Gulf States Newsletter

PEOPLE, POLITICS & RESOURCES IN THE GULF REGION

www.gsn-online.com Volume 33 • Issue 864 • 6 November 2009

‘Scorched earth’ in Yemen further raises regional

temperature as US considers Iranian angle
Humanitarian concerns have forced a ceasefire in Yemen’s murderous Al-Houthi conflict amid signs that the Arab-
Iranian ‘cold war’ is hotting up. With Saudi Arabia and Egypt joining the US in seeing wider regional significance in
what has long been understood as a localised conflict, Ali Abdullah Saleh is looking to exploit a difficult situation

W
ith Operation Scorched Earth, Ali Abdullah Saleh has
pulled out all the stops in his efforts to crush Houthi
rebels in northern Yemen. The president has deployed
even his regime security reserve to restore Sanaa’s writ to the
north, in an unfortunately named operation supported by the
United States, Saudi Arabia and Egypt, which have been drawn
together by allegations that the Houthi rebels are backed by
Iranian intelligence.
The Iranian angle is being taken very seriously in Washington,
where the Houthis have never received sympathy (see box article
below). For the shaky government, the overall causes of the
conflict are largely immaterial; after five years and amid
mounting challenges to his authority, Saleh is desperate for
victory and has recognised in the Houthi crisis an opening to
revive his flagging profile in Washington and across the region.
A war against ‘Iranian-based rebels’ is timely, and the government
is dishing it up on a plate; for Saleh, it is both a gruelling
challenge and an opportunity to rekindle the role of valued
partner that he played in US calculations in the immediate
aftermath of the 9/11 attacks.
But such has been the ferocity of the violence visited on civilian
populations that, on 28 October, the US State Department finally
yielded to international pressure and called for the return of
ceasefire conditions in the fifth round of fighting between
Houthi rebels and government forces. Spokesman Ian Kelly
released a memo that said:“The United States calls on all parties
to return to the ceasefire that was established in 2008; to respect
principles of international humanitarian law; and to avoid any
action that would endanger the civilian population – including
relief workers – in the affected areas.”
The grudging announcement came after many weeks of pressure
from the United Nations High Commissioner for Refugees
CONTINUED ON PAGE 3

Big spenders KRG questions Kuwait’s women MPs demand more

Not all headlines about Qatari
business are positive, with
wealthy Al-Thanis embroiled
in controversial schemes in
London and Paris, but
projected growth rates and
other domestic indicators are
good and moves to develop
business links in Asia hold big
promise. Following a strategic
review of their SWF assets, the
Qatari mega funds are back in
action at home, with massive
projects such as developing a
rail network, and abroad,
where a number of eye-
watering bids are being lined
up.
—SEE PAGE 11
Barham Saleh heads the
Kurdistan Regional Government
three months after contro-
versial elections in northern
Iraq. Saleh is widely respected,
but his PUK sponsors have
been weakened in
competition with coalition
partner, regional president
Masoud Barzani’s KDP. The
new government must
improve its governance,
including in the natural
resources sector, where Ashti
Hawrami remains minister.
With investors piling into
KRG oil, GSN looks at Gulf
Keystone Petroleum.
—SEE PAGES 6 AND 10
Voting, parliamentary seats and
ministerial posts are only the start
for Aseel Al-Awadhi. She wants
women in Kuwait to be full
citizens in more than politics.
Despite recent reforms –
discussed in Politics below – there
is still a huge distance to make up
in terms of women’s social and
legal status, says the MP, who does
not wear a hijab, inside parliament
or elsewhere.
“Women don’t have equal rights,”
Al-Awadhi told GSN, running
through a checklist of major areas
in which women are not treated
the same as men. “A married
woman who works cannot open a
bank account for her children
without the agreement of her
husband; the husband has to be
the co-signer. The children of
Kuwaiti women married to a
foreigner are not treated as
Kuwaitis. In family law, women are
not treated as independent adults,”
she said, pointing out that, until a
recent constitutional court
decision, a woman could not get a
passport without the permission of
a male member of her family.
Al-Awadhi is one of the liberal
parliamentarians who have drawn
most of their support from the
middle classes of the capital city.
But she is acutely aware of the
need to reach beyond the totemic
issues such as voting, foreign
travel rights and the hijab that
CONTINUED ON PAGE 6

ISSN 0953-5411 Cross-border Information

 Contents

POLITICS
YEMEN: Scorched earth policy raises temperature 1
KUWAIT: Women MPs demand more 1
YEMEN/IRAN: Alliance against the Houthis 4
SAUDI ARABIA: Promotion for Mansour Bin Mitab 4
KUWAIT: Constitution boosts status of women 5
Gulf States Newsletter
IRAQ: New government for KRG 6
Volume 33 • Issue 864 • 6 November 2009 POLITICS: OBITUARY
KUWAIT: Talal Mubarak Al-Ayyar 7
Sales and Service
Direct: +44 (0) 1424 721 667 ROYALS WATCH
Fax: +44 (0) 1424 721 721 SAUDI ARABIA: Ahmed Bin Khalid fined 8
Email: info@gsn-online.com
SAUDI ARABIA: King Abdullah, Prince Salman 8
Director Nick Carn
nick@gsn-online.com SAUDI ARABIA: Ministers visit Oman and The Hague 8
SAUDI ARABIA: Saud Al-Faisal in Belgian talks 8
Editorial director
Jon Marks (jon@gsn-online.com) SAUDI ARABIA: Abdelaziz, Al-Sudeiri funerals 8
News editor SAUDI ARABIA: Princess is no rebel 8
Eleanor Gillespie (eleanor@gsn-online.com) UAE: Khalifa Bin Zayed re-elected 8
Senior contributing editor RAK: Al-Qasimi wedding 8
Paul Melly (paul@gsn-online.com)
Contributing editors DEFENCE AND SECURITY
Nadine Marroushi
YEMEN: Jets feel the strain in rebel fighting 9
John Hamilton
Kevin Godier (Finance)
ENERGY AND INDUSTRY
James Gavin
Cartographer UAE: Abu Dhabi’s role in nuclear plans 9
David Burles CORPORATE/IRAQ: Soaring shares attract Keystone backers 10
Production DUBAI: Enoc makes full Dragon Oil takeover move 10
Jill Macfarlane-Miller (admin@gsn-online.com)
Webmaster FINANCIAL RISK
Chris Light (webmaster@gsn-online.com) QATAR: Investment vehicles emerge from recession 11
Publications director
Nick Carn (nick@gsn-online.com)
QATAR: Problems for Emiri brothers 11
QATAR: Investors look to Asia 12
Gulf States Newsletter
Published fortnightly since 1974 DIARY
PO Box 124, Hastings, East Sussex TN34 1WP, UK
Tel: +44 (0) 1424 721 667 EVENTS: What’s on around the region 13
Fax: +44 (0) 1424 721 721
Email: info@gsn-online.com
DATA
Cross-border Information Ltd DATA: Middle East risk indicators 13
Registered office: 19 Wellington Square, Hastings, East Sussex DATA: Stock markets and exchange rates 13
TN34 1PB, United Kingdom
Directors: JJ Marks, JM Ford, NJ Carn RISK MANAGEMENT REPORT
OMAN: B/2 14
© 2009 by Cross-border Information Ltd. All rights reserved.
OMAN: Labour and investment laws 14
Single subscriptions of GSN are sold by post, and email. Data and information
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network of correspondents through extensive surveys of sources and published QATAR: Investment climate 15
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2 GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009

