) from a lack ofcoordination anong Gulf states fo evolve a coherent regional in-dustrial development policy. Th$ result has been a wasteful duplication of industrial activity. Thf aluminium smelters are a case inpoint. The smelter in Bahrain, for instance, 'is admittedly pro-

ducing almost at its rated capadty (but), this is only by cutting itsprice to such an extent that only variable costs are covered"' It is

further argued that "if this polic! continued, the fixed costs of the

Dubai smeltcr certainly will havd less chance of being recovered."26

Such wastefulness in relation to large cement plants is also reported.

They have como up in almost dvery Gulf oil state-the problem

having been further exacerbate{ by the current recession in the

building industry. Nasif J. DaUdab and Badr I. Mohyuddin have

this to say:

The multiplication of plants in the UAE alone is startling, whic.h

to dat€ account for 4. 5 millioth tons of installed capacity, withI million tons under construption. This fuure has to be seen

in the coutcxt of (i) the UAE'd population, which stands at I .2million, of which 85 per cenft are expatriates; (ii) the regional

installed capacity (21.6 uilliQn tons), and capacity under con'

struction (6 million tons). Tbi$ amply reflects the diseconomies

inherent in these investment d$cisions.Eo

Efforts are under way to coodlinate the industrial development

policy of the Arab Gulf through the Gulf Cooperation

Council (GCC). Nonethelesr, enlargement of the markets

through extra-regional would be necessary to combine

economies of scale with "2?

Apart from seeking to in thcir national economies,

tbe GCC countries (as borne criut by available facts and ffgures)28

have preferre<l to put the bulk of their oil revenues in Wcsternbanks dnd financial institutions. onally, they havc spent (andcontinue to do so) disproporti ly large sums oD arms procure-

ment from the West. Large resources have also been used

up in imports of luxury goods from the West at bighly infiatedprices. In other words, bulk of t$e oil revenues earned by the Gulfcountries were simply transfi in one wav or the other to theindustrialized Wcst. As Walter J,l Levy has pointed out, "lhe greatbulk of the new oil money, or flowing to the OPEC

S.P. Ssrs 43

countries has been soaked up, often through prodigious spending

by those countries in the West." He adds, "As a result the shock

to the industrialized economies has been cushioned, and the flowof petrodollars directly into the financial system-while itself enor-

mously increased and the source of continuing major problems-has not turned out to be the nightmare many had feared in197 4,"2e

The developing countries have not been that fortunate. Indced,

they have suffered disastrously from periodic oil price hikes causing

enormous pressure on their balance of paynents' Their steadfast

solidarity with OPEC countries in the fight to get a 'fair' return on

their oil wealtb, failed to earn tbem the gratitude of oil rich countries

who refused to entertain pleas of difrercntial (cheaper) oil prices forpoorer third world countries. The developing countries has also

hoped tlat their solidarity with OPEC nations would enable them

(with OPEO's new economic leverage) to secure reasonable and

stable prices for their own commodity exports. But this was not tobe so because the OPEC (with Gulf oil producers being its majorconstitutent) opted in favour of economic collaboration with the

industrialized West. Not only did the third world countries fail toobtain higher prices for their own commodity exports (tlere was

indeed a further decline in these prices due to economic recession

in the West whicb, in turn, was partly the result of oil price hikes),

they also had to bear the brunt of recurrent oil 'shocks' with result-

ant strain on their foreign exchange resources.

India's case is illustrative in this regard. Even though India'scrude imports remained more or less static around 15-17 milliontons, its import bill increased from $ 146 million in t97U7 | to $2 . 3

billion in 1978-79; it further rose to $6.3 billion in 198G-81 follow-ing the second phase of oil price hikes in 1979-80. As a result,

India's current account surplus of some $l billion turned into a

large deffcit in 1980 of $3 . 5 billion-an adverse swing of $4. 5

billion on an export base of some $9 billion.s0Consequently, external indebtedness of the third world countries

increased markedly.sl According to Levy, "Between the end of 1973

and carly 1978, the total foreign debt of non-OPEC Third Worldcounfties partly as a result of the high cost of their oil imports, has

increased from an estimated $95 billion-of which $30 billiou owed

to commercial banks*to $210 billion, of which $90 billion was

obtained from private financial institutions."sr Still another source

44 Tsn EF"trAN Gur,r nqp AsrA

has put the total lforeign) deb of developing countries at $620

Arab and other Muslim es-in that btder), but tbis was a

billion in 1983; rising from justpayments on external debt rosegering sum of $63.7 billion inducers did provide economic aidbctween 1974 atd 1982 (most of

pittancc oompared to tbeir totalintcrest payment$ in 1984,

This apart, the developmenttries has not even served their

has been very litde economicshich could even approximate toSayigh. According of John To

The economie$ of eachdominated by the oil sectorthe characteristics of an encla

billion ia 1970.88 Their interestm $7 billion in 1973 to a stag-

1984.34 Admittedly, Arab oil pro-$58 billion to these countricsof course, going to non-OPEC

and was even less than their

of the Gulf oil-rich coun-interests. Professor Yusif A.

But the fact remains that thereelopment in the Gulf countriescriteria laid down by Professor

(constifuting the GCC) are (still)and) still has a great many ofThe population in each country

Sayigh has enunciated eight to asscss this:86I. Rise in ths level of eco performancc within a balanced

seotoral pattern where manuf, industry occupies a prominentposition and is associated withdiscipline, ratiouality, inventive

tle acquisition of the values ofand scientiffc causality-it

muS be thc result of society'sof enclave sectofs.

lities and efforts, not the activity

2. Provision of an expandedgoods and servioes to satisfy the

volume and improved quality ofneods of the population.

3, Wider opportunities for ve employment.4. Evening out the pattern of e distribution.5 . Narrowing of tle 'devel Ler?t gap' in the region.

the social, oultural and political6. Evolving the capability ofenvironment to providc the my with ideas, knowledge andskills, attitudes 4nd institutionsof the ecooomy.

for the efficicnt operation

7. Achievement of a Wide

the process of development.of popular participation in

I . Achieving the widest possible of collective (regional)self-reliance in development,

This is, of course, a tall order.

certainly bas a grcatly volune of top quality goods

8 P. Ssrn 45

avaitable for consumption, but goods which are almost excluci-vely imported-foreigners make up more than half the workforcein the six countries, There are great extremes in incomes-andlarge divergence in the pattern of income distribution betweensocial groups, localities and countries.s6

Townsend, however, does not share Sayigh's pcssimism evenwhen suggesting that tbe Gulf development strategy has failed tomeet almost any of his economic determinants. He opines: ..The

uniqueness of the environment and the problem precludes the auto-matic translation of devclopment thcories which may have applica-bility in other environments and other socioties."s? But he fails toexplain how Gulf states, whose economies are now an integral partof the international capitalist market system, can escape beingjudg-ed by accepted ecotromic criteria applicable to all such societies.Exclusivity is no longer the privilege of the Gulf countries (howeverunique and peculiar their own environment), How can ono justifythe misuse of oil income when its implications for Gulf societiesare so grave! To quote Sayigh again: .'The record of the seventiesreveals over-use and misuse of financial resources, wbether forcotrsumptiotr or investment. The high and rising consumerism hasserious implications, in that it uses up a proportionately large partof GDP; it leads to the leakage of vast inancial resources iitoimports, thus failing to encourage the diversiffcatiol and expadsionof national production; it creates patterns of behaviour which itwill be very difficult to change...."88

If savings are not matcbed by an increase in real investmeut (as

has generally been the case), this inevitably leads to inflation. Forinstance, as Hazem Beblawi has pointed out. .,It isnotthe oil priceinctease per se that is responsible for inflation; rather it is a parti.cular mode of investment (of puttitrg surplus oil money in OECDbanks) tbat gives rise to the price increase,"t0 (Indeed, on,ly 2.4per cert of the increase in prices io the United States in 1974 couldbe explaincd by oil price incrcases; and the samc is rue of otherOECD countries.)4o Beblawi elaborates :

...placing OPEC funds in OECD countries cannot increage realinvestment without a change in cffective demand. Without achange ia efective demand in favour of more capital goodoindustriec, OECD countries cannot increase thEir real investm€at

46 TIE PERSIAN Gur,r eNP AsrA

simply because financial happen to be available' The

inability of OECD countrieswould trigger inflation...."41

increase their real investment

He then goes on to make a

countries. Beblawi argues:for investmetrt in develoPing

He adds:

There (then) exists an c:Ne, as well as a Political one'

lor oil surplus countries to their funds in the developing

countries rather than to place in the developed counfties.

It is true that, on the face it, developed countries seem toa wide spectrum of advantagesoffer Gulf oil surplus

that developing countries are to match ... However, be'

hind the misleading facade tle hard facts that OPEC sav'

ings can hardly increase real in developed countries'

Inflation would nnobtrusiv ely./uzds (emphasls added)... M

pefiistently erode the sane oilby self-interest, the Gulf oil

states' investment in develo countries turns out to be self-

... can oo the contrary offer Gulftheir savings into real investment

defeating. Developing cooil states a chance to transf;and hence protect them erosion by inflation.{8

Tbe Gulf oil surplus are facing the same old Problem,than two hundred years ago, ofis not all. "Regardless of what

identified by Adam Smith moreequating money with wealth.they do with their surPlus f " says Beblawi, "OPEC surplus

couotries will anyway be left developing countries as tle ulti-

. S.P. SE'rn 47

mate debtors of their surplus"g (as already evidenced by their'mount-ing external debt). In other words, .'The fate of one depends thenon the prosperity of the other."

Beblawi seeks to put his case for Gulf oil surplus funds' invest-ment in developing countries in the wider context of a new inter-national order. He says :

The new international economic ordor is trot otly the fight ofnon-oil developing countries; it is also the condition for theconsolidation of OPEC gains in oil prices.aE

Among developing countries, Soutb Asian region (with India as

its leading component) offers many attractions for investment ofsurplus Gulf oil money. Before going into this question at someIength, let us first examine what presently is the most useful economicinteraction between the Gulf states and important countries in SouthAsia: emigration of labour from this region into the Gulf states. Inthis connection, Shahid Javed Burki of the World Bank has made astudy of its implications for labour exporting countries, with specialreference to Pakistan,{6 An obvious benefft of labour export is theflow of remittances to home countries which partially relieve thestrain on foreign exchange resourc€s from the oil price hikes of1973-74 and 1979-80. For instance, between 1973 and 1982, theglobal current account deficit of developing countries rose from $l Ibillion to g118 billion, while their medium and long term outstand-ing debt increased from $109 bitlion to $518 billion,{? Even thoughthis sharp increase is largely attributable to the oil ,shocks', but thesituation of developing countries would have been even more grimin the absence of remittances from expatriate workers to their homecountries.

In the case of Pakistan, for example, remittances now providealmost as much foreign exchange as its total exports (about 40 percent for Bangladesh). According to Burki's calculation, remittanceswould account for about two third of the growth in pakistan's GDpin recent years. ,'Without the migration of workers,,, says Burki,"instead of an increase in (sfc) five per cent per annum it (pakistan)managcd during the difficult years of the 1970s, its GDp might havegrown at only two per cent per annum (which) would have meant adrop in per capita income of about one per cent per annum ratherthan the two per cent increase that the coutrtry was able to

48 TdB PsR.stlN GULF AND Asre

manage." The c.ontribution of to Patistan's GDP growth

in the years 1978-82 was 3.4Per ; while its share for Bangladesh

was 1,4 per cent.asbecause the absolute number ofrich Arab World bave been fewer

India has not been so fi

expatriate lndia1labour iu the

than those from Pakistan. For in 1975, the number of Indian

migrant workers in ArabGCC countries) was about 142,(

and the projected estimates for Irates) were 291,200 ar'd 446,India's relatively large GDP, contribution of workcrs' remit-

tances of its growth would y be less spectaculaf' It was'

nonetheless, quite welcome as it to partiallY cushioa the losc

in foreign excbatrge fronfrom oil price hikes. TheIodian workers in the Arab world as reported itr the Hindustan Times

at Rs.2,5@ erores annuallY.(12 February 1986), areExpatriate work-force in

their home countries foreigocountri* have helPed increase

sarniogs in Yet alother waY:

by crcating new markets for export of goods and commoditics

used largely or solely by thesc winstance, its shatc of the Middlefrom only 2 per cent in 1970 to

In the case of Pakistan' forin total eroorts has increased

have also resistered an9 per cent it 1982. Iodia's exPorts

(though less spectaculady); rising

from 2 per cent itr 1960 to E cent in 1982.60 Othet beneficial

been: at increase in the wages ofeffects of labour migmtionworkers who remained behind, alleviation of povetty among

The 1984 Warld DeveloPmmtthe families of cxpatriateReport of the World Banktion bas had a substantial

that in some countries emigta'on wages of the unskilled workerg

at home.6r Burki, in this conn , cites the case of Pakistan:

...real wages of uuskilled labour in the largcst citiesof Fakistan, after having stagBant for several Years,

bave increascd at the rate 15 per cent per annum since 1972.

Since per capita national during this period increased bY

it is clear that such a sharP in-orly two per ccnt percrease in wages of poor improved thcir relative Port-tion in society. Thic veryurskilled workers occurredto the Middlc Eaet...,

increase in real wages of

ies (Algeria, Iraq. LibYa and the

0 comParedto 205,7W Pakistanis;

5 (assuming low economic growth

respectivelY.rs Again becausc of

the time of largc scale migration

S.p. SETrItg

He concludes: ..In other words, migration benefitted not onlythosc who were directly involved in it but also thosc workers whoremained behind and were able to benefit from the manpowershortages that were thus created."62

Burki believes,."Perhaps, the most signiffcant impact of migratlonto the Middle East has been on poverty in the labour exportingcountries." In reference to Pakistan, he writes, ..It would appearthat international migration has had a very significant impact onthe poor in Pakistan. It has played a decisive role in removing theworst manifestation of absolute poverty from many poor regionsin Pakistan."68 In a limited sense, the same could be said of theKerala region of India, which has sent a large number of s'orkersto the Gulf states.

But large scale emigration from South Asian countries has notbeen without some costs;!a

l. Loss of output that may result from the withdrawal of labourfrom tbe local market. Forlabour suq)lus countrics, like India andPakistan, this may seem odd, but sectoral and regional imbalancescan ocour when the withdrawal of labour is of a signifcant propor-tion. To take the case of Pakistan: although emigration accountsfor about 5 per cent of the labour force, for certain types of un-skilled labour and speciffcgroups from certain regions (male workersof the ages between 20 and 25 from the nodhern districts of thePakistani Punjab), the proportion may have been as high as 33 to50 per cent.

2. When semi-skilled and skilled workers are involved, the costs

are even higher. This will mean additional expenditure on trainingto replenish the skills lost through migration. Even this may notfully compensate the loss, since workers learn a great deal throughexperience on the job. And such cost is difficult to even compute.

3. Large scale migration has usually caused inflation in thelabour exporting countries. Several studies, made recently, haverevealed that migrants' remittances are mainly directed towardsconsumption of goods and commodities; and very little of their in-como is actually used for investment purposes to enlarge the pro-ductive base of their home countries.ir As a result, "these remittan-ces contributed signi6cantly to inflation in the labour exportingcountries, which often lacked both the production capacity andimports infrastructure to meet the demand created by the remittanceflows."5o

50 TsE PERSTAN GuLr ero ASIA

4. Larye scale remittances maf encourage patterns of consump-

tion that are considered for development. The de-

monstration effect of this type oI1 conspicudus consumption (VCRs'television sets, cameras, etc.) niay have a profound uufavourable

impact on domestic savings and &lso on the pattern of investment.5. There are, ofcourse, the sopial costs, such as increased corrup

tion from entry/exist permit rhckets, (and customs clearance);

difficulties associated with re-edtering the home couotry's labourmarket on return; psychological cost of separation from the familyand so forth.

It would, however, seem that, on balance' labour migration toGulf states has benefitted both qrorkers (with remuneration exceed'

ing home country standards by as much as a factor of ten)6? andtheir home countries. But still is need to systematize andregulate the flow of migrant with a view to minimize theirexploitation by unscrupulous co For this purpose, bothGulf states and labour exportigg countries must come together toformulate mutually acceptable guidelines and procedures, Indiaand Qatar havc recently done this. They have signed a

labour agreement envisagingtions of some 50,000 Indian

provement in the working condi.in Qatar and protection of

their contractual wages and ri!hts.68 The labour ministers ofthetwo countries have also decided to set up a six-member committeeto oversee its implementation. lllhe committee, with three membersdrawn from each country, would meet periodically for this pu{pose.According to the Indian labour pinister, who was tisiting Qatar,New Delhi is having discussion$ with some other labour exportingArab countries for similar agreepents with them to regulate andprotect the rights of Indian worl(ers.

Serageldin and his co-authors have recommended an agenda foraction on labour migration for Gulf countries. They bave propos-ed :5e

Fftst, regional cooperation ln manpower planning. Whether it bedone ultimatgly by a supralnational agency or some othermechanism, a realistic ffrst qtep would be for the countries ofthe region to share informatiot on prospective manpower require-ments and supplies.

Second, acquisition of citipenship, The oil rich statos havenot ofered ertensive opportu4ities to expatriate labour for grant

S.P. SE.ftI 5T

of citizenship. Indian workers are a case in point. Apart from Iraqwhere nearly 50 per cent of Indian settlers (10,000 out of 20,25dIndians) havc been naturalized, thc record of other Arab count_ries is abysmal.60 Saudi Arabia, for instance, has about 197,000Indians but only 2,100 have been granted citizenship. The sameis true of other oil rich Arab states, where non-Arab expatriateworkers in particular have very little chance of acquiring citi-zenship, .,Given the lack of opportunity for naturalization,,'Serageldin et al. opine,.,one wonders if the migrants will remaineatisfied with merely enjoying a higher standard of living, orif. tbey will seek greater political and matcrial participation."?hey stress, .'The case of migrant children, who, though bornand raised in the oil rich states, arc denied full integration inthese countries, poses an even more serious problem.,,61

Third, terms and conditions of employment Unionization oflabour is not allowed in most Gulf states, But as devclopmentmoves from the construction to the project operation phase, theaverage length of the employer-employee relationship is likely toincrease and bring about someform of collective bargaining. Theoil-rich Gulf states may, therefore, be well-advised to anticipatesuch a course and create the necessary machinery for a construct-ive dialogue with organized labour.

It may well be argued that in view of the economic slowdown inGulf oil countries (following a dramatic fall in their oil revenues),and the coDsequent retrenchment of expatriate workers, labourmigration, in any case, could become a marginal issue. Countrieslike Saudi Arabia and Kuwait are seeking to drastioally cut foreignIabour (Kuwait by as much as half by 1990, and Saudi Arabiaintends to retrench 650,000 foreign workers by the end of tbisdecade).oz In Saudi Arabia, according to one estimate, 50,000foreigners were said to be leaving every month out of an expatriatepopulation numbering between 2 to 4 million.6s At its peak, inearly eighties, expatriates comprised more than one half of the em-ployed workforce in Saudi Arabia, and about one-third of its totalpopulation.oa In Kuwait, the expatriate population outgrew thenatives, with Kuwaitis reduced to only 4l per cent.66 In UAE, theforeign component became as high as nearly three-quarters of theoverall population.os

The current trend of retrenchment of foreign workers is not en-

52 Trfi PBRSIAN Gu[r lr'ro souTH ASIA

tirely unexpected. This was bound to occur eveo without the fall inoil revenues as trlore and more cdnstruction projects neared theircompletion. The only difference lbeing that this would then have

happened in a pihased manner' lvithout the need to prolong the

schedules of projects still under c@struction, or shelving others thatwere planned. With the sort of dependence (becausc of small nativepopulations and shortage of local Nkills) oil rich Gulf countries have

on expahiate labour, there is no *ay they can do without them, orby employing them in very small ltumbers. As development in Gulfcountries moves from the construbtion to the project operation and

maintenance phase, there will be a Sirowing need for skilled manpower.

Countries like India, Pakistan an{ Bangladesh, with their large pool

of qualified,professionals (and geQgraphical proximity) could easily

meet these requirements and ch4aplY too, compared to Western

Europe and the United States. Therefore, what is likely to happen

is that the character of expatriate workforce will change from thepredominantly unskilled and semi-skilled to skilled professionals;

tlough the demand for the formef category will not disappear.

Anotbef factor militating agai[rst a major reduction in foreign

workforcc is the likely opposition to this of the native entrepre-ncuriat and business communitY df the Gulf states. With the expat-

riate population in these countrie$ ranging between half and three'fourths of their total population, any signiffcant reduction in theirnumbers will further contract an already small market, thus seriously

damaging their local manufacturidg and commerce. The local entre-preneurial and commercial interests, that have come to wield con-

siderable influence in Gulf states bn powers that be, will not letthishappen easily. Therefore, barri6g some economic disaster, theprospects of labour emigration to the Gulf region do not appear thatbleak as indicated by reports in nbwspapers of tbe exodus of foreignworkers to their home countries. The situation, most likely, willstabilize by 1990 at a relatively lower number with the balance tiltingin favour of tbe skillecl manpowef.

Finally, despite tbe fall in oil rovenues, the income of Gulf states

from this source is still considerable. Indeed, with appropriate re-ductions in their defence budgets gnd arms purchases, and adoptionof other measures of economic rationality (such as, cutting on im-ports of luxury goods, checking the diversion of state funds for pri-vate uses of the royal households, adoption of sensible social welfareand medical schemeg in place df generous bandouts, etc), their

ncurial and business communitY ull sBres. expa

S.p. SsrH 53

current account deffcits could easily be bridged or considerably re-duced, Even without this, the fall in oil revenues is made good, invarylng degrees, by returns on their investments. For instance, inthe case of Kuwait, its investmeut income on foreign assets wasestimated to reach between $8 billion and $9 billion in 1983 to equalor even exceed its oil revenues.6?

Admittedly, other oil states have not bcen as judicious in theirinvestments as Kuwait, but still they do receive considerable in.comes from this source. Coupled with so much scope for pruningtheir extravagant budgets, development prospects of Gulf countriesremain largely undirninished. That being the case, the interactionbetween the oil rich Gulf states and major South Asian countriesin the area of labour migration will continue to be quite extensivo.The recent labour agreement between India and Qatar, and similarIndian approaches to other Arab countries (importing Indianlabour), would seem to suggest that New Delhi regards this as acontinuing phenomenon for the foreseeable future.

Manpower export, however, lucrative in terms of foreign exchangeearnings, is not an enduring basis to build up a relationship. Whatwe need is a wide-range of economic relations to create interdepead-ence between the oil rich Gulf states and countries in South Asia.An immediate area of economic concern to South Asian countriesis their considerable dependence on Gulf oil, and the resultant strainon scarce foreign exchange resources- In India, for example, thegap between indigenous production and the total demand for crudeoil is rising, thus necessitating more oil imports. This gap is ex'pected to widen futher during the Seventh PIan period, because ofrising demand at the rate of about 8 per cent annua11y.68 TheSevcnth Plan envisages an increase in domestic production fromthe current level of 30 million tonnes to around 35 million tonnes

a year by 1989-90. The total demand for petroleum, even aftermaking due allowance for various measures of oil conservation

is estimated at 52 to 53 million tonnes, some l0 million tonnes

more than the current level of abaat 42-43 million tonnes. This,

obviously, will further strain our scarce foreign exchange resources.

Already, there has been a sharp increase in India's overall imports;the largest being in oil imports. The demand for oil has increased

at the rate of 7.5 per cent, while the domestic production rose by

only 3.5 to 4 per cent.6e

Since most of India's oil imports are from Gulf states, therc is

54 Tr.E hnsren Gur,r lNo Sourls Aste

an urgent need to identify and efipand eoonomic relations withthese countries to lessen this excbssive strain on our foreign ex-

change reserves. An obvious remddy would be to swap Gulf oilwith India's primary and manufdcturing products. India is now afood surplus couf,try, while most Gulf states are large importers offoodgrains. Whethcr as part of swap arrangements or market deals,

it should be possible for New Delhi to interest Gulf states to lift itsfood surpluses thus rcducing India's oil import bill. Similarly, inthe Belds of consumer durables and manufacturing, India has thecapacity to match its production to meet the requircmcnts of theGulf region.

According to former FICCI lFederation of Indian Chambers ofCommerce and Industry) President, Mr. K.N. Modi, who recently leda tradc delegation to several Arab cbuntries (including Kuwait, Qatarand UAE), there are good prospecps of doubling Indo-Arab tradefrom Rs. 4,400 crores to Rs.8,000 Crores in the next five years.?o Mr.Modi reportedly told the Indian press that there was considerablescope for diversifying Ind.ian expqrts to wide-ranging engineeringgoods, capital goods, metal products and consumer durables. Healso pointed out that Arab countriles provided excellent scope forIndian entrepreneurs to set up Joint ventures in metallurgical,petrochemical and consumer indu6tries.

India has already set up instltutflonal machinery by way of jointcommissions with somc of the Gulf states to identify and promotecommercial and industrial ventur€$. But the progress so far has notbeen that satisfying, In UAE (United Arab Emirates), for example,although a joint Indo-UAB semmission was set up in 1975, it hasmet only four times during the lbst ten years of its inception; itslast meeting held in May 1985.?1 IF the last round of talks, a pro-posal to set up a joint investment pompany was mooted and exa-mined with a view to step up tradq and expand industrial coopera-tion. If this were to naterialize (which seems likely), this could be-come the model for similar initiatives with other Gulf states. Theproposed joint investment compa{ies could become a vehicle forpromoting joint ventures for which there is considerable potential.Some such ventures have already Qeen floated; the largest number(13) being with the UAE. One suc[ project involves trilateral co-operation between India, UAE an{ Tunisia for setting up a petro-chemical complex in India; with UAE providing ammonia, phos-

S.P. SsrH 55

phates being supplied by Tunisia and India providing the technical

expertise and manpower.Indeed, petrochemicals and fertilizers are two areas where Iqdian

technical expertise can be matched with Arab capital and raw mate-

rials. And since the Gulf countries are facing problems in marketingthese products in industrialized West (because of over-capacity

thcre), India's expanding needs could provide a useful alternative

market outlet provided it does not entail excessive drain on India's

TABLE 1.

Date Value ProjectslTrade Deals Co ntries

Octobef 1980 $13.1 million

November 1981 n. a.

Psce6$e1 1981 $3 millio,n

Jaruary 1982 $38 milliori

March 1982 $150 million

Provision and installation ofsteel containers

Prbvision of 1.5 million tonnesof Indian iron ore annually

Management of a nitric acidand ammonia complex

Extension of sugarcaneplantations

Construc;iotr of 576 housos atTabuk

Assembly of 5,000 jeeps

Construction of a dam

April 1982

April 1982

June 1982

n. a.

$39 million

India andKuwait

India andBohrain

India andAlgeda

India andIraq

India andSaudiArabia

India andIra.n

India andLibya

India andBahrain

$0.?75 millio! construotion of a sulphuricacid plant

Note: Ashok-Leyland group from India bagged an order, December 1985,

for tbe supply of 130 buses to UAE. Earlier, buses from Tata had been

supplied to most of the tratrsport companies in Dubai, Abu Dbabi and

other Emirates, excePt Sharjah.?s

56 THB Pnnstc,N Gur.r .lNo Soutn Asre

foreign exchangc reserves. In othef words, Gulf project assistancecould be tied with supplies for the lndian market,

Another joint venture proposal irnder active consideration is forthe establishment of a sponge iron plant in Sharjah (a constituentstate of the UAE federation) to run on natural gas. Tie capacity ofthe proposed plant will be about qne million tonnes a yru., *hi"nwill substantially meet thc requirejments of the Gulf CooperationCouncil countries. Still another p|rdect underway, involving Indo.UAE cooperation, is for manufacturing ofshore and onshore oildrilling platforms.

A look at some other projects and trade deals between India andArab countries, will give us an idea of the direction in whicheconomic relations might further be channelcd. Table I is illus-trdtive.?2

Pakistan, Bangladesh and Sri Lahka have also been involved insome projects/trade deals as seen irl Table 2.1a

TABLE 2.

Projwts lTrade deals Cowtries

November 1978 $300 million

Mafch 1982 $316 million

November 1978 n.a.

May 1977 gI20 million

Constrrlction of an ammoniaTurea cbmplex at Lasbela inPakist4n

ConstrUction of 5,000 housesat Najhn

a. Railway constructionb. Supdly of 10,000 tonnes

of ud€a to Bangladesh

Agreement on delivery oftea oved 5 years

Pakistan andUAE

Clprus, LibyaPakistan andSaudi Aratia

Iraq andBangladesh

Sri Lanka andLibya

Tle above tables (by no means exhaustive) are quite indicative.In the case of India, the saleable products are its- iron orc, steelcontainers, buses, management/cqnsultancyltechnical excsptise_

S.P.SETI{ 57

both in agriculture and industry-construction works, etc. Theseare the directions in which further avenues need to be explored.There are many more which could be tapped as indicated by a listof products recently supplied to the Indiau commerco minister bythe visiting Iranian minister of industry and which Iran would liketo buy from India.?6 It included iron and steel items, compressorsand electrical goods, caustic soda, synthetic fibre, rayon yarn,asbestos, alumilium foil, cellophane, paper and chemicals. Anotherarea covered in the talks with the visiting Iranian minister relatedto link deals to involve, for instance, Iran's non-oil export like sul-phur against Indian exports equipment for projects. Bharat HeavyElectricals Limited is already tendering for three thermal powerprojects in Iran.

To lessen the difrculty of foreign exchange payments, India andIrau signed, in March 1985, an agreement to set up a Special Fund.This Fund of $200 million, to be earmarked out of payments fromIranian oil exports, is iotended to act as a buffer for foreign ex-change payments. The Iranian industry minister has assured thatthe Fund would be set up shortly. New Delhi could explore possi-bilities of setting up similar funds by Arab Gulf oil exportingcountries.

The most ambitious joint venture todate, in which India and Iranhave figured, relates to the Kudremukh iron ore project in India.This project was conceived under the Shah's regime. He had com-mitted his country to meet tlle entire cost of financing the Rs. 600crore Kudremukh project on the explicit understanding that ironore concentrates produced there would be supplied to the Iraniansteel mills.76 But with the Shah's overthrow (Iran had by theu alreadyadvanced $255 million) the project ran into difrculties because thenew regime refused to honour the agreement. Nevertheless, Indiamanaged to complete the project but has been finding it difficult tofind enough customers to buy its iron ore concentrates. With aproduction capacity of7.5 million tonnes of iron ore pellets perannum, Kudremukh project is operating much below its rated capa.city for want of orders. Lately, howevor, Iran has agreed to liftsome of the iron ore concentrates from Kudremukh. Initially, it willimport 600,000 tonnes which might gradually increase (over anunspecifed period of time) to about 4 million tonnes. India alreadyhas fouod customers (Bahrain being the largest, with 1.5 m tonnesof iron ore supplies annually)?7 for neaiy 2 million tonncs of Kudre.

Sorrdn Asle,58 THs Pengen Gulr eNo

mukh iron ore. ,Apart from Bahrdin,?s New Delhi might explorefurther possibilities of exporting (of swapping with oif iron ore tothe Arab Gulf region.

If the impressions of a recent lirdian tradc delegation to Arabcountries, led by Mr, K. N. Modi, are anything to go byn Arabsare said to be keen to intensify their contracts with Indian business-men and regard India as the only country in the world which pro-mises secure investments.?o This qay seem rather over-optimistic,but the recent American freeze of Libyan assets (and a similaraction against lran, some years agof in the wake of the seizure ofAmerican embassy and its persodnel) is bound to make Arabswonder if their investments in thd industrial world (particularly,the USA) are as safe as they led thdmselves to believe. This shouldenhance India's potential as an outlet for Arab investments, espe-

cially now that New Delhi has conslderably liberalized Indian cco-nomy. The recent flurry of highJevql visits to Arab countries (PrimeMinister Rajiv Gandhi's Oman visit was a poce.sotterleo ut" 'oU'-

cative of a new impetus in this direftion. A number of Arab dele-gations, comprising senior businessinen, are expected to visit Indiashortly, according to Mr, K.N. Modi. India is also expected tosign agreements with the Organizati0n of Arab Pctroleum ExportingCountries (OAPEC) on oooperationr in the ffeld of petrochemicals,marketing of crride oil and naturhl gas, as well as training ofpersonnel in the oil industry.sl

Indian contractors, even as late-Ntarters. managed to win somehandsome construotion contracts dgring the late-seventies. At theend of 1981, they had won contrarcts worth $5 billion.s2 But thiscompared poorly with South Korea whose share in the constructionboom was as high as $44 billion.es Apart from being late-comcrs,Indian contractors' relatively poorshowingis "thought to be largelythe result of (their) go-it-alone attitude." However, Indians havethe twin advantages of proximity and technical manpower; andthey now seem prepared to enter idto joint ventures or go in assub-contractors. Even though the cdnstructioo boom is now over,this new approach should help the4 penetrate more Gulf markets,other than Libya and Iraq which hald provided 75 percent of theirMiddle East earnings.

The prospects of doing more busilness with the Gulf could be en-hanced if South Asian countries (palrticularly India and Pakistan)were to follow 8 regional approaoh in their dealings with the Arab

S.P. Sarn 59

world. With the formation of SAARO (South Asian Associationfor Regional Cooperation) and some improvement in Indo-Pakrelations, this might not after all be an impossible task. India hasan image problem in the Gulf region (particulary in Saudi Arabia)where it is seen an anti-Pakistan lwhich is a Muslim country) andnot very protective of its Muslim population. It is also perceivedas pro-Soviet. This is reported to have figured during the talksbetween Saudi leaders and Mrs. Indira Gandhi when she visitedSaudi Arabia in April l982.sa How far Mrs. Gandhi was able todispel this misperception is difficult to say. But lately, under PrimeMinister Rajiv Gandhi, there has been some perceptible improve-ment in India's relations with both Pakistan and the United States;and tbis could not have but done some good to India's image withthe Arab Gulf countries. A joint SAARC or Indo-Pak approachto relations with the Gulf region, however, is unlikely in the nearfuture. Hence, India would have to act largely on its own to pro-mote and expand economic and trade relations with the Gulfcountries.

India's political image has not been the only factor contributingto its poor showing. Therc are other reasons too. These are:86

Firstly, Indian products are not comparatively as good as fromother coutrtries, Second, Indian suppliers'samples are different fromreal supplies. Third, contracted supplies are inordinately delayed.Fourth, packaging is of a poor quality. Prime Minister RajivGandhi, during his Oman visit, conceded as much when he report-edly said that part of the problem (India's disappointing export per-formance) arose from lack of quality, competitiveness and salesman-ship.86 Apparcntly, New Delhi is aware of all this and, hopefully,steps will be taken to rectify this situation. Apart from trade, Indiacan do a lot in terms of helping to revive and, even expand, thedccaying agricultural sector of the Gulf economies, and to set upindustrial estates based on small and medium industries to meetthe regional needs oftbe GCC. It can also contribute significantlyto the services sector.

CurnrNr OrL SITUATIoN

The glut in the global oil market has reduced the price of oitfrom $36 a barrel in 1981 to 916.75 a barrel,s? Consequently, oilrevenues ofOPEC countries have plummeted thus creating serious

6 TflE Pmsrex Gulr nno Souirrr As[q,

balance of paymOnt problems. Evbn the oil-rich Gulf countries arerunning current account deficits; with the richest ofthem (SaudiArabia) having a balance of paymbnts deficit of close to $30 billionin 1984.88 With foreign assets of over $140 billions0 (with incomeaccrual on them), this should not worry Saudi Arabia too much.But it is worrying nonetheless agalnst the backdrop of a continuingfall in oil prices and a hefty reduction in the share ofOPEC oilsupplics to the world demand. f'or instance, OPEC share of theworld oil market has decliued froh two-thirds in the scventies toabout one-third currently; the rebt htrving been gobbled up by thebig non-OPEC exporters like Brltaitr, Norway, Mexico and theussR.00

Consequently, the OPEC oil cartel has developed cracks and itsmembers have given up their feeblo attempts to regulate produotionand prices. The Saudi oil ministqr, Sheikh Ahmed Zaki Vamanlhas warned of a disastrous oil pribe war if non.OPEC producers

werc to continue going their ownl way.01 Indeed, a very lively dis-cussion has been going on for sonte time now regarding the extentto which the oil price will continue to fall, and whether the'rosy'OPEC days of tbe seventies will wer return. The American journalForeign Policysz had invited two experts to debate this issue.According to Stephen Stamas, altftough the short-tcrm scenario ofoil supply overtaking the demand ls encouraging, "the long-rangechallenge remains." Hc writes, "ahhough its (oil) share of energyis falling, oil will still provide almost one-third of all energy consumedat the eod of this century, and its irolume is projected to grow upby more than l0 MM8/D (barrels a day)."08 His arguments are asfollows.oa

l. Oil consumptioo has exceeded the level of new discoveriesfor more than a decade; hence tte world is increasingly living offalready discovered reserves and that gap will likely grow in theyears ahead.

2 . The major oil consuming areas of the world-the UnitedStates" Western Europe, and Japan-produce only a fraction oftheir oil needs. Even with some further increase in non-OpECsupplies, they will continue to dqpend heavily on OpEO importsfor the balance of this century. Besides, developing countries willrequire growing oil imports to suplort their economic growth.

3. The volatility of the Middle East situation will continue tocreete uncertainty about future oil supplies.

S.P. SBm 6l

4. Some of the oil alternatives are now in doubt as a rcsult ofgrowing environmental and safely concerns; thus sharply escalating

investment costs and, in some cases, the difficulty of bringing on

oew technology. This is certainly true of nuclear power' (Solar

energy has also failed to develop on a wide enough scale to even

marginally replace oil. Aud with the continuing fall in oil prices,

alternative and renewable energy forms, including synthetic fuels

might become less attractive in terms of investmonts involved and

their costs of production.)Fred Singcr, on the other hand, believes that OPEO's monopoly

on prices is now over. He writes:

By uext decade, with the combination of price'ilducod energy

conservation and alternative eaergy development, oil consump'tion in industrialized countries will decline toward 20 millionbarrelles a day (MMB/D) or even lower-compared with 1978

consumption of 40 MMB/D, North America, including Mexico,will be producing at least 15 MMB/D and the North sea, per-

haps 3-5 MMBiD. These levels of production mean that little oilwill be required from the rest of the world to meet Westernneeds.06

He goes on to make, what (in hindsight) could only bo called aprophetic assotion :

Well before then (end of this decade), the combination of lowerworld oil demand and increased non-OPEC production willlikely cause fierce competition among OPEC producets, even ifSaudi Arabia were to stop production. If Saudi Arabia remainsa producer, the crunch will occur much sooner. In either.case,OPEC would have to slash prices to sell oil.s8

As for the discussion effect of lower oil prices on investments inoil alternatives, he opines:

At the point (when oil prices have fallen sufficiently), industrialnations may not be willing to accept cheap oil because they willhave made alternative energy investments. Political pressures

within producing counfries, such as the United States, will lead

62 Tsn hnsnr.l Gur,r llro Soi:nr Asre

to calls for import quotas or tarrifs, perhaps along the liue of1959-73 oil import quota, to kgep out cheap Arab oil...sz

In a similar vein, Hobart Rowdn predicts a bleak future for theO.PBC producers.rs He quotes ph[lip K. Verlegcr Jr. (an Americanoil expert), from his testimony before a House energy sub_com_mittee, who reportedly said that the real qucstion was not whetherthe slide in prices could be stopped at $20 a barrel or even $10.Verleger believes that some of the new industrial conservationpractices and substitutions are frobably irreversible. But DanielYergin, another American expert Who heads the Oambridge EnergyResearch Associates, is not so slnguine, He argues: .o,..Marketrealities-will again give way to gpological realities-the concenrra-tion of oil resources in OpEC alnd in the Middle East. And thatwill eventually put the era of surplus behind us."es However,R_owen disagrees, He supports thcise experts who urge that the riskof lower oil prices (weakening the resolve for conservation and sub-stitution) can be ofset by import taxes.roo

The British weekly, Economisflror 4ro sees a bleak futurc forthe OPEC and is all for desrroying it permaneDtly. Itwrites,'.OPECcould soon be just another fi word, fading from headlineto history book." It adds, .,Its fate rests with a few hundred politi-cians in Britain and America (whq) can turn an unseasonal fall inoil prices into permaneut gains flor the world economy."roz TheEconomist does not take the calls of OPEC leaders, whohave warncd that non-OpE0 will not be able to win aprice war if they persisted in no[ lining up with OpEC producersto stabilize oil production and It argues that since the con-tribution of oil to OpEC eco is disproportionately high(compared with, say Britain, whficb gets only 8 per cent of itsrevenues from taking oil production), any pricc war will inflictmuch more damage on them. Hpnce, it regards such threats fromOPEC as ,.their most obvious bluF.,'

The Economist is all for raising petrol and diesel taxes by the USGovcrnment. "By keeping up pQtrol prices to the motorist," itargues, "America (and other coun[ries too) would maintaln the pres-sure for conservitrg oil, so that OflEC could not regain its Darketffxing power in the 1990s." fndeed, it sees in this (taxing themotorisr)a panacea to rid the American (and global) economy of all its curreutills, The argument goes like this:

S.P. SEIH 63

,..by passing a bill that increased petrol and diesel taxes in three

stages, by $l a gallon in all, it (US Congress) would raise $135

billion a year in new revenues before the decade was out...Interestratcs would fall, easing the debt'servicing burdens (of many

countries)...That in turn would reduce fears ofa banking crash'

and also cut the federal goverments' bill for debt interest (as well

as reducing its budget deficit;.'.."tos

The Econonistwarns, "If Congress docs not go for a petrol taxsoon, it will have missed its best chance of returning the world tocheap oil, slow inflation, low interest rates and rapid growth."

It scems rather all too simple. And as with most simple solutions,there are political problems when it comes to implementing them.

For instance, how will the Congress explain to the American people

(who have been fed on cheap oil far too long) that they must pay

higher prices for their petrol and diesel when the price of oil in theinternational market is ridiculously low? It seems to assume an

incredibly high level of motivation on the part of American citizen-ry, and that too in a non-emergency situation. Moreover, if the oilprice were to continue declining, it will mean a continuing rise inpetrol tax which is politically not sustainable.

Whatever the Economist might say, OPEC producers (especially

the largc Gulf oil producers) are better suited to withstand an oilprice war because of their cheaper cost of production. In the case

of non-OPEC producers, like Britain and Norway, the cost ofproduction o[ the North Sea oil works out at about $15 a barrel.lorThe Arab oil producers, on the other hand, were able to selltbeir oil in the sixties at around $2 a barrel and still claim royaltiesfrom the oil 'majors' working on their oil fields. Even assumingthat the costs bave since gone up by 100 per cent or more, theMiddle East oil could still be marketed at about or a little over $5a barel.

Admittedly, this would cause a havoc on OPEC economies (espe-

cially its non.Arab members), but for Britain and Norway it couldspell the end of their oil industry, and not just the tax receiptsfrom oil. Even the 8 per cent tax which Britain gets from its oil-though seemingly small as a proportion of its total revenues-iscrucial to its ailing economy. Therefore, it is sheer bravado to suggestthat OPEC would be the main loser in an oil price war.

il Tw PERsTAN Gurn eNo Sotfnr AsH

In the circumstances, it would spem that non-OpEC oil exporters'will have an equal, if not greater, stake in a stable interenationaloil price regimen, If so, the price pf oil shoutd stabilize around $20a barrel, (after the on-going fluqtuations harre worked out theircourse) for its profitability to be maintained for all oil exportingcountries. Tbis will still mean sbfrcient proffts for the Gulf oilproducers, and hence the continuipg need for South Asian countriesto forge development links with them.

NOfES

1. This would broadly explain the Sbviot interest in cultivatitrg India, sinccEid-fifties. For a detailed discusslon of lado-soviet rclations during thefifties and sixtles, see S.p. SGth, .iRussia's Role in Indo-pak politics,',Asion Surtey, August 1969.

2. According to Chenery, from 1950 tp 1920, new oil discoveries in ttre MiddleEast and elsewhere far exceeded th€ increase in demant! and oil pricesactually decliqcd by 50 per cent ib real tems. As a result, oil rapidlyreplaced coal and, by 1973, wa| supplying half of the world's energyrequirements. Furthermore, in lfre period 1960-73, oil from OpECcountries (of which the Gulf oil producers were tle main suppliers)supplied 40 per cent of the total in world's primary energy. SeeHolis B. Chonery, the World Economy: Round II,"Foreign Afairs (New York),

3, Ifazem Beblall".i. The ArabHelm, London, 1984), p.175.

4.

1981, pp.1102-?0.

Economy in a Turbulmt Age, (Ctam

AMul Mqiid Farid, (ed.), Oil and, Securit! in the Arabian Qutf, (Cl:oomHelrn, London. t98l), p.15..'Oil and Decline of tho West," Foreign Affatrs, (N. y.), Summer 1980,p.1009.

See in this connection Arab Leagrle's pledge of support to Libya in tbowake of tbreatened Amcricaa and Israeli armed retaliation against Libya-salleged involvoment in the terroridt mids (believed to be rhe work ofa Palestinian faction 1ed by Abu l{idal) at Rome and Vietrna airports inDecember 1985. Tines of India at,d Indian Express,6 January 1986.Sec n, 2. 8. Ibid., p.1105.

$ Fred Singer, "An End to OPEC? Bct oD tho Market" (Debating thefuture of OPEC), Foreign Poticr, Wirter 1981-82 (No. 45), pp.1l5-2t;see also Walter J. LaW, "Oil: An Agenda for dre L98Os," Foreign Afabs,Summer l98l, pp.1079-01.

See '.The Oil Turmoil," (editorial), Tribune, 14 Decernber 1985; "CrudeWerfaro," (editorial), Hind stan Times, 72 Deoembcr 1985, ard "ACa.rtel Crapks," (editorial), Times of Indla, 11 December 1985.

6.

'f

9.

10.

S.P. SETH 65

11. .'Arab Petrodollars I Where did All the Money Go?," South (edixorial),

London, Sepiember 1985 (No. 59), pp, 1G-11'

12. r.3, p.132.

13. Jiang l{ong, "Arab Countries: Hard Times Spark Readjustment,"Beijing Reviev) (Berjinc), 15 July 1985 (No. 28) pp,ll-12'

14. See n. 11.

15. See S.P. Seth, "Saudi Arabia's Security: All Eggs in the US Basket"'and "Contradictions in Saudi Situation," Times of India, 12 and 13 May1981.

16. n, 11.

17. Tim Niblock, (ed.), Social and Econontic Derelopment in the Arab Gulf(Croom Helm, 1980) (for an indicative list ofbeavy industry projects

operating, under constructio! andi or planning, sea pp. 102-5).

18, For a detailed a@ount, see M.S. El. Azhary, (edJ, The Impact of OilReton es on ,4rab Gulf Developrnent (Croom Helm, London, 1984), pp.

9l-106, also n. 17, pp. 95-105.

19. Azhary, qn. 18), p. 96. 20. lbid., p.97.

2l . Estimat€ by the Gulf Organization for Industrial Consulting (GOIC)(quoted in Azhary, Ibid., p.91).

22 . *The Trado Politics of Middle Eastern Industrialization," ForcEnAffairs, Y'lintet 1978-79, 9.309,

33. South (London), September 1985, p,249, 24. Ibid.25. S6e !. 18, p.102. 26. Ibid., p.103.

27. Ibid., pp.103-4 (cCC consists of Saudi Arabia, Kuwait, Qatar, Behrain,Oman and United Arab Emirates).

28. S€e n. 11 aod n. 13.

29. .'The Years that the Locust hatb Eaten: Oil Policy and OPEC Develop-ment Prospects," Foreign Afairs, Wintet 1978-79, p.287.

30. Partha S. Ghosh, "World Oil Outlook: Some Policy Implications forlndia," India Quarterl! (New Delhi), October-December 1983 (Vol')Q(XIX, No. 4), p.399.

31 . Ibid 32. n. 29, pp. 29243.33. n. 11. 34. Ibid.35. The Arab Ecornmy, Past Pethrmanca and Future Prospects (Oxfotd

Univ€rsity Press, Oxford, 19821, pp.136-37.

36. "Philosopby of State Development Planning" (Chapter 4) in El Azhary'n. 18, p. 39.

37. Ibid., p.52. 38, Ibid., pp. 39-'{0.

39. n. 3, p.86. 40. Ibid., pp. 86-87.

41. Ibid. p.140. 42. lbid.43. Ibid., pp. 1,{0-41. 44. Ibid., p. lzt. 45. Ibid.

46. "International Migratiori: ImplicatioDs for Labcur Exporting Countries""The Middle Edst Josnal (Wasbington), Autumn 1984 (Vol. 38' No. 4)

66 Tk PBRSTAN Gur,r nno So{rn Asn

pp.668-84. Ttis issuo of tfu Wddb Eatt Jowtal, is devotad to an€xamimtion of issuos relating tb manpower migration into West Asiaand North Africo.

Tbese and othor facts relating to rpigration arp drawn (uohss otherwis€specifed) from Shahid Javed Bur(i's above sfiidy.Ibid., Table 4, p. 674.

Ismail Seragel{in, et al., "Some l$sues Relatcd to IJabor Migration inthe Middle E4st and North Afriga," The Midille East Joamal, Ltlyrmn1984 (Vol. 38, No. 4), Tablo 3, p1 636.

n, 46, p.674.

World Developwnt Report 1984 (Washiqron, D.C., 1984), Chapters4 and 5.

a,46, p. 676. 53. Ibid., p. 682.

Ibid., pp. 675*76. 55. r. 49, p. 623.

Ibid. s7 . lbid., p.624.

Times of India, 19 January 1986. 59. n. 49, pp. 62f25.Indian Express,24 October 1985. 61. n. 49, p, 626...culf IndiaNi Tte Exodus," Indla Today (New Delhi), 15 Novembcr1985, pp. 70-71.

Times of India, t7 Deccmber 19B5.

Naiem A. Sherbiny, ',Bxpatriate n,abour Flowsto the Arab Oil Countriesin the 1980s," The Middle Easi Jdurml, Autumn 1984 (Vol. 38, No, 4),p. 648.

Ibid., pp. 652-53. 66, rbid., p. 656.

Sortt (LondoD), January 1983, p. 39.

For facts and figures of oil productior and oil fulporte, see Ttnes olInfra,28 D€oembet 1985 and 6 fanuary 1986; also Hind ttan Tirt4s,31 December 1985,

Times of India, 20 Jaruary 1986.

Hlrldustan Titiles, 19 ,afliary 1986i

For an account of Indo-UAE relitions, s€e the special feature on UnitedArab Emirates in Ttnos of India, p0 January 1986.

Achilli, Michele aud Mohamed Khaldi (eds.), The Role of Amb Davelop-ntent Fmds tn the World Eanany (Cfqom Helm, London, 1984), Table9.I0; pp.1210+14.

Ibid., p. ll1. 74. Ibid.Hindastdn Times, 26 Nwember 1985.

For a fairly detailed rcport se Til es of India,30 Janualy, 1986.

n. 72. p. l{t.Bahrain has oontracted to buy, fiv€ y€aB, 7.5 miliotr tonnes ofiron ore frm Kudremukh Plant.

48.

49.

50,

5t.

<t

54.56.

58.

60.62,

63.

64.

65.

67,

68.

69.

70.71.

73.75.76,

78.

f9. Etndustan Ttnu s. 8 R ebf'nryTimes, 7 laarnry 1986.

S.P. Ssrtr 67

80, Seo in this coonection, S.P. Seth, .,Promisitrg Gulf Links," HindastanTimes, 12 December 1985.

81, Times of India, 8 December 1985.

82, Sauth (London), 1983 lune p, 64.

83. Ibid. 84. n. 30, p.4O5.

85. R, Sikka, "Procp€cts of Greatcr Cooperation," The Tlmes of India,(special feature on UAE), 30 January 1986.

86. n.80.87. The lndian Express (editorial), 10 February 1986.

88. El Azhary, n. 18, p. 50.

89. Ibid. A recent report has put Saudi Arabia's foreign cash feserv€s at$60-80 billion, see Robin Lustilg, .,Riyadh's Economic Future Ub-certait!" Tirus of India, 6 February 1986.

90. Gwynne Dycr, "OPEC: .Vagrant Beggars)' Hindasian Times,l2 Novn-bof 1985; see also lrttes ol India, ll December 1985, and editorials iaTimes of Indb, 11 Dec@ber 1985, Etndastan Times, 12 Deccmber 1985

*d, Tibune, 14 Decemtler 1985.

91" hdist Express, ll Novmber 1985i Times of India,27 laruary 1986.

92. Fr€d S, Singpr, "Ar End to OPEC? Bet on the Market; " StephenStamas, "More is N€eded," Forcign Poltct, Winter 1981-82 (No. 45),pp. 115-25.

93, Ibid., p. 123; see also Sumithra, "Depleting Oil Reserves," EindasianTfines,lI Februaf,y, 1986, andG.K. Pandey. ,'Falling Oil Prices: Iodia'sOp{i@s," Timet of India, 12 February 1986.

