October, 2003

The Impact of the US Presence in Iraq on the GCC

Ashraf Mohammed Kishk

With the fall of the Saddam Hussein regime on 9 April 2003, an era of foreign threats to the Gulf Cooperation Council -GCC- - made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE - was supposed to come to an end. On the contrary, though, the situation has become more complicated and new threats have emerged to the security of these countries, which hold the bulk of the world's oil. The US is now a key player in Middle Eastern affairs, shouldering the responsibility for spreading democracy and eliminating the threats to security in the Gulf region - chiefly the regional aspirations of Iran and internal instability in Iraq. What, however, does this mean for the GCC, and what are political, security and economic repercussions for the council of the US presence in Iraq?

1- Security consequences:

Looking at the nature of the threats faced by the GCC from the situation in Iraq, it is clear that in order for the Gulf countries to guarantee the security and stability of the region, they should reach a clear formula for dealing with three main parties, namely the US, the new Iraq and Iran.

The US is expected to retain its presence in the Gulf, especially since the bombing in Riyadh on 13 May 2003 of foreigners' residential compounds, which killed 34, seven of whom were Americans, and injured 194, including 44 Americans.

Though the US pulled back from Saudi Arabia, it intensified its presence in other Gulf countries, such as Qatar, and its reliance on Oman. On a region-wide level, then, these changes were essentially cosmetic, with Washington merely moving its forces from the countries that oppose their presence to others more accommodating, while maintaining the strength necessary to protect its strategic interests. The US presence in the Gulf has been facilitated by the growing belief in the area that maintaining its security should be an international affair. This view finds credibility because the six Gulf states were not long ago protectorates of Britain, and the elite of these countries has cordial relations with the international powers. Moreover, the fact that these are small but rich states - with sizeable Asian immigrant populations - surrounded by larger and more powerful neighbours, increases their sense of the need for this foreign presence.

The US presence in the Gulf is related to US interests in Asia, Afghanistan and the oil of the Caspian Sea. The close economic ties between the US and the members of the GCC enhance the importance of this presence. The US is the second largest trade partner for the countries of the council, and the biggest exporter to the Gulf. In 2000, US imports from the GCC totalled $20.4bn while US exports to these countries reached $10.8bn.
The Arab Gulf countries' vision for Iraq after Saddam Hussein is governed by their view that it is imperative to consolidate stability in Iraq. These countries have thus tended to support the Governing Council of Iraq, as mirrored in the statements of many of their officials, their hosting of a council delegation and their welcoming of Security Council resolution 1500 on the establishment of the council. They believe that if a new unified and stable Iraq is not established, the country will be caught in the trap of civil and doctrinal conflict and will likely become an exporter of terrorism.

The GCC members' recognition of the governing council does not, however, mean that they do not have reservations over establishing relations with the new Iraq. Kuwait, for instance, has the issues of borders, compensation and prisoners of war to resolve. According to a recent Kuwaiti newspaper poll, 50% of participants still feared possible Iraqi aggression, mainly due to the belief expressed by the former Baathist regime that Iraq has a historic right to Kuwait.

The GCC also fears what the US has in store for the region. Washington plans to initiate reform in the Middle East to ensure that the governments of the region respond favourably to its demands and promote its interests. While the close ties between Washington and the members of the GCC may rule out a US strategy of regime change, the Arab Gulf states still very much fear changes in the region. In this regard, there are two possible scenarios:

First: The US may propose the formation of new security alliances, such as the resurrection of the Baghdad Alliance, whose charter was signed in February 1955 by Iraq and Turkey, by Britain in April, Pakistan in September and Iran in October. The US did not join the alliance, which collapsed after the Iraqi revolution of 1958. What increases the likelihood of this scenario is that the main players -Pakistan, Turkey, Iraq and Iran- remain vital within the framework of US policy, even if the order of their importance has changed. The US now gives priority to Pakistan in the east and Israel in the west, with Iraq at the centre of the alliance. This creates new challenges for the GCC. While the council has a strategic partnership with the US, its members are still part of the Arab world, where problems with one partner to the alliance, Israel, are far from solved.