Yemen
‘Scorched earth’ in Yemen
CONTINUED FROM PAGE 1 downtown Saada city. The districts of Razzeh and Al-Dhaher
(UNHCR), the European Union and Yemeni Red Crescent, and
followed a similar statement by the Council of Europe on 27
October. While the humanitarian impact of the fighting in
northernYemen has been severe for much of the last five years,
it was only in October that refugee agencies were able to raise
the profile of the crisis, following a series of Yemeni Air Force
bombing attacks that struck civilian targets, including markets
and refugee camps (see Defence and security).
US hesitancy to back a ceasefire has been rooted in American
support for Operation Scorched Earth, the Yemeni government
security offensive launched on 11 August (GSN 860/6).
Whether there is truth in speculation about Iranian meddling in
Yemen – and the evidence is limited at this stage – the conflict
has exercised strengthening ties between the three countries,
which form the vanguard of the anti-Iranian bloc in the region.
With the government creating a veritable blizzard of anti-
Iranian allegations, and with Iran’s many enemies in Washington
lapping it up,Yemen’s campaign against the Houthi rebels is
emerging as a bizarre test of commitment in the nascent Arab-
Persian cold war.
The fifth Houthi campaign
There had been four rounds of major fighting between
government forces and the Houthi clan in Saada province, north
of Sanaa, before Operation Scorched Earth. The first two
rounds took place in June-September 2004 and March-April
2005, followed by high-intensity fighting in late spring and early
summer 2007, albeit local to the rebels’ mountain redoubt. The
fourth government military campaign took place in 2008,
ending when mutual exhaustion brought the struggle to a
temporary close.
By the time an informal ceasefire took hold, all the key points
of contention remained unresolved, including Houthi demands
for an end to anti-Houthi religious propaganda campaigns
(Houthis are Shia-influenced Zaydi Muslims not Sunnis), urgent
medical assistance, and the formation of a committee of tribal
sheikhs and religious scholars from different sects to supervise
the withdrawal of troops to their positions before the first
conflict in 2004. Other demands include a presidential amnesty
for fighters, the release of detainees, the exchange of bodies
(including the movement’s leader, Hussein Al-Houthi, killed in
September 2004) and national dialogue, the formation of a
Houthi political party and the establishment of a university in
Saada for Houthis.
By this summer, the Houthis and the government were spoiling
for a fight. The Houthis struck first, seizing two key pieces of
land. A section of the Sanaa to Saada road in Amran
governorate, was cut in August. It placed the rebels just 70km
north of Sanaa and cut off Yemeni Army garrisons in Saada
from resupply. The second was the northern districts of Baqim
and As-Safra, key smuggling routes on the Saudi border.
GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Politics
Following these successes, the rebels cut roads between Saada
and Jawf to the east, and started attacks on government-held
(on the Saudi border) also rose up and expelled isolated army
outposts.
These stinging blows led to Operation Scorched Earth, a large-sale
operation targeting 15 key locations and committing almost all
of the regime’s available security forces including, for the first
time, Saleh’s presidential guard, the elite 29th Yemeni Army
mechanised brigade. The order of battle includes ten army
brigades, over half of the active strength of the Yemeni Army
and all of its best units. Saleh has gone for broke by gambling
his regime security reserve.
Alongside these forces, the government has again called up
Popular Army battalions across the targeted areas. These tribal
levies are modelled on the Iraqi Baath Party militias (due, in
part, to the influential role of former Iraqi Republican Guard
officers in today’sYemeni military). While most recruits to these
units simply want a wage, many are Sunni Arab Islamist militants
who want to fight the Shia Zaydis. Their ranks have recently
been swelled by former Arab-Afghan Mujahideen such as Khalid
Abdul Nabi, whom the US State Department describes as a
leader of the jihadist Aden-Abyan Islamic Army. He joined the
jihad in Saada in February. The overall commander of the new
campaign is General Ali Mohsen Al-Ahmar, the president’s
half-brother, who spent the 1980s recruitingYemeni jihadists to
fight the Soviets in Afghanistan and since then has regularly
drawn in such former jihadists – local and foreign – to fight the
Sanaa government’s enemies.
Hard fighting
Both sides have fought this latest campaign with increasing
ingenuity and harshness. The government’s tactics are familiar:
it creates cordons of tanks and other armoured vehicles around
rebel villages, empties civilians from the area and then bombards
the area with Soviet-pattern towed field guns, truck-mounted
BM-21 122mm multiple rocket launchers, mortars and air
support (see companion article). Eventually, infantry forces
tentatively probe for resistance and capture lightly defended
areas. It is unsurprising thatYemen’s tactics closely mirror those
used by the Baathist military against the Kurdish and Shia
uprisings in Iraq since the 1970s. Iraqis act as advisers to a
number of Yemeni army battalion and company commanders.
Alongside these blunt force tactics, the Yemeni military has
shown new capabilities to precisely target Houthi commanders
using signals monitoring and air attacks. Shortly before he was
reported captured on 18 October, Houthi operational
commander Abdelmalek Al-Houthi publicly accused the US
of providing intelligence support to the government.
On the other side, the Houthis appear to be evolving new tactics
and capabilities. The rebel Khatab Badr, the armed wing of the
Al-Shahab Al-Mumen youth foundation, is now seeking to
recapture some symbolic and strategic urban areas. In late
October, Houthi rebels launched a co-ordinated assault on the
presidential palace in Saada. As in last year’s struggles, Yemeni
3
Politics Anti-Iran alliance in Yemen & Saudi Arabia
In alliance against the Houthis, cold war partners accuse Iran
The government has stressed the Iranian connection in recent
communiqués on the northern conflict. Houthi leader Badreddin Al-
Houthi exposed his movement to charges of Iranian backing by contacting
Shia marjas (spiritual leaders) in Najaf and Qom, drawing stern criticism of
government crackdowns from Shia notables such as Iraq’s Grand Ayatollah
Ali Al-Sistani. Iranian state media has strongly criticised the Yemeni
government’s handling of the Houthi issue.
Perhaps more significantly, at least three Lebanese citizens appear to have
been killed in the fighting in Saada governorate since August, and eulogies
for them were published by Lebanese Hizbollah media outlets. The deaths
fit a pattern of Iranian Revolutionary Guard Corps (IRGC) support for
proxy movements in Lebanon, Iraq, Bahrain and Afghanistan.
The Iranian angle is being taken seriously in Washington, which views the
Houthis as anti-western religious zealots due to their apparent involvement
in actions against Yemeni Jews and allegations from 2006 that the
movement sought to assassinate US ambassador Thomas Krajeski. More
recently, the Yemeni government has ‘smeared’ the Houthis by highlighting
their actions during the recent campaign, including the targeting of aid
workers and use of suicide vests. Other claims include Houthi clan
involvement in cross-border smuggling and their role in weakening the
government as it seeks to prevent state failure. The bulk of Washington’s
$8.7m annual aid to Yemen has consequently been directed to the military,
and there are strong indications that Yemen is receiving intelligence
support from the Pentagon.
Army infantry and levies have struggled to hold their own in
close combat with Houthi rebels. More than a dozen Yemeni
Army tanks have been destroyed in urban fighting with rebels
armed with rocket-propelled grenades (RPGs), land mines and
Molotov cocktails.
The rebels have captured Yemeni Army mortars and armoured
vehicles, and appear to have been rearming during the last year
(see below). Houthis’ use of assassination tactics has become more
regular and more successful. Rebels narrowly failed to kill Harf
Sufian’s district administrator in late summer, but did kill
Brigadier General Amr Ali Mousa Al-Uuzali in late October.
Cutting rebel supplies
In addition to fighting for key terrain and to destroy Houthi
commanders and forces, the government has fought a war of
supply. Road junctions have become critically important in
otherwise impassable mountain terrain, andYemeni Army forces
have stopped 10-20 trucks a day carrying weapons, explosives,
food, fuel, medicine and gas cylinders to rebel elements in Saada,
Malaheet and Amran.
The government is also trying to cut off the rebels from the
Red Sea, which is viewed as a key re-supply route. The rebels
get financial and logistical support through local Shia religious
taxes and overseas contributions from the diaspora, particularly
Kuwait and United Arab Emirates. This money is spent at
arms souks in Yemen and, increasingly, in the Horn of Africa.
4 GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Yemen is also getting strong backing from Saudi Arabia and Egypt. As
well as stressing the need for mediation and humanitarian efforts, Saudi
and Egyptian involvement has a substantial military and security
component. The Saudi government has long sought to grind down the
Houthi challenge because of the many rebel attacks on Saudi border
guards and construction companies working on border defences. The
Houthis’ role in smuggling networks and their opposition to Saudi Arabia’s
extension of Salafist mosques into Saada have further motivated Riyadh to
support the Saleh government. Saudi military assistance to Yemen appears
to be accelerating; in addition to approximately $1.2m a month for
Operation Scorched Earth, the Saudis are providing intelligence support
and, for the first time on 19 October, used artillery and helicopter gun ships
to strike Houthi groups on the border.
Egypt’s role in the conflict is less direct but still significant. Often seen as
a ‘sleeping giant’, Cairo wants to be seen at the forefront of a regional
initiative to restrict Iran’s perceived influence (see GSN view). This factor has
become more important since March, when Egypt exposed Hizbollah arms-
smuggling networks in the Sinai that were sending arms into Gaza. Egypt
is keen to increase its regional stature by working with the US and Saudi
Arabia. Foreign minister Ahmed Abul Gheit and intelligence chief General
Omar Suleiman travelled to Yemen on 5 October to meet President Saleh,
then to Saudi Arabia to consult King Abdullah. US consultancy Stratfor
reported in late October that Egypt was pushing for sustained air strikes in
Saada province, as well as joining the US in support for Yemen’s military.
Money and arms reach the Houthis via the harbour at Midi in
north-western Yemen. It was in this area that the Yemeni
coastguard boarded and searched the Monady, a small Iranian-
registered trawler that was allegedly found to contain RPGs and
107mm rockets. The government said the vessel, which
originated in Sharjah and crossed Oman and Eritrea, was proof
of its long-standing claims of Iranian support for the Houthis.
New position for Mansour Bin Mitab
On 2 November, King Abdullah appointed Prince Mansour Bin Mitab Bin
Abdelaziz Al-Saud as municipal and rural affairs minister. Mansour’s
father, Prince Mitab, who has a record of government service dating from
the early 1950s, held the position since 2003 but has resigned. Prince
Mansour has been Saudi Electoral Commission chairman for several
years, and this year suggested women might get the municipal vote (GSN
852/9, 753/3, 749/2, 741/2, 739/1). He also served as deputy municipal
and rural affairs minister.
While the significance of Mansour’s appointment should not be
overplayed, analysts suggest it could pave the way for Mitab to act as
Allegiance Commission (Al-Hayaat Al-Bayaa) chairman if Prince
Mishaal Bin Abdelaziz becomes too ill to serve (GSN 863/1).
An observer told GSN: “Mansour and Mitab have worked together a lot,
notably on the elections. Abdullah is, at the very least, signalling that the
architect of the closest exercise that Saudi has ever come to democracy
is a person of importance who can be trusted with a full ministry.”
Kuwait
Kuwait’s constitution boosts status of women
In an often fractious political scene, the 1962 document is the foundation upon which all Kuwaitis agree – and it is
now working in favour of women’s freedoms
F
or the second time in a month, Kuwait’s constitutional court
has ruled in favour of women’s rights. It has decided that
women who do not wear the hijab retain their full political
rights to vote and to sit as members of parliament. The court’s
judgement, which cannot be appealed, is a serious rebuff to
ideological Islamists seeking to undermine the breakthrough
made by the dynamic feminist movement with the election of
four women to the National Assembly in May. Just a few days
earlier, the court ruled that adult women do not need the
permission of their husbands, fathers or male guardians to obtain
a passport. In reaching these judgements, the court has reiterated
the absolute primacy of the 1962 constitution and thus, implicitly,
limited the scope for extending sharia Islamic jurisprudence.
When parliament passed the women’s political rights law in 2005,
Islamist conservatives added a clause insisting that women abide
by sharia when exercising their political rights. This was the basis
of an attempt to secure a court ruling that would force women
to wear the hijab in parliament or when voting as ordinary
citizens. But the constitutional court pointed out that the sharia
reference failed to define the requirements of Islamic law in
specific terms. And in remarks that have ramifications far beyond
the issues of women’s dress or political rights, the court also stated
that the constitution, which is higher than any law, guarantees
personal and religious freedom and does not discriminate
between people on the grounds of religion or gender.
This ruling could have an impact across a range of policy areas
where Islamists have tried to introduce new rules on the way
Kuwaiti society functions in the public realm. They have
succeeded in pressuring the government to separate the teaching
of men and women at Kuwait University, and even in private
educational establishments, provoking liberals to make
unfavourable comparisons with Saudi Arabia, where King
Abdullah Bin Abdelaziz recently sacked a senior cleric for
objecting to his establishment of the first co-educational
university. Indeed, Kuwaitis saw TV coverage of Emir Sheikh