94.96.

98.

99.100,

loz.104.

Sineter, n,92,pp. 123-24. 95. Ibid., pp. It9-20.Ibiit., p. t2O. 97. Ibid.

Ilashington Portl reproduced in The Guardian Weekly @Iaachater),28 July 1985 (Vol. 133, No, 4), p.1s.

Quoied fron Nev York Times, ibid'.

r, 98. l0l. 14-20 December 1985, (Vol. 297, No. 74241, pp. la-t!,Ibid., p.12. 103. Ibid., p. 13.

-Tte Oil Tnraoif ' (editorial), Thc Trlbune,14 Decembcr 1985.

4, South Asian on to the Gulf:Problems and

GIRIJESH PANT

South Asia has emerged as one the leading sources of labourPakistan, Bangladesh and Srisupply to the Gulf countries.l

Lanka, have collcctively provi about 4 million workers to theregion, thus appropriating a very t share ofthe market. Acloser look at the demand-supply f rs suggests that despite thoslackening of the economic activi

that in the oil recessionsituation, the sizc of labour of the rcgion may not growbut the relative share of Asians, from South and South-east Asia, is likely to grow lly in medium and high-tech-nology sectors. Conversely, thefrom the Gulf have acquired very

sent by the workers

in oil prices, the region will continment its labour force. In fact it is

sion of inter-regional cooperationcountries has also emanatcd out ofremittances.

caused by the downward swingto need expatriates to supple-

share in the balance of

between South Asian and Gulf

payment account pf the labourpower export accounts for single

g countries. Today maa-source of foreign exchange

earnings for South Asian coun In case of Pakistan, thc remit-tances at one stage (1982-83) cx the total exports of thecountry.

fn a resource constraint faced by all the South Asianaford to ignore remittancescountries perhaps none of them

and leave them to the vagaries the invisible hands. But at theamong South Asians can leadsame time a growing compet

to depress the wage structure t afecting the volumc of re-mittances itself. In other words asupplier countries of South Asia

is emerging among the

policier so as to maximize thecoordinate manpower exportSimultaneously, a new dimen-

owing need of manpower and

GrRtJBsH PeNt 69

The central concern of this paper is to projeot this inter'regibnaldimension of cooperation between the capital-poor South Asianand labour skill constrained Gulf economies in a broader frameworkof South-South cooperation. Obviously this calls for a study of the

labour market as well as the pattern of South Asian migrationto the Gulf. The first section of the paper deals with the nature ofthelabour market; in the second section, a country-wise study of South

Asian countries is undertaken, followed by the impact and signi-flcance of the flow of remittances on the labour exporting countries.In the last section an attempt has been made to articulate the need

for inter-regional cooperation for mutual advantage.

I. Gur,r LABouR MlmEr IN TRANSITIoN: Elr nncrNc TnnNps

The size and nature of labour market in the Gulf economies has been

determined by four faotors: (a) volume of oil revenue; (b) sectoralpriorities inthe plans; (c) the availability of the local manpowerand skills; and (d) the rolationship between socio-political sensitiv-ity ofthe region and tbe foreign workers. Though all these four'components are crucial but their criticality has been varying, tbere-

by shaping the policies of the labour importing countries and also

providing significant input for the labour exporting countries forpreparing policy responses to the new situations.

In terms of development stages, ten years since the oil boomconstitute one phase of economic evolution. During this period the

region has completed the task of laying the basic infrastructure and'

initiated a process of skill generation both domestically as well as

by providing facilities for training its manpower abroad. Ol the

four factors, mentioned above, it was the size ofthe oil revenue

which appears to be the key determinant in shaping thc labour mar-ket during this phase, With oil revenue providing the requisite pur-chasing power, infrastructure building became the priority sector

in the process of dcvelopment. Since infrastructure developmentrequired massive construction, which happens to be highly labour-intensive sector, the demand for labour was inevitable.2 Flowever,the booming labour market demand could not be met by localsupplies both due to small population as well as due to very lowlevel of skill availability. Thus import of labour became necessary.

As far as the sensitivity of the foreign workers' presence was con-cerncd, it can bo argued that in the initial phase it was not very

high, though it will be wrong to suggest rhat the system has beenimmunc to it. In fact the changing folicy responses and at time evonchanges io preference for nationalities by the local regioes doreflect on the seneitivity.

The decisive impact of oil revenrte on the labour markct catr bcseen by looking at its expanding size. In 1975 the total employmentin the Arab Gulf region was estirhated at 2,53g,300 which wssexpected to have gone up toincrease of 29 per cent, TheTable l.

3,259,800 by l98q registering anwise break-up is given in

TABLE f. WoRK FoRcB TEE A&AB GULF REGIoN.

Percentincredsebetween1975-80

Saudi Arabia 1,799,9M 27.6

t< t

30.4

7) 7,

60.3

Kuwait

UAE

Balrain

Qatar

299,800

296,500

75,800

66,300

377,rqD

386,50p

92,W

106,300

5.4

4.1

9.9

2,538,300

J. S. Bitks and C.A,Development (London, 1

tt qt

The Crisis of

The increase has been lowest in dase of Bahrain (22.3 per cent)and highest in case of Qatar (60.3 fer cent).s From the point ofview of the demand for the expafriates, it will be relevant to seethe share of natlonals in tbe erhployment market during thisperiod. Estimates are fhat betwee{ 1975-80, the annual growthrate of national work force has bee! 2.2 pr cent jn Saudi Arabia

GInuBsIr Pnvr ?l

as against tbe rise of labour markot by 5 per ccnt. In case ofKuwait, national labour accounted for 5 per cent growth as

against the average of 4.7 per cent, in UAE the national labourforce grew by 3,2 per cent as against the average of 5.4 per oent,

for Bahrain and Qatar these growth rates have been 4'5 per cent

against the averagc rise of 5.4 por cent and 4.2 per cent re'spectivcly. The corresponding changes in tho share of nationalsis given in Table 2. In Saudi work force the share of nationals has

gone down from 57 per ccnt to 49 per cent. In case of Qatar and

UAE also the expatriates took greater proportion in rise of employ'ment opportunities than the nationals, but in Kuwait and Bahrainthe national work force retained its share.

TABLE 2. NU\DE& or NArroNar, AND TrtErB, PEBcENTAGE rN TorAlWoRK FoRcE.

Cowtry 1975 1980

Natiorcls Perccnt Natlonals Percet t

Saudi Arabia 1,026,500

Kuwait

UAE

Qatar

91,800

45,000

12,s00

57.00

30,6

15.2

18,9

1,133,300

r17,200

s2,7N

15,600

49.3

31.1

13 .6

12.7

SouRcE: Birks and Sinclair, op. cit.

Projectioos of the future demand for expatriates in the ArabGulf region have been made under three different scenarios of bighgrowth, medium growth and low growth for 1985 and 1990.4 Theprojections have been summarized in Table 3.

In case of three countries, namely, Saudi Arabia, Kuwait and the

UAE, the demand for expauiate workers is likely to be between

3985 thousand to 4088 thousand under low growth and high growth

scenarios respectively. What remains tho significant featuro of thelabour market of the region is thc dominant share oftho foreignworkers. "By comparison with 1980, tbe expatriate labour ratio in

72 Trln Pnnsuu Gulr eno

TABLB 3. PRo,ECTBD DBMAND

RrcroN,* 1985 AND

Scensrio

High Growtlh

Medium Growth

Low cro$th

ASIA

Exp,c,rRrArEs IN AR,AB GULF(N THOU8ANDS).

1990 .

4,088

4,036

3,985

fSaudi Arabia, Kuwait aDd UAE.

1990 is likely to be higher. In Sdudi Arabia from 53 per cent to62 per cent; in Kuwait from 79 pef cent to 82 per cent, in UAEfrorq 89 per cent to 90 per cent."o

changes, with tho graduation of thq market to the second phase ofdevelopment. The projections for the market made by a World

While the demand for f workers is likely to continue,despite the slowing down of the elonomic pac€, the occupationalstructure of the market is to undergo somo qualitative

Bank study suggest a tilt in favour of skilled sector.The projection for 1985 is basqd on high growth assumption

which is not valid in view of the recession, yet given thedemographic structure, skills and the kind of economic activitiesundertaken by the$e countries, in tlLe low growth situation only themagnitude of tbe trend will vary. thus these ffgures can be readwith some precaution but they c$ntinue to remain relevant inshowing the occupational of the market. At aggregatelevel, the region's dependence on labour power seems tobe increasing in the professional technical category (A-l) byaround 3 per cent; in the categorj called A-2 it shows a rise by Zper cent. Wbilc a marginal decline {an be seen in case of categoryclassified as sub-professional andbreak-up suggests wide variation.

(B-l). The country-wise

73

TABLE 4.

GRJrssH PeNr ,

DBMAND FoR ExpAtnr.qrs LABoUR rN Wrsr AsuNCouNTRrEs, 1980-85 (NUMBERS).

t980 l98t 1982 1984 19851983

Professi onal andtechnical 139,405

(7.0)

Otherprofessional 252,636

Sub-professionaland technical 200,096

Other sub-profes-sional 115,321

Skilled office andmanual 801,148

Sem i-skilled andmanual 599,118

Unskilled 474,417

149,179 159,195 170,730 184,073 210,769

(7.0) (6.7) (7.2) (7.8) (14.t

271,614 29r,234 313,506 337,300 380,960

(7.t (1.2) (7.6) (7.2) (12.9)

221,327 23E,261 254,173 275,317 313,322(10.o (.6) (6.7) (8.3) (13.8)

125,245 130,577 133,078 138,399 151,371

(8.O @.3) (t.e) (4.0) ( e.5)

858,594 914,0& 973,108 1,U3,997 1,1s2,784

(7.2) (6.4) (6.4) Q.3) (10.4)

6@,478 721,9t9 793,m2 882,674 947,988

(10.2) (e.4) (10.0) (rr.2) ( 7.4)

487,994 497,994 512,6s9 547,874 ssl,946(2.7t Q.2) (3.0) 16.9) ( 0.7)

Total 2,582,140 2,7 7 3,481 2,953,24s

(7.4) (6.t3,15t, 156 3,409,6? 4 3,76,140

(6.7) (8.2) ( 8.8)

Note: Figures in brackets indicate perc€ntage incr€as€ over the pr€viousyearc'

SouRcB: World BaDk.

74 Tw PK$AII Gwr lwp

From the point of dcveloping: such as India, Sri Lanka

and Pakistan, whichhave been largely to the semi-skilledit appears from Table 4and the unskilled segment of the

that for semi-skilled (C-2) jobs, market is shrinking even under

high growth assumption in and Kuwait, but shows ,signiff-cant rise in Saudi Arabia (from 3f.2 per cent to 55.00 per cent),

VLE (77 per cent to 80.5 per pent) and Qatar (75.4 per cent to81.00 per cent), In thc unskille$ categories Bahraiu, Qatar andSaudi Arabia were expected to sliow favourable changes.

The nationality-wise break up of the projected demand oftheexpatriates suggests that in comp{rison to 1975 when the Southeast

Asian workers provided 1.3 per cdnt of foreign work forcq in 1985

their share is likely to be 9.5 pef cent under high growth scenario

and 10.9 per cent in low rate scenbrio showing a rise of around 34

per ceot. South Asian work forpe is likely to enhance its share

uarginally from 21.6 per cent toL2.7 per cent in high growth and

21 .7 per cent io low growth scen4rio registering a rise by about l0per cent. In contrast to this the sfare ofArabs is estimated to dec-

liae to 48.4 per cetrt and 50.5 psr cent respectively in high andlow-growth scenario. Among dhp A'rabs, it is the Yemen ArabRepublic that is likely to bear the brunt most severely because

their sbarc is likely to go down to l0 to ll percentin 1985asagarnst 20,4 per cent in 1975.6 It is reported that of late the GulfGovernments have oncc again tdken on an official position to eo-

courage the inflow of Arabs in plhco of Asians because there has

been pressure spccially from the fress expressing concern about theAsian presence. "The intenso public debate of the issue is centredon Asian component of the wolk foroe, whether from the Indiansubcontinent or South East Asia.'I7 At tle official level, a numberof measures have been conceived to enbance the Arab sharo in workforoe. The UAE has introduced a [aw that envisages that 30 per centof the block visas issued for thf foreign workers be reserved forthe Arabs. But the trends do not to providing credence tothe official policy. Tbis between the offcial policy andthe trends can be explained by lofking at the politics of the demo-graphic trassformation.

The policy and attitude of Arab Gulf governments towardsthe expatriates in general and tois determined by their strategy

Arabs and Asians in particularevolve a system in tho region

where the political ctatus quo is maintainod deryitc tho ohauging

Gnrrxn Pr,ur ?5

economic profile of the region. This has been attempted so far by "ex-ploiting the expertise of immigrant labour to serve the functions ofdependency while isolating their political involvement and maintain-ing the legitimacy of clan power when the tribal base of legitimasyis diminishing. Policy responses to this problenr have been, on the,one hand, to control the immigrant population by a system ofinsecurity in terms of their tenure, on the other hand thrbugh paten-alistic policies tbwards the local population, to engendet dependenceon the ruling class aud status distinction between the nationals andnon-nationals.o'8

From the above premise it beoomes very apparent that the Gulfstates will be trying to maiotain the market for the expatriates, theirchoice towards a particular nationality would be governed by thefact that which of these nationalities and their homc governmenthelp them in manipulating the labour market, Between the Arabsand Asians, taking various attributes together it would appear tbatAsians are likely to meet the reguiremetrt in greater measur€s.Moreover, a larger proportion of Asian work force is with theprivate sector where the employer enjoys freedom to choose tlesource. Since Asian labour is relatively cheap and also said to bemore efrcient and less troublesome, they are likely to retain theirsbare with the private sector, In countries li&c Saudi Arabia wherethe thrust is to enlarge the private sector participation in the economyas the Fourth Five-Year Plan indicates, the Asians are likely towithstand the pressure created against them. However the publicpressure against the Asians could bs used for further modifying theimmigrant policy. For instance, thc labour camp formula of Koreansmay be made obligatory because such a formula serves the purposefor mceting the public pressurc without making any substantivechange. Camp formula is preferred because in this the work forceis "isolated, they are easily controlled, the minute they have finish-ed their job they leave."s

As pointed out earlier the market for the expatriates is also likelyto be influenced by the new economic priorities of the Gulf Govern-ments specially in view of the oil recession and the availability ofthc local skills at the wages acceptable to the expatriates, From tbepoint of labour market, perhaps the key sector which has beenaffected by the oil recession has been the constructioD sector.However, in assessing the magditudc of this adverse impact, it hasto be reiterated that even in oil bouyaot regimo, the rete of erpan-

76 TrB PERsTAN Gur,r eNo AsrA

sion would not have been le to tho seveoties and earlveighties. "The phase of deyelinfrastructure construction of

it has served to accentuate

t centred on the creation ofschools and hospitals and

housing which is the most labour tensive and it is completed innormal coursc, the constructionto thitr out. Now in the absence

most Gulf states. And even inindustry workers would have begof more new projects coming u there would be less occasiou for

is reported that in Saudi Arabialaid off labour to hang back."rowith the decline in construction infrastructure building, uptoone million expatriates, i.e, a

riate work force will leave the "

ximately one-third of the expatom by the end of the decade.ll

Estimates suggest that in recent the construction sector hasit enjoyed in the initial yearsstarted losing the lead sector

of thc oil boom.lz In Kuwait, to the census of 1980, only25 per cent of the expatriatesAccording to the study reported

in the construction sector.

of no objection certificates formarket salesmen, workers in

Khaleej Times about 80 per centtriates are for jobs such as super

rants. tailors, bankers, etc.rePerhaps the sectors where thegrowiDg is the maintenance

iates market is likely to remainoperation and service sector as

well as in the high technology r, because in either case theindigenous population is not to be available for the reasonsoutlined below.

During the last one decade of il prosperity; the state pursued apolicy through which the natio ls were provided employment

sector. It is argued that such ato maintain the status quo in

opportunities in state-runpolicy has been devised with athe domestic power structure "a substantial administrativesector strengthens a ruler vis-a- the family, tribal and religiouspersonalities whlch had consti competition beforo oil wasdiscovered."la Understandably the national work force getting

vization, it will be difficult tosubjccted to a process oftransfer the work force even if wage structure is so tilted.rsMoreovef, "the modern educaArabia and the Gulf states" ha

system adopted by Saudi

suited to the needs of such raoidlnot been the type of system most

developing economies; indeed,the disinclination of the popula-

tion to undertake jobs other administrative posts in govern-ment service. Technical and v tional training is consideredmarkedly inferior to general education which is the onlv

GrRUEss PANr 77

means of achieving a university place."rz Yet another dimension ofthis employment pattern would be that the skill generation is likelyto be stunted which will affect the very development process of theregion. A study of skill formation in Saudi Arabia points out thatthough the government has launched a number of schemes giving

special emphasis on vocational training, upgrading and on the jobtraining but "relatively few of the measures introduced by thegovernment to improve the quality of education aud training have

met with success."l?Given the diverse naturc of political regimes, demographic pro-

files and the economio plans in the region, there can be variationsin estimating the size of the labour market, Yet the sheer need forthe maintenance and completion of the on-going projects, retainsthe expatriates as critical component of the labour market. There-fore, the policy of the Gulf States will be to take a tough posturc

and regulate the market in a way that minimizes the cost element,be it economic, political or social. In the semi-skilled and unskillcdsector of tho market, non-Arabs are likely to be in greater demand.

In the skilled sector, the Arab suppliers are having second views

despite tbe glamour of remittances. View is gaining strength that'ointernational migration selects the most able members within each

skill level ofthe labour force. The loss to the source country isgreater than the numbers alone suggest .... Remittances do notmake up for the investment in labour which the poorer country has1ost."18 In other words, tbe Arab countries will be ffnding it difficultto spare skilled manpower for the maintenance and operation sectorin the Gulf countries which means the market is likely to go to theAsians" Moreover, Arab expatriates are vulnerable to intra-Arabfeuds. Reccntly, the way Libya expelled the workers from Tunisiaand Egypt has disturbed other labour suppliers. It is reported that

"most of the deportees appear from countries that are on badterms with Libya.... If Nimeri was still President of Sudan, the

. Sudanese would have been the first to go."reOf the non-Arab Asians, the prominent suppliers of the work

force have come from Pakistan, India, Korea, the Philippines andThailand. Countries like Bangladesh, Sri Lanka and, of late,China, too have been exporting their cheap labour to the Gulf. Itis reported that with the wages going up, the Japanese contractorsare looking for alternative to the Koreans, and Chinese appeer to

78 TrrE FmsnN Gurr lNo Asn

be the substitllto.e However. share and pattero of these Asiannigraot workora has been

II Perrnnn oF SouIII AsrAN

Manpower export from Southtion in volume, So docs the

countries shows marked vana-flow of remittances.

But tte wor* force shares features in its composition. Theremittances are of critical i to each of these countries.While this open$ up a situation intra-regional competition, moreso in recessionary market at the same time it also provid-es the rationale for cooperation. are approximately 4 millionSouth Asian workers in the East remitting about $4 to 5

South Asian region is facing awith only gl4 billion as export

billion to tleir home countrv.debt burden to tbe tune of $37revoaue to ffnancc the needs. As Table 5 suggests,thc largest sto€* of the from South Asian subcontinenthas migrated from Pakistau, account for more than 65

TABLE 5. SourE ABrAN LABoUR rN TIIB MDDLB BAsr AlrD THEnRET,fiTTANCBE.

Nei prlwe tranater(nillton $)

Pakistan

Indigb

Baugladech

Sri Lanks

2,5001000o

'-I984j 4-1982

FIA QlanetA Estomic

3044a

2700q

@6.2b

270 .7b

6626.9

91310000

Sorncs: , Annual Supplements, 1985.

GIRIXE$I PA.NT 79

per cent of the South Asian migrants' A country-wise survey willperhaps provide better insight of the increasing significance, ofmanpower export and remittauces fort he individual countries as

well as for the region.The importance of remittances for Pakistan'o economy can be

appreciated by the fact that the Sixth Five Ycar Plan (1983-88) out'lay has been concelved on thc projectcd workers' remittanoes atthe level of $4221million in 1987-88. It assumcd l0 per cent risc inremittances from estimated net-migration of 550,000 duriog the

plan period. However, the data for 1983-84 and 1984-85 indicate a

decline in remittances after reaching a figure of $2886 million in1982-83. Trends in the workers' remittances can be seen fromTable 6, In ten years'time remittances bave inoreassed from $124

million in 1972-73 to $2286 million in 1982-83 showing a pheno'

menal eighteen times rise during the decade. However, between

TABLE 6. RrurrrAucgs sv PaxBrAm Wonxens (rN MrLLroN DorrAR!).

Year Remittances (Toisl) Ratlttiance forMtddle East

Percent,otal

1972-73

1976-77

7978J9

1979-80

1980J1

1981-82

1982-83

1983-84

r98+85(B)

124

578

1396

1748

?.095

2886

2/t50

1096

1363

1667

I836

2403

234/.

ll. a.

78

78

80

83

83

86

SouR.cE: .'Pakistao Eoonomic Survey, 198t[-85," guoted in Pakittan and GUUEconorrtist, 11 January 1986.

E-Estimale.

80 THB Pnnsnw GULF AND AsrA

1982-85 and 1984-85cent.

The growing dependence ofcan be seen by the cushion it prbalance of payments deficits.accounted for merely 14 per centhalfofthe total exports in l97G

have declined by about 18 pcr

economy on remittancesin easing the pressure on

1973-74 workers' remittancesexports but its share exceededand the total exports in 1982-83.million while remittances werePakistan's total exports were

$2886 milion in 1982-83.

TABLE 7. ThADB DEFrcns AND

(MrLuoN DoLLARS).

Exlmfis Imports

nt PArrsr,q,r's EcoNoMY

Debtservicing

Tradedefuit

Ret tittances

In view of tbe fact that the trade deficit has increased to an alarm-ing proportion, suggesting thaf merchandise exports are not ina position to underwrite the impott need along with rising obligationto serve the foreign borrowing, the increasing reliance on remit-tances is understandable. But as if has been pointed out in a seminarorganized by Karachi Chamber of Commerce and Industry on'Export of Manpower, Iovisible parnings and Home Remittances'the economy could not afford {ny decline in manpower export.Therefore all efforts were needed fo gear up manpower exports fromPakistan to the Gulf region,zl belause about 85 per cent of remit-tances havs been coming from thf Gulf rcgion, It is estimated thatabout l0 per cent of Pakistani ldbour force is in the Middle East2raccounting for 70 per cent of ovefseas workers.

, In terms of skill composition, rpnskilled and semi-skilled workersengaged in manual works consti]tute about 83 por cent of the ex-patriates. Of tho remaining, 6 pei cent are reported to be salesmen,4 per cent injprofessional sectors,] 2 per cent iu service and remain.ing 3 per cent in other s€cto$. Nfiost of the Patistani labour force

GrRrrrss Penr 8l

is in Sauali Arabia, accoutrting about 60 pcr cent of it, followed bythe United Arab Emirates with 15 per cent, Qatar 8 per cent, Kuwait5 per cent and Bahrain 3 per cent.a It is estimated that there will be

a net outflow of Pakistani workers in the range of 52,000 to 58'000pet yerir. About 70 per c€nt of the Pakistani migrants are fromPunjab, followed by Sind with 14 per cent, NWFP 12 per cent and

Bahrchistan 4 per cent, It is obscrved that though the Pakistaniworkforoe has some advantage over tbe workers from other count-

ries but "there is a lot ofspeculation about the possible change inthe demand for Pakislan labour fotce in future'"84

Indians are the s€cond largest community from the sub-continentin the Gulf region. In 1975, 150,000 Indian migrant workers were inthe Middle East and their size increas€d to 800,000 by 1983 register'

ing a growth rate of about 25 per cent per annum' The pattern ofgro*th rate when studied in terms of time interval shows that itwas after 1979 tbat it grew at a faster pace raising Indian share

fron 8 per cent to 20 per cent of all the expatriates working in the

region.$ With the annual net flow of 180,000, Indians are likely torcduce the gap with the total Pakistani stock in the region because

the arnual net flow of latter has been 15Q000 per year. The country'wise break up of the Indian workers is given in Table 8.

TABLB 8. INDIAN WORKERS IN THE GULF,

Counlry 1975 1983

Seudi Arabia

Kuwait

UAE

Qatar

Babrain

r5,0ffi (12.2,

2r,500 (17.t5t,500 (50.0)

16,000 (13.0)

e,000 ( 7.1)

270,000 (38.3)

115,000 (15.3)

250,000 (35.5)

40,000 ( 5.7)

30,000 ( 4.3)

Totd 123,000 (100.0) 705,000 (100,0)

Note: Figures in parantheses are percentages of the total.

professionals or had teohnical education, the

82 Tiu Psnsr.AN Gur"r ll.rp Asrl

In the Gulf countries Indian orce has risen from 123,000 to705,000 between 1975 and 1983 wing an increase by more thanffvo times. The country.wiso up shows that in Saudi ArabiaIndian workforce went up by 18

the increase was ffve times, in U1975 and 1983, in Kuwait

it went up by four times whilein Qatar and Bahrain the has bcen morc than three times.However, in ternas of dispersal of total workforce in the region,it shows greater degree of In the individual labourmarket, Indian share is estimatedforce in the UAE and Bahrain.

some differences also. "Whileunskillcd workers is signifcantlyIndia; Pakistan and Bangladcshpossessed some skill. Even theihe highest literacy rate in Soworkers to the Middle East

more than half of the work-

Pakistan and Bangladssh."zoskill composition of the Indiantbe basis of the data for Qatarfrom Kerala can provide the

bout 45 per cent in Qatar,2l.7per cent in Kuwait and 7.5 per in Saudi Arabia.

Tbe skill composition of the In workers bears resemblanccwith the Pakistani workforce wing dominant proportion of

But at the same time there areunskilled and scmi-skilled worproportion of the oompletclyin the case of migrants fromto a markedly greater extent,of Kerala, which has by far

Asia, has $ent more unskilled

Though the country-wise data ofworkforce are not available, yetand the sample of the Indiansbroad idca of the skill levels of Indian expatriatos. In Qatar thestock of Indian workforcc is at 45"000 for 1984. As Table9 shows about half of the wsemi-skilled labourers,

brce consists of unskilled and

The sector-wise employment of Indians can be obtained fromthe data on Bahraln which show 50.4 per cent are with the build.ing construction and transport followed by service sector (22.9

to be employed as supervisoryper cent).t? Indians are alsostaff in department $tores, hotels, banks, oil companies, most of

. The unskilled and low levcl ofthem owned by the privateskill of the Indian labour forceKerala migrants.rs However, it i

supported by thc studies onfound out that the skill level of

the Indian workforce is i 'oThe averago skill level oftban the skill level of migrantsKerala's migrants in 1980 was

from India in 1975. In 1980, 18 cent of Kerala's migrants were

GnuBsn Panr 83

TABIE 9. INDIAN WoRKroRcE rN QArAR,, 1984.

Sktll lewl Nwnber Pacentage share

Unskilled

Semi-skilled

Skilled

21,2N

3,085

7,430

47.2

6.8

16,5

6.6

20.4

Higbly skilled 3,000

' Working as admidstsative stafr 9,170

t,075

Total 45,000

SouRcEi Indlan l.abour Year Book,1984.

corresponding proportion for Indian workers in Kuwait in 1975 was14 per cent.zo

Emigrants from India arc distributed over scven States-Kerala,Andhra Pradesh, Punjab, Gujarat, Goa, Maharashtra and TamilNadu. Of these states, Kerala accounts for more than 50 per centof Indian emigrants. However, their share has gone down due toproportionately greater outflow of emigrants from other parts ofIndia, particularly since reducing the sharc of Keralites .to thelevel of 33-40 per cent.

Though remittances do not constitute that high proportion ofIndian exports as in Pakistan, but its share has been of criticalsigniffcance to the Indian cconomy speoially in financing the risingoil bill after the oil price hike. Remittances are recorded under'privatc transfer' head of the invisible in current account whichincludes other receipts like donation from religious and charitableorganizations, etc. From the computation done by Gulati andMody summarized in Table l0..it can be seen that after making im-pressive rise till 1980-81, there has been marginal decline in l9g1-g2but again in thc following year there has been a spurt by 15 per

99.8

&l TEB Purf,AtI Gurr lHo

cent"s According to the same . the Indiao rcmittances fromthe Middle East io 1980 were t $2198 million accounting for

cstimated at $2930 million. The75 per cent of ths total\Yorld Bank Resident Mission attances at $2.3 billion in 1985.

Delhi has projected remit-

TABLE 10, INDIAN RBcErPr (Rs. MrLuoN).

Growth rdte(pe&e''t>

l97A-71

197t-71

1976-77

t9n-78

1978-79

1979-&l

1980-81

I981-82

1982-83

t,232

1,982

7,927

1t,356

lt,719

116&4

23,688

22,986

43

5

42

-tt5

SomcE: I. S. Glulati ald A. ModY, of Indao MigrBnts frmtho Middle Bast," CDS brktng Papsr, No. 182, 1984.

Ifr 1977-78, thc renittasoes for 20.8 pcr ccnt ofthoIndian exports but in 1982-83 accour ed for 30 per cent. Priorto the oil pricc-hike remittaDces for only 7 per ccnt ofsxlrorts. Thc rising share of ncedg to bc apprcciated iq

the contert of rising Indiao in tbe seventies. Today whcaa glaring proportion rpeciallytbe tradc deficit has increased

after the opening up of theup at tle desired pace, the

and exports are not movingobligatirma are rounting (dcbt

servking for 1984-&5 hae beofi cahulatcd at Rs 1115.0 crore)

Grnursa Pmrr 85

the signi0cance of renittaaces io tho bahrce of paymeot accountis too obvious to be statcd.

TABL,E 11. INDIA'$ TRADf DBFIcrr AND REldmANcs (Rs. CboRxB).

Year Exwrs lttvom Trade defiait DeU ne,$lttawetservicittg

1977-:78

1932-b3

5433.5

9137.1

5541.0

t49lx.2

10?.5

5175.1

820.7

947.5

1,135

2,6fi

Sovr'cgi Ecorromic SttreY, 1984-85.

Baogladesh and Sri Lanka havc been late-comers to the labourmarket of the Gulf, but their dependence on remittances has

enhanced the signifioance of the market for their manpower exports.

Of the three lakh Bangladeshis working abroad, 2.4 lakh are

reportcd to be employed in the Middle East constituting about 80per c€nt of the total. About 35,000 are reported to be in SaudiArabia.El From Table 12 the recent trend of overseas migrants and

TABLE 12. FoR.BIGN EMpLowBNr AND REMITTANCES(rN ChoRB TAKAS).

Brrrploymentabroad

Rcntittarces

1981-82

1982-83

1983-84

19E{"-85

68"362

63,551

50,r22

51,9!4

8r2,2r

1497,92

1476.81

825.07

Sn,aun.fi. Baegl4d6h F&tortic ,Srrv€l, 198rl-€i

86 Tne PER.sTAN Gur.r .q,no ASIA

ionsequent flow of remittances be seen. It appears that since1980-81 there has been decline in annual overseas employmentcompared to the trend of last ten During last ten years, theaverage foreign employment per year is recorded at 55,000 to60,000. The corresponding fall inThe amount for 1984-85 is equi

remittances can also be seen.

to thc amount for l98l-82.From Table 13 lt appcais that rr

of the exports and 38 per cent of tmounting debt, debt-servicecent of total exports. In view of composition, Bangladesh'sworkforce again shows the of unskillcd and semi-skilled

migrants to the Middle East,workers constitutitrg 58 per ccnt offollowed by skilled (31 .3 per cent),professional and tochnioal (5. I per

ofcssiooals (5. 6 per cent), sub-).rn

TABLE 13. BANGLADEsE DEFICIT AND REMTmANCES

(IN CRORB TAKAS).

Tradedeficit Remmittances

ittances account for 75 per centtrade deficits. In view of thcis estimated at about 15 per

1983-84

1984-85

1990,19

2375.00

5852.00

7155.00

3861.81

4780.00

1476,81

825.07

Growing imFortance of for Sri Lankan economy canbe seen by the fact that its export eafnings from manpower exceeded

Rs.6,5 billion to the balance.of gayment account, It 1977, the ,remittances accounted for only 2 plr cent of total foreign exchangeeatnings but in 1982 the share ( million) has reported to havegone up to 20 pen cent. Morecome from the Middle East, The

70 per cent of these earnings

migrants seems to be in Saudi with tle estimated figure of30,000. Unlike other South Asian couhtries, in Sri Lankan workforce,

the principal foreign exchangeIn 1981, tea fetchcd Rs. 6.4

women consist more than 50 pernannies and domestic servants.rants are unskilled labours-52

for last hundred years-tea.while remittances accrued to

ooncentration of Sri Lanka

of the total, working as maids,largest section of thesc mig-

Skilled and semiskilled

GrnrrssH Perqr 87

contribute 38 percent and l0 percent of migrants belong to tlemiddle level cadre.83

III MeNpowen ExpoRT RBrrlrrre.rgcns AND DBVBLorMENT:IMPACT oN THE ExpoRTrNc SocrBrns

Given the prospect of exports in the Gulf market, and the criticalsignificance of remittancss as the leading source of foreign exchangeearnings as outlined in the preceding section, it is understand-able if thc Govcrnments of South Asian countries have been pursu-ing various policy mechanisms to increase the manpower exports.The issue that needs to be evaluated at this juncture bcfore articu-lating the oeed for intra and inter-regional coopcration is: whctherthe experience of last ten years makes a case for augmenting co-operation in the context of development. In evaluating and estimat-ing the dcvelopment impact of this transaction it will be necessaryto state at thc outset that manpower exports cannot be equatedwith a commodity export in a mechauical manner. For importingas well as exporting country it involves political, social and psycho-logical dimensions which in case of plural societies showing fragilemodern social structure with regional disparities can prove to bccounter-productive. Secondly the migration from the developingcountries of South Asia to the oil rich Gulf States diflers in morethan one sense with thc migration taking place from the dcvelopingcountries to the developed world. Both in terms of naturc of themigrants-income as well as skills and tho duration of stay, thismigration differs conoeptually as well as in its developmcnt con-notation.

If migration can be divided into two categories-settlement andcontract migration, then it can be argued that South Asian migra-tion to the Gulf region is of latter kind. ,.It is chafacterized by ajob contract that is concludcd on behalf of the workcrs by theemployers for whom the workers are to work, and a single visaauthorization is usually given on behalf ofa single employer. Theduration of the stay is explicitly specified in the contract, normallyone year, and the workers usually travel without dependants. Oncethey arrive in the host country, i.e. the country of employment, theworkers usually stay together in accommodation that is providedby the employer."s Deflned this way a cootract migrant will havediflercnt connotation of remittances. His propensity to save and

The difference between the grorsby the social cost or negative econo

88 Tru Perst,rx Gur,n eNp Asle

spend is guided by differeot oDs having its own impacton tle development profile ofwords while at the gross level

importing eouDtry. In othqof foreign exchange to the

economies perpetually facingnet gain from subh transfer

crisis is a positive gain but the

money "whether they will be

upon the utilization of theto augment the investment

capital resources of the country is largely by consurnp-tion behaviour of the families of workers and by tbe institutioral struoture that help mobilize do caoital for iovestment...."8t

d net benefit is accounted forexternalitv that results from

migration and the impact of on the economy of thecommunity from which the workers come. Ia other wordsto appreciate the net gains from trancactioo to ths SouthAsian countries it will be relevant look at the empirical evidenceof the utilization of these along with its social dimen-slon.

The South Asian experience of wer export shows greater

degree of similarity ttran diversity, To look at this experience in aholistic frame, it will be relevant to classify it into its variousaspects and examine their Broadly spcaking th$ecan be following dimensions:

(i) Utilization of the by the workers and its impact

, on local economy; i(iD Impact of migration on labour market at aggr€gate and

sectoral level ;(iii) Extent of skill generation an{ the absorptive capacity of the

exporting economy;(iv) Stability of the export market and remittances inflow;(v) Institutional structure for mopilization of romittancer; and

(vi) Impact on the social system,

In the absence of any comprehensive study either at regional orat national level it is difrcult to pro{ide adcquate data support andevidence to quantify the net gains frqm the transaction. Yet an effortis made here to look at tho proble@ based on the fragnentary in-formation and sone studies lookilg at ooe or two aspects of tbeproblem. From the different sourcEs the availablc accouat on theutilization pattern of remiltances sllgge$ts a comrnon behaviour in

GlglrBsl| PANr 89

all oountries of South Aeia. It shofls that the lbrge share of these

earnings has so far gone to moot either oonsumption demand' or

to wriie-off indebtedness and for the purchase of land and build-

ing. Since more that half of the expatriates have gone from low

income cetegories, it is understandable if the money was used either

to satisfy the pent up demand, to rehabilitate the household or to

clear the debt burden. It is interesting tbat while these workers show

high lxopensity to save during th€ir overscas stay, their propensity

to consume goes up in tbe home country. Noticeable imiract of tha

remittances induced consumption has been o served in case of local

commodity market and more pronouncedly on the land price' It isapprehended that "rapid changc in houschold consumption pattern

nay disrupt the €conomy at the local leveland result in domand'led

inflation. In addition, the incrcase in foreign exchango earning may

prove illusory, if it is also accompanied by a corresponding large

ioc..ur" in the &mand for imported con$umer goods."m

The cmpirical ovidence in support of above contention can be

found in these countries. Tbe study of Kerala State in India sug-

gests that "tbs land prices in Kerala, particularly in districts and

villages of high migration have registered an increase of 100 pet

cent a year since the mid seventies, but th€y cannot easily be docu-

mented at the macro-level because of increasing tendency to under'

statc the value of land transactions in documents of tranrfer to

avoid taxation."s? Similar evidences have been found in BangJadcsh

, where 56 60 per cent of the earning has been reported to be spcnt

on land, construction of houses and buying coosumer durablcs's

In Pakistan "in urban areas where housing conditions are extremely

poor and millions live in miserable conditions, some of the foreign

iemittances have created an extra demand for housing and so urban

landowners have made €normous profits, There is a superflcial

booo' in construction industry, but 'it has only increased the pro-

pensity to import, because Pakistan, produces very little steel and

other capital goods of the kind required in building' As a con'

seguence house-rents in major cities have increased sharply and

land prices have gone up dramatically"'8r In Kerala too, the feudal

elements are reported to have gained due to the inflated land prices'ao

The impact of labour migration to the Gulf region on the domes-

tic labour market can bc better appreciated at the tevel of disaggre-

gation Being labour abundaot economies, South Asian countries

view migration as a sourc€ of employmeot. Since the major scg'

90 Tns Prnsr,c,N Gur.r ano

ment of the expatriates havesignificant scarcity bas beenhave gone up of semi.skilled woWhat is signiffcant is thatadverse impact of tho migrationcording to Paklstan Economicgenerated shortage of middlunskilled labour in rural areas atwithin Pakistan underwent aselective nature of out-migrationment pattern in human capitallogy."!r In India too while tnebut at the samc time a fewperience scarcity of manpower.team came to recruit nurses in Ipitals and other places with largefor lucrative foreign jobs. .,This

thc important departments and othis thc Law Ministry had toExternal Affairs Ministries."a2skill flight was reporred by ONMore recently drdin of trainedMadras Atomic power proiect64 engineers and highly skilled sugo to Gulf countries.skills such as plant operation andmaintenance."43

Unlike the migration to thedid not contributo in a signlficantthe emigrants, Yot it would be'no change in the skill upgradationbeen done to cstimate this.going to yet another dcvelopingture within which their workersare working with the multinatido acquire skills even if engagedchallcnges when the workerscapacity becomes relevant. So farfelt this problem in a big way butbe one ofthe key issues. In

segl

.It

Asre,

from ttre unemployed people no, yet there are cases where wages

like masons, carpenters, etc.all the economies have felt the

f skilled and professionals. Ac.(1983-84), ,,out migration has

technicians in urban areas andseason. The wage structure

transformatio n because of thehich has also affected the invest-

employcr's choice of techno-tion did help in providing jobs,

ts of labour market did ex-is reported that when a Saudia nearcrisis came to Delhi hos-

umbors of qualilied staff rushingfeared to affect the working of

on theatros. Perturbed overup the case with Labour and

scarcity and complaint ofregarding its offshore drillers.

and technicians was felt byKalpakam. It is reported that

rs had left the projcct to, "there was shortage in specific

entation and control or

countries, Gulf migrationway io developing the skills of

to conclude that there will be

So far no work seems to haveit can be argued that despite

untry, the organizational struc-been working specially if they

from the developed world, theysmall jobs, this will create new. Here the question ofabsorptive

Asian countries havo notis not very far when this willthis problem has started be-

Grnnnsn PeNr 9l

coming visible. The issue is reported to have been raised in a se-

minar organized by the Karachi Chambsr of Commerce andIndustry.da

The issue of stability in the onward-flow of remittances has

acquired importance because of increasing dependence of SouthAsian countries on the remittances. The declining trend in the in-flow of remittances has been causing corcern and the governments

are taking measures to augment its flow. Evidently an economy

like Pakistan cannot even aflord fluctuations in the remittancos'flow. Thus, it is not surprising if a scries of steps have been recom-mended by the Karachi Chamber. Some of the signiffcant steps areas follows:{6

1. Pakistani engineering, construction organizations and consul-tants in forcign countries should be persuaded to employPakistanis.

2. The Government should enter into a package deal with foreigncountries employing outside manpower. The counter-tradearrangements can be cxtcnded in this area also.

3. The Bureau of Emigration and Overseas Employment, Govern-ment of Pakistan, has fixed a monthly salary of 640 riyals forunskilled Pakistani workcrs. However, thc unskilled workcrsfrom Bangladcsh, India and Korea arc being employed at amonthly salary of 300/400 riyals. Bmployment of Pakistanis atlower salary be allowed.

4 . Liberal package for import of machinery for migrants be

develoPed.

To a greater extetrt the net gains from the remittances can be en-hanced if suitable institutional mechanism can be conceived for notonly augmenting the inward flow of the remittances but also forproviding suitable channe! for productive investment. While thegovernments in South Asia do pursue policy for the former, not ade-quate efort has been made for the latter. In Pakistan like in thePhilippines and Thailand, it is obligatory for an emigrant to openbank account before he leavcs the country and a minimum ratio ofthe earning will have to be remitted through official channels. These

countries also provide favourable rate of exchange on remittancesand higher interest rate on bank deposits made out of these remit-tances. In some cases these workers are allowed to open foreign

Y) T\fr Pnnslu Gulr nqo Asrl

exchange ac€outt at a domcstic a facility not available other-wise. Financial instruments are afso uscd fol channelizing remitted

allows a migrant worker to sell ttie foreign exchange to Bangladeshimporter at a promium over the rate, thus supposedly actingas an incentive to use official ls for scnding money home. InPakistan under Non-Reoatriable . Scheme, custom dutyis levied at a concessional rate. Id Iudia too, incentives are giveo

under NopResident Indian t Scheme, and some attractive

offers are given by Government and Unit Truet of India.The issue that seems to have ncirt received sufficient attcntion by

the policy planners and is likely tO emerge as formidable challengc

is the question of rehabilitation of the expatriates after they como

savings. In Bangladesh wage1974 based on the Pakistani

AlternativelY, he may acquirelation having adequate staying

' scheme was introduced rn

Voucher Ssheme. The scheme

properties of 'foot loose' popu-wer and seeking refuge in fare-

back. As pointed out eailier, tbcsb migrants go only for a limitedperiod with the intention of earnifg but settling back in their home

country. Already tle ilflow of these expatriat€s has started be-

coming visible. In this context, it is essential to stress that tho mig-rant may be the same individual Uut his flnanoial pro0le altogether

changes when he retutns. Witb tbe new money powcr he seeks a

correspooding equivalence.in socibty and also in the polity. In otherwords he would like to assert hir bponomic strength. This assertioncan be utilized by providing suitable channels of investucnt, thus

chialism- In a socially differen society it may acquire ttredimcnsi,on of etbaic oonfliot, feuds and even growthof regional parochialism, One of Indian Muslims fromHyderabad does provide somc

'.Now a whole new breed ofin this direction. It observee,

ready to pay ary price for landrich Muslios with petro-dinars isand building in the old city of

I{ydcrabad. This break on ttre ntal expansion of tle Marul,aricommunal riots in Hyderabadcommunity was one roason for

dtring November-December I ,... Incidcntally, the communaltension was conflned to localitiecbadis lived or where Marwaris

the Gulf moneyed Hydera-in majoritY."eo Similarly in

Palistan where a good of expatriates have come froo

GIRTIS:H Peur 93

mral areas of Hyderabad, Sukkur, Quetta, Multan' Peshawar'

AtUottuUuO, the stress of nEw wealth is being felt in the social

fabric.{? The point made here is that while such a stress is inevitable'

what is needed is to make a suitable institutional mechanism, opening

aveoues for investment for thcse returnees which minimize the

social disruPiion'The inf,ow of remittances ln shaping the development pattern

towards dependency or sclf-reliance has been a matter of debate' Itis argued that manpower export has been used by the ruling class

of tf,e hbour-."po"tiog countries to acquirc liquidity which is

increasingly getting diffioult to obtain. It helps the ruling classes

of thc Gulf as will as the international capital looking for cheap

manpow€r. In case of Pakistan manpower export has created a trew

kind of dependence by changing the orientation of the economy

overwhelmilgly in favour of external market. The Pakistani eoo-

nomy has goi ieduced to merely a service platform to be ueed for

the needs of cxternal market specially the Gulf'

IV Eumowc CoN,rPr,BtrlsNtenITY: RATIoNALB FoRCooPERATtoN

The relationship between regional cooperation and development

needs to be sein at two levels. At one level, regional cooperation

can be seen as response or reaction to either regioual or global

context, while at other level it can bc viewed as ao effod to meet

the structural inadequacies of the domestic system. In the former

scnse regional cooperation, in fact, becomes a bargaining strategy

for better terms of trade, access to market, larger flow of cxternal

c&pital and technology. Io tle second case it becomes a process topool the resouroes and markct for reaping the advantage of scale'

[Io*"o.t, in either case it can lead to development only if it can

contribute in reducing external dependence and help in creating

internal resilience. Thus regional cooperation by itself cannot ini'tiate any development process. It acts merely as a catalyst in the

ongoing pr@css. Viewed in this context intra'rcgional cooperation

among the South Asian countries and inter-regional cooperation

among thc labour erporters and importers of Gulf and South Asia

can be conceived for better exchange of manpower'remittances'

From the preceding account it is clear that irrespective of the size

and volume, all the South Asian countries arc tryiog their best to

pronoto th€ export of manpower' What is interesting ig that io

tors. There are npither evidences nor the prospects at the givcn

94 Tsn PERsTAN Gur.r.lnp Asu,

doing so they are cutting each by intensifying competition.market, they arc trying toConsequently, id a not so

rcduce their w4ge level . This can prove to be counter-productive. The volume of depends upon the numberofworkers, the wage level and propensity to remit. This object-ivc can be bettor served if the countries coordinate theirmanpower policy, bargain for wages rather than cutting eachotber and help each other in the leakage of remittances.

Thc rationale for inter. cooperation between the supplierand importer of manpower

shows signs of transition interms of its denoand, the of local manpower to run andmaintain the system is not very b ght at least in the short run. Inother words, their dependence on manpower will continue.And, of the given suppliers, Asia will continue to remain the

importers have pursued a policycheaper sourco. So far, the laof obtaining South Asian man to the extent they could do,in interacting with the local rce, and have pursued a mechani-

as bardware. If it is agreed thatcal view for looking at them purethe development of society cann be obtained by acquiring merely

the growth of software also, thenhardware but equally important isthe Gulf states will have to that an increasing interactionbetween the workers from the ou world contributes in develop-ing the skills. Here we are to that segment of market whichis skill-oriented. The Gulf srates this time should learn fromother developing countries' that by training manpower

promoting relationship to reduccglobal system. With the myth ofit will be easier for thethc advantages in coopcratingFrom tho first section of tbisthat even though the labour

in the latest levet of technologythe growth of indigenous skills.

of the Gulf States at present isracy level or to trbin manpowef

from a wider premise forrespective dependence ln thcpower getting over, perhaps

of the Gulf countries to see

the fellow developing countries.it should havc become clear

not a sufficient condition forhout developing indigenous

red either to increase the lite-sending them to high-skill sec-

skills no society can move to self-reliant development. In theglobal market fon skills, South countries, speciatly India,have acquired a level of to.develop skills indigenouslyat least at intermodiate lcvel. resources development policy

Gnrrrsu Pllu 95

pattern of development to see the growth of this intermediate skillsector at the wage level which the oconomy can sustain. ThoughSouth Asian couotries thcmselves bave sectoral limitation, a co-operative plan between the two regions can be mutually advan-tageous, ki other words, what is suggcsted here is that in the field ofhuman resource development, particularly skill generation, there is ascope for inter-regional cooperation. This can be achieved by esti-mating the regional demand and supplies and coordinating their res-pective policies. It is pointed out that the concept of tumkey contractis gaining currency in the Gulf market, "Unlike traditional recruit.ment agencies a turnkey labour contracting frm will take part in allstages of project, from tender to completion, including providingtheir own executives to administer the workforce supplied by them.With their knowledge of the most suitable and cost-cffective sourcesof labour, such Srms can contribute to a bidder's competitivenessbecause ensuring the supply of an adequate workforce is now oneof the important factors in successful bidding. Contractors usinglabour contracting term. cau enjoy tle advantage of knowing thatthey can provide the required labour efficiently and quickly."o

The growth of tbe turnkcy companies can be a positive step inpromoting inter-regional cooperation. In the Gulf countries a num-ber of local companies have come up undertaking the task of con-struction work in a wide-variety of flelds. In fact there is growingpressure for the protection and promotion of these companies. Andthere is no denying that unless, a class of entrepreneurs developsin the Gulf, these economies cannot achieve the goal of developinga market-oriented 'Islamic system'. As pointed out above one of thccriteria to bid successfully is to have adequato availability of man-power for thesc contracts comprising of various skills of differenthierarchy. A turnkey company is supposed to provide assortedpackage of skills. In this context a joint company operating at inter-regional level can be of advantage to both the regions, while it willensure to the local company from the Gulf to bid at a competitivelevel because of ensured availability of skills. It would be of benefitfor the South Asian region because a company operating at a re-gional level will have workforce of various nationalities of theregion without disrupting any sector of the labour market. In otherwords, a complementary role of skill supplies is visualized here bc-tween South Asian and Gulf companies. These companies can befrom the state sector or a joint sector. Obviously tle process of

1.

,

J.

4.

96 THE PERSTAN GULF AND SqurE AslA

collective efort$ cannot be left tb the market forces. It will have tobe initiated by the governments $hich in turn mcats it requires agreater degree of understanding 4mong the go.vernnents of the tworegions.

NOTES

For tlis paper Gulf States mef.n Saurli Arabia, Kuwait, UAB, Qatarand Bahrain.

R.P. Shaw, *Dligration and Em$loymeot in tbe Arab World: Construetion as Key Po{icy Variablc," llnternatlonal Labour Rzview, vol. 118,

1970.

J.S. Itirks and C.A. Sintle,)t, llgb Manpo*er: Tfu Crisis of Dewlopnent (I'andoa, 1980), p.358.

N . A. She'rbiay, "Expa8iate Labdur Flows to the Arab Oil Countries ilthe 1980s," Tha Middle Eatt Joufnal, Yol. 38, NG 4, 1984.

Ibid., p.667. 6, n.4, p.636.,.The New Nomads; Manpower ih trc CUt" The Middle East,Febrwry1983, p.29.

J.S. Ismael, K wait Soctal CIanAa ln Htsto cal Perryecttte, p,125,

n. 7, p.30.

Khaleej Times 2O APril 19E3.Khaleej limei, Zu Apfil rY6t.

Saudi Construction, MEED Spedal Report, Octob€r 1985, p.2,

R. Paul Sbaw Mob lsias Eflntei Resowces tn the Arab WorldR. Paul Sbaw, Mobillsiag Resowces tn the Arab World (Lotdon,1983).

Khaleej Zlnes, 6 MaY 1983.

T.C. Niblock, Oil E@tonu at d Impoct of, Social and Polttlcal Str$c-paper).

Disotimination," Moithly Revtefr,

tue ln the GBtf Area,,.Oil for UnflcrderielopmerltNovemb€r 1978,

I.S. Birks and C.A. Sinclair, " Aspoct of thc Labou Market in tbeMiddle East with Special to the Gulf States," The Journal ofDevelopment Areas, Apfil 1979,

I.A. Sirageldtrn et al., "saudis Transition 3 The Challenges of a Chang-ing Labour Market," World Publicatlon, 1984, p.53.

I.A. Sirageldln et al., and Int€rrational tabour Mi$ationin thc Middle East and North " World funh Publlcation, p,68.

Middle Et*t Economic Dtgesi, 7 1985, p.21.

