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The Gulf Yearbook - the GRC's premier publication - is an annual compendium of analyses on events in the Gulf region during the previous year, with forecasts for the next. The essays by scholars delve into political, diplomatic, economic, security and energy issues related to the Gulf Cooperation Council (GCC) countries, as well as Iran, Iraq and Yemen. The 'Gulf Yearbook' will be published in Arabic and English and will be available in print and digital formats by the end of March.
In his opening remarks, the GRC Chairman, Abdulaziz Sager, highlighted important issues that transpired during the last year. 'The conference is being held at a time when the Gulf region is passing through a dangerous phase, especially in light of the tragic situation in Iraq, which is akin to a civil war, and holds the potential to disintegrate. There is also the complication of the Iranian nuclear file in light of the faltering diplomatic efforts and the sanctions imposed by the United Nations Security Council, which may even lead to a military confrontation,' he said.
The Gulf Yearbook, Sager added, 'discerns and analyzes the new developments in the region, but avoids preconceived judgments in interpreting them.'
Political
Elaborating the findings of the Yearbook, Prof. Hasanain Tawfiq of the Zayed University and an Editorial Board Member at the GRC said that the most important step in the political changes being attempted in the GCC countries during 2006 was the Saudi move to establish a legal framework for political succession. It 'demonstrated the unity and stability of the royal family, and prevents the possibility of future divisions within the ruling elite.'
The role played by the National Assembly in the succession row in Kuwait was highlighted as a demonstration of proactive role that the parliaments are beginning to play in the region. 'The same was the case with opposition groups and their relationship with the ruling elites,' he said. The strained relationship between the government and opposition MPs in Kuwait over issues relating to electoral constituencies, corruption charges and other policies in the fields of education, press freedom, settlement of bad debts, and external relations were also cited as examples.
In Bahrain too, the opposition and the government witnessed differences regarding naturalization of expatriates, mechanism and guarantees of fair elections, and 'Al-Bandar Report'. 'But the elections and the results thereafter proved that the government had shown great flexibility,' Prof. Tawfiq said.
Referring to the UAE's experiment with elections to the Federal National Council and the forthcoming municipal polls in Qatar, the academic said that they set the stage for progress in the region's attempts at political innovations and improvements in issues relating to election campaigns, results, transparency, and role of women.
International Relations
Dr. Christian Koch, Director of International Studies, GRC, said 2006 witnessed a steady deterioration in regional stability: 'Despite efforts by the United States to undertake a more realistic assessment of the Iraq situation, Washington did not have any solution that could quell the violence.'
Further, Iran's sense of confidence and its willingness to take tough positions 'raises fears that the Arab Gulf States could find themselves in a situation that is not of their own making,' he added.
Though ties with both Asia and Europe were expanding, 2006 also underlined that in terms of Gulf security, no other international actor would replace the US in the short or medium term. 'While Europe and Asia have expressed their concerns about the regional security environment, neither side is ready to invest in the hard security mechanisms that the Gulf requires.'
Economy
In his overview of the GCC economies in 2006, Dr. Eckart Woertz, Program Manager, Economics, said that 'the long-term outlook of oil price remains positive, although there might be some soft spots over the next two years due to an economic slowdown in the US and China, and some incremental oil production coming on the market from non-OPEC countries like Brazil. A part of the oil price surge of recent years can be attributed to a decline in spare capacity, but the current OPEC production cuts ironically might lead to lower prices should the market perceive them as a recovery of such spare capacity.'
On the international level, Dr. Woertz stressed the increased importance of the GCC countries in financing the US current account deficit. With the GCC current account surpluses now larger than even China's, petrodollar recycling and the investment options of GCC countries are naturally followed closely by the international banking circuit. 'As the US deficit continues to mount, the dollar is likely to slide further and the GCC countries need to worry about currency diversification and modification of their currency peg to the dollar,' he said.
On the negative side, the problem of rising inflation in smaller Gulf States and the necessity for statistical reform and more accurate data was stressed. In light of the stock market corrections in 2006, Dr. Woertz pointed to the need for improved corporate governance, transparency and broader capital market development. The further development of a GCC bond market and the unification of the local capital markets were crucial, he said, and discussed dangers of overheating and duplication of similar investment and real estate projects. 'The Geopolitical tension caused by the Iranian nuclear stand-off could hurt investment sentiment,' he warned.