Sabah Al-Ahmed Al-Jaber Al-Sabah attending the opening,
which modernisers hoped would change a few minds at home.
But the conservatives remain hugely influential. They recently
persuaded the government to impose a midnight closing time on
public cafes. After furious protests from cafe operators who were
losing money, this was changed to 1am – still a drastic restriction
in a society where, in warmer months, people sit outside until the
small hours. While the government tends towards the liberals on
economic policy, it relies heavily on support from Islamist and
tribal interests and is thus poorly placed to resist conservative
pressure for constraints on social life. Prime minister Sheikh
Nasser Mohammed Al-Ahmed Al-Sabah let the courts, rather
than his government, settle the recent tussles over women’s rights.
GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Politics
Barely had the votes been counted in May’s election, than
Islamists sought to derail the victories of two of the four new
women MPs – Aseel Al-Awadhi and Rola Dashti, neither of
whom wears the hijab. For decades, women have played a
prominent role in Kuwaiti public life as senior officials, media
bosses and, more recently, as ministers and now MPs. Although
most Kuwaiti women cover their hair, many of those in public
life do not. The traditionalists’ attempt to force women MPs to
wear the hijab was about much more than clothing. It was
symbolic of the wider tussle for political power and the shaping
of society. By the time of the election, there was real
momentum to get women into parliament. While Al-Awadhi,
Dashti and former minister Massouma Al-Mubarak were fairly
well-known, the fourth woman elected, Salwa Al-Jassar, was
not a prominent public figure, although she was active locally.
But Al-Jassar benefitted from the determination of many people
in her constituency, including men, to include a woman among
their preferred candidates. The dignified but feisty performance
of education minister Nouriyah Al-Subaih when subjected to
live, televised parliamentary questioning in early 2008 helped
to persuade many men that women merited a role in politics
(GSN 822/1). Well-briefed and determined to make her case,
she won the confidence vote. “She was so confident and
capable,” recalls Women’s Cultural and Social Society secretary
general Lulwa Al-Mulla, a long-time campaigner for women’s
rights. She said the effectiveness of Al-Subaih and Al-Mubarak
as ministers had shifted attitudes. “That was a great change in
the mentality of society,” she said.
But the traditionalists tried to fight back through the issue of
dress. The question did not arise with the June 2005
appointment of Kuwait’s first full-ranking woman minister,Al-
Mubarak – who later left government and was this year elected
to parliament with a massive vote – because she wears the hijab.
But when education minister Al-Subaih entered parliament
without her head covered, some Islamist MPs walked out.
This year, Hamad Abdelaziz Al-Nashi, a voter in Kuwait’s third
constituency, where Al-Awadhi and Dashti had just been
elected, sought to challenge their election through the courts.
Aware that the reference to sharia in the women’s political rights
law had not specified what sharia compliance by women would
mean in dress terms, the Salafist parliamentarian Mohammed
Hayef Al-Mutairi submitted an official parliamentary question.
In early October, the Ministry of Awqaf and Islamic Affairs
officially responded, issuing a fatwa that women should wear
the hijab in front of men they did not know – a category that
would obviously include parliamentarians and male voters at a
polling station. Feminists and liberals were depressed at this
news because they feared the constitutional court would have
5
Politics
no choice but to rule that refusing to wear the hijab breached
the sharia requirement in the law.
A leading liberal Kuwaiti political scientist told GSN that the
constitution had referred to sharia as the most important,
although not the sole, source of its principles. However, he said,
when the constitution was drawn up at the height of secular
Arab nationalism in the early 1960s, no one expected political
Islamism to become such a powerful force; the reference to
sharia was intended as more formal than real. In today’s very
different climate, there was a risk this sharia reference would be
used to impose strict religious constraints that the architects of
the constitution had never envisaged, warned the liberal analyst,
speaking before the court’s decision. Many Islamists take the
opposite view, seeing the growing influence of religious
principles as a right and natural development that will rectify the
mistakes of the past.
The constitutional court asserted the basic principle of the
constitution’s provision for core freedoms, as stated in its text.
Several factors may explain this decision, not least that the
Ministry of Awqaf and Islamic Affairs’ Islamic scholars stress that
their utterances represent guidance on matters of religious
principle and interpretation but do not carry the force of
legislation. This point was made by National Sharia Committee
chairman Sheikh Isa Ahmad Al-Ebaidhi in an interview with
GSN last year (GSN 829/8). “Kuwaitis support the rules of
Islam,” he said. “But they are against strict compulsion. They
don’t want to be forced.”
Above all, the constitutional court is keen to protect the
standing of the 1962 constitution as the one document that all
Kuwaitis, whatever their political or religious views or social
standing, accept as the foundation of the country’s distinct
Kuwait’s women MPs fight on
CONTINUED FROM PAGE 1 The only minister who retains his portfolio is natural resources
have attracted outside attention if women’s rights campaigners and
liberals in general are to appeal to less affluent Kuwaitis. “We have to be
more realistic,” she said, stressing the need to deal with core economic
and family issues such as employment and the division of income.
Sometimes, for example, a man will take another wife without having
the financial means to support his existing spouse. Problems also arise
when couples divorce: usually the woman is awarded custody of the
children but, until now, child allowance was paid to the father. “Most
women have these concerns, such as the unfairness of divorce. Yet, most
men see things differently – and they are scared. Even liberals have
tribal values,” she said.
Parliament’s committee for women’s issues – set up even before there
were women members – has voted to change the rule on child allowance
so that it is paid to the parent with custody. However, this has yet to be
passed by a vote of the whole house.
Despite her impatience at the huge list of changes to be tackled, Al-
Awadhi believes progress is being made and wants to win support issue
by issue, as traditionally conservative public attitudes gradually shift. “I
don’t think it would be a good idea for us to push it as a package. We
need to go step by step,” she said.
6 GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Kuwait & Iraqi Kurdistan
identity. Indeed, perhaps encouraged by the court’s stance but
also uttering a fundamental platitude with which no Kuwaiti
will disagree, Sheikh Nasser Mohammed this week introduced
the new economic development plan by stressing that the
government was keen on upholding the constitution because “it
realises it is the nation’s safety valve”.
IRAQ
Trading places in KRG
Former federal deputy prime minister Barham Saleh took over
as Kurdistan Regional Government (KRG) prime minister on 29
October, three months after parliamentary elections in the
region. Saleh has cut the number of ministers from 27 to 19,
and dispensed with eight ministers without portfolio. Saleh was
nominated by the Patriotic Union of Kurdistan (PUK), led by
federal president Jalal Talabani. His predecessor Nechirvan
Barzani came from the Kurdistan Democratic Party (KDP), led
by his uncle, regional president Masoud Barzani. The two
parties rule in coalition under a 2006 power-sharing agreement
where control of ministries is exchanged by rota.
According to critics, the length of time that Saleh took to form
his government is evidence of his weakness compared to the
KDP, which became the ruling coalition’s dominant force after
the PUK lost votes to the opposition in Sulemaniyah in the July
election (GSN 859/5). According to Dr Kamal Mirawdali,
who ran as an independent against Masoud Barzani for president,
Saleh will share his authority with deputy PM and KDP
politburo member Azad Barwari, whose approval will be
needed for every decision. However, Saleh’s supporters say his
high standing in Baghdad and his reputation for honesty will
help to improve traditionally poor Erbil-Baghdad relations as
disagreements persist over the status of Kirkuk, the legality of
the KRG’s oil exploration licences and other fundamental issues.
minister Ashti Hawrami, who is officially an independent,
although many commentators say he is allied with the KRG.
Hawrami was embarrassed by revelations in September that he
had acted as an intermediary in a share transaction between
Norway’s DNO and Turkey’s Genel Enerji, which have
important exploration and production assets in the region (GSN
862/1). Although it is still not clear what happened to the profit
in this transaction, which the minister said he did not gain from
personally, the Kurdish authorities have concluded there was no
wrong-doing. Hawrami emerged unscathed from an ineffective
late October interrogation by the regional parliament.
The previous government’s deputy interior minister, KDP-
nominated Abdul Karim Sultan Sinjari, is interior minister.
In a similar switch, the PUK’s Bayiz Saeed Mohammed
Talabani becomes finance and economy minister, and the
PUK’s Jafar Mustafa Ali takes over as minister for Peshmerga
affairs (defence minister).
* A full list of the new government can be found in the GSN subscriber
library.
Kuwait
Death of a Kuwaiti political player: Talal Mubarak
Al-Ayyar – 5 March 1959-23 October 2009
The death of Talal Al-Ayyar at the age of 50 marks a theatrical crescendo to the tumult and controversy of
Kuwaiti public life, in which the former statesman had been an active player
A
lthough lacking charisma (and age), Al-Ayyar’s family
connections and ability to build alliances with the
tribal bedouin of his Jahra governorate stronghold
allowed him to play a role in Kuwait for decades. Related to
Sheikh Jaber Al-Ahmed Al-Jaber Al-Sabah through the late
emir’s maternal family,Al-Ayyar became prominent in 1990
after his appointment to the National Council – a body the
late emir hoped would substitute democracy with token
public representation. Many Kuwaitis cite this as an example
of the politically motivated naturalisation of bedouin in Jahra,
who, it was intended, would provide unwavering support for
the Al-Sabahs. Many of this population were Saudi nationals
rather than stateless bidoun; they had tribal connections to
bedouin already living in Kuwait but otherwise little
historical presence in the territory.
Being a royalist and an effective advocate for Jahra locals,Al-
Ayyar was rewarded by being elected to the National
Assembly in 1992, 1996, 1999, 2002, 2003 and 2006, where,
in most cases, his voting record proved detractors’ accusations
that he was ‘the boss man’. So it was unsurprising that he was
given the portfolios for the ministries of social affairs and
labour and electricity and water in the 2001 cabinet. An
elder brother, Hamad Al-Ayyar, had served as housing
minister in the 1970s.
Many were astonished at the ability of Al-Ayyar, who was
descended from the Harb tribe (part of the Muzeina
confederation), to secure the support of more populous tribal
groupings. Throughout the changes which took place up to
1999, voters in Jahra continued to believe that Al-Ayyar’s
special bond with the Al-Sabahs and his ingenuity would
secure their demands (often greater financial allowances for
government and military employees and housing benefits).
Yet, with the Al-Sabahs forced to mend fences with urbanised
Kuwaitis and the bedouin’s increasing Islamicisation, the
dependability of the bond would be called into question.
Two issues in particular gave rise to tensions that made Al-
Ayyar’s life difficult: women’s political participation and the
redrawing of political constituencies.
Hailing from a wealthy, established bedouin clan with deep
ties to Kuwait and its rulers, and growing up in a fairly
worldly setting, it is difficult to imagine Al-Ayyar being
personally opposed to women voting in National Assembly
GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Politics: obituar y
elections. Yet he earned the ire of prominent women’s rights
activists for an alleged personal attack on Massouma Al-
Mubarak, the first woman appointed to cabinet.
Questions of suffrage
Al-Ayyar’s opposition to women’s participation in politics is
a matter of public record. He was reputed to have told a
gathering of voters in Jahra that women in politics would be
disastrous for the country and, to use a well-worn phrase
from the Kuwait of those days, “contrary to our values and
customs”.
Nevertheless, when the executive’s determination to allow
women into the political sphere became known, Al-Ayyar
demonstrated his loyalty to the emir by voting for the 2005
bill which gave women full suffrage – only months after he
had opposed a move to have the matter investigated by
Kuwait’s constitutional court.
While women’s suffrage brought some tension to the
seemingly unbreakable bond between the executive and the
bedouin, it was the redrawing of electoral constituencies that
destroyed it. Both (ultimately successful) demands were
driven by pro-democracy Kuwaitis, especially those from
merchant families. Campaigners who agitated for the
reduction in electoral constituencies from 25 to five tried
unsuccessfully to persuade bedouin Kuwaitis that the move
would not mitigate their electoral strength; very few bedouin
were enthusiastic about the change. Al-Ayyar was convinced
the new system was designed to harm the interests of tribal
Kuwaitis, who had enjoyed a disproportionately large share of
National Assembly seats. Principled on this point at least,Al-
Ayyar had refused to run in this year’s elections.
Even at the end, Al-Ayyar’s life represented a battleground
for Kuwaiti rivalries. A reliable source confirmed the official
version of events: that Al-Ayyar died of complications arising
from a long-standing kidney problem shortly before a
business trip to France. This source spoke to GSN in a move
to dispel rumours that Al-Ayyar had died in Turkey.
According to one rumour doing the rounds in smart quarters
of Kuwait City, he died at the hands of a criminal gang with
whom he was ostensibly involved. Al-Ayyar remains a figure
of public speculation even after his death.
7
Royals watch
Ahmed Bin Khalid fined