5.,7

8.

9.

10.

11.

12,

13.

14.

15.

16.

17

18.

19.

m.21.'',

Mid.dle East Economl. Dtgest,

Pakittai and GuIf Eeononlst,

February 1984.

October 1985.

Pa*tstan Ecaaomic SrPrey, 7 p.1O9.

GrnrrBsH Perr 9?

23. Far Eastern Economic Review, 13 September 1984, p. 60. 24. lbid.25. I.S. Gulati ard A. Mody, ',Remittarc€s of Indian Migrants to the

Middle Bastl An Assessment with Special Reference to Migrants fromKerala State," CDS Working Paper No. 182, 1984.

26. Ibid.27. Indian Labour Year Book, 1984.

28. R.R. Gopinathan Nair, ',Asian Emigration to the Middle East: Emiera-tions from Kerala," Centre for Developmelt Studies Working Paper No.180,

29. n.25, p. 13. 30. Ibtd37. Mid.dle East Review, Annual Number 1984.

32. W. Mahmud aod S.R. Osmani, .'Impact of Emigrant Workers' Remit-tano€s on Bangladesh Economy," The Bangladesh Development Studies,1981.

33. The Middle East, February 1983, p. 32.

34. Udam Kerdpibule, "Remittances from IDternational Imigration: ASummary of Findings and Issues for Labour Exporting DevelopingCountries of the ESCAP Region," Econoitic Bulletin for Asia and Pacific,Vol. )OO(N, No. 2, 1983.

35. Ibid.36. J. Addleton, !'The Impa€{ of International Migration oD Economic

Development in Pakistan," Asion Survey,Vol. XXIV, No. 5, May 1984.

37. Gulati and Mody, n. 25, p.33.

38. A.R,M. Anwar Hussain, .'Remittances from Intemational Labour Migra-tion: A Case Study of Banglailesh," Mimeo, 1984, p.46.

39. J. Rashid, ..Political Economy of Man-Powex Export," in M. Gardeziand J. Rashid (eds.), Pakistan: The Root of Dictatorship.

4O, C. Achuta Menon, "Kerala's Bett€r Gold," Patriot, 27 July 1983.

41. Paktsian Econontic S nel, 1983-84, p. lO.

42. Indian Express, 18 September 1983,

43. EconomicTimes,6 October 1984.

44. Paktstan and Gulf Eunonrirt, 12 October 1985.

45. Ibiil., p.20.

46. Syed M. Hasan, ,.Indian Muslim and Foreign Bxchange Remittances: ASample Survey," in fowtal of Institute of Muslim Mlnority Afairc,(Jeddah), Vol. 3, No. 2, 1981, p.93.

47. Iamil Rashid, ..The Political Economy of Manpower Export" in Gardeziand Rashid (ed.), Pakistan: The Roots of Dictatorship.

48. Pakistan-Grlf Economist,lT August 1985, p. 547.

5. fslam as aGulf-South

ASGHAR ALI

Factor in

Muoh has been said about religion especiatly Islam, being a co-hesive force. But this talk has bben, more often thdn not, on aoemotional level, not on a rigoro[s lntellectual level. Religion, attimes, might prove a cohesive or a,t timos a divisive forcc dependingon maoy factors. Nobody can rej$ct out of hand the propositionthat in certain situations religion froves to be a uniting force. Onthe other hand, it would be equ[lly untenable to throw out thehypothesis that rcligion emerges af a divisive force. This can bestbe understood if one bears in min{ that often religion is made toplay an instrumcntal rather than a determinativc or a causative role.

Of all the present world religio{s, Islam is more oftcn claimed tobc an integral part of Muslim polity, the two being, according tothis hypothesis, of inseparablonesf of religion from politics. Islamls not taken in the sense of providNr of certain guiding values; it israther taken in the sense of religidn with all its doctrinal parapher-nalia including rituals. Thus an Islamic state is expected to enforcesalat (prayer\ and, saum (fasting) {s well as a set of other rituals. Incertain cases the concept has bcbn so stretched that as long as aruler, howsoever tyrant hc may bd, enforces sclaf, rebollion againsthim is prohibited.l There is a whdle corpus of hadith from whichdiferent functions ofa state could be, and have been derivcd. It isanother question altogether as to how reliable the corpus of theseahadith (sayings and doings of the Prophet) is.

There has been a dissenting view as well. According to this vicwit is rot doctrinally correct to $aintain that religion and politicsare inseparable fmm cach other. ft points out that the Quran does

not give the concept of a state bu! only the concept of a society.Similarly 'Ali Abd alRaziq of Egypt also believes that developmentof Islamic statc was a historical faqit, not a doctriual or theological

Cohesiv$/DivisiveAsia Copperation

ENGINEER

Asonen ALI ENGINEER 99

requirement, However, one must admit that overwhelmiog majoritymaintaias the proposition of inseparableness of the two.

The recent attempt at revival of religion in the Islamio world has

further strengthened the view that religion is mainstay of Muslimpolitics and that it is a great cohesive force. However, the concernhere is oot to prove or disprove whether religion is mainstay ofMuslim politics, the concern is its being cohesivs or divisive force

in Gulf-South Asia cooperation. The recent developments in West

Asia have provided interesting dimension to this issue.

Religion, or aDy other ideology can be neither 'cohesive nor divi-

sive foroe per sc. Much depends on objective developments. Theo'logical or ideological view not only reverses reality, it also gives itan air of finality, On the other hand, an empirical view takes intoaccount all the relevant factors, including changing situation, Truthis an integration of the ideological and the empirical, unlike realitywhich is mere empiricism. On the other hand, if truth is divested ofempiricism, it becomes pure theology/ideology.

Empiricism does not provide cohesiveness, though it may bringabout divisiveness. For cohesiveness, theological/ideological dimen-sion is necessary and it is in tlis sense that Islam and Marxismclaim to cstablish international solidarity. It is theological/ideolo-gical, not empirical, which has an emotional appeal. However, it mustbe clearly understood that theological/ideological cohesiveness can-not be sustained in all empirical circumstanc€s. With the changc inempirical circumstances cohesiveness may yield to total divisiveness.

A developing/dynamic situation, therefore, is hardly expected toretain religious cohesiveness. Quite often even intra-regional co-hesiveness cannot be sustained under pressurc of developing events,let alone inter-regional cohesiveness. Divisiveness might emerge

either on sectarian linguistic or on cultural lines. No religion has

ever remained incessantly monolithic under pressure of events. Thebest example one could provide is that ofPakistan. All Muslims, ormost of them, if not all, seemed to be united before the formationof Pakistan. There seemed to be tremendous emotional upheavalamong the Muslims. However, soon after the formation of Pakistao,clcavages began to develop, first along the linguistic and then alongsectarian lines. Jinnah was shown black flags on Urdu being madethc national languagc of Pakistan whcn be visited Dacca in 1948.8

Cleavage along sectarian lines was also to follow soon. Riotsagainst Qadianis in Lahore and other parts of Punjab broke out in

100 TIG PERSIAN Gwr er.lp Sotrm Asn

March 1953. Justice Munir report baid : "In thc beginning of March1953, widespread distrubances brdke out in the Punjab which insome places continued till the mid{le of April 1953. These took so

alarming a turn and assumed such a mcnacing form that in severalplaces the military had to be called in, and in Lahore Martial Lawhad to be proclaimed whioh reqained in foroe till the middle ofMay 1953,"4 The feelings ran so hlghtbat even certain district unitsof Muslim League disqualified Ahrlnadis frorn its membership. TheCity Muslim Lcague, Kamoke, foi example took such a step and itdecided to rusticate from the Lealue all the Ahmadis and that noAhmadi should in future be eligible for membership of the League."E

The League took this step whoso president Jinnah after the for-dation ofPakistan had declared : "In any case, Pakis-tan is not going to be a theocratic be ruled by priests with adivine mission. We have manv us, Christians andParsis-but they are all Pakistanis. will enjoy the same righrs andprivileges as any other citizen,"s (may not deserve to be calledequal citizens of Pakistan. Hotainly showed signs of strain under the impact ofthe developingsituation, proving our thesis. This came under more andmore strain as the situation kept changing.

East Bengal not only resented position of Urdu, it ultimately

snapping ofties with a coroligio West Pakistan was the result ofgreat deal of socio-economic which occurred in Pakistansince the partition. It was not a sudden development in anycase. The matter of Ahmadis also not remain where it was. Thev

broke off from West Pakistan anddent nation with its own distinctive

also came to be persecuted morebanned to recite kalima (the holyplaces of worship as mosques.

itself to be an indepen-and culture. This violent

Today they are cvetIslam) and call th€ir

more,ormula of

General Zia issued a martial ordinance in April 1984 whichforbids the members of the community to call theirplaces of worship mosques, to use azan (call to prayer) ascall to prayer and to use other M symbols. The present ordi-nance makes it a criminal offence r thc Ahmediyas to practice theirr€ligion according to their belief.? are arrested for displayingkalima arcrund their neck or their place of worship mos-

rasis supplied) Ahmadias may or.s, they certainly deserved to be

, the religious cohesiveness cer-

que. The sectarian conflict the Shi'a-Sunni form as well.

AscsAR ALI ENcTNEER 101

The Islamic revolution in lran has given it a sharper edge. Thus inthe month of Muharram in 1984 the city of Karachi cxperiencedviolence between Sunnis and Shi'as during which several persons

wcre killed and property worth lakhs of rupees dcstroyed, Shia-Sunni riots have bccome an annual feature. "Even if the govcn-

ment were not directly responsible," says the pamphlet of thePakistan Democratic Forum, for instigating the strife, it cannotescape the blame because such clashes become inevitable in the cli-mate of religious particularism and fanaticism which has beenengendered by the regime's policies and pronouncements.s

The divisiveness is not conffned to .heretical sects' like the

Qadiyanis and the Shi'as. It has spread to various orthodox Sunnisects also. The pamphlet goes on to say, ..The clash betwcen groupsof Deobandi and Barelvi Sunnis in Lahore during the past ycar(1983, A . E.) also had a ring of mystery about it, for despite theirage-old doctrinal diferences the two groups had never resorted tothis type of violence, Many political observers have suggested thatthese sectarian conflicts have been promoted by the governmentitself to keepthe population embroiled in base issues rather thanparticipate in political protests"0 Be it as it may, one has to agreethat these sectadan conflicts have been developing under theimpact of changing political situation. Religion, which is sought tobe used as a cohesive foroe, turns into sharply divisive one in theface of uncontrollable empirical developments which cannot be con-trolled ideologically.

Under certain situations before and immediately after partition,religioo did prove to be a cohesive force, But economic and otherdevelopments induced nationality-consciousoess, especially amongthose who have been left out in tbe economic race. Mainstream reli-gion being one, polarization begins on the lines of nationalitiesbased on region and language and theological idiom begins to bereplaced by nationality idiom. During my visit to Pakistan in 1986,10

I clearly felt that the people were more concerned about nationalityquestion rather than religion. People of smaller nationalities likeSindhis and Baluchis are acutely aware oftheir being discriminatedagainst in economic and political sphere. They did not seem to bevery much enamoured of their common Islamic bond with thePunjabis whom they saw as their oppressors though of course theyhave profound respect and regard for their religion.

My observations are also borne out by a rocent report from Balu-

T--

102 Trs Psnsretlr Gur-p ello

chistan. According to it "Afterrule Baluchistan is witnessine a

Asrl

of quiet enforced by militaryre-emetgence of nationalist

demdnds that made the orovince the 'soft underbellv' of Pakistan...One of the most dynamio natiohalist revivals is by the BaluchStudent Organization (BSO), has demanded autonomy forthe vast province bordering Iran add Afghanistan. The BSO is stillbanned. But mor@ than 5,000 of it$ members held an open conven-tion here last May....'We are not treated equal citizens ofPakistan', Yasin (Newly elccted of BSO) told Reuters ina university hostel, 'We are like slavcs. We are asked tofind jobs in the Gulf, while from other provinces are cominghere and taking work away from us', he said."u

The question of Sindhi natr is quite well known. Sindhis

Pakistan. To quell the recent upriding, Zia's martial law regime didto the Sindhis what Bhutto had dcine to Baluchistan. Thus PakistanDemooratic Forum's booklet on Pakistan says:

The Sindhi natlonality has been a special target of the militaryregime's oppression ever since the latter came to power in July1977. However, this oppressio4 has been heightened markedlysince the Sindhis rose in a mili[ant matuer in response to theMRD's call for civil disobediencd in the fall of 1983. The 'moppingup' operation launched in rural Sind to punish the population forparticipating in the movement stlll continues. Army troop strengthin Sind has been markedly incrlased, military installations havebeen erected and the province lopks like an armed camp....A reignofterror has been let loose in rurdl Sind. The Sindhi weekly Hidayathas cited several incidents in lwhich Sindbi women have beenarrested by security forces and bleld as hostages in order to forcethe male members of their families to come out of hiding.tz

Religion in such acute situatiqns not only loses its cementingpower but also its legitimacy in tde eyes of the people. This feelingwas epitomized in his Delhi speec$ by Abdul Wali Khan, leader ofPakistan's NAP and son of Khan Abdul Ghafar Khan when hesaid that, .,the so'called Islamic sjstem being imposed on the peopleof Pakistan was against the tenets of Islam and was supported by ahandful of mullahs who were in tle pay of the Government drawingsalaries equivaledt to that of the $hief Sedretary Grade." Launch-

AscHAR Alr Excrxrnn 103

ing a crusade against the paid 'mullahs' who were earlier in the pay

of the British empire and now drawing their beneffts from US im-perialism, Wali Khan blamed them for the partition of India andthat of Pakistan and for all the miseries attending the Muslims inthe.Indian subcontinent.ra

Similarly writing in The Star (Pakistan) Bulleh Shah says very

pertinently: "Pakistan has been ripped apart on religious grounds.

What is keeping it together is not religion, but politics, culture, and

history. What thc Ulema have bcen preaohing is not the deen ofAllah as revealed to His final Prophet, but fanaticism, violence, andbigotry, of the Jahiliya (pre-Islamic period of ignorance;. Islam has

been reduced to 'ritual prayers, harsh punishments, atd holy levies

recovered arbitrarily from the middle income groups. Or the desec-

ration of other peoplc's places of worship, or thc denial of human

rights to the minorities and weaker sections ofthe Pakistani so'ciety."14

Thus it would be patently wrong to think that religion, in allcircumstanccs can be a cohesive force. Its cohesiveness yieldstothestrains of development, both political as well as economic. Thiscohesiveness can be as brittle as that brought about by any otherfactor. It is neithcr superior nor infcrior to any other factor. Whilcframing any policy towards Pakistan or any other Islamic country,this fact is to be borne in mind. It is though necessary not to ignore

religious sensibilities of masses.of people, one need not be need-lcssly overawed by religious games that politicians play. It may be,

on the other hand, necessary to call the bluff and this certainlywould bo in the interest of thc people.

BANGLADBSH

As pointed out earlier, Bangladosh violently broke off from Pak-

istan, Right from the day of formation of Pakistan, religion provid-ed very tenuous bond in case ofthis region. Regional culture andlanguage, rather than religion, was a cementing force in case ofEast Pakistan. Religious cohesion was only a temporary phenome-

non. At the end of 1950 Fadul Haq, the lion of Bengal, wrote toa friend in a letter: 'oThe gods of Karaohi seom convinced that thepeople of East Bengal are no better than goats and may be slaughter-ed with impunity..,. They think that East B€ngal contains onlymilch cows aud that tie Royal Bengal Tiger is dead...."15

104 Tns Prnsnn Gur,r exo Sours Asre

The above lettor gives clear indi$ation of the minds of the leadersof East Bengal towards West Pdkistan rigbt from its inceprion.During the war of cessation the pgople of East Pakistan were reallyslaughtered like goats by the ,god! of Karachi' as put by Fazlul Haqin his above letter. Religion thu$ in oase of Bangladesh stood nobetter chance of $aving the crumbling unity between the two unitsof the then united Pakistan.

It is also intenesting to note lhat Fazlul Haq called himsclf a"proud member" of the "great Bepgalee race" while paying tributeto Rabindranath Tagore in August I94l.lu The experience of manyMuslim countries in recent times c[early shows that linguistic andcultural bonds are far stronger thpn those of religion. The BengaliMuslims, any observer would be4r it out, are quite religious andvery faithful to Islam. Yet, cultur{lly and linguistioally thcy are sodifferent from other Urdu speaklng Muslims of north India thatthey were always looked down upgn as some kind of second classMuslims not deserving equal sta{us with them. Whether it is dueto their backwardness, poverty and low caste status is a matter ofanother debate.

Oultural and linguistic bonds ndt only prove more cohesive, theyalso reduce the impact of religiqus fanaticism. Though BengaliMuslims are, as pointed out highly religious, one wouldconspicuously notice absence of us fanaticism among them.What is termed as 'religious talism' also did not find fertileground there. Fundamentalist could achievc aggressive postu-res in Pakistan but the Gover.'ment, deppite someeforts, could not give it that turn, Even a comparison between offi-cial Islamic literature published from Pakistan atrd that publishedfrom Bangladesh also clearly this out. The Islam projcctedby Bangladesh litorature.is far morb human and lacks fundamcntaldoctriaaire approach and "theoldgical correctness", though it ismore true to Islamic teachings. it should be noted that therewas no attempt to enforce, unlike the Islamic punishmentsin Bangladesh. It is also a fact that political misuse of religion has

been far greater in Pakistan than in tle latter country,To provide empirical for this is a stupendous task

and it is not the subject of this pa . However, one can make oneor two observations. When an rcligion becomes an importantingredient and an operative factortural tradition, such tradition is

the formation of a native cul-re likely to yield to religious

AscHAR ALt ENcINSBR 105

pressures than a native tradition which absorbs certain values and

rituals of an alien religion without yielding its nativity' The MuslimBengali culture is, by and large, of latter variety whereas the northIndian Muslim culture is, of the former one, The South India TamilMuslim and Kerala Muslim cultures resemble the former. TheSouth India Tamil Muslim and Kcrala Muslim cultures and Northeastern Kashmiri and Assami Muslim cultures also fit into tholatter category of well established native culture absorbing alien

religious traditions. It would also be worth nothing that like theBengali Muslims, Tamil, Kerala, Kashmiri and Assami Muslims are

also deeply religious and faithful to Islam. It is a wroDg pcrceptionthat cultural nativity reduces religious faithfulness, or even religiousorthodoxy, for that matter.

Nertvs Cur,rr;nr Hvpounsts

I would like to propose a hypothesis which can be empirically testedthat whcnevcr a native tradition absorbs an alien religious valuesand rituals, the synthesis is likely to produce more humane and less

fanatic religional cultural tradition than otherwise, i.e. when thco-logical religion seeks to play a dominant role and absorbs nativeculture as its passive ingredient. In the latter case fanaticism be-

comes a dominant trait. I am also of the view that fanaticism is as

irreligious as irreligion itself. Fanaticism ismore socio-political thanreligious in orientation. Orthodoxy can also not be always cquatedwith fanaticism. The distinguishing line may often be thin, but it isnevertheless there. There would always be some variants and excep-

tions but that does not falsify the above hypothesis.

TnB Gur-r CounrntBs

For an outsider Muslims are a monolithic community and all theGulf countries are united by virtue of their religion. It is far moretrue if the observer happens to be hostile towards Muslims' Twohostile communities, it is interesting to note, always look uponanother community as monolithic and one's own community as

deeply divided. The impression of unity and solidarity among

Muslim Dations has increased since the emergence of fundamentalist

Islnm. The whole Islamic world is seen as united. However, any

shrewd observer of the Islamic scene knows this is far from true.

106 THE Pm.sHN Gur.r eNp Asra

Emotional unity must not be with the unity of interests,The former unity crumbles asheaval vanishes. The countriesKuwait, the two Yemens as welllike Saudi Arabia, Syria, Leeach other and if some oftheir common interests tlanGulf Oooperation Council IGCC)common interests. Otherwise whvlargest country in the area.

Islamic fundamentalism itself is

cials have helped to reinforce thisIn fact Claudia Wright is not

as the cause of emotional up-the Gulf region like Iraq, Iran,other countries of West Asia

n, etc. are deeply divided againstare united, it is more because ofon religion. The countries of the

also bound together by theirshould they not include Iran, the

not a homogencous phenomenon.

tion,"r?

Its lranian variety is not merely from the Saudi one; thetwo confront each other directlv Again, tle former one poses

hegemony in the region where-powerful ohallenge to theas the latter one pcrceives it toit in all possible ways. Writing

its main ally and hence befriendst thc Iranian fundamentalism

Claudia Wright says: ,.They (i.e. udi Arabia and its allies) believethat Islamic fundamentalism. at in its Iranian Shiite form, isa subversive and expansionist ogy that can only be stopped byforce, and that sectarian conflict Iraq's Sunnis and Iran'sShiitc made war inevitable in Ito halt. Ever since the Islamic

and, flve years later, impossiblewas establisbed, statements

by the Ayatollah Ruhullah Kh and Iranian Government ofr-

cofrect io saying that it is mcresectarian conflict between Sunni and Shii lran. To any keenobserver it would not take longis essentially conflict of interests.

come to the conclusion that itotherwise could one explain

close cooperation between Sunni bya and Shii Iran? Even Iraq isnot wholly Sunni. Nearly sixty of its population is Shi'a.Despite six years of war with Iranno serious signs of revolt by the

nitiated by Iraq there have beenhi'as of Iraq against its Sunni

reginie led by President SaddamNation statcs have come to and it is national interests, not

religious or sectarian itrterests determine cooperation andeyes to reality would denyalliances. Only those who close

this fact. Pan Jslamism in the f rm of slogan has always beenwith us. But it has been ainternationalism also did notnationalism, like Communist

tro mote, no less. Communistany more viable. Islamic inrer-

earlier, aay be a

ASGHAR ALr ENGINEBR 107

highly desirable phenomenon for the ideologues but in a worldwhich is highly unevenly developed economically, empirical momentdominates ideological momeDt. In fact no ideologue should ignorethis empirical reality.

Here it would be quite important to take into account the increase

in the volume of sale of armaments in the Gulf region in order tounderstand tbe true dimension of the problem. Robert C. Johansenand Michael G. Renner say:

Indedd, far from being a static flow to the region, US arms sales

have multiplied. In the first half of the 1970s, they averaged $3 .2billion per year-more than the total accumulated sales ($2. 3

billion) ovcr the previous fifteen years. From 1975 to 1979 armssales tripled to an average of $8.9 billion per ycar. Annual arms

imports to the Middle East jumped from $2 billion in 1972 to ovet$15 billion by 1982 .... In recent years, the Middle Eastern count'ries have spent $50-60 billion for military purposes each year.

Syria, Libya, Iraq, Egypt and Saudi Arabia have occupied theranks ofthe world's five leading weapons importers since 1979'18

It is undoubtedly true that Amcrican machinations are largely

responsible for this scenario in thc Middlc Eastre but one cannot

completely exonerate these countries of guilt. They entertain deep

sense of insecurity against eich other. All thcse arms bave been

piled up not to fight against Israel, the common enemy of the

Islamic world; they have been and would be used against otherIslamic countries. Iran today is most dreaded by all the Arab count-ries and siucc the revolution in Iran there has been a fundamental

change in alignments. Iraq which was a sworn encmy of Saudi

Arabia has moved close to it and receives from it generous financial

aid. Saudis see it in their own interest to finance Iraq to fight awarof proxy against lran, Again, it is common interest, not commonality

of religion which have brought the two erstwhile arch enemies

together.Today Pakistan and Saudis are quite close to each other for no

other reason than commonality of interests. Both are in American

orbit of influcnce and both desire Americao presence in the region.

Pakistani soldiers, it is common knowledge, provide personal secur-

ity to thc Saudi rulers though it has been officially denied by Zia.Pakistan has not been as close to any other Islamic country in tbe

108 Trc PBsrlN Gur.r eNp Asn

region. The Zia regime mostPalestinian cause in order to

and blatantly betrays theAmericaa aid, both flnancial

and military, With the change regime in Pakistan, which islikely, the relations with Saudisinterest may not remain tbe same

cool off as perception ofbeforc.

Also, had religious cohesioncause would not have been so

an effective foroc the PalestitriantantlY betrayed by many Arab

countries. In case of Palestine it not only common religion butalso common language and cul Even then it would be no ex-aggeration to say that as many Palestiniaos were massacred bvJordan and Syria as by Israel. J turned anti-Palestinian wheuits stability was threatened and the Palestinians in Septem-ber 1969-for that reason it came be knswn as Black Scptember.Similarly Syria tried to decimatc when its hegemony was inperil in Lebanon, The and the Shi'a Amal are killingeach other these days, though stand for revolutionary changein the region.

Thus one can see that religion ig not a predominant factor in co-operation between Gulf countries hnd South Asia although by nomeans it is an unimportant factdr. While common interests areccrtainly most important in cooperiation and alliances, religious sen-sitivity should not be ignored. It ip one thing to take real interestsinto account, it ls quite another to respect religious sensitivities.One cannot forget that whatever t$e behaviour pattern of the elite,masses are deeply religious and po ruler or regime, howsoeverpowerful, can ignore tbe religious sintiments of the common masses,This remains the common deoomi{ator in all the situations. Aoartfrom other things the Shah was thrown out as he repeatedly offend-ed the religious sensibilities of the Muslim masses in lran.

Tbe shrewd rulers are those w$o judioiously combine materialinterests with religious sensitivity aE one or the other might becomean overriding factor in a fast chanling situation. It is not alwayspossible to prescribe any recipe for it. It is only shrewd judgementwbich helps. Even an ovordoze of religion in a fast deterioratingsituation may not help as the oase irf Numeri in Sudan shows. In or-der to save himself Numeri began td impose Shariat most rigorously.However, the game was seen throug! and he was thrown out througha massive revolt. On the other hand at the height of prosperity theShah of Iran was thrown out as he did not respect the religioussensibilities ofthe people. These tnio contrasting cases clearly show

AscHAR Ar-r ExcrNnm. 109

how necessary it is to have a shrewd judgement and a judicious

combination in such matters,

NOTES

1, See Asghar Ali Engineer, Islarrtic State (Delhi, 1980).

2. Qamruddin Khan, Al-Mawardi's Theory of the Siate, BazE€ Iqbal, Lahore,n. d., p.4.

3. C.M. Naim (ed.), Iqba!, Iinnah and Pakistan: The Vision and Reallty(Syracuse University, 1979), p.98.

4. See Report of The Coart of Inquiry to Enq ire into the Punidb Distutbances

of 1953 (Lahore, 1954). p.l.5. Ibid., p.94.

6. Chaudhry Muhammad Ali, The Emergence of Pakistan (New York, 1967)'p.386.

7. Se Pakistan: Severe Detelioration in Euman,Rigfrts, Pakistan DemocfaticForum, November 1984, Jamaica, USA, p.10.

8. Ibid., p.12. 9. Ibid'10. I was in Pakistan during March 1986.

11. See Reuter's repot "Baluc,histan revlves natiooalist deman d," Times ofIndia,12 June 1986 (Bombay edition).

12. See n.7, pp.l2-13.

13. See his reported speech "Islam Misused by Pak Mullahs" in Times ofIndia,2 laatrary 1986 (Bombay edition).

t4. S'ee Bulleh Shab "A Pak View of Ayodhya lssue," The Star, reproducedir Times of Indn,8 April 1986 (Bombay edition).

15. Quoted by Rajmohan Gandhi ir Eight-Lives: A Stud! of the Hindu-MuslimEnco un t e r (D elhi, 1986r.

16. Quoted by Rajmohan Gandhi, Ibid., p.203.

17. Claudia Wright "Rcligion and Strategy in ths Iran-Iraq Wat," Third WorldQuarterly (London) Vol. 7, No. 4, October, p.839.

18. Robert C, IohanseD and Michael G. Renn€r "Limitiog Conflict in theGrlf," Third World Quarterly, Vol. 7, No. 4, pp.807-8, cf. Joe Stork, "ThoCarter Doctrine and US bases in the Middle Basf '. MERIP Reports, 10(7)S€ptemb€r 1980, p.4 and World Military Expenditures and Arms Transfers1972-1982, United States Arms Control and Disarmament Agency, Wash-ington D.C,, April 1984, p.55, Figures in current dollars,

19, Joe Stork and Martha Wenger, "US Ready to Intervene in Gulf Wat,"MERIP Reports, lU (G-7) July-September 1984. It has been suggested thatIraq's decision to go to war was encouraged by the United States, whichwanted to takc advantage of the revolutionary chaos in Iran in order toreplace Khomeini by Shahpur Bakhtiar who was in Baghdad at the timeof the Iraqi invasion. cf, Third World Quarterly, op. eit , p.810.

6. Political Economv the Gulf States

PRADEEP BHARGAVA

INTRooucrror.l

The Gulf states becamethey decided collectively tofollowed by a rapid capitalistwhich has no parallel in world

integrated the Gulf economie ssmall private capitalist sector

t for the first time in 1973 afteroil prices. Independence wasormation of their economies

. The enormous wealth that

the world capitalist system. Adeveloped in some of the Gulf

poured in from oil revenues hasInvcstment has been made not o

bstered capitalism in the Gulf.

ture but also in some of thein construction and infrastruc-modern industries. A lot of

surplus money has also been in in foreign banks, which has

states. Thus has started the of embourgeoisment of the, and also of the monarchialmerchants and tbe tribal

regimes constituted by kings an princes. This process is beingexperienced by Saudi Arabia,Arab Emirates and Oman.

, Qatar, Kuwait, the United

The oil price hike of l9?3 was after a prololged struggleagainst the imperialist powers. rise of nationalist forces in Iranand Iraq forced nationalization and gained partial to fullcontrol over hydrocarbon The other states in the Gulfdid not opt for nationalization. r strategy was to demandgreater participation in oil from the oil companies. Thelevels of participation achieved tbe 'existing relationships withthe foreign companies aro not the in each ofthe Gulf states.The two methods of struggle, nalization and participation,against the imperialist powers areence cao be traoed only to thesocieties.

y different. The differ-structufes of the respective

PRADEEP Bumclvl 111

One major determinant in state formation is the role of Islam.Islam has manifested itself in disparate ideologies. In lran, Islam hasbeen informed with a revolutionary character. It claims to rejectauthoritarianism and identifles with egalitarianism, respecting, at thcsame time, the right to private property. In Iraq, the Baathistideology of pan-Arab nationalism is the ofrcial doctrine of theregime, In Saudi Arabia, both the monarchial state and the ulema

are ardent supporters of Wahhabism, In Oman, the state religionis lbadism, the tbird as well as the smallest of the three majordivisions of Islam. Each of the different maoifestations of Islam lsreflected in the changing inner structures of Gulf societies andiu the capitalist transformation of their economies. Islam also acts

as a contradiction between the rapid formation of the capitalistbase of these societies and the sharp lag in the corresponding evolu-

tion of a capitalist ideology and its psychological manifestations.

An analysis of capitalist transformation, the process of embour'geoisment and the role of Islamic ideology is necessary to under'stand the process of state formation in the Gulf region. State for-mation in the Gulf is not homogeneous in style and character. Each

state has an ideology of its own and a history quite diferent fromthe others. And ideology and history are meshed with the pro@ss

of embourgeoisment and the nature of the regimes.

This paper attedpts to study the political economy of statcs inthe Gulf, The ffrst section is devoted to an overview of variousMarxist and new-Marxist tbeories of the state. In the second seo'

tion, the oil factor and the rise of nationalist forces are analysed.

A comparative a ssessment of state formation in the Gulf is attcmpt-ed in the third section.

PoLrTrcAL EcoNouv or Stetr

Marx did not work out a systematic and formally complete theoryof the state. Lenin's most famous pamphlet, 3'The State and Revolu-tion," written on the cve of the Bolshevik Revolution purports tobe a restatement of the Marxist theory of the state. Lenin viewed theState as au instrunmnt of a ruling class, so called by virtue of itsownership and control over means of production. The new Marxiantbeories reject the instrumentalist state oflenin. These theories also

challenge the idea of a universal theory of the state or a singleversion of capitalist state. They argue for specifc historical analysis

I

ll2 THB PBRsr^N Gulp eNp

within the univetsalisticoapitalist societibs.

The new Marxian theories of thp capitalist state of the developedoocieties are derived from epistemology rooted in classperspective analysis. A major clntribution on the theory of theoapitalist state is made by Nicos The Poulantzas theoryis based on the crucial social of class struggle, and notindependent of ig as perceived by other new Marxiao theorists.sThe statc is the materialization and condensation of class relations.The state is a class state. The t class makes consciousattempts to influence and control the state as an obiect of its socio.economic power. But becausc ofthe existence of class struggle, tlestate must appear to be a us from dominant class power in

that the metropole monopolics the transition from the firstto the seoond phase of im i.e. from raw material exploit-ation to industrialization in themetropole development. Amin

due to contradictions inthe Frank thesis and argues

that industrialization in the is a result of national libera-tion movements wherein the pcri bourgeoisies won from im-perialism, tbe right to ind

The most important ofthe dependent state in analys-es madc by Frank and Amin isweak and the state is relativelythc local bourgeoisie. Frank

the local bourgeoisie is relatively

subservient in relation to thebourgeoisie of tho metropolis,

order to retain its very legitimacy as a state. Thus the state can, atone and the same time, represent tle interests of a conscious domi-nant class and still be a site for clfss struggle.

Tbe new theories of the capitaliFt state perceivc the c'lass strugglein terms of its historical applicalbility. The attribute of historicityis totally contrary to either abstr{ction of the state: Althusserianstructuralism or Leninist imperiallsm.s The most valuable contribu-tions on centre-periphery linkag4s aid hence the evolution of adependent state are made by Gun{er Frank and Samir Amin.a

In the dependency view of Fradk and Amin, the stete in thethirdworld is seen as an €ssential instrtrment for administration of thedependent role of these economles in the international division oflabour and the capitalist world process of capital accumulation.Amin difers frour Frank in ond important respect. Frank argues

Asre

relating to the state and to

and autonomous in regard tothat the local bourgeoisie iscompared to the imperialist

PRADEEP Bnmceve ll3

Cardoso and Faletto have critically reviewcd Fraok's and Amin's

theses.6 Thcy agree that periphery development is conditioned by

capitalism as a world system. But they reject the theory of depen-

detrt capitalist development and the idea of permanent stagnation

of the periphery due to narrowness of internal markets, They provc

convincingly that internal markets are not constricted in the peri'

phery and the wages in the periphery tend to rise and the looal

bourgeoisie tends to strengthcn. This brings Cardoso and Faletto

to postulate that the state is the instrument of imperialist penetfa'

tion but only to the extent that the exploiting bourgcoisie can

organize a hegomonic bloc that ovetcomcs resistance to deepening

dependency.The theory of the capitalist state, as postulated by Poulantzas and

the dependency theoristsn converge at one point-the rise of author-

itarianism. According to Poulantzas, alrthoritarian statism indicates

"intensifiod state control over every sphere of socio'economic lifoooubined with the radical decline of the institutions of political

democracy with draconian and multiform curtailment of so called

'formal' liberties." Authoritarian statism is bound up with tbe

periodization of capitalism into distinct stages and phases. Itcorresponds to the current phase of imperialism and monopolycapitalism ia the dominant coutrtries, in the way the liberal state

oorresponds to competitive stage of capitalism and the various forms

of the interventionist state to the previous pbases of monopolycapitalism. The implications of authoritarian statism aro a decline

in importance of legislatures and a transfer of power to the execut-

ive; decline in the rule of law and a fusion between various appara-

tuses of the state-legislative, executive and iudiciary; declining

role of political parties.In the periphery, the authoritarian state comes into existence be-

cause of a weak local bourgeoisie which fails to establish its hege-

mony and hence cannot maintain power through democratic forms

ofthe state. The strength of foreign capital and m€tropole states

and their unwillingness to allow atrti-imperialist control of demo'cratic states pusheis and helps the local bourgeoisie to establish

bureaucratic authoritarian regimes, regimes that are much beholdcn

to the real powor of foreign tath€r than to local capital.From the above roview of the Marxian and neo'Marxian postu-

lations of the capitalist and the dependent state some importantformuluious €merg€ that can be helpful in analysis of the Gulf

tl4 Tnn PsRsrAN Gur,n aNp Sourn Asr,c,

States: The capitalist state is a product of ctass struggle represent-ing the interests of a conscious dohinant class; the capitalist statcis seen in terms of historical applidability of olass struggle. The de_pendcnt state is scen in terms of a historical evolution of a depen_dent centre-periphery relationship; lndustrialization in the peripheryis a result of national liberation mlovements; there is no permanenlstagnation in the periphery due to dependent capitalist development;the dependent state is an instrumedt of imperialist penetration butonly to the extcnt that the peripherhl exporting bourgeoisie can or-ganize and resist deepening dependenoy. Finally, authoritarianismhas manifested itself ditrerently in lhe capitalist state and the depen-dent state.

A major omission in the above review is that of the pre-capi-talist structures and their role in state-fof mation. All the abovetheorists have given marginal impottanceto the pre-capitalist struc-tures. If a state is seen as a condensation of class relations, theclasses in .pre-capitalist structure will have to be included in explain-ing the state. For example, both the dominant and dominated

Gulf capitalist development have gevertholess only partially beenable to push through a dependent capitalist development, One ofthe main roasons behind this is the rise of nationalist forces mani-

classes of the tribal structuresstatc formation.

an important role in the Gulf

The Gulf states can neither be as capitalist statolor a dependent state as the fo array of facts and ana.lysis will itself prove, The Gulf statbs may encompass characteristicsof both. Foreign companies that have played an important role in

fested directly in oil nationalism.

TnB Rlse oF OrL NArroNALrsM

The political and economic history of Arab oil is vertically cleavcdbetween two diferent coufses traiversed by a nation state*thecourses of nationalization and garticipation. The unrestrainedimperialist robbery of oil resources was challcnged by thc emergingnationalist forces, ffrst in Iran and b decade later in lraq, leadingto nationalization of the oil ffelds a4d termination of concessionaryarrangements. Iran and Iraq werc joined in tbcir anti-imperialiststruggle by other countries outside the Gulf region: Algeria, Libyaand Venezuela. The second course, itaken by Saudi Arabia, Kuwait,

PneosEp Bnmceve 115

Bahrain and United Arab Emirates, was more moderate, though italso countered the robbery by a checkon the continuing drop in theoil prices through equity participation with the oil companies.Thus, the unrestrained robbery was put under lesser or greatercontrol by each of the Gulf states.

The 1970s can readily be aocorded the distinction of being themost significant decade in the history of Arab capitalism. The shiftin the locus of policy and decision making*from foreign companiesto national governments-is by far the most sigliffcant structuralshift marking the state building processes in the Gulf. Three majorfactors explain the structural shift: first the rise of nationalist forcesleading to nationalization in Iran, Iraq, Algeria, Libya and Venc-zuela; second, rise of the Organization of Petroleum ExportingCountries (OPEC) and its ensuing collective bargaining power andthird, the Arab-Israel wars of 196? and 1973.8 None of these events

alone can explain the major changes in the 1970s. The three events

reinforced each other to make it possiblc for the nation states tostand united against imperialism,

The most notable fact in anti-imperialist struggle is that lraq,Algeria and Libya in the 1960s were not only convinced that nation-alization was the only practical way to get equitable terms for tho

oil extracted but they also prepared themselves for nationalization."Essentially, the preparation was intellcctual and psychological, inthe sense that there had to be a reasoned conviction of this posi-

tion, and that there had also to be readiness of the measure thatwould turn conviction into fact, Coupled with this the three coun-tries prepared their public for the objectivo and mcasures it necessit-

ated and for the confrontation it was expected to bring about."eThe founding of OPEC in 1960 had tittle to do with the anti-

imperialist struggle in lraq and Algeria. Its primary aim was tocounter the continued drop in posted prices, which the companios

had been justifying in the name of an oil glut-created by themselves.

By the mid-60s OPEC was able to check this decline and continuedto resist until the great oil price shock of 1973 when OPEC began toexerciso almost full control over hydrocarbon exploitation.

The 1973 oil price hike, leading to a world crisis, became the mostsigniffcant event in the history of Arab oil. The crisis also madethe heated debate of the 1960s between advocates ofnationalizationand participation almost redundant. As all the nation states startedshowing strong signs of anti-imperialist policies it was thought that

116 TIg PsRshw Gur"r nNo Sorjrn AsrA

thcy had achieved some parity it their ideological/political andsocio-economic orientation.

However, the ideology of nationflization and the intellectual andpsycbological preparedncss ofthe Seople of lran and Iraq for thcexpected confrontation with tle imperialist powers and their pro-teges within these states eventually led to a state building process

different from other Gulf countriles. On the other hand, equityparticipation proved to be a rather modest effort to ffght againstimperialist robbery. This modesty Was reflected in the state buildingprocesses which characteristically rBtained their monarchial charac-ter. Even within the group of nati$n states opting for participation,thc political and ideological comBitments vary as do the socio-economic conditions. This is reflected in the diverse nature of theeconomios and of capitalism tbat the Arab states have espoused inthe last 13 ycars following the l97t oil price hike.

Bcfore the 1973 crisis none of the Arab oil exporters had majoritycontrol over the oilfields. By the ehd of the decadc, however, allcame to have majority control aSd some full cotrtrol, The picturevaried between 60 per cent to 100 per oent ownership and control.

Oil nationalism was not confinbd to cxercising control over oilffelds but made inroads into ups[ream and downstream oil opera-tions. These inroads proved tb be a threat to the oil com-panies and the .imperialist powers. While the interests of the oilcompanies are more of a financful nature and are now increas.ingly rcstricted to downstreamhave long term strategic interes

the imperialist powers

they can contain thestates.

in upstream operations so thatpolitical aspirations of the Gulf

In spite of oil nationalism andwere led into tho inescaoable

by 1979, tle Gulf economies

The economies were urged toof tle world capitalistisystem.

ce more oil so as to fulfil their.'international responsibilities" 16lher than preserve their self-inter-ests. Very high production levels were reaohed in the latter partof thc decadc which led to the buil{ing up of embarrassing surpluses.The surpluses were ploughed badk into the foreign banks of theworld capitalist system. The oil ppoduction levels had to be sus-tained then, for a cut would haFe been damaging to the worldcapitalist economy in which most of thc surpluses had been invest-ed. Another important constraiut irn production was a strong link-age betwecn marketing via foreign oil companies. Only the oil com-

Pnaossp BHARGAvA ll7

panies posscssed the technical capabilities to undertake explorationand production, A concerted effort to overcome these constraints

by some of tbe nation statos was noticed in the 1980s.

In the 1980s there have been drastic changes in the world oil eco-nomy. Thc demand for OPEC oil crashcd. OPEC's share in networld oil exports declined from over 90 per cent in 1974 to a littlebelow 66 per cent in 1984. The fall in demand is attributed to:conscrvation in energy use; substitution of oil by alternative fuels,economic recession in the West and growth of non-OPEC oilsupplies. In 1983, the benchmark crude fell to $29 a barrel withSaudi Arabia agreeing to act as a swing producer. The prices fellfurther with several countries including Iran undercutting OPEOpriccs. The spot market prices in Fobruary 1986 plummeted toaround $17 a barrel. Tho prices were roported to be as low as $8

a barrel in July 1986. Since OPEO's October meeting the prices

have remained stuck around $13-15 a barrel. While demand for oilfell till 1985, it staried picking up aftcr that. It is likely to rise

further, but not to the level expected by Saudi Arabia, Their frust-ration to maintain their quota and a price level of $18 a barrel

ended up with sacking of Sheikh Yamani as oil ministcr inOctober 1986. The excess supply, howevet, may turn out to be

a short run phenomenon till North Sea oil is exhausted. The

success of OPEC lies in holding together at this time of the crisis

and excrcising some controls in domestic expenditures. OPEO has

realized the necessity of produotion programming to modulate the

wild fluctuations in spot market priccs.

The present price crisis will turn out to be a short run phenome'

non. In the long run, the shape of the Gulf economies will be deter'

mined by downstream operations: refining and transport of oil andproduction of petrochemicals. Ineachof .these activities, the cost

effectiveness of the projects has been established in favour of the

Gulf States.

A comparison of total cost of production shows that the new

Gulf reffneries, given the present transport arrangement, are com'petitive with the existing OECD refineries and are significantly morecost effective than new refineries that the OEOD may set up.ro

However, cost effective refining does not ensure a market which

remains dominated by the oil companies. To gain this type of secur-

ity in the oil market the Gulf countries will havc to go furtherdownstream to dlstribution networks in the maln matket overseag,

ll8 Tns Pnnshl.l Gur.F ,c,Nn Solrrn Asn

service stations, dealership, etctll Only Kuwait has so far madeany practical and successful hca{way io acquiring and operatingrefining and distribution facilities <irverseas. It may be difrcult forother countries to follow suit for certain conditions need to be fu16led :

requisite spare cash, political endofsement, ability to negotiate withcommercial flair and the capacity tp absorb, manage and direct thenew systems otrce they are acquired.ls

The petrochemicals industry in tbe Gulf could be doveloped onlyafter the mid-70s when financial co[ditions improvcd considerably.In spite of the easy availability of fuel and feedstock required forttre industry, the Gulf countries had to wait till the ftst mainprice hike. Thcy did not possess the technical capability to buildfertilizer plants. ADd they were dispouraged f;pm undertaking theseventures by the oil companies wlich were themselvcs among the

' giants producing petrochemicals.ls The oil companies argued thatthe Gulf companies were technicalfy and managerially unprepared,that they could not face harsh cqmpetition, and would benefit bysticking to the then existing interngtional division of labour leav-ing downstream operations to the oil companies.

However, in the mid-seventies, tfle Gulf countries plunged intothe giant petrochemical industry. the economic advantages for suchan industry already existed. Tbe main advantages pertained to loca-tion. A petrochemical industry ne0r an extractive industry whichproducos crude oil or a refining ind$stry wtrich produces reffned pro-ducts and a gas treatment industry which produces gases needed asfeedstock makes more economic anld technical sense because eachindustry is linked to the other. Thc other main advantage comple-mentary to the first is the fact t[at fuel and feedstock needed bythe petrocbemical industry constituie an inordinately large propor-tion of production variable costs. Flor example, in the ammonia in-dustry, 65 per cent of production is accounted for by feedstock,.available in plenty locally; in case o[ethylene,8l per ceot produc-tion cost is aocounted for by fuel ald feedstock.la The cost of fueland feedstock is so low that it dore than comnensates for hiEhcapital cost of plant construction, ipsufficiently trained manpolierand iruderdeveloped infrastructure.

As a rssult, in spite of an unsure @arket, the petrochemicals in-dustry made headway in the Gulf. fhose industries have been com-missiooed, except in Kuwait, as joint ventures with oil companiesand other multinationals including those from Japan. In most of

Pneorsp BHARGAVA 119

the cases, marketing is undertaken by the foreign partner.Kuwait has entered into joint ventures with foreign ffrms only

for marketing purposes. The Kuwaitis have realized the importauceof maintaining their own control over domestic coupanies. Allother states bavc given upto 50 per cent shares in their petrochemi-cal industry to foreign partners, On the other hand Kuwait, realizingits own contraint of technology and infrastructure, is entering intojoint ventures in other countries. In this arrangement feedstockwould be provided by Kuwait. Ncgotiations have taken place withCdF-Chimie regarding a joint venture plastic and resin plant inFrance,r6 with Tunisia to expand Tunisian fertilizer capacity.

Kuwait is also building up capacity to manufacture chemical pro-ducts for domestio consumption, Realizing ttrat consumption ofspecialized consumer products based on petrochemicals will increasein the Gulf, Kuwait has entered into joiat ventures with SaudiArabia and Bahrain to set up such industries.

When the industries were launched it was clear that marketingthe petrochenical products to the US and Europe would be diffi-cult because of the protectionist policies they may adopt. Yet it wasexpected that the oil companies would be able to export at leasttheir share of the products to their parent country. Based on thisthc Saudis stated that their market distribution in the future wouldbe 20 per ccnt to United States, 22 per oent to Western Europe, 20per cent to Japan and 38 per cent to the rest of tbe world.r0 Theprotectionism expected from the US and Europe is now well con-firmed. The Saudis now expect to sell only 15 per cent each to theUS and Europe, 32 per cent to Japan, 26 per cent to the Far Eastand 12 per cent to rest of the world.l7

The protectionist mcasures of the west are thus driving low cost' products to the East. This may rcsult in some turmoil in the in-

dustries of the East. The imperialist powe rs may be able to protecttheir industries in the short run. But the beginning of a slow shiftof production facilities away from developed market areas towardsdeveloping, resource-rich ones has taken place.

Transition from the stage of crude oil export to advanced stagesof development means greater diversification for Arab oil economies.The integration of downstream operations with national economiesis associated with backward and forward linkages into many moreindustries. Simultaneously, the cxport of surplus financial resourcesto industrial countries for placement or investment is minimized.

120 Ttre hsrAN Gurp eNo Sobrn Asl,l

Dependence on industrial countdes, and loss of real purchasingpower, arisiug fiom inflation and curren€,y depreciation the,re, isgreatly reduced. This release of prpssure spills ovEr to the area ofpower politics whercin the role of fhe Gulf is greatly enhanced, andwhich enables tho Gulf states to t{ke relatively more independent

prices as compared to worldwill determine their ability to

will have two more eflects-

in the market. The will tocompcte is amply reflected in nranncr the infrastructure fordownstream operations has been

To zummarize, the 13 Year otd ulf history of caPitalism has in.with a srcccsdul anti-imporial-teresting twiste and turns. It

politico-economic decisions and pr{rsue a more self-reliant develq>ment.

The petrochemicalone at the regional level and the o{her enhancing relationships withthird world countries. The oil r has had a complementarity-promoting influence betwcen thc Gulf states as is evident from co-

operation and coordination indownstream operalions have not

operations. However,oped within a collective Arab

framework. Somo recommendatio1s have been made by the OAPEGregarding coopcration in the development of downstream opera'tions. OAPEO has urged action leading to more Arabconsultatign, cootdination of pmarketing and crodit facilities,

implcmentation of projects,of information and devel-

opment of skills-designing, operation, maintenance,researoh and product adaptation. recommendations have also

urged collective action for tho pr@otion of skills in dealing and

oegotiating with other regions, for attraction of investment in-

ing and research aimed at developdcnt of downstream industries.rsSome joint companios or projegts are sponsored by the OPEC

in some areas both upstream aod downstream. The advantages ofjoint action-pooling and better al]location of regources on thc basis

of national and international mar&ets with a drive to cut a place inthe world export refining and petrochemical and fertilizer indus'tries-will probably lead to the up of coordination and

oooperation.The Arab share of in world output would be

around 5 to 8 per cent when the ustries come on stream. Theand the qualitY of Arab outPut

ist struggle againot unrestrained ofoil. The 1973 oil price

PRADEP BuARGAVA l2l

hike, a major achievement for the Gulf, brought in unpredictable

and unimagiaablc oil revenues which were investcd back into the

imperialist banks. This brought the Gulf back into the infalliabletrap of imperialism. The advancement of refining capabilities and

energy intensive industries such as petrochemicals, though in their

initial stages, have proved that the Gulf is not and will not be a

periphery of the imperialist powers but will emerge as a competitor

in the economic field of world capitalism' In fact the future of the

Gulf economies lies in thc energy'intensive industries alonc' The

flow of petrochcmical products began in the 1980s and almost coin'

cides with the first recession for the Gulf economies, caused by adrastic fall in oil prices. Gulf economic problems are further accen-

tuated by the piotectionist measures adopted by the imperialistpowers against Gulf products. The protectionist trend has made the

Gulf economies turn to other pastures though returns will come

only in the long run. Tho Gulf economies are now trying to achieve

intigration at the regional level and also trying to enhance rela-

tionship with third world countries wherc the future markets for

Gulf products lie.Considering the above sequence of events, the Gulf states can be

divided into three groups for an analysis of state-formation' First'

Iran and Iraq which opted for nationalization of oil resources and

more importantly prepared their peoples psychologioally for anti-

imperialist struggles. The second group includes the Gulf monar-

chies of Saudi Arabia, Bahrain, United Arab Emirates and Oman'

They chose the path of participation and hardly prepared their

p.opl. fot anti'imperialist struggles. Their dependence on foreign-compaoir.

for petroleum extraciion and other downstream indus-

tries is far mori than tbat of the third group, which includes only

Kuwait. Kuwait has chosen to be rclatively independent of foreign

"o.puoi", and the multiqationals' Kuwait has built far more in'

roads into downstream operations than any other monarchy'

Why has Kuwait alone been able to build inroads into down'

stream operations while the surpluses of other Gulf countries lie

relatively dormant? Why are these countries so docile? Why is the

particip;tion of foreign companies still so high in some countries?

ih" uort.r, to such questions lie in the inner structure of the Gulf

states,

122 Tsnpm.srlN Gurr ero Sotnn hsrl

Tnn Gwr Srerns

Monarchies built on societies whic! werc largely tribal or mercantileassumed the charactcr of a rentilr state in the first decade of thetwentieth century with the discove{y of hydrocarbon resources. Bvmid-century, the rentier statcs with their hydrocarbon linked inter-nationalist capitalist linkages wepo deeply shaken by emergentnationalism, Tbis markcd the begiinning of capitalism. In the Gulfmonarchies, capitalism has carvedl out its own history, a historydifferent from that of western societies, Capitalism has penetratedthe castles of monarchy built on tribal aristocratic linkages and/ormercantilism. In the last 13 years, $ince the emergence ofoil power,the rentier state has grown into itate monopoly capitalism in amanner which hag practically no analogy in the hisiory of capi_talism.