Security and Defense
In his presentation, Dr. Mustafa Alani, Director of Security and Terrorism Program, said 2006 witnessed a general decline in terrorist activities in the GCC countries largely due to the Saudi preemptive anti-terror efforts against Al-Qaeda cells, but an upsurge in Iraq causalities - a record high of about 3,000 every month, with the number of wounded almost three times that figure.
'On an average, there were about 40 kidnapping incidents daily, and the total number detained on security grounds reached about 30,000,' he said.
In the defense arena, the academic pointed out that there was considerable increase in defense spending and procurement of weapons: 'The GCC countries signed 13 deals worth $35 billion, most of them with Western countries.'
Failure to stabilize the situation in Iraq will have catastrophic consequences for the Gulf region and beyond. On the other hand, the lack of resolve in tackling the Iranian nuclear program would perpetuate the crisis, lead to a possible arms race and invite more foreign interventions in the Gulf,' Dr Alani said, adding: 'It is certain that 2007 will inherit most of the security problems that engulfed the Gulf region last year.'
Environment
On the state of the environment and natural resources, Dr. Mohamed Raouf, Senior Researcher, Environment Program, said that 'the GCC countries are very poor in terms of arable lands and water resources, and contribute about 2.4 percent of world CO2 emissions though they have just 0.5 percent of the world's population.'
Among the main environmental challenges, he listed the fallout of an accident in or military strike on Iran's nuclear facilities, as well as the building and demolition debris associated with the construction boom in the region.
'One would like see a culture of sustainable development developing, where environment and natural resources get maximum attention in every decision and at all levels. This can only be achieved by an policy mix which addresses different environmental issues, assigns a more active role for civil society organizations in decision-making and implementing plans, and encourage public-private partnerships,' Dr Raouf added.
Summaries of presentations
Internal Political Developments: A General Overview
Prof. Hasanain Tawfiq
Department of Political Science, Zayed University, and
Member of the Editorial Board, Gulf Research Center
The first part of Prof. Hasanain Tawfiq's paper dealt with the issue of political succession and cabinet changes in various GCC governments. In this context, he provided an in-depth analysis of the problem of political succession in Kuwait, with conclusions about its most important implications for the country. Cabinet reshuffles in some GCC states, such as Kuwait, the UAE and Bahrain were also discussed.
The second part of the paper dealt with the most important constitutional and legal developments in some GCC states during 2006. Chief among these is the system of pledge of loyalty to the king or 'Bayaah' in Saudi Arabia. It is a major step towards political and institutional reform in the kingdom, because it provides a legal framework for organizing the process of political succession. It demonstrated the unity and stability of the royal family in Saudi Arabia, and prevented the possibility of future divisions within the ruling elite.
The third section analyzed and evaluated the performance of the legislative bodies in the GCC states and the nature of the relationship between the legislative and the executive institutions. In this context, the role of both the Kuwaiti parliament 'Majlis Al-Umma', and the House of Representatives in Bahrain were analyzed. The relationship of each of these two institutions with the government went through difficult times. In Kuwait, it reached a crisis stage that was provoked by differences over the number of districts that also serve as electoral constituencies. It led to a call for early elections, and relations between the two branches of the state remained tense as frequent interpellations occurred in the National Assembly. In Bahrain the House of Representatives (Majlis Al-Nuwab) expressed its dissatisfaction with the government's response to its demands and suggestions.
The fourth part was a detailed account of opposition groups in some GCC States and their relationship with the incumbent regimes. The strained relationship between the government and opposition MPs in Kuwait, over issues of electoral constituencies, corruption and other policies in the fields of education, freedom of the press, settlement of bad debts, external relations, were discussed. The tension between the opposition and the government in Bahrain over issues of naturalization of expatriates, the mechanism and guarantees of fair elections, the so-called 'Al-Bandar Report' and other bills, were tackled. He said that the governments showed a great measure of flexibility towards some of the demands of opposition groups, an example of which was the cancellation of the electronic system of voting in Bahrain and the agreement by the Kuwaiti government not to reinstate the so-called 'trouble-making ministers.'
The fifth part dealt with the issue of collective protests in some GCC States. This was an important phenomenon in Bahrain, where opposition and civic groups staged marches, protests and demonstrations to highlight their demands or express dissatisfaction with certain decisions and policies. This was quite evident in Kuwait too, where young people made their voice heard by staging peaceful 'orange' marches to support reformist MPs over the issues of reducing the number of constituencies, and corruption. Naturalization of people who had no citizenship was also a subject of protest.
The last section delved into the issue of the human rights situation in the GCC States. It gave an overview of some of the reports published in 2006, which included criticism of the human rights records of some GCC states. Actions taken in relation to issues such as combating trafficking in human beings, empowerment of women, protection and rights of foreign labor and naturalization of the bidoon (stateless people) were also covered.