Board members of the listed Saudi Chemical Company, including Prince
Ahmed Bin Khalid Al-Saud, have been fined for approving an acquisition
in which the chairman (Prince Ahmed) had a vested interest but failed to
consult shareholders. The move is the latest by the increasingly active
Capital Market Authority (CMA) to increase transparency in the
Kingdom. Ahmed and six board members were fined $13,300 each.
According to CMA, Saudi Chemical bought a 15% stake in Mawarid
Trading through a unit called Saudi International Trading Ltd (Sitco
Pharma) without obtaining shareholders’ approval.
The CMA said: “The fine is because they have accepted a deal for their
subsidiary to buy 15% of the shares in Mawarid – although the chairman
of the [SCC] board had an interest in the transaction – without
authorisation from the general assembly.” It added that the SCC board did
not reveal in a 2 July Saudi Stock Exchange (Tadawul) disclosure that
the chairman had an interest in the transaction – Prince Ahmed holds
shares in Mawarid Trading parent Mawarid Holding. Ahmed, who is in
his late 50s, is a son of the big Saudi investor and businessman Prince
Khalid Bin Abdullah Bin Abdelrahman. They are from the Al-
Abdelrahman branch of the family.
SAUDI ARABIA
KING ABDULLAH: Qatar meeting
Qatar’s Emir Sheikh Hamad Bin Khalifa Al-Thani has been in the
Kingdom for talks at King Abdullah’s Janadriya farm. Qatari foreign
minister and premier Sheikh Hamad Bin Jassim Bin Jabr Al-Thani
and other ministers were with him. Emir Sheikh Hamad has recently
been in North Africa, including Libya.
SALMAN BIN ABDELAZIZ: To Geneva
Riyadh governor Prince Salman Bin Abdelaziz has visited his brother,
Allegiance Commission chairman Prince Mishaal Bin Abdelaziz, in
Geneva. Mishaal has been unwell for several weeks and recently
travelled to Geneva for health care (GSN 863/1, 861/7). Mishaal’s sons
Abdelaziz, Bandar, Saud, Sultan and grandsons Mohammed Bin
Abdelaziz and Mohammed Bin Mansour are with him. King
Abdullah, Crown Prince Sultan and second deputy premier and
interior minister Prince Nayef have also spoken to Mishaal by phone
to check on his condition. Prince Salman has also spent a lot of time
abroad this year, staying with his brother Sultan in Morocco.
DEFENCE PRINCES: Oman, The Hague
Deputy defence minister Prince Abdulrahman Bin Abdelaziz has
attended the eighth Gulf Co-operation Council (GCC) defence
ministers meeting in Oman. Assistant defence minister Prince Khalid
Bin Sultan has been in The Hague on a three-day official visit at the
invitation of Netherlands’ heir apparent Prince Willem Alexander.
SAUD AL-FAISAL: Belgium meetings
Foreign minister Prince Saud Al-Faisal has held talks with visiting
Belgium foreign minister Yves Leterme. According to local media,
one topic under discussion was possible Belgian co-operation in Saudi
plans to inject carbon dioxide into oil fields. The Middle East peace
process and Afghanistan were also discussed. Belgian Crown Prince
8 GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Saudi Arabia, UAE & RAK
Philippe was also in the delegation; he separately held talks with King
Abdullah Bin Abdelaziz.
HAYA BINT ABDELAZIZ: Funeral
King Abdullah led funeral prayers at Riyadh’s Imam Turki mosque
on 3 November for his sister, Princess Haya Bint Abdelaziz Al-Saud.
Also attending were some of Haya’s other brothers, including recently
retired municipal affairs minister Prince Mitab, General Intelligence
Directorate head Prince Miqrin Bin Abdelaziz, deputy interior
minister Prince Ahmed Bin Abdelaziz and Saudi Arabian National
Guard deputy commander Prince Badr Bin Abdelaziz. The King
then received condolences from princes, scholars and ministers.
AL-SUDEIRI: Funeral
Acting Riyadh governor Prince Sattam Bin Abdelaziz performed
funeral prayers for Haya Bint Ahmed Al-Sudeiri in late October. It
is unclear who she was, but she was undoubtedly important because
other senior princes attended.
SARA BINT TALAL: Not a rebel
Princess Sara Bint Talal, a sister of billionaire investor Alwaleed Bin
Talal, has been profiled on the saudiwave.com website. Sara said she
often accompanied her father, Prince Talal, who is a Unesco special
envoy, on his humanitarian trips. She said she considers herself a
“people’s princess” and aims to serve the people “without
discrimination”. She said:“I learned to love others on the ground, by
witnessing poverty and people’s miseries.” In September, Sara was at
Middlesex University for the launch of a laboratory to research cancer
treatment. The laboratory will work with the Lee Smith Foundation,
of which Sara is a global ambassador (GSN 861/7). Sara said:“We are
conducting research in order to save the lives of thousands of cancer
patients, and/or to relieve the suffering of many patients using
advanced therapy treatments.” She recently lost her mother, Mudhi
Bint Abdelmohsin Al-Tamimi Al-Anqari, to cancer. Sara lives in
London, but previously chaired a Saudi charity that helps children
with Down’s syndrome. She also led a campaign to improve the living
conditions of prisoners. She dislikes her nickname “the rebel
princess”, which she was given after denouncing the Kingdom’s ultra-
conservatives for being the cause of restrictions on women. She said:
“The government have to confront them [the conservatives].” She
believes that “women should be full partners” in the Kingdom –
going beyond driving and voting to include equal rights in court.
UAE – ABU DHABI
KHALIFA BIN ZAYED: Re-elected
UAE and Abu Dhabi ruler Sheikh Khalifa Bin Zayed Al-Nahyan
has been ‘re-elected’ as president. Supreme Council members and
rulers agreed that Sheikh Khalifa will rule for another five years.
UAE – RAS Al-KHAIMAH
AL-QASIMI: Wedding
A daughter of Sheikh Mohammed Bin Saqr Al-Qasimi has married
out of the family, to Mohammed Bin Abdulrahman Bin Rahma Al-
Shamsi. The sheikha is a granddaughter of RAK ruler Sheikh Saqr
Bin Mohammed.
Energy and industr y
Yemeni jets feel the strain in rebel fighting
The fighting in northern Yemen has long had a severe humanitarian impact, but it was only in October that refugee
agencies were able to raise the profile of the crisis, after bombing attacks that struck civilian targets
T
he Yemeni Air Force (YAF)’s offensive against Al-Houthi
rebels has hit markets and refugee camps, producing
‘collateral damage’ incidents that are the inevitable by-
product of increasing use of aerial strikes in this phase of the
uprising in northernYemen. As in other conflicts, the air force’s
first attempts at the precision bombing of Houthi leadership
figures inevitably caused civilian casualties.
Air support has been an essential part of the government’s five
major campaigns against the Houthis since 2004, and the
difficulty of deploying heavy artillery and mortar in the
mountainous north has brought it to the fore. The workhorses
of the Yemeni fleet are the Russian Su-22 strike aircraft and
Mi-24 helicopter gunships, which undertake bombing runs and
unguided rocket strikes from their main base at Sanaa airport.
Yemen’s fleet of Russian MiG-29SMT aircraft, the most
modern jets in its inventory, is also used for ground attack.
In the past, the YAF has been wielded like a blunt instrument.
Yemeni “mud-movers” – Su-22 and MiG-29 flying in
formation – have dropped unguided bombs that plaster entire
hillsides after the Yemeni Army’s artillery barrages. Su-22 and
Mi-24 use ‘carousel’ tactics to fly in one at a time to ‘ripple’ their
unguided multiple rocket pods at target areas. Air assets have
also been used to strike mosques, government buildings, petrol
stations, water and electricity infrastructure, and cell phone
towers. These missions have primarily utilised the MiG-29SMT
and its modernised Zhuk-M radar mapping capability.
For the first time,Yemen is using precise targeting intelligence
to identify the locations of rebel leaders, which are then attacked
using precision strike aircraft. Shortly before he was injured in
a strike on 18 October and captured in a follow-up raid by
Yemeni commandos, Houthi operational commander
Abdelmalek Al-Houthi publicly accused the US government
of providing intelligence support to the Yemeni government.
GSN’s sources in US Central Command coyly confirm that this
is the case. The formula is well-known, and involves the
secondment of ‘man-hunter’ teams to a regional ally; such teams
were behind the killing of Colombian drug lord Pablo
Escobar, and were used in November 2002 to kill Al-Qaeda in
Yemen’s first leader Sinan Al-Harithi. Algeria has received
support for a small fleet of precision strike aircraft to reach into
mountain enclaves in the Boumerdes and Tizi Ouzou areas.
Yet for every success of this kind, there are multiple failures, as
the US and Israel have found over the past decade. In Yemen,
accelerated use of air power resulted in collateral damage
incidents involving a market in Amran and a refugee camp in
Harf Sufiyan in September (with 87 dead), a market in Saada in
October (15 killed) and ‘friendly fire’ incidents that have killed
GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Defence and security
12Yemeni soldiers in the past two months. But a MiG crashed
on 2 October and a Su-22 was lost on 5 October. Although the
rebels claimed they had shot down the MiG, with US analysts
pointing to Iranian supplies of shoulder-launched missiles, it
appears both incidents were mechanical failures or pilot error.
According to US consultancy Stratfor, theYAF is looking to fall
back on its old habit of importing mercenary pilots from the
former Soviet Union or getting training from Egypt’s air force.
Yemen is contracting Russia’s design bureaux to procure
additional MiG-29SMT and MiG-29UBT training variants.
Abu Dhabi pushes UAE nuclear plan
The UAE’s civil nuclear programme is notionally a federal affair, but it is
being driven forward with some gusto by Abu Dhabi, confirming its
position as the dominant driver of federal energy policy.
A key political figure is foreign minister Sheikh Abdullah Bin Zayed Al-
Nahyan, who headed teams negotiating bilateral agreements with the
United States, France, South Korea, Russia and Japan, as well as with
the International Atomic Energy Agency (IAEA). Last January he and
then US secretary of state Condoleezza Rice signed the bilateral ‘123
Agreement ’ for peaceful nuclear co-operation, and Sheikh Abdullah has
appointed Hamad Al-Kaabi as the Ministry of Foreign Affairs’ special
representative for international nuclear co-operation. Al-Kaabi has served
since 2006 as a primary interlocutor on matters relating to nuclear energy
and non-proliferation between the UAE government and third countries,
the Gulf Co-operation Council and international organisations.
Another key official is Emirates Nuclear Energy Corporation (Enec)
director Mohammed Al-Hammadi, who was formerly with Abu Dhabi
National Oil Company affiliate Zakum Development Company. Al-
Hammadi has been involved in major country-to-country agreements.
Enec was created in 2008, after a white paper concluded that atomic
power was a viable solution to meet future energy needs. Enec is
working with IAEA guidance, and will be governed by an independent
nuclear regulator. One of Enec’s challenges is to harness private sector
expertise; it will do this by making investments in the nuclear sector.
Enec has not so far awarded a major contract, but it has received at least
three bids to build a first nuclear power plant – from a French group of
Areva, GDF Suez and Total; General Electric (US) and Japan’s Hitachi;
and Korea Electric Power Corporation with Hyundai Engineering &
Construction (both South Korea).
Meanwhile, Abu Dhabi Crown Prince Sheikh Mohammed Bin Zayed Al-
Nahyan is backing the programme via a strategic partnership between
Mubadala Development Company (MDC), of which he is chair, and
Rolls-Royce Group ; the UK company has worked its way into key
sectors of the Abu Dhabi economy over the last 30 years and is working
with MDC to assess the emirate’s industrial capabilities to support a
potential civil nuclear power programme.
9
Energy and industr y
Soaring share price attracts Keystone backers
The prospect of major oil discoveries appears to have ended questions raised when Gulf Keystone announced that
Etamic had become its partner, although there remains little information about the deal
S
peculation among investors in AIM-listed Gulf Keystone
Petroleum (GKP) about the identity of Etamic, the ‘Middle
Eastern investment fund’ which acquired half the
company’s Iraqi Kurdistan assets in a little-explained deal in
August, does not appear to have dissuaded buyers of its stock
(GSN 862/10). On 30 October, London-based Barclays
Stockbrokers told the company it had acquired a 6.76% stake.
Investor interest is being driven by the positive preliminary
evaluation of the Shaikan-1 well, which was discovered in
August soon after Etamic was cut in. The company’s share price
shot up, from £0.13 on 5 August to £1.095 on 3 November.
Dynamic Global Advisors last month estimated the range of oil-
in-place to be 1bn-5.3bn bbls oil gross, with a mean of 2.8bn
bbls. Investors appear to believe that the neighbouring Sheikh
Adi block – brought in by Etamic – will also deliver significant
discoveries of this scale, although exploration is a long way off.
The prospect of major discoveries appears to have silenced
questions raised when GKP announced that Etamic had
become its partner; no further information has since been
released. Etamic had secured stakes in the adjacent Sheikh Adi
block and Ber Bahar, which lies further to the north-west.
These appear to be drawn from territory released after the
renegotiation of the boundaries of DNO’s Tawke block in 2008,
which contains the region’s most important producing oil field.
They now belong to GKP.
GKP has attracted a number of high-profile backers in the past
year. In May, it signed a £30m standby equity distribution
agreement with the YA Global Master SPV (YAGM) fund
managed by New Jersey-based Yorkville Advisors LLC. It has
drawn down £6.9m of this, for which it issuedYAGM shares at
a 5% discount to the market. One of the largest shareholders in
the company is Miles Moreland’s respected Africa-focused fund
Blakeney Management, which acquired an 8.81% stake in May.
Capital Research & Management Company, part of the privately
owned US-based fund management company Capital Group,
owns 7.88%, most of which it acquired in July 2008. Big
shareholders also include Bermuda-based Gokana Trust (with
6.36%) and AIM-listed RAB Capital (1.06% – with former UK
chancellor Lord Lamont as a non-executive director). GKP’s
senior managers hold stakes through US-based Gulf Keystone
Petroleum Company LLC (GKPC LLC ), which owns 8.27%
of the shares. GIBCA, which sold a stake in GKP of just over
4% on 16 September, owns shares in GKPC LLC, as do GKP
founders Todd Kozel and AA Al-Qabandi.
Timis connection
One of the most controversial shareholders in GKP is believed