State monopoly capitalism refer! to thc third stage of capitalismfollowing the earlier two stages i of competitive capitalisni andmonopoly capitalism. The state in this stage plays an active role inafecting the structure of the econofly and in coordinating the socialdivision of labour. State interventio! is manifested in large publicsector production of goods and sdrvices, corporatist planning anda wholc range of Keynesian moqletary and fiscal iolicies. Thecapitalist state also supports internationalization of productive capi_tal with the help of multinatioual dorporations. Most importantiy,the state emerges as a significant eoonomic power concerned withthe accumulation of capital.rs

In the Gulf, state monopoly caditalism derives its strength fromthe oil revenues over which the statd has 100 per cent control. Theinvestment of oil rcvenues in diderent ventures-industrial andsewices-has fostered capitalism. lvlodern industrics being highlycapital intensive and requiring hugb investments have been com_missioned in the statc sector. A lot Of construction activity has alsobeen undertaken by the Gulf stateq. The role ofthe private sectorin the Gulf economies has been minimal. Thus the Gulf states aresignificant economic powers concernid with accumulation ofcapital.The states are structuring the ecodomy and also supporting theinternationalization of capital throu$h muttinationals. The diffeienceis that some states like Kuwait are rdss dependent on murtinationals1nd ,are capable of taking their own decisions while others likeSaudi Arabia are intertwined in thQ cobwebs built by the multina_

PRADEBP BHARGAVA 123

tionals. The states also have complete control over monetary and

ffscal policies,This transition from rentier state to state monopoly capitalism

is unique in the economic history of the world. lt bas bypassod

the competitive stage and monopoly capital stage of capitalism.

The lower stages of capitalism are now in the making as state

monopoly capitalism has inevitably led to embourgoisment ofkings and princes and also other classes faithful to the monarchies-the merchants and the tribal elements. The history of capitalism inGulf begins from a stage which the developed countries have nowreached, after startiog from their industrial revolution.

To maximize gains from the export of hydrocarban products, the

long term policy of the Gulf states entails product line diversificationin both upstream and downstream operations and exploring new

markets both within the Gulf and in the third world. To pursuc

these policies, state owned companies have been set up. Industrialactivity other than petroleum-based-such as refloing, gas liquefac-

tion and petrochemicals -is given low priority by the state. And the

state owns the key petroleum-based industries. The states stimulateprivate investment in intermediate industries to service the petro-

chemioal plants or further downstream: manufacture of petroleum-

based consumer products. The Gulf monarchies are systematicallyavoiding the setting up of high cost, import-substituting industries,the bane of development in many a developing country of the world.In fact, state apathy has been reported towards private sector'sattempts to set up these industries. This means that an industrialbourgeoisie will develop only under the direct control of the state

and in industries which fall in the hydrocarbon product line diver-sification. A section of bourgeoisie emerged during the constructionboom bythe investment made in construction based industries' Theconstruction boom was simulated by the state. Thus, monopoly andnon-monopoly capital has grown and in the future will grow oulyunder the boundaries of the economic ffeld demarcated by the state,

The share of ruling families in oil revenue has been substantial.No authentic estimates are available. According to one estimate, the

share of ruling families iu oil revenue during the period 1952-1971has been 2.7 percent in Kuwait, 32.4 percett in Bahrain,40.6 per-

cent in Qatar and 25.0 percent in the UAE. According to Newsweek,

700 Saudi princes have become multi-millionaires and foreign depo-sits of the Saudi royal family total 80 billion dollars.ro

124 Tlg,s PERsIAN Gur.r auo Asn

Monopoly capitalists are out of the ruling families andthe trading dynasties. Tbe con and none too advancedcommercial activity, intertwined with the commercial interests ofthc multinationals led to the m m growth of a parasitic bour-geoisie in Saudi Arabia, UAE, and Bahrain. Private busincssdid not venture into challenging proposals. They mostlyopted for immediately pro operations such as contracting,importing, marlteting and real {state devclopment. The govern-ments havc helped the local coftractors by making it obligatoryfor a foreign contractor to around 30 pcrcent of thcsuD-

localvalue of the project to aparasitic bourgeoisie is su

industrial firm. The growth of aby the state by issuing shares of

government owned companies to ihc public.The situation is totally t in Kuwait. The Kuwait state

gives more credencc and to the developmcnt of a com-mercial bourgeoisie over the induNtrial bourgeoisie, The state involv-cs foreign contr&ctors in govcrnhrent projccts but Kuwaiti agentsare required on purchasing contraots. Only Kuwaiti firms are allowedto import and opeculate in the local market. Interest-free loansare available to Kuwaiti merchrints. By these and several othermeasures, the state has helped thd Kuwaitis to establish thcmselvesas formidable businessmen in thbir own country and also abroad,thus strengthening the old Kutwaiti tradition of trading. TheKuwaiti private sector handles Kulvaiti real cstate investments in theUS. These include apartment and office complexes in WashingtonD.C., top hotelb and commercial centres in Atlanta, Georgia, andoffice buildings in Houston and Tlexas. The merchant bourgeoisiehave organized themselves in thb Kuwaiti Chamber of Commerceand Industry (KCCI). The KCCI is in some respects more power-ful than the national assembly of Kuwait.

Besides the growth of nonopoljr and non-monopoly capitalists, amiddlc class has also emerged in the Gulf. In Bahrain and in othercity states and also in the urban cbnglomerations of Saudi Arabia,quick politicization of thi popula$e has taken place, Education hasbroadened the horizons of the poflulace and allowed penetration ofideas such as Nasser's pan-Arabi{m and the Baath ideologies com-bined with rapid economic devqilopment. Thus has a powerfulmiddle class come into existence.

In the United Arab Emirates a{d also in other countries of theGulf, free cducation for nationals is available upto university level

PRADEBP Bnm.olve 125

and the education system has been largely expanded and improved'

A younger generation with an outlook different from the parochial

outlook of the monarchs is slowly making its presence felt' "Theolder leaders whose original loyalties were heavily rooted in narrowly

contrived interests find it difrcult to maintain fcderal loyalties than

do members of the younger generation. It is this second.group'

comprising nearly half of the citizenry and cutting politically'

socially and economically across all segmcnts of population includ-

ing rural households and other families and tribes, that most ofthe positions of prestige and influence in the UAE-and also in

many cases those of real power-are increasingly being transfer-

red."2rThc description of the educated nniddle classes for the UAE is

also true for Kuwaiti and Bahraini societies. In addition, in both

Kuwait and Bahraio, petty bourgeois nationalism is emerging as a

strong force. In Kuwait the Palestinian population has'played a

catalyst role in politicization of the middle classes' The professional

groups of doctors, engineers and architects maintain a continuous

dialogue with the Palestinians who fill the middle ranks of the state

administration, headed by the Kuwaitis' In lgTT,thcPatriotic Club

of Kuwait, (al-Nadi-al-Watani), the mecting group for Palestinians

and Kuwaitis who fclt inclined towards pan'Arabism.and Palcstinian

struggle was closed down.There is considerable discontentment among the Palestinians

working for the state as there is a discriminatory wage structure. Inan establishment, a Kuwaiti junior to a non-Kuwaiti may be given

a higher salary. This hurts the Palestinians more because they have

not come on a contract like most othd expatriates and most of them

have been there for more than twenty years. However, the avowed

support that the Kuwaiti state has given to the cause of the Palesti-

nian Liberation Movement brings some relief to the deprivcd

Palestinians. Al-Fatah is allowed to collect taxes from Palestinians

residing in Kuwait. In addition, tlc Kuwaiti Government also con'tributes directly to al-Fatah. In this manner, tbe Palestinians con-

sole themselves at least as long as the PLO reccives assistance fromthe Kuwaiti state.2z

While in Kuwait, petty bourgeois nationalism is simulated by thepresence of Palestinians, in Bahrain the militant working class was

inspired by the penetration of ideas such as Nasser's pan-Arabism

and thc Movement of Arab Nationalists (Hareka). Way back in

126 Tun PBRsu,N Gur.r exp AsrA

1938 the militant working demanded expulsion of foreignworkors from the Bahrain pr Ieum company. In tbe post-Warperiod they demanded more mcasures and political controlof oil resources. The militant were made to tum intoShia.Sunni riots by the m . Howovcr, in an anti-sectarianmeeting a Committee of Nationalwas set up under the slogan .,Noon."ss It reflected the heightened

nity (Lajnat al-Ittihad al-Wataili)and no Shi'ism from now

of a working classmovement rising above

The expatriates are an enslaved tion, largeiy disorganized andalienated from the state except in Kuwait where the expatriatePalestinians have radicalized the

Thus in the capitalist)rery.of the Gulf societies, among the

dominant classes are the ruling lbmi the emerging monopoly

a number of countries including A{ab, South Asian and Soutl-EastAsian. According to an estimate inade in l9g0 the expatriates costi_tute over 50 per cent of the work force in Saudi Arabia, around T0per cent in Kuwait and around 85 per cent in the United ArabEmirates and Qatar.2r A large number of the expatriates are construc_tion workers and are likely to go $ack. But a large number of skill-ed workers will remain there pcrm+nently to man the various indu.st-ries. The local population is found only in sorvice and trade sectors.

The working class movement h4s since then matured. The ,,Gene-ral Committee for Bahraini Workirs', is the only officially recogniz-ed body of labour and the only democratic institution of its kindin the Gulf. The frst election to {his body took place in 19g3. Ineach of the eight major compatries of Bahrain ,,joint consultativecommittee" between managemeot and labour were set up. Theemployees have adopted a cautiotus approach to deal with a highlyrepressivc regime but they see to [t that the labour law is strictlyenforced. The term .,trade uniod" is not used either by tho regimlor by labour. Political afrliatioas are also not allowed.sa

The formation and recognition, of the General Oommittee forBahraini Workers is the culminati]on of several years of struggle bythe workers beginning with the [emand for expulsion of foreignworkers from the Bahrain Petroleum Oompany io 193g. It also en-sures Shia-Sunni amity at least between tle workers.

Another important class in Gulf societies is that of the expatriat_cs. They become important by thqir sheer number. They come from

and non-monopoly oapitalists and lthe commercial bourgeoisie. Then

Preosnp BHARGAVA, 12?

there are ths middle classes enthused with petty bourgeois nation-alism. And finally there is the dominated, sometimes described as

enslaved, class of expatriates. The prc-capitalist structures are ofsignificant importance in state formation in at least Saudi Arabiaand Oman. In the city states cf Bahrain, Kuwait, Qatar and theUAE, they are of marginal importance.

The bedouins in Saudi Arabia have not been absorbed by themodern economy thriving on oil revenues, Only a small minorityof them have settled in towns, many serving the White Army of theKingdom of Saudi Arabia, whose task has been to counter.balanccthe regular army. The White Army also known as the NationalGuard is under the control of Prince Abdullah since 1963. This wasfounded to give employment and cash to Najdi leaders. The Guardis the royal family's defencc of last resort against internal oppositionand one must presume that its views are heard on subjects otherthan subsidies and salaries. A small number of the bedouin popula-tion has not directly beneftted from the oil revenues but their socialhistory is changing as a result ofrapid developments sinc€ the seven-ties. The bedouins maintain their tribal identity, But a process ofdetribalization has becn initiated by rapid economic development.The first step in this direction is the sedentarization ofthe pastoralnomads. The pastoral nomads maintained the productive continuitybetween the desert and areas ofpermanent settlement. The introduc-tion of motor vehicles has caused a real change in the relationshipbetween the bedouin and. pastoral space. The pastoral lands whichwere the exclusive rights of the tribes, called the diras, have beenvirtually abolished by the 1968 law on the distribution ofland. In fact,progressive dispossession of tribal space is part ofa long establishedd etribalization programme.

Ugo Fabietti has rightly perceived that the detribalization policyis directed towards strengthening the centralized state. This hasaltered the nature of available resources and the modes of access tothem. The diras are facing ecological degradation and animals arenow raised on cultivated fodder. Therc is a shift from breedingcamels to breeding shcep, a small size animal, The state assists inthe cultivation of fodder and the bedouin is now tied less to ex_ploitation of natural resources and more to the state oriented farms.Due to these changes there is a change in breeding practices.as

The progressive detribalization oftribal space at the expense ofthe bedouins is also marked by maldistribution of arable and irriga-

I28 Tns PERSIAN Gwr lxo SQUIH Asn

has now coBe to an end. The go t, in an attcmpt to streng'

then the ceutralized, state, has marked the beginningof a new kind of social based on a new social division of labour.

The resistarco, if any, from afrected bedouins is passive butnot unheard of. Tbe failurc of Harad projcct, for example, was

partly due to bedouin reluctance take part in cnterprises in which

individuals belonging to factions are given the possibilitythe others.2sof obtaining greater benefits

At one end of the social , there is the bedouin, alienated

from his means of production, an unprivileged strata

of the kinedom. The tribal having olose family links withthe Al Saud family form the crust of society. King Abdul

y links betwecn tribes and thedivorced daughters of tribal

heads. The son of ttre kingtribe of the majlis. Tho tribalGuard or have become landlo

up to be the spokesman of thenow eitter lead the National

a conduit for the distributionThe landlords have been used as

oil largesse to the bedouins. Theprogrammes both for the bcdouinsstate has taken up several

and the urban populace.

The Gulf states, like wcstern societies, have attempted to Play

Anz had in the past establishedroyal house. He married and

ted land. The land distributiou is based on tribal ownership. Actualland allocation depends on !uo4 factors as closeness of parentagc

to the local amir dealing with thc land distribution, and possession

of influcntial friends inside the erf irates or in al-Riyadh ministries'z?

Land is being purchased by ricf businessmcn or by farmers who

wish to enlarge the area of landl thcy already possess' The land is

cuhivated using salaried importqd labour from Egypt or Pakistan,The right to private propcrty sdbstitutes the traditional collectiveright ofaccess to land, In fact, the 1968 law makes possible the

€mergence of a market for land i[ a society where once there were

only collective rights.28

Detribalization has favoured thb tribal leaders who are iu a better

position to cxploit their conneo{ions with the state. At the same

time it has deprived the bedouins dfcollectivc ownership and exploit-ation of natural resources. In othpr words, the bedouins have been

deprived ofthe qontrol over their means of production. The means

of production are now owned tiy the new landlords. Collectivism

the role of a wclfare rtate. The have injorvcned in a numbcr

PRT,DBEP BHARoavA 129

of onoe-marginal spherer sucL as tran$poit, hsalth, environm€nt and

community serviccs. Thosc wclfare serviceg are iategrated with and

at tle same time erpnd.ing tho spoce for the reproduction andac.rmulation d oapital, "This rcsults in considerable politicizatiorof popular struggler rclatcd to these sphercs. Tb popular masses

ars row directly confronted with the stale. In a period of economis

crisis such state iotcrvcntioo sheds its alluring aspect of'social poli-cy'. Its conlec'tion with tbe inierests of capital is revealed and the

$tats incurs a sizeable loss of legitimacy in the eyes of the popular

oasses.- Authoritarian gtatism is tbe reality which cmerges fromthe ruios of the welfare gtate.s

The welfare statism ofthe Gulf stat?s has had betu created and

ehed in lens thao a 15 year period. Hospitals and schools were

built electrilcation programmes were undertaken, people were given

free borxes. Loans to build houses wcre allowed. The major facili-ties were subnidized, Jobs were created in govcrnment. There wereopporfunities for making moncy while doing no work. The recessionhss slowcd down the welfarc programmes. The statc can tro lo[geratrord sobsidies whicb people got uscd to, jobs have bccome few aadnoney-making a difrcult task, possible only thromgh hard work.The ruling families are now worricd, for people do rcsent the moneythat ruling fanrilics make.8l Some of the rulers are being acsused ofhelping pnt the merchants out of business-bhaviour which does

rot eadear them to the te$t of the trading community.sgNo apression of thcse reseotments in public bas bcen roported.

Nwerthelees, due to thE welfare programmes, popular masses are

now direstly confronted with the statc, but they have no institutionor orgaoization through which to express their rescstment, exceptin Kawail Thc ffrst major recessioir has on the one hand revealcdthe interests of the statc in capitalism, and ia monopoly capitalismin particular, and a sizeable loss of legitimacy of the state in theeycs of popular masses on tie other. In westenr societies authori-tsria[ statisff emcrgcs from the rrdus of thc welfare state. In monar-chial societies, the first recession itself has been a big blow to wcl-farism, The wcakening of welfarisn rcquires state suppression ofaroussd e,xpeclations and formal liberties of tlc populace to main-tain ruling class hegsmony. Moreover, there is a sharp lag betweenthe rapid transfornation of a capitalist base and the correspondingevolution of a capitalist ideology and its psychological manifestation,The gap is filled by religious fuodameatalim.

130 Trc PERSTAN Grnr euo

The monarchies have so far used religioo to their ownadvantage. In collaboration with the ulema repressive methods aregiven religious sanction. The between the monarchy and theulema is the strongest in Saudi bia. The meobers of al Sheikh.the family of Muhammed bin Abdul Wahhab, the founder of

al Saud. Thc ulema reportedlyWahhabism, are closely alliedoccupy high positions in the they are judges and lawyersand can influenoe people thro mosques and educational institu-tions.83 There is no evidence toulema among the bedouin andsince its inception, been a statetribal loyalties and to unleash

In the mosaic Iraqi society Kurds, Shia and Sunni, theSunni regime proclaims itself to secular. The lraq-Iran war hassbarpened the Shia-Sunni co in lraq. The conflict is aggravatedfurther, because the Baath party an element of Sunni orthodoxybuilt into it, The Sunni orthodotinuity, that took the lraqi Baath

is an outcome ofan historical con-in its fold, that had an appeal

for Arab nationalism. The helped the Baathists, consistingprimarily of petty bourgeois e to overthrow the monarchY,though with the support of the

Iran is different from all other ulf states in the matter of reli.gion. The Iranian ulema wereTawhidi and thc not-Tawhiili.

divided in two groups-th€Tawhidi did not separate reli-

gion from polirics while the non-lawhidi showed deference to mon-archy and played the same role as the Wahhabi ulema in SaudiArabia. The Tawhidi ulema led al revolution against the monarchyand overthrew it and the power of the mostazafeen

capitalist growth but it isand Soviet. Both the s

Asn

the influencc of Al Sheikhthe countryside. Wahhabism has,

ligion and has been used to bind

y against imperialism-Americanand tlcir proteges have described

the Iranian regime as It is not fundamentalist.Islamic orthodoxy is not lism. Use of rcligion in poli.tical movemeuts is not a new omenon. The church, for example,openly supported Aquino in the Philippines. Martin Luther Kingand Mahatma Gandhi have also the force of religion to mobilizcpeoplc. Bishop Tutu is struggling against a U$ protege,

PRADEBP BHARcAvA l3l

the racist regime in South Africa. Ayatotlah Khomeini successfully

used religion to overthrow the Shah who was strongly supported

by US imperialism.In Iran a revolution led by religious leaders involving the masses

and in lraq a petty bourgoois military alliance guided by the revo'lutionary Baathist ideology overthrew parochial monarchs supported

by imperialist powers.Both Iraq and Iran now being engaged in a futile and a meaning'

less war is only an irony of modern world history. The war holds

back the great possibility of the spread of the revolutionary ideologi-

es that the two regimes are posscssed of.

COT,.ICLUSIoN

State monopoly capitalism ofthe western societies has entered intoa symbiotic relationship with the state monopoly capitalism ofGulf monarchies. The authoritarian statism of the west is wedded

to the authoritarian monarchies of the Gulf. In the west democracy

is on the decline, in the Gulf democratic institutions arc meaning-

less postulations. Petty bourgeois nationalism is suppressed inboth the societies. Petty bourgeois nationalist states are suppressed by

the West and by Gulf monarohies. Petty bourgcois nationalist states

of Iran and Iraq aro pitted against each other. This endless Iran'Iraq war is a strategic success of the imperialist'monarchy symbiosis.

The contradictions within the symbiotic relationship have also

emerged, The recent recession due to a fall in oil prices and proteo'

tionist measures adopted by the imperialist powers against importsfrom the Gulf, continuation of the Palestinian struggle for theirhomeland are a result of these contradictions. Nevcrtheless, these

contradictions have initiated integration within the Gulf countries

and also a search for new markets in the third world.Authoritarianism is underwritten in Gulf societies. State mono-

poly capitalism and monarchial institutions are happily wedded to'gether. The future holds an intensifed struggle for state power be-

tween the emerging monopoly capital and non-monopoly capital.

The Suq-al-Manakh stock market crash in 1982 in Kuwait indicated

thc hostilities between the two capitals: The old ruling families and

the merchant dyansties on the one hand and a new class of educated

youflg men who have recently acquired wealth on the other. Petty

bourgoois nationalism and its aspirations have made a small dent in

132 Tffi Psnsilx Gurr,c,No AstA

Bahrain and Kuwait, manifestedassembly respectively. To create

a workers' uuion and anationaldivide in petty bourgeois nation-

alism the ruling classes turn toof religious fundamentalism.

methods such as the use

Religion has lbst its meaning ab a binding force as far as the edu-catEd middle class is coocerned. ft remains an efective adhe,sive tobind bedouins and keep them It also remains an efrect-ive instrument to create a Shia divide in any petty bourgeoisnove6€nt. It has proved to be a]n efective weapon to engage theanti-imperialist and anti-no revolutionary zeals of Iran atrdIraq in an incessant war. Reli as a revolutionary force existsonly in Iran. Other statcs never had the religious institutions likemasjids and madrassas, that the rallying point for the revo-lutionary ulema. The zeal of the mostazafeens (the

to tha mostazafeens in the Gulfoppressed) is lihely to percolatemonarchies and not be restricted to thc Shia community alone. Onlythe war holds back such oossibilibies.

What does the future behold f$r Gulf state-formatiotr? In westerasocieties, in their present stagc of statism, the cxecutivehas more effective power thau parliaments. In the presentstagc of state monopoly capi in the Gulf monarchies, parlia-uents will have little meaoiDc. oan only function as an elected

powcr. Hence a pafliametrt s only help the authoritarian rul-ing classes to legitimire their Io state$ other than Kuwait,tbe kings hold a majlie (audicacc)lwhere grievances from local peopleare hcard. Saudl Arabia hasparliamcnt with contedpt. It

ys looked at tle institution ofbeen responsible for dissolution

of parliaments in Bahrain aid at one time in Kuwait.Ncvertheless, the Gulf states m.iry have to set up parliaments in the

long run witlout weatening executive, which presently is byand large the ruling family itself. A large national assembly buildinghas already beca built ia Saudi A{abia. The state will thcar rotr resenr

Pnlpnep Bslnoeve 133

the interests ofthe conscious dominant class and stlll be a site forclass struggle, a site where the working class can win incrcased

democracy and yet be out of power, Authoritarianism will continueas the executive, judiciary and ttre military will rcmain in the domainof the dominant classcs. Democratic institutions may be built with-out allowing evon a small segment of political power to non-mono-poly capital or its allies.

t.

NOTSS

Nicos Poulantzas, State, Power, Socialism, NLB, London, 1978.

A critique of the Neo,Marxist theorists of State is done by H.C. Sri-vastava, "N€o-Marxiau Paradigms in a Capitalist Statg," Social ScienceProbings, June, 1985, pp.749-62. Accor{ing to him, tbe neo-Matxianbourgeois State theorizing collapses otr two vital points: who is theagent of class struggl€ and what is the social mechanism of traosition tosocialism?

Iouis Althusser, Lenin and Philosophy ond Other Essays, Monthly ReviewPress, London, 1971.

Samir Amin, Class and Nation, Hisroticalb and in the Current Cisis,1980, Monthly Review Press.

5. Ibid.6. Femando E. Cardoso and Enzo Faletto, Dependency and Develop-

ment in latin America, University of California Press, 1979,

7. Ibid.8, Yusuf A. Sayigh, Arab Oil Policies in the 1970s, Ctoom llelm, London,

1983, p. 9.

9. rbid10, Fereidum Fasharaki and David T. Issak, OPEC, the Gulf, and the World

Petroleam Ma*et, A Study in Government Policy and Downstream Opera-tions, Ctoom Helm, London, 1983,

11. Ibid. 12. rbid.

13. This kind of advice came from diferelt quarters, itrcluding UnitedNations Economic Commission for Westem Asia (ECWA), "Basis for theformulation of strategics pertaining to development of tbe petrochemicalindustry in the ECWA region." Paper submitted to Expert Groupsmeeting on the Petrochemical Industry in the ECWA region, 9-12, June,1981, Vienna, Austria, sponsored jointly by BCWA atrd United NationsIndustrial Development Organization, UNIDO, Paper No. E/ECWA/ID/wG/5/3, May 1981, pp. 2-3.

14. .'Future Looking Bleak for Buropean Chemical Industry," PetroleumIntelligence Weekly, 15 June 1981, p. 8,

134 Tw, PrnsreN Gur-r eNo Sormr Asre

15. "Kuwait," Mlddle East Economic Survey,3 September 1979.16. "Saudis Preparing for Second Ph{se of pehochemical plan,', petrole m

Intelligetrce Weekly,3l August 1f81, pp.2-3.17. "Products of tbe Desert going for a Song," Far Easten Economic Retiew,

20 Juns 1985, pp. 105-6.

18. ECWA Workins Paper, 1984, pp 7-9.19. Dictionary oJ Marxist Thought, ed. by Tom Bottomor€, Harvard Univcr-

sity Press, Cambridge, Mass., 1983.

20. During the period 7952 to l97o-7t!,, the family share in other countdeshas been 32.4 percent in Bahraid, 40.6 percent in eatar and 25 percentin the UAE, as citeal in'Hazem Sl. Beblawi, ".The predicament of theArab Gulf Oil States: Individual Gains and C.ollective Losses" in Mal-colnc H. Kerr and El. Sayed Yassin, eds. Rich and poor Ststes in theMiddle East: Egypt and the New )4rab Order, Wesview press, Colorado,1982, p. 212.

21 . Iohn Duke Anthony, .,Transfomation Amidst Tradition: The UA.E inTransition" in Sharman Chubin, qd. Securit! ln the PersianGulf: Domest-ic Political Foctors, The Interuiational Institut€ of Strategic Studies,Gower, 198I. p. 23.

22. Arnold Hottioger, ,.Political Instiltutions in Saudi Arabia, Kuwait andBahrain" in Sharman Chubia, ofi. cit,, p. 8,

23. Fred Halliday, Ardbia Without Sgltans, Pengaifl, London, 1973, p.443.

A, Middle East Rtview, 1985, p.73.

25. J.S, Birks and C.A. Sinclair, ..Alrab Manpowef: The Crisis of Develop-ment", LoDdon, 1980, p. 358.

26 . VCo Fabielti, 'Sedentarisation as a Means of Detfibalisation: Some Poli-cies of the Saudi Arabian Goverhments towards the Nomads," in TimNiblock, €d. State Society dnd E|onomy in Saudi Arabia, Croom rlelm,Inndon, 1982.pp. 10G14.

27. lbid, 28. rbid. 29. Ibid.30. Nicos Poulaotzas, op, cit.31, GCC Survey, Tle Economist, February, 1986, p, 25.32. Ibid. 33. Ibid.34. On the Iraniao Revolution an insfder"s view is avaitable in Asaf Hussain,

Islamic lran: Revolution anil Courlter-Revolution, Frances Pinter, London,1985.

7. Gulf Cooperation Council and the Outside

Powers: A Sturly in Mutual Perceptions

GULSHAN DIETL

Perception is a highly subjective concept as it invariably incorpo'

rates the perceiver's own personality and prejudices' Studying some-

one else's perception multiplies thc element of subjectivity as the

perceivcr, consciously or unconsciously, brings in his own personal'

ity "oO

ptejuaices into the exercise. And extending such an exer'

oise to the realm of politics compounds the dangers. A politician

would have to be very unlike his species indeed, if he easily gives

away his perceptions to external scrutiny.With all thcsc limitations, it would still be a worthwbile attempt

to identify the perceptions of the Gulf Cooperation Council(GCC) towards the key outside powers that infiuenc€ it and the

perceptions of these powers of the GCO. Such an exercise would

iender useful insights into the place of the GCC in global and

regional power confgurations. It would also serve the purpose ofassessing the evolution of the GCO in the last five years of its exis-

tence and of determining changes, ifany, that have taken place in

its attitude towards the outsiders and vice-versa. This, in turl, may

pcrmit speculation on the direction the GCO may take in the com-

ing years.

Two problcms that encounter the exercise may be stated at tleoutset. One, the GCC is not a monolith. There are problems-even

serious territorial disputes-among the GCC etates' There are diver-

gent opinions on tle very nature and role of the group among its

member.states. Their perceptions of the world and world politics

are varied. This paper will, therefore, analyse thc general GCO con-

seDsus on major issues and indicate differences on other issues as

may be required' Two, barring Kuwait, the GCC states-Saudi

Arabia, Kuwait, Qatar, United Arab Emirates (UAE) and Oman-permit no disscnting opinion on any major domestic or external

136 Tsr PnnsuN Gur.r ewp

matter. Therefore, only theto examination. However, thedissent occasionally makes itselfnote of when aveilable and

An astor's Wteranccs aJrdstanding his peroeptioos Sinc,,epatients on a psychiatrist's couchated truths either. Again, aand at times more devious thandifrcult to interpret. Action, intion-and that will bc the guid

The two supetpowers andIsrael and the People'shave been singled out for thesix powers on the criteria of theirpreoccupation with thcm in adoubt start with lran. Thesuperpowers and then takes uBflow of narratiou. Iran, Iraq aathe end in view of theircrucial juncture.

GCC ano rns UNTTEp Srarus

Tbe United States relied heavllyAsia to sail through the stormyIranian revolution and theUS tended to depend even morepillar. US sfficials and authorsthe "two-way specialArabia-without mentioniug eventwo. President Jimmy Cartered: "The futuro of Saudi Arabiaare tied together very closely in an

The special bilateralism gavemitneft, when toryatds the endwhat came to be known as tl€ CUnion message od 23 January Ioutside force to gain contrrrl of thcgarded as an assault on the vital

Asu,

of thc ruling elites are openund and across-the-border

d. These utterances are taken

arc tbs oaty guider to undcr-actors in question .are ja oo way

the utterances are no unadulter-'s actions are morc constrained

individuafs, and as such, morey case, is better than exclama-in the following analysis.rcgional powcrs--Iran, Iraq,

Republic of Yemen (PDRY)-If one were to take up tbese

pactonthe GCC and theGC€ing order, onc would no

however, begi ns with tlre tworegional pow€rs to retain the

the Gulf war are dealt with atbearing on the GCC at this

the "two-pillar" policy in WestIn thc aftermath of the

loss of one of the pillars, then Saudi Arabia-thc remainingt to great lengths to claborate

between thc US and Saudithe minor irritants betvracn thethe chorus, when he proclaim-the future of the Unitcd Stares

irr€vocable uay."lto a selccti,se unilateral com-

hic terure, Carter enunoiatedDoctrine. In a State of thehe said: "An attempt by any

GuIf rrgion wi{ bc re-of tie l-Brited gtates of

Gur,ssn'r Drsf,L 137

Ammica aod will be repelled by a'ny mcans n€cessary includingmilitary forco." Its implementation was the creation of the RapidDcployment Force (RDF)-I 10,000 strong, fast-m.oving, hard-hirting, elite troops.

The Reagan Administration marked a radical departure from thepast. Whereas Carter's policics evolved in response to the localissues as they emerged, tbe Rcagan Administration started off witha global str&tegy. Local issues werc to be takcn up astheyfellwith-in the preconceived global design, Tbe demarcation between tbeArab core and Gulf/Southwest Asia was brushed aside in favourof an enlarged strategic entityof the Middle East, in which Pakistan,Turkey and the Horn of Africa formed the outermost limits. A"Skategic Consensus" was to be evolved within the whole area andcountries as far apart as Egypt, Oman, Sudan, Turkcy, Pakistan,Kenya and the wholc of the Gulf were euclosed wirhin it. The de-bate orer a unilateral versus aa alliance approaeh was tentativelysettled in favour of the latter although tbe capability for unilateral-ism was not neglected. The RDF was converted to Central Oom-mand (CENTCOM), reporting d,ireodly to the Secretary for Defcnoe.Its combat strength was doubled and seven tactical ffghter wingswerc added to it.

The Gulf Cooperation Council did not cover the entire designat.ed area of the Strategic Conseasus. Its twin merit lay in the factthat it covered the rnost crucial chunk of that area and took up thechallenge of lran. If one can identify the broad US goals in theGulf as ljmiting the fallout of the Iranian revolution, rcassuring thepro-US Arab regimes and keeping Gulf oil and waterways sebure-then the GCC can be easily accorded a role in their implemcnta-tion.

The US did not greet the GCC with cxuberance. In facl, its res-ponse was rather cautious and delayed. John Tower, the Chairmanof the Senate Armed Services Committcc, praised its forrnation say-ing, "Given the various challenges to Gulf sccurity, thisstep towardsregional cooperation is important."2 Later, the Secretary for Defen-ce, Casper Weinberger, said the US "welcomed the esfablishment"of the GCC "since its inception" and commended its role in thearea of "mutual defence and security cooperation among its mem-bers." He went on to reemphasize bilateralism in US military co-operation with GCC member countries and said. 'there havc been

138 THS PBRSTAN GULF AND SoqTH AsrA

no occasions for aollective GGC dlscussions with the United Stat€s

on military matters,"sThe ffrst significant interaction bttween the US and the GCC was

the spectacular controversy over thQ Airborne Warning and ControlSystems (AWACS). In Gctober lP8l, Reagan personally steered

the sale of five AIVACS planes wofth $8.5 billion to Saudi Arabiathrough the US Senate. During thq monthJong debate in variousUS forums, two facts came out with startling clarity. In answor toa question, the Administration expfained that:

...US Air Force provides one Avionics Intermediate System

(AIS)-a sort of all-purpose dipgnostic test centre-for each ofits F-I5 wings (three squadrons per wing), In contrast, the RSAF(Royal Saudi Air Force) is one AIS unit for each ofits threc F-15 squadrons, plus ode spare. These fourRSAF F-15units could, in the event of a US deployment, support four USF-l5 wings (12 squadrons), savipg the United States the

need to devote scarce airlift to carrying tho AIS unitsArabia.afrom European or US bases to

A second revealing fact came the Secretary of State AlexanderHaig, who said that US " would be necessary well into

Saudi AWACS aircraft."s Thethe 1990s for "the support of ffstatement was amazing in view of fact that NATO trainees com-

three to fifty-five weeks, withplete their trpining progr:lmme

the average time of about sixteenPut together, tht two facts point at a likely eventuality of

the US use of the AWAOS by to the tactics of oversellingand training. Besides, the US put conditions on its sale.

The Saudis had to agree to all intelligence gathered bY the

AWACS with the US, deploy only within the geograPhic

borders of Saudi Arabia' bar anY

third country, and, so on. The lastof such intelligence to a

ition was partially set aside,

when the US agreed to autho thc AWACS data transfer towar in June 1984. The data are

now being transmitted directly to waiti air-defence radar screens

simultaneously with tleir to Saudi bentres.o

In vicw of the fact that US are already operating in Omanonly a small territorial adjunct

Kuwait at the peak of the

and Bahrain, and Qatar, at best,

Gur.sHltt Drsu, 139

to the sprawling Saudi land-mass, US air cover extends ovtr the

entire GCO air-space barring the southern areas of the UAE.The GCC perceives the US role favourably, although there are

built-in asymmetries in the relationship, The US, a global power

by definition, is globe-watching and globe-managing and its securityperceptions and concerns are global. The GCC, on the other hand,displays far more restricted, regional security concerns. In a con-flict-ridden area, where national sovereignty has not yet taken firmroots, where national power-sharing is not yet institutionalizedand where ethnic and sectarian rifts are tearing national identitiesapart, security considerations are bound to be inward looking ratherthan tailored to global doctrines. GCO dependence on the US is so

overwhelming and the GCC need to appear independent is so great

that the GCC is constantly on the horns of a cruel dilemma.On the eve of the formation of the GCC, Crown Prince Fahd was

quoted as admonishing the superpowers to "quit poking theirnoses" into the internal affairs of the Gulf region. He said that theGulf nations do not need foreign help in maintaining their securitybecause "Gulf security is exclusively the affair of the Gulf nations"and they would soon bo developing "a collective Islamic strategy" fordefending the legitimate rights of the Islamic peoples.? The GCOSecretary-General, Abdullah Bishara, strove to drive home the same

point in an address before an American gathering. He complainedthat he was both surprised and shocked that the US Administratiolstill approached the Gulf in the same way as it did before the crea-tion of the GCC and had not yet realized the changes the GCC hadbrought about not only wilhitr the Gulf but also in the wider Arabregion. He proclaimed that "the day when the US or other powers

could send their boats to the Gulf with total disregard to the wishes

and determination of its people are over."8Thus, the GCC rulers are neither wholesale converts to US strate'

gic perceptions nor are they likely to totally merge their security in-terests with US strategic doctrines. The advantages of a formalsecurity alliance with the US arc far outweighted by the politicaldisadvantages. To enumerate some of the irritants in US-GCCrelations and the factors that pull the GCC away from an outrightsecurity alliance with the US: (l) It would further erode the alreadyweak internal legitimacy of the rulefs vis-a-vis the dissent groups.

(2) It would expose them to an already shrill chorus of accusations

of being the lackeys of US imperialism from countries like Libya,

140 Tue hRsrAN Gur,r .rNo Asn

Syria and Iran. (3) It wouldsensus comprising otatcs like

jolt the moderate Arab con-Jordan, Iraq, Sudan, besides

those of the GCC. (4) It would bf seen to be an indirect securitylink-up with Israel in view of tic US,Israel Strategic Understand-ing. (51 It would ioevitably raise thd Soviet stakes in the regionaldevelopments. (6) fne fear that thc US may gain all the advantagesout of an alliance while the going is good and wriggle out at thefirst alarm of an approachingtrayal of the Shah has still notUS about its willingness and

The memory of the US be.(7) The open debates in the

to seize the oil fields areseen as depicting the GCC rulers as utterly dispensable and oil as

the sole policy consideration. (8) Publicity given to the internalwranglings withio the ruling familfes and doubts cast upon thesulvivability of their political syrterhs do not lead to a relationshipof trust. (9) When Israeli jets ove{flew Saudi airspace on theirmission of destroying the Iraqi Osirak nuclear plant, the US-mannedAWACS in Saudi .Arabia did not ralsc an alarm. Even if onc argues

that the Saudis would have preferi'ed to remain ignorant and, inany case, were in no position to do anything if informed, it docsindicate a state of affairs in which the Americans decide whatintelligence information to share the Saudis. (10) The US isgenerally perceived to be keeping thc Gulf states vul-

dependent on and amenablenerable so that they continue toto the US. (11) US hesitation in the quality and quantityof weapons that the Gulf states would like to purchase is yet an-other strain in relations. (12) The Sarldis perceived the Camp DavidAccord as a US movc to isolate Egybt which could have been ofassistance to thcm in modernizing armed forces and providingmilitary training.

Within tbe GCC, Oman and Kuw{it present two poles in their at-titudes towards the [JS---Oman bein$ the most pro-US of them alland Kuwait striving to maintain a bflance between the US and theSoviet Union. In Jnrne 1980, befor$ the formation of the GCC,Oman entercd into an Economic an{ Military Cooperation Agree-ment with the US under which Ohan permitted Americans tostockpile supplies on its territory anld to use its defence .,facilities,'in times of crises in exchange for w$ich the US agreed to spendlarge sums on developing Omani airfields and harbours. In contrastto the rest of the GCC members, O(an is explicit in welcoming USintervention in rcgional affairr, trn a {Vnicat interview, Kiag eaboos

Gulslrlr.r Drrrr, l4l

said, "we are the gateway to Arabia and the oil route. Any aircraftin the Horn of Africa, Kabul or Tashkent is capable of covering a

distance of 450 miles to drop mines in the Strait of Hormuz, closing

the Strait and scvering the West's economic artery. What prevents

such an occuffence is thc knowledge that we are fricnds of the

West."eKuwait, oa the other hand, has had several problcms with the

US in the past few yeafs. The most serious ore comes in summEr

1984 when the US Congress agreed to sell Stinger missiles to Saudi

Arabia, but turned down a similar request from Kuwait. The

Kuwaitis retaliated by purchasing $327 million worth of Soviet

missiles. A second serious dispute cetrtred around the nominationof Brandou Grove as the US ambassador to Kuwait in carly 1984'

Kuwait refused to accept him on the groudd that his previous post

as the consul-general in Jerusalem made him suspect as pro-Israeli.

The US ultimatcly backed down and appointed a State Departmeot

or6cial.The tarker war in sunmer 1984 wben tbe closure of the Hormuz

strait seemed imminent, provided interesting insights into the degrce

of cooperation that each of the GCC statcs was willing to accord

to US intervention in the region. The Onraui Minister of State forForeign Affairs, Yousef al.Alawi, said that his country would con-

sider military action iu conjunction with other f,ations if Irancarried out its threat to blockade the Hormuz strait. That impliedOman's readiness to pafticip.rte in a joint military action with the

US. Sheikh Salem al-Sabah, the Kuwaiti Defence Minister, viewed

the closure as an "act of aggression" and endorsed the view thatthc closure would provide foreigr powers with a "pretext to inter-vene in and control the Gulf region." The UAE stressed the need

for a "speedy and serious search for outlets other than the Hor-muz." Bahrain's Sheikh Khalifa bin Hamed said the "superpowers,with their military might, will ensure for themselves freedom ofnavigation for tbeir vessels and oil supplies" and expressed the viewthat protection ofthe strait was "a joint responsibility of all worldstates, especially those benefftting from that sea lane."lo So whilethe GCC states were all worked up over the Iranian threats, Bahrainand Oman seemed to openly iuvite the United States to defend thcStrait.

Ilassan Ali al.Ebraheem provides almost tbe only anti-US, antiGCC opinion from within the Gulf that is free and open and quite

142 Tw Pmsrelc Gur.r aNo So

influential. In a book entitled Kulvait andthe Gaf(Croom Helm,London, 1984), he recalls the overghrow or assassination of NuriSaid iu Iraq in 1958, the Shah in fran in 1979 and Sadat in Egyptin 1981. His conclusion is obvious [nd yet extraordinary, '....popu-lar suspicion of the US in the re[ion is sufficiently deep that anyclose rclationship or identification On the part of the Gulf govern-ments with American interests or sscurity projects will in the longrun only result in the alienation pf populations from their owngovernments, witb consequencos tlhat might well be similar to whathappened in fran."Il

Opposition movemcnts in the Grilf castigate the GCC as the lame.duck child of the United States, Gbnerally, these movements venttheir anger in badly-printed leaflet$, pamphlets and books. One suchbook entitled Sauili Defence Speniltng: A Case of Misuse of MuslimWealth 1n,p., n.d.) relying solely on tbe data given in the MilitaryBalance, claims that: (l) the per capita defence expenditure ofSaudiArabia in the year l98l was no! only by far the highest in tlcworld, but exceeded also the combipeil per capita dcfence expendi-tures of the US, Britain, West Ger{any, Pakistan, Malaysia, Jordan,Spain, Turkey, Morocco, Egypt, lAlgeria, Indonesia, Sudan andNigeria. (2) The defence expenditfrre per person in the armed for-ces of Saudi Arabia is more tha{ four times that of the US. (3)Tbat for just two-thirds of Saudi dpfence spendiog, eleven countries(Ttrkey, Algeria, Egypt, Jordan, Morocco, Sudan, Pakistan, Libya,Indonesia, South Yemen and North Yemen) together are maintain-ing defencc forces numbering 2,3f0,850 against 52,200 of SaudiArabia, operate 2,366 Combat aircpaft against 128 of Saudi Arabia,and hold 12,877 tanks against 450 bfSaudi Arabia. The book endswith the sweeping charge that all Saudi decisions are made inWashington.12

GCO eNo rHE SovrE r UNroN

The Soviets have legitimate interesls in the Gulf. Their proximityto the region, more than fifty-milliqn Muslims in the Soviet Asianrcpublics, the strategic and oil imp$rtance of the area, and Americaninterests in the region, all tend to e[hance Soviet anxiety about thehappenings in the Gulf. Way back in 1921, the Soviets concludeda Treaty of Friendship with lran, qhder the articles five and six ofwhich they gained the right to sendl troops into lran should a third

GursnlN Dlsrl, 143

party intervene there or use lranian territory as a base for an attack

on Soviet territory. The Arab Gulf states were more or less insulat-ed from Soviet influence till 1972 when the treaty of Friendship and

Cooperation with Iraq gave the Soviets their flrst home-port facilityat Basra.

On the eve of the British withdrawal from East of Suez and the

tentative regional initiatives at putting together a local securityalliance, the Soviets reacted sharply. They announced their firmopposition to {oreign military bases and military presence in the

area and promised to continue to support people's liberation strug-gles. "This applies completely to the national liberation struggleslaunched today by the peoples ofthe Persian Gulf region," a com-mentator wrote.rs After the Iran-Iraq reconciliation in 1975 wheothe idea of a regional grouping gained fresh momentum, the Sovietsreacted even more sharply. Moscow radio called it an attempt tomaintain the status quo in an alliance between "imperialism andlocal reactionary forces" that sought to make the region an "im-perialist protectorate" in service of counter-revolution in thc area.l{

The Soviet reaction to the GOC, therefore, was predictably hos-

tile. Soon after the idea for a Gulf grouping was mooted, the Sovietsbrbnded it as an old attempt by the US to form "an aggressive

military bloc in the Gulf to draw some of these states into the orbitof its hegemonistic policy and to cause a split within the ranks ofthe Arab countries."16 They also accused it of being directed against

the "national liberatlon movements.'016 A third charge levelledagainst it was that it was aimed at the overthrow of the IranianIslamic Reoublic.u

The ofrcial Soviet position on the Gulf was formally presented ina proposal by the then Soviet President Leonid Brezhnev in anaddress before the Indian parliament on l0 December 1980. Itproposed: (l) Not to set up foreigu military bases in the PersianGulf area and on the adjacent islands and to deploy nuclear or anyother weapons of mass destruction there. (2) Not to use or threatento use force against the countries of the Persian Gulf area and notto interfere in their internal atrairs. (3) To respect the status of non-alignment chosen by the states of the Persian Gulf area and not todraw them into military groupings with the participation of nuclearpowers, (4; To respect the sovereign right of the states of that areato their natural resources, (5) Not to raise any obstacles or pose

threats to normal trade exchanges or to use of sea-lanes linking the

144 Tas PEe$rAN Gur.r nwo

states of that area with otherBrezhnev propostls remain tleaffairs of the Gulf, Thcy purpod

The Sovict position on thecoDmentary on Radio Moscow

ia the world. To date, t&cdensed Soviet position on the

secure the rcgion from outsidc

seemed to rel€nt aftef that. .d

Asrl

itrterfefence, provide it with stability, guarantee its sove.reignty over its oil resources and the same time take care of tbo

treaty which was widely sE€tr as a Eounter ard a challenge to theGCQ. Pravda greeted the evedt as hn ..important stage in the streng-thenirg of the solidarity of the nltional Iiberation movements, inthc intensifcation of their against imperialism and reac-tim."b It was reported that the deliberations of the trc6ty,

pres€nt at all meetings, but henot only was a Sovietalso assistrd in geparing the and took the chair at meetingson all matters of foreign policy. blished clauses iu the treatvwere said to inoh.rde provisiotr for fhc setting up of a joint militarycommand under Soviet zu with its main headquar0ers inAdeo and subsidiary headquartcrs i[ Tripoli and Addis Ababa, andplanc for a campaign desigoed to the GCC.{

perception of the various memfo reflect a differentiatedwithin the GCC as Oman

was seen to be the chicf oulprit. It woulcl be worthwhile to quoteit at length:

..,the represeotative of the lackej rcgime in Omau was unablc topersuade tbe participant$ to acc€pt the plan for tie *tablishmetrtof a military-political bloo under Washington'e supervision outhepretbxt of defehce against thepants reaffirmed afresh that the

Sovi€t tbreat. The partici-of the Gulf's security

wae their privato duty. They as they had at the previousconference in Abu Dhabi, any attenpts aimed at iutsrferencefrm outside, and protested tbe fmoigu military preser@and called for the liquirlation $f foreign military bases in theGulf, Arabia ard Red Sea and the Isdian Occan. Thie part of

Gursnen DBrL 145

the statement read like a direct condemnation of the actions ofSultan Qabus, who has presented the USA witl territory for US

military bases. Many observers pointed out that the demands oftle participants regarding the security of the Arabian Gulf coin-cided with the Soviet proposal on this issue.z2

Tho Soviets sought not only to approve selectively the GCCpostures but also to highlight the similarity of approach betweenthemselves and the GCC. Thc Omani regime was singled out forattack with the aim of preventing further US military penetration

into GCC territory., GCC perceptions of the Soviet Union are equally hostile. Tillvery recently, Kuwait was the only GCC state that had normaldiplomatic relations with the Soviets. Kuwait was also the onlyGCC stato that gave a cautious and conditional welcome to the

Brezbnev proposals. The Kuwaiti Emir said he hoped, "the Soviet

President will back up his plan with goodwill and decide to with-draw from Afghanistan"'rs

The rest of the GCC memtrers reactcd unfavourably. The Omani

reaction was outright hostile as Yousuf al-Alawi declared the pro'posals to be "insincere" and accused the Soviets of having "strategicplans to annex the Gulf area to its sphere of influence and hege-

mony."t4 Prince Sultan, thc Saudi Defence Minister said, "inter'ferencc of any sort by any party not belonging to the area in the

a.ffairs of this vital part of the world is rejected as unacceptable tothe leaders and peoples of the area."26 Abdulla Bishara considcrcd

the proposals "unacceptable" saying: "It would be futilo to neutrali'ze the Gulf while the Soviet troops are in Afghanistan, atrd the

Soviet naval forces cruise the Indian Ocean or the Arabian Sea, ormaintain facilities in various Red Sea and Arabian Sea ports."ze

The Soviet attacks on the GCO evoked responSes ranging fromdefensive to counter-offensive. An official Kuwaiti source denied

thc Soviet charge that thc GCC had links with the US, and argued

that it only served the interests of the six founder states' It criticiz-ed Pravda fot taking what the Amcrican press had said as a basis

for its commentary in the knowledgc that oertain American news-papers tended to distort genuine attitudes.2T

The Soviet move to send thc warships to South Yemen in Mayl98l also did not go uunoticed. A GCC foreign minister denounced

the timing as an 'ract of provocation." "How can we ask ttre

146 Tw PE'RSIAN Gur.r ll.ro Soufir Asu

Americans to leave the Gulf when the Soviets appear to be flexingtheir muscles in nearby Yemen," asled another.ra

The Kuwaitis continued their efforts at placating the hostileSoviet perception of tbe GCO. Oq the eve of the frst summit, theKuwaiti foreign minister, Sheikh Salbah al-Ahmad, visited Moscowand pleaded with the Soviet leaddrs to restrain South Ycmcn andthereby remove what Oman saw as a constant security threat. Heinformed them that Qaboos had promised to consider cancellingthe agreement with tho US if the Ybmeni threat could be neutraliz-ed. The Soviet foreign minister, Aqdrei Gromyko, suggested in re-turn that if the Gulf states wanted better relations with Moscow,tho obvious first ste p was to establigh diplomatic relations.2e A fewmonths later, the Kuwaiti Emir hidsclf visited Rumania, Bulgaria,Hungary and Yugoslavia. At the ehd of the visit, he openly advo-oated a policy of even-handedness letween the East and tle Wcst,aad said he would ask tho GCC to establish diplomatic aud eco-

nomic rclations with the Soviet Union and East European count-rics.so

The question of diplomatic relatibns with the Soviet Union ac-quired an important place in intra-GCO parleys. Abdullah Bishara,an astute politician, made a majol blunder in his career when heexpounded his views on Soviet-GOC relations, "The absence ofrelations with the Socialist states dqes not mean that the Gulf states

are aligned against them, Nor does the absence of relations mean

tbat the Gulf states are in the edbrace of the US and the rest ofthe Western worldr" he explained. The main reason "is a GCOconviction that the East bloc countfies have no initiative in worldaffairs." He said the Soviet Union wh.s "involved in problcms direct-ly afecting the GCC member countties" and cited an Omaai com-plaint that the Soviets were "playing a role in the Sultanate's disputewith its neighbour South Yemen."sl

The Kuwaiti parliament immediately took up the issue. It charg-ed him of being pro-West and calle{ for his immediate resignationfor violating the Kuwaiti constitution. The resolution was adoptedby 35 votes in the 50-member assemlbly. It had no executive eflectas the Kuwaiti government opposedl the call.sr The incident indicat-ed a strong sentiment in favour of a more balanced global posturein at least one of the GCC membef-states. Since the others permitno sueh expression of dissenting oplnion, it may not necessarily benon-existent,

Gur-snlN Dtsu, 14?

