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The Persian Gulf and South Asia

The Persian Gulf and South Asia

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Arms Raco Problegrs Political, Social, Technological and
Resource Aspects

Eprron: BnnnlNr SsN Guprn
"Both volumes are rich in contqnt, eloquent in style, stimulating
Hindustan Times, 13 July 1986. "Since regional cooperation in Sorfth Asia is till now just apromise rather than an achievement. the authors of this two-volume work quite rightly concentrate on the tnajor problems that stand in the way of such cooperation. While dOing so, they have been able to

and thought-provoking. They are pioneering additions in the fleld of regional coopcration and dcvelopment in South Asia." The


a collection which is worth any reader's time


he or

she has an interest in South Asian affairs either as a scholar or as a aittzen."*The Telegraph, 16 November 1986.


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




Policy Research, New Delhi




Centro for Policy Researoh

New Delhi, 1987

All rights reserved. No part of this pubfication
be reproduccd or traosmitted in any forin or by any means, without th€ writtetr permission of the publishers.

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



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


This volume brings to fruition the second phase of the Centre for Policy Research Project on Regional Cooperation for Development. The papers edited and collected for this volrrme by my colleague, Ptofessor Bhabani Sen Gupta, were presented at athree-day seminar held at the CPR in March 1986. A year earlier, CPR held a six-day workshop on Regional Cooperation for Development in South Asia. The concept of regional cooperation has taken firm roots in South Asian minds, however slow and halting may be the steps taken by the governments towards a goal that is now widely shared. No geopolitical region is self-contained; indeed, regional cooperation in the Third World is an integral fragment of the growing design for South-South cooperation reaching out to North-South cooperation for worldwide development of the human condition. It is natu. ral therefore that CPR should reach out from South Asia to the adjoining regions of South-West Asia or the Persian Gulf and South-East Asia. With both regions South Asia has developed sturdy historical and contemporary linkages. The seminar on Prospects and Problems of Development Cooperation betwecn South and South-West Asia sprang naturally from our workshop on Regional Cooperation for Development in South Asia. We are now set for a tbird seminar to explore prospects of inter-regional cooperation between SAARC and ASEAN, the two regional cooperation organizations in South and South-East Asia. The papers presented at this seminar will form the fourth and ffnal volume within the scope of the CPR project which will have run for

three-and-a-half years under the overall supervision of Professor Bhabani Sen Gupta. For our South Asia-South-West Asia seminar we tried to get scholars from the Gulf region, but failed to get positive respoqses


to our invitations. From Pakistan, lowever, came lt{r M.B. Naqvi, an eminent journalist with long-tine association with the Pakistan and Gulf Economrisl. Bangladesh was represented by Dr ffnmayun Kabir of the Bangladesh Institute of Strategic Studies. Indian participants came from Delhi and Bombay. The ten papers presented in this volume cover almost all the major aspects of the political ecotomy of the countries in thc Persian Gulf region and explore present and future prospects of developmental oooperation between these countries and South Asia' The ffrst two papers, written by Profbssor K.R. Singh' of the School of International Studies, Jawaharlal ['{ehru University, and Professor Bhabani Sen Gupta, respectively, examine security linkages between South and South-West Asia and 4rgue for making these linkages truly indigenous and strong. Profes$or Singh offers a constructive design for a "nonaligned security doctrine" erected on a consensus of understanding among the countrles of the two regions. Professor Sen Gupta wants India and Pakistan to jointly ensure that Pakistan is not dragged into a wider war in the Gulf region involving one or both superpowbrs. Mrs Gulshan Dietl, also of SIS-JNU, offers an interesting portrait of the mutual perceptions of the GCC and the superpowers. Since perceptions often determine the range of inter' statc relationsbip, bilateral as well ds multilateral, her essay indicat. es the reach and the constraints of the GCO nations' interaction with both superpowers. At a somewhat diferent but still Interconnected level, Mr Jawid Laiq, a CPR Fellow, looks critically into the GCC countries' impetus for regional cooperation. Mr Laiq'$ conclusion is that the most im. portant impetus is to ensure these oountries and their regimes from intolerable pressures from internal 4nd external sources' Dr Pradeep Bhargava also a CPR Fellow, in a pioneering paper, examines the political economy afid state structure of the Gulf countries including Iran and Saudi Arabia. His paper may raise eyebrows especially where he questlons if the Islamic regime in Iran can be called "fundamentalist"; liowever, his description of the domestic politics followed by Gdlf region regimes as "welfare statism" is likely to fnd general acdeptance. Picking up the Islamic theme, Mt Asghar Ali Engineer, Director of the Centre for Islamic Studies, Eombay, probes a very important question: is Islam a cobesive or a divisive factor in generating co'

FonswoRD vii
operation between the Grilf region, which is the home of Muslims, and South Asia, which is inhabited by Hindus, Muslims, Buddhists and Christians. Mr Engineer's conclusion is that religion is no barrier to cooperation between the two regions; within and between nation-states it plays both cohesive and divisive roles; further, religion's place in tbe human condition changes with the nature, momentum, and social and economic thrusts of development. In three interconnected papers, Mr S.P. Seth, who came to CPR as a Fellow from Australia to work for tie Project, Dr V.L. Rao, of CPR, and Dr Girijesh Pant, of SIS-JNU, take a comprehensive look at prospects and problems of economic cooperation between the Gulf and South Asian countries. Despite their different approaches to the subject, they agree on one point that should interest all South Asian countries, namely, the Gulf states will remain for a long time substantially dependent on migrant labour from Soutl Asia, skilled as well as unskilled. Between them, the three papers offer interesting insights on the transition of the Gulf countries

from feudalism to capitalism and the role modern institutions like commercial banks are playing. These papers, then, need be read along with Dr Bhargava's paper on the political economy of
the Gulf states.


Ajay N. Jha, a young researcher and scholar of SIS-JNU,

has contributed a paper on the growing relationship between India

and the Gulf countries.
These papers, valuable as they are, do not tell the entire story of the CPR project, The CPR faculty gained a lot from a whole year's research, study and discussion of the issues involved in inter-regional cooperation between South Asia and the Persian Gulf countries. Oral participation at the seminar, not included in this volume, constituted an enriching intellectual experience. Overall, CPR's Regional Cooperation for Development Project has made a signiffcant contribution to the steadily growing pool of inquiry and understanding of the objective and subjective realities that govern developmental cooperation between and amongAsian countries both at the regional and inter-regional levels. This volume should therefore be read withthe two that emerged from the CPR workshop on South Asia, namely, Regional Cooperation and Development in South Asia, Vols. I and 2 (New Delhi, South Asia Publishers, 1986).

I wish to thank all my colleagues

and scholars

fromother institu-



tions in India wbo took part in the OPR seminar and gave us paelousty of their knowledge and nvisdom. Tbe fourth volume in this series will be plblished before the end of 1987.
Centre for Policy Research

V.A. Per PaNeNoKsR

New Delhi 110021
December 1986





I. 2. 3. 4, 5. 6. 7.

Security Cooperation between South Asia and the Gulf-Scarch for a New Framework

South Asia and the Iran-Iraq War

The Gulf Region and South Asia-Prospccts Economio Oooperation


South Asian Migration to the Gulf-Problems and

Islam as a Oohesive/Divisivc Factor Asia Cooperation

in Gulf-South

Political Economy of the Gulf States


GULSHAN DIETL Gulf Cooperation Council and the Outside Powers-A Study in Mutual Perceptions





JAWID LAIQ Gulf cooperation c ouncil-+-3oyal Insurance against Prossures from Wittin and Without V.L. RAO Gulf International Banking AJAY N. JHA India's Relations with the Gulf Oountries-Issues and



209 242



Pradeep Bhargava is Fellow

at the Centre for Policy Research. His forthcoming books arc Political Economy of Sri Lanka



(Navrang, New Delhi) and Political Economy of the Gulf States (South Asian Publishers, New Delhi). Gulshan Dietl is Associate Professor in the Qentre for West Asian and African Studies, School of International Studies, Jawaharlal Nehru University, New Delhi. She has authored The Dulles Era: America Enters West Asia (Lancer International, New Delhi). Asghar Ali Englneer is Director, Institute of Islamic Studies, Bombay, He is a well known activist in enlightened Islamic politics and edits a bulletin entitled Islamic Studies.


Ajay N. Jha is a doctoral fellow in the Centre for West Asian and African Studies, School of International Studies,
Jawaharlal Nehru University, .New Delhi. Jawid Laiq is Fellow at the Centre for Policy Research, New Delhi. tle got his grounding in political studies while doing field research for London University among Indian plantation workers in Malaysia and Sri Lanka. Formerly he worked with the Economic and Political lTeekly, Indian Express and now defunct New Delhi magazine. He was also a correspondent of Kuwait News Agency. Girijesh Pant is Associate Professor in the Centre for West Asian and African Studies, School of International Studies, Jawaharlal Nehru University, New Delhi. He has published papers in several scholarly journals. V.L. Rao is Rescarch Professor at the Centre for Policy Research, New Delhi where he holds the State Bank of India chair. He is a frequent contributor to economic journals and








newspapers on various aspects of int€rnational trade and banking. S. P. Set& was Fellow at the Centre for Polioy Research, New Delhi. IIe was formerly Assistant Editor, Times of India and is currently a freelance schcilar and journalist operating from


Australia. Bhabani Sen Gupta is currently Research Professor at the Centre for Policy Research, New Delhi, and a columnist for leadiog newspapers in India. He has been Senior Fellow and Head of the Disarmament Studies Division, School of Interna' tional Studies, Jawaharlal Nehru Uoiversity, New Dclhi; Senior Fellow at the Schoot of International Affairs, Columbia Univcrsity, New York; a Rockfeller Fouadation Fellow for the Study of Intcrnational Oonflict; and a Consultant to the Human Rights Commission and the UN Disarmament Commission. He has authored several books iacluding Nuclear Weapons? Policy Options fdr India (Sage, New Delhi" 1983)' The Afshan Syndrome: Havt to Live with Soviet Power (Yikas,


New Delhi, 1982) and has ddited Sofiet Perspective of Contemporary Asia(South Asiad Publishers, New Delhi' 1984) and Regional Cooperation and 'Development in South lda, Vols. I and 2 (South Asian Publlshers, New Delhi' 1986). K.R. Singh is Professor and Chairman, Centre f,or West Asian and African Studics, School of International Studies, Jawaharlal Nchru university, New Dethi' r{e has authored several books including, The Indian Ocean: Big power pre' sence azd local response (South Asian Books, Columbia) Iran-quest for security (likas, New Delhi) ar.d The Persian Gulf and Arms Control (Strbtegic Defence, Australia).


Security Cooperation between South Asia and the Gulf: Search for a New tr'ramework

region itself, from outside the region or by a combination of the two. Before the security framework is defned, the nature of these threats need to be correctly assessed. Thereafter appropriate
counter-measures can be evolved.