10 GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Gulf Keystone & Dragon Oil
to be Romanian-born investor Vasile Frank Timis, who told
Deal Reporter in September that he had acquired a large stake in
GKP, when the shares were valued at £0.08-0.09 earlier this
year, and that he would sell at £1.50. Timis’ stake is probably
not held directly as his name is not in the company’s most recent
declaration of major interests.
Timis is best known for his African mining ventures. He is
chairman of Sierra Leone-focused African Minerals and is also
believed to have an interest in London-based European
Hydrocarbons, which has a stake in Liberia’s offshore Blocks 8
and 9, and recently registered a company named African
Petroleum (for more on this visit GSN’s sister publication African
Energy at www.africa-energy.com).
Timis was a founder of former market darling Regal Petroleum,
but in 2005 resigned as chief executive following allegations of
exaggerating oil assets in Greece to ramp up the share price.
Despite this episode – one of several in a colourful career
–Timis can clearly still raise cash when needed. In July,African
Minerals got £64m in a share placing to fund drilling at an iron
ore project.
The Timis connection at GKP is reinforced by the presence on
the company’s board as a non-executive director of Lord
Truscott of St James’s. Truscott is also a non-executive director
of Timis’ Kazakhstan-focused Eastern Petroleum Corporation
and, until August, he was also on the board of African Minerals.
From 2006-07,Truscott was a minister at the UK’s Department
of Trade and Industry. He was exposed by The Sunday Times
newspaper in January as one of a number of members of the
House of Lords (the upper chamber of the UK parliament)
willing to accept cash for amending legislation to benefit private
companies.
Dubai bids for 100% of Turkmen oil play
Dublin Stock Exchange and London Stock Exchange-listed Dragon Oil
has agreed to a full takeover by its majority shareholder Dubai government-
owned Emirates National Oil Company (Enoc). Analyst opinion was
initially split between those who reckoned minority shareholders were likely
to accept the offer and others who said they should reject it.
Enoc has offered £4.55/share in cash for the Dragon Oil shares it does not
own. This represents a 35% premium to the 3 June share price, which
analysts at Merrill Lynch thought would be acceptable to the minority of
shareholders, who currently hold 48.5% of Dragon’s stock. But London’s
NCB Stockbrokers said Enoc’s offer should be rejected because it
reflected only what cash-strapped Dubai can afford, not what Dragon Oil
is potentially worth. NCB’s target price is £8.05/share, based on the
assumed value of its single-asset, oil and gas in the Cheleken contract
area in the Caspian Sea, offshore Turkmenistan.
Qatar
Qatari investment vehicles emerge from recession
Not all the headlines are positive, with wealthy Al-Thanis involved in controversial projects in London and Paris, but
domestic indicators are good, business is building in Asia and the mega funds are back in action
Q
atar has emerged from the global recession with prospects
that are exciting investment banks. HSBC Bank Middle
East chief economist Simon Williams said in early
November that “all regional economies are likely to prosper [with
the upturn] but our expectation is that it is Saudi Arabia, Qatar
and Abu Dhabi that will lead the way”. Of these three
economies, Qatar will have the strongest growth as it completes
many of the investment projects begun a few years ago.
According toWilliams, as rising oil revenues join gains in liquefied
natural gas revenues,“we expect to see a significant uplift in actual
government outlays”. He argued that, with the possible exception
of Dubai, no other regional economy experienced the 2003-08
boom as strongly as Qatar, with GDP increasing by some 300%
in five years. Senior Qatari officials also remain upbeat, with
Emir Sheikh Hamad saying on 2 November that the economy
should expand by 9% in the fiscal year 2009-10 and by 16% in
2010-11.
Following a quiet few months in early 2009, the Qatar
Investment Authority (QIA) and its associates are dominating the
business headlines again. According to RGE Monitor analyst
Rachel Ziemba, Qatar “has been pushing forward in the past
couple of months… Qatar has more new revenue because of
the stabilisation of the oil price but also because of the increase
in natural gas output”. QIA’s return to international mode has
been signalled by reports that the fund is considering raising its
already considerable stake in supermarket chain J Sainsbury.
In early November, the US government said it had sold its
London embassy building to state-owned property investment
arm Qatari Diar. Last year, Washington announced plans to
move from Grosvenor Square to a new high-security building.
The announcement followed Qatar’s October decision to
increase its stake in Songbird Estates, which controls around half
of the buildings in London’s Canary Wharf financial district.
QIA subsidiary Qatar Holding is now the largest investor in
Songbird with a total investment of some £350m. Qatar
Holding chief executive Ahmed Al-Sayed said the move was a
reflection of “the improving sentiment toward UK commercial
property in recent weeks”. It now holds 24% (up from some
15%) of Songbird.
But London is not all good news for QIA. Prominent architect
Lord Rogers’ practice Rogers Stirk Harbour & Partners
announced in mid-October that it will sue Qatari Diar, as
owner of London’s Chelsea Barracks, for £2m in unpaid fees.
Rogers was sacked from the £3bn project this year after UK
heir apparent Prince Charles put pressure on the Qataris over
Rogers’ design (GSN 851/6). Rogers’ lawyers, Reynolds Porter
Chamberlain, are expected to file for damages against Qatari
Diar. The Sunday Times reported in late October on property
GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
Financial risk
tycoons Nick and Christian Candy’s decision to try to recover
money (some £1m) they claim is owed to Candy & Candy by
the Chelsea Barracks owner. The Candy brothers have worked
with the Qataris for several years, but relations have been
strained (GSN 841/6). QIA has another London project with
them, One Hyde Park (GSN 803/9, 800/20, 795/12, 791/2).
Diar recently secured a $1.1bn syndicated loan from Qatar
Islamic Bank to fund European investment and refinance the
acquisition of French firm Cegelec. It needs substantial funds:
development of the railway network, which officials hope to
have in Doha with links to other countries by 2026,“has been
assigned to Qatari Diar”, according to Qatar Railway chief
executive Ghanem Saad Al-Saad. Qatar Railway has been
established with $100m initial capital, but “more funds will flow
in as time passes”,Al-Saad said.
Meanwhile, Qatar Holding has retained New York-based
Evercore Partners as adviser on the possible acquisition of Areva
SA’s electricity transmission and distribution network. It is
considering joining a bid by General Electric and CVC Capital
Partners for the French company’s assets.
Pressure on Emiri brothers
The business troubles of two of Emir Sheikh Hamad Bin
Khalifa Al-Thani’s brothers (he has four, all half-siblings) have
been in the news. In October, former Kaupthing chief executive
and prominent Icelandic banker Sigurdur Einarsson was made
an official suspect by fraud prosecutors examining alleged
market manipulation relating to an investment in the failed bank
by Sheikh Mohammed Bin Khalifa Al-Thani. Only weeks
before its collapse, deputy prime minister Sheikh Mohammed
became Kaupthing’s third largest shareholder, paying a reported
$285m through his Q Iceland Holding company (GSN 838/5).
The investigation centres on Sheikh Mohammed’s purchase and
a stock market statement in which Kaupthing did not mention
his stake had been financed via a complex corporate structure
using loans from Kaupthing. According to The Guardian
newspaper, investigators have discovered that Kaupthing loans
used to fund the controversial share purchase were in part
covered by a personal guarantee by Sheikh Mohammed. They
are also focusing on a second loan to another of his companies,
advanced without collateral or guarantee. This loan was used to
repay Kaupthing, clearing the Al-Thani sheikh of almost all his
personal liability. The Guardian said: “Investigators suspect the
net effect was to give the impression the sheikh had invested
£155m to become Kaupthing’s third largest shareholder when
behind the scenes he had taken little or no economic risk.”
11
Qatari investment
In Paris, where another Sheikh Hamad ‘brother’ – reported in
the western press to be Sheikh Abdullah Bin Khalifa, Hamad
Bin Abdullah (clearly not a brother but perhaps the emir’s
businessman nephew) or Abdullah Bin Abdullah – continues
to face a media battering over his plans to restore the Hotel
Lambert in Paris, which he bought in 2007 from the Rothschild
family (GSN 845/5).
Despite the building’s reportedly dilapidated state, the sheikh’s
$60m plans to modernise the iconic property for his family have
caused fury in some Paris quarters. Opponents see the plan as
a threat to France’s cultural heritage, while others believe there
is xenophobia and racism at play. According to state-certified
architect for historic monuments Alain-Charles Perrot, “the
project is attacked because, behind the scenes, the French can’t
stand that the people buying hôtels particuliers [stately homes] in
France are Arab princes”.
Sheikh Abdullah Bin Khalifa was prime minister until 2007, but
was replaced by foreign minister Sheikh Hamad Bin Jassim
Bin Jabr Al-Thani in a rare cabinet reshuffle (GSN 803/4).
Abdullah had reportedly “tired” of the job. His son Sheikh
Hamad is increasingly prominent on the business scene.
GSN view: Redefining Egypt’s role in the Arab world
minister Dr Youssef Boutros-Ghali, and including such excellent salesmen
as investment minister Dr Mahmoud Mohieldin, has made substantial
strides in reforming the financial sector, easing the way for cutting-edge
Cairo-based concerns such as private equity investor Citadel Capital and
investment banks Beltone Financial and EFG-Hermes to become
significant regional players.
But too much is seen to move too slowly, with business criticising many
government ministers for their lack of drive and/or bowing to perceived
populist pressures over everything from maintaining market-distorting
subsidies to putting the brakes on such success stories as the liquefied
natural gas industry. Levels of foreign direct investment have slumped,
with Gulf investors among those pulling back.
Players such as the European Union would like a closer relationship:
indeed, the sort of ‘advanced association agreement’ that Morocco has
negotiated is on offer. But the Europeans want to see a greater
commitment to political reform, which some key players within Egypt don’t
want – notably, influential factions in state security (who are believed to
have spread false rumours that a new EU deal would force gay rights on
the country). Open markets are far from universally favoured.
Palestinian role
Egypt remains a key player in the Israeli-Palestinian conflict because it is
one of the few states that maintains relations with all sides. (Jordan is in
a similar situation, but under King Abdullah II is seen to carry much less
weight.) Cairo has a critical role in reconciling the feuding Palestinians, and
in persuading allies such as the United States and Europe that they should
recognise Hamas, “just as they accept Hizbollah and [Israeli prime
12 GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009
GSN view continued
Qatar’s Asia focus
Qatar Investment Authority (QIA) and its associates are increasingly
looking towards Asia. In early November, Qatari Diar said it would soon
sign an agreement to develop a project in Vietnam. Qatar Holding, which
invests on behalf of QIA, is close to opening an office in China to add to
its presence in India. Chief executive Ahmed Al-Sayed recently told The
Financial Times: “Asia is a growth market for us – we are really serious
about finding the right opportunity there.”
QIA and Malaysia’s Khazanah Nasional Bhd are working to establish a
joint investment fund. Malaysian international trade and industry minister
Datuk Mustapa Mohamed said last month that Qatar was “very keen to
invest in Malaysia”, but “they need concrete proposals”. The Malaysians
are looking for more Gulf investment. State-owned Malaysia
Development Bhd recently agreed to establish a $2.5bn fund with Saudi
King Abdullah Bin Abdelaziz’s son Prince Turki Bin Abdullah (GSN
862/6). Qatar already owns a 70% stake in Asian Finance Bank and a
49% interest in a mall in Kuala Lumpur.
It’s not all about business. Qatar is paying for the construction of what will
be one of Asia’s largest mosques, in Tajikistan. Analysts said this was
part of Qatar’s attempt to extend its influence beyond the Gulf rather than
an investment decision.
CONTINUED FROM PAGE 16
minister Benyamin] Netanyahu”, as one official put it. Since February,
Egypt has hosted four rounds of inter-Palestinian dialogue, including
welcoming Hamas leader Khaled Mishaal to Cairo in late September. But
persistent rows have undermined efforts to reconcile them – most recently
underlined by Hamas’ rejection of Palestinian National Authority (PNA)
president Mahmoud Abbas’ decision to call presidential and legislative
elections on 24 January.
As a senior source observed, Egypt is not a ‘mediator’ in the Middle East
peace process – “we support the Palestinians whatever their mistakes” –
and its aim remains a return to 1967 borders. To achieve this, Cairo has
taken the diplomatic route, pushing for a Syrian strand to the peace
process as well. But while its role is widely welcomed, even close allies
complain of a lack of dynamism during what seem to be the last years of
the Hosni Mubarak presidency.
Even when Cairo has sought to be proactive, things have backfired. Egypt
and Arab allies were outraged when ‘Arab/Islamic candidate’ Farouk Hosni
was defeated in the election for a new head of the United Nations
Educational, Scientific and Cultural Organisation (Unesco). Bulgarian
official Irina Bokova was appointed director general after governments
expected to back Hosni withdrew support in the face of negative coverage
of an official who, as culture minister, had cracked down on press and
artistic freedom, was seen as anti-Semitic and whose main qualification,
according to some critics, was his proximity to the president and first lady
Suzanne Mubarak. The regime is mobilising behind Gamal as the
candidate for change, but he has much to do to persuade Egyptians that
he can lead a profound shift in the way politics in transacted. Restoring
Egypt to the forefront of regional diplomacy and geopolitics will be an
equally tough ask.
Data Events