From time to time, the Saudis have also been promising/threaten-ing to resume diplomatic ties with the Soviets. Rapidly deterioratingSoviet relations with Iran must certainly have contributed to thcinitial Saudi rethinking on improving ties with the Soviets. Later,the leaks of secrct Soviet-Israeli talks added a fresh input to Saudicalculations. As early as January 1982, Hashem Abdu Hashem,editor-in-chief of the government-guided daily Okaz and a politicalcommentator on Radio Riyadh, strongly indicated that the King-dom might accept diplomatic ties with Moscow if it ended its mili-tary presence in the Red Sea and the Horn of Africa and withdrewits forces from Afghanistan.se In December 1983, Prince Saud al-Faisal, the Foreign Minister, visited Moscow as a member of theArab League delegation to canvass support for Palestinian participa-tion in the peace process. In mid-1984, amidst controversy over thesale of US Stinger missiles Prince Bandar, the Saudi Ambassadorin Washington threatened that if the US was unwilling to oblige,the Arabs have the option of taking their '.arms business to Mos.cow, Paris or London."ra Two days after that, he hosted a widely.publicized banquet for Anatoli Dobrynin, the Soviet ambassadorand the dean of Washington's diplomatic corps.36 Around the sametime, Prince Saud gave an extensive interview in the course of which,in reply to a quostion if Riyadh would shortly open relations withMoscow, he said, "there are in fact relations and contacts with thoSoviet Union. What has been suspended is diplomatic representa-tion, and this will come in time."s

A year later, it was a Soviet source that made a contributioo tothe on-going speculation. The leader of a Soviet delcgation to South.Yemen was reported to have told his hosts that Soviet and Saudidiplomats had been secretly meeting in Kuwait and that negotia-tions were underway for a resumption of formalities,sT

Then, out of the blue came the Soviet-Omani announcemen! atthe United Nations on 16 October 1985 that the two countries hadagreed to establish diplomatic relations. Even as the shock-wavesgenerated by the event were spreading wide, Sultan Qaboos made amuch harsher indictment of the Soviet role in the Gulf than everbefore in an interview, he granted on the Omani national day on19 November. "The Soviet Union, or Russia before, has alwaysbeen expansionist, That is a fact of history. We are concerned aboutthe Soviet presence in Afghanistan. Perhaps if the Soviet Unionunderstood that further expansion is not in its interest, it will stay

14S Trrr PERsTAN Gur,r'eNP SoPrH AsIl

out of trouble in tho region"'s Si{ce Oman seems to have retained

its origional perception of the S$viet Union, the move towards a

diplomatic rapprochement,could oply be explained as purely tacti'

cal-probably at the urging of the GCO' Tho fact that Oman was

scheduled to host the next GCC sdmmit in a few days' time could

also have been a factor behind the move.

On the evc of the GCC summit [n Muscat in November l985,the

Kuwaiti daily al.Ray al'Amm reforted that the meeting was todiscuss a new initiative for the estdblishment of diplomatio relations

with Moscow.80 All through the summit deliberations, rumou$were rife and a concerted GCC initiative in this directiotr was con'

sidcred immincnt. Nothing happefcd. And yet, few days after the

summit camc tho announccment from thc UAE forcip ministry

that it had cstablished diplomatic pclations with Moscow with effect

from 13 November 1985. In Mosdow, Tass madc a sioilar annoutr'cement.'o

As rt came ou the heels of the summit, the UAE decision was

seen as a GCO-m:otivated move. I[ made ihe UAE the third country

within the GCC to have ties with Moscow. The Saudis may followsuit in their own characteristio foof'dragging fasbion; and thoy may

do it sooner than expccted. Once fhat happens, Bahrain atrd Qatarwould immediately follow them. {he three may also decide and aot

on the matter together. However, iinspite of the tremcndous diplo-matic and symbolio sipiffiance of such a move, it may not neccs-

sarily herald a political change ou either side.

TsB GCC AND THB Pnopr,s's Dsil{ocRArtc REPuBLIC oF YBMBN

On the theoretical lcvel, the PDRY poses the greatest challenge tothe GCC. Whcreos Iran threatens fhe Gulf 's hereditary monarchies

with revolutionary Islamic and re$ublican ideals and Iraq appeals

to the pan-Arab, socialist and reprf blican aspirations of Gulf politi'cal consoiousnesss the PDRY qucsfions almost everything that thc

GCC desperately strives to preserye-hcreditary rule, Islamic cthos,

the status quo and pro-Western o{ientation. On the practical level,

the PDRY challenge is mainly strqtegic. It is located on the side ofthe narrow month of the Rcd Sea at Bab al-Mandab and has a

long coastlinc in thc north of the lndian Ocean. Aden, its port'citycapital, is considered the Gibral{er of the east, the best harbourbetween Suez and India. The isladd of Perim sits on the southern

GuLsnlN DIBrt 149

tip of the Red Sea and the island of Socotra, 200 miles of-shore, is

located just off the Arabian peninsula and commands the trafficbetween the peninsula and the African Horn. Any development inthe Arab-Israel conflict or strife in the African Horn or superpower

rivalry in the Indian Ocean inevitably affects the PDRY. Its borders

with Saudi Arabia, North Yemon and Oman add to the country'srole in rcgional devclopmeuts. The PDRV-Saudi border is more orless quiet, but the National Democratic Front's (the North YcmeniIibcration movement based in PDRY) forays into North Ycmenand the Popular Front for the Liberation of Oman's incursionsinto Oman have repeatedly dragged South Yemen into conflicts withits neigbbours,

South Yemen is the only Marxist Arab statc and the influence ofthe Soviet Union is pervasive-idcological, political and strategio'

Inl979, thc then President Abdul Fattah Ismail signed a l5-ycarTreaty of Friendship and Cooperation with the Soviet Union and ayear later got observer status in thc Warsaw Pact and in theCOMECON. Aden, Perim and Socotra are important Soviet naval

bases and the Khormaksar is an equally important Sovict airbase inthe country. The party-to-party and state-to-state ties bctween SouthYemen and Soviet Union are close.

In April 1980 Ali Naseer Muhammad replacod Fattah Ismail andby the cnd of June set out on a tour of Saudi Arabia, UAE, Kuwaitand North Yemen. The trip was widely seen as the beginning of the

"Arab option" in South Yemeni foreign policy and yiclded noti-ceable rcturns by way of liberal grants from Arab Gulf sources. Soonafter thc GOC idea was mooted, Muhammad met King Fahd andPrcsident Saddam Husgein and made a proposal for an urgent confer-ence of Arabian Gulf, Peninsula and African Horn states to discusg

ttre means of removing all foreign bases and fleets from the region.'rThe GCC, on its part, tried to soothe rufred Yemeni feelings.

The Kuwaiti Emir made a flying visit to Aden and agrecd to hold a.'Gulf summit conference to consider Gulf security" and called forthe Red Sea to be turned into a zone ofpeace.a2 He also visited Sana,

the North Yemeni capital. Abdullah Bishara visited Adcn and Sarasoon after that and proclaimed emphatically that the two Yemensare "part and parccl of the people of the Gulf. They cannot be leftout in the cold as we embark on an ambitious programme for Gulfdevelopment."ns During the visit, Muhammad was reportedly favour-able to the idea of the GCC. "You in the GCC are now coming

150 THr.Pnns^c,N Gur.r ,lxo Sourn A$.l

to mc with a message on ending the tension and think that is aconstructive approach. I think yor{r common approach to politicalissues would make it easier for {he tension [with Oman] to dis-appear," he hoped.aa Bishara protrised to start an economic assis-

tance programmc and to bring it cf oser to the GCC.TE

Soviet hostility to the GCC and the South Yemeni disillusionmentabout entering tbe exclusive grogping changed the situatign. InAugust 1981, South Yemen, hoste{ a meeting where South Ycmen,Ethiopia and Libya drafted and approved a Tripartite Friendship andCooperation Treaty. The Treaty e4visaged a Supreme Council com-posed of the three leaders and a Ministerial committee charged withits implementation, Under it, ag$ression against any one of thethree would be considered as direct aggression against the other twoaid all means would be used to prcitoct the aggrieved party. It calledfor developing cooperation in miliftary and security felds so as toconsolidate their defence forces tO safeguard the independence so-

vereignty and revolutioDary character of their countries.46 The Sovietrole in bringing the three togethtr was openly acknowledged as

Muhammad declared that "we ccinceal from no one our interest indeveloping and 'expanding coopdration and friendship with thesocialist countries lcd by the US$R and in establishing the closestand deepest militant relations with the rest of the world's rcvolution-afy movcments."{7

The Tripartite Treaty was percpived to be a hostilc act by tleGCC and its foreign ministers cpmmented unfavourably on theattempts by outslde powers t6 ,,bpild up positions in the Gulf areato threaten its security and sovefeignty."as Relations with SouthYemen steadily worsened after that. In February 1982, the GCCforeign ministers convoned an e$ergency meeting in Manama toconsider tle Omani accusation tbat the PDRY was plotting withthe Soviet Unioo to destabilize thq regimes in the Gulf.ae In Aden,the government claimed to have unearthed a sabotage plot and'made a number of arrests. It a4cused Oman, Saudi Arabia andNorth Yemen of conspiring to inrriade its territory and to bombardtargets deep inside the country.so

By the end of the year, Kuwaiti tnediation had succeeded in bring-ing about normalizatioo of reladions between South Yemen andNorth Yemen and also between Sbuth Yemen and Oman.

The situation from then on coqtinued to remain normal betwecntho GCC and South Ye.men till a bloody civil war broke out in the

GursruN DIml l5l

latter half of January 1986 in South Yemen. Abdul Fattah Ismailwho had been in exile in the Soviet Union since 1980 had returnedhome in 1985 and the power struggle between him and Muhammadhad resumcd, A confusing sequence of events revealed that FattahIsmail had plotted Muhammad's murder, who was alerted and hadFattah Ismail executed; the pro-Fattah lsmail forces gave an opencall to revolt, a few of Muhammad's own collcagues joined in andthe war spread like wild flre throughout the country; Muhammadfled the country; and the former Prime Minister Hyder Abu BakrAttas who was in India when the storm broke out, left for Moscowand returaed home to take over as the new President.

Thc GCC did not have time for collective deliberation. SaudiArabia and Oman, the states with vital stakes in the happenings in-side South Yemen, reacted differently to the situation. In Riyadh,King Fahd and his Oouncil of Ministers reviewed the situation "inthe sisterly state and prayed to God that the leadership in thatcountry may sooD be able to put an end to the bloodshed andfghting to spare the lives of innocent Arabs and Muslim peoples."6rOn the other hand, Oman was accused of siding with the forces ofMuhammad. An unidentified aircraft reportedly bombed Aden air-port held by Defence Minister Salih Muslih Qasim who had gonc

over to thc rebels and there were inevitable rumours that the airoraftbelonged to Oman.ta

Kuwait, as usual, was active on the diplomatic front with the aimof minimizing the damage to Yemeni-Gulf relations. The Kuwaiticharge d'Afaires in Aden, Fadhel Salem Bougaith, met YemeniForeign Minister Abdul-Aziz-al-Dali and secured a tentative assur-ance that the Ycmenis would continue their foreign policy ofimploving relations with other countries in the Arabian Peninsula.ss

GCO aro Isn lnlDuring the 1970 Black September clashes in Jordan, the US assigneda role to Israel in a worst-case contingency. Since then, Israel hasincreasingly taken over regional operations on behalfof the US andhas violenfly opposed US attempts at spreading its stratcgic bets inthe region. In the seventies, it threw its full weight behind Iran vis-a-vis Saudi Arabia within the US-sponsored ,,two-pillar" securityarrangemont, After the Iranian revolution, Israel continued to objectto the US security understanding with the Saudis and the salc of

152 THe PERsTAN Gur,r eNo Sormr Asrl

US military systems to them. The FCO tlerefore did not evoke afavourable respon$e in Israel.

Menachem Begin, the then Prime Minister, was cmphatic in assert-ing that "Saudi Arabia is not capable of playing any useful role

differently in view ofhis party's aiq at making Israel ao indigenousMiddle Eastern state. IIe saw merit ln the formation of a "resionalanti-terror set-up to counter Soviet pr alien penetration and fanaticforces" and proposed that the US,

whatsoever. It is one of the mostThe Israeli Labour Party leader,

Arabia participate in such a set-up.Barely a month after the frst

states in the world."ePeres, perceived things

Egypt, Jordan and Saudi

summit, Israeli air force

itv of the Gulf states

planes flew over Jordanian and airspace and struck at theIraqi nuclear facility at Osirak near Baghdad. The Israeli violationof Saudi airsoace and an aerial on lraq-far away from itsnational borders-served as a freshtions in the region and showed the

of its aggressive inten-

in the face of such a policy.The Israelis then drummed up a campaign for securing

an explicit and exclusive strategic bctween the USand Israel. The American-Israel c Affairs Committee, the apexpro-Israel lobby in the US, and publicized a special reportthat strongly criticized the US policy of reliance on strategic airliftand highlighted, instead, the advan of US-Israel cooperation

political stability, politicalin view of Israel's geostrategicreliability and advanced society. Thq report advocated the preposi-tioning of material in Israel on the grc of; l) Force efectivc-tioning of material in Israel on the grounds of; l) Force efectivc-ness; as the material prepositioned i[ Israel could be redeployed tothe Gulf 66 days sooner than from the continental US, 2) Cost; as

it would save $9 billion in additional C-5 aircraft needed to achievethe same results from bases in the US.66 The US-Israel strategicagrecment was signed on 30 November 1981. It openly assigned arolc to Israel in the eventuality of U$ intervention in the Gulf. TheGCO, a minor partner in the US secubity doctrine, was pushed underthe US-Israel protective umbrella.

The GCC states, on their part, b]ave always nurtured deep sus-picions oflsraeli willingness and caBability to strike, expand andoccupy Arab lands. Their fears are further compounded by Israel'sleverage in the US decision-making process, its consistent refusalto compromise on the Palestine issue aad its strident opposition to

Gur,snnq DtsIL 153

US arms transfers to the Arabs and to a security understanding

with them. Ahmad Zaki Yamani, the Saudi Minister for oil, re-

flected a general feeling ofthe Arabs when he answered a question

as to which he considered to bc the greatest threat, Zionism or the

Soviet Union. "Without a doubt Zionism. It is Zionism which has

bitten off one of our hands," he said.6?

And yet, the GCC has never attempted to take on the Israelichaltenge. It did not deliberate over Osirak, preferring instead toparticipate individually in the emergency meetings of the ArabLeague and the United Nations Security Council. The Saudi royaldecree that it would bear the cost of rebuilding the destroyed Osirak

facility was bardly an appropriate response.

The GCO, instead, has opted for a political response to the

Israeli threat, On 7 August 1981, the Saudis proposed an eight-

point peace plan, the crucial seventh point of which guaranteed the

right of all states in the region to live in peace. It was the flrst cver

Arab initiative for a political solution to the Arab-Israel dispute.

The GCC foreign ministers endorsed it in September' But the

second GCC summit in November, where the plan was expected to

sail through triumphantly only "reviewed the Arab and internation-al reaction" to it and asked Saudi Arabia to include it in the agenda

of the Arab League summit with a view to "achieving a common

Arab position."oa

The Arab League summit that met in Fez, Morocco, on 25

Novcmber 1981 broke up the same day amidst hysterical denuncia-

tions of the Saudi initiative. The third GCC summit reiterated its

full backing for the plan and called upon the Saudis to resubmit itto the Arab League at its Dext meeting. In September 1982' the

Arab League finally approved the plan with minor changes. The Fez

peace plan, as it is called, embodies the general Atab oonsensus on

the Arab-Israel problem,Since then, the GOC has chosen to quietly support the Mubarak-

Hussein-Arafat option on the matter and issue statements only on

specific instances of Israeli threats and related matters. Thus' the

Israeli aggression on Lebanon in mid-1982 was discussed by the

GCO foreign ministers who urged the United Nations Security

Council to apply sanctions against Israel for refusing to pull out ofLebanon, asked the United States not to hinder the execution ofthe United Nations resolutions on the matter, and reaffrmcd its

support for Lebanon's sovereignty and territorial integrity and for

15.t TnB PERSIAN Gulr .e,xo AsrA

the Palestinians and the PLO.6J In May 1983, the GOC forcignministers rejected the 17 May 1983 kbanon-Israel accord and onceagain called for the unconditifrom Lebanon.9o At the peak , intra-Plo fighting in November

withdrawal of all Israeli forces

"deflnitely and whole-heartedly sppport Vasser Arafat as the leaderof the PL0."81 And finally, after an unprovoked Israel attack onthe PLO headquarters in Tunis, Abdullah Bishara warned againstunderestimating Israel's capacity for aggrossion and spoke of a jointdeterrent plan, without speciflyin* it.03

GCC lNo Inee

"The lake of oil now seems to be on the brink of a volcano, andeverybody is looking around fearful of their positions and future*except for Iraq, which is strong alrd confident of itselfand its future,and this enables it to play the malin role in stabilizing the region.,'So proclaimed a secret circular of lraq's ruling Baath party soonafter Khomeini came to power in February 1979.6s The circularwas leaked out, sending shivers dpwn the spines of the Gulf rulers.

Iraq's population is bigger than the entire GCC population puttogether. Its Baath ideology, bastid on Arab nationalism, secularismand socialism, is anathema to the conservative monarchies. fts re-publican protestations are abhotred by them. And not havlng acommon border with Israel, it htrs taken up the most strident anti_Israel stances and accused any fr$ntJine state of ..treasou,' at theslightest instance of moderation, [n addition, its regional ambitionsand territorial claims on Kuwait hlave not endeared Iraq to the Gulfrulers.

After the lraq.Iran reconciliation of l975,Iraq became an enthu-siastic supporter ofa regional groirping, After the Iranian revolu_tion, Iraqi ambitions got a further boost. In July 1979, SaddamHussein replaced Ahmad al-Bakf as the president of Iraq andlaunched his own Ostpolitik in two successive phases. In Septem-ber, he gave a call for the creatio$ ofa collectivi Arab Gulf Secur_ity Force and the establishment of a joint Military Command tocontrol it. The Force was to har,ie an autonomous status and anindependent budget to be contributed by the participating states,each according to its financial resburces. He said Iraq was preparedto conclude a bilateral defence agfeement with any state intcrested

Gursruu DtBtr, 'I55

in it and offered to send troops to Bahrain and Kuwait in the event

of internal uprising or external attacks.sd

When the plan failed to evoke a respotrse, Saddam followed it upby a vaguely worded eight-point "Arab National Charter" that called

for the termination of all foreign military presenc€s in the Arabworld and unity among its members. The Charter was announced

with a lot of fanfare on 8 February 1980. Saadoun Hammadi, the

Foreign Minister, was $ent to Kuwait, Bahrain, Qatar, UAE and

North Yemen, and Ezzet lbrahim, the Vice-Chairman of the IraqiRevolutionary Command Council (RCC), was sent to Jordan and

Saudi Arabia to enlist support for it.The Iraqi exclusion from the GCC, in the circumstances' was

humiliating. It meant the negation of all its earlier attempts at put-'ting together a. Gulf-wide grouping and was seeo as a deliberateaffront. Saddam gave full vent to his anger in an interview in whichhe blamed Saudi Arabia as the moving force behind the forinationof the GCC, criticized Sheikh Zayed for his failure to send a delegate

to the Arab parliamentarians' emergency meeting held in Baghdadin July 1981 to condemn the Israeli attack on Osirak, and put Iraqirelations with Kuwait under strain by renewing his deniand for a

lease on the Kuwaiti islands.os Saadoun Hammadi called for strength'ening the Arab League rather than creating other forums in the

region.66Iraq-Kuwait mutual peroeptions deserve special treatnrent in view

of their bearing on Iraq's relations with the rest of the GCC. Iradscoastline on the Gulf is only 40 miles long and its only outlet tothe Gulf is through the Shatt al-Arab estuary which isalmost entire-ly blocked by Kuwait's Bubian and Warba islands. This single

fact of geography has largely shaped Iraqi policy towards the Gulf.Till 1963, it continued to claim Kuwait as an integral part of itsterritory on the ground that historically the Sheikhs of Kuwaitderived their powers from the Governor of Basra in Iraq who iotum was appointed by the Ottomans. On Kuwait's independence

from Britain in June 1961, Iraq threatened to march in, but was

prevented by British and Saudi forces. In 1973, there was a second

Iraqi threat to Kuwaiti territory.In 1981, Saddam reopened tbe issue by asking for a 99-year lease

on the Kuwaiti island of Bubian and stating his purpose to build a

naval base on it to defend both the countries. In a misplaced gesture

of magnanimity, he acknowledged Kuwaiti sensitivity on the matter

156 THB PrnsrlN Gur,r l,r.tp Sotrur

and added tlat Iraq was willing t! acr

lo set up the naval base" if Bubiad prnrnl'|.- 0?

and added tlat Iraq was willing t! accept ..anywhere else in Kuwaiito set up the naval base" if Bubiad presented a speoial sovereigntyProblem.oz

Iraq was at war with Iran and I{uwait was in the process of evolv-ing the GCC. On both these the timing of the Iraqi demandwas terribly wrong. Prince Fahd senr an urgent messageto Kuwait warning that the leasin$ of the island would greatly pro-mote Baghdad's hopes of g the Gulf and would make the

the Kuwaiti Emir that Saudi Arabla would support Kuwait-milit-arily, politically and financially any attempt to seizc theisland by force. The Iraqis did not give up on thc mattcr.Saadoun Shakir, the Iraqi Interidr Minister, was reported to havemade a formal ofler during his to Kuwait a month later.es

Iraq also wields considerable political influence :rmong theKuwaiti elite. Ovcr the years, it has carefully nurtured a pro-IraqiBaathist group in Kuwait that consistently championed theIraqi cause within the limited of the Kuwaiti political process

against the possibility of the Irari-Iraq war spilling onto its terri-tory.?r Bubian could be a key-stratrfgic asset to either side in theIran-Iraq war and the Kuwaiti fortlfications aroused anger on bothsides. Whereas the move was gen$rally perceived to be a defcnsivemeasufe against Iraqi covetousnesJs,Ts Iran charged that it was de-

and freedom of expression. The Kuwaiti daily al-Anbaa generallyreflccts Iraqi opinion and often carries interviews withlraqias well aspro-Iraq Kuwaiti leaders, Ahmad liussein, a vetoran retired Kuwaitidiplomat, in a front-page article h al-Anbaa, strongly urged theinclusion of Iraq in the GCC, whidh he said would create a forcethat could indicate limits to ,,th{se who have ambitions in thearea."6e In another instancc of Eolidarity with Iraq, Jasem al-Qatami, a member of the Kuwaiii National Assembly, urged thegovernment not to follow the GCG resolution on the Iran-Iraq warthat was formulated at the sixth suinmit. The resolution, it may benoted, was a little more even-ha{ded vis-a-vis the warring partiesthan previously.?o

The controversy over the island Of Bubian was revived once againin April 1985 when Kuwait decldred it a military zone, offJimitsto all civilians, and stationed ant[-aircraft units there to guard

signed to aid lraq.rsleft out of rhe GCO

Gursnlx Dmrr, 157

remains strong, although it is expressed more in terms of hurt pride

rather than outright anger. A quote from Tariq Azizaptly sum-

marizes the current Iraqi perception of the GCC.

...to deny lraq its role in the Gulf would be illogical. Iraq is the

major power in the Gulf. It has to be accepted as a power. Butone may ask: "A power for what?" Not to changc the govern'

mcnts in the area. Not to impose policies. But, rather, a power

which is an important partner in shaping tho security, prospcrity,

and future of the 1980s, This is a legitimate and constructive

rolc.?a

GCC lxo InrN

Relations between the Arab rulers on the western shore of the Gulfand the Shah on the eastern shore were never entirely devoid ofrivalry and suspicion. Saudi Arabia and lran, thc two complement-ary pillars of the US Gulf strategy, were themselves regional com-petitors. The Shah's calls for a region-wide security arrangemente

thereforc, could never take off as the Arabs were wary of his inten-

tions of dominating the area. However, maintaining the status quo

was the common broad aim within which thc rivalries were contain'ed.

With the Shah's departure from the scene, the situation changed

drastically. Whereas post-revolutionary lran retained thc elemcnt

of dominance-with even an enhanced menacing posture the cle'ment of preserving the status quo was thrown overboard. The net

result was an almost total estrangement of Arab-Iranian relations

in the Gulf.The Iranian threat could be analysed in terms of its ideological

appeal and political example and the willing and eager audience

across the Gulf. Islam accords priority to the concept of umma

(community) that cuts across national identities. The Iranian govern'

ment terms itself the Wilayete Faqih, that is the statc of God, and

claims to be only a precursor ofthe universal divine government.

Tbe Wilayet-e Faqih, by togic, is duty-bound to uphold the ideal ofdivine rule and spread the mcssage to alltbe mustazafeen (exploited)

to strive and get id of mustaqbareen (exploiters)' The export of re-

volution, therefore, is in the very nature of Iranian idcology.

The Iranian claim to be the "true" example of an Islamio statp

158 THB Pmsr,Lu Gurr .q.Np Sourn Asr^l

would have been inconsequentiat i{ itself if it bad not found .largesections ofpeople across the Gulf lvho were ready to listen and con-vert themselves to it. Shias consiitute seventv-five perccnt ofthepopulation of the Gulf. Of this, nigety-flve percent of Iranians andsixty percent of Iraqis (the two host populous states in the Gulfwith roughly forty million and thirteen million people respectively)are sbias. Within the GCC, seventj percent of people in Bahrain,twenty-four percent in Kuwait, eighteen percent in the UAE, sixteenpercent in Qatar, eight percent in Saudi Arabia and four percentin Oman are shias. Compounding the above population fgures isthe fact that most of the oil-rich ar,eas in the Gulf are shia-populat-ed. Besides Iran and lraq, the caude in point is the shia populationin the oil-rich al-Hasa province of Saudi Arabia. Again, the Gulfrulers are sunnis and the shias have alwavs been a minoritv whohave felt politically and economically deprived. Add to this theregion-wide family, business and relligious connections that the shiashave always maintained and one cahnot underestimate the impact ofthe sbia revolution in lran.

The.Iranian appeal is not only thbt of a militant Islarnic state andis not confined only to the shia mabscs. Its articulation ofthe con-cept of mustazafeen touched a cofd in every heart that felt itselfdeprivcd and oppressed. Its defi4nce of thc United States hasbecn a source ofinspiration to natibnalists ofall hues in the Gulf.Its championing the cause of Palegtine was appreciated by the restof the Arabs. Revolutionary lran strcceeded in putting tremendouspressures on the Arab Gulf regimed. Its appeal, though faded overthe years, is not yet completely di$sipated and can very well re-emerge if the regional balance of fdrces undergoes a major change.

Tbe GCC was formed to stem thF tide of the Iranian revolution.Abdullah Bishara identified lran's qirest for supremacy in Gutf seour-ity as tle main source of threat to the stability of the GCC states.?6

Thefact that the GCC was mainly directed against it was not loston lran. It promptly threatened to t.take action', if any political ormilitary pact was directed against i! and alleged that the GCO wasformed not for reasons of security, but in order to ..maintain Foreignmilitary interests" in the area.?s Ira{ian Foreign Minister Ali AkbarVelayeti was even more explicit whdn he said it was ..necess:uy toremind the gentlemen bordering t{e persian Gulf that they shouldnot forget that Iran is the greatest a4d the most powerful country inthe region." He warped the GCO against aligning itself with the

Gur-sneN Durr, 159

US and reminded them that Iran considered America as the arch'enemy.?t

It would be worthwhile to briefly examine the relations of tleindividual members of the GCC with lran. Bahrain has bcen a

special target of Iranian anger. Iran's historical claim over it ardits big shia population have made Bahrain extremely wlnerable toIran.ln 1970, the Shah renounced a 400-year old claimlo it, but soon

after the revolution the claim was revived as Ayatollah Sadeq

Ruhani gavc repeated calls for the annexation of Bahrain. AlthoughPrime Minister Mehdi Bazargan and Foreign Minister IbrahimYezdi denied Iranian ambitions in this regard, the rapidly enhancingstatus of tbe clergy within the Iranian political hierarchy did nothelp in allaying Bahraini fears. In December 1981, when the Bahraingovernment discovered an lran-engineered plot to overthrow theKhalifa regime there, fears gave way to panic' The Prime Minister,Sheikh Khalifa bin Sultan al-Khalifa, said that the government had

traced the sabotage network to Tehran and accused lran of sending

terrorist groups to Bahrain.Ts Later, he identified Khomeini as the

Gulf states' fundamental enemy and called on them to end tradeand other dealings v/ith lran.?' The Bahraini Minister of Informa-tion, Tariq al-Muayyed even produccd evidence to show that a

Shia mulla, Hadi Moderrasi, was expected to arrive from Iran duringthe disturbances and declare a Khomeini-style Islamic republic inBahrain and Iranian naval vessels were to have crossed the channel

and helped in consolidating the insurrection.s0The GCC reaction to the Bahraini uprising was swift and effect-

ive, Within a few days, the Saudi Interior Minister, Prince Nayef,visited Bahrain and the two countries signed a bilateral securityarrangement. Very soon after that, Saudi Arabia entered into similararrangements with Oman, Qatar and the UAB. Arrangements co'vered provisions for coordination of information, cross-border pur'suits, extradition of criminals, etc. Kuwait held out on the ground

that such an arangement would violate the Kuwaiti constitution.The Kuwaiti refusal prevented the bilateral arrangements from ac-quiring a general GCC-wide nature and role-although tho Kuwaitisare urderstood to have accepted their obligations under it withoutformalizing the same,

Apart from the claim over Bahrain, the Iranian seizure of three

Arab islands belonging to Ras al-Khaima and Sharjah Emiratcs ofthe UAE constitutes the second major territorial dispute between

160 Tru PrnsreN Gur,r eNo Sotnu Asrl

Iran and the GCC. The Sbah caftured the islands on thc eve oftheBritish withdrawal from the Gul[, Unlike tbe Iranian claims andnegations of claims over Bahraln, the Iranian official position onthe islands has remained unequfvocal and consistent, Bdni Sadr,the then Iranian President, categprically refused to relinquish thcmon the ground that Arab contrpl over them would in effect meanUS control.sl "

Strangeln it was Iraq, rather tban the GCC, that took up theissuc ofthe islands and made thelr return one of the conditions forstopping the war in its initial gtage. Sheikb Zayed,, the Presidentof ttre UAE, has displayed a very cautious attitude over the matter.In a carefully worded statement, !e summed up the UAE position:

"With regard to the issue of tte islands, we have announced ourstald and proof exists that the Isfands are Arab oncs. We, however,shall not seek to seize tbese in a non-brotherlv manner.This is our intention and this ls what we have announced to ourneighbours since the ffrst day. know our stand."8r

In fact, among the GCC the UAE has maintained the mostcordial relations with Iran. Its , specially lran-Dubai trade,has remained uninterrupted, UA$ press coverage is the least hostiletowards Iran and links between the two have grown

Qatar too nurtures against lran. Months before theGCC summit in Doha in N 1983, Qatari security precau-

yet, a cache of arms was dis-tions were very much tightened.covered including haod-heldbeen used to shoot down the

missiles which muld havcof the incoming heads of state

for the summit.88 Even during thg summit, an attempt was made toblow up the Sheraton Hotel, tho tvenue of the summit. There wasno conclusive proof to implicate lran but the Qatari accusing fingerfumly pointed at it.

On 21 Dccember 19 83, six borirbs went off in .various parts ofKuwait hitting such targets as th{ American and French embassies,the airport and a ministry buildigg. In a swift sweep, the Kuwaitigovernment arrosted twenty-frve persons, all of whom admitted tobeing members of D6vra, the Shia opposiiion group of Iraq which

over the years. In March 1982, Iranian Deputy Foreign MinistefAhmad Afifi visited the UAE qhich was followed by the visit ofAli Akbar Velayeti in August 1983. In mid-1983, the UAE togetherwith Kuwait, took a lead in medilting between Iran and Iraq overthe oil-slick issue.

GwsnlN Dun 16l

has sought shelter in lran. Sinoe then, the Dawa has made twoserious terrorist attempts to get the convicted prisoners released.

Thus, in December 1984, a Kuwaiti jetliner was hijacked to Tehran

and in May 1985, an attempt was made on the life of the KuwaitiEmir.

Iran and Saudi Arabia remain the chief protagonists across the

Gulf divide. On the tevel of rhetoric, both have questioned each

other's Islamic credentials. On the level of speciffcs, thc major issue

has been the Haj. Whereas Iran has accused Saudi Arabia of grave

neglect of the holy places and ill-treatment of haj pilgrims, thcSaudis havo alleged that Iranian pilgrims werc engaging in politicalpropaganda and demonstrations thereby disrupting haj rituals andviolating its sanctity. For the past two years, there is a perceptiblethaw in Saudi-Iranian hostility. The 1984 haj passed off peacefully.

For tho one minor incident that did take place, the Iranians accused

Iraqi agents rather than the Saudis. In May 1985 Prince Saud

visited Tehran and met Velayeti who returned the visit in December.

GCC lNo rrrB IRAN-IRAe WAR

Whon Iraq attacked Iran in Soptember 1980, there was a general

belief that the Gulf statcs had incited Iraq and promised supportin its war efforts. Iraq's initial claims that it was leading an Arabwar against Iran and labelling it as the modern-day "}adisia" lettfurther credibility to that version, It was also assumed that SaddamHussein had consulted the Saudis during a visit he made to Riyadha month before thc war began. On the other hand, there was a reportthat when Saddam complained to Prince Saud al-Feisel at the lackof Arab support, hc replied that Iraq should have told its Arabbrothers what it was going to do and sought their support beforc-hand, In point of fact, he said,. they would never have agrecd toIraq launching the attack.88

Whichever version one tends to believe, there is no denying tlefact that the Iran-Iraq war was greeted with a sigh of relief in theGulf statcs as it diverted Iranian fury away from themselves. Therewas a general sensc of solidarity with Iraq and even instances ofdirect mllitary involvement as the first shots were fired. Iraq hadsent helicopters, troops and aircrafts to Oman and was reported tohave sought Omani permission to use its bases for an attack on theislands of Abu Musa and Greater and LesserTumbs, The Americans

162 Tsr PEtsrAN Gur,r nNo Sorfnr Asra

and British took conoerted diplohatio action to dissuade eaboosfronr this course of action.sa Sinolilarly, Iraqi naval,units were re-

on the regional power structure a]s well as domestic power-sharingarrangemcots. Iranian victory wou[d entail disastrous consequences.Iraqi victory could also prove danlerous.

During the ffrst two years of har, Saudi Arabia, the UAE andKuwait provided nearly 930 biltion in grants and loans to Iraq. TheSaudis probably also financed the Idaqi purchase of French weapons.From 1982 onwards, the direct nilitary aid stopped. Thq GCIScountries, instead, agreed to produce Iraq's quota of 1.2 millionbarrels of oil a day on its beballf and transfer tbe proceeds toBaghdad.

The ffrst two GCO summits callCd for an end to the war in gener-al tcrms. It was only after the Irairian offensivc in the spring of 1982wbich cleared out the Iraqis from Khuzistan and led a march to-wards Basra that tbe GOO statc$ woke upto the urgency ofthesituation and took up the mattcl at the Organization of IslamicOonferences (OIO) and the United Nations, When tbe third summit

portedly anchored at UAE ports, thfcrats to destrov themanywhere in any port had the effect on the UAE.$

refrained from direct interven-Sincc then, tbe Gulf states hation although they have been grappling with problems.Their role has been limited they have not considercd it wiseto go beyond a point in getting lved and also because thcywield no influence on Iran and limited on lraq. At the samc

with the eventuality that theinto it. Even if that alocs not

time, they are constantlywar may spill over and draghappen, any outcome of the wai have a far-rcaching impact

considerably. It criticizcd Iran for its international borderwith lraq," noted that such pments posed a threat "to thg

nation and the violatior of itssafcty and security of the Arabsovercignty," and asked lran to to the peace proposals ofthe OIO, the nonaligned and the United Nations.t!

The Doha Summit in Novembei 1983, for the first timc, proposeda peace formula based on a by-step creation of neutralizedzones. First to be taken out of thb war would be the Gulf includingthe Iranian ports and the main oil facilities at the Kharg island ei-pofting terminal. Having neutralto have been paid to the 3@-mile

the Gulf, attention was thenruriding from the mouth of

Gulss,rx Duu, 163

tho Gulf in the south to the mountain peaks of Kurdistan in thonorth.s? Also for the first time, Sheikh Zayed proposed a "MarshallPlan" to rccotrstruct both countriec.ss

The summit marked an evolution in GCO thinking on the war. Bythen, Iranian revolutionary appoal was believed to have subsided,Iran's relations with the Soviet Union had worsened and had im-proved with the Americans. Ths chances of an outright victory forlraq had also dimmed. GCC statements from tben onwards reflectedIts desiro to come to terms with lran without completely jeopardiz.Ing its relations with Iraq. In May 1983, the foreign ministers ofthe UdE and Kuwait had attempted mediation betwecn the twowarring parties on the issue ofthe oil-slick and floated the idea ofa s3teconstruction fund" that appearcd to meet one of lran's princi.pal demands- war reparation.rs Zayed's proposal of a "MarsballPlaa" was only an elaboration of the same idea to cover Iraq.

By mid-1984 the situation had changed again with random attackgon the oil tankers by Iraq and the Iranian ultimatum to retaliate by

blocking the Strait of Hormuz. With attacks on two Kuwaiti and

one Saudi tankers in thc Gulf tensions rose dramatically. The GOO

foreign ministers held an emergency meeting and decided to tak€the matter to the Arab League and from there to the United NationsSecurity Council. GCC shipping experts and naval officers beganplotting ncw in-shore lanes close to the Arabian side ofthc Gulffor thcir tankers.se Saudi Arabia and Kuwait agreed on joint air

cQver for their ships.oo And finally, on 5 June 1984, Saudi jets, guided

by the AWAOS, intercepted and destroyed an Iranian F'4 fighterbomber, There was then a temporary respite in the bombing.

Tbe fiftn summit in Kuwait once again called on lran "to parti-aipate in the efforts which aim at findiog a solution basedon attain-ing thp rights of both parties."or

Th9 resolution approved at the sixth summit reaffirmed GCO

"roadilcss to mediate with the warring parties in order to put an

end to the destructive war in a way to preserve the rights and legiti-m4tc interests of the two parties as a step forward to normalizingrelatioos among the region's states."ez The novelty ofthe resolutionwas that tbe call to peace was not directed at Iran alone, but atboth the parties-thus omitting the assumption behind tho eadiercommuniques that Iraq wanted peace whereas Iran was the intran-sigent party.

Iran grceted the GCO cbange in posture, Velaycti welcomed thc

164 Tun PERsTAN Gur,r.enn Sburn Asre

communique and added that IrAq would rcspond to tla friendlygesture.os Ayatollah Abdul Karirh Musavi, the Iranian Chief Justice,expressed the hope that the GCQ would take practical measures toback the realistic stand.ea And Rlafsanjani, thc influential Speakerof the Iranian Parliament said, .'[ve have believed all along that thecountries supporting Iraq will change their policies and give up thcirsupport when they lose hope in thc Baghdad government." He addedthat the Gulf states trusted Iran because "they know well that lranhas not harrned them although i{ has been capable of doing ss."o0

It was in this climate of expectations that Velayeti made a tripto Riyadh. It yielded no results; on the'contrary" it set the clockback. After the visit, Saud al-Feisal reported that he had notdeteotedany change in the Iranian stand that might lead to peace. Velayeti,on his part, was quoted as sayilg that he had not even discussed theconflict in his talks with King Fahd. The Iranian Prime Minister,Mir Hussein Moussavi, dismissed the whole exercise by stating tlatVelaycti's trip had.'nothing to do with the iesue."00

In mid-February, Iran launched yet another ofensive and succeed.ed in reaching aud holding onto the Iraqi port ofFao. It broughtIranian troops within 50 miles of Kuwait City. Iranian President AliKhamenei's message to tle Kuwa[ti Emir to maintain strict neutralitywas followed by the charges that Kuwait had helped lraq by permitting the use of Bubian island and by offering medical treatment towounded Iraqi soldiers.

The war, at this juncture, is viltually at the doorstep of the GOC.The GCC response has been an bnusually strong communique thatwas issued at Riyadh at the end of the emergency foreign ministers'.meeting in early March. In a veiled refcrence to the Gulf Rapid Dep.loyment Force. It said that the deflence chiefs of staf of the GOO, whocoordinate deployment of troops and resources, would meet shortlyto "take appropriate measures tb confront any possible tfueats."The communique then went back to its original position of praisingIraq for its readiness to end thd war and declared its resolve tointensify contacts with the United Nations and the nonaligned move-ment for renewing mediation attgmpts.0? If the Iranians take tle warinto Kuwait, thc GCO as a wholp may get involved in a defensiveoperation, according to the abovie verbal commitment.

Gursrrl.t.t Drurr, 165

CoNcr.usroNs

It should be repeated at the outset that tle GCO is not a monolith.At one end of the spectrum is Oman that has openly conceded mili-tary facilities to the US and is eager to tum the group into a securitybloc. On the other is Kuwait that has maintained continuous diplo-matic ties with both the Superpowers and is insistent on an expandingrole for the group, especially in the economic fleld. The diversepolitical systems, economic structures and extemal orientations ofthe GCO membet-states have generally been accommodated withina broad GCO consensus. The Iranian threat and Saudi diplomaticgenius have contributed in retaining and consolidating the consen$us,although differences oo maDy issues have been openly aired fromtime to time.

Contrary to the prevailing general opioion that everything is milkand honey between the GCC and the US, a deeper analysis showsthe situation to be otherwise. GCO dependence on tle US is so

overwhelmiog and its need to appear independent is so great thatit is virtually constantly on the horns of a djlemma.

The Soviets did not take kindly to the formation of the GCO, butover the years, the two have come a long way in evolving a limitedrapprochem;nt tbat is reflected in the establishment of diplomaticrelations by the UAE and Oman with the Soviet Union. The Sauditrump card of resumption of diplomatic ties is yet to be played, butit is bound to come in the course of time.

The GCC perceives the PDRY as an ideological threat as the

latter questions almost every political value that the GCC desparately

seeks to preserve and promote-hereditary rule, the Islamic ethos, thestatus quo in the region and the linkages with the United States. Withthe normalization of relations between the PDRY and Oman, theskirmishes over the border between the two have endedo althoughthe recent change in leadership in South Yemen may alter the situa.tion oncc again.

The GCO clearly perceives the Israeli ohallengc as military andhas yet opted in favour of meeting it only at tJre political level. TheSaudi-sponsored Fez peace plan is the first Arab initiative for thepolitical solution of the Arab-Israe lproblem.

The Iraqi ideology based on Arab nationalism, secularism, social-

ism and republicanism; its territorial claims over Kuwait; and itsregional ambitions resulted in its exclusion from the GCC although

166 Tss PsRstlr.r Gulp lNo Sourn Asu,

Iraq had consislently worked for a Gulf-wide organization sincc the

mid-sevcnties, Through the war yBars, Iraq has been militarily sapped

and ideologically bruised and may not be in a position to provide an

altcrnative centre of power in thq Gulf. It may still be an unwelconeclaimant to membership of the qCC in the aftermath of the war.

It would not be wrong to state that the GCC was put togctherprimarily to serve as a shield against the Iranian threat. Althoughthe Iranians have created crises ih the GCC states by resorting toterrorist attacks and inciting and supporting subversive plots, theirchallenge is mainly ideological. The GCC has attempted to placate

Iran and at times, warn it, but hfu not directly confronted it.The Gulf states' role in inciti4g Iraq to attack Iran cannot be

determined, but the fact remains ithat the war relieved thcm of tre-mendous pressures from lran. Tle creation of the GCC owes a greatdeal to the war as it removed two aspirants to Gulf leadership fromthe scene and provided a unique opportunity to Saudi Arabia toquietly put together the group rirnder its own exclusive leadership.The GCC has so far succeeded in steering clear of the war althoughit has financed the Iraqi war efqrt, attempted mcdiation betweenthc warring parties and held out pttractive financial rewards to Iranif it stops the war. At the momerit, the war has reached the veryfrontiers ofthe GCC security shield and the GCC posture has changedfrom one of mediation to that of preparing for a defensive engage-

3.4.

6.7.

8.

NOlTES

Quoted in Steven t. Rosen an( Haim Shaked, "Arms atrd tbe SrudiConnection," Comtrentary (New lYork) vol. 65, no. 6 June 1978, p,33.

The Views of Researches od Sqholars on the Establishrr.ent of the Gulf,Coopention Coancil (Kw,tait, 198!), p.80.

American Arab ,4rairu (Washingtqn, D . C.) Fall 1983, no. 6, p.3.

The Proposed AWACSIF-L, Enhdqcement SaIe to Saudi Arabia 1A etatrReport prepared for tbe Committte on Foreign Relations, United StatesSenatc, Washington, D .C., 198I)l p.13.

Indian Express (New Delhi), 5 Ostober 1981.

The Middle Ehr, (London), 9 Jul* 1984, p.11.

Internatianal Eerald Tribune (Parib), 19 January 1981.

Focus on the GCC (An Arab-BritiEh Chambcr of Comrnorce Publication,

l.

,)

Guunex DrBtrL 167

. , Proceediss of a One-day Confcr€lc€ held on l Decomtru 1983, Londoh,I983), p.16.

9, Foreign Broadert Infortutton Service, 4 May 1981, p,3.

10. Arabia (Loodon), April 1984, pp.45-46,

U . Ilassan Ali al-Ebraheem, Kuwatt e,td the Gulf (Cronm l{€lm, L,onalon,1984), p.62.

12. Saudl Deferce Spending: A Case of ldisse of Muslim Weahh (Dp, rd'r.13, D. Dyoioy, ..Pcssian Gulf Countries at tho Cross-Roads," Intemttiorcl

.dfairs (Moscow), Marqh 1973, p.57.

14. Moscow Radio in Arabic, 29 Novembtr 1976. Quot€d in ShahramChubin, ,,Soviet Policy Towards Irao and tLe Gulf," in Charles Tripp'elL, Regional Secafity in the Middle East (Intemational Institute for Stra-tegic Studieg, Gower, London, 1984), p'39.

15. Pmvda (Moseos'), 16 December 1980.

16. ?ass (Moscow), 31 December 1980.

1?, Sbahra,m Chubin, Security in the Perslln Gulf: Role of Outside Powers(International Instituto of Sarategic Studi€s, London, 1980)' p.150.

18. New Yave $ew Delhi), 21 D€cember 1980.

t9. Egypttan Gazette (Caito),26 May 1981.

20. Prmada, 23 August 1981.

2I. Ian Greig, A New Shadow Over the G lf (Fopign Affairs Researoh Insti'tute, 1981), p.8.

22. Survey of World Broadcasrt, 6 Septemb€r 1981, p,Cl.

23. Iat€rvieru. of Sheikh Sabah al-Ahmad in Okaz, lBMarcb 1981. Quoted inM.S. Ef-Azhary, The Gulf CooPeration Council attd Regtonal Defence irt

the 1980s (Udvcrsity of Exeter, Exeter' 1982)' p.101.

?.4. Foreign Broadcast Inlormation Senice' 27 January 1981, p'Cl.

25. Ibid.,2 Aptil 1981.

26, Monday Momitte (Beir\t), 20-26 Julv 1981, pp.2F-26.

27 . n.2,9P.75-'76.

23. Intenational Herald T bnne,26 May 1981.

29. Egyptian Mail (Cairo), 16 May 1981.

30. Emiruies Ners (Abu Dhabi)' 22 S'ept€mber 1981.

31. Egyptlan Gazette,22 March 1982. 32. Ibid., Z Marcb 1982'

33. Emirates lfelrs ll January 1982.

34. Dfltri K. SiDes, Soviet St/ategy in Syia and the Persian GzIl lMiddleEast Institute, WashitreloD DC' 1984)' p.9'

35. Juatith Perera, "Nding the Be4r!" The Mitulle fiast (June 1984), p'I3'

36. "Nyadh, sup€r Pow€rs and the Arab World," Mondav Morning' 14 May1984, P.54.

!7 , Newsweek (New Yotk), 6 MaY 1985.

168 TrrB Pm,surl Gulr nNo Sorfur Asn,

38. Qaboos's inton iew witl Altaf Gaubar, Joarl (Londol), November 1985,p.97.

39. Forcign Broddcast Infomation Sentlce, 28 October 1985.

4O . Kuwait Times, 76 Novemober 1985.

41 . The Arab World (Bc;itr:lt), 3 Februs{y 1981.

42. The Observer News Se/yice (Londrop), 9 February 1981.

43, Outlines of an Address of the Sepretary-Gercral Abdullah Bithara at StI,oais Confercnae, 22-23 September 1983 lRiyadh, 1980), p.3.

44. Abdullah Bishara, "The Gulf Coioperation Council: Achievem€nt arrdProspect," Focus on the GCC, n.8, p.16.

Ibid. 46. Times of India (New Delhi), 2 Septomber 1981.

Aden Eome Radio Senice, 17 August 1981.

International Herald Tribune (Paris), 3 September 1981.

Egwtian Gazette, 7 February 1982. 50. Arab World, 26 Marcb 1982,

Saudi Gazette (Jeddah), I7 January 1986.

Obsener (I-oDdoD), l9 January 1986.

Kuwait Times, 27 January 1986.

Begin oa Israeli Radio on 18 May 1981, Quotod in tfu Ittstitute forDefence Stadies and Analyses Neys Review on llest Asia (N€w D€lhi),June 1981, p.131.

Ibid., April 1981, p.39.

Stoven Rosen, The Strategic Yalae pf Israel (.{IPAC Paper, Washington,D.c., 1982).

Foreign Broadcast Information SeniPe, 4 March 1981, p.Cl.Times of India,ll November, 1981:

Guardian (Ludon), 14 July 1982.

Forcign Brcadcast Informatian Senipe, 2,0 M.ay 1983, p.C1.

45.47.48.49.5L5t

51

54

5<

56.

<7

58.

59.

60.

61 . Guardian,? November 1983.

62. Foreigt Broadcast Infotmation Semice, 23 October 1985, p,C2.

63. Colin L€8um, "Husseil's Mission for Justice," The Obsemer News &r-rrce. 25 September 1980.

64. The Middle East, January 1981, p.1?.

65 . Arubia, September 1981, p.29.

66. Sa'dun Hammadi, Iraq: Clear PolicVes and Firm Principles lPress Confcr-€nc€ at Iraqi Cultural Centre, London, 1l March 1981).

67. "Lease Sought on Kuwaiti Islaird," Middle East Ecorcmic Digest(Iondon), l7 July 1981, p.21.

68. The Daily Telegraph llondon), 16 Marob 1981.

69. Financial Times (L@don), f 9 March 1984.

70. Tehron T tes, 71 Novomber 1985.

7l , Janes Delence Weekly (Londotr), 6 April 1985, p.581.

Gursnen Dnrr, 169

72. Foreign Broadcast Infon ution &rvice,25 Marcb 1985, p.Cl.

73. Elizahh O. Colton, "Kuwait's Siegp Mentality," lfersreek (New York),13 \lay 1985, p.29.

74. The lraqJrun llar and US-Iraq Relations: An lraqi Pe$pectire (NationalCourcil Reports, no 2, Washington D.C., 1984), p.38.

75. Abdullah Bishaaa, Outline of the Seminar on the Secarity af GUU G.{ewYork, 1982), p.7.

76 . Stat€ment by Hojatolislam Sayed Ali Khameini, The Middle fust , Januty1981, p.17.

77. Financial firnes (Loodon), 28 January 1982,

78. Arab /Vews (Jeddab), 16 December 1981.

79. Egyptian Gdzette,24 Januaty 1981.

80. Intenstionnl Herald Tibune, 27-28 March 1982.

8l . Financial Times,25 Ma,rch 1980.

82. Al-Ittihad al-Usbui, 28 May 1981. Quotod in M.S. El.Azhary, n.23, p,t5.

83. G .H, Janson, "The Attitudes of the Arab Gov€rim€nts towards tleGulf Wa,r," in M.S, Bl-Azhary, ed, Tbe lran-Iraq War: An Histo calF,conomic a d Political Anal/rts (Croom llekn, London, 1984), p.82.

84. Sunday Telegraph,5 Ootobor 1980.

85. Guardian, 30 Sept€mb€r 1980.

86, Fareign Broadcast Infoftiution Service, T2 Novcmber 1982.