Regions per se are never tbreatened. Threats are posed to the regimes in power, to the political, economic and social systems in a given state, or to the territorial integrity and sovereignty of the state in a given rigion. These threats can be posed either by forces within the

Many of the regimes in the Third World are threatened either by a coup d'etat or by a revolution. There is a basic difference between the two. Change of regime by a 'palace' coup might replace one ruling elite or its faction by another without bringing about a basic change in the nature of the state system. Such palace coups occurred in Pakistan when General Yahya Khan replaced General Ayub Khan or when Abdul Salam Aref replaced Abdul Karim Qassem in Iraq, These were not revolutionary changes, thougb cach of them threatened the regime in power. However, some regime changes denote basic reorientation of the state policy. Such revolutionary changes were brought about in Iraq in 1958, Afghanistan in 1978 and lran in 1979. Tbey not only brought about the downfall of monarchies but also altered the socio-economic ethos of those states. Absence of agreed ground rules for a smooth transition of power is partly responsible for these dramatic changes. Over a number of years, a regime gets equated with a particular systemic pattern. When a smooth transition is hindered, the cumulative force brings about a revolution. Not only are these regimes overthrown but the changeover is also accompanied by basic changes in the state system. Revolutions in Iraq, Afghanistan and Iran not only
changed the regimes

from a monarchy to a republic but



Tnr PrnshN Gur.r eNo

SourHl Asre

changes also paved the way for Baalh sociallsm in lraq, communism

in Afghanistan and Islamic fundamEntalism in Iran. The elite of the concerned state as well as several regional and outside powers benefit from the ptevailing system. Hence, possibility of systemic change is seen as 4 threat to their combined secu' rity and is resisted. For example, tle West and the Gulf Cooperation Council (GCC) countiies, espdcially Saudi Arabia, are linked with common political, economic lnd strategic bonds. The West wants an assured supply of oil at a feasonable price as well as seeks a favourable means of recycling the petrodollars. This can be best assured by maintalning the status qtro in these states. The regimes the West's concern for oil and of the GCC states also benefit petrodollars. Hence there is a strat$gic consensus between the two. Oonsequently, the GCC states not harm the basic strategic the West. In return, the West has a strategic interest in intcrests of guaranteeing the survival not only of these regimes but also of the systems that they help to Despite the strategic linkage, cannot always be averted. Once the change is brought the new elite, after it settles down, also seeks new equations in ihe region and beyond it. This cycle of status quo and revoluti transformation continues bethat would help accommodate causc of lack of adequate the existing system to new changes bnd popular aspirations. Several societies in the Thlrd World that not well equipped for these changes, as well as their respectivo igreat power partners, feel that their security is threatened by these challenges. The so-called threats from socialism and Nasseiism in the past and religious fundamentalism today arise partly from that syrdrome, The third source of insecurity is the threat to the territorial integrity and sovereignty ofa given state. This type of tbreat is posed due to two main causes; emergencd of new ccntrifugal forces in a state due to weakness in national i{tegration, and historical claims and counter-claims among the states thomselves. Thus, threats to territorial integrity and trational sovBreignty can arise from within the country itself, originate from abroad and be fueled from there or can be the result of a oombination of bbth these factors. The Kurdish ffovcment and the Dhofar rebelliori illustrate this point. The Kurdish movement is a legdcy from the past. The disintegration of the Ottoman Empire and the creation of new states in the post-World War One period gai,e hopes to the Kurds that they



too might be able to have a homeland of their own. But, while the partition of the Ottoman Empire resulted in the carving out of states like Iraq and Syria, the Kurds did not benefit from it. On

the contrary, the partition of thc Ottoman Empire further subdivided them. Before the First World War, the Kurds were living in two states; tbe Ottoman Empire and lran. Now they are spread over four states; Iran, Turkey, Iraq and Syria. All through thesc years, thc Kurds have been agitating for the recognition of their separate entity but have been denied that except in Iraq where their scparate ethnic idontity has been recognized u[der an agreement between the Iraqi Government and the rcpresentatives ofthe Iraqi Kurds. Turks refuse to recognize them
and call them moutrtaio Turks. Kurds have also been used as pawus chess-board of regional rivalry. Iran and lraq both uscd them at one time or another to put political and military pressure against the adversary. That has sustained the Kurdish movement

in the

all through these decades. ?hough the Kurds have learnt the art of using the Iraq-Iran rivalry to their best advantage, they also know that neither Iraq nor Iran would allow them to form a separate state because an indepeudent Kurdish state, howsoever small, would poso a threat to the national integrity of all the four regional powers; Iran, Iraq, Syria and Turkey. Thus, while the Kurdish movement is kept aliie by all parties and supported by one regional power or the other against the adversary, it would never be allowed to emerge as an independent force capable of challenging any of these states. Hence, it will remain a source of perpetual destability and yet will be unable to achieve its objectives under present circumstances. The Dhofar movement has its local base in Oman and support bases among the neighbouring and foreign powers. It had its roots in the demand for autonomy and a better deal for the people of Dhofar, an outlying provioce near the border of South Yemen. Gradually the movement acquired Marxist overtones and spread to some areas in tbe eastern part also, especially in the Djebel Akhdar region near the Gulf. The movement enjoyed base facilities in South Yemen and was supported by tbe Chinese and the Soviets. By 1971-72,the movement had acquired serious proportions. Neighbouring Arab states of th€ Gulf and Iran as well as UK began to support Oman ffnancially and militarily to contain the movgment. In fact, Iranian troops took active part in anti-insurgency operations





in oman. Also, by 1972, China, wishing to

improve its relations with the Gulf states, especially with lran, withdrew its open support from the Dhofar movement. By thp end of the seventies, thanks to the Kuwaiti diplomatic eflorts, Sotrth Yeriren also showed political restraint. Consequently, the Dhofar movement has been effcctively contained. Dhofar and Kurdestaq movements prove that while in the case of Dhofar, effective regipnal cooperation and adequate socio-economic inputs helped to st4bilize the region, policy of exploiting the Kurdish movement f6r short-term political objectives,
has sustained and often helped to irrtensify the Kurdish movement' Great power aspiration to domipate a state or a region either for its natural resources and wealth or for strategic reasons also threatens the territorial integrity and national sovereignty of a developing state. Recent history oF the Third World is a witness to it. These areas were brought under colonial dominance and great power hegemony either because of their geopolitical importance or

their economic advantages. Today, the Gulf is a major target of great power rivalry because of itq huge oil resources and also because of its geopolitical location. During tbe days of colonialism, these areas were either occupied bf European powers or were subject to unequal treaties. Today, the dominance is sugar-coated under terms like strategic consengrrs, Targets, however, romain the

RBcroNe.u CooPsnertoN AND SBcIJRITY

Ill-effects to these threats in their wide spectrum, can be avoided, to a large extent, through cooperation not only within the region

but also between two or more regions. However, to attain such a cooperation, three things are essgntial. Firstly, there has to be an effcctive understanding among all the members of the region. Subsequently, there has to be an undefstanding among the regions concerned on the interdependense of tfeir security and on a framework to protect it. Lastly, the regions should generate adequate capability

to efectively help each sfher in providing the

necessary help in ensuring their mutual security without increasing their dependence upon great powers. When one analyses these three preconditions of cooperation for security between South Asia and the Gulf, one finds that thero are serious diffiqulties in their practioall implementation. The very first

K.R. Srrcn


variable and in a way the most ciucial one-unity of understanding among the members of each region-is lacking in both the regions. In South Asia, despite the great fanfare with which the SAARC was

launched, there is neither a climate nor a framework of regional understanding on security matters. Despite long and protracted negotiations, Indo-Pak relations have not improved substantially. To the traditional points of dispute like the Kashmir question and thc arms buildup, new factors like the punjab problem have been added thereby leading to greater mistrust. India's relations with Sri Lanka have also been deteriorating largely due to the illtreatment of Tamil minorities in Sri Lanka and its domestic repercussions in lndia,

There is nothing encouraging in the Gulf either. The traditional Iraq-Iran rivalry has taken a more virulent form and oncc again is threatening to turn into an Arab-Iranian rivalry. Except for Syria and to some extent Libya, almost all the Arab states are supporting Iraq today, The lraq-Iran conflict has also accelerated the process of unity among the monarchies in the region. These states in the Arabian peninsula have grouped themselves into the Gulf Cooperation Council (GCC). It should, however, be noted that the GCC constitutes only a sub-system of the Gulf and hence the name Gulf Cooperation Council itself is a misnomer. At the moment there are three main atcors in the Gulf. They are the GCO states, Iraq and lran. They have conflictual rclations. The Baalhist Iraq, though it has come closer to dhe GCC, because of the Iraq-Iran War and the so called threats of Islamic fundamentalism, was till recently treated as a serious threat to the security and even territorial integrity of the states of the Arabian peninsula. Until the downfall of the Shah and more so before the tide of the IraqIran War began to turn against lraq, Iraq was considered by most experts of the Gulf as the greatest single source of threat to regiotral stability, both politically and militarily, and was used as one of thc justifications for arms transfer in the region. Today, Iraq is projected as a front-line Arab state by the GCC state. Will this perception survive the end of the lraq-Iran War? Iran, under the Shah, was regarded as a pillar of regional stability, especially by the Arab monarchies. Today, Iran is considered as a dangerous enemy both by Iraq and by the GCC members. Thus, intra-regional understanding, vital for maintaining and promoting regional security, is lacking in both regions.




Gur-r nxp Sourtrr Asn

is no understanding betweco One would arguc that since the possibility of cooperatim the members of the region, talk between the two regions would be fiar fetched. Logically, that would some of the membem of be true despite the understanding such understanding existed each of these two regions" between Pakistan, fran and Pakistan and tle GCC in general

have arrived at that
operation among these states was

under the CENTO. Today, Saudi Arabia in particular The earlier framework of couoon the Western defence

pact. The presentt framework of security understanding also falls undcr that patterr though these st&tes claim to be nonaligned. As noted earlier, the systcmic linka$e between these states and the West is a strong binding force betgeen them. The CENTO as well as the preseot aligrurent of forces in these two regions were influenced in the p4st, and continue to be influenced even today, by the great power rivlalry within the framework of a bipolar world order. Moreover, both of them are directed against the Soviet threat as perc€ived by tbe USA and these regional powers. Such a framework of cooperation between regional powers and great powers, in the context .of the Cold War rivalry, was rcsisted in tbe paot and will contlnue to be resisted in future by other states in the region. It wil be difficult to envisage India's cooperation for the security of the area in an environhent in which Pakistan and Saudi Arabia are linked up, in a strategic understanding, with the USA and Chiaa. lledce, if effective and credible intraregional and intcr-regional coopQration has to be brought about, eforts should be directed to loo$en tbe strong linkages between some of the regional powers and great powers, conceived in the context of cold war rivalries. Anotler point that needs to tfe noted is that the extent' scope and nature of cooperation betweed these powers in the area has to be clearly defined to avoid confusibn and misunderstanding. Therc are reports of large number 'of Plakistani troops in Saudi Arabia but neither the number of such trdops nor the nature of their work Reportedly these troops is spelled out bY either ofthe gov near the frontiers of South Yemen and in outlying are stationed be deployed in actual combat areas of Saudi Arabia. But would to preserve regime stability Yemren or lran' or asaiust South ? It is not known. the GCC in Saudi Arabia or doubts.abqlt the prospectr of These uncertainties raise

K.R. Srrcn


cooperation between South Asia and the Gulf. In fact, the present alignments of forces in South Asia and the Gulf and their linkages with great powers further divide the regional powers and lead to greater insecurity. The acoelerated arms race in the area, especially in the Gulf, has added to the sense of insecurity. Regional powers are spending on defence at an alarming rate (see Table l). Yet, regional conflicts have drained tbe strength of these local powers. No state that depends for its security upon great powers cau be called truly independent and sovereign. Hence their so called security policy based upon the notion of military superiority, has in essence, eroded their independence and sovereignty without adding to their overall security. Any effort to add to that military strength only heightens the sense of insecurity. If a political process leading to real regional cooperation can be worked out it will be obvious that these states can take care of the military threats to their security from forces outside the region till such time as the international factors come to their rescue. A glance at the military and paramilitary strength of these countties, even small statcs of the Gulf, reveals that the conventional military capability of many of them has not only inoreased considerably but also can compar€ favourably with that of any medium power (see Table 2). Politico-military capabilities of these tegions, however, is

cancelled out due

to intra.regional rivalries and factions. At the

moment, these forces are deployed in confrontation with each other in the region and hence instead of ensuing the security ofthe region lead to its insecurity. Situation can alter dramatically if these forces, instead of confronting each other in the region, are redeployed so as to confront the outsiders.
DEFTNING REcIoN FoR SBcuRrrY CooPnnetrou

is essential to define the concept of a 'region' for the typc of is euvisaged. At the moment' region is broadly a politico-geographical entity governed by two main factors; geo' graphical cootiguity and political acceptability' Other equaily


cooperation that

important factors like water resource management, economic oapability, maritime interests, socio-cultural linkages, etc' are by and large, ignored while forming these regions. The disadvantage of a region bas"d primarily upon politico-g€og;raphical factor alone is