Events across the region 25-27 January: Qatar Projects, Doha

Web: www.meedconferences.com/qatar
23 November: The World in 2010 Executive Forum, Abu Dhabi
Web: www.economistconferences.com/wi2010 1-2 February: Prospects for Middle East & North Africa Energy

6-8 December: World Islamic Banking Conference (WIBC) To be held in London. Web: www.chathamhouse.org.uk/mena_energy

To be held in Bahrain. Web: www.megaevents.net/islamic_banking 1-3 February: GULF C4iSR 2010, Abu Dhabi

7-9 December: Iraq Petroleum, London Email: info@wbr.co.uk Web: www.wbresearch.com/gulfc4i

Web: www.cwciraqpetroleum.com/ 7-8 February: Middle East Insurance Forum, Manama

2010 Web: www.megaevents.net/insurance

24-26 January: MENA-EX 2010, Jeddah 14-16 February: Middle East Project Finance 2010, Manama
Web: www.mena-ex.com Web:www.meedconferences.com/projectfinance

Middle East risk indicators

Preferred Moody’s Fitch Ducroire Delcredere ONDD medium- to
Country payment Coface sovereign sovereign short-term political long-term political
terms grading rating rating risk rating risk rating
Bahrain OA A3 A2 A 2 2
Iran CIA D — — 5 6
Iraq CIA D — — 6 7
Israel OA A4 A1 A 3 3
Jordan OA B Ba2 — 3 5
Kuwait SD/OA A2 Aa2 AA 2 2
Oman OA A3 A2 — 1 2
Palestine CLC — — — 7 7
Qatar OA A2 Aa2 — 2 2
Saudi Arabia OA A4 A1 AA– 1 2
Syria ILC C — — 4 6
Turkey ILC B Ba3 BB– 3 4
United Arab Emirates OA A2 Aa2 AA* 2 2
Yemen ILC C — — 3 6

Key: ULC = Unconfirmed letter of credit. ILC = Irrevocable letter of credit. CIA = Cash in advance. OA = Open account. SD = Sight draft. * = Abu Dhabi
Sources: Agencies and Cross-border Information Ltd, Hastings, UK.