87. Guardian, 3 No\tember 1983.

88. Nadia llijab, '.Gnlf Peace S€€k€rEi Patohing up Arab Quartels," fneMiddle East, Decembor 1983, p.l5.

89. Iohr Butloch, "Gulf Stat€s in Move to Unify Defenc€s," Daib Tele-

eraph,22 May 1984.

N. Daily Telegraph,3 lvlay 1984'

97 . Foreigt Broadcast Inforrnation Semicezz Nov€mber 1984, pp,C;X42.

92. Kuwait Tines, 7 November 1985.

93. Tehran Tines, 7 Novemt er 1985.

94. Ibid.,9 Novemb€r 1985, 95. Ibid., 20 Novomber 1985,

96. Ktwait Times, Tl Dcccmbcr 1985.

Vl . Statesnan (New Delhi), 5 Maroh 1986.

8. Gulf Cooperation Cqlncih RoyalInsurance against Pfessures fromWithin and Without

JAWID LAIQ

That old cliche-unity is strength--r-is not always applicable or work-able among neighbouring nations. Neighbours may be more proneto friction than to fraternity. Yet, pommon perceptions and intercstshave brought neighbouring countries togethcr in the form ofregionalgroupings such as the European Economic Oommunity (EEO), thoOouncil for Mutual Economic As$istancc (CMEA), thc Assooiationof South-EastAslan Nations (ASEAN), thoGulf Cooperation Ooun-cil (GCC).r

Even a glance at these four regi[nal groupings ghowg that thcirmember-countries share certain cfitioal concerns and perepectives.(SAARC is an cxceptional groufingln that iti members oftbn donot Se€n to sharc the same concefns,)

Tnr CoMraoN Tnnneos

The ffrst, and most important, of these joint concerns, is a sharedthreat to security from internal or external sources or from bothsoutces.

The second shared perspective is a common foreign policy percep-tion which is closely linked with the first shared coucern regardingsecurity. A shared foreign policy perception regarding the UnitedStates/Soviet Union and also regarding a proximate, major regionalpowcr like Vietnam or Iran acts ab glue forthe members of regionalgroupings.

The third is the advancement an{ joint protection of their econom-ic assets and interests and trading terms.

The fourth is some degree of silnilarity in political systems whichextends to a broadly common political ideology.

The flfth is consensus about thc rble of the important powor within

J.lwro Llte 1?l

the regioual grouping, a cotrsetrsus shared by the importarit power.Usually, except in thc casc of thc Soviet Union within the OMEA,the importaot power voluntarily adopts a low-proffle, self-restrainedrole.

The sixth is a broad ethno-cultural affinity, Westem European,Slavonic or Arab, Though tbere is a domioant Malay cultural strainin ASEAN, Thailand and the Philippines do no quite fft into thomould, Among the GOO members, therc is the additional culturaladhesive of a common languagc, Arabic,

Looking at the specific casc of the GCO,x these six commontbreads of regional goupings are clearly visiblc.

Sncunlry

The six GCO members-Bahrain, Kuwait, Oman, Qatar, SaudiArabia and thc United Arab Emirates-clearly agree on their threatpercoptioas, though thcre are slight differences in emphasizing thethreats. Thc intsrnal threats cannot be separated from the cxternalthreats to the Gulf regimcs.2

Oommunism and even vaguely socialist-inclined groups like pan-Arab Nasrcrists, the Iraqi and Syrian Baath parties or the left-leaning PLO (Palcstine Liberation Organlzation) factions have longbecn vicwed as prime threats by ttre dynastic regimes of the Gulfcountries.s (Gulf countries or Gulf states in this paper donote tho sixmember-countries of the GOO and exclude Iraq and lran, althoughthcsc two are part of the Gulf region,)

Palestinian, Iraqi, Syrian, Yemeni, Egyptian and other pan-Arableftist groups, soon after the British withdrawal from Aden in 1967,oxpanded their links with leftist groups witlin the smaller Gulfstates. Adcn was renamed as the People's Democratic Rcpublic ofYemen and became the only communist-ruled country in the entireArab world. The new Republic stepped up support to the PopularFront for the Liberation of the Occupied Arab Gulf (PFLOAG)which was involved ia a rebellion in Oman's southern province ofDhofar which was to last from 1965 to 1975 when it was crushedby a formidable combination of British, Jordanian and the Shah ofIran's fotces.a PFLOAG had links with the Popular Front ofBahrainand with the National Front for the Liberation of Bahrain both of

*Ito GCC war formally born oo 26 M8y 1981.

172 Tw PERSTAN Gut.r er.p SourH Asn

which tricd to convert the Bahrain parliament into a forum forcriticizing the ruling family of Bahfain. This could not be tolcratedand tho Emir (rulcr) of Bahrain didsolved the country's parliamerttin 1975 after a short existence of ohly two years,6

Kuwait's fourth parliament was also dissolved after a similar ex.perience it 1976, but unlike Bahraih, a new Kuwaiti parliament wasestablished after fresh elections in 1981.

The driving force behind leftist dissent in thc form of the ArabNationalist Movement (ANM) weie Palestinians.c The largest seg-

ment of the Palestinian diaspora in the Gulf is in Kuwait. It numbersabout 300,000 out of Kuwait's total population of 1,450,000. (1982census-58.5 per cent indigenous, 41.5 per cent expatriate. ThePalestinians arc by far the largest expatriate group.)?

The Kuwait government thereforre finds it necessary to be the mostvocal among the Gulf regimes in demanding the restoration of thePalestinian homeland,8 But it is nolt willing to allow direct criiicismof the ruling family from any quarter. The dissolution ofthe fourthparliamcnt was prompted by such qriticism from thrce lcftist mem-bers,

Oriticism of the ruling family in any public foru:n is also tabooin the other four Gulf states which have nevcr cxperimented withparliaments.0 Dissent is pushed int6 subterranean channels and sur-faces in unexpected (by the ruling lpgmes) and sha4r political andiocendiary explosions.

regime.roTherc have also been unsuccessful demands for reforming the

Saudi monarchist system. The sttongest such demand came fromwithin the royal family in June 1960 when a group of princes andsome commoners proposed a draft constitution and called for amoro limitcd monarchy aud a partly elected parliament. This groupwas led by Prince Talal, a half-brother of the then ruling monarch,King Saud. When their attempts at reform were frustratsd, Talaland his group, popularly known as the .Free Princes', tookrcfuge in Cairo and coalesced with the Front for ths Liberationof Saudi Arabia, a middle class froup established in 1958 andhaving communist links, From Cfliro, the Free Princes made re-gular broadcasts on behalf of the Ljiberation Front, calling for theovertlrow of the monarchy and its rcplacement by a conetitutional

JAwID LAIa 173

democracy. However, in 1964, the dissident princes returnod to SaudiArabia and were promptly pardoned for their wayward ways.rr

A number of other small groups of Saudi emigres formed smalland ineffective liberation fronts in the 1960s and early 1970s withthe encouragement of thc Egyptian Nasserists and Iraqi Baatlists.But these groups could not muster support on Saudi soil.ls

Early in 1966, 19 'communists'were jailed and 34 were given royalpardon. Later that year there were reports of bombings in Dammamand in the capital, Riyadh. They were ascribed to republican infil-trators from North Yemen, which was thea in the grip of a civilwar between Saudi-backed royalists and Nasserist, Egyptian-backedrepublicans. In March 1967, 17 North Yomenis were executed forplanting bombs at government installations and royal palaces, in'cluding that of Prince Fahd, the Interior Minister. The Nasserist

threat to the Saudi regime was deflated with thc defeat suffered byEgypt at the hands of thc Israelis in the Junc 1967 war.le

In.Tune 1969,300 Saudi Air Force personnel were arrested forconspiring to attempt a coup in collaboration with the Front for the

Liberation of Saudi Arabia. The entire air force was grounded and

underwent a massive purge. It is claimcd that the Saudi armed forces

(cxcluding the bedouin-dominated National Guard) have nevcr

regained the position of royat trust they had enjoyed till 1969.1{

A Western commentator with considerable experience of Saudi

Arabia suggests: "If there is a lesson to be drawn from the unrest

of tbe 1960s, the Saudi royal family (Al Saud) has learned it. The

disfavour of radical regimes in the Middle East can be perilous forthe internal stability of thc kingdom. The Al Saud's (radical; policies

on tbe Palestine Question, its rather sub rosa relationship with the

US and its response to the Iranian revolution have shown how well

it recoCinizes this. Such a realization has been evident in Prince (nowKing) Fahd's refusal to providc public support cither for US use ofOmani bases or for WashingtoD's quatrel (on the hostage issue) withIran. Only in the ctucial area of oil policy has the Al Saud pursued

actions that seem more in the interest of consumers than of its radi-cal brethren in OPEC."r6

As briefly sketched here, Oman, Bahrain, Kuwait and SaudiArabia witnessed leftist radical activity during the 1960s and early1970s. In the other two Gulf states, Qatar and the UAE, there wasnegligible activity by leftist radicals.

Most of this leftist radical activity was linked with countries out

U4 Tns Ppxsex Gur.r aNo Soutn Asn

ildo the Gulf aroa, particularly figypt, Syria, North yemen andSouth Yemen. Immigrant groups+the palestinlans in Kuwait andthe Vemenis in Saudi Arabia-acled as detonators for leftist ex-plosions in these two countries. Ia Oman, the Dhofaris of the re-mote southern province, who harle always nursed regional senti.metrts, were the focus of a Marxist.,lled liberation front openly sup-ported by communist-ruled Soutb Yemen. Babrain's leftists werclargely home-grown, though inspifed by Egyptian Nasserists andSouth Yemeni Marxists.'

To the conservative rulers of the Gulf, the leftist groups support-cd by the radical Arab states, seemed to bc acting as proxies forthe Soviet Union and Sovielinspired communism, even if Moscowdid not show any particular enthuslasm for overthrowing the Gulfregimes. The internal threats werb linkcd with the extemal threat

l-

of Sovlet communism.r.Till 1979, the six Gulf regimes harboured their common threat

porception of leftist radical forces by Moscow and its Arabrclient'states. (Egypt was regarded as having teft the Soviet foldwhen President A"nwar Sadat abrogated the Egyptian-Soviet Treaty of Friendship and on 14 March 1976.)

The Gulf regim es' common threat perception was strengthened in1979, though it came from a t dircction. Like thc US Ad.ninirtration and most other g the Gulf regimos were

ary 1979 by radical Islamic Shia felass antl-royalist liberals, Kurdish tribal regionalists and the leftistrcvolutionary Mujahideen-e-Khalq.l? The Soviet leaning Tudeh(communist). party backed the anti+Shah coalition from a distance.By August 1979, Khomeini's radicall Islamic forccs had turacd onmiddle class liberals such as thc National Democratic Front led byMatin-Daftary (grandson of Mossadeq who had been the natioqalistPrime Minister of Iran during th4 short-lived anti-We$tern ioter-lude of l95l-53) pnd l8 other oelwly formed polltical partics. InSpptember 1979, tbe Islamic forces grushcd Kurdish rebEls who hadbecome disenchanted with Khomeini's growing authoritarianism.The climactic confrontation betwerirn Khoemini'e Islamic radicalsand the leftist Mujahideen-e-Khalq was to come in 1981, ending intbe defeat of the Mujahideen.rs The Tudeh party was later crush€dwithout any resistance.

There was an immcdiate fallout ffom the ovorthrow of the Shah

Jlwrp LIIQ 115

on thc Shias of Saudi drabia and Bahrain and a delayed ono onthe Shias of Kuwait.lo The Islamic revolution in lran also had ademonstration cffect on puritanical Sunni groups in Saudi Arabiawho regarded the Saudi royal family as corrupt, profligate and un"Islamic.2o

.bligious oppositior to the throne in Saudi Arbia is ingraiaed inthe ascetic, puritan tradition of Abd al Wahab (1703-92) whocalled for a permancnt struggle against corrupt and unrepentantMuslims, including corrupt rulers. The tradition continued into thc20th century when a section of the bedouin tribal fighters of SaudiKing Abd al Aziz's army revolted and had to be put downwith thaaid of the British air force. Thesc tribal fightcrs were called thpiklwanzr (loosely meaning, defendcrs of the faith) and their zeal warexploited by Abd al Aziz to units the NajC atdHejaz areas into theKingdom of Saudi Arabia in 1932. Large groups of the * hwanthenturned against Abd al Aziz as they felt that hc was not followingthc Vlahabi percepts, although Abd al Azizand his family alwayrclaimed---and continue to claim to this day-that they arc repositor-ieb of Wahabism.ss

- The tradition of Wahabi revolt against corrupt rulers was embod.ied in.Juhaiman al Otaibl, the religious preacher who led the storm.ing of the Grand Mosque in Mecca, Islam's holiest ohrine, inNovember 1979, togcther with a band of around 400 followers. TbeGrand Mosque was rccaptured after a long and bitter two-wcekbattle by Saudi troops assisted by Jordanian, Frcnch and Pakistanimilitary advisers. But in a country where rcligious opposition tothe throne is deeply ingrained and whose borders are open toIslamic zealots from all over the world due to the annual laj pil-.grimage, the puritan Sunni rcligious threat to tbe throne has notdisappeared.

Juhaiman al Otaibi was killed in the battle and 63 of his surviviog.followers were later beheaded. One-third of those beheadcd wergnon-Saudis. Among the foreigners who stormed the Grand Mosque.werc Egyptians, Kuryaitis, an American Btack Muslim and a Guya-nese from South Ar4crica.sg

A religious pamphlet written and published by Al-Otaibi in carly1978 provides a lfuvour of the ideology behiod thc Mecca updsing.Tbe pampblet proclaims:

'.There, aro two classes of rulers. Qne who follows tbe Koran andthe sunna, and the other who forces the people to do his witl. The

176 Tnr PBRsTAN Gur,r lr.ro Sdurn Asn

people are not obliged to obey thO second class of ruler even lf theyrule in the name of Islam.

"Thc royal family is corrupt. It worships monoy and spends itonpalaces not mosques. If you acoept what they say, they will makeyou rich; otherwise they will porsbcute and cvcn torture you."4

In the same mouth of Novembor 1979, though without any jointplanning with Otaibi's zealots, th* Shias who arc conccntrated inthe oil-rich Hasa province in eastern Saudi Arabia, spurred by theIranian revolution and the stridant calls of Radio Tehran, insisted

on bringing out the banned Ashura religious processions. Jitterysecurity forces opened ffre and rio$ng continued for 24 hourr, leavingat least 17 Shia dead, There was fenewed violence in Qatif, a keytown of Ifasa province on I Febhuary 1980, the first anniversaryof Khomeini's triumphant return to Iran.

The violence in Hasa province led to efforts by the Saudi regime

to placatc the Shias by starting a rrumber of new public works andinstalling a new, relatively libersl, provincial governor. Thoughtherc has been no renewal of vliolence since 1980, the Shias, whoform 8 per cent of Saudi Arabia's population, remain a politicallyrestive elemcnt. (The Shias of Hasa province are among the mostpoliticized segments of Saudi society as they were among the ffrstto be employed in the Saudi oil industry and wcre activc in clan-

destine union activity against thc lrivileges eojoyed by the Amcri-can cmployees of the oil companips.)t6

In Bahrain, which has a 70 ger cent Shia population, Shia'ledprotests against unemployment, thc rough behaviour of the securitypolice, the pro-Western policies of the government, public drinkingand oabarets, begatr on the lranian-inspircd (liberation of) Jerusalem

Day, 17 August 1979, and continrled through the rest ofthe year.rc

The protests were centred aroundl religious processions which in-cluded radical, secular elements. flusain Musa, an activist of thoPopular Front of Bahrain, a secular organization, has described the

€ffect of the Iranian revolutisa erl people in the Gulf States:

"The revolution has kindled a hew zcal a6ong the people and ithas kiudled conflicts. It bas matlc the people hate those (Gulf)regimes. Their sympathy for change in the area exist€d but the re-volution unveiled it. Thus, we obberved thc spontaneous movem€ntof tle people-not only solidarity with tho revolution in Iran aodthe Palestinian tovolution-but an cxpression of local feelings,

Jlwo Lere l7Z

democratic feelings, feelings hostile toAmerica, to American princi-ples and to the American presonce."zz

A secood wave of demonstrations in Bahrain followed in April1980, this time with tbe specific focus that the Khalifa ruling familyof Bahrain was plotting with Iraq to undo the Iranian revolution.

Shia resentment against the pro-Western Sunni rulers of Bahrainwas to culminate in a plot to overthrow the Khalifa regime. Tbcplot was discovered in December l98l and ?3 persons, 60 of themBahraini nationals, were tried and convicted in 1982, Most of themwere accused of belouging to the lranian-backed Islamic Front forthe Liberation of Bahrain.se

'Xn Kuwait, where24 per cent ofthe population is Shia, expres-sions of Shia'resentment were temporarily forestalled by the deport-

.. ation to lran of some Shia leaders of Iranian origin. However, on12 December 1983, tle French and US embassies in Kuwait werc

. attacked with car-bombs. Other installations were also attacked.seEighteen Kuwaiti residents of Iraqi and Lebanese nationality wercarrested for the attacks. The security authorities said that they wereIranian-inspired Shias.

The Kuwaiti authorities have claimed tbat Iranian inspired-Shiasof diverse nationalities were also responsible for an unsuccessfulbid to kill the Emir (ruler) of Kuwait on 25 May 1985 and behindblasts in two cafes on tl July 1985 which killed nine persons andinjured 56.30

The continuing Iran-Iraq war, which began on 22 September1980, initially caused concern that it may spillover and envelopthe Gulf states or that Iranian successes may lcad to overt Iraniandomination of the Gulf. But with the continuing stalemate on thcbattle-front, the Gulf states are no longer too perturbed about thewar, though no Gulf leader would openly prsclaim like HenryKissinger tlat ..the ultimate American interest in the war is thatboth (Iran and lraq) should loso."sl

Despite the weakening of Iran because of the war, Iran has, since1979, replaced the Soviet Union and its friendly Arab states such aeSouth Yemen and Syria as the main threat in the perception of theGulf regimes. It is not the military-strategic threat which worriesGulf rulers as much as the ideological threat posed by a radical,antidynastic, anti-American Islam which is a joint oause for concernamong the Culf rulers.38

The intemal troubles in Saudi Arabia, Bahrain and Kuwait set

The earlier joint pcrcepion wtich lastcd till 1979 of a leftlrt' pan'

Arab, anti-imcrLan, Soviet insfircd threat had made the Gulf

rulers (except the Kuwaitis) virtpal satraps of the US' The preseat

joint perceftion of a populist, pan-Islamic, anti-American, anti'

-ooot hitt, Ituoian-inspired thrcpt has not led to a fur ther cozyrng

up with the United States but" oq the cootrary, to a eerious attcmpt

to seek come degrce of autonomyl from US and Westem influence

and pressures through greater co$rdination among the Gulf states-in effact a oonsc'lous attempt by the Gulf regimes to distance thes'cclves from the Amcricans who &fe much hated by the Gulf popula'

tions This docs not mean that the Gulf regimes wish to alienate

themselves from the Americans. They only wish to havg some free-

dom of manoeuvre and not be s*n to be connected with sucb poli'

cies as US support for Israel agaipst the Palestine Liberation Organi'

zation, US support for the Israetli control of southern Lebanon or

the US dssire for deployment of its military forces in the Gulf which

could instigato an adventuroug #ilitary response from Tehran and

would cause further angry prote$ts among their own populations'88

Ia every summit of the GCC lpaders since the first in AbuDhabiin May 1981, when tho GCC wab eetablished, the Gulf rulers havc

l?8 TIs PERSTAN GI'LF .l,NP Sourn AsIe

ofr by the Iranian revolutionof all six Gulf states which inforeign policy of these states and

GOC in May 1981.

Fongow Por.tcv

reiterated their opposition to sriperpower rivalry and inten'entioq

in the Gulf area and have tried [o establish thcir nonaligoed crc-rlantiq I c

The Gulf rulors arc taking pa{ticular care to avoid being rcgardod

by their own populations as Anierican stoogcs. The overthrow ofthe Shah of lran, in which one df the popular and highly cmotional

ingredients was thc antipathy td a regime subservicnt to the US,

has left a legacy whioh cautioqe against any open alliance with edependence on the US.

The only country in the Gulf arca which has allowed the US

acccss to military facilitics, Od-an, is re-negotiating its dgreemctrt

with the US and stipulating that aocess will only bc altowed

on a ca3€-to-casc basis and dnly after prior pernission from

dentials.

to a subtle chango in theto the formation of the

Jrryrp latq 179

Oman. Tbe facilities which could be used by the US in an cmer-gency and .with Oman's permission are four air0elds at lvfasirah,Sib, Thumarit and at Khasab which overlooks the strategic Straitof Hormuz, the 23-mile wide channel which separates O.man fromIran, and through which passcs 20 per oent of the uon-comnunistworld's oil exports.sa

Following up its desire for widening its foreign policy options andhorizons, in September 1985, Oman announced that it would beestablishing diplomatic relations with the Soviet Union.86 Shortlythereafter, the UAE also decided to have diplomatic relations withthe Soviet Union. This could be a prelude to the establishmcnt ofdiplomatic relations between Saudi Arabia and the Soviet Union.Hitherto, Kuwait was the only GCC state to have diplomatic ties

with Moscow.Ifowever, in the flnal analysls, if any of the Gulf regimes was

fac_ed with the prospect of being overthrown and could not meetthe challenge with the assistance of its GOC partners, it would haveto turn to US military power as its ultimate protector. This is clearlybrought out in an interview given in November 1984 by the Sultan

Qaboos bin Said al Said of Oman:

Q: Oan you give your ourrent appreciation of the general secur-ity situation in the region?A: I think it has improved a gteat deal, largely because of animproved appreciation of the security imperative and the felt needfor close cooperation among tic states in this region. For. inst-ancen Kuwait, which was strongly opposed to military collabora-tion and any joint effort for security, is now in the forefront ofthoadvocates,

The lran-Iraq war has been handled with some sensitivity by allconcerned. Recently, when the Americans were greatly exercisedby what thc Iranians were saying, I advised caution Fortunately,the US came to the same view. . .

Q: Some of the GCC states insist that the region's security istheir concern alone and not that of any outsider. What aro yourviews on this subject?

A: We want to look after our own afafts and have thc capaclty todo so under normal circumstances. After all, why have we boughtso many weapons? Ifthere should be a noajor armed confrontatio!,

180 Tsn Pnnsrell Gur-r eNo Ssufir Asln

wo would like to have advice on military planning and to borrow

expertise from our friends. lVe ilo not want lheir soldiers.

But in the uhtmate scenarib where all odds are against us,I do not

see how we can avold asking our frienils from outside and all those

who want to see this region stablc and peaccful. (Emphasis mine.)8o

EcoNoMrc INrsREsrs

More tlan seourity interests, id is the cconomic intcrests of the Gulfcountries which have become lied to the US and the West.

Oil and oil money have furt[er integrated the six GCC states withthe world capitalist system, spfcially since Deoember 1973 when theOrganization of Petroleum Ex$orting Oountries (OPEO) dramati-cally raised orude oil prices filve-fold aftcr the Arab oil-producingcountries had demonstrated thq vulnerability and dependencc of theWest on Gulf oil through thei4 shortJived oil embargo against theUS,87 The embargo was meant to exert pressure on Washington todilute its backing for Israel during thc October 1973 Arab-Israclwar.

Initially, the powcr ofwas demonstrated but the

oil as a political-economic weaponbecame blunted as hugc sums of

money from oil exports beganwere then recycled to the W

flow into the Gulf countries andthrough investments in Western

government securities and markets and imports into the Gulfof Western industrial goods, items and armaments.s

Fifty-fve per cent of thein the Gulf region (the six

reserves ofcrudo oil arc located

means that the economicgrow as production fromlines bccause of smaller

states plus Iran and Iraq)Ee whichbetween the West and the Gulf will

sources such as the North Sea dec-of oil. (North Sea production is

expccted to poak in 198G87 then decline sharply.)The attempts by oil outside the Gulf over the past five

years (1980-85) to maximize and profits have led to asignificant decline in Gulf oil ues. But this decline is likely tobe short-term. Acoording tojections made at the World

domand-and-supply pro-Congress in 1983, the prcsent

period of slack demand for oil bound to be followed by a burgeon-ing world demand for oil bySaudi Arabia and Kuwait, r

Mainly the Gulf area, particularlyits large oil reserves, would be in a

position to medt the additional for oil as other oil.producing

Jewro Lare tgl'countries wou'ld be lowering thcir production due to their fast deplet-ing reserves. The present phasc of dcclining oil prices is, thereiore,likely to be a short-term phenomenon, followed by a sharp rise inprices by 1990, if not earlier.ao

Till the Novembor 1985 OPEO decision, pushed by Saudi Arabia,to increase oil production despite low demand, Saudi Arabia and theother GCO countries had faithfully allowed foreign (that is, mainlyWestern and Japanese) demand rather than their national needs todetermine the rate of their oil production, This is the hallmark ofa dcpendetrt rclationship.rl

The Saudi-inspired decision ofNovember 1985, however, indicatesthat the Saudis who are being backed by the other GCO states (eventhough Bahrain aud Oman are not members of OpEO), are for theffrst time sinoe 1973, attempting to follow a slightly independent pathin the economic sphere by deliberately raising Saudi oil productionfrom around two million barrels a day in the summer of 1985 tofour and a half million barrels a day in the frst week of Februaryl986.as The Saudis and their GCC allies are thus undercutting othcroil producers and tryitrg to re-establish their primaoy in the oilmarket. This is creating shock waves among US and other Westernbankers bocause some major oil producers outsido the Gulf may beunablc to pay their large debts as thcir oil revenues plummet as aresult of oil prices declining drastically from 930 per barrel to around$17 per barrel, mainly due to the Saudis flooding thc market withtheir oil.{3

Mexico, with a foreign debt of g96.4 billion, is likely to defaulton its repayments to Western bankers as its dollar earnings fromoil plummet. Even a limited drop of $4 per barrel of crude will costMexico $2.2 billion in lost oil revenues in 1986, Venezuela (foreigndebt $35 billion), Egypt ($30 billion) and Nigeria ($20 bi[ion) arethe other oil exporters with large foreigo debts, whose drop in oilearnings could endanger Wcstern fi naocial institutions.{.

The oil exporters with small populations and large foreign ex-change reserves are all in the GCC. These countries are ableto copewith the decline in their oil revenues by drawing on their fnancialreserves and by slashing government spending. Despite lower oilrevenues since 1982, the GCO states arc still estimated to have hcld$200 billion in financial reserves in the West in mid-I985,{6

Due to the dccline in oil revcnues, the aggregate current aocountsurplus of gl7 billion of tho GCC countries in 1982 was transformod

182 TE PERsAtl Gwr lxo Sbunr AsIr

into an aggregate ccffent accoualt deffcit of $5'7 billion in 19E3'Dua

to corrective actiqns like prunibg development programmee and

reducing imports, the GOO colrntries reduced tlcir deflcit to $3.3

billion in 1984.40

Thc belt-tightcniog measurea ty the GOC governmef,t$ arg how-

evrr, not very welcome in societibs whcre citizas have got used toviewing tlc state as a source df perpetual enrichment. Moct GeF

citiaens would rcgard taxation as an unjust violation of their funda-

mcntal rigbts. Unlike in the rest of the world, governments in the

GCC states do not levy any taxes (exoept a few marginal customs

dutier) on tleir citizens but instead directly channel governmcnt ftrnds

into citiz€os'hands by an extenslve system of easy loans, subsidics

and evcn straight grants. The attcept is to create a super rich'

reotisr socictY.4?

Kuwait seem to have succeoded in this attempt with 70 psr cent

of its nationals gettiug private inlcomes froD rents in 1979'0

Gulf rulere soem to beliwe that they can buy social co e'Dtncrt

af,d political stablility for their subjects. Asked about tle ways and

meais used for achieving stabilitjr, Bahrain's Prime llinister, Khalifa

bin Salman at Khalifa, answered:

By providing, for the Babraini tindividual, who is our truc resour@'

in tie areas of eduoation, horlsing and eeonomic nceds. By giving

him opportunities for work and growth. By distributing the wealth

of tlis small country as a rccognition of the effort of the citizitn

who helped produce this wcalth, ratber thal as a gift of the govern-

mert. By the security which protects property and posscssionr

ag wcll as libertics, it is the t ise government which achieves truc

stability.{e

When furthcr asked to id€ntify theGulf's stability, the Bahraini Primeextcltal factors:

forces whicb thrcatmd thcMinister exclusivelY blamcd

The entire world is plotting againct our stability. The Weetern ardworld mcdia aro not interestdd in our accomplishments. . . World

informbtion media cover our news if a group of boys throw asmall ffrecracker at a buildiilg and broak the windows. Within a

few hours you get a reaction fron Washington, and immediate$ a

'liberation front' is formed ahd claims responsibiliW for tbs in'

trrwrp Drn 183

cident. The concem of the world has bccome to wait for thgemallest incidont to occur af,ong utr as if it were a sigg of instabi-lity, so that all the resentmsnts it contains can be rcported by

the vast world information media in order to shako coa8denc,c

in us,bo

These answers aptly illustrate the dependence-cum'defiance syn'

drome of Gulf rulers towards ttre West and towards Washington inparticular, a syndrome which is reflccted in the workings of ttrcGulf

Oooperation Cor.lncil.Superpower rivalry and competition in the Gulf area is anothcr

strongly felt concern of the Gulf rulers (and Gulf citizons). The ffnal

comnunique of the second sumnit of the GCC held in Novcmber

l98l expressed the GCC's "rejection of all attempts by superpowers

to interfcre in tbe region's affairs."5lThe Gulf states conc€rn about superpower interference in the

reglon is coupled with the realization that their vulnerability to

fluctuating oil prices on the world market affects their enrichmcnt

policics and, in turn, could spatk off social and political unrert.

By a deliberate decision to boost oil production at a time when

the world market'is already flooded with oil and by forcing oilpriccs to drop by almost 50 per cent in three months' the Saudis

and thcir GCO allies are dcmonstrating that it is in the interest ofcll oil-producilg countrics and of Western fimocial institutions to

come 6 a comprehensive agreement to maintain oil prices at a stable

and ,.rcalistiC' level.52 (*Realistic" is a euphemism for a suitably

higb lcvel.) The Gulf states could then cootinuo their enrichmont '

policies unhamPerod.The massive channeling of wealth into the hands of Gulf oitizens

is regarded by Gulf governments as a major factor in ensuring social

coGntment, ThE unstated assumption is that a contented oitizenry

is averse to political change, speoially to any politioal change which

would disinherit tbe ruliog families of the Gulf'68

Kuwait was ths pacc'setter in establishing a comprehcnsivc net'

work of enrichment policies which are now followed, with local varia'

tions, in all thc Gulf states. Gulfgovernmcnt$ assist citizens to acquire

land and housing and to set up businesses through large subsidies

and cheap loans without requiring muoh offort or investment from

the citizen. Typically, tbe gov€rnment may buy private land at or

above tho market prioe, develop the land by iostalling service$ and

l84i frIB Pgnsrlr Gu.r lNp

a slightly higher price than the co tho undevelopod land wasbought in the first place. The will then provide cheapIoans to thc private buyer to build which can be rented outat a high premium to immigrants looking for housing as immigrantscannot own land or houses.sa (198J was an exceptionally bad yearfor Grilf landlordb as land and pfoperty values dropped 25 to 50p€r ccnt due to the recesssion in tbe area.)

In oommerce, the Gulf states hllp tbeir citizens by restrictingownership of shares in public comphnies to citizens alone. Nationals.must owtr at least 5l per cent of any private business even thoughthe business may be largely mandged and operated by expatriatepbrtners. Oheap loans are provided [o industr.ialists and contractors.(ki Saudi Arabia, cheap loans are dlso available to expatriate part-ners.)

Qatar, Saudi Arabia and the {IAE tolerate big commissionsbcing paid by foreign companies [o agents (citizens only) to wingovernmcnt contracts-even thoug! contract prices have at timesbeen raised by over 20 per cent to alllow for the commissions.s

If businesses falter, Gulf governnlents will often bail out incom-petent businessmel by ofeiing addibional loans or by buying sharesin the faltering company. After ttc Souk al Manakh (Kuwait'sunofficial stock exchange) crash iri 1992, the Kuwait governmentbailed out thousands ofgovcrnment funds,

by doling out $7 billion from '

Not only are cohmerce and ind but also agri-culture, Farmers are provided with seeds, powpower, water and fuel athighly subsidized rates to make barren desert fertile. This isspccially so in Saudi Arabia which hds the largest tand area. Till 1985,the Saudi government was buying all available local wheat at g970per toDne compared to the world et price of gl25 per tonne,resulting .in a Saudi wheat in 1985 of I .7 million tonneswhile-domestic dcmand for wheat is only about 900,000 tonnes ayear. The inflated trrrocurement pric{ of Saudi wheat has now been

state-subsidized agriculture, though n]ot to the extent ofSaudi Arabia.Bahrain, Kuwait and Qatar, with thbir small land areas, are virtualcity-states and have little scope for {griculture.

Agricultural subsidies are meant t[ be a step towards food self-sufrciency while industrial subsidiep are meant to diversify Gulf ,

reduoed to $555 per tonne.66 and the UAE also encourage

-JArjy:o Lerq : t8'5'

economies bway from thelr dependence on the single major resource

-oil. They are also part of the enrichment policieJmentioned earlierwhich are coming under strain as the Gulf statos' oil revenues havedropped by 50 per cent since 1982. Tbis strain on their enrichmcntpolicies is the basic cause of the current campaign led by SaudiArabia and its GCC partners to regain their share in the world oilmarkct,

As stated earlier, tbeso policies are expected to keep Gulf citizcnssocially content and politically docile. The indications are that theopposite may be happening, specially in Saudi Arabia and Oman,where industrial and agricultural subsidies are creating new social

-and potentially political-tensions by widening income disparitiesrather than narowing them. These growing disparities could bedisastrous for the ruling families of Saudi Arabia and Oman.5?

Another major destabilizing factor has been the erosion of age-old, traditional social networks due to the introduction of moderntechnology or causcd by deliberate government policies of central-ization and national integration.

In Saudi Arabia, 25 per cent of the indigenous population is ofbcdouion origin, that is from desert tribes with pastoral or semi-agricultural occupations. Io an attempt to wear down the socialsolidarity and political autonomy of each individual tribe, a royal l

decree of 1953 converted traditional tribal grazing reserves intopublic lands, thus reducing the importance of the tribe as a socio-oconomio unit. This conscious detribalization policy was carried astep further with the 1968 law on distribution of land. According tothe 1968 law, plots of land were allotted fdr the frst time to indivi-dual bedouins in an efort to convert nomads into property-owniDgsettlers. But the productivity of the plots ofland varied according tothe availability of groundwater resourc€s and the depth at which the 'water could be reached. This led to some families within the previo-usly homogeneous tribal unit (which used to regard water as acollective resource) gaining superior productive resourccs while otherfamilies were cut off from that most basic resource, water, This hascreated considerable resentment and social differentiation withineach tribe.68

The good intentions of the 1968 law, in that it was intended toimprove the economic prospects of the bedouin, were belied in an- '

other manner. The bedouin who has bcen allotted a plot has theright to sell off his plot. Rich urban businessmen have bought plots

186 lllsPsRsuw'Gur mo SourF Asl

from bedouins and amalgamated t{ese plots into big, capital'intens-

ivc farms. Tbe capital is supptied tiy the goverument in the form of

cheap loans and beavily subsidizedi agricultural inputs' The labour

is also cheap and usually imported form Egypt and Pakistan'Er

This moans that tbe local bedoulo who previously had a oollective

right to the land is completely aliqnated from the land, not cven

being employed on it. Large'scalo migratioo of bedouins into the

citiee, seeking job,e in government 4nd the National Guard or per-

forming peripheral functions like tlaxi-drivers or hotel servantg has

reeulted in a new Phenomenon of tribal solidarity. The bedouin

is increasinglY beginning to see as part of a single bedouin

identity rather than as a member qf a particular tribe.so

Tbe growing bcdouin solidarity, coupled with the self-realization

that thJy form a relativcly low-paid, unskilled strata ofSaudi society,

has profound Political specially in a societY whero the

bedouin have been prone to the prpritanical zeal of anti-materialist

Wahabism. The Saudi National Guard of 25,000 men, consisting

exclusively of bedouins, was ff as a counter-force to the Saudi

military of 51,500 men whicb has bcen prone to radical Arab nation'alist influences. With the growing consolidation and alienation ofthe bedouin, who form 25 per ce4t of the Saudi population, the

National Guard may itself become a focus of political instability.slWhile the welfare and enrichmept policies of tbe Saudi state have

raised the living etandards of tra{itional scctors like thc nomads

and the subsistence farmers of bbdouin stock, the modero sectors

in tradc and industry have leaped much farthcr ahead' thus widen'ing the income diffcrentials withi4 Saudi socicty. Even more ur'settJing, the right to private properqy has overwhclmed tho traditionalcollective right of access to laod aud water. Misguided plans to settle

nonadic communities have led tq these goups losing control oftheir means of ploduction.o

This process of social differe$tiation and alienatioo has also

occurred in Oman, though in a ditrerent form. Agriculture in the

nortbcrn interior areas of Oman {'as rclatively more inteneive thanin much of Saudi Arabia due to easier access to water: The back-bole of agriculture was the traditlonal system ofcollective irrigationthrough an undepground network of channels flowing out of an

oasis, a Erring, a well or a reservoil. Water from ttre channels (qanats)

was distributed according to a cop.plex system of tribal laws which

supplied water to all who providqd regular labour for tb upkeep

Iiwrr Lrtq 1S?

of tbe anciert qanats. This traditional s1atcm of irrigation and itsattendant laws are known as falaJ. Thc village societies built around

it practieed a primitivc 'democtacy',6The introduction of pump-sets end deep bore-wells end the large'

scalo migration of male villagers to seek unskilled joba on the Oman

coast or in the army of neighbouring UAE (85 per centof theUAEarmy's soldiers are from Oman), has all but destroyed the falaisystem, Primitire democracy has been r4tlaced by widetncomc mdsocial imbalances within tbe villages of intcrior northcrn Oman.

Government development programmes have often been monopolized

by a few of the more grasping families in each village and the pump'

sets supplied by the governmcnt have been uscd so indiscriminatelyas to deplete dangerously underground water resources which were

formed through percolation over many centuries. Modcrn technol-

ogy, which is destroying t}Le falai system, ifnot regulated, couldatso destroy Oman's prccarious water resources.'4

Government development programmes, wclfare schemes, loatrs,

subsidies-all fuelled by oil money-have damaged traditional socio'

economic structures such as lhe falai arrd the tribe and have alieaat-

ed old communities from tleir traditional patterns of life withoutproviding adequate alternative ohannels for redressal and expression

of grievances. Oil monoy, which has been instrumental in creatingmany of the new social ioequities and tensions, is also regarded bytie Gulf ruters as tte antidote to the very tensions it has created.

The Gulf rulcrs havc repcatedly shied away from political reformin the hope that oil money will subdue all tensions. This could wellprove to a short-lived illusion, particularly in Saudi Arabia andOman, which have developed sharply dualist economies with amodern, highly productivc sector and a traditional, Iow productiv-ity, low income scctor. The Saudi Ministry of Planning estimatesthat 35 per ceot of the Kingdom's labour force (excluding nomadsand women) is engagpd in the traditional low wagc sectors litesubsistence agriculture, petty trade, personal aod domestio service,some types of construction and transport.s

The modern sector of industry, commercc and high fnance withworldwide dealing;s has spawned an ambitious new middle class,

not only in Saudi Arabia, but in all the Gulf states, The new middleclass comprises the upper reaches of the civil service, exccutives andtechnocrats ia industry and the men who run thc key banking andflnancial institutions of thc Gulf. Maoy of them have beeo educated

fnancirg the Gulf's royal families before the advent of oilrevenue$. This old middle class its initial fortunes mainlythrough the pearling industry dobinated the economies offour Gulf states till the international pearl market collapsed withthe Great Depression of 1929 and(cultured pearls) it Japan.o?

the advent of pearl farming

Pearling (diving for pcarls) was t$e main source of income aod

employment of Bahrgin, Kuwait, Qatfr and the Trucial States (now

UAE) till the 1920s, Practically every adult male was involved inpearling with most income being off by the flnanciers who

backed the. seasonal Pearl and lent money at usurious

rates to build and Provision the boats. These financiers had

close links with the Bombay who bought the pearls and

rosold them at hugc profits to the and Western jewellery

markets.0s The financiers evolved intQ traders who are now the oldand oonservative middle class of Kuwait, Qatar and the

UAE.Ar1. l

Tablc I shows the oxtent to which pgarling dominated employmentin four of the Gulf states.Gs

In Saudi Arabia, the trading

The new middle class is distinotthe Gulf who have expanded intoand construction companies. Thedominant role in the economies oftwo centuries and has been a

mental in supporting the rise of theod control over pcninsular Arabia

bedouin graziers is grossly wrong'tion in the Gulf states has been

tribal, though the tribes hevo played

specially in Saudi Arabia, as a militr

the old trading families ofp of large cornmercial

trading class has played aGulf for at least the lastpolitical inffuence through

of the towns were instru-Saud family which establish.1932.10 ln Oman, seafaring

important peripheral role,force.

traders played a dominant role in the economy and polity.It is evident that the poPular noti that the Gulf statcs before

tribal, nomadic societies ofdominant mode of produc-

the exploitation of oil wero

rather than

JAwrD LAre lB9

TABLE 1. PEARTTNG MANpowB. rN THE SHETRqDoMS rN 1q)8.

Totalpoprr.

I.abour forceengaged inwarlW

Percentdgeof pow. inpearlinC

Bahraiu

Kuwait

Qatar

Trucial States(now UAE)

99,075

37,000

n,000

72,000

17,633

7,2W

12,890

22,M5

I820

48

31

The tribes have got largCly absorbed into the new middle class inthe city-states of Bahrain, Kuwait, Qatar and the UAE, but not inSaudi Arabia and Oman, duo to the enrichment policies followedby Gulf governmeuts. As stated earlier, in Kuwait, 70 per oent ofits nationals were gettitrg incomes from rents in 1979,

Two Harvard professors, Mark Heller and Nadav Safran haveestimated that 8.1 per cent of the Saudi labour force is middleclass.?l They have come to the stigltly bizarre mathematical con-clusion after correlating middle class percentages witb political up-heavals in other monarchies that the Saudi middle class has reached

. the "critical mass" or approximate percentage at which the middleclass has led rcvolutions in other countries.

While this eccentric analysis need not be taken too seriously,observers have noted the restiveness of the new middle class inSaudi Arabia and in other Gulf states. In private conversatioqs,middlc class individuals often express their frustration and. resent-ment at having no say in the political decision-making process andhaving no public forum to present tbeir vieivs. The bomb explosionsin Kuwait in 1983 and 1985, the attempted coup in Bahrain inl98l and a number of anti-royalist conspiracies in Saudi Arabia inthe 1970s indicate that with no political reform and no representat-ive institutions to provide a cbannel for discontent, there can be un-expected political upheavals in the Gulf countries aud specially inSaudi Arabia where oil mon€y has crcated a dual economy with

190 Trry PBRsIAN Gwr rNP Sourlr AsIe

marked social differcntiarion. Such politfoal upheavals could be

set off by a temporary coalition dfdisenchanted middle classcle-

ments, puritanical Islamic forces aa[ leftist ratlicalsPAttempts at diveraifcation of the ecolomy away from dependence

on oil rcvenues is also problematic. Iodoctrialization is regardod as

the most direct method of diversi8cption. Lack of tecbnical skills,

lack of adequate lodigenous manpotrer, lack of a big enough market

to make industry profitable, are co$mon constraints in all the six

Gulf states. The formatlon of the Gulf Oooperation Oouncil has

been seen as a oeans to overrcome $ome of the constraints oo in'dustrial development and diversificati,on

In March 1983, the six GCC stat€s abolished custom tariff bar-

rierg betwcen themselvcr on locally manufactured goods, marking

the first major stcp towards establ]isbing a common market. GOO

nationals ar€ trotl, fr€e to 8et up indurtrier in aoy of thc six statce

and to bid for industrial 8nd co mercial contracts on an equal

footing.tEThe GCC has also begun to nep[iate ar a tingle unit with guoh

organizations as the European Ecotomio Community (EEC)' Toughnegotiations have becn going on abbut a 13.4 pcr ccnt duty imporcdby the EEO on GCC petrochenical products sucfr as polyethylenc

and methanol. Petrochemicats arc among thc few GOO industrialproducts which aro competitive on international market b€cauge

of the low cost of petroleum and gas in the Gulf, whichare the basic raw materials for the industrY.t'

While the GCC has proled agroupings ard to create a larger

body to face other regionalthan existed in the indivi'

dual Gulf states, the nost severe on indostrialization inthe Gulf-skilled indigenous proved insurmountable. The formation of the GCCthis problem.

in no way helpcd to ovencome

Somc Gutf officials, includingSheikh Zayed, havc suggcsted that

to the UAE President,only way to solve the Pro-

blem of dependence on immigrants to minimize iadustrialization.a permancnt expatriate PoPu-and run industrial plants and

TLese advisers are keenly awarelation would be required to mainthis group of foreign settlerstion workers) would require

tbe transient forcigtr comtruc-outlets,6

Jewro Lnrc l9l

Pourrcer, Svsrrus

The sociat tensions arising from rapid and skewed economic modern'lzation, from the growth of a new subsidized middle class and

from the presence of ao alien segment of45 per cent ia thc GCO

states'total population of 15 million in mid-1983,7e cannot be con'

tained by the old' narrow-based, autocratic political structures ofthe Gulf gtates.

Even the one country with an elected political body, Kuwait'

restricted the right to vote to nairow group of56,848 "first class"

citizens (3. 5 per cent of the total population) in its 1985 p&rliameqt'

ary election.z? First class citizenship is awarded only to those whose

families have been in Kuwait since 1922. Women of any category

do not have the right to vote.The Kuwait parliament makes the laws but the Emir (ruler) of

Kuwait cao veto ttrem. Parliament can be as oritical of the Cabinet

as it wishes but it cannot throw out the Cabinet. However, parlia'

oetrtary criticism can occasionally bring results. Justice Minister

Sheikh Salem al Duaij was forced to resign io 1985 after parliament

questioned him on sooc of his dubious financial deals.?8

The Kuwait ruler and his family are sacrosanct. They canaot be

criticized in parliament, the press or any public forum. This ruleapplies to the ruling families of all the Gulf states.?E

The power to make all major national decisions rests firmly with

the royal families of the Gulf states' The council of ministers, even

in Kuwait, is chosen by the ruling family and is packed with mdm'bers of the ruling family.

In Kuwait, 6 of the 16 ministers and ministers of stato beloDg tothe ruling Al Sabah family.so ln the UAE's fcderal council ofministers, I I arc from ruling families out of the total of 24.81 Asthe UAE is a federation of seven emirates, members from six of tho

seven ruling families are accommodated in the council of ministers.In thc present Saudi council of ministers, 9 of the total of 32 are

from the royal family.srComm oners oftalent and highly-educated technocrats are coopted

into the decision-making process both as ministers and senior civilBervants. The able oil ministers of Kuwait, the UAE and SaudiArabia are all commoners. At the end of 1979, 19 of tbe 64 Saudiministers, ministers of state and deputy ministers had Ph. D.s-[ror€doctorates probably than in any othel sation's batch of ministers:€'

I 192 TIIB PsB.sraN Gur,r eNp Sodry Asre

Most of these doctorates were froh American universities.The ruling families, the coopted ministers aad senior civil servants

. aod the conservative old middle [lass (distinct from thc growingnew middle class) of trading fa$ilies who now own vast businessempires, form the small power eliles of the Gulf states. Each of thesepower elites has an interest in suflporting eaoh other through tbepolitical and economic linkages fdrmed by the GCC.. The highest authority of the GpC is the Supremc Council, com-

I prising the rulers of the six statei. All major policies and decisionsol the GCC have to be approved unanimously by the six rulers,' The presidency of each s"ssion df the Supreme iouncil is rotatedamong the rulers according to {he alphabetical order of the sixcountries, The Supreme Council id assisted by a ministerial council

. of foreign ministers and a sccretaiiat at Riyadh in Saudi Arabia.sa

. Thc organizational structure of the GGC indicates that the GCCls the apex body of the power elitds of the Gulf states. Insize, thesepower elites are small. The centre bf Saudi Arabia,s power elite, theRoyal House of At Saud, is estim[ted to comprise 5,000 to ?,000princes.86 The Al Saud is by fai the biggest ruling family in theGulf.

There are very fewreliable esti{ates ofthc proportion ofnational' revenues which are directly alloc{ted to the ruling families. Oneassessment about Abu Dhabi, whlch emirate has the highest percapita income in the world and iq th€ richest of the seven emirateswhich form the UAE, is that its rlrling family takes l0 per cent ofAbu Dhabi's anoual oil income bhich was in the region of $9.gbillion in 1984.86

Such concentrations of wealth, riven in societies with a basically' high standard of living, create socipl tensions which the autocratic

aad conflned political structures of the Gulf will find increasinglydifficult to contain or to accommodate.

Jawro Lerq 193

the extradition of harmless political individuals under the garb ofan intemal sccurity agrecment.8t Due to a series of bomb blasts inKuwait in 1985, there is now some rethinking on the issue of signingan agrcement.

On this issue, as oD other issues, Saudi Arabia has followed adeliberate policy of underplaying its views-nevcr pushing its opi'nions or its interests too forcefully or too openly ooto its partners

in thc GCC.Saudi Arabia,-with 10.4 million of the GCO'rtotal of l5millioa

people, with 2,150,000 square kilometres of thc total land arerr of2,564,N0 square kilometres, with $70 billion of thc total externalrescrves of $200 billion, with 85,000 of the total of 20l,000nilitaryand para-military porsonnel-ir accepted as lhe dominqtt power inthe GOC but it has taken care to avoid being seen asthe douinatingpower.88

The Saudi reluctance to dominate the GOC is most clcarly secn

in the spheres of internal sccurity and defence. Saudi Arabia hasrepeatcdly indicated that it would like the GCO to adopt an InternalSecurity Agreemont (ISA) and to haw a unified defcncc affangn.metrt to cover all thc GCO states. But as Kuwait has been reluetantabout the ISA and there has been no consensus about a uniffoddefonco arrangemcnt, Saudi Arabia has been quitc happy to agrteto cooperatioD among thc GCC atates in the internal socurlty aaddefence spheres. Joint military exercises, plansfor a ioint air defencoDetsork and the stationing of a small joint mtlitary contingent onSaudi oil, are acceptcd by Saudl Arabla as seoond-best substitutesfor a GOO defence pact.8o

In the economic sphere, Saudi Arabia has given up at lea$t oreof its prestigeous national projects so as not to haro tho interestsof a GCO partner. It has dropped its plan to build a largc alumi-nium smelter at Jubail as this would have cut into the economioviability of thc existing aluminium smelting plant at Bahrain.oo

More significantly, till November 1985, Saudi Arabia quietly al-lowed GOO partncrs like Oman, Qatar and the UAE to undcrcutSaudi sales in the world oil spot market and to kecp up their oilproduction levels while Saudi Arabia lost oil revenues by rcstrictingits oil production in a futilo (and almost solo) bid to maintain worldoll prices at around $30 per barrel. Sincc November 1985, SaudiArabia has stepped up its oil produotion and let oil prices slidcdown. Its GCO partners have had no altornativc but to back the

194 Tm hnsnN Gur,r.c,Np

latest Saudi moves.or

Corcr,usroN

It is apparent that the GCO is like ajoint stock corhpany in whichthe ruling families, thc leading buslness families and coopted soniorcivil servants and technocrats sharg a common stock ofperspectiveson internal and external security, fbreign policy, economic issues,political systems, the role of the dominant power and ethnicity.With the sole exception of ethni0ity, theso perspectives are zotnecessarily shared by the peoples o[ the Gulf states,

This makes thc GOO a fragile ofganization despite its successfuljoinf ventures in several fields. It afso appears that the potential forsocial and political instability in thB GCO states, and specially inSaudi Arabia, is noticeably great, Any major upheaval in SaudiArabia, the GCC's pivotal power, hould destroy the GOO.

NOTBS

For a cogsrt comparison of ASEAN, FEC, GCC and SARC (now re.mmed SAARC), see Mohammed AFoob, .,The primacy of the political:South Asian Regional Cooperation (SARC) in Comparative perspoctive,"Asian Survey, Vol. )O(V, No. 4, April 1985, pp,M3457,

See Joseph A. Kechichiar, "The Grilf Cooperation Council: Search forS€curity," Third ll/orld Qwrterly, Vol, 7, No.4, Octobel 1985, pp.853-88: .

I.

9.10.

11.