Tsn PsPsteN GULF AND Sour$ AslA




fi{E GULf




Armcd forces

expenditue $ billion


Para-militarY forces ('000)




413.0 305.0 212.0
512 .O



0.332 9,94 t3.877 1.66

2.18 ?4,0
79 .O

Ira,D Iraq


198s 1978

na na




| ,43 0..767


198 5

19.2 21.5


na na









1978 1985

t7 .78

4l .5






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fr XX

&:& riri

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

A legign defined primarily on tbe basis of contiguity, in a traditionally accepted geographical division of the globe, will not always be appropriate as a unit for regional security. This definition of region will become all the more inappropriate if two or more traditionally defined adjacent regions think of pooling their resources for evolving a framework of common security. Regions traditionally
called as South Asia and the Gulf per se are for evolving a common security framework.

not appropriate




If one iakes South Asia as a regional division one finds that while it gives the impression ofa cohesive geographical entity, few of its members can interact with the others fruitfully in security matteri, unless they individually and collectively interact with the central power, India. As has been noted earlier, South Asian states have not only differbnt security perceptions but many of them are pursuing antagonistic policies. Thus, they cannot, at least for the time being, hope to evolve a South Asian framework of security. Their geopolitical positions, however, make it easier for them to interact separately with sub-systems outside South Asia. Bangladesh, though treated as a part of South Asia, is equally close to Burma and South East Asia. Pakistan, since the partition and especially after 197 l, is openly searching for a West Asian identity and has deliberately tended to devslsp stronger political, economic and strategic ties with states of West Asia than with those of South Asia. lndia, thanks to its central location, has the unique geographical advantage of the capability to interact fruilfully with both the flanks of Southern Asia. Some of the members of South Asia, like Nepal, Bhutan, Sri Lanka and the Maldives are so isolated that they cannot hope to effectively participate in any other regional sub-system except South Asia. Moreover, the roles of the island states in security matters would differ drastically from those of the isolated mountain kingdoms. It is also difficult to envisage a situation wherein Nepal".Bhutan or Bangladesh can effectively participate in tbe'security framework of the Gulf or vice versa. The Gulf also cannot be treated as an independent unit for purpoies of security. Its security is linkcd not only with some states of South Asia but also with those of the Levant and North East Africa. The Gulf aod South Asia dlso interact directly and indirectly


THB PsR$ew



Sours Asrl

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

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

the Bab al-Mandeb. It will the western coast of India, southern parts of Pakistan, Iran, Iraq, the whole of the Arabian Peninsula, the Horn of Africa and will extend to the African coast
down to Kenya.

The study ofthe question of in this broad region can be conducted under four main the northern tier, i,e. the 0 Security in the area falling area south of the Soviet Central Asia extending from the Pamir Plateau to the Caspian Sea and of the immediate littoral of the Arabian Sea. It would cover and the northern Parts of Pakistan, Iran and lraq. (ii) Security ofthe littoral of ttrre region extending from South India to East Africa including Gulf, the Red Sea littoral and

(iiD Security of the island repu lics of the region, especially Sri Lanka, the Maldives and tho Seychelles. (iv) Peace, security and freeddm of navigation in thc Arabian Sea and its natural projections, i.ej tle Gulf and the Red Sea. Before one seeks to evolve a frahework of security for this region it will be important to evaluate it$ strategic enviornment and the possibilities of changes thorein. fhis area had enjoyed a stable structure for a long time, at least sihce the beginning of this century. However, serious structural cbanggs have taken place in the strategic environment of this area since [he last decade. lts ramifications need to be carefully studied before a framework of regional security cooperation can be thought aboutl Till recently, the strategic struc ure of this area could be described as constituting four horizpntal parallels, These were Jhe iouthern periphery of the Soviet Cehtral Asia, tho northern tier or the area immediately adjoining the Soviet Ccntral Asia, the southern tier or the Arabian Sea/Gulf littoral, afd lastly the Arabian Sea proper merging into the Indian Ocean. Tbe Anglo-Russian rivalry during the nioeteenth cdntury consolidatdd these parallels. Britain was the

K. R. Sntau


undisputed sea power and the Russian presence was uncontested in Central Asia. The area under study, stretching from the Pamir Plateau to the Caspian Sea and sandwitched between the land power and the sea power, was divided into two distinct spheres of influence. Russia was conceded special interest in the northern tier. Britain retained its dominant role in the soutbern tier. The 1907 agreement between these two powers gave a seal of diplomatic approval to this division of the area into spheres of influence' Of course, the people of the area were not consulted. But when Iran was occupied during the Second World War by the USSR in the north and by Britain and the USA in the south, that concept was reiterated in practice. Attempts were, however, made by both the parties to extend their spheres of influence in each others zone of influence. The Soviets tried to assert their position in northern Iran in World Wars I and II but had to backout under tremondous diplomatic pressures. With the commencemetrt of the Cold War, this coexistence was maintaincd in Afghanistan but not in other areas of the nortbern tier like Turkey, Pakistan and lran. Attempts were made to alter this correlationship of forces, especially after the visit of John Foster Dulles to this region in 1953. When Iran joined the Baghdad Pact, or CENTO as it was called after the 1958 coup d'eat in Iraq' the sea power was not only able to extend its sway right upto the southern periphery of Central Asia but coul{ also threaten the Soviet heartland from the military basis in Iran, Turkey and Pakistan. Though the 1958 coup d'etat broke Iraq away from the sea power's influence, and subsequently put it under the influence of the land power, the change had only a limited impact upon the basic structure of the four horizontal parallels because of lack of direct land access. These parallels, though dented, did not disintegrate. As noted earlier, these horizontal parallels continued to be the basis of the Western strategy for that region even after the Second World War. The so called northern-tier concept of John Foster Dulles, which led to tbe formation of the Baghdad Pact/CENTO, was parfly based upon it. The subsequent US strategies and policies, as enunciated in the Eisenhower Doctrine of 1957, also reflect-

ed that framework. Even the US naval strategy in the Indian
Ocean since the early sixties, the Nixon Doctrine of 1969 and tbe subsequent strengthening of lran under the Shah followed the logic

16 Tnr



eno Souru Aste

of those geo-strategic structures. As long as they were secure the USA could afford to take a low trlosture vis-a-vis this region. These horizorrtal parallels, that had given the area a strategic stability, though by a balance of forces brought about by the great powers, began to disintegrate aftdr 1978. The Afghan coup d'etat and the subsequent entry of large number of Soviet troops there in December 1979 not only eliminalted one of the flanks of the northern tier but al$o brought the Sbviet forces very close to the vulnerable southern tier in Baluchistarr/I\tlakaran coast. Several regional and Western scholars also began predicting that the Soviet forces in Afghanistan were not only capablle of moving but were intending to move further south through Ealuchistan towards the Strait of Hormuz, with the intention of threatening the oil lanes of the Gulf. The Iranian revolution of 1979 and the ouster of the Shah removed the predominant influence of the sea power not only from the northern tier but even from an important part of the southern tier. Since Iran was seen as the liingpin of the sea power strategy in the area, the change was seen ds a serious setback to the Western interests ia the region. After the gverthrow ofthe Shah, a virulent propaganda attack was launched against the West in general and the USA in particular. That was further intensified during the hostages crisis. Also, during that period, the policy of the Iranian government to allow the Tudeh P0rty to operate freely, while suppressing other dissent movements in lran, was seei as a sign of continuing rapprochement between thc revolutionary Iran and the Soviet Union. Thus, a strong impression wag created, and for good reasons, that though Iran had not formally joined the Soviet bloc, events, in Iran and Afghanistan had dealt a final blow to the concept of strategic stability based upon horizonitat parallels. Under the new alignment of forces, it seemed that these horizontal parallels were being replaced by the newly created verltical parallels. These new parallels have not odly broken the earlier geo-strategic structure of the region but have &lso introduced totally new variables. One of the significant changes that has been brought about is that, unlike the earlier horizontal parallels, the regional powors of the vertical parallels are following antagonistic policies. This is true about India and Pakistan, Pdkistan and Afghanistan, Iran and Iraq, Iraq and Syria, Saudi Arabib and South Yemen, Somalia and Ethiopia, etc. These antagonisms not only create further destability

K. R. SDICH l7
in the region as a whole but also cnable the great powers to play the game of divide and rule more efectively, much to the disadvantage of the regional powers. Other regional factors like the Iraq-Iran war, the emergence of Syria-lran axis, new spurt to the Kurdish and the Baluchi movefear of destabilization. No wonder, the USA began to gct alarmed' The new tbrust of the RDF/CENTCOM strategy can be explained as a l)art of the wider response of the USA to the newly created
regional uncertainties.
ments. threat

of Islamic fundamentalism, €tc. havc added to this

Iu 198G-81, it seemed that the land power was flnally on the verge of acquiring its long desired goal of access to the warm waters in the Indian Ocean, The US reactions, especially the CarterDoctrine, can be explained in that context. In his State of the Union Address in January 1980, that followed the events in Iran and Afghanistan' President Carter wamed that any attempt by any outside force to gain control of the Persian Gulf region would be regarded as an assault on the vital interests of the United States of America and that such assaults would be repelled by any means necessary, including military force. The Carter Doctrine differed significantly from the Eisenhower Doctrine. Unlike the earlier Bisenhower Doc-. trine, the Carter Doctrine, which remains the basis of the US stra' tegy for the region till today, does not even envisage the token necessity of an invitation by a regional power for direct US military intervention in the aera. At one time, it did appear that the USSR, which had a vital say in the affairs of Afghanistan, would.also be able to influence events in lran. The hostages crisis made matters worse for the USA' However, unlike Afghanistan, there was never a direct Soviet influence in Iran. Whatever indirect influence it had exterted got eroded after the Iranian Government crushed the Tudeh Party, Tbe virulence in the US-Iranian relations was reduced following the settlement of the hostages crisis and, though the rhetoric of anti-Americanism was maintained, largely for home consumption, the new elite in Iran refrained from taking such steps as would have harmed the longterm strategic interests of the West. In fact, the West, and more specifically Europe, significantly improvcd its relations with Iran. Today, a new set of vertical parallels have emerged in the area stretching from India to the Red Sea and beyond. Also, the sea oower has lost its former hold over the southern tier. These new fac-








tors bave influenced the strategic Qnvironment of South West Asia. New linkages are being strengtheted in the vertical parallels like between Pakistan and Saudi Ar4bia and, though the West has helped to strengthen such linkagep, the sea power .has adopted a strategy of self-reliance that is ln direct contrast to the earlier strategy based upon the Nixon Doctrine. Hence, the RDF/ CENTCOM strategy has come (o stay, at least for some time to

The newly evolved strategic enVironment has addcd a new dimension to the sea power strategy in the area. Earlier, it was conditioned by the requirements of fbctors liks control over the major sealanes, possible deployment ofl the SLBM system, and to $ome extent, upon balancing the convehtional naval presence of the rival power. Subsequcntly, after 1974, it got influenced by the possible threat to the free flow of oil frbm the region due to oil blockade imposed by the oil producing countries themselves. The response was gunboat diplomacy and the threat to occupy the oil producing belt, especially the Saudi oil corei It was a politico-military threat,


more political than military, though the ultimate military option was not ruled out. That policy took into account the fact that thc then prevailing horizontal parallels and strong US-Iran links gave tho sea power a high degree of frFedom of action in the southern tier. Now that the old parallels no longer exist, tho sea power has to cvolve new equations. The sea pqwcr strategy today d€pends upon the minimum support from the southef n tier states. Bulk of the military capability is designed to be projected from beyond the region. Thc CENTCOM strategy, therefore, 4€presents the lack of faith of the sea power in the possible resolrrce mobilization from the area itself; something that was taken for granted as long as the Shah was ruling over lran. Today, Paltistan and Saudi Arabia cannot bc given the role of Iran under the Shah because the Saudi oil core itself might become one of targets. Moreover, Pakistan, despite the willingness of its ruling elite today, cannot replace lran under thc Shah in ffnancial resources and 4ilitary hardware. This has led not only to a more direct involvemest of the sea power in the area but also to its enhanced presence on the high seas and the strengthening of the Diego Garcia base. It has also led to the policy of maintaining transit and storage facilities in select points on the Arabiao Sea littoral as a part of the new strategy.