Stock markets and exchange rates

Stock Market Index value Index % change Since 2008 Exchange rate
(Index) (5 November 2009) One week 01.01.09 performance Currency £ $ € ¥ (x100)

Bahrain1 1,507.26 -1.41  -16.45 -34.52 (Dinar) 0.6250 0.3770 0.5593 0.4152
Iran2 12,506.00 0.79
44.48 -11.10- (Rial) 16,423.80 9,907.00 14,697.50 10,910.20
Iraq3 n/a n/a n/a n/a n/a (New Dinar) 1,906.47 1,150.00 1,706.08 1,266.45
Jordan4 2,552.41 -2.43  -7.47 -24.94 (Dinar) 1.1742 0.7083 1.0507 0.7800
Kuwait5 7,334.10 -0.18  -5.76 -38.03 (Dinar) 0.4746 0.2863 0.4247 0.3152
Oman6 6,333.07 -0.34  16.39 -39.78 (Rial) 0.6383 0.3850 0.5712 0.4240
Qatar7 6,953.34 -2.55  0.98 -28.12 (Rial) 6.0354 3.6406 5.4010 4.0093
Saudi Arabia8 6,343.12 -1.53  32.07 -56.49 (Rial) 6.2168 3.7502 5.5634 4.1298
UAE – Abu Dhabi9 2,920.14 -3.41  22.18 -47.49 (Dirham) 6.0891 3.6730 5.4491 4.0449
UAE – Dubai10 2,097.63 -4.55  28.19 -72.42 (Dirham) 6.0891 3.6730 5.4491 4.0449
Yemen n/a n/a – n/a n/a (Rial) 341.631 206.075 305.723 226.942

1 Bahrain Stock Exchange – All Shares Index. 2 Tehran Stock Exchange – Tepix Index. 3 Iraq Stock Exchange – ISX Price Index. 4 Amman Stock Exchange Index.
5 Kuwait Stock Exchange Index. 6 Muscat Securities Market – MSM 30 Index. 7 Doha Securities Market – DSM 20 Index. 8 Tadawul All Shares Index.
9 Abu Dhabi Securities Exchange. 10 Dubai Financial Market.

Sources: Cross-border Information, Hastings. Financial Times, London.

GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009 13

Risk management report
GSN Risk Grade — B/2: Oil price volatility underlines need for diversification, Oman maintains Iran links
Political and social developments
Overview: Sultan Qaboos Bin Said Al-Saeed has been at the heart of the
governing structure since taking over from his father Sultan Said Bin Taimur in
1970. Modernisation has transformed a traditional society now numbering
more than 3.3m citizens (the majority Sunni Muslims who follow the minority
Ibadi rite), with notable efforts to promote women and help poorer
communities out of poverty. A polity is gradually evolving based on codified
citizenship rights and a separation of powers – although power remains strongly
centralised around the Sultan. Qaboos was only briefly married, and with no
children has devised a succession system from which will emerge one of several
candidates drawn from the relatively small Al-Saeed family.
Institutions and civil society: The 83-member Majlis Al-Shura
(Consultative Assembly) is intended to scrutinise and debate government
programmes; it has so far held two elections with all adult citizens eligible to
vote. The last was held in October 2007 and candidates are elected for a four-
year term. There are currently no women members (two sat in the previous
assembly). Critics say the Majlis Al-Shura remains a junior institution, although
it has gradually found its voice, with robust debate on some issues; it has
advisory powers as half of the bicameral Council of Oman.There are also limits
to civil society institutions. Only very limited news flow emerges from Oman,
and though a more dissident web culture is emerging, the authorities try to
keep a seal on media of which they disapprove. A fourth English-language daily
newspaper, the Muscat Daily, was launched in August. The existence of another
privately owned paper further breaks the state’s monopoly on the press, but
media freedoms remain extremely restrictive, with government retaining
powers to censure any news stories and imprison those convicted of libel or the
release of sensitive news.
Foreign relations: Oman maintains favourable relations with virtually every
country, despite its close strategic relationship with the West. It has close,
historic relations to the United Kingdom and strong military co-operation has
underpinned growing ties with the United States.
Regional links: Oman has been instrumental in keeping Iran active in
regional diplomacy. Sultan Qaboos met president Mahmoud Ahmadinejad and
other senior Iranians in Tehran on 4 August. There was speculation that
Qaboos’ first official visit to Iran since the fall of the Shah in 1979 offered an
occasion to pass on messages from the US and/or UK, but it also reflected
Oman’s determination to maintain dialogue with the Islamic Republic, even
while other GCC member states lose patience. Iran and Oman are co-
guardians of the Strait of Hormuz, through which an estimated 40% of the
world’s crude oil passes. Muscat hosted the latest GCC summit conference,
when it and was urged by other member states to rejoin the monetary union
and single currency project.
Hard security: The Royal Air Force of Oman (ROAF) has emerged
strengthened from tough competition from other services, winning the biggest
budget from the Ministry of Defence because of its ability to fight a wide range
of threats. GSN has revealed that an estimated $2.2bn deal is in the works
involving BAE Systems and the Eurofighter consortium for the ROAF to
purchase 24 Typhoons to replace its ageing Jaguars (GSN 859/7).
OMAN: Labour and investment laws
EXPAT LABOUR LAWS: Oman has tightened its labour laws by formally banning the
employment of workers residing in the Sultanate illegally or the employment of
expatriate workers who are registered with other companies. Companies are no
longer allowed to employ expatriate employees in professions deemed to have
been Omanised. Punishment for breaking new labour laws ranges from fines to
prison sentences, along with repatriation at the company’s expense plus an
indefinite ban from re-entering the Sultanate. Also included in the amendment is
the provision for employees to receive between three and 12 months’ wages or to
be reinstated should a court declare unfair dismissal.
FOREIGN INVESTMENT: Although Oman has followed a policy of Omanisation in recent
years, the potential for foreign ownership in companies is less restrictive than
elsewhere in the region. Since joining the World Trade Organisation in 2002, Oman
has permitted foreign ownership in companies operating onshore of up to 70% if
the firm has minimum capital of OR0.15m and 100% if the capital is over OR0.5m,
provided the project is deemed to be beneficial to economic development.
14
Oman
Economic and commercial outlook
Overview: Ministry of Economy data show GDP growth of 13% in 2008.
The government expects growth of 2.5% in 2009, despite the impact of
global recession, due to better performances in non-oil sectors. But
dwindling oil and customs revenue has seen the Sultanate’s earnings drop
26.7% in Jan-Aug 09. Inflation remains an issue but is slowing; M2 money
supply growth slowed to 18.6% in Feb 09, from 20.7% in Jan 09. Oil and gas
remain at the centre of economic activity, but low oil prices and a resulting
36.3% drop in net oil profits recorded in Jan-Aug 09 underline the economy’s
need to continue its diversification. TheVision 2020 policy, launched in 1996,
aimed at achieving such diversification, and subsequent investments have
ranged from promoting Oman Liquefied Natural Gas Company and other
gas-related projects to developing new services industries. Among growth
areas is transport; as of end-June, Oman had signed 22 development
agreements for the ports and civil aviation sectors at a cost of OR88m
($228m). Government spending has increased 1.7% and the state budget
deficit stood at OR50.3m in Jan-Aug 09, compared to a surplus
OR1,567.7m in the first eight months of 2008.
Bank exposure: Profit at the largest banks dropped 41% in Q2 09 to
OR34m ($87m). This slump was blamed on the crisis surrounding Saudi
Arabia’s Saad Group and Ahmad Hamad Al-Gosaibi & Brothers Company
(Ahab), as well as the need to make higher debt provisions due to the global
crisis. The total credit provisions of the top five banks soared 225% to
OR53m in Q2 09 from OR16m one year earlier. BankMuscat, whose
exposure to Maan Al-Sanea’s Saad Group and Ahab totalled $171m, recorded
a OR80.4m profit in the first nine months of 2009, down 11% on Jan-Sep
08. National Bank of Oman (NBO), with $17m exposure, recorded a net
profit of OR19.6m in Jan-Sep, down 44% on Q1-3 08 figures.
Oilfield ouput: Oil production has been stabilised after years of slump and
is now increasing, with output expected to rise to 900,000 b/d in 2010.
Oman’s largest producer, majority state-owned Petroleum Development
Oman, has again extended the prequalification deadline for $7bn worth of
contracts for oil field development – part of PDO’s effort to reverse declining
production that is starting to yield results – to 31 December. Two contracts
are on offer to develop fields in the north and two in the south, each running
for seven years with an option to extend for three more. Companies are asked
to bid for engineering and maintenance at the fields, each with turnover of
up to $200m/yr. Two contracts worth up to $150m/yr are for work offsite
from the oilfields, such as hooking up pipelines.
Blue City: The $15bn Madina Al-Zarqa (Blue City) project remains locked
in an ownership dispute between an Al-Jenahi-led group and local partners.
The project to create a new city 34km² in area, for a population of 200,000,
has been mired in difficulties from the start, and now appears to have stalled
due to commercial and contractual differences between the owners. Blue
City has so far fallen short of its targets, selling only $53.9m units of its
expected $639m worth.
OMAN: Key data and forecasts
($m, unless otherwise stated) 2007 2008 2009f 2010f
Nominal GDP ($bn) 41.6 55.9 48.2 54.5
Nominal GDP per capita ($) 16,202 21,537 18,398 15,056
Real GDP growth (%, local currency) 7.7 7.1 3.3 4.0
Inflation (annual average %) 5.9 12.0 6.0 5.0
Cen. Gov. financial balance (% of GDP) 9.1 19.2 -5.8 -2.1
Current account balance (% of GDP) 4.6 12.3 -9.4 0.8
Official forex reserves ($bn) 9.5 11.3 9.0 9.2
f= forecast.
Source: Moody’s Investors Service
GULF STATES NEWSLETTER • VOL 33 • NO 864 • 6 NOVEMBER 2009
Qatar Risk management report

GSN Risk Grade — B/1: Economy gets thumbs up as investment climate set to improve