Jewo Larq 195

3. Fr€d llailiday, Arama lry hot, ,Snlfczr, Penguin, Ilarrrondsworth, 1974,pp.2l-31 and pp.499-51 2.

4. Dilip Hito, Inslde the Middle East, Routledgo and Kegan paul, Iondoo,7982, pp.l1*-775.

5. Arnold HottiDgpr, *Political In6titutiotrs in Saudi Arabia. Kuwait andBahrain," in Sbabram Chubin, ed. , Seczr ity in the Peuian Grf 1 : Domes"tic Political Factors, International Instituto for Strategic Studics, LotdoB,and Gowsr, Faraborowh, 1981, p.6.

6. Ibid., pp.8-9.

7, Avi Pfascov, Security in the Persian Gnf 3: Modenrization, Politic,alDevelopmont and Stability, Int€rnational IDstitute for Stratogic Studies,London, and Gower, Faf,nborough, 1982, pp. n-78.

8. Allan G, Ilill, "Population, Migration atrd D€v€lopment in the GulfStatps," in Shahram Chubin, n. 5, p.69,

Avi Piascov, n.7, pp.150-155.

Fred llallidan n. 3, pp.65-69.

Jamo Buchan, .'Stcular af,d Religious Oppositiotr h Saudi Arabia" ioTlo Niblock, ed., State, Society and Bcorcmy tn Satdi Arabia, Ctm,Ilelm, London, and C.entre for Arab Gulf Studies, Eret€r, 1982, pp.1l3-114.

12, Ibid., p,114. 13. Ibid., pp.11/S-115. 14. Ibid., p,115.

15. Ibid., p.116. 16. Dilip lliro, u. 4 pp.2%-295,

17. For an insidcr's detailed accouot of the US Administration's surpriseand confusion about the Iraaian r€volution, see Gary Sick, AII FaUDowz.' A.merica's Fateful Encounter with l!an, I.B. Tauris, Iondoo,1985.

18. Ibid,, pp,0o-204.

20. Ibid,, p.19.19. Avi Plascov, n.7, pp.27-tX.

21. For an ac@unt of tfu ikhwan, seo Peter Sluglett and Marion Farouk-Sluglett, *The hecarious Monarchy: Britain, Abd al Aziz ibn Saud aadthe Establishment of the Kingdom of l{ijaz, Najd ad its D€pendeDcies,192132," in Tim Niblock, n. 11, pp.42-45.

22. For a flrll€f, picture of Wahabiem, se€ Dorsk Hopwood, ..Tho ideologicalBasis: Ibn Abd al Wa.hab's Muslim R€vivalism," in Tim Niblock, n. 11,pp.25-35.

23, James Buchan, n. 11, pp.120-123.

24. Jubaiman al Otaibi, '.Rules of Obediace and Allegianco: Misconductof Rulers," utrdated pa.mphlet, quoted in lames Buchan, n" 71, p.122.

25. Janes Buchan, n. 1I, pp.118-120. 26. Avi Plascov, tr. 7, pp.28-33.

27. During a discussion with m€mbers of other political organizations of thsGulf, recorded in Al Safv (newspaper), Beirut, 18 November 1979.English version rn Near EattlNorth Africa Report, toral PublicationsReeearch Service, 25 January 1980.

28. Middle East Reiew 1985, pp.70-71. 29. Ibid,, p.r25.

196 THB PcRsnN Gwr eNo

*The War between han andjoumal distinct from thG British

annual of similar name), Vol, 17 No. I, Fall 1984, p"48. This viele wasreiterated by the Rpagar Richard lV. Murphy, USAssistant S€oretary of State Near Eastsn aod South Asian Affairs,

that a victory by either side is neithcrsaid that it ic ..our basiomilitarily achlevable nor desirable because of its destabilizingcfect on the region." Quoted in Gulf. tbe War and US Policy" inGrea, Decisions 85, Forcign Association, New York, 1985, p.33,

Shia percgntages of Gulf are: Oman 4, Saudi Arabia 8, QatarBahrain 70, Irao 92. See James A.16, UAE 18, Kuwait 24, kaq

Bill, "Resurgent Islam in thoZ, Fall 1984, p.120.

Gulf," Foreign l.f?lrs, Vol. 59, No.

3I).

31 .

33.

34.35.

36.tl.

KhaIeeJ Times, Dubai, 12 July

Kissingo is quoted in WalterIlzq,l' Middle East Reriew (sr

For a cogent account, seo Aother detaile<l accounts of thc

Plascov, n. 7, p.25. Therc are severalr olers hying to distance themselvcr

from any obvious depsndenc: or suppoft fof the us.The Statesman, New Delhi, 21 J 1985.

The Eindustan Time$ New 10 Oorober 1985.

Fot Edstem Economic Reyiew, 15 November 1984.

OPEC oil revenues jumped from .2 billion in 1970 to $75 biflioa ir1974. See Frcd Halliday, "The betwe€n Two R€volutions" in TimNiblock, ed., Social and Development in the Arab Gulf, CroomIlelm, London, and Centre for Gulf Studies, Exeter, 1980, p.223,

38. Arms sales to West Asia from fhe US alooo jump€d from g2 billiron in1972 to gl5 billion in 1982. S{e .,World Military Expenditures andA.rms Transfqrs 1972-1982," United States Atms Control and Disarma-m€st:Agency Washington, D.C., April 1984, p.55.

39. Keith Mclacblan, ..Natural ReFources and Development ia tho GulfStates" in Tim Nibloc[, n. 3Z p181.

rO. Consensus of €nergy experts at the round table discussion on ..Supplyand Demand-Regional Stressesf' held oo 2l Septembe! 1983 at tle 12tbColgress of the World Energy Cfnference, New Delhi.

41. Rosemario Said Zahlan, .,Hegemfny, Dependence and Development in tho' Gulf" in Tin Niblock, n. 37, p.Il.42. The Eeonomisr,Iondon, 8 F€brubry 1986.

43. Ibid. M. Time, New York, [0 February 1986.

45. Indian Exyess, Bombay, 6 May !985. 46. Ibid.47. 'Michasl Field, .,Economic Probldms of Arabian Peninsula Oil States"

in Shahram Chubin, n. 5, pp.5455.48. Ibid., p.39.

49. Al Mustaqbal, Pafis, 12 Janua4y 1980. Exoerpts in Englisb quoed ioAvi Plascov, \, 7, p,165,

50. lbid., p.166.

<t51

54,

tawrD LarQ 197

.51 . .'From strcDgth to StreDgth," background paper on GCc, MaleejTinieS,Dubai, 9 November 1982.

The Economlst, London, 8 February 1986.

Avi Plascov, n. 7, p,167.

Michael Field, n. 47, p,51.

Ibid., p.52. In addition, education is free till university level for citizensof Gulf states. Medical care is genorally free for the eEtirs poputatioH,

both citizeDs anal e;Kpatriates, Elochicity, water, telephonoo, basic food-stuffs are- subsidized by most Gtrlf govemments for tleir entire popula-tions. Till thc receat recessioD in the Gulf, almost every citizeu wasguaranteed a job.

Emma Duncan, "Growing Pains' The Gulf Cooperation Council Countries-A Survey," The Economist, Loadon, 8 February 1986' p.38.

For growing disparities in Sautli Arabia, see Arnold Hottinger, pp.l4-18.In passing, Hottirg€r quotes a Riyadh taxi-driver, "I ag€e with cuttiogoff the hands of thieves. But in that case the men of the royal familyought to have no hands teft!" For disparitid in Oman, see J.C. Wil'kinson. "Chaoges in the Structur€ of Village Life in Oman" in TimNiblock, a. 37, pp.l3t-133.

58. S€e Ugo Fabietti, "sedentarisation as a Means of Detribalisatiotr: Some

. Policies of the Saudi Arabiatr Governmcnt towards tie Nomads" In TimNiblock, n. 11, pp.l86-187. Also see, DonaldP. Cole, "Pastoral Nomad3

in a Rapidly Changing Economy: The Case of Saudi Arabia" in TiinNiblock, n, 37, PP.1O6-121.

59. Ugo Fabietti, n. 58, p.195 60. Donaltt P. Colo, D' 58, ?.I1&6I. Avi Plascov, B. 7, pp.704 and 110. 62. Ugo Fabietti' n. 58, p.197'

5-3. J.C. Wilkinson, e. 57, p.197, 64. Ibid.' pp.l28-133.

65. On Gulf rulers' teluctan!:e to allow political reforn, see Avi Plascov, n'7, p.167. On Saudi dual economy, see Donald P' Cole, n' 58' pp'107-

108.

66. Freit llalliday, "A Curious and Close Liaison: Saudi Arabia's Rslations

with the United States" in Tim Niblock, n. 11, p.132.

67. Rosemarie Said Zahlan, n.41' pp.6'l-{5.

68. For a moving account of tlle tigours of pearl diving and of the lcv€l ofexploitatiotr by both Indian and Gulf rnerchants, see Mohamed G'Runaihi, "The Mode of Production iD tbe Atab Gulf before the Dis-

covery of Oil" in Tim Niblock, n. 11' pp.49-50.

69. Rosennarie Said Zahlan' n. 41' p'63.

56.

70.

71.'1J

Tim Niblock, "social Structure and the Development of the Saudi

Arabian Political System" in Tim Niblock, n' 11, pp'78-95'

Mentioned in Emma Duncan, n 56, P'20.

For the emergonce of the new middle class in the Gulf' see Avi Plascov'

n, 7, pp.85-86. For possible marriages of convenience bctweeu middle

classes, Islamio forces and Maf,xists, see lbid" pp.79-9.

198

73.

74.

75.

76.11

78.80.

81 .

82.83.

84.

85.

86,

87.88.

Tsr Pnnsnry Gwp.nNp Sotrnr Asn

Iouise Denver, ..Gutf Cooperatidn Council: A Common Market Comesinto Being," Midille East Rettiew l98y'., pp.45-48,Khaleej Times, Dutrai, l August 1985.Nao6i Sakr, ..Federalism in t$c United Arab Emirates: prospects andRegional Implications" in Tim tliblock, n. !7, p.lg4.Inilian Express, Bombay, 6 May [985,Bmma Duncan, n. 56, p.20.

Ibid., p.25. 79. Avi plasoov, n. 7, pp.I5(I-155.Collated from MEN Repori: fiuwait, Middlr- East R€s€arcb InstitubnUniv€rsity of Peensylvania, and Croom llcln, Dover, New Hampshire,198t Table 2, p.123.

Collated from MEN Report: Unlted Arcb Emirures, 1985, Table z, p.122.Collated from MEN Report: Sarldi Arabia,1985, Table 3, p,123.Collated from Saudi Arabia yealpook l97g-gl, Tbe Rssearch and publi.shing llouso, Beirut, 1980.

Article 6 of the GCC foundiaf chart€r si8oed at Abu Dhabi, 26 May1981.

The estimato of 5,000 princes fs in Emma Duncan, n. 56, p.18. Thehiehcr estimate of 7,000 princes ib in John Duke Anrhony, .:Aspects ofSaudi Arabia:s Relations with Other Culf Stat€s" in Tim

-Nblock, n. 11,

p.153.

Middle East Rcview 1985, p.265.Joseph A, Kochichiaa, n. 2, p.8g5.Population figr.res are mid-1983 Qstimates ia South, Iondon, Septemhr1985. Exterdl reserves figures *e n Tin", New york, il DecemUec1985, for Saudl Arabia, aoLd r\ Indian Express, Bombaj,6 May 1985,fof all the GCC countries combidcd. Figures of armed personnel are i!Joseph A. Kechichian, n. z, pp.ds5-t56: -'---.-

89. Ioseph A. Kechichiaa, n.2, pp.8J3_860.90. John Duko Anthonn n. 35, p.15t'.91. Time, New York, 17 Februsry f986.92. See, for inst&loe, Nabil M. K4onfot, *Gulf Stat€s, Succ€ss througb

Collaboration," Ki aleei Times, Dubai, 24 July fS8S.

9. GuIf International Banking

V.L. RAO

IurnooucrroN

The rapid growth in oil revenues following the two oil-price hikesof 1973 and 1979 gave rise to increasing activity in the Gulf region'sfnancial markets with a large number of international banks andGulf Arab banks opcning their branches and the latter increasingtheir operations in the international financial markets, in particularthe Eurocurrency markets,

After the first oil price like, about $ 6 billion in petrodollar sur-pluses were utilized for the capitalization of wholly Arab-ownedfinancial institutions (Muehring, 1985, p. 19e).

The volume of syndicated Eurocurrency loans led by Arab banksincreased gradually from $ 2.3 billion in 1978 to $ 3.6 billion in1980. There was a sharp rise to $ 9 billion in 1981 and 1982. Therewas a decline thereafter in line with the general decline in the in-tcrnational credit market. The share of ArabJed syndications intotal market' lending increased from very low levels till 1980 toover l0 percent from l98l onwards (see Table 1).

Arab-banks lending to developing countries is higher than that toindustrial countries, but MiddleEast borrowcrs account for over halfof it. Their share increased from below 25 pcrcent in 1980 to about55 pcrcent in 1984 (Bmtking World A'tgust, 1985, p. 4l).

However thlee major recent developments in thc internationalfinancial markets, viz. gJobalization, securitization, and dcregula-tion, bave had their adverse impact on Arab commercial and invcst-ment banks. Arab banks could not competo with banks such as

Oiticorp in offering a wide range of global services. This is inaddition to the economic downturn in thc Middle East. In interna'tional banking, tcchnical expertise and a keen sense of the markethave predominated ovcr oredit risk. tack ofthis expertise resulted

200 i\rg PsRsrAN Gunr lNp

TABLB f. AnAB.r,ro rED LBTDTNG (i BrLLroN).

1977

1978

t 979

0.1

0.3

0.7

1,1

2.6

t.9

1.6

0.9

2.0

1.8

)<

6.5

7.9

4.6

1.0

2.3

,<

3.6

9.1

9.8

o.z

5.3

1980

1981

r982

1983

1984

Totdl narketIending

34

74

79

81

9l

91

60

52

sYndicationsa

ottg -etrnties

Total Arab-led syttdi-elies

Sovncr: World Bank, Worldsourceg bf nhich weroMiddle fust Eutmmic

Dats aro fof Eurocurrercy qmore, publbly announced in t!Syndications in which oae or1

obad maua8iets.

neport 11fi5, p.113, lhe babicFiranctal Market Trends, and

with a maturity of on€ j&ar oryear giveD.

more Arab ba[ks acted es load or

in the return on qquity going from 18 percent to 9 percentfor a number of Arab banks (M

Many of the top Arab banks1985, p. 194).

1984, Bahraio Middle East Bankhigh capital-asset raiios. Ia

a ratio of 35.2 percont andovcr 20 others in top 100 Arab exceeded l0 percent capital-ascct ratio (the US Primary caPitd/ requirenent is i5 percent(MeDougall 1985, p.147). Tbni a rela$iv€ly less eftci€ot

V.L Res 201

usc of tegourccs by tfte Arab banks cmpa,rcd with other interoa-tioml bao&s.

The ffnancial linkages among the Gulf states arc few because oftbe nature of the Gu|f economics. Intra-Arab trede acoounts foronly l0 percent of the reglon's total exports. Further, tho capitalmarkots in individual countries are also not very wcll developcd(BankW World, A:ogast 1985, p. 4l; Kubursi, 1984).

Oqurmnqlr, AND INvEsrr\dBNr BANKINc

Major intcrnational banks from the USA, Europe, Japan and othcrcountries have partlcipated in a big way in the Middle East financialmarket. Many oountries opened ofshore banking units (OBUs) inBahrain. Though the declining baoking activity In the Middle Eastin gencral and Bahrain in particular has led many banks to lesseo

or withdraw their operations ln Bahrain, some international banksfeel that the outlook for banks' operatlon in the Middle East is guitcgood.

Scandinaviwt Bcn&r. Scandinavian Banking Group Managing Direc-tor's viow is that it is a short-sighted policy for banks to be leavingBahrain and that they would want to come back in 5 to l0 yeartimc. Scandinavian Bank, according to him, will continue to stay lnBahrain since it camc to Bahrain to support major Scandinavianoompanics with investments in the regron (Wilson, 1985, p, 94),

Japanese Bankc. Nomura Investment Banking and Yamaichi Inter-national are among the major Japanese banks in thc Middle EasLJapanese presencc in Bahrain is mainly to servicc the ffnancial dcal-ings between Japan and Saudi Arabia. Nomura Investment Bankiqg(Middle East) considers the Middle East sccond only to Asiaas thccompany's most important fund managcmcnt area. Kuwaiti fundsaccount for 35 percent and Saudi Arabia's 25 percent ofthe fundsmanaged by the company (Wilson, 1985, p, 94).

Inilian Banks. The recession in the Middlc East in the 1980s had itsimpact on the operations oflndian banks there. The Bank ofBaroda,whioh had cight branches in the UAE, decided to merge its regiona-l

and zonal offices ia the UAE. The Bank of Baroda's only OBU inBahrain has been taken out of tho jurisdiotion of the Abu Dhabi

2(D Tw knsrex Gur"rnwo ASIA

zonal ofrce end has been placed the direct control of its hoad-quarters in Bombay (Business 12December 1985, p.4).

Arab Bo&s.In the UAE, the wellftnown Galadari episodc resulted inthe takeover of the Dubai Bank (fbrmerly majority-owned by Abdul-Latif and Abdul.Rahim Galadari) by the governmcnt-owned UnionBank of the Middle East (UBMED. Dubai Bank suffered substantiallosses on real-estate projects in Sihgaporc after a slump in its pro-perty market. Abdul-Wahab had borrowed heavily from UBME toffnance his gold speculations, lcBll above the bank's capital andreserves. The UAE government tbok control of UBME.

The UAE Central Bank introdtced some remedial measures: itlimited bank directors'loan to 5 percent:of total capital and re-serves, and those of board me$bers to 25 percent. Banks wererequired to classify loans into fub-standard, doubtful and loss-making. Also, banks wcie require{ to substantiate the size or existenccof hidden reservEs (Banking World,1985, pp4344).

The stock-exchange crisis of September 1982 in Kuwait still con-tinues to have its impaot in the Middle East banking activity. Theunofficial stock-exchange, the A1l Manakh, dealt with a huge totalgross indebtedness of an estimalted 985 to $90 billion. The realproblem in the stock exchange irash was that many of thc netcrcditors on thc exchange were plso debtors to cach othel in busi.ness aud, therefore, any failure by the big operators, had a crashingimpact on the small operators mdking the lattcr bankrupt (Bankingll'orld, 1985, pp. 4344).

Dncr-rNwo Acrlvrtv

Since 1982 the overall economic activity in the Middle East has

witncssed a decline following in oil revenucs. Saudi Arabia'sfrom 198U82 to 1984/85

(B anktng Wor Id, 1985, W.percent from 1984/85 to 1985/86

As far as international banks andArab banks are concerned, the is characterized by fall inbank assets and proffts, and closures and mergers.

According to the Bahrain M AuthoriW (BMA)'s June1985 Report, total assets held 74 offshore banking units (OBI)in Bahraiu declined from $63 in March 1984 to $54 billion

oil income, e.g. declined by 50and is estimatcd to dccline by

in early 1985 (Gabriel, 1985, P. 23).

' V.t. RAo 203

Net losses of some banks in 1984 were as below (Wilson, 1985,p. 94):

Bahrain International Investment CentreGulf Investment OompanyPearl Investment Company

$ 27 million$ 70 million$ 45 million

The losses were attributed to the fall-out from the stock exchangecrisis of Septembor 1982 in Kuwait.

The overall performance of the Arab banking scctor in 1984declined compared with 1983. Out of 92 institutions for which datacould be compared, 48 improved their capital/asset ratios, but only22 of 8l banks improved return on capital (McDougall, 1985, p.r27).

Bqtk Closures. Thc US bank, Security Paciffc, booked half a floorin the l2-storey Centre built by the privately-owned BahrainMiddle East Bank but the plan did not come through since its UShead ofrcecalled in the OBU.

The Bahrain Middle East Bank itself was looking for a buyer forthe Centre, compteted in 1985. Other US banks which went toBahrain looking for offsbore banking status left Bahrain (Gabriel,198s, p.124).

Barclays, the British OBU in Bahrain, closed itshine-man dealingroom in August 1985. Oontinental Illinois, Banco diRoma, and theRoyal Bank of Canada also withdrew from Bahrain during 1985.

The reasong for the slowdown in the ofshore banking activity inBahrain are:

- The depressed economies of the Gulf States since 1982 followingrevetrue decline thus reducing the demand for funds;

- Iran/Iraq cotrflict which closed two financial markets in the re-gon;

- Shifts in international financial markets from syndicated lendingto bond issues and other instruments;

- Concentration of banking business in the London, New York andTokyo financial centres,

Mergers. In May 1985 three banks-Khaleej Commercial Bank,Emirates Commercial Bank and Federal Commercial Bank-were

S4 TIIBPR8IAN GWTINO A$A

mcrged to form Abu Dhabi About $340 mlllio had

to be injected into the new bank the Abu Dhabi government toprovide new capital. A further in of new money was consider-

expected and no dividendsod neccssary as staf redundancice'wcre envisagcd at that time , 1985, p.58). Examples offi€rgrrs and other rationalization by international banks

in the Middle East have beeu above.

Funrr.s Pnospscrs

The declining coqmercial banking in the Gulf region result-

ed efforts towards divcrsification d consolidation.The Bahraid Monetary (BMA) maintains that, despite

the reduction of activitY orin Bahrain, thcre is strong

wal bv some international banks

cial activities. The BMA recentlYin Bahrain for divcrsified ffnan-approved applications for ncw

offices from ltalY's Monte Dci di Siena. Ycmen Bank forCiticorp Investment Bank,Reconstruction and DoveloPment

whose licence is for a regional ofrce covering thcMiddle East. Midland Bank, had an OBU in Bahrain since

1976, established during 1985 to a branch ol Midland Bank

. Group Interoational Tradc a wholly-owned Midland Bank

subsidiary lWilson, 1985, P.93).

Investment Banking, Iavcstment is roen as one of theoutlcts for the deolining banking buslness. Creation of,a rccondary market for investorsEuronotcs and FRNs has been

of Bahrain as a fidancial centre.Arabian Invcstmcnt Banking

buy and sell instrumenG such as

to keep the importaace

rporation (Investcorp), whichspecializes in investing and the placemot of hlghquality"acquisitions, bought Ncw York cr Tiffany & Company in 1984

in Philadclphia for $28 millionfor 9134 million aad Packardio 1985 (Wilsoo, 1985, p94).

G eo g raphic Div eqifi c ation. Asla Bank recently gaiued anindircct shareholding in a Chinese bank with outlets in If ong Kongand Macau. The bank also to channel monev from theMiddlc Eaet to thp Paciflo Rim as

lookiag for ep4a{iag,ttoh ri*.in the Middlc Eastwerc

Y.L. Reo 205

Daelopment of Regional Capitsl Mo?ket Thcrc are attempto todevclop a regional capital market in the Middle East. In re@ntyears, lcading Middle East banks such as Arab Banking Oorpora-tion and Gulf Intcruational Bank have moved away from basic lend-ing-based business and have been increasingly involving themsclvesin underwriting bond issucs. Longer term borrowing and lcnding,compared with the earlicr preference for the short term, is gainingin prominence. Further the governments of the countries participat-iog in the Gulf Coopcration Council (GOC), viz. Saudi Arabia,Kuwait, Bahrain, UAE, Qatar and Oman have bcen actively el-couraging the market', development (Banking World, Lagtst 1985,p.4l).

Oil Prlce, Futurc prospects for the ffnancial activity in the Gulfregion and Gulf region's financial relations with tbe developingcountries depend on whether and if so lby what magnitude and inwhat time-frame will there be a revival in thc oil prices.

The reverse oil shock of 1983 lowered the oil price from $34 tog29 per barrel which again foll to $24 in 1984 and less than $15 inearly 1986. It is speculated that the price may even come down tof 5 per barel. However, Gulf countrics believe that they would beable to withstand this hardJanding of the oil price eince: (a) theyhad diversifled their investments world-wide; (b) they had recovered

most of the investments they made In the oil sector and (c) theywould still makc a profit on each barrel of oil since their cost ofproduction has come down substantially. It ie estimated that the

cost of production in the Gulf region is $2 per barrel oomparedwith about $15 for countrieg like Britain and Norway (FinancialExpress, 24 February 1986, P'l)'

GULF-SourE AsreN Coopnn lnon

OPEO's surplus funds are largcly placed in OEOD countries atrdabout 20 percent of the surplus is allocatcd to the devclopingoountries. Beblawi (l984,pp.l20-l2l) argues tlat contiouation ofplacemcnt of OPEO surplus funds in the OECD countries wouldperpetuate its fnancial charaoter while investment in the developingcountries, with all their shortcomings, can offer a chance of traneforming thc financial into real.wealth.

Arab aid mostly goes to non-oil A,rab countricg whose share h

206 ifsr Prnsnw Gurr ano SourEr Asu,

1982 was 80 percent of total aid. Tho priority ranking ofArab aid allocation is: Arab countries, other Islamic count-ries, and the rest of the developing The other form of finan-

is for the business-orient-cial cooperation with developingod Arab banks to finance pro in the developing countries(Wohlers-Scharf, 1983). The Arabches in the South Asian countries

banks having bran-

Bank of Credit and Commerce

1982) were:

Bangladesh, India, PakistanInternational

Bank of Oman

Dubai Bank

Middle East Bank and UnionBank of Middlo East

aud Sri Lanka

India, Pakistan, Sri LankaPakistan, Sri LankaPakistan

Janata Baak (Abu Dhabi)State Batrk of India (Bahrain)

Bank of Baroda (Abu Dhabi)Habib Bank @ahrain, AbuDhabi)

National Bank of Pakistan

(Bahrain, Saudi Arabia)

United Bank (Bahrain, AbuDhabi, Qatar)

greater cooperation betweenshould be possible putting

The South Asian countries' bank$ which had branches in the Gulf(in 1982) were:

Bangladesh

India

Pakistan

Arab investment in tle countries has been limited inscopc and number. Oountry-risk limitcd trade potentialarid lack of investment in developing countries are themain reasons for this. A number Arab banks are investing inagro-industries, real estate and industries. However theiroperations are still concentratedabsorptive capacity in the Arab

the Arab region. The limited

diversifying Arab investment toMallakh (1984) expressed the hope

tntries points to the need fornon-oil developing countries.

the Gulf and the Indian

industrializecl countries' technology and the skilted #It ""llSouth Asian oountries in a three-way relationship.Another trilateral cooperation envisaged by Arab countries with

developing countries is that of Arab aid complemented with multi-lateral aid and Arab financing and investing in the developingcountries.

Though there havo been some schemes operating on a country-to-country basis betweeu Arab OPEC and Soutl Asian countries onboth the lines mentioned above, the prospects for cooperation (inparticular financial cooperation) as between the two regions*Gulfand South Asia depend on the steps that are yet to be itritiated ina substantive way ia areas suoh as linking of clearanoe arrangements,tradc fnance, etc. However, greater economic oooperation withineach regioo has to precede inter-regional oooperation.

Corqcr,ustoN

The post-1982 recession in the Gulf region followi4g the oil pricedccline had its impact on the international banking activity there.Many international banks withdraw or reduced their operationsfrom Bahrain and efected rationalization (e.g. mergers) at otherplaces. Banks in the Gulf are diversifying to activities such as in-vcstment banking. Efforts aro being made to develop a regionalfinancial market.

Greater economic cooperation with developing countries has beensuggested as one way of converting tha present financial nature oftle surplus funds 1by placement in banks mostly in OEOD countries)to real-wealth. The coopcration with dcvoloping countries is envi-saged in different forms such as combining the latter's skilled man-power with industrialized countries' technology in the dcvelopmentof agriculture, industry and infrastructure in tho Arab region andcombining Arab aid with multilateral aid and commercial lendingby Arab banks in the developing countries in financially viablc pro-jects. Gulf-South Asian economic cooperation on these lines existsto some extent on a country-to-country basis. Stcps have to beinitiated to develop cooperation on a region-to-region basis.

208 frrnPmsIAN Gur.ralqo

Earker, "Unitd Arab Emirates- Suweidi," Dectmber 1985,pp.58-59.

Ba*tns World, "M[ddl€ Eastern Bankibg," August 1985, pp'4144.

Beblawi, Ilaz.em, The Arab Gulf Econotlty in a Turbalent Age (London; CroodHelm, 1984).

Bl Azhary, M.S. (ed.), hrtpact of dtl Revenues on Arab GuIl Duelopment(London: Croom Helm, 1984).

Gabriel, Clare, "Offshore Banks io Cboppy Seas," Sonrfi, December 1985, pp.

123-24.

Kubursi, Atif, The Eco omles of ihe \rabian GuIl: A Sidtistical Sou?ce Book,(London: Croom Helm, 1984).

Mallakh, Ragaei 81, "Tho Gulf Codperation Council and th€ Prospects forGulf Economic Coordination," io M.S. El Azhary (ed. 1984, pp.54-6l).

McDougall, Rosamund, "Arab Banki4g: Top l0&--Retreat on Most Fronts,"The Banker , December 1985, pp.l27 47 .

Muehring, Kevin, "The N€w Look in Arab Deal Making," Institutinnal Inves-

tor, Juoe 1985, Dp.193117.Wohlers-Scharf, Tftute, Arab and Ishmic Banks: New Business P$tncry for

Developing Co ntries (Patisi OECD, 1983).

Wilson, John, "Gulf Banks Look for Birsiness Abrcad," The Ba*er, Vol; 135,No. 718, Decembor 1985, 93-98.

10. India's Relations with the GulfCountries : Issues and Responses

AJAY N. JIIA

The Gulf* remained a "hotbed

of feverish rivalry among thc mari'time powers of Europe since the beginning of the 16th century tillthe end of the Sccood World War. After 1945 two major factorsbrought the Gulf to the threshold of a new era which was charac-terized, firstly, by political dovelopments in India leading to theouster of Britaln from the Indian subcontinent h 1947, thus mark-ing the end of British colonial rule when the Gulf was essentiallyan extension of the British Indian empire. The second factor wasthc discovery of large deposits of oil in the Gulf, the exploitationand export of which, in tbe light of evergrowing demand from allover the world, gave unprecedented financial power to those states.

The independence of the smaller sheikbdoms of the Gulf, thenknown as the "Crucial States", in the wake of the announcement

of the British withdrawal from east of Suez in 1970 added a new

dimension to Gulf politics.The developments of 1973 leadiog to a substantial hike in oil

prices and tbe consequent f,ow of wealth made the Gulf emerge as

one of the leading oommercial ceotres on the face of the globe.

The geo-strategic importance of the area both as a predominantsupplier of oil and a fast expanding market went up considerably.This was quite obviously reflected in the massive flow of interna-tional goods and services to the Gulf, With a favourable balance

of trade and accumulated funds, the Gulf states have initiated boldnew programmes of modernization and industrialization to speedilybuitd up infrastructures and divetsify their oil'bascd economies indesired directions. This has also resulted in the large scate import

* The term 'Gulf is takcn h€re to m€an tte dCC staes (Saudi Artbie,Kuwait, the UAE, Babrain, OmaD and Qatar) and lraq,

210 Tnn Pnnsh!,l Gwr eNo Asn

of manpower from East Asia and {he tndian subcontinent.However, developments at the g of the 1980s in the re.

gion have had a marked impact on the cconomy and security of theGulfstates. The recent glut in the qforld oil market has resulted in asharp deoline in oil revenuesand construction activities

to a slowdown in economic

to ofer a unified assuranoe

the Gulf. All availablccvidence points to a relativcly er OPEO in the near futurc inwhich the Gulf states have played f. dominant role so far. ExceptOman, the oil revenues of all the Gulf states are decliningand according to a study by the Utrited Bank, major oil pro-ducers like Qatar, Kuwait, Saudi and the UAE have earned$82.5 billion less from oil in 1985 in 1984.r

The Soviet intcrvention in thc Iranian revolutionatrd the return of the Ayatollah, tfe impact of Islamic fundament-alism leading to Shi'ite unrest inl many Gulf cities, the ongoinginternecine war botween Iraq and Ifan since September 1980, a coupattempt in Bahrain in December 1981, a series of bomb explosionsand other subversive attcmpts in Kuwait io December 1983 andSaudi Arabia last year have all the vulnerability of thisregion. In the light of these ominouir devclopments, six Gulf states-Saudi Arabia, Kuwait, the UAE,ed the Gulf CooDeration Oouncil

Oman and Qatar-foro-

agaitrst any external threat or subversion.In the backdrop of tlese devolo and the centuries-old ties

betwcen India and the Gulf this paper attempts to brieflytouch upon India's cultural and ercial relations with the Gulffrom ancicnt timcs to 1947 when became independent. It alsopurports to present in a n the various factors and eventswhich influenced and shapcd Indials policy towaids the Gulf in thepost-independetrce era till 1971. $owever, the main thrust wouldbe to highlight dwelopnents in the Gulf region and the Indiansubcontinent sinoe l97l like the war of 1971, the Arab-Israeli war of 1973 and the oil crisis, its impact on India'seconomy and the various it took to absorb the oil shock.Finally, ttre working of Indian dinow would be exgmined,

in the post-1973 era till

I. INprr, AND THB Gurr: A EYBvIEw

Indo-Arab relatidns have a long Tha present friendly rela-

Arev N. Jire 2ll

tions between India and the Arab world in general and the Gulfregion in particular have been buttressed by centuries of commer-cial ties and cultural confluence between two dynamic and creativecivilizations-Arab and Indian. The nature, magnitude and signiff-cance of thesc two civilizations on each other have been immensez

through the ages. These ancient civilizations which flourished on tbebanks of the Euphrates, the Nile and the Indus may well be regard-ed as presenting a sort of relay race of human culture. Arabs andIndians have lived along the shores ofthe same Arabian sea whichIed to a considerable amount of cultural and commercial contactbetween thcm, The Gulf has acted for centuries as a bridge con-necting India with the rest of the world in the West. History, cul-ture and religion have all contributed significantly to strengthen theties created by geography, The Persian Gulf is an extension ofthe Indian Ocean and is linked to it through the Gulf of Oman.

Olose commercial and navigational contacts existed between Indiaand Arabia Felix cven in the period prior to recorded history.Numerous excavatioos and archaelogical sources have establishedthe occurrence of demographic movements, commercial intercourseand oultural communications between the two regions since the thirdmillenium B. c.3 Contact was established between the merchants ofthe Kulli culture in southern Baluchistan and those of early dynasticSumer, probably around 2800 B.c. There is evidencc pointingto the presence of Indian merchants from Makran and Baluchistanin the city of Elam and Sumer in early dynastic times. Mohenjo-daro was a great port carrying on tradc by sea with Ur and Kishand Egypt.a Queen Hutshepsut's was one of the first commercial-cum-diplomatic expeditions to India from Egypt in the ancientperiod.6

These contacts continued in the centuries immediately precedingthe advent of Islam, Whereas in West Asia, this period was markedby the political supremacy of Persia, in India it was marked by therise and fall of the Guptas and the Mauryas, The north-eastern front-iers of Ohandragupta Maurya's empire encompassed the whole ofAfghanistan. The fact that the existence of these two great empireswhose boundarics touched each other must itsell have been a greatcause for promotion of cultural exohange and commercial inter-course.

However, the period of deeper cultural and commercial relationsbetween thc Arabs and the Indians began after the rise oflslam and

212 Twn PERsIAN Gulr eNo Asre

its eastward exoaosion. The rise spread of Arab power, parti-cularly the foundation of the A basid empire which withir a fewyears of the risc of Islam, vast territories stretching from

was one of the ffrst sciences inBagbdad tbrough the translation

of Africa in the wcst to thethe Oaucasus in the nortl tosouth,o This period has been

between the two regions. Indo-at their zenith when Al-Baruni.

the Canary islaods off the West Cborders of China in the east andthe shores of the Arabian sea inidentified by scholars as the go perlod of Indo-Arab relations.Apart from intensive trade and the process of exchange

in this period was rcciprocal andof the maximum amount of kn

the-dissemination and fusion

religion and philosophy andge in tbe sciences and the arts,and cultural ideas, AstronomY

ced in the academic circles off the works of Aryabhata and

Brahmagupta apart from the Indian " Surya-Sidhanta", TbeIndian numerical svstem and the ncept of zero becamc known tothe Arabs and they also transla into Arabic tbe whole system of

Chakara", "Susruta", "Nidana"Indian medical science includine 'and "A sthanghradaya".? In the of fction and philosophy too,there was a very rich interactioArab trade and cultural tiesthe famous Arab scholar andof the llth contury to study

visited India at tho beginningsciences and to learn from their

wisdom, He trantlated many Ara scientific works into Sanskrit andthrough his monumental booka very interesting account of

"Tahriq-ma-lil-Hind", he gave

Iegacy to the Arabic speaking woIfowevcr. it was when India wi

ia's ancient culture and scientificd of his time.essed the beginning of Muslim

conquests from the north that t Turks, Afghans and Mughals, andnot the Arabs. became the mai instruments of Arab knowledgeand education in India. The middle ages were marked by ageneral decline in trade and re both in India and the Arabworld. This was the Deriod when Indo-Persian interaction becamemore intense. The Islamic influence since then has left oer-manent impressions on Indian cul tradition, architecture, langu-age, literature, att and science. ose cultural contact betwecn theMughals and thd Safavids is well in the Indo-Persian fusionin Indian paintings and The Persian influence onIndian culture was at its peak g the reigns of Akbar to ShahJahan. The Ta1 Mahal, described as the "Soul of Persia

the Urdu language, are theincarnate in the body of India,"

Arev N. Jna, 213

two living symbols of the fusion and synthesis of Indo-Persiancultures"

With the advent of thc European maritime powers and moreparticularly Britain in India and the march of colonialism in tbeGulf region, active contacts began to dwindle and the flow of tradeand ideas became a trickle as both India and the Arab world passed

into British tutelage. This does not mean that there was a total cut-off in Indo-Arab trade and commercial relations. They did existeven then but it was neither the Arab world nor India tbat benefit-ed directly by this trade. India's economy at tbat time \ryas primarilygeared to British imperial interests. Indigenous industries andhandicrafts were destroyed by the British while the export of rawmaterials continued to feed the industries of England. The beneftsfrom Indo-Arab trade went directly into British pockets.s

It was not until the dawn ofthe modern period that as a resultof reawakening and socio-religious reformist movements that intellec-tual contacts between India and the Arabs were restored. At thebeginning of this century, ties were restored in the form of emo-tional commitments to certain issues like religion (Kbilafat move-ment), anticolonialism, anti-imperialism and many others, It issignificant to note that the era of western domination over Indiaand the Arab world had more or less been the same and it was

during this period that both were passing through the critical phase

of their struggle against foreign dominance. Since contacts at na-tional level were sporadic, India's support for the Arabs came inthe form of reiteration of Indo-Arab solidarity at the emotionallevel.o The Indian National Congress, which under the leadcrshipof Mahatma Gandhi had been transformed into a mass organiza-tion dedicated to political emancipation and social regeneratiop, be-gan to take increasing note of nationalist movements in neighbour-ing regions and to relate them to India's own struggle in thecommon fight against colonialism and imperialism, The Arabs onthe other hand also saw that their own emancipation and indepen-dence was very much dependent on the success of India's strugglefor freedom.ro

II. INDIA AND THE Gur,r arrsR Ir{tnpBNoBNcs

After independence, the political ethos generated by India's freedomstruggle exercised a marked influence on free India's official policies

214 Tlg,B PsRstlN Gur.r .luo

and attitudes towards the Gulf An independent Indiafelt emotionally committed to the aspirations of tbe Arab people.

Its policies towards the Gulf equally determined by its politi- '

cal, economic and securityOne ofthe basic considerations governing India's policy towards

the Gulf region was the of security. The geo-strategic

truly emphasized from ancientI of trade and communication

importaoce of this region had

between the anoient centres of and the outer world. Inthe context of the maritime among thc European powers, itsimportance increased manifold. ughout reocnt history, be itthe British seizure of Aden and Egypt aod the establisbment of achain of protectoratcs in the Gulf area or Napoleon's expedition toEgypt or tle Czarist Russian drive to the Persian Gulf or Hitler's"drive to the EaSt", the purpose !f all the contending powers hadbeen to seek a foothold in India b[ controlling the trade routes andcommunication lines. The British withdrawal from India along withthe creation of Pakistan and the pmergence of independent states

in the Gulf region coupled with the rise of Soviet Union and theUtrited States as new global powei's no doubt changed the form butnot the substance of international irivalries in the region. Even now,about 90 per cent of India's goes through the Arabian

region could have a tremen-

times as the Gulf has been a

Sea. Hence, any instability in thedous impact on lldia's trade and

support, professedly on moralconfiict over Palestine atrd the

. The continued relevance

in the Arab-Israeli

of the region to India's security m[s undcrscored by Prime MinisterJawaharlal Nehru in a statementin March 1949. "If you bave to

ore the Constituent Assemblyany question affecting the

Middle East, India inevitably' into the picture. If you baveSouth-East Asia, you cannotto consider any question con

do so without India. Wbile the East may not be directlyrelated with South-East Asia, are connected with India."Ir

The second objective of Indiah interest in the region was thedevelopment of trade. India, -hence, sought to buildfriendly relations with the Gulf with considerablc emphasison Saudi Arabia and Iraq. It to win the latter by its outspoken

a member of rhe UN Specialdemands of the Arabs. Ason Palostino, India did not

subscribe to the majority Plan the partition ofPalestinc. Secondly, India also legitimately conccrned about

fulv N. Jtu 215

Pakistan's rolo and constant strea.m of allegations by the Pakistanileaders, press and political ffgures to discredit India and its policiesas being anti-Muslim and also that it was tbe biggcst threat to theexistence of Pakistan. India's oonstant identification with the Arabshad its advantages.lt Thc insistonce on moral principles gave Indiandiplomacy a measure of influence which canoot be explained interms of its then available power and actual resources. Moreover,it yielded another political bonus in so far as it enhanced India'sprestigc in the Arab world which started looking up to India forsupport.

On the bilateral plane, efforts directed at laying the foundationsof a mutual cooperation betwccn them were made by settingup andexchanging delegations and embassics at different levels with allthe countries of the Gulf region. The same was also sought to be

achieved by signing treaties of friendship as well as trade and cul-tural agreements with them, These efforts were further reinforcedby exchange of visits and the holding of consultations on variousissues, wbether bilateral, regional or international.

In the wake of the formation of the Baghdad Pact, India's policybecame so Cairo-centric that Indo-Egyptian rclations came to be

represented as Indo-Arab relations. Tbis produced some unavoid-able complications for India.lt led unnecessarily to the alienation ofothcr Arab countries like Jordan and Saudi Arabia and, later, Iraqduring Kassem's regime. A sharp division among West Asianpowers in the early and mid-sixties into two groups-one as the

Islamic, pro-westcrn or reactionary and the otber as socialist, dcmo-cratic or revolutionary-presented a set of new problems to Indianpolicy makers. India found itself in the progressive nonalignedcamp led by Nasser whereas Pakistan continued to exploit its reli'gious identity throughout the 1960s with the conservative states ofthe rcgion for support in its dispute with India.

Thesc efforts, however, were only partly successful. TVhen theIndo-Pak war of 1965 broke out, India expccted these states to takea rational and impartial attitude towards the war waged on itsfront-iers. The Governments of the Gulf states, howcver, were neitherunanimous nor united in their response and reaction to the situa-tion as it unfoldcd itsclf in thc Indian subcontinent. But, the press

of the region, siding with its co-religionalists in Pakistan, was near-

unanimous in its anti-India stance all through thc war. All that India

216 TFE PnnsAu GuLF AND Sotmr Asu.

couldachieve wgs lraqr andKuw*i[ineu-trelity in thewar. Indiahadcertphly exp€ctidr more support,rt

In thq afterpatb pf 1965 war, grir trade rclatioos did register arigniffcant ripe a4d India sigped trade agreements and culturalpacts witb some Gulf states. Thi[ peasant state did Dot last longand thg precipitating factor onqc again was the detcrioratioq inInds-Pakistani relptions in l97l foflowing the Pakistani arnycrack-down in East Pakistan (now Bangl{desh) aad the resultant flow ofover l0 million refugees to India. Though there was general sym-pathy with India on the refugee {uestion, Gulf states .like SaudiArabia, Kuwait and others wero its most vehement critics. TheseGulf states strongfy denounced Indfia as tbe aggrossor and accord-ing to a Beilut N€wspaper, Al-N alpar (22 December l97l), ..duriogthe firrt days of the war, Saudi Ar4bia, Kuwait and Abu Dhabi to-gether collected a suq of 9200 millfion and passed it to tahya Khar,than Presidcnt oi Pakistan to hel]p him repulse the Indian in-vafg15."ra

m. Drvnr,opuBNrs lN THE 1970s: Tusrn lMplcr on lNora

The $,eginaing of the 1970s the emergence of some quali-tative changes, appearing almost usly in the powcr struc-tures of the Indiaq subqontinent an! the Gulf region. Thcse changosin the environment of the two regions had a profound bcaring upontheir mutual forqign policy tions towards one another.India's regional environment, wing the dismemberment ofPakistan aftel thq 1971 war, had uodergone a radical transforma-tion. Thc emerggnce of a secular Bangladesh within theSUbcontinent, was a change in tho state structur€of South Asia, in the po within tbe region and in India'sperceptions of its increasing role asl a whole. As a result of theseeftanges, New Delti for the first time since 1947, was able to riditself of itt rather unhealtby tion with Pakistan and theIndo-Pak powcr bplancel6-a pretied down to the subcontinent

tion which had kept Indiaprevented it from pl,aying an

cffectiyc role in ths wider arena of international afairs commensu_rate with its size, geostratogic lodation and actual and potentialrcsources.

This relolUtionary change incontinent had followed quickly at

power structure of the sub-e heels of the completion in

Arev N. fitA Zl7

November 1971 of th€ British withdrawal from the Gulf region.

This withdrawal had thus simultaneously triggorcd off a similarmulti-dimensional change i[ thr power shucturo of the Gulf regiotr.

Witb the re$ultaat liberation of Bnhrain, Qatar and the UAE, itlod to a protiferotion in the number of regional actors. Lackitrg ioany political or pilitary powcr, theso states could not be expectedto play aqy oommanding role in the Gulf except to keep themselvosin tact and naintain their monarchical systems with the help andgoodwill of the bigger and more powerful countries around andoutsida. This convcycd tbe improssioa of the creation of a vacuumin the Gulf to many outside powers.

The Shah oflrap, wfuo eince the British announcement in February1968, had nurturcd the dosire of fflling up this imagined vacuum, ina military action, occupied three disputcd Gulf islands of Greatorand Lesser Tumbs and Abu Musa at the critical choke-point in theStrait of Hormuz. The Shah's actiou amply signiffed that with thedepafture of the Bdtish, Iraa had taken on the role ofa pre-eminentpower in the regioa and ossumed the responsibility of policeman ofthe Gulf. This solf-assumed leadcrship of Iran and its self-help inanaexing the three Gulf islands mct with wider apprehensions

throughout the region rcsulting in tho severing of diplomatic tioswith lraq and othpr Gulf statcs.

Those dcvclopmente in the Gulf scelario, when combioed withthe affuane of the Gulf statog from their increased oil revenues,initiatcd the procees ofan arms race in the regton. Thc Shah ofIran, ootivatod by his desire to control the Gulf, embarked upon amassive armament programme. Its ropercussions were increasinglyfelt in Iraq, Saudi Arabia, Kuwait, the UAE and other Gulf states,

who with thoir overflowing petrodollars also began shopping forsophistioatod armoury. ro

The huge piling up of arms in Iran and the Arab states of theGulf was greeted with raised eyebrows in India. The possibility ofthese arms flnding their way to Pakistan in the event of any futurewar with India incrrased the anxiety of the Indian Government.l?This concErn was not wholly unwarranted in the light of their at-titudes and their support to Pakistan in past Indo-Pak wars despiteclose economic and commercial contacts of these states with India.

Moreover, the oil wealth of these Gulf states ensured their in-creasing involvement in internatlonal affairs. The value of theirrcsourc'es to the outside world assured them (especially since 1973)

218 TrrB Pmslx Gwr lNo AsIA

a degree of iof,uence and the <if mutual dependence betwcendrew them increasingly into thcthe oil producet's and

international areha as a powerful 18 Finally, their attempts atbringing tbeir newly found to bear on some speciffc issues,most importantly, to bring about redress to the Palestinians fortheir legitimate rights, opened new perspectives in international

scble, modern and sopbisticatedpolitics. Thus, the inflow of largeweaponry into the Gulf with thc energy crisis, followed

by the OPEC, the consequeotthe desire of the Gulf states to

by a six-fold increase in oilaccumulation of petro-dollarsdivert these resources into for themselves more resilienteconomies with massive programmes well before theoil reserves werc exhausted, Ied a significant change in the mutual

Gulf towards one another.perceptions of both India and

The Energy Crisls and India's The energy crisis in a broadperspective can be described as depletion offossil fuels in theworld in view of their ever consumption, Though energyis derived from a vast variety of the 20th century worldbegan to rely more and more oil as the primary source.lo Thcexcessive dependence on oil till was largely due to its cheapprice as comparod to other sources. The pendulum swung tothe othcr extreme with the steep ice revision made by OPEC afterthe Arab-Israeli war of 1973 S1.88 a barrel in January to$11.65 on lst December 1974). The increase in thc price of oilwas only one facet of the Arab of the 'oil weapon' which alsocomprised (i) a progressive 5 per15 per cent cutback initially, and

great significance. This wasworst-hit were countries like

t cutback in oil production withan embargo on the supply of

their oil to the countries Israel in the war.zr These develop-ments created numerous f about an impending catas-trophe.

To governments reudered in recasting their budgets andthe Gulf with about 62 per centreframing their economic

of the proven oil, reserves ated in and around it, assumedtrue of all countries but thc

which with its total annual needof about 23 million tonnes of produced only Tmillion tonnesannually and thus faced a gap of about 16 million tonnes, If the

moving, this gap had to be fflledwheels of industry were to beby imports. The problems which country faced then were mainly

. Arev N. ftIA 2I9

to ensure a steady supply of oil and to find resources to pay for thehuge oil bill.rz

The development of India's relations with the Gulf states in thepost-1971 era could be examined in two stagcs. The first of thesestages were the years 1972J4 dving which the main thrust of India'sdiplomaoy towards thc Gulf was directed towards repairing thofencesand rebuilding the ties broken by the 1971 war. The second phase

began with the oil price hike in the beginning of 1974 in which tbeeconomic obiectives overshadowed the political objectives of Indiatowards the Gulf. Thus the working of Indian diplomacy towardsthe Gulf since mid-1970s has to be measured mainly by the cconomic.rod.

India's involvement in Bangladesh afairs posed serious constraintson its policy towards the Gulf. Not only did this bring Pakista'ncloser to the Gulf states but it also marked the ebb-tide of India'scrcdibility in the region. Throughout 1972-73,lndia's main objectiveremained that of convincing thc Gulf states of its good iutentionsand it was the Simla Agreement oi August 1972 which romoved

some misgivings of tbe Gulf states aroused earlier and restored

India's credibility to a considerable extent. The question of Bangla-

desh and the Pakistani POWs, however, continued to plague India'srefations with the Gulf till 1973, It was the 1973 Arab-Israeli warand the subsequent oil crisis which posed new cballenges and prob-lems pushing the Bangladesh question into the background andforced both India and Pakistan to evolve new policies in the lightof the changed situation.

India made efforts to solve the first problem by falling back upon

the traditional polioy of support for the Palestinian cause and ex'pressing its all-out support for the Arabs at the UN and otherinternational fora. It also supported the inalienable rights of the

Gulf oil-producing states to bave complete control over their naturalresourccs thercby acceptiog the legitimacy of the six-fold rise in the

oil price and refused to join any consumer bloc to confront the oilproducers. These gestures of India convinced the Arabs of its gen'

uine friendship as a result of which it was not only exempted fromthe oil-embargo but also excluded from the oil-squeeze that was

likely to result from the 5 per cent per month cut-back in the oilproduction.

In order to pay tbe soaring oil bill, India had to ftnd ncw markets

and strive for larger export earnings through a coucerted export

120 Tne PBnsrAb{ Gur,r aNo SoJnn Asn

drive in thc Gulf region. Indian di]ptomacy aftcr the oil oisis wasinfluenced by economic urgency add a variety ofpolitical considcra-tions which gav€ an altogcther nelv orientation to its Gulf policy.The mein thrust of this new oconQmic diplomacy was the emphasisou India's emerg€nce as a country that could economically, tech-aologically and industrially play + vital rolo in contributing to thedevqlopment of the Gulf. The of these Sheikhdoms. theirdcsiro to divcrsify tbe economy {nd the relative absence of an in-dustrial infrastruoture could be by a geographically conti-guoua India stcpping up its of machinery, cemeot, iron andrtcel, engineoring and electrical appli besides traditional itemslike rice; vanaspati, tea, jute,teohnical advan@s made by

, spices, etc, In addition, thecould also be used in setting up

joint ventures, jolnt industrial andolcs, cto. Forcign exchange could

cooperation, consultan-

tancos through increases in export of manpower.In these objectlves India met remarkable success. The years

which followed witnessed unia Indo-Gulf relations,

cordiality and cooperation

Moreover, political developnen which took place in 1973-74also convinced the Gulf states the genuine eforts of the Indiangoverrmcnt in normalization of its ations with Pakistan. An agree-ment for the repatriation of the

be earned from the remit-

istani POWs worked out bythein August 1973 followed byIndian and Pakibtani

in 1979 in the UAE and Kuwaitmaterirls it has been accepted asGulf.