K.R. StNcs


These reorientations have led to basic changes not only in the power equations but also in the strategies of the great powers. These changes will have to be noted by regional powers before they evolve their own security doctrine. In the fifties and the sixties, thearea was seen as a launching pad for the possible sea power offensive against

the land power. In the strategic perception ofthe sea power in the fifties and the sixties, the western flank of the region was linked to the NATO by Turkey and to the US VI Fleet in the Mediterranean, while the eastern flank rested upon lran and Pakistan' Attempts were made not only to boost their military capabilities by politically supporting the regimes in power, by large-scale arms transfer and economic aid programme, Modern bases and comounication facilities were also created in these countries. Their navies were also suitably strengthened. The US Navy' began to operate more frequently in the Indian Ocean after 1963 and almost replaced the erstwhile naval power, Britain, :rfter the British deolared the East

of thc Suez policy. Diego Garcia, techuically a joint


American base, is mostly operated by the USA. The main thrust of the Western strategy in the area in the fifties and the sixties was to neutralize the USSR, Situation changed in thc seventies. Whilc the basic objectives remained as before, a new dimension was added to it. The fear of the energy crisis made the USA aware of the growing dependence upon the Gulf Oil. The repeated threats by Arab oil producers, including Saudi Arabia undcr King Faisal, to use oil as a political weapon, and the oil

embargo against the USA, as a friend of Israel, following the October War, as well as the monthly cut-back in oil production by the OPEC members at that time posed a direct threat, both immediate and long term, to the economy of the West in general and the USA in particular. It had a tremendous impact in shaping the subsequent US strategy vis-a-vis the Gulf. Several leading fgures in the USA began to argue that, ifneed be, the USA should not hesitate in occupying these oil felds. The US Secretary of Defence, James Schliesinger, in a TV interview in Washington on 6 January 1974, warnod the Arabs that they were running the risk of having force used against them if they utilized the power of oil embargo to cripple the largest mass of the itrdustrialized world. Blueprints were prepared to oocupy the Saudi oil core. The US task force in the Indian Ocean was further strengtbened. Similar reactions were seen in 197819 following the


20 Tm Pmsrex Gur,r mp

Sourjn Asn

revolutionary chaoges in Iran ancl {he possibility of Islamic fundamentalism spreading to other stated in the Gulf. The lraq-Iran war has added more to this general thrbat perception, so much so that the enhanced US military presende in the area is not unwelcomed

to some of the leading members of the GCC. Today, the US task force guards the sea lanes from thN Gulf and the Saudi-US AWACS monitor the environment from the the new challenges in the region While the USA felt threatened its perceived ioterests in the and took countcrmeasutes to its own or with its rcgion on onal supporters, the USSR was han revolution soon began to also taking similar steps. The generate its o*n domestic . Moreover, the backlash of Afghanistan also. The Soviets Islamic restrgence in lran was felt got themselvcs invited in in December 1979 and have Today, tle Afghan Governstayed on in that country ever thc active involvement of the ment is surviving largely thanks Soviet armed forces in Today, the area no longer only an arena of great power of their strategy. This has rivalry but has bccome the very added an altogether new dimension not only to the great power interest in the area but also to the local responses. Earlier one could even propose a strategy of allliance with one power agaiust the other. Now, one will havc td evolve a strategy to keep both the powers out ofthe area. Fortudately, this strategy ffts with the policy of nonalignrnent that is bding openly preached by all the
local powcrs.

Nolqer-rotpo SEcURITY DocrntNn
Developments as discussed abovo have focussed the spotlight on the need to evolve a nonaligned sepurity doctrine. Though the nonaligned states believe in steering blear of the Cold War rivalries, their attitude towards their own decurity is largely influenced by the constraints of the Cold War and the bipolar global model. Thus, assumptions that conflicts c4nnot bc resolved and that there is no solution outside the frame$,ork of bipolar world have tied sevcral of these states to one gredt power or the other. It is so corlmotr to hear that but for tho great powcr presence in a given area, regional power would feel in$ecure. This not only leads to a psychological dependence upon thd great powers but also legitimizes

K.R. SNGH 2l
their presence and policies vis-a-vis a given arca

in the Third

World. Earlier, in the fifties and the sixties, the Third World was divided into two broad groups; states that were aligned to one bloc or tle other and the nonaligned states. Now, virtually all developing
states claim

to belong to the nonaligned movement (NAM) in spite

of their overt or covert linkages with one power bloc or the other. Thus NAM itself has started reflecting the trcnds ofthe bipolar world, That has added new dimensions to the security perceptioos of these states. It has not only increased their di:pendence upon great powers but has also enhanced their feeling of insecurity. If the ill-etrects of this dependence has to be reduced, these states should evolve a framework for regional cooperation as well as cooperatien betweeu diferent regions in the light of ncw approaches to security that are based upon the ethos of the nonaligned movement. The new security consetrsus among these nonaligned states ne€ds to be based upon two basic postulates. Firstly, security and stability of each state rests not only upon non-conflictual relations with its immediate neighbours but also upon the stability of the area as a whole. Secondly, such a security and regional stability can bc arrived at only after all the member statcs havc evolvcd a frame. work of understanding that will not only lead to mutual cooperatioo but also hclp to isolate them from the ill-efects of the existing bipolar world order. Such a consensus can be based upon ttrc acceptance of the following principles:


Respect for the stability of the regime and the system



given state.


of territorial integrity. The OAU

has already


incorporated that principle.


Avoidance of politico-military llnkages with great powers that are conceived in the context of great power rivalry or the intra-regional rivalry, Concerted efforts by all members to remove the regional threats to security. If necessary, special institutional frameworks should be created within the NAM to facilitate conflict resolution and crisis management. Conscious efforts to strengthen socio-eoonomic and cultural


Tnn PrnsLc,N Gurr lNo Sourh Asu
ties among these states so as to nurture a better environment

for regional and intra-regional cooperation. While the acceptance of these broad principles by the NAM will pave th€ way for a political envitonment conducive to regional cooperation, some concrete steps m|st also be spelled out towards achioving that objoctive. Two framdworks of regional cooperation for maintenance of peace and need to be further evaluatec. They are the concept of tary disengagement as a part t and conflict resolution of NAM's effort at crisis mechanism, and the need to creale appropriate regional maritime authorities to look after and safeguard the maritime interests of
these powers.

One of the causes of the failurc, or the inability, of the NAM to play an efective role in crisis management and conflict resolution, especially among its members, is tbs absence of a viable and acceptable framework for implementing itb resolutions. Hence, the NAM

resolutions, though accepted almbst unanimously, are seldom implemented. The latest is the iuability of the NAM to fnd a viable and mutually acceptable solution to the lraq-lran War. Thus, if the NAM can evolve a suitable fr[mework for implementing its resolutions, it will greatly stretrgthen its hands in reducing tension in the Third World. This disengagehent framcwork suggested here is an attempt in that direction. Disengagement, in this speciffc c<intext, is treated as a broader

interaction of military as well as political processes



tensions. These processes are simultaneous and interdependent. While military disengagement is physical separation of the troops and weapon systems in a given arda that are engaged or are likely

to be engaged in armed confronta{ion, political disengagement is .a process tbat not only helps towards military disengagement but also in preparing an cnvironmeDt conducive to a detente thereby leading not only to crisis managemeint but even conflict resolution
per se.

Military disengagement is morc than ceasefire or troops witha situation that oot only disdrawal. Its essence lies in but also creates structures engages the troops and weapon that can even preempt the resum$tion of armed conflict. Thus, it zone. zones of arms limitaincludes concepts like a and mutual inspection, tion, mechanism for suPervision, v

K.R. SINcn


etc. These steps not only lead to but are also the outcome of political detente. Thus the political dimension of disengagement is equally important. -Il

a framework of political and military disengagement can be evolved, the NAM will be equipped with a viable mcchanism not

only for crisis management but also for preempting a conflict from escalating into a crisis. If the NAM can evolve a suitable framework of disengagement it can be offered as a viable means for containing, if not resolving, the present Iraq-Iran War' If it had been available earlier, the NAM could have prcvented the border clashes between Iraq and Iran before September 1980 from escalating into a full-scale war. Conflicts between developing countries cannot be wished away. However, if the NAM can succeed in creating a viable and mutually acceptable mechanism for conflict resolution, outside the framework of the present bipolar world order, it will contribute a great deal to the creation of an environ' ment of peace and stability in the South. The second framework of regional cooperation, especially about
maritime affairs, is based upon the newly acquired rights under the recently accepted law of the sea. There is no doubt that the littoral states have acquired new maritime rights. The territorial sea limit
is extended to 12 nautical miles and the exclusive economic zone to 200 nautical miles. Moreover, these states have also acquired extensive rights of exploitation of mineral resources in their continental shelves that might extend deep ioto tbe adjoining seas, depending upon the depth of the water. Thus, the littoral states, even of the

Third World, have acquired legal rights over vast

areas that


rccently were treated as parts of the higb seas. Not enough attention has been given in thc Third World to meet the challerges posed by these new laws. One of the results ofthe new law of the sea is that large parts of

the adjoining seas will be directly or indirectly subject to the laws littoral states and the institutious created to those laws, This is particularly true about fishing in the enforce state's exclusive economic zone, seabed mining in the continental Shelf, questions relating to pollution control, etc' These will affect not only the great powers but also regional powers. While the great powers and traditional maritime powers are equipped to meet these new challenges, the countries of the developing world have still to
promulgated by the


Trn PsRshu Gur-n


SouTH AslA

evolve suitablo mochanisms to enjdy the
these new laws.


benefrts arising out


Another point tfiat needs to be noted in this context is that whilc these states have the right to enjoy the benefits of these new laws thcy also have corresponding obllgations to the community that bas granted them those rights and the benefits that flow from them' Hence, to ebjoy for themselves and to create suitable environment wberein othe6 can also cnjoy full benefits ofthe law ofthe sea, these maritime states have to perlform certain duties as part of that obligation. These duties can be performed more efectively if
these states cooperate on a regional basis. Some of these duties are as follows: Survey the sca lanes in their rpgion and make available up-todate maps. Today, few developing states have these facilities. 2) Reducing the danger to navigntion by marking the sea lanes,


especially through areas where th9 littoral states are exploiting resources in the continental shelf. fhis is becoming urgent because several of these areas are already b4ing saturated with oil rigs, platforms, oil pipelines, oils terminals, etc 3) Acquiring the capability to conduct mine-countermeasure operations and, if necessary, to escort international shipping from the zone of national sovereigoty aod littoral priority to major sea lanes of the Ocean. Recent threa{ posed by mines in the Red Sca attack on tankers have and also the possible threat of ges. vividly drawn attentiou to the claim the benefts of the new Several of the developing states law of the sea have not done much to meet these obligations. Unlarge sums on acquiring doubtedly, several of them have ve cared to acquire basic ships ships but few of them fighting This is especially true about like survev vessels and the countries of the Gulf whose ecofiromic survival itself depends to their sea lanes free. a large extent, upon their ability to If one analyses those dctails as gilven in Table 2 (under Navy) and Table 3, one finds that except foi Iran no other state has €ven bothered to acquire survey vessels. Only Iran and lraq had acquired mine countermeasure (MCM) ships by 1975. Saudi Arabia acquired them by 1980. Even todfy, except for these three states, no other Gulf states operates MCM systems through all of them depend heavily upon opea sea lanes in tbe area for their economic survival.

K.R. Sncn






Cowrtr! Year ghey

diidi- C-aaslal-fi--7 heli- airuaft

MCM ships

MCM MR, MR helicoprcr copter


1975 1980

Iran Iraq

1975 1980


-66 6210
,, a


7975 1980 1985 7975 1980

7 a







r985 Saudi





-4 -4






9)urcEi Military



s*d, Jme's Fighting Ships (London).