Municipal and parliamentary elections in GCC states were discussed. The experiences of Kuwait, UAE and Bahrain were analyzed. Issues relating to election campaigns, election results, transparency, and the role of women were addressed in light of their impact on the overall process of political development of the GCC States.
Regional and International Relations of the Gulf Region: A General Overview
Dr. Christian Koch
Director of International Studies
Focusing on the 'Gulf and the International System in 2006,' Dr. Christian Koch, Director of International Studies at the Gulf Research Center, highlighted the major forces which impacted the security and stability of the region throughout the year.
He drew two main parallels to the conclusions reached a year ago when the GRC argued that despite the increased significance of the Gulf from a political, economic as well as strategic perspective, the stability of the region had not increased, and that overall it has seen an increase in the involvement of various international powers. While these trends certainly were confirmed by the events of 2006, Dr. Koch pointed out that as the year progressed, a continued and steady deterioration in regional stability became increasingly apparent. While at the beginning of 2006 there was still a sense of optimism that the internal environment in Iraq would see an improvement, by the end of the year there was an almost complete breakdown of security in the country with approximately double the amount of civilians killed in the second half of 2006 than in the first half. Moreover, despite efforts by the US to undertake a more realistic assessment of the situation, the year also showed that Washington did not have any magic solution that could lead to a quelling of the violence.
With regard to Iran too, the year began with the hope that Iran and the international community could work out a diplomatic solution to the dispute over its nuclear program. However, by the end of 2006, those faint hopes had almost completely dissipated leading to fears that only another confrontation would be able to stop Iranian ambitions. Iran's sense of confidence and its willingness to take on tough positions regarding regional and international issues also raised fears that the Arab Gulf States could find themselves in a situation not of their own making.
Dr. Koch then moved to the broader international environment to look at the relationship between the GCC States and the US, Europe and Asia. Regarding the US, he argued that the GCC states increasingly found themselves in a quandary having to choose between their traditional reliance on the United States to provide a sense of regional security and their disagreement with many aspects of US policy. As a result, the prevailing opinion was that events in the region were beginning to spin out of control with the United States being unable to exert control over them.
However, he mentioned that though ties with both Asia and Europe were expanding, 2006 also underlined that in terms of Gulf security, no other international actor would replace the US in the short- or even medium-term. While Europe and Asia have expressed their concerns about the regional security environment, neither side showed itself ready to invest in the hard security mechanisms that the Gulf still requires. The result is a Gulf region that maintains both its strategic significance and its potential for further instabilities.
GCC Economies
Dr. Eckart Woertz
Program Manager, Economics
In his overview of the GCC economies in 2006, Dr. Eckart Woertz outlined the economic challenges faced by the GCC countries in their efforts to diversify their economies and extend the value chain of their oil and gas production. The energy supply scenarios in the Gulf and developments related to energy-intensive industries like aluminium were highlighted. He also pointed to the development path chosen by Dubai, namely diversification into trade, services and tourism, and said that many GCC countries are trying to emulate this strategy.
The long-term outlook of oil price remains positive, although there might be some soft spots over the next two years due to an economic slowdown in the US and China and some incremental oil production coming on the market from non-OPEC countries like Brazil. A part of the oil price surge of recent years can be attributed to a decline in spare capacity, but the current OPEC production cuts ironically might lead to lower prices should the market perceive them as a recovery of such spare capacity. But in the long run, the dominance of the Middle East, which holds about 60 percent of worldwide oil reserves, will play out. It is the only region that can make up for production declines in other areas like the North Sea and North America.
On the international level, Dr. Woertz stressed the increased importance of the GCC countries in financing the US current account deficit. With the GCC current account surpluses now larger than even China's, petrodollar recycling and the investment options of GCC countries are naturally followed closely by the international banking circuit. As the US deficit continues to mount, the dollar is likely to slide further and the GCC countries need to worry about currency diversification and a modification of their currency peg to the dollar.
On the negative side, the problem of rising inflation in smaller Gulf States and the necessity for statistical reform and more accurate data was stressed. In light of the stock market corrections in 2006, Dr. Woertz pointed to the need for improved corporate governance, transparency and broader capital market development. The further development of a GCC bond market and the unification of the local capital markets were crucial, he said, and discussed dangers of overheating and duplication of similar investment and real estate projects.