Second: Iraq may join the GCC. The Gulf countries' have reacted with a cautious welcome to this idea. GCC secretary-general Abdel-Rahman Al-Attiya, denied that Iraq had requested to join the GCC, pointing out that the country had been an influential member in the council's affiliated organisations prior to its invasion of Kuwait in 1990. It seems too early for Iraq to be accepted in the GCC, though the possibility remains for the country to join the council's subsidiary organisations, similar to the gradual admission of Yemen to the council.

This underscores that the tension between Iraq and GCC members is not so much linked to the former regime and its Baathist ideology as to Iraqi aspirations to control the Gulf. In this regard, there are a number of points to consider:

- There is no parity between the political systems of the GCC, which have made remarkable leaps towards democratic transformation, and Iraq, which has until recently been under totalitarian rule and has no democratic experience. Moreover, the domestic Iraqi political scene is complex, involving several ethnic groups, which makes the establishment of a democratic system more difficult.

- There is a major imbalance between the economic capabilities of the GCC members and Iraq. The council members' GDP growth rates range from 3.6% in Saudi Arabia to 10.5% in the UAE. The Iraqi economy, though, is in a state of ruin. It has been estimated that Iraq's growth rate after the lifting of sanctions will be extremely low, and that the Iraqi economy will not recover until 2005. Iraq is not expected to restore its average per capita income as it stood in 1980 before 2016.

- The social structure throughout the GCC zone is more or less uniform, especially with regard to the common Gulf culture, customs and traditions. Iraq, however, has an ethnically diverse population, made up of Arabs -70-80%-, Kurds -15-20%- and Turkmen -5%-. The majority of Iraqis are followers of Islam, 60% Shia and 20% Sunnis, and there are also various denominations of Christians, as well as Yazidis and Shebeks.

- GCC-Iranian relations: The members of the GCC realise that cutting Iraq out of the strategic equation in the region leaves more room for Iran, the biggest country in the region and possibly an owner of nuclear weapons. Iran has considerable authority over the Shia in the Gulf, which constitute the majority in Bahrain, and is party to a long disagreement with the UAE over three islands in the Gulf. Iran thus constitutes a major security challenge for the GCC, regardless of the situation in Iraq.

Despite the steps taken by Iranian president Mohammad Khatami to communicate with the GCC before and after the Iraq war, there is still controversy surrounding the council's acceptance of Tehran's calls for the establishment of a regional forum for security issues separate from those parties that Iran considers to have no connection with Gulf affairs, including the US. The results of this controversy have been negative, with Iran facing difficulties with the International Atomic Energy Agency -IAEA-, which had set 31 October 2003 as the deadline for Iran to disclose all its nuclear capabilities. The reports that Iran possesses nuclear weapons also serve to make the foreign presence in the region more acceptable, if not desirable, with the smaller Gulf states wary of falling prey to possible nuclear blackmail.

Should Iraq enjoy stability in the future, the GCC could set separate plans for cooperation with Iraq, Iran and Yemen, similar to the joint councils formed by Nato with both Russia and Ukraine. The council could also form a semi-official multilateral aggregation with Iraq, Iran and Yemen based on the Association of South East Asian Nations -ASEAN- model.

2- Political consequences:

In light of the strategic partnership between the US and the six GCC members, Washington's calls for reform are confined to pushing for more democratic institutions, such as a free press, the reform of education and transformation to market economies, without mention of changing the ruling systems, which Washington considers the main pillars for security and stability in the Gulf region.