2.6 TEn PnnsnN


The Gutf countries have, of lite, acquired a substantial escort capability based primarily upon fdst patrol boats armed with longrango guided anti-ship missiles ljke the Exocet, Harpoon and the Slyx. Table 2, howcver, shows thdrt, of these states only lran, under the Shah, showed an awareness oli a balanced naval development. Iraq was constrained by its geo-physical limitations. Other states, especially of the GCC, have started acquiring that capability only in the eightics. Today, the Gulf [s over-saturated with these so' phisticated long-range standoff m issilcs whether surface-to-surface or air-to-surface. Their indiscri4inate use would cause havoc in these narrow and shallow waters. fhe tanker war tlat is going on in the Gulf is an indication of that on a small scale. The Gulf is a shallow area that is getting congested not only with intemational shipping but also with mechanical structures related to the oil industry. Shipping and oil industry need to be properly organized on a regional level if ftiture complications have to be avoided. Thus there is need to organize a Gulf Maritime Authority (GMA). Such an organization caq be entrusted with the following

1) Conducting periodical survey of the sea lanes.

2) Preparing and distributing niaritime maps of the areas. ) Marking sea lanes and piloting in the zones of respective sovereignty and beyond it. 4) Coordinating the MGM capdbility in the region. Items one to three can be coordinated tbrough the GMA and the respective coastguard and police authorities of the littoral
with the respective navies of the of the ncighbouring regions.


need be,

the navies

of fields. Indian tion in these making and mine co inputs iD the develoPment of
There is

great scope

and inter-regional coopera-


regions also. If the regional freedom of navigation in thc

maritime survey, map operations, etc. can be useful capabilities in the adjoining can coordinate in guaranteeing


sense than they can morc effect-

ively demand that the adjoining high seas be free from the naval ence, $uch steps can also help presence of the great Powers. of the Indian Ocean as a promote the fcalization of the
peace zone.

The above mentioned flve


strategic consensus for

K.R. SrNcs


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

in fact, extend the South'South cooperation purely economic level to cooperation at all levels. Such a from a new approach to South-South cooperation will help to stabilize the area politically, economically and strategically and, thus, contribute to its overall security. Finatly, even the great powers should welcome such a development because regional stability within the
These principles, framework of such a strategic consensus among regional powers will assure these great powers that their legitimate interests in the area are not being harmed either because of intra-r€gional rivalries or because of linkages between regional powers and great powers. Thus the quest for a new security doctrine for the NAM can alone provide a right environment and an appropriate frame of reference for cooperation between South Asia aod the Gulf.


2. South Asia and th$ Iran-Iraq War

The second cold war merged the geopolitical borders of South'West and Soutb Asia. The origin of Cqld War II are still controversial. In time, wheo a consensus emergFs on this hotly debated question,

the origin will probably be tr{ced to the American defeat in
Vietnam. Every inconclusivc defch.t or victory in war sows the sced of another war. Even as most Almericans wilted at the profound shock of the Vietnam defeat, some prepared for a global reassertion of US military power. Vietnam, Angola and Mozambique established in the perceptions of strateglc thinkers in America a symbolic linkage between Soviet power and third world revolutionary change. Arms control and limitation aqcords and negotiations between Washington aud Moscow got seripusly tied upwith "linkage" in the late 1970s. For the United States, the fall of the Shah of Iran and the loss of Iran as a sentinel of Amcrican Fnd Westertr interests in the vital regions of the Persian Gulf and the Middle East was a disaster even worso than the defeat in Vietnam, President Jimmy Oarter ordered a massive rebuilding of US milltary strength during the Iranian crisis of 1978-79. SALT-II died with the fall ofthe Shah. The Saur revolution in Afghanistan in Aprll 1978 was taken mistakenly as an ominous signal of what might happen to Iran, Pakistan and a host of fragile Arab countries loaded iwith the new-found oil wealth. The Soviet military interventiop in Afghanistan heraldcd the arrival of acopalyse. The US saw thq move as the first step in a Soviet military lurch into lran. Thc Cariter Doctrine committed the US to

the defence of "vital intcrests" in the Persian Gulf by military means, if necessary. The Rapid peployment Force was stationed on land and in the waters witSin striking distance of the Gulf. Pakistan became a front-line stdte for the containment of Soviet




power. A search was mounted for a strategic consensus on tbe security of the Persian Gulf region as well as Pakistan. Afghanistan and Pakistan merged the geopolitical regions of South Asia and SouthWest Asia. From 1980 on, both superpowers have had to see the two regions interlinked with one another for security and stability as well as in the uncertain drift to change. When Leonid Brezhnev offered his Persian Gulf peace plan during his visit to Ncw Delhi in December 1980 he unambiguously linked Afghanistan and Pakistan to it. In the six years that have passed since the Soviet intervention in Afghanistan, the process of intermeshing of the two adjacent geopolitical regions have gathered steady, if complex, momentum. It is no longer possible to decouple the strategic relationship between Pakistan and the United States from American security engagements in the Persian Gulf. The Soviet military presence in Afghanistan had added considerable edge to the stake of Saudi Arabia and other Arab states of the Gulf region in the stability of a pro-US regimc in Pakistan and in the war-worthiness of the Afghan mujaheedin. The Saudis have financed the Pakistani purchase of 40 F-16 fighters from the US underthe l98l-87 aid package. Riyadh and other Arab governments of the Gulf bave been extending substantial help for the upkeep of the Afghan refugees in Pakistan as well as for their continued resistance to the Soviets and the Afghan Marxist regime. The lslamic fundamentalists among the refugees and their political patrons in Pakistan, the Jamat-i-Islami party, look up to the Saudis for political as well as monetary backing. In other words. thc Arab states of the Gulf are a factor in the Afghanistan crisis which no political settlement can ignore. Iran is also involved in Afgbanistan, but in a different manner. About half a million Afghans are reported to have taken refuge in Iran. An indefinite number of Afghaos engage the Soviet-Kabul forces in guerrilla war, operatiog from Iran or within Afghanistan with lranian assistance and patronagc. However, the Iranian regime is against yielding to the United States and the Saudis a role in Afghan resistance to the Saur revolution and the Soviet military presence. Nor does Tehran support the CIA-run programme of arms aid to the mujaheedin through the territory of Pakistan. In June 1986, when leaders of three Afghan resistance groups went to Washington, had a highly publicized meeting with President Reagan, and canvassed for direct supply by the US of more sophisticated


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

weapons to the Afghau rebels,

of two other

groups, affili'

ated with the Iranian brand
opposed a larger American

Islamic fundamentalism, oPenlY

t in the Afgban

lndeed, Iran acts as a brake

Pakistan's involvement with the

Arab states in the Gulf region. Pakistan's involvement with [he security of some of the Arab About 30,000 Pakistani trooPs states is much more than protect the regimes and their in three Arab states in the Arabia alone. These trooPs have Gulf, as many &s 20,000 in been trained in the use of some of the most sophisticated weapons the US in recent years. Howsystems tbe Saudis have bought which Tehran may Percver, Pakistan is wary of any ceive to be against its interests. unlike the Arab States of the Gulf Cooperation Council, hf,ve long held lraq to be the aggressor in tbe lran-lraq war and, US and Saudi pressure, has Islamabad has had to remained neutral towards both in order to please both the maintain its distance from Ba Iranians and at one time the Public opinion, too, restrains getting inv in the war on the side of lraq. Islamabad from The Arab countries of the on their part, have kept Pakistan outside of the region's cal institutions. Pakistan was join the GCC nor showed any interest in joining neither invited to it. Unlike Oman and Bahrain, Pfkistan has not given base facilities to the United States. Pakistan sets a bigh premium on friendly relations with Iran which is an immediate neighbour. Iran-Pakistan relations are good, but are neveftheless strained by Pakistan's prevading military ties with the Unlted States. The rulers of Pakistan are fearful ofthe Iranian brand pf fundamentalism whioh is propagated by the minority Shia sect. Shia intellectuals in Pakistan are more vocally and passionately anti-American than their Sunni

Any aggravation of the seculity crisis in the Persian Gulf region is likely to sharpen the dilempas and contradictions built into Pakistan's involvement with the security and stability of the Arab States. The 30,0@ Pakistani trpops serving in Saudi Arabia, tbe UAE and Oman have been plabed under the military command of the states that have hired thefi. Ifowever, if Saudi Arabia gets involved in the Iran-Iraq war, that is, if this apparently endless bilateral war widens into a Gulf XVar, it is uncertain if the Pakistanis witl join the fighting on behalf of their employers. If they do, they


Gupra 3l

be fighting against lran, and this will not only lead to an immediate collapse of the good relations now existing between Pakistan and lran, but may also create a sizeable domestic political upheaval within Pakistan. Most Pakistanis would not like to see their country ffghting a war on the side of Saudi Arabia against Iran. Pakistan shares a border with lran, and not with any of the Gulf Arab countries. The Baluchis of Iran can be goaded to link up with the Baluchis of Pakistan to form a larger Baloch state enjoying far greater autonomy than now. The recent escalation of the lran-Iraq war and the gains made by the Iranian forces seem to have already sharpened tbe dilemmas of Pakistan. Launching a surprise offensive in the second week of February 1986, Iranian forces crossed the strategic Shatt-al Arab river after a major anphibian operation. The lrauian objective was to threaten the Iraqi port of Basra. By 10 February, the Iranian forces gained a foothold in Iraqi territory; particularly in the island of Umn-al-Rassa, where lraqi oil installations are located. Shortly thereafter, Iranian forces took the Iraqi port of Fao, close to the Kuwaiti border. The BBC reported that the Iranian forces had captured the Iraqi missile bases, while a Voice of America broadcast said that the Iranian advance was causing..a lot of concern" in Kuwait. On 12 February 1986, the United States issued a unilateral warning to Iran that if its ofensive meant action against any ofthe Arab states other than lraq, it would be harming American interests. It was a thinly veiled threat that tlre US would take action to defend the Arab states of the Gulf. The US warning once again exposed the dilemmas of the Arab states. They did not particularly relish the idea of being protected by a superpower that was also the protcctor of Israel. At the same time, none of the Arab states, nor the members of Gulf Oooperation Council as a whole, are confident of taking on Iran as a military power. The Arab states therefore took the issue to the Sccurity Oouncil after lraq had turned down yet another GCC appeal to Baghdad and Tehran to put a stop to the war. Iran boycotted the Security Council session. It also rejected the Council's resolution demanding an immediate cease fire, even though the Security Oouncil for the ffrst time recognized Iraq as an aggressor. The BBC reported on 4 March that rhe GCO had created a ,.special force to be deployed wherever needed." With Iranian forces a merc iix miles from the Kuwaiti border, thc GCC decision was immediately interpreted as




THs PERsIAfi Gur,r eNo Soqrs Asn

a move on the part of the Ar[b states to rush to Kuwait's defence if Iran determined to pfrnish Kuwait for the considerable help it had exteuded to lraq in thp last five years. In this gathering crisis in the Perdian Gulf, the strclngest ever US naval forc€ to pay a friendly visit to any South Alsian Port called at the port of Karachi. Five warships and a iumber of submarines, led by the nucleat-powere d catier Enterprlisp, anchored at Karachi and nearly 6,000 American navy meo landedl in Pakistan for a few days of rest
and recreation.