Political and social developments Economic and commercial outlook

Overview: Qatar has been ruled by the Al-Thani family only since the mid-
19th century. Their rule gradually became entrenched with the end of the
Ottoman period of dominance in the Gulf and British recognition of the Al-
Thani and Qatar’s borders against fierce Saudi claims. The sheer size of the Al-
Thani – with an estimated 7,000 to 20,000 members, it is thought they are the
largest ruling family in the Gulf after the Al-Sauds – ensured that different
family factions were formed throughout the 20th century, with each
demanding their share of the revenues that trickled in with the export of oil
beginning in 1949 by Anglo-Persian Oil Company. While Al-Thani rule has
been largely uncontested by other leading families in the emirate, there has
been some history of instability as different politicised alliances vied for power.
Qatar now has a reputation for being one of the more stable Middle Eastern
countries in a dangerous neighbourhood of troubled states.
Ruling group: Emir Sheikh Hamad Bin Khalifa Al-Thani came to power in
a 1995 bloodless coup, and since then has worked hard to modernise the state,
with his core team consisting of leading wife Sheikha Mozah Al-Misnad, prime
minister and foreign minister Sheikh Hamad Bin Jassim Bin Jabr Al-Thani
(HBJ), oil minister Abdullah Al-Attiyah and the emir’s old ally, finance minister
Yousef Hussein Kamal. The emir and Sheikha Mozah are increasingly giving
responsibility to their son, heir apparent Sheikh Tamim Bin Hamad Al-Thani,
as well as their highly educated daughters. Elections for a new parliament, the
Majlis Al-Shura, have been promised for several years, but the Qataris seem to
be in no hurry to risk the instability that can come with elections – as seen in
neighbours Iran and Kuwait recently.
Foreign relations: UK special representative for international trade and
investment the Duke of York, Prince Andrew, has been in Doha for meetings
and talks. The prince said he welcomed recent British and Qatari efforts to
create a better trade and investment climate, citing the signing of a double tax
agreement in June, and an investment promotion and protection agreement that
he had signed in October. He noted that bilateral relations between Qatar and
the UK had not been as close as they should have been, and that Britain had
tended to take Qatar for granted, but this had changed, with Britain now
importing 29% of its liquefied natural gas from Qatar. Sheikh Hamad has
recently been in Algeria and Libya, which have both emerged as allies. He held
meetings with Libyan leader Colonel Muammar Qadhafi, general secretary
(prime minister) Dr Al-Mahmoudi Al-Baghdadi and foreign minister Musa
Kusa (previously the foreign intelligence head). In Algeria, Sheikh Hamad met
president Abdelaziz Bouteflika, prime minister Ahmed Ouyahia and ministers.
Iran: Emir Sheikh Hamad was in Tehran for a one-day visit in early November.
He was expected to hold talks with Iranian president Mahmoud Ahmadinejad
and foreign minister Manouchehr Mottaki. This is the emir’s second visit this
year – his son, heir apparent Sheikh Tamim, has been expected to make an
official visit for several weeks, after the emir reportedly entrusted him with the
Iran portfolio. Ahmadinejad has been to Doha four times since coming to
power. The emir said in July that he would not allow anyone to damage
Tehran-Doha relations.
Overview: The economy is driven by hydrocarbons: Qatar has the world’s
third largest gas reserves, and the mid-decade high oil price climate helped it
to diversify and create powerful investment vehicles, such as the Qatar
Investment Authority. The IMF has predicted growth of 11.5% this year. In
a 3 November address to the Advisory Council, Sheikh Hamad said that the
economy should grow by 9% in the 2009-10 fiscal year, and 16% the following
year. “The country’s solid economic and financial standing should not make
us forget the importance of efficiency in utilising our financial resources,” he
said. HSBC Bank Middle East chief economist Simon Williams sees very
strong growth as the emirate completes big investment projects begun several
years ago (see Financial risk, above). With the possible exception of Dubai, no
other regional economy experienced the 2003-08 boom as strongly as Qatar,
with GDP increasing by almost 300% over the six-year period, according to
HSBC. While the economy this year did slow down – consumer price
inflation dropped from 15% in 2008 to 2% in January 2009 – extensive direct
government support for Qatari banks protected the state-dominated financial
sector from further fall,Williams said.
Banking: Qatar National Bank’s Islamic arm is planning to add a further ten
branches to its network of five branches in Sudan. QNB, in which Qatar's
sovereign wealth fund owns a 50% stake, recently said that it is targeting
surging demand for Islamic banking in Sudan. Another unnamed Qatari bank
has reportedly recently received approval to set up operations in the country.
The recently established Barwa Bank in late October announced the soft
launch of its Doha operations. The Sharia-compliant bank, which has
authorised capital of QR1bn ($274.6m), is a subsidiary of the listed Barwa
Real Estate Company, which is part-owned by Qatari Diar. Barwa has been
appointed mandated lead arranger by Qatari Diar to provide QR500m of its
QR4bn syndicated facility to fund European investments. Bahrain’s Gulf
Finance House (GFGH) in late October sold 10% of its 15% stake in Qinvest
to Qatar Islamic Bank. GFH is currently divesting non-core assets. Qatar
Islamic Bank last month reported a net profit of QR1.01bn for the first nine
months of 2009, compared to QR1.2bn for the same period last year.
Tax: Qatari finance minister Yousef Hussein Kamal has announced plans to
slash corporate tax on foreign firms to a flat 10% starting next year. “There is
a [new] tax bill and once promulgated it will bring down the rate to 10%,” he
said. Qatar’s corporate tax currently depends on a company’s income, ranging
from 10% to 35%.
Population and labour: According to Qatar Statistical Authority the
population has grown to 1.67m, with males constituting 1.28m. The total
population in October has grown 8% since December 2008. In early
November, labour minister Dr Sultan Al-Dousari said that, under amendments
and additions to Qatar’s 2004 labour law, penalties against violating companies
will be raised. “We have increased fines and measures have been made more
stringent against companies which fail to comply with the labour rules,” he
said. The minister said an inspection department currently makes some 1,000
surprise and regular checks every month on companies.

QATAR: Selected economic indicators QATAR: Investment climate

FOREIGN OWNERSHIP: A recent amendment to the investment law will allow foreign
(QRm, unless otherwise stated)
investors to own 100% of companies in the following sectors: consultative and
2005 2006 2007 2008p technical work, information and technology and distribution. The amendment also
GDP – 206,644 258,591 372,384 relaxes the law on foreign investment in other sectors, such as agriculture, health,
Exports (fob) 93,773 123,945 152,951 190,912 education and tourism. Non-Qataris are still prohibited from investing in the banking
(of which oil and gas) 75,648 101,292 123,679 152,610 and insurance sectors.
(oil and gas % of exports) 80.67 81.72 80.86 79.94 INTERNATIONAL INTEREST: According to Qatar Financial Centre Authority (QFCA) head
Imports (fob) 32,992 53,911 72,158 87,254 Stuart Pearce, international companies are showing increasing interest in launching
Trade balance 60,781 70,034 80,793 103,658 their regional operations in Doha. Pearce said that some 10-15 global firms are
preparing to start operations in Qatar through the QFCA. "There's big interest from
Current account 27,234 34,430 38,022 47,420
European and American firms in terms of asset management… some firms are talking
CPI yearly growth (%) 8.81 11.84 13.76 15.10 about moving their Middle East and North Africa investment management platforms to
Budget year surplus/deficit 18,962 14,917 18,916 33,162 Qatar,” he said. He added: “A lot of firms we've been talking to for some time have put
p = preliminary their plans for the Middle East on hold ... Now they are saying 'let's get this plan off the
shelf'… There's been a re-energising of old contacts, and lots of new ones.”
Source: IMF Article IV, January 2008; Merrill Lynch, January 2008.

GULF STATES NEWSLETTER • VOLUME 33 • ISSUE 864 • 6 NOVEMBER 2009 15

GSN view
Egypt’s diplomatic star splutters in last years of Hosni Mubarak’s reign
Egypt’s role in the alliance gathered behind Yemeni president Ali Abdullah
Saleh’s efforts to crush the Houthi rebellion suggests the ‘sleeping giant’ of
Middle East politics has not entirely withdrawn from its central role in regional
diplomacy (see Politics). Cairo still plays an important part in mediating in the
Israeli-Palestinian dispute, most recently in trying to heal the fratricidal rift
between Fatah and Hamas. But otherwise, Egypt under 81-year-old President
Hosni Mubarak seems to have long parted from its Nasserite status as a critical
hub for Arab political and cultural thought and action.
According to a former foreign minister, the Israeli-Palestinian conflict took up
about 80% of his working day. But, at present, Cairo is not much of a conduit
for communicating with Israel because the two countries’ ‘cold peace’ is in one
of its more difficult phases. Meanwhile, senior Egyptian officials admit that Cairo
has been less than a marginal player in Iraq. Recent friction with Iran, reflected
in the Yemeni intervention, is seen as an unpleasant sideshow; sources said
they were embarrassed that much of Cairo’s recent response to the perceived
‘Shiite challenge’ focused on anti-Shia sentiment rather than contributing to the
global effort to control Iran’s nuclear ambitions. Across an array of conflicts,
newer players such as Qatar seem to have more impact, despite being smaller
than Egypt in terms of population and history. The feeling in Cairo, even of
regime stalwarts whose views were canvassed by GSN, is that Mubarak’s
presidency is in its final phase – and that his innate conservatism and slow pace
of decision-making have had an impact on all facets of political life.
The consensus in this fin de siècle atmosphere is that Gamal Mubarak will
succeed his father, not least because no other candidate has come forward.
While the military establishment has provided all of modern Egypt’s leaders,
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sources said the senior ranks – whose make-up and inclinations remain little-
known even to the most assiduous Egyptian and foreign observers – do not
seem to have found a candidate. Defence minister Field Marshal Mohamed
Hussein Tantawi has seniority but is seen as too old. Intelligence chief Omar
Suleiman is a key player in Israeli-Palestinian deals, but while regarded as a
heavy hitter outside Egypt, insiders suggest the general, who was born in 1936,
may have limited traction in other areas.
Mubarak’s mid-decade constitutional changes have smoothed the way for his
son. And other candidates – such as those backed by the opposition Al-Ikhwan
Al-Muslimeen (Muslim Brotherhood) – would have problems obtaining the
necessary 250 signatures from the National Assembly, upper house and
municipal councils. Gamal has built up a power base in the ruling National
Democratic Party (NDP), has a modernist outlook – as might be expected from
a former investment banker – with the weight of the presidency behind him.
His father is not a popular leader, and Al-Ikhwan would probably stroll to victory
if there was a level playing field. But increasingly, neither Mubarak senior’s
popularity rating nor Al-Ikhwan’s political disadvantages are seen as key factors
in the succession. Gamal has supporters – including within the military
establishment – and many of the attributes of the modern younger Arab leader:
powerful family backing, knowledge of global markets and a dynamic wife in 27-
year-old American University in Cairo business graduate Khadija, who is the
daughter of construction magnate Mahmoud El-Gamal.
A Gamal presidency might accentuate the positive, reflected in the bright spots
of the Egyptian economy and society. The economic team led by finance
CONTINUED ON PAGE 12
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