These states had already begun efforts aimed at democratic reform without the benefit of outside pressure. In Kuwait, there have been moves towards the ratification of women's political rights since the July 2003 parliamentary elections. In Saudi Arabia, Crown Prince Abdullah bin Abdel-Aziz announced in early August King Fahd's approval for the establishment of the King Abdel-Aziz National Dialogue Centre, which will act as a forum for Saudis, boosting the process of national dialogue and consultation, and allow for the formation of a coherent national front against extremism. In Bahrain, the ratification of the national charter has given civil society institutions the chance for greater self-expression. In Qatar, the referendum on the constitution can be considered a remarkable step towards democratic progress. The UAE and Oman, meanwhile, have worked to develop consultative -shura- councils, while the Arab Gulf states generally have also started to pay more attention to the issue of human rights on the level of legislation and practical application.

Yet this trend within the GCC towards political reform is impeded by the need to find a balance between security and democracy. As these countries move towards democracy they are facing considerable security challenges, such as the bombings in Riyadh, which have led to the imposition of restrictions on NGOs and charities, despite the recent wave of governmental support for such organisations.

The countries of the GCC have also begun efforts to improve education. Saudi Arabia has revised the national curriculum to achieve a balance between religious and cultural material and subjects geared to prepare students for today's job market, with English now compulsory from Year 6. Qatar, meanwhile, has extended privileges to a number of US universities to encourage them to open faculties of medicine and business administration.
The six members of the GCC are progressing gradually. Their democratic transformation was not the outcome of developments following the Iran-Iraq War, but rather came after the Gulf War of 1990. A major concern for these countries is that moves towards democracy should reflect local circumstances rather that merely imitating or importing political patterns from elsewhere. In this way, the governments of these countries will avoid abrupt changes that could lead to domestic strife.

3- Economic consequences:

The US presence in Iraq raises new challenges for the GCC on the economic level. Regional investment rates are expected to decrease, and the establishment of a free trade zone with the US necessitates new legislation that might run counter to the nature of local economies. The oil sector, too, could be greatly affected. The six GCC states rely heavily on oil, which accounts for 75% of their exports and around 80% of their income. Any tremors within this sector in the world market could result in chaos for their economies.

Some anticipate that the oil sector will suffer should Iraq's oil industry be privatised. This would threaten the GCC, which has controlled oil flow from the region since 1973, and allow foreign companies a piece of the action. In this case, Iraqi oil production would be more related to market mechanisms than that from the Organisation of Petroleum Exporting Countries -Opec- and other Arab petroleum exporters. The cut in oil prices that would result if Iraq returns to its pre-1991 levels of production would lead to a loss of nearly $60bn annually for the GCC. In addition, the US companies that succeed in signing Iraqi oil contracts will have a better negotiating stance with other governments in the area, which will allow them to secure contracts on better terms. This will inevitably result in the bulk of investment going to Iraq at the expense of the GCC countries.

Others, though, believe that the GCC will not be influenced by the return of Iraqi oil to the world market for various reasons:

- The current lack of security in Iraq is deterring many foreign companies from signing oil contracts in the country. This could lead the US to maintain the country's former contracts with Russian, Chinese and French companies rather than have US companies engage in dangerous and unviable contracts, at least until the security situation changes. French and Russian companies have previous experience of working in Iraq during times of crisis.

- There is no indication that Gulf oil revenues would decrease if Iraqi oil flows once again to the world market. It has been estimated that world demand for oil will increase by 1.8% annually till 2025, which would mean that the oil production of all the Gulf countries would be absorbed into the market.

- The GCC countries have taken measures to prepare themselves based on predictions for future oil market conditions. One plan is to establish large reservoirs for oil storage. Kuwait, for instance, seeks to increase production in its northern fields to 900,000 barrels per day till 2005. Saudi Arabia, meanwhile, is well able to establish large storage facilities.

Despite the swift pace of change in the region, the six members of the GCC have sufficient power to guarantee the survival of the council as an effective and influential regional player along with Iran and a new, moderate Iraq. The GCC's strength is enhanced by the economic achievements of the council and the decision made in the Doha summit to establish a GCC customs union, which will lead to monetary union and then a unified currency. Most importantly, these countries enjoy a cohesive social fabric, with populations that reject violence and value dialogue as a means to reach agreement concerning the challenges they face.