Warsbips of great naval po*ers do not call at foreign ports merely for the sport of friendship. The actual significance of these calls is military and strategic. As Admiral Robert Hanks, a former chief of strategic operations of tbe US Navy, wrote in the winter 1978 issue of Strategic Reriew (Wasbington DC), "Among the varied facets of American pow{r which can be applied to aid "'

political stability (in the Indiad Ocean region)-diplomatic and economic, for example-one of the most useful is the naval prcsence. The periodic visit of a walship with the Stars and Stripes fluttering from its stern has communicated in the past and will signal in the future interest in, and support of, friendly nations. That presence, suitably advertised, also serves to transmit a cautionary message to others who might be contemplating adventurism." The presence of nearly halfia-dozen US warships led by tbe
Enterprise in Pakistani waters dt Karachi was, then, an unmistakable manifestatlon of the place Pakistan occupied in American
strategic designs for military opebations in the Pcrsian Gulf region. The warships would not have called Karachi unless the Americans regarded the situation in the Gulf potentially gravc. From 1980 onwards, numerous American ddcunents have ascribed to Pakistan a major but unspecified role i$ a war in the Gulf. Pakistan has refused to give military bases to ltle US' However, the Pakistan's military may have made some sdcret commitment to place facilities at US disposal in the event of Ut military intervention in the Gulf region. If any such interventio{ does take place, it will not bc to check any Soviot "adventurism", but the spread of lranian military power beyond the frontiers of Ir{n. However, US intervention will almost certainlY draw an appr$priate Soviet response. Iran may turn to Moscow for military sJupport which most probably the Kremlin will extend promptly Fnd affectively. If Iran is stubborn




eaougb to staud on its own feet, the Soviets will almost certaioly intervene in southern Iran and occupy the portions of the country that are adjacent to this border, if the US intervenes in lran, The US presence at Karachi port led to protests from Pakistan's political parties and sections of the press. It triggered a major

controverqy, particularly because it happened at a crucial stage in the negotiations being conducted by the UN mediator, Deigo Cordovez, for a comprehensive political settlement of the Afghan

Neither the military regimc in Pakistan nor the US government to be ready to sign an accord with Moscow, by and large on Moscow's tcrms on Afgbanistan as long as the shadows of a wider war on the Gulf region lengthen. At the same time, it would be foolhardy for Pakistan to get involved in a wider Gulf war on

behalf of the Saudis without repairing its relations with Afghanistan and the USSR, assuming that the rulers of Pakistan do determine that their interest lies with the Saudis and the US ratber than with fran. Pakistan's dilemmas arc therefore complex and are getting sharper as the Iran-Iraq war continues, escalating atrd waning by turn, but sbowing no sign of coming to an end, A wider Gulf war will have an unpredictable impact on the Middle East, Europe, Iapan, indeed the whole world, and may lead to the first direct collision of the superpowers since the World War II. Its lmpact on South Asia will also be traumatic. The worst sufercr will bc Pakistan. A wider war will push up the price of petroleum as oil installations will be bit and oil flows seriously impeded. Pakistan will be denied tbe monetary help it has been receiving from Saudi Arabia, Kuwait and other Arab countries. There will be mad rush homeword of the three million Pakistanis working in the Arab countries, thereby deprivitg Pakistan of the $3 billion repatriated annually by this huge work force' Pakistan

relations with Iran will turn belligerent and it may invite heavy penalities from the Soviet Union too. Its cleaved and fragmented internal policy will come uncler unprecedented pressure. There will bo anti-American uprisings more serious than the l98l burning of the

US embassy in Islamabad. To be sure, the other Soutl Asian countries, including India, will also be badly atrected, A crisis of oil supplies will hit all these countries. A Pakistan caught in the cross-ffre of a war in which not only the Arabs are pitted against lran but the US is pitted against

34 Tsn Pensrew Gutr eNo
the USSR in a local conflict in advantage to India, It will and dismantle tbe prevailing will not inflict physical damage on be significant, and a radical the Gulf area will have a serious the final outcome of a war of be detrimental to Indian security able finally to ovetpower Iraq nation in the Gulf and the middle impact on India and on the In reversely, what would be the there isa cotrsequent expansioo of If tbe war spreads.to a third Gulf intervention, and Pakistan is ob use, how would that affect India's It is in the interest of both India war does not turn into a Gulf war ably Soviet, intcrvontion, But it is either country or both to war. Numerous Indian, Pakistani, matic initiatives to persuade the begin to negotiate a comprehensi have proved to be barren. The succeed in the future where they However, India and Pakistan ac damage to both and to South interest that Pakistan does not or in a wider war in the Persi involved if its facilities are not soldiers stationed in Saudi And Pakistan cad refuse to place even if the US undertakes a if its relations with India are no threatened from India and India vital natioaal interest that the war not suck Pakistan in, the policy be carcfully deflned and executed This is not a situation in which in the juice of its own blunders.

Asn third world, cannot be of any the whole of South Asia of power. A wider Gulf war dia, but economic damage will in the strategic realignmett in
on Indian security, Even betwcen Iran and Iraq may political interests. If Iran is emerge as the most powerful

wbat would be the event's

's security environment? And if Iran is finally defeated and
in the Gulf region? and leads to US military untry to place facilities for American environment? Pakistan that the lran-Iraq US, and, then inevitond the diplomatic means of the two belligerents to halt the
S influence

Islamic and nonaligned diplolligerents to stop fighting and good-neighbourly relationship countries are not likely to failed so far. together, can limit the war's It is in Pakistan's and India's involved in the lran-Iraq war Gulf. Pakistan will not get by the US and if the Pakistani are not drawn into the war. at America's disposal intervention in the Gulf onlv if Pakistan docs not feel Pakistan. If it is in India's the Persian Gulf region does ns of this premise have to a high sense of purpose. can allow Pakistan to stcw tever the scenario of Pakistan's

Bnes$Ir SsN GUPrA


involvement in a Gulf war, India is deeply affected' ff the United States drags Pakistan into a Gulf war, and the Soviet Union intervenes on behalf of Iran, India's relations with the US will revert to the old pattern of hostility. Little will survive of SAARC' If Iran can defeat lraq, Pakistan may be swept by a deeply anti-US Islamic fundamentalism. The waves of that fundamentalism will not stop at Pakistan's borders with India. If Iran loses tbe war to the

United States, despite Soviet support, American power will be supreme in the Persian Gulf and the Middle East, and that will not te in the security and national interests of the Indian State' If Iran wins with Soviet support, most of the region geopolitically termed the Northern Tier will fall under Soviet influence. This will circum-' scribe the role India wishes to play in South Asia. India and Pakistan must therefore talk to each other on the pro' bable scenarios of the war in the Gulf in the coming months' As the probable scenarios are fabricated, the two countries will realize how their interests are linked together in favour of keeping South Asia meticulously out of the Gulf war. This is an issue that compels tbe attention of strategic thinkers and analysts in both count' ries. If thcy do not get alert to the issue, the two governmeots will not talk. Goveroments are notoriously myopic when it comes to taking a longer-than-now view of military conflicts. Besides, many Indians would derive short-sighted vicarious pleasurd from a mis' fortune overtaking Pakistan because of its military dependencies on
the United States.

3. The Gulf Region
Prospects of

South Asia: Cooperation

region was of considerable stratcgic importanc€ to the as a gateway of their Indian Empire. Hencc thdy extended I over most of this area (with nominal autotromy for tbe local rulers) to prevent any hostile Europoan power from its presence thcre, and thereby
pose a threat to

Durirg the colonlal period, the


'jewel in the

Gulf region became important


depended on its extensive oil Asian countries t$e region has geographical proxlmity. For the cient in oil, its inportance todate as it does, its southern underbelly.r With the virtual replacement of by oil as a primary source of energy for indugtrial and other the stakes of oil-consuming countries in the Gulf region are, re, self-evideat. Oil's relative cbeapness, plentiful supply,a enience in handling, transportation and storage made it an energy source for industrial expansion, especially in the West Japan, in the post-World War II period. Oil prices remained birly stable during the decades of flfties and sixties. For it was still priced under g2 a barrel during this period,s And was despite the formation of the Organization of, the Petroleum Countries (OPEC) in

'. After World War II, the matry more countries which For India and other South importance because of viet Union, which is self-sufrmore geostrategio oonstituting

The posted price of oil (an oil majors-conglomerates of panies controlling bulk of the oil fixed the price ofoil and determined to the produciog countries) was the oil producing oountries of a

formula under which the and American oil comand its marketing share of oil income flowins ridiculously low thus depriting share of income from a vital




resource. This situation was allowed to prevail even when the of Japan and Western Europe on the Gulf oil was overwhelming. For instance, by mid-seventies, Japan and Wertern Europe depended on Gulf oil for about 80 per cent and 65 per cent of their total oil needs respectively; America's share of Gulf oil imports was relatively low at around 15 per cent ofits total oil needs.a (According to Walter J. Levy, US dependence on Gulf oil amounted to 30 per cent of its total oil imports,)E The phenomenon of low oil prices could not obviously last long. There were several factors militating against it. The post-war process of decolooization had set forth a new wave of nationalism prompting old colonies and semi'colonies, in due course, to assert sovereign control over their national resources. In the case of Arab countries, this trend was further reinforced because of the dispossession of Arab Palestinians from their home-land on the creation of the sovereign Jewish state of Israel. The resultant rise of panArabism made it difficult even for conservative Gulf regimes (otherwise well-disposed to the West) to opt out of the Arab assertion of their common identity and destiny. An issue on which all Arab countries tend to make a common cause (notwithstanding their varied tactical rcsponsos), is the question of seeking a homeland for the dispossessed Palestinians.E Their oil policies have, therefore, been considerably influenced by thie factor, as evidenced by the short-lived (but ineffectual) oil embargo of the sixties (during the six-day Arab-Israeli war of 1967), and relatively more effectivc exercise ofthe oil weapon by them during a similar 1973 conflict. But the assertion of natiooal sovereignty and use of pan-Arabism could not have produced results in the absence of favourable economic factors. While, during the fifties and sixties, oil supply had exceeded demand.T tbe situation tended to reverse thereafter creating an upward pressure on oil prices. As a result, in t973 and 1974, the OPEC cartel increased the oil prices four-fold. By 1978, supply and demand for OPEC oil tended to balance at a price level three times that of 1972 in real terms.s Apparcntly this was not considered enough and there was a further hike of OPEC oil prices ia 19798O from $13 to $32-$40 a barrel.e In the process, they disregarded the delicate demaad-supply equilibrium already established in 1978. It was, of course, believed that the disruption of Iranian oil production and consequent reduction in oil exports from that country

-38 Tnn'PssIlu Gur-r

once again create a tigbt
advantage of OPEC Producers.

(following the revolution in lran) oil supply situation oPerating to This was not to be so; and the

of energY to reduce dePendence oil production in non-OPEC on imported oil suPPlies; Sea); and de-regulation meacountries (Mexico, EgYPt' and to increase its oil Production' sures adopted bY the United recession in the industrialized West and the Above all, economic oil prices) considerablY damP' United States (partly from creating an oil glut. The spot ened the world oil demand $20 a barrel with forecasts of a 'market oil prices are now further decline.ro created for the OPEC countries The oil bonadza of the 1 their relatively large oil exports (especiatly its Gulf members, but smaller. poPulations) such wealth which was undreamt of and 1983, Arab oil-exPorttng before. For instance, between I ut $134?.31 billion; tbe sbare countries earned from a total of was $378.06 billion and $tl6'2 of Saudi Arabia and Kuwait of looking at this is that the oil billion respectivoly.ll Another increased the oil income of these price hikes of 1973 atd 1974 n to $ll0 billion in 1974'12 countries from a sheer $15.2 occurred over a relativelY accrual of such large Since the lacking in almost all other reperiod to a group of co short a sources, its dispersal was bound to be haPhazard. PredictablY' and West EuroPean banks' large proportion of it went to By end-1983, for instance, the G t oil-producing countries had de' banks.1a They also spent liberally posited 9350 billion in the W machines; most of it unwar' on expanding their respective manpower (small PoPulations ranted when viewed in terms of tasks. To take one examPle; lacking in necessary skills) and force of only 50,000 men, spent Saudi Arabia, with its total def alone between 1980 and 82.14 To $62.5 billion on arms pr it has employed thousands of adtechnically man its defence lb Saudi Arabia's militarY visers, mainly from the United ion in 1976 to $22 billion tn expenditure rose from over $9 The same is true for other Gulf 198l-a level mdintained since
development of alternative