Pakistan's recognition of Ban in February 1974 and the Tri-partite Agreement among the go ents of India, Pakistan andBangladesh finally cleared the and political debris left by thel97l war and ushered in a new in Indo.Gulf relations.

India cnjoys mhny advantages the Gulf market. Geographicalproximity and India's fraternal ti with tbe Gulf states put it in arelativoly better position to a reasonably good place as theirtradlng partner. There has been a acceptability of Indiangoods in the Gulf. Indeed, in commodities like galvanizediron products and cast iron India enjoyed a near-monopoly

in the field of constructionregular supplier throughout the

Bilateral Agreemants and Joint C . One of the most imDor-tant aspccts of India's increasing in West Asia was to rasie

Ar,ry N. Itut 221

relations from diplonratic-political cooperation to econouic-techni-cal collaboration and to change its focus from Egypt, Syria adthe Lebanon to Gulf countries like Iraq, Saudi Arabia, Kuwait atrdthe UAE. Thc setbacks tlat occurred earlier might be attributed toa learning proces5, especially when onc considers the speed withwhich new patterns of intertrational relations evolved after the oilcrisis.

In its quest for building ties with theseGulf states, India signed anumber of bilateral agreements and Joint commis3ions werc formedfor promotion of economic and technical cooperation. Howevcr, italso increased its exports to the region roughly ffve-fold. Ir thcprocess, it also developed new economic structures and trade pattenrc,exploited and processed some of its raw materials with the he.lp offoreign capital and found ernployment for several hundred tbourand Indians which altogether resulted in a favourablc forcign cx-change balance. As a result, within a few years India's inagc ia theGulf countries changed considerably, in fact more than anywhcreelse because there was a sudden presence where forrncdy thete hadbeen next to none. It is interesting to note that whereas in early1976, the Bombay-based Economic and Politlcal lTeekly complairrdthat in the Arab Gulf, India had ..no image" for its goods or iBknowhow,zs in late 1978, a joint Arab delegation from chambers orftrade, industry and agriculfure visited India to explore fresh arcasfor joint ventures and other technological coopcrstioo as wc[ EsIndia's capability to export agricultural products.a

The new importance of Iraq as India's main source of oil oor€'lated with the general upgrading of bilateral eoonomic relatiotrs ththad started some years ago. India mct its first fir.m succxs iu lra{in 1973 resulting in an agreement through which the letter agreed

to supply India 30 million tonnes ofcrude oil over ten yearc.*Indo-Iraqi ties were enhanced with the visit oflraqi Vie-Prcgideat

Saddam Hussein in January 1974. A major breakthrough came withthe sigoing of yet another agreement granting a gl@ millioa softloan to India with an interest of 2,5 per cent repayable ia l0 yerrgafter an initial 5 year grace period to help India correr the cost ofoffimported from lraq. Moreover, it also agreed to give India croditrfor setting up plants to produce alumioa and iron ore pellets adto import Indian products on a long-term basis. Howcvef, the frstever visit to Iraq of Indian Prime Minister Indira Gandhi in early1975 proved to be the "real starter" in Indo-Iraqi tics lEvoolitrg s

222 Tan PsRsrAN Gwr et.rp Asrl

close identity of views betweenial, regional and lnternationalagreements in various areas.8.

two countries on various bilate-ard resulted in some morethen, nany a visit has taken

cement.s?

place by the top dignitaries of sides to facilitate more coopera-tion and collaboration in manv

Eforts were also made to close relations with other Gulfstates and it was on the lines those considerations that MrsGandhi's visits to the Saudi in April 1982 and the UAE

1981. Her visit has been termedgap" and removing

rclations, Iodian primeministers and presidents had been visiting European andAmerican countrics but had such an important arca forIndia in economic and strategic Moreover, the Arabs gavemuch weightage to the personal of relationship so far as theque$tion of granting aid and was concerned. Thus MrsGandhi's visit, apart from aiming oew economic deals was also

of thc regional situatiou andgeared to apprise the Gulfpledge India's support to them at time when external forccs tbreat-ened to involve the area in a conflict. Quite apart from themutuality of economic benefit that ensue from a closer coopera.

was successful in convincingand nonalignment werc pro-

tion, between the two areas, MrsGulf statesmen that tbeirtected orrly by clope cooperatlon consultation with each other onvarious issues. She also the formation of the GCO (GulfCoopcration Council) as a historic and, above all, impressedupon the Gulf people India'sfriendly relations with Pakistan.

to have close and genuinely

One of the most tangibile of these visits was the signingof bilateral agreements and on joint ventures and otherprojects. Moreover, the t of India's offer of 26 to 40per cent equity share to Gulf rs cngaged in joint venture pro-jects resulted in many business from Gulf businessmen.Some 19 new areas were identifled or joitrt venlures and a team of95 top industrialists from Saudi Kuwait and the UAE show-ed keen intercsts iu invostment in particularly iu petrochemi-

and Kuwait were undertaken inby some scholars as ,'bridging amany irritants that existed in

cals, pharmaccutioals, fertilizers. From 1973 to 1985, India had 22 fficial bilateral agree-ments with the seven Gulf states in fields of economic, scientificand technical cooperation. these agreements, India under-

Arev N. Ilar 223

took to assist the Gulf states with the supply of goods and technicalservices for various development projects such as railway ties, steelrolling mills, electric power transmission, shipbuilding and repairfacilities, supply of iron ore for the manufacture of light engioeer-ing goods, fertilizer, cement, agricultural equipment and many other.India also signed cultural agreements with most of the Gulfstates (with the UAE in 1973, Bahrain iu 1975 and lr':aqinl977 aadQatar in 1985) wfich envisagcd cooperation in fields of education,culture, sports, radio, TV and tourism. Thus it could be seen thatby the late 1970s, India had established multi-dimensional ties withthe Gulf countries whioh were based on the complementarity of eco.nomic needs aod services and not merely on the identity ofpoliticalviews and social objectives.

Joint Ventures, Consultancies Turnkey Projects. The award of anumber of prestigious projects, contracts, oonstruction and consul-tancy work to various Indian firms speaks of India's success in itsquest for new vistas of technical coopsration. Trade between thetwo has also increased significantly (Tables 2 and 3),

In Iraq, for cxample, some of the important contracts awardedto Indian companies are-construction of grain silos, roads and brid-ges, various sewerage projccts, cxtension of Baghdad colour TVstation. There are about 3t Indian companies presently engaged indiferent kinds of projects in lraq. In 198I, out of the total of 9?projects, 27 were with public sector companies and the rest withprivatc scctor companies.2s

About $200 million worth of Iraqi contracts werc secured byIndian companies in 1978 alone. EPI (Engineering Projects India)alone bagged contracts worth Rs. 43 crores from Technical Indus-rics of Baghdad for a turnkey project. Another Indian ffrm (Conti.nental Construction) was awarded the Rs. 27.5 crore Nassirya Sewer-age Projeot which was the 4th project awarded to India the sameyear.2e Other contracts won by India in 1978-79 werc a Rs, 8.7 crore .

contract for building a bridge across the Diyala river in nortbcastern fraq, a bridgo across the Khider in southern Iraq, a Rs. 42crore contract for building silos in north.west Iraq by EPI. Indiaalso secured contracts to construct a 327 ka road valued atRs. l0 crore and a treatment plant of tho Amara Sewerage andDrainage Project.so Moreovcr, the $276 million prestigious railwaycontractsr which India baggcd against stiff international com-

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pctition in l98l was also a rcminder of its preeminent position asacountry with a well-developed railway system. This contract alsoincluded the construction of nearly 85 bridges including a major oneover the Euphrates river.

On the other hand, HMI (Hindustan Machinc Tools)and BHEL(Bharat Heavy Electricals Ltd) are set to takc up many projects inIraq. A model township on the outskirts of Baghdad is coming upunder a Rs 13,5 crore project undertaketr by a Bombay eqgineeringfrm.Ea The UP Stato Bridge Construction Corporation is among thepublic seotor companics with a fairly succcssful record. Rail IndiaTcchnical Economic Services (RITES) has secured a contract foroupervising the execution of the Akashas-al Qath railway linc worth$6 million while ITDC is planning to lend a big hand in boostingIraq's ambitious hotel building programme in Mosul.ss India is alsogoing to set up a machine tool unit in Iraq apart from helping in22 nerry areas including tractor manufacture and electronics. In addi.r

tion, other projeots includo thc construction of 2,269 housing unitsby Punjab Chemi Plant at Basrah-Um-Qasi aud Fas Khork watersupply project by Continental Construotion, Al-Thawrn sewerage

by Jai Prakash Assoclates, Minister's Building project by EPI andthe Construction of Massayeb-Samakra Railway Line by IRCON.84Further, Indian companies have also undertaken contracts for ser'viccs like management supervision, training and consultancy worthabout $20 mi11ion.86

Of courso, the ongoing lran-Iraq war has seriously afected theIraql cconomy resulting in a sharp decline in its cxport carnings. Ithas led to a massive cutback in Iraqi imports. However, the increas-ing success of Indian companies could be judged from the fact thatdcspite tbc war, the contract valuc of Indian projects-civil, mechani-cal and electrical was worth 92.68 billion ln 1983 as compared to$I.E5 billion in 1980.8c

In Saudi Arabia, Indian companies have been involved in con-struction and engineering projocts worth $400 million. Saudi Arabia'sreadiness to award India a $50 million contract for establishing a50 MW gas turbine plant and for installing a 180 km long high ten-sion transmission lines? was further evidence of Saudi appreciationof India's capabilities in tho power sector; By the end of 1984, therewere six major joint vcnture projects in India's hands and some ofthem on the verge of completion. BHEL alone is ourrently involved in

228 TrrB PERSu,n Gwr exo Soutn Asl

an electriflcation project in Wadi Gizan. Thc Dredging Corporationof India is assisting in the of the commercial port ofYanbu. EPI has been engaged intanks in Jeddah.88

the construction of oil storage

Among joint ventures in the sector are the construction ofstaff quarters at Riyadt U by Howe India, the constructionof a hotel in Dammam by East In{ia llotels and the commissioniugof a desalination plant by Tata Company. KMA Interna-tional of Iodia has signed a joint Venture agr€ement with tle Housoof Binadin, a reputed Saudi indusdrial conoern, for transfer of tech-nology "in relzited . plants wot'th ('S|, 30 million.se Ohampaklat Invest-ment and Financial Consultancy (OlfCO; is elso planning to set upa joint venture. Bank'of Baroda h4s evinced keen interdst in piomot-hg joint ventures ln the ffeld ofl banking. ln addition, Tatas areassociated with threc 4ajor projectd-sale.and servicc. of Tata trucks,refrigeration equipment and sale abd fabrication ,of, profgb houses.

AOC has won ths oonfact for tlc managemcnt of .Yaobu CementPlant, Deccan Enterprise, Secundefabad, for producing rubber riogsand,Dcsein Private Ltd. of Delhi fdr consulting engineering and pro-ject contracting serviceg.ro In 1984 Saudi Arabia also decided to im-portlndian solar onergy systems fof use in hoteh, hospitale and def-ence establishmcnts and it awarddd the contract to Bharat Solar

and residcntial complexes, school university campus, hos"pitals and office buildings.. Five qEPlincluding the Rs 2,300millionventure witl a Japanesc company is said to be the largest turn-key prqiect undertaken by public sector company abroad.aaOthcrs include the building of a defence camp worth Rs.

projects fave been bagged byiya Houring Complep in joint

Arlv N. Jui 229

codtractcd to build roads, highways,.an oil refinery and g sponge

iron plaat; ACC have built a gement factory.aa

Anong private sector ooncpaniesr ' Parles have set urp and,are man'aging soft drink bottling plants in Kuwait. A plant fornanufactur'ing bulbs has already been set up with India and Hungary jointly'Biecco Lawrence havc established an electrical repah shop hnd West

Iadia Erebtivrs and Fedders Lloyd irre'ersaged in insulation tifther-d&f $tatibns; fetilizcr complexos ard distillatiotr plad1s,.rF"r -

In the UAE, the importaDt Indian contracts aie civil works for ardflnet'y.iri'the Ruwais ihdustrial area in Abu Dhabi by EPI of the

valiie of $25.25 million, a tube-blending plant being set up by BalmcrLawric, consultancy work for AbuDhabi National Oil'Company by

ON'GC, a multi-purposc pipelioc by Engineers India and divil con-struction. work for'the aew international airport in: Abu Dhabi by

Eagineer,ing Construction Corporation.4o ,.; ,, .,r., '

Besides, a number ofjoint ventures havc becn eet .trp'in Dubai formaoufac{urc bf pressure vessels, sulphirric acid, contairers, wireropes, pa'lbts; pld$tic' products, crofil works, tea bags; steel scaff'

0ldings; Most of these have gone into producfion arid the.rest are

6t thc verge of cbinpletion. These projects have been mtinaged by

compaqies like Tatas, Kamanisr.SAIL, Dastur International andmany

smaller business houses. Other projects which,have .been io various

stagos o-f conpletion and .ippleqentatiqn nclude. technioal :aonsul-

tancy, large landscaprng jobe,rfilm. procurement and distribution. InShariah;. an Iadian company had a. sub'contract for building the

Sharjah InternationalAirport which was inaugurated in April l979.az

Sooe'other.plants being set u0 in Sharjah, Ajman, Umm'al-Qawain

inpludo those for producing soft drinks; ice cream, pharmaceuticals,

asbestos sheets, electrical conduit pipes and electrostatic dust pre-

cipltatbrs.4s''Indian companies have also been engaged in smaller Gulf states

in many areas.,In Bahrain, a.. cement faotory is . to be cstablished

with expertise froo ladia. One joint venture-is related to sulphuricacld prodr:otion while 'auothor is the assembly, of ooaputer com-

ponents at the Saota Cruz electrodic export processing zone.4e InOmatr;r thcro were'at loast sioiot Itdialr jotnt veotute proJeiits whioh

ibcludcd ttading and constiuction consultancy services and wood

and panel productS. The Taj Group is managing 'the Royal Guest

House apart from its joint venturo in. an. Indian, reetaurant.60 Yet

230 TIUPBRSTAN Gur,rnlo

another joint veuture which hasGovernment is for water-wellQatar, an Indian ffrm acquiredcouplo of years back.6s

Mmpower Export, Yet auotherbeen the large scple export ofwith a huge pool of labour ofcally and socially to takeand programmes of the GulfAnd when Indian constructiondifcrent parts of the Gulf,force wittr theq at a rolativclyto provide a largo number ofnecessary skills has been acntropreneurs to win contracts

The exact number of Indiandifrcult to compile. It ig estimatcdA large number of illegal wthe Gulf. By Deccmber 1983,

Indian workcrs in Saudi Arabia.to 95,000 in Kuwait,72,000 to 7Bahrain, Opan and Qatarhomc country.sa Thcsc remitrancesboost India's foroign cxchange

Indians working in tho Gulflndia, particularly from Kcrala,areas not previoruly associatedMadhya Pradesh, some arcas of Ustarted sending a large number ofgest supplier of labour to thethcre are about 135,000 Keralitcsare in the Gulf countries.6{ Kcralatotal land area but it has theployed. A combiqation of suchan oxcellcnt brecding ground forwell be that the employment oppoas a safety.valve for pent-upsulted in activities of a different

Apert from these traditional pool centrcs, a considcrable

Asta

been approved by the Indianand sprinkler irrigation.sr In

worth Rs. 500 million a

of Indian enterprisc haoto the Gulf states. India

kinds was well placed geographi-of the multidimensional necds

following the construction boom.began to win contracts in

naturally took their own labourwage-rate. Indeed, the abilitylow paid workers with all the

factor in thc ability of lndian

in the Gulf coutrtrics isbe between 1.25 to 1.60 million.are pres€nt in different parts of

were about 125,000 to 15O000300,000 in the UAE, 90,000

,000 in lraq and about 98,0fi) iuRs. 2,000 crores annually to tbe

reccntly wcre largo enough todespite incroases in oil priccs.

mainly from thc western half ofand Rajasthan. However,

immigration such as Bhopal inPradesh and Bihar havo also

rkers, Kerala has beon the big-According to unofrcial sources,

abroad and most of thcmhas only 1.2 per cent of India's

proportion of cducated unem...unemployment and litcracy is

political discontent and it could.in the Gulf have acted

that might havc othcrwisc re.at home.

Arly N. JHA 231

number of nurscs and maids from Pondicherry and Goa have alsobeen workiog in the Gulf. Indian migrants have become a predomin-aat faotor in many, Gulf oil companies, banks, hotels, stores, fact.ories and in the clerical admiaistration of business. Indian exports,iacluding doctors and eagincers, are cmployed in a number ofSaudiGovernment organizations as well as privatc companics, hospitakand nursing homes. A good number of tcachers, professors and as-sistants have been workiug in such Saudi academio institutions asKing Faisal University at Damman and King Abdul Aziz Univcrsityat Riyadh.ud In Kuwait Medical College, thcre aro 18Indian doctorsand mcdical experts out of the total of l@ faoulty members.66 Inother Gulf states such as thc UAE, Bahrain and Oman, many hotelsand business concerns run atmost entirely by Indians. The Chairmanof GulfAir (an airline jointly run by threo Gulf states) was an Indianuatil sometime back,6?

In 1979, there was some problcm about illegal immigrants in thoGulf states, lurcd by unscrupulous agents charging exorbitaot com-missions without providing any reliable or secure employment. Thisled to a considerablc tightening of immigration laws, particularly inthe UAE, atrd s substantial number of Asian labourers, includingIndiang, were despatohed back home.

In order to check thc infrltration of illegal immiglanls to the Gulfand to avoid such an unpleasant situation in future, the Governmentof India, for thc frst time, signed a Labour Pact with Qatar whichsought to organize and regulate the entry of Indian workers to Qatarthrough government channels or through registered recruiting agents.It also provided for workers to be givcn employmcnt authcnticated byboth governmertts.08 The Indian Govcrnment has also been persuad-

ing other Gulf states to eoter into an agreement of the same naturcon a "government to government" basis and the UAE has rcspond-ed posititely so far.

Arab Aid and lwestmmt in India. The Gulf states have given sub-stantial economic aid to India for various plants and projects (Tablol). Saudi Arabia gave a loan of Rs.589,51 million for thc SrisailamandNagarjunaSagarprojects in Andhra Pradesh.se It provided an-other $32 million for the Koel Jaro hydroelectric projeot in Bihaf.60It also advanced Rs 900 million for the ffrst phasc of the RajasthanCanal project in 1981 and it has also agreed to give another loan of$ 100 million for the second phase of the Rajasthan Canal besides

232 Tnn Psnflen Gur"p aNp Asn

assistance to other projects. In 1985, India signed an agreemeatwith the. Saudi fund for' for a loan of SR 172 million

.thermalpower project II be-(US $50 million) for theing co4strucJpd,W NTPC. It aLso in principle to provido, a.

loan of,.SR ,l4lrnillion, (930

project.6rfor the Nhava ShEva port.

The Kuwait Fund,for Arab, ,Dcvelopment has extordod,

economic aid to India, though inof Rs. 52,srores for.the ,A.npara

ways, In 1981,'it'gavea loan

This was in addition to two othercrores given earlier for two po projects-the Kalindl hydro:

project at Kopli in 1978. Thcelectric project in 1976 and afourth in the series was a loan of I million by Kuwait to Indid in1982 fqr-tle Tha,l laishet project.os Yet another develop

s apoupl of goodwi,ll geqerqle{.in l98l an{, 198?.and.ber

investmpnt .policy .that- madcGulf busincsspen eager to invesi joint venture projects with Indianpublic and private sector Particularly, the UAE has been

oapital investmcnt in India. Asshowing tremendous enthusiasm ff

ment in this direction was the isste of a 9107 milioq.bond inDec.ember.l9,$l (Xhq.highqst for.a codoercial borrower in. Kuwait) forRashtriya- Qhomicals apd, FertilizgrJs, Bombay,ca In addition; aocor&"ing to fl{t,agxeo{4ept sigued iq oat0ber l-98.3,..Kuwait,,agreed,to: pro-vide a loan wortb about Rs. 500 dillion to India for'phase.I ofitheSouth Basseiri Sias dsvelopment prpjoct.gs The Abu Dhabi Fund for,Arab Economic Devclopment gav$ a loan of Dhirams 68 mi ion to'India in January l98l to ffnance tfc ,construction of'the Garhwalhydroelectric project in Uttbr Pradeshe6 and at present it is considc6.ing some.s.peciflc new projects ia India for. s. ubstqlial. fnanclal aq-

carly as in 1980, two UAE banksthe two countricg agreed to the

project in Uttar .Pradesh.oz

of Rs. 45 crores and Rs. 35

their branches in India 6nd

vestmerit corporaiio!.ind the opelin Dubai. A decision was alsq talfinery on the west coast with 12 rcapacity of ttre Mathura. rsfiqery).

fng pq of ajoi4t IndolQ4F jn:.g oftb9 India Inyestmcn! Fe4tre,to set pp Indjals biggeFt c,il,re.?

llieq to?pes oppacifiy.(double lSeIndia has also bcen ,ggnsidering

an offer fron the UAE for the up of two more refineries aada final. reporl is still awgited on.reff neries. Tentatively, Mangalore

location aod size of these twothe site. chosen ia,the soulh.

Arrv N. Irilr 233

with a capacity of 8 million tonnes. aud.the other at Karnal ip thE

north with.o capaeity of 6 million tonnes. ' ., ' ' i 'rAt state level, thc governments of Gujarat and Mahararhtra'have

also been quite succeisful in trying to attract Gulf businessmen and"

industrialists for majorjoint venture projocts. Guj arat has the ofrers

of financial investmcnt worth Rs. 500 million'o? Dollars by industrial'

ists in the UAE are bein! invested. Various petro'dollar projects

have been identiffed and wbrked out by thd governmetrt of Maha:

rashtra in collaboration with UAE partners' Two alumina plants'

rubber plantatious, high tension insulator and electrodes manufacttu-

ing units are to be set up in the Konkan region of Mahalashtra'

Vidarbha. will havetwo cement plants, Marathwada a blendedrspun'

yarn mill, and agro-based units. In Aurangabad, a zip fastoner manu-

iacturing unit will be set up and two'housing projects are slatcd:for

thc Bombay-Pune region.68

Tho Dubai fransport Oompany signed a protocol with thc Maha''

rashtra Government in August l98l for joint ventures rclated to aWest Ooast Freeway ovdr'the sea strctching from Nariman Point in

sooth Bombuy to Mahim in central Bombay at an estimated cost of

Rs' ?0 crore and a Thanacreek Inland watenvay adjqiniog Bombay

at an estimated cost of Rs. 50 crores.oe Further' ITC in oollabgra:'

tion with Al-Futhqim, group of the UAE has set up a' oelY compapy

*tt.A a'lpItCORP international for"dsveloping rand maragingl

ioi"rc oot iao rodia,in disaent parts of the world such as sriJ..auka,,

BruneijoInGujarat,thestatc'slndustriallnvestment'OorporatiooGUil ft sctting up projects in collaboration with the Al-Guhrair

lrouo of the UAE for an export committed alumina plant . at an

;;,#"t.d cost of Rs. 400 crores 'and a Rs' 1'15 crore stoinless steol'

tube planL?l The Italian firm Snam Progetti has beengiveo tbe€on-

;; i"; designing and supply of imported equipment and material

i"t tl. p**ifo,i no" zno otore Indo''Gulffcrtilizcr plant to be set

"p "il"gaitf-pur in UP. if,he sub'contract for the supcnrision ofthe

"6o.troiito of 'the

ptrant which has a'40 per cent Gulf sharcholding

Um U..o givetr to Piojects and Devolopment India Limited'

ttoth tbc warring dations are of the NAM has made Indiagravely coocerned about the siof the nonaligned movement, Itwar but with no success.

Economic considcrations have India's response to thc war.Iraq and Iran havo besn the suppliers of oil to this country.W.hen thc war began in 1980, India expected to rcceive 6.2 millioo

84 Tw hnsrn Grrr,r.l.r.rp

her by the UN, theArabLeagugOonfercnce and many individual

tounes of crude from Iraq and 3total import requirement of 16.5

any part of the woild. Butlndiadidof trran India also did not condemoponc, as alleged b! Iran and manAhwaz area in Khuzistan in early Iof the signatories ofthe Gcneva Ithe use of asphyxiating poisonous oIiquids, materials aud deviccs."zlous of the genuineocss of India's

Asr^l

nonaligned forum, the Islamichave failcd. The fact that

n as it has been the Chairmaobcer trying its best to €nd thi!

tonnes from Iran out of itstonnes for that year. India

id lran.?8

oondemo the Iraqi invasionIraqi use of chemioal wea.

western countries, arouod thel, despitc the fact it wrs oD6tocol of 1925 which ..outlaws

othcr gas aad of all amlogousbre, Iran has becn susplcl-efforts as a part of the tron-

was forccd to make expensivc spot in the wake of disrup.tion of oil supplies dus to the war. also had to suffer a consid-erable loss in tcrnr,s of its exports af least for the first 45 moirths.All exports of engineering goods sea to these two states had tdbe suspended at a time when India annual exports of eoglneoring

Iraq and Rs. 30 orores to lrao..2goods totalled about Rs. 50 crorceIn addition, there were more than I 000 Indian workers workingin the two countries. They an impressive amount to tbeirhomc country. Above all, India hadtion contracts in Iraq and Rs. 100

500 crores lrorth of conrtruc-

India's delicate position was as the majority of the Gulfstates with whom it had recentlv oomprehcnsive eoo-nonic, scientiffc and technical supported lraq. Anyout-right sripport to Iran would ve rosultcd il the sevoring of,Indo-Arab culf ties in which India, India's stand on the war has not,

many stekes.

ians as 'partisan' and pro-Arab. Itdebacle of the Sioo-Indian war of

, been scoi by lran.becn allegod that sincc lhe

condcmn all aggresions aad toIndia's policy hac bcen tothe fruits of "ggrersior is

aligued initiative and it was aor that the lndian iuitiative

Arrv N. fi{A t3t

at thc ?th NAM Summit heldinDelhiinMarch l9S3dldncitachievoany breakthrough whatsocver.

The Balance Sheet : Need for a Fresh Petspec!ile. The ch^nges thathave takcq place in the past twelve years in Indiao cxpoiling methodsaod abilities, the number of consultgacics, turn-kcy projects andjoint ventures in which Indian companies have been invoived in th6Gulf rogion, speak of the success of India's .,new economic diplo-macy" to a great cxtent. India's increasing thrust to find fresh out.lcts in the oil.rich Gulf states to market its manufactured goods aswell as primary commodities has met with tremondous success. Uotila few ycars ago, Indian engineering cxports to thc Gulf, consistedtmainly of components and thcn developed into a growing mixturcof capital goods. By tle late 1970s, morc and more of them formedpart of a project and by 1980 many Indian engineering, mechanicalerection and turn-key projects were being completed. The infrastruoture to support this sort of overseas activity has been considerablystrengthened and there is every indication that both the Indiangovernment and private sector companies have found that they ercable to compete successfully with prestigious Western frms and rrcdotermined to increase their stakes in the Gulf.

It would, howeyer, be extremely nsive to feel satisfied about thequantlrm of cooperation already achieved. Seen in the backdrop ofthe overall proximity between India and the Gulf the area ofco-oporation falls short of our pot€ntial. With all the goodwill andpossibilities, con$idering the needs of the Gulf oountrics and therelativcly advanced state of teohnology and industrial oepabilitydevelopcd by India in many ffelds, India has unfortunately not becnable to take maximum advantage of thc opportunities ofercd in thewake of the oil crlsis. The Gulf contributes nearly Rs. 2,500 croresannually by way of foreign exchange to India through remittances,,and imports. But even as a trading parttrer of the Gulf, India oc-cupics a position as low as lSth or 19th and the worst part is thatsince 1980-81 it has been constantly pushed downwards.

So far as Iraq is concerned, one could agrec that because of tleongoing war, Itrdia's cxports to that country have sufered. Butsurprisingly enough during the same period, India was involved inthe largest number of construction projects in Iraq. But how aboutothcr countries? How miserable is India's trade performance can begauged from the fact that India'e cxports to SaudiArabiawcroonly

236 TIu Hnsnx Gulr eno Sotmr Asrl

worth Rs. 180.13 crores wheothetbtal Seudiimportsaegregated Rs.60,000 crores.?6 This is the situatioh despitethe fact tlat there hasbeen a substantial incrcase in Indif's exports during last few yearsto tlte Kiugdqp. India's position is as low as 25th or 26th in theoverall Saudi market. Almost the s4me situation prevails with Indiafsexport$ to Kuyait, UAE and other Gulf Stats. Its exports to Kuwaitpeaked at Rs. 132.75 croresin 1981+82and came down to Rs. 117.08crores, in,,1983-84. India's exportc to thc,UAE have been *tagnating

-Rs. 130;55 *orcs in 198 l-82 and R.s. 137.22 crores in I 983-84. Thesamc has been thd case with India'b cxports to othcr Gutf statos ascan be tcpn in Table 2. In terms ofoverallquantum oftrade betweenthese Gqlf states and the outside *orld, India's share comcs to less

than 1.5 per cent. This poor perfo is not just restricted to,exports. which may bc suffcring froft various.types ofconstraints andbottlenecks, bureaucratic buo and administrativc lethargiesand, above all; Iaok of but is equally reflbcted io the

from our national servingdwindling foreign exchangein the Gulf, The Korcans and,the fapanese, ,for example, ,are

. fewer.

in number than Indians but they Save been earning two to thrcetimes mor€: t[ad us. '

In thc light of a slow-down in cbnstruction wcirk all along theGulf, job' prospects are shriirking for thousands of Aslaas vlho see

the region as a land of golden oppdrtunities. The Gulfcountries' oilrevenues have deolined sharply.?6

This has impeded their expansiQn plans and economic growthrates. As a result, thousaods ofvorfters from the ladian subcontinentalong with othcrs have started feeling the pinch. According to, MBEDreports;'Indian drivcrs, Pakistaai clerks and South Korean buildingworkers whose labours havc transf$rmed the Gulf are now leavlngin droveg as contrbits expire.?t Evc[ ifthe number oflndianworkorsdoes not drop greatly, thcre are redsons to believe that the level oftheir remittanccs cciuld soon begif, [o do so. Inflhtion could eatintomigrant workers' savings and the rbduction in interest ratgs on tbeirbank deposlts could together re$rilt in a rapid slowing down ofrcmittances.

There now seens to.be a favo climate for Arab investmentin India as.the awareness of India' capabilities has been .growing

in allowing special rinvest:

g countrios hds promptcdin India; Unfortirnately,

fast. The Indian Government'sment oohc'essions to: oil eiporting

iI

some Gulf investbls td take' an

funv-N. Intr 237

various advantages and facilities of this liberalized policy availabloto tle ilvestors are not iroperly and widely lnpwn ip the Gulf. Evennow maiy of ttem do not seem to be futly aware about the xate oftaxation".5ufeq.of,.investment, and repatriation, ratgs. of .return, bank-ing and other infrastructural frcilities. There-is,urgcnt.need for properpublicitf," of the,',Indian .Governmeutls .schemes- for Gulf',inves0orsthrougb newspapers, magazines and other publicity media through.out the'Guff. Thbsd'schefues' shoirld also be eiplai'ned tit' th6'iepre.sentativcs of ihe leading Gulf business houses through frequentoxchange.of, delegatioas; personal visits by Indlan businessmen; bran.ches oflndian banks and bther'ageacies. Tbe FICCI ieport bf the

DiDiii)

Industrial climate in India.Rules and procedures for . repatriation of currency fromIndia.Return on'invcstment made in India,Market available for different types of products in India.Type ofmanagebsnt control which any joint venture partnerwould be able to exercise in ioint ventures in India.

iv)v)vi)

.', r i., - i r'

.- .:. i 1 .i :tr '. 'l

l. The Times of tndia (Delhi), 31 May 1985.2. For detaits see, D.P. Singha| India and World Ci'lilizationr (Catcutta, i972),

pp.19-37; Shireen R;atnaga\ Encounters: The Wzsterly Tydde ofthe EdfapwnCivilization (Odord Univ Press, 1981), pp. 78-94,

3. S€o,,Magbul Ahnad, Mo.Arah Relattotls (New Delhi: ICHR, 1961); pp.4-5.

4. "Tbe Harappa civilization may have established contacts with thc West. be-tweetr the years 2300 and 2000 B.c. Tbe Arabs were tbe maln agehts of tradebetween India.and Egypt. They supptied_ t9 ESypt pr€cious stones,. spicesand the inc€ilse'burnt at the altar of tie'ancient Egyptiaa Gods. FromIndiri, Muglin and'siiicE$ wetti sirpplied wliich thiy eitliei fetched themielvesor brought from the Indian merchants at their ports on the Gulf of Ailen.It sitf'thfotlh this tr$de:'6nd iontacts itiih thd ancient civilizationsihEast,India and E ypt that the Arabs built a magoificient civilization whobe poli-

tical,aid cultural cotrtre rras at SabseatDuritrE thc'relgn:of rKtng Sotomon

(g7443t' B,C:) "voyages utero made to Opbir every thtoe ry€ars and th€ mer-

chandize brought from th€re con$isted of gold' silver' iswels, wooal, 'hbry,I

I

I

of Socotra". For details see Hadi A Hisiory of Perslan Navigation(Londotr, 1928), pp 47-?6 and A.F.1951), pp. 8-9.

5. Archaslogical cvidonces such as thsBachian Camels on the obelisk of

Arab Sea Faring (PriDceton,

of apes, Indian elephants andIn (860 B.C.) and tho pre-

sence of copper, sanalal-wood, logs of teak, black-wood aDd ebotryfound iu the t€mplEs of Moon at and in the palace of Nebuchad-nezzare, both belonging to the 6th B,c. sugg€st India's fairly in-timate relations with West Asian vido S. Maqbul Ahmad,, Indo-Arab

73-14..Rdratrbrrr (Now Delhi: ICHR, 1967),6. "Th€ imlusion of Sind within the empire fufther accelerated tb€ over.

land trado with IDdia. Ilowcver, tho ter impetus to Indo-Arab sea-tradowas givcn whcn Boghdad was f by Abbasid Caliph Abu-Jafar-Al-

was an epoch-making event iD the, for the first tinle, the capital of the

Mansur, Ths fonndation of Bagthistory of Indo-Arab relatiotrs, forArab ompire was directly linked bywatcr systcm of tlD Tigris and thsPersian Gulf. The anci€nt potts of

with the Arabian sea, through thewhich joiDtly flowed into the

to play tteir role atrd in tim€,succeeding c€nturies acquired thc

was also developed and during tbcof a Liverpool fo! the Arabs

where the imports and exports of thc and the West were stocked andChim, Egypt, East Africa anddistributed to various centres of

exchanged. Goods imported fromothcl countries werc stocked hers andthc Afab ompire. Similarly, goods of were carricd from here to an-othsr port on th€ Gulf called SiratIndia, China and other countri€s ofibid., pp. 82-83.

ttrere loaded into boals bound for\Mest." Quoted in Maqbul Ahmad,

7. For details, Ravindra Kumar, /zdra the Percian GulI Region (Bombay,1967); Busb B. CooW, Britain in ,heUniv. Press, 7967), Britain, India and

'ersian Gulf 1894-i914 (California,Arab s : 194 I- I 92 I (Berkeley, l97l),

and also J.B. Kelle:.!, Britain and ther968).

$an Gulf (Oxfotd, Univ€fsity Press,

8. Ravindra Kumar, n. 7, pp. 19-20.9. In their fight agiainst colonialism, Arab links had been first forged at

238 Tru PnsrNlGu,r nNo

ap€s and pcacocks. Thore werE

the Congress of OpFessed Nati,where Nehru emerged as a linkments. He bad even dfafted and dovedThis, Nehru thougbt, was his dutyand were stationed in Mcsopotamiaand employees wore taking part in

dlerchant rottlem€nts otr tbe lslaad

Darayam and Sohar continued

in Brusseh (February 1927) fronthe two national liberation move-

resolution on Mesopotamia (Iraq).

"Indian taoops had conquereda large number of Indian clerksexploitation of the country, it was

up to us to demand the recall of the of occupation and to say tbatwe wish to be no parties in this adventure." The lndian NationalCongress at its Calcutta sossioo in 1 also paesed a r€solution exprcssingIndia's full sympathy with tho Arabs their struggle for emancipation

: vide Syed Ayub, "India and the(Delhi), Vol. l, No. 24, 10 Octo-

from the grip of WostemArab World", Indian and Foreignbet 1964, p.24,

tuav N. J'J,^ 239

t0. Tbesg feelings were more than rociprocatcd by the Arabs. Reminiscent oftlis emotio[al affinity is a letter writtetr by an eninent Ifaqi statesm€n,

, Kamal-Al-Chatlrichi to Jawaharlal Nehru in Decembcr 1938' He wrote,

'.We whole-heart€dly appr€ciate your strugglc and wish that we had the

opportunity to share in it though in small measure, fot we both aro in th€same boat. Tru€ endeavour iD the campaign against imperialism and ex.ploitation must Dot be considered in separate units but tath€r tbat neithergeographical frotrtiers tror political obstaclos caD supptess it," videJawaharlal Nehru, Duncft of OId Letiers (Bombay, 1958), pp.304-5.

Il. Jawaharfal Nehru, /ndia's Forelelt Policy: Seleeted Speeches (S€ptetnber

l94cApril 1961), Delhi 1961, p,22.

12. For details see, M.S. Agwani, "Ingredients of India's Atab Policy," Infranarrd Foreign Reviev, Vol. 10, No. 10, April 1973, p.13; K.R. Singh, "Indiaaud IVANA," Interndtional St dier (Delhi), Vol. 17, Noc. 3-4, July-Decem-ber 1978, pp.625-3t i "India and the Arab World: 1947-67," Indian Hori-zons, Yol. 22, No, 2, 1973, p.52: "Indo.Arab Relations," Weekly RottttdTable (Delbi), Vol. 11, Nos. 2G27, 5 Aqust 1973, pp.1-21.

13. For dotails on fndian r€actio! s€€, Richarat K. Kozichi, .'India's PolicyTowards the Middls East," Orbis, Yol. 11, No. 13, February 1967 aual

Girilal Jain, "Disillusionment with the Arabs-A Shift in the lndiaa Opi-nion," Round Table (Londoa), No. 228, October 1967, p.435.

i4. At-Uaha, (Beirut), 22 Deo€mber 1971; Najib E. Sabha,,'Impact of Indo-Pakistani War oo the Middls Ea8t, ' lltorld ,4fairs (Washington), VoI. 35,

No. 2, Fall 1972, pp.l-31.

15. Mohammad Ayoob, "Indo-Irani4D Relations: Strategic, Political and Ecolomio Dimeosions," India Q arterly (Naw Delhi), Vol. 33, No. 1, January-March 1977, p.3,

16. Vide R. Jahtinen, An ts in the Perciaz Gzf(Washingfon, 1974), pp. 1-31.

17. Expressing his fears on the arms race and th€ subsequent imperialism :builtin the region, Itrdia's External Afairs Minister, Sweran Singh, while speak-ing at the Commonwealth Conferencc at Ottawa on 3 August 1973, pobtedto its "incalculable consequences for tho peoplo of those countrios andtheir neighbours," vide Indian and Foreign Revlew, Yol. 10, No. 10, 15

August 1973, p.6.

18. For details see M.S. Agy'atr;i, Politics in the Gulf (Delbi: Vikas, 1978), pp.9-I0; Tim Nimblock (ed.), Social and Economir Developmeni in the GuIf(Lcndon, Croom Helm, 1980), pp.l4-18; ]!Iay Zihar Daftari, /sszes tuDevelopment: The Arab Galf States (London, Croom HeIm, 1982), pp.3-5.

19. Of enorgy dema,nd iD 1960, 33 p€r cent was met by oil, by 1970, it rose

to 43.9 per cent and by 198(F85 it was exp€cted to reach b€tween 47.8 to52,3 per cetrt vide Pster llill and Roger Yielvoye, Etgrg, in Crisls

(London, 1974), P.18.

20, Annual RFport of thc Council of International Economic Policy (March

IS6$. n.158. vi<te A.M. Rustov and Joho F' Muogo, OPEC: Success and

ir"!ir",t lNew York, 1976), Table t' P'l3Z' Also soc' A'K' Ga!8ulv'

240 Tru Prnsnq Gur,r ero Soufn Asn

" *E^eryy Crisrr: pouring,Oil oa Waters," Forelin /rade Refieat.5;'. 'rnrle (N6ur D;ibi), No. roc, rz

. . @dhDr.Vol. 9' No. l, April-June2l . "World Energ.i 'Crisis," IUAelcIy

.

12. In lditia'ij tasdj the enersy-criiid hi6 r. rof paymcots: Tbis is '€videbl from,! becom,i'niorii of i'ciiiid or Uhrcefact that'though rni'&nde impors

, .,' in. 1974 incredsod only'by'0:6imillibi toddes td r€Xch IS.0 ririllion tonnesover thc 1973 figure of 13.4 tonnes, the cbst of thd,iti"imports in-

crorcs in the saric pei{6'& Rajya1E75 vid€'sreodhdf, ,.Wodd Enerry

Bloc,:' Taorrtnn Ataiiilfepoft (New

creased f|om Rsl 244 clordd to Rs:', ',,SaQha D.eba@s, ,February:,24. dnd l

Crisis and tle Proposcd Consumor,,,,.,Qelhi,, {CWd},.Vot., 1,9, Apiil 1975,

2?., Ecoaomic axd Pollticat Weekly (f,om , 27 S6ptbmber 1976; iii4.

"India's Baghdad Pact," Far Easterit':. :80; Nd. 21, Marctr.28, tb73,,-pp.r:.s!6. An:agreirient waiN signtd with tho''i for deslgnitg ald cohstrrrctibn of

ments wefe Sigued-one "bi(CSIR) and tbe other by Indiantraiabg Ilaqi students ard officials inment, roil coD servation, landVol. 13, No. 8, I F€bruary 1976, pl

28. Vide Giriiesh palrr: . ,.Iran''Ifaq Cotflict andlndia,. oss (Dblhi), vol, r,r...,No,, 1, January l984jp.72., , , I .. (

29., "Fruitful Indo-Laqi EcononiicVol.72, Ndi 8, 23 Fobruary 1979,

30. Ibid.r'r'31;'Ibidl32.

* Eastern Econdttti.ll (Delhi),:' :..

July

bay),

34.37.

4,39.

4r.

Arlv N. Ja 241

43. Ibid., 13 May 1981. 44. Ibid,45. The Economic Times, 25 Rebrnzry 1982.

46. Vide Richard Thomas, India's Energena as an Industrial Fower: MiddleEastern Confiacts (LondoD, 1982), pp,I8-19.

47. Ibid., p.57. 48. Ibid., p. 78.

49. The Statesrwn @€thi), 12 February 1981.

50. FICCI Report on the second nveting of Indo-Arab troint Commission, lng'p.42.

5l . The Ecottomic Tlmes, 14 June 1982.

52. Economic Trends (EICCI,Delhi), Vol. 11, No. 14, 16 truly 1982, p.42.

53. Quoted in The Economrc Times,30 D€cemb€r 1983.

54. Richard Thomas, n. 46, p.44.

55. Financial Express (Bombay), 2A Aptil1982. : I

56. The Statesman (Dethi), 23 February 1982.

57 , The Econamic ?rmer, 14 November 1981. :.

58. The ootable fcature of this agreement is tbat in case of a, disPutn, r betweenan employee atrd th6 worker, there is scope for initial coqeili4tion by the

Qatari Minister of Labour and Social Afairs and if an amicable Ecttlemcnt

is not arrived at, th€ compl4int can be refcrred to tbe aomi'etert judicialauthority in that country. Tho agreement also provides for a joint com-mitte€ to r€view the implementatiotr of the agr€em€nt. Attiched to th€main agreement is a'specimen model cmployment conlf,act which covors

all tbc essential t€trms and coflditiotrs for oEploymetrt like salat'y, workinghours,,overtime, transport,.accommodation, service behefits€iidldoath anddisability compensation. Yide The Economic Tlmes (Ddhl),l7 April 1985,p.2. -. ..

59.

60.

62.63.

65.

66.

67.68.

69.

72.

lJ.

74.

75.

76.

Quoted, in Economic Times,22 November 7982, p.4, '

lbid. 6i. Asicin Reairder,I985, p.18414.

FICCI Annual Report on Indo-Arab Jolnt Commisslonr, t981, pp'48-49.

Ibid., p.52. 64- Ibid., P.56.

IIrc Hindu (Madras'1, 19 October 1983.

The Hindustan Thnes (Delhi), 12 May 1981.

Patfiot (Delhi)' 24 January 1982. 1r .ii1 , jBhtz (Bomb,y),5 December 1981, p.11.

Ibid. 70. Ibid. 7l . Ibid. j

Pinaticial Express (Bombay), 30 November 1981.

The Economic?imes (Delhi), 27 Septemb€r 1981. "" ', '. 'Ouoted in Christopher Raj "Ferment in West Asia" in Satisb Kumar (ed')'

iearbook in India's Foreign Policy 1982-83 (Dclhi, Sage' 1985)'

FICCI Report of Batuain and Saadi Arubia, Match 1982' pp'17-24'

: The Times ol India (DeihD' 31 May 1985'

Mitutle East Ecowmtc DBeti (Lotdon)' 7-14 Novembcr 1985' pp'13-l '4

fndex

Afghanistan, 20; Soviet Militaryintervention in, 28-29; Iranianinvolvement in, 29

Ahmadis, 100Airborne Warning and Control

Systems (AWACS), 138dlnmisium industry, rOArab l€agw and Israel, 153Armed foroee, 8Arms race, Z 217

Baath i&oto€y, 124Baath Parties of lraq and Syria,

threat to cCC, [7fEaath Socialiem iD Iraq, 2Baghdad Pact, 15

Bahrain, Shia populatio! in, 177;working class moyem€nt iD, 126;uprising in, 159

la'hrain Monetary Authority, 202Baloch State, 3lBaluchistan, 101-2Baqlad€sb, and Islam, 103-5.

@op€rati@ witn the Cruf, SeBedouin, 128, t85Bourgeoisie in the culf, 123-32

Carter Dootrine, 17, 28, 136Cemeot industry, 40Cetrttal Treaty Orga.nization

(CENTO),6, 15CBNTCoM Strategy, 18Oommunism in Afghatistaa, 2

Defence expendituro, 8Defibd,lizatio\ W-28

Developmcnt strat€gies, 4+-45Dhofar movemont, 3, 4Diego Garciq 18

Eisenhower Doctrine, 15, 17Ethnicity, 194

Frcct, 54,234

Gulf Cooperation Council (cCE)div€rgsnt opiDions withi!, 135;formation of, 210; and Iraa,157-61 ; and lraq, I 5rt-57;aad lran-Iraq war; 161-64;and Istael, 152-54; aadSecurity 171-80; and SouthYemen, 150-51; aod SoviotUD.io!', 742-46: a,nd strategiointorosts of the w€st, 2;Supreme Council, 192; and US,t3642

Gulf International Bankiag, 199-267Gulf Maritime Authority, 26Gulf Rapid Deployme l'or@,

28, 114, 1r7Gulf regimos, threat p€roeptions of,

t74pulf.Soutb Asia Coopcration,

93-96, 20tr; turakeycompanies, 95

Gulf-war. Sae kan-haq war

$ormuz Srait, ctosure of, l4I

Iodia1n1, Arab aid and investmrDtin, 228-30; banks, 20I; co-

operation with Gulf, 58-59;cooperation with Iran, 57,

r€lation wit! the Gulf' 210-40;workers in the Gulf, 81-83

Industrial alevelop ment, 39-41, 42'

t87-88Internal Security Arrangpment' 193

Investment banking, 203

IraD, hostage crisis, 17;

ideological threat to GulfStates, 177; pre-eminent Power,2l7i tbl3at to GCC, 157-61,174

Iranian ulema and the revolution,130

Iran-Iraq war, 16l-64, 177; andCCC, 5, 3l, 33, l3l ; andIndia, 23O-32, and Oman, 1 61 :and Pakistan, 34; and UnitedNations, 162

Iraq, cr€dit to India, 221; and GCQ,154--57; and IsraBl, 154; threatto Kuwait, 155

Islam and Gulf-South Asia coopera-tiotr,98-109

Islamic fundamentalism, 5; in Iran,2lslamic revolution end Shia-Sunni

conflict, 101

Israel and GCC, 152-54. agression

on Lebanon 152; and lraq, 154

Japanese banks, 200

Kerala, Iand price in, 89

Kudremukh Project, 57

Kurdish movemont, 2-3Kurdish rebels, 174

Kuwait and joint veotures' 119;

Palestinians in' t72: Parlia'm€nt, 191; and Soviet Union,t46

Labour market in the Gulf, 169-96

Labour migration to the Gulf' 50-51

labour retrenchment in the Gulf'

5l-52Libya, 77

INPnx 243

Manpower exPort, impact on €xpolt-ing societies, 87-93; and India,227

Marxian theories of capitalist state'712

Migration, definition, 87-88;from South Asia to the Gulf'78,79

Middle class, 187-89Mine Counter-Measure (MCM), 24

Mujaheedin, arms aid from CIA, 29

Nonaligned Movement and sscurity

Perceptions, 21-23Nonaligned Security, Doctrine,

20-27Nasserism, 2Norrh Allantic Treaty Organization

o{Aro), le

Oil based industries, 40Oil incomes, 38, 46Oil Nationalism, tbe rise of, I I zl--21

Oil prices, 37, 59-66,110, 117; andSouth Asia, 64

Oil refineries, cost of production in,117

Oman, iffigation in, 186; militarYfa.cilities to US, 179

OPEC, 180; emergence of, 115,

future of, 62; investment inThird World, 46

PDRY (Yemen), 148-49Pakistani, cooperation with Gulf:

56; tloops in the Gulf, 30

Palestinian, 173-74i c use and reli-gion, 108; in Kuwait' 125

PLO, tbreat to GCC, t77Pan-Arabism, assertiotr of national

sover€igntY, 37; in Bahrain' 125

Pan-Islamism, 106

Parliaments in the Gulf' 132

Petrochemicals, 42; cost efiectiveness

of industries, 118

Political tensioos and oil money' 187'p.t"i"i ri".t for the Liberation of

the OccuPied Arab ('uu

244 hloo<

(PFLOAG), 171

Popular front for liberation ofOman, 149

Protectiotrist policies of US aodEurope, 119

Qadianis, riots against, 99-100

Qatar and Iran, 160

Quran and concept of statc, 98

Rapid Deployment Force (RDF).See Gulf Rapid DeploymentForce

R€gion, changing geo-strategic struc-tures, 14-20 definition forsecurity cooperation, 7, 13

Regional coop€ratiorl in the Gulf"

Religion, revival, 99Religious fundameltalism, Z, 104-5t

and native culture hypothesis,105

Remittances from the Gulf to SouthAsian countries, 48-49, 80, 84-86

Royal families, 188

Saudi Arabia, air force, 17 3'. agri-cultual subsidies in, 182[-85;dominant power role, 192-93;political conspiracies in,172-73, ptiYate sector in, 75;and Soviet Union. 147

Scandinavian banks, 200Security in the Gulf, 4-7, 1.4-n:

Pakistan's involv€ment, 30Shia population, in the Gulf, 158;

and overthrow of Shah,l7 4--7 5;in llasa province, 176; in

Bahrain, 1?7Shia intellectuals in Pakistan, 30Sindhi nationalism, 102-3Souk al Manakh, 184, 201South Asia and the Qulf, 4--7;

forei€ln exchange eaming fromthe Gulf 68, and Iran-Iraqwar, 28-35

SAARC approach to culf, 59South Yemen, Soviet bases in, 149Soviet Union, bases in South femen,

149; and GCC, 142-46, ls}ttreaty witb Lan, 142-43; troopsin Afghanistan, 16

Sri Lanka-Gulf cooperation, 56State monopoly capitalism in the

Gr:Jlf , 122State, political economy of, 111-14States, in the Gulf, 121-32Steel making in the Gulf, 39

Tripartite Treaty, 150Tudeh Party, 16, 174

United Arab Emirates, federalcouncil, 191; seizure of isla,ndsby Irao, 159; ties with Moscow,148

United States, military bases in tbeGulf, 19: and fall of Shah ofItan, 28; relations with GCC,139-40, l4Z, 178, 180; war-ships in Karachi, 32

Wababism. 175

Weapons in tbe Gulf States, 9-12lVelfaro State in the Gu[ 129

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