Tag Archives: Oman

The End of the Mindless Self-Indulgence: the Gulf States

Algeria needs the price of Brent crude, an international benchmark for oil, to rise to $157 dollars a barrel. Oman needs it to hit $87. No Arab oil producer, save tiny Qatar, can balance its books at the current price, around $40 (summer 2020)….The world’s economies are moving away from fossil fuels. Oversupply and the increasing competitiveness of cleaner energy sources mean that oil may stay cheap for the foreseeable future. 

Arab leaders knew that sky-high oil prices would not last for ever. Four years ago Muhammad bin Salman, the de facto ruler of Saudi Arabia, produced a plan called “Vision 2030” that aimed to wean his economy off oil. Many of his neighbours have their own versions. But “2030 has become 2020…” 

Still, some see an upside to the upheaval in oil-producing states. The countries of the Gulf produce the world’s cheapest oil, so they stand to gain market share if prices remain low. As expats flee, locals could take their jobs…

Remittances from energy-rich states are a lifeline for the entire region. More than 2.5m Egyptians, equal to almost 3% of that country’s population, work in Arab countries that export a lot of oil. Numbers are larger still for other countries: 5% from Lebanon and Jordan, 9% from the Palestinian territories. The money they send back makes up a sizeable chunk of the economies of their homelands. As oil revenue falls, so too will remittances. There will be fewer jobs for foreigners and smaller pay packets for those who do find work. This will upend the social contract in states that have relied on emigration to soak up jobless citizens….With fewer opportunities in the oil-producing states, many graduates may no longer emigrate. But their home countries cannot provide a good life. Doctors in Egypt earn as little as 3,000 pounds ($185) a month, a fraction of what they make in Saudi Arabia or Kuwait. A glut of unemployed graduates is a recipe for social unrest…

For four decades America has followed the “Carter Doctrine”, which held that it would use military force to maintain the free flow of oil through the Persian Gulf. Under President Donald Trump, though, the doctrine has started to fray. When Iranian-made cruise missiles and drones slammed into Saudi oil facilities in September 2019, America barely blinked. The Patriot missile-defence batteries it deployed to the kingdom weeks later have already been withdrawn. Outside the Gulf Mr Trump has been even less engaged, all but ignoring the chaos in Libya, where Russia, Turkey and the UAE (to name but a few) are vying for control.

A Middle East less central to the world’s energy supplies will be a Middle East less important to America. ..As Arab states become poorer, the nature of their relationship with China may change. This is already happening in Iran, where American sanctions have choked off oil revenue. Officials are discussing a long-term investment deal that could see Chinese firms develop everything from ports to telecoms… Falling oil revenue could force this model on Arab states—and perhaps complicate what remains of their relations with America.

Excerpts from The Arab World: Twilight of the Petrostates, Economist, July  18, 2020

The Meaning of Forever: permanent military presence

UK Foreign Minister Michael Fallon cemented a raft of military agreements with Oman in August 2017, including the use of an Arabian Sea port for British naval ships.  Fallon visited the sultanate on August 28, 2017 to sign agreements with his counterpart and strengthen the already close military ties between the two countries.  A memorandum of understanding was signed between the two defence ministers to allow British naval ships to the use facilities at Duqm port before the establishment of the UK Joint Logistics Support Base.  “This agreement ensures British engineering expertise will be involved in developing Duqm as a strategic port for the Middle East, benefiting the Royal Navy and others,” Fallon said….Among the craft that will be allowed to dock in Duqm is the HMS Queen Elizabeth aircraft carrier, the largest ship in the British navy.   From Duqm, the supercarrier will be able to “project influence across an important region” the UK foreign office said.

The Joint Logistics Support Base*** will give the UK a “permanent” military presence in Oman, serving as a naval base, training facility, and key logistics centre, the foreign office said on its website.

Also finalised were joint exercises between the two countries, including “Saif Sareea 3” due to take place next year in Duqm.  Oman and the UK have some of the strongest military relations in the Gulf, strengthened after Sultan Qaboos bin Said took to the throne in 1970.  The UK was a key ally in the sultan’s war against communist separatists in the south of the country.  British military officers have traditionally trained the Omani armed forces, while the UK has been a notable arms supplier including the sale of 12 Typhoon “Eurofighters” with the first jets delivered in May

Excerpts from UK secures use of Oman naval base in Duqm, The New Arab, Aug. 29, 2017

***Once completed, the UK Joint Logistics Support Base, a multi-million pound joint venture between British defence company Babcock International and the Oman Drydock Company, will provide the UK a permanent training facility in addition to a key military logistics centre in the Gulf. It will also be connected to other Gulf countries by the Gulf Rail Project.