PEC oil Price hikes of 1979 and uctive. The new enhanced Price 1980, therefore, Proved cou being: level could not be maintained fqr varietY of reasons. These consuming countries; major oil conservation measures adoPted



countries where defence budgets and arms procurements have been spectacularly stepped up following the oil bonanza of the seventies: A large sum of petrodollars was spent on the import of luxury goods, mostly from the industrial West (which includes the United States). And for these purchases, Gulf oil producers paid astronomically inflated prices. According to Rehman Sobhan, for Arab oil producers, the import prices of these goods increased by nearly 350 per cent; for Saudi Arabia the prices charged were more than 500 per cent between l9?3 and 1977' Similarly, the transfer of petrodollars to the West under the curious heading "invisibles", as listed in the Bank of England statement, was said to be as high as $82

billion in


million b/cd in 1986. And this may increase by another I million b/cd ifall the projects already announced are implemented.rs ln the case of petrochemicals, the regional lArab Gulf) production capacity in ethelyne, for instance, is expected to increase from 410,000 (in 1982) to about 3. 30 million tons and that of methanol to | .52 million tons by late 1990.1e Of late, steel-making has also received attention, as important re' seryes of iron ore exist in northern Iraq and Saudi Arabia. This has become possible with the DR process for steel-making lwhere gas can be used as a reducing agent to remove oxygen to produce sponge iron, which then is melted and refined to make steel). Almost all Arab culf countries have either established steel mills or are determining its feasibility. However, so far, Gulf steel industry meets only a very.small percentage of the total regional steel demand (about l0 per cent in 1982). But if all the projects under implementation or at planning stage do get started, it will meet a major part of the
regional steel requirements'

This is not to suggest that the Gulf oil producers have not made any productive use oftheir oil revenues. They have indeed embarked on an ambitious programme of industrial development.l? Since they have plentiful oil and gas supplies at low costs, this development effort has been largely geared to energy-intensive industries, The petroleum refning and petrochemicals are its most prominent examples. The export capacity ofthe first is erpected to increase from about i million barrels per calendar day (b/cd) in 1980 to more than 2

Aluminium is another industry which has interested the Gulf countries. According to Dabdab and Mohyuddin, "The fortuitous combinaiton of investment capital, low environmental sensitivity,


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

ASIA an ideal platform for prirnary

and low cost ene4gy has made

aluminium smclters..."m

In I

the Gulf region had ao installed

capacity of 305,000 tons of the production output consumed ed. By 1995, tho regional equal the present supply.
Cement indusfiy looks like supply of raw materials, low market; althougb the last factor extent due to the slump in rcgional production capacity of million tons. With the slowdown might emerge as a net exporter of Apart from oil and gas-based ive projects, there is not much of and ship repair yards have, of 8uper-phosphate fertilizer project on domestic availability of metal complex has a projected

um with about 40 per cent of onally and the balance exportfor aluminium is estimated to

a good future with Plentiful encrgy and a large regional Iately bcen negatived to some on industry. The installed in 1983, was over 23.6 construction activity, the Gulf

ustries aod other energy-intensdustrial activity. The dry docks come up; and so too has the and glass factory in Iraq based and sand. Oman's copper pacity of 20,000 tons. Besides, there is small and medium-scale ufacturing activ ity, covering a range of products, under private terprise, but it is still limited in scope. The manufacturing seotor the Gulf economy has come to constitute, on average, 12.5 per t of the regional non-oil GDP is still quitc small,tl which The general argument in favour iudustrial devclopment in the Gulf oil states is that since oil a non-renewable resource, they must create alternative sources of wealth well beforc the oil wealth runs out. This rationale rather weak, considering that tbe major thrust of their development strategy is itself geared to developing an industrial tied to and dependent on the same non-reuewable resource material, as in th€ casc of oil refineries and petrochemioals. A to Louis Turncr and James Bedore, "Of the six most t variables that will affect the ultimate proftability of such petrochemical and reffning projects, four are curpently working the Middle East states.",s They have listed them in the fo descending order of importance:

1. Considerable over capacity petrochemical aod refining i


large parts

of the


S.P. SsrH 4l

2. High construction costs of these projects




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

4. High tran$portation costs because of thc remoteness of the regioa from industrial markets. However, the Gulf oil countries do bave the advantage of plentiful supply of oil and gas at low costs, and relative immunity to environmental considerations because of the thinly populated areas. But obstaclcs seem more powerful. For the foreseeable future, the most important obstacle appears to be the continuing overcapacity in refining and petrochemical plants in the EEC countries, which are viewed by Gulf statos as an important market outlet for tlese products. According to the South magazine, Saudi Arabia's US $10 billion petrochemicals programme, has raised the spectre of protectionist action by rival producers in tbe industrial world.e3 The Saudis are threatening retaliatory action by way of imposing heavy duty on their imports from the industrial world. They could even undercut the established petrochemical producers in the West if they were to dump their products in the expanding Asian rnarkets. According to Ibrahim Bin Salamab, Vice-Chairman of thc SABIC (Saudi Basic Industries Oorporation), "It is no secret that the dcvcloping countrics of Asia are experiencing rapid growtl and consequently have an increasing appetite for commodity petrochemical produots-the dcmand for petrochemicals in developing countries will increase at double the rate of developed countries,"'r Salamah insists that Saudi Arabia is keer not to disrupt the world
market (by starting a price war), since it too would suffer from a crash in prices. Unless the Gulf countries anrd capitalist Wcst can work out some mutually agreed arrangements regarding the share of the Gulf in the petrochemical markets leasier said than done, because any sizeable cut in the industrial world's petrochemicals
industry, with a view to accommodate the Gulf producers, would have serious implications for employment in these countries), a price war seems unavoidable. As for the devcloping countries, where the Saudis visualize an expanding market, its potential will remain limited because of foreign exchange constraints' Oil refineries and petrochemicals apart, even industrialization in other areas is hampered due to shortago of skilled looal manpower, higb ffxed cost$ as proportion of total costs, and lack of economies



Trtn PBRSIAN Gur,r

lNp Sovrs Aste

scale. It has also suffered ljntil verf recently) from a lack of coordination anong Gulf states fo evolve a coherent regional industrial development policy. Th$ result has been a wasteful dupli cation of industrial activity. Thf aluminium smelters are a case in point. The smelter in Bahrain, for instance, 'is admittedly producing almost at its rated capadty (but), this is only by cutting its price to such an extent that only variable costs are covered"' It is further argued that "if this polic! continued, the fixed costs of the Dubai smeltcr certainly will havd less chance of being recovered."26 Such wastefulness in relation to large cement plants is also reported. They have como up in almost dvery Gulf oil state-the problem having been further exacerbate{ by the current recession in the building industry. Nasif J. DaUdab and Badr I. Mohyuddin have this to say: The multiplication of plants in the UAE alone is startling, whic.h to dat€ account for 4. 5 millioth tons of installed capacity, with

in the coutcxt of (i) the UAE'd population, which stands at I .2 million, of which 85 per cenft are expatriates; (ii) the regional installed capacity (21.6 uilliQn tons), and capacity under con' struction (6 million tons). Tbi$ amply reflects the diseconomies inherent in these investment d$cisions.Eo
Efforts are under way to coodlinate the industrial development through the Gulf Cooperation policy of the Arab Gulf enlargement of the markets Council (GCC). Nonethelesr, through extra-regional economies of scale with would


million tons under construption. This fuure has to be


be necessary to combine

thcir national economies, Apart from seeking to in countries (as borne criut by available facts and ffgures)28 tbe GCC have preferre<l to put the bulk of their oil revenues in Wcstern
onally, they havc spent (and large sums oD arms procurely resources have also been used up in imports of luxury goods from the West at bighly infiated prices. In other words, bulk of t$e oil revenues earned by the Gulf in one wav or the other to the countries were simply transfi industrialized Wcst. As Walter J,l Levy has pointed out, "lhe great flowing to the OPEC bulk of the new oil money, or
banks dnd financial institutions. continue to do so) disproporti ment from the West. Large

S.P. Ssrs 43
countries has been soaked up, often through prodigious spending by those countries in the West." He adds, "As a result the shock to the industrialized economies has been cushioned, and the flow of petrodollars directly into the financial system-while itself enormously increased and the source of continuing major problems-

has not turned out

to be the nightmare

many had feared in


The developing countries have not been that fortunate. Indced, they have suffered disastrously from periodic oil price hikes causing enormous pressure on their balance of paynents' Their steadfast solidarity with OPEC countries in the fight to get a 'fair' return on their oil wealtb, failed to earn tbem the gratitude of oil rich countries who refused to entertain pleas of difrercntial (cheaper) oil prices for poorer third world countries. The developing countries has also hoped tlat their solidarity with OPEC nations would enable them (with OPEO's new economic leverage) to secure reasonable and stable prices for their own commodity exports. But this was not to be so because the OPEC (with Gulf oil producers being its major constitutent) opted in favour of economic collaboration with the industrialized West. Not only did the third world countries fail to obtain higher prices for their own commodity exports (tlere was indeed a further decline in these prices due to economic recession in the West whicb, in turn, was partly the result of oil price hikes), they also had to bear the brunt of recurrent oil 'shocks' with resultant strain on their foreign exchange resources. India's case is illustrative in this regard. Even though India's crude imports remained more or less static around 15-17 million tons, its import bill increased from $ 146 million in t97U7 | to $2 . 3 billion in 1978-79; it further rose to $6.3 billion in 198G-81 following the second phase of oil price hikes in 1979-80. As a result, India's current account surplus of some $l billion turned into a large deffcit in 1980 of $3 . 5 billion-an adverse swing of $4. 5 billion on an export base of some $9 billion.s0 Consequently, external indebtedness of the third world countries increased markedly.sl According to Levy, "Between the end of 1973 and carly 1978, the total foreign debt of non-OPEC Third World counfties partly as a result of the high cost of their oil imports, has increased from an estimated $95 billion-of which $30 billiou owed to commercial banks*to $210 billion, of which $90 billion was obtained from private financial institutions."sr Still another source


Tsn EF"trAN Gur,r nqp


has put the total lforeign) deb billion in 1983; rising from just
payments on external debt rose

of developing countries

at $620

gering sum

of $63.7 billion


ducers did provide economic aid bctween 1974 atd 1982 (most of

Arab and other Muslim pittancc oompared to tbeir total intcrest payment$ in 1984, This apart, the development tries has not even served their
Sayigh has enunciated eight

billion ia 1970.88 Their interest m $7 billion in 1973 to a stag1984.34 Admittedly, Arab oil pro$58 billion to these countrics of course, going to non-OPEC es-in that btder), but tbis was a and was even less than their

of the Gulf oil-rich couninterests. Professor Yusif A.
asscss this:86

Rise in ths level of eco seotoral pattern where manuf, position and is associated with discipline, ratiouality, inventive


performancc within



industry occupies a prominent tle acquisition of the values of

and scientiffc causality-it
lities and efforts, not the activity

muS be thc result of society's

of enclave sectofs.


goods and servioes to satisfy the

3, 4. Evening out the pattern of e distribution. 5 . Narrowing of tle 'devel Ler?t gap' in the region. 6. Evolving the capability of the social, oultural and political
environment to providc the skills, attitudes 4nd institutions my with ideas, knowledge and

expanded volume and improved quality neods of the population. Wider opportunities for ve employment.


of an


for the efficicnt operation

of the ecooomy.