After a brief outline of the status of GCC free trade agreements and the planned GCC currency union, Dr. Woertz forecasted the economic outlook of the GCC countries in 2007. Although continued investment inflows and high growth as envisaged by the IMF are likely, he gave five important caveats:
• possible weaker oil prices in the short run;
• corrections in the real estate markets of smaller Gulf states, distressed consumer debt and a late fall-out of the stock market corrections could lead to declining bank profits;
• an impending gas shortage in countries other than Qatar could limit expansion of energy-intensive industries;
• geopolitical tensions caused by the Iranian nuclear stand-off could hurt investment sentiment;
• inflation in smaller Gulf states could limit real growth.
Security and Defense Developments
Dr. Mustafa Alani
Director, Security and Terrorism Program
The GCC security situation in 2006 was characterized by widespread instability and the escalation of security problems that started in 2005. The most important issues were the deteriorating security situation in Iraq and the looming confrontation between the international community and Iran over Tehran's nuclear program. The year 2006 witnessed a general decline in terrorist activities in the GCC States, and upsurge in such activities in Iraq. The monthly death toll in Iraq reached a record high of about 3,000, with the number of wounded almost three times that figure. There were about 40 kidnapping incidents daily on an average, and the total figure of detainees for security-related reasons reached about 30,000.
There was considerable improvement in counter-terrorism operations. The most important development was the success achieved by Saudi security forces in dealing with Al-Qaeda cells in the Kingdom. The preemptive strategy of Saudi security forces led to the dismantling of active Al-Qaeda cells and the arrest of many terrorists. The Gulf region saw two failed attempts of attacks against oil facilities in Abqaiq in Saudi Arabia and Maareb and Hadrawmaut in Yemen.
The issue of the Iranian nuclear program was finally taken to the UN Security Council which issued two resolutions under Chapter VII of the UN Charter (UNSC resolutions 1737 and 1696), demanding that Iran immediately abandon all activities to enrich uranium.
In the area of defense, there was a noticeable increase in defense spending and procurement of weapons. The GCC states concluded a total of 13 deals, most of which were with western countries, for a total amount of $35billion. There was a clear trend toward strengthening and modernizing the air force.
The security developments in 2006 could have far-reaching adverse effects on the stability of the Gulf region in 2007. Failure to stabilize the situation in Iraq will have catastrophic consequences for the Gulf region and beyond. On the other hand, the lack of resolve in tackling the Iranian nuclear program would perpetuate the crisis, lead to a possible arms race and invite more foreign interventions in the Gulf. Therefore, it is certain that 2007 will inherit most of the security problems that engulfed the Gulf region last year.
State of the Environment in GCC Countries
Dr. Mohamed Raouf
Senior Researcher, Environment Program
This section of the Gulf Yearbook covers the most important developments in environmental affairs in the GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE) in 2006.
This section is structured as follows: First, the current state of the environment, natural resources, and environmental problems in the Gulf region which include land degradation and desertification, terrestrial biodiversity, coastal and marine environment, water resources, air pollution and solid wastes management, are discussed.
The GCC are very poor in terms of arable lands and water resources. The GCC countries contribute about 2.4 percent of world CO2 emissions; they have just 0.5 percent of the world's population. The per capita emissions of all GCC countries are higher than the average for high-income countries.
Second, an overview of the main environmental changes, threats and opportunities of the year 2006 - including institutional and legislative changes, important environmental events, civil society organizations' activities in the environment field and environmental management system in the Gulf region - is provided. Two major environmental threats of 2006 - Environmental Threat from the Iranian Nuclear Program and Construction and Demolition debris threats - are also discussed. The final section focuses on the environment outlook for 2007.
The GCC countries have made strides towards enhanced environmental governance since the publication of the Brundtland Report. National Environmental Strategies (NES) and Action Plans (NAP) have been prepared and the development of sustainable development strategies is underway in some countries. However, the Brundtland Commission's vision has not achieved. The main cause has been governmental reluctance to implement the integrated environmental, economic, and social decision-making the report called for. Governments still routinely conceive and implement economic development programs on a sectoral basis without considering their environmental and social causes, contexts and implications.
One would like to see a scenario of environment or sustainability first where environment and natural resources get maximum attention in every decision at all levels. This can only be achieved by an environmental policy mix which addresses different environmental issues, assigns a more active role for civil society organizations in environmental decision-making and implementing environmental policies, and gives an important role to the private sector. In fact, public-private partnerships in environmental issues are important to overcome environmental problems.
Keen observers of environmental issues will agree that while 2006 was a noteworthy year for the GCC, there have been no major changes in environmental policies and development priorities.
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