7. Achievement of a Wide the process of development. I . Achieving the widest self-reliance in development, This is, of course, a tall order. has been very litde economic shich could even approximate to Sayigh. According of John To
The economie$ of each

of popular participation


possible of collective (regional)

But the fact remains that there elopment in the Gulf countries
criteria laid down by Professor

dominated by the oil sector the characteristics of an encla certainly bas a grcatly

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

volune of top quality


8 P. Ssrn 45
consumption, but goods which are almost exclucively imported-foreigners make up more than half the workforce in the six countries, There are great extremes in incomes-and large divergence in the pattern of income distribution between social groups, localities and countries.s6 avaitable Townsend, however, does not share Sayigh's pcssimism even when suggesting that tbe Gulf development strategy has failed to meet almost any of his economic determinants. He opines: ..The uniqueness of the environment and the problem precludes the automatic translation of devclopment thcories which may have applicability in other environments and other socioties."s? But he fails to explain how Gulf states, whose economies are now an integral part of the international capitalist market system, can escape beingjudged by accepted ecotromic criteria applicable to all such societies. Exclusivity is no longer the privilege of the Gulf countries (however unique and peculiar their own environment), How can ono justify the misuse of oil income when its implications for Gulf societies are so grave! To quote Sayigh again: .'The record of the seventies reveals over-use and misuse of financial resources, wbether for cotrsumptiotr or investment. The high and rising consumerism has serious implications, in that it uses up a proportionately large part of GDP; it leads to the leakage of vast inancial resources iito imports, thus failing to encourage the diversiffcatiol and expadsion of national production; it creates patterns of behaviour which it will be very difficult to change...."88 If savings are not matcbed by an increase in real investmeut (as has generally been the case), this inevitably leads to inflation. For instance, as Hazem Beblawi has pointed out. .,It isnotthe oil price inctease per se that is responsible for inflation; rather it is a parti. cular mode of investment (of puttitrg surplus oil money in OECD banks) tbat gives rise to the price increase,"t0 (Indeed, on,ly 2.4 per cert of the increase in prices io the United States in 1974 could be explaincd by oil price incrcases; and the samc is rue of other


OECD countries.)4o Beblawi elaborates


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


Gur,r eNP


simply because financial inability of OECD countries would trigger inflation...."41
He then goes on to make a countries. Beblawi argues:

happen to be available' The increase their real investment





He adds:
There (then) exists an lor oil surplus countries to countries rather than to place c:Ne, as well as a Political one'

is true that, on the face offer Gulf oil surplus that developing countries are hind the misleading facade ings can hardly increase real Inflation would nnobtrusiv ely ./uzds (emphasls added)... M states' investment in develo
defeating. Developing co oil states a chance to transf; and hence protect them


their funds in the developing in the developed counfties. it, developed countries seem to a wide spectrum of advantages to match ... However, be'
hard facts that OPEC sav' in developed countries' pefiistently erode the sane oil by self-interest, the Gulf oil


countries turns out to be self... can oo the contrary offer Gulf their savings into real investment erosion by inflation.{8
are facing the same old Problem,

Tbe Gulf oil surplus identified by Adam Smith more equating money with wealth. they do with their surPlus f couotries will anyway be left

than two hundred years ago, of is not all. "Regardless of what

" says Beblawi, "OPEC surplus developing countries as tle ulti-


S.P. SE'rn 47

mate debtors of their surplus"g (as already evidenced by their'mounting external debt). In other words, .'The fate of one depends then on the prosperity of the other." Beblawi seeks to put his case for Gulf oil surplus funds' investment in developing countries in the wider context of a new international order. He says :

The new international economic ordor is trot otly the fight of non-oil developing countries; it is also the condition for the consolidation of OPEC gains in oil prices.aE
Among developing countries, Soutb Asian region (with India as its leading component) offers many attractions for investment of surplus Gulf oil money. Before going into this question at some Iength, let us first examine what presently is the most useful economic interaction between the Gulf states and important countries in South Asia: emigration of labour from this region into the Gulf states. In this connection, Shahid Javed Burki of the World Bank has made a study of its implications for labour exporting countries, with special reference to Pakistan,{6 An obvious benefft of labour export is the flow of remittances to home countries which partially relieve the strain on foreign exchange resourc€s from the oil price hikes of 1973-74 and 1979-80. For instance, between 1973 and 1982, the global current account deficit of developing countries rose from $l I billion to g118 billion, while their medium and long term outstanding debt increased from $109 bitlion to $518 billion,{? Even though this sharp increase is largely attributable to the oil ,shocks', but the situation of developing countries would have been even more grim

in the absence of remittances from expatriate workers to their home

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





manage." The c.ontribution of in the years 1978-82 was 3.4Per was 1,4 per cent.as India has not been so fi expatriate lndia1labour iu the than those from Pakistan. For

to Patistan's GDP growth while its share for Bangladesh ;
because the absolute number of rich Arab World bave been fewer in 1975, the number of Indian

ies (Algeria, Iraq. LibYa and the migrant workers in Arab GCC countries) was about 142,( 0 comParedto 205,7W Pakistanis; and the projected estimates for I 5 (assuming low economic growth respectivelY.rs Again becausc of rates) were 291,200 ar'd 446, contribution of workcrs' remitIndia's relatively large GDP, y be less spectaculaf' It was' tances of its growth would to partiallY cushioa the losc nonetheless, quite welcome as it in foreign excbatrge fron from oil price hikes. The Iodian workers in the Arab world as reported itr the Hindustan Times at Rs.2,5@ erores annuallY. (12 February 1986), are countri* have helPed increase Expatriate work-force in sarniogs in Yet alother waY: their home countries foreigo export of goods and commoditics by crcating new markets for In the case of Pakistan' for used largely or solely by thesc w in total eroorts has increased instance, its shatc of the Middle 2 per cent in 1970 to 9 per cent it 1982. Iodia's exPorts from only (though less spectaculady); rising have also resistered an per cent itr 1960 to E cent in 1982.60 Othet beneficial from 2 been: at increase in the wages of effects of labour migmtion alleviation of povetty among workers who remained behind, The 1984 Warld DeveloPmmt the families of cxpatriate that in some countries emigta' Report of the World Bank on wages of the unskilled workerg tion bas had a substantial , cites the case of Pakistan: at home.6r Burki, in this conn ...real wages of uuskilled labour in the largcst cities stagBant for several Years, 15 per cent per annum since 1972. during this period increased bY it is clear that such a sharP in-

of Fakistan, after having bave increascd at the rate
Since per capita national

in wages of poor tion in society. Thic very urskilled workers occurred

orly two per ccnt


improved thcir relative Portincrease in real wages of the time of largc scale migration

to the Middlc Eaet...,

S.p. SETrItg He concludes: ..In other words, migration benefitted not only thosc who were directly involved in it but also thosc workers who remained behind and were able to benefit from the manpower
shortages that were thus created."62 Burki believes,."Perhaps, the most signiffcant impact of migratlon

to the Middle East has been on poverty in the labour exporting countries." In reference to Pakistan, he writes, ..It would appear that international migration has had a very significant impact on the poor in Pakistan. It has played a decisive role in removing the
worst manifestation of absolute poverty from many poor regions in Pakistan."68 In a limited sense, the same could be said of the Kerala region of India, which has sent a large number of s'orkers

to the Gulf states. But large scale emigration from South Asian countries has not been without some costs;!a l. Loss of output that may result from the withdrawal of labour from tbe local market. Forlabour suq)lus countrics, like India and Pakistan, this may seem odd, but sectoral and regional imbalances can ocour when the withdrawal of labour is of a signifcant proportion. To take the case of Pakistan: although emigration accounts for about 5 per cent of the labour force, for certain types of unskilled labour and speciffcgroups from certain regions (male workers of the ages between 20 and 25 from the nodhern districts of the Pakistani Punjab), the proportion may have been as high as 33 to
50 per cent.

When semi-skilled and skilled workers are involved, the costs will mean additional expenditure on training to replenish the skills lost through migration. Even this may not fully compensate the loss, since workers learn a great deal through experience on the job. And such cost is difficult to even compute. 3. Large scale migration has usually caused inflation in the labour exporting countries. Several studies, made recently, have revealed that migrants' remittances are mainly directed towards consumption of goods and commodities; and very little of their incomo is actually used for investment purposes to enlarge the productive base of their home countries.ir As a result, "these remittances contributed signi6cantly to inflation in the labour exporting
are even higher. This


countries, which often lacked both the production capacity and imports infrastructure to meet the demand created by the remittance




GuLr ero


tion that are considered

of consumpdevelopment. The demonstration effect of this type oI1 conspicudus consumption (VCRs' television sets, cameras, etc.) niay have a profound uufavourable impact on domestic savings and &lso on the pattern of investment. 5. There are, ofcourse, the sopial costs, such as increased corrup 4.
Larye scale remittances maf encourage patterns


tion from entry/exist permit rhckets, (and customs clearance); difficulties associated with re-edtering the home couotry's labour market on return; psychological cost of separation from the family
and so forth. It would, however, seem that, on balance' labour migration to Gulf states has benefitted both qrorkers (with remuneration exceed' ing home country standards by as much as a factor of ten)6? and their home countries. But still is need to systematize and regulate the flow of migrant with a view to minimize their For this purpose, both exploitation by unscrupulous co Gulf states and labour exportigg countries must come together to formulate mutually acceptable guidelines and procedures, India

and Qatar havc recently done this. They have signed a provement in the working condi. labour agreement envisaging tions of some 50,000 Indian in Qatar and protection of their contractual wages and ri!hts.68 The labour ministers ofthe two countries have also decided to set up a six-member committee to oversee its implementation. lllhe committee, with three members drawn from each country, would meet periodically for this pu{pose. According to the Indian labour pinister, who was tisiting Qatar, New Delhi is having discussion$ with some other labour exporting Arab countries for similar agreepents with them to regulate and protect the rights of Indian worl(ers. Serageldin and his co-authors have recommended an agenda for action on labour migration for Gulf countries. They bave proposed :5e

Fftst, regional cooperation ln manpower planning. Whether it be done ultimatgly by a supralnational agency or some other mechanism, a realistic ffrst qtep would be for the countries of the region to share informatiot on prospective manpower requirements and supplies.

Second, acquisition of citipenship, The oil rich statos have not ofered ertensive opportu4ities to expatriate labour for grant

S.P. SE.ftI


of citizenship. Indian workers are a case in point. Apart from Iraq where nearly 50 per cent of Indian settlers (10,000 out of 20,25d Indians) havc been naturalized, thc record of other Arab count_ ries is abysmal.60 Saudi Arabia, for instance, has about 197,000 Indians but only 2,100 have been granted citizenship. The same is true of other oil rich Arab states, where non-Arab expatriate workers in particular have very little chance of acquiring citizenship, .,Given the lack of opportunity for naturalization,,' Serageldin et al. opine,.,one wonders if the migrants will remain eatisfied with merely enjoying a higher standard of living, or if. tbey will seek greater political and matcrial participation." ?hey stress, .'The case of migrant children, who, though born and raised in the oil rich states, arc denied full integration in these countries, poses an even more serious problem.,,61 Third, terms and conditions of employment Unionization of labour is not allowed in most Gulf states, But as devclopment moves from the construction to the project operation phase, the average length of the employer-employee relationship is likely to increase and bring about someform of collective bargaining. The oil-rich Gulf states may, therefore, be well-advised to anticipate such a course and create the necessary machinery for a constructive dialogue with organized labour.

It may well be argued that in view of the economic slowdown in Gulf oil countries (following a dramatic fall in their oil revenues), and the coDsequent retrenchment of expatriate workers, labour migration, in any case, could become a marginal issue. Countries like Saudi Arabia and Kuwait are seeking to drastioally cut foreign Iabour (Kuwait by as much as half by 1990, and Saudi Arabia intends to retrench 650,000 foreign workers by the end of tbis decade).oz In Saudi Arabia, according to one estimate, 50,000 foreigners were said to be leaving every month out of an expatriate population numbering between 2 to 4 million.6s At its peak, in early eighties, expatriates comprised more than one half of the employed workforce in Saudi Arabia, and about one-third of its total population.oa In Kuwait, the expatriate population outgrew the natives, with Kuwaitis reduced to only 4l per cent.66 In UAE, the foreign component became as high as nearly three-quarters of the overall population.os The current trend of retrenchment of foreign workers is not en-

52 Trfi PBRSIAN Gu[r lr'ro


tirely unexpected. This was bound to occur eveo without the fall in oil revenues as trlore and more cdnstruction projects neared their completion. The only difference lbeing that this would then have happened in a pihased manner' lvithout the need to prolong the schedules of projects still under c@struction, or shelving others that were planned. With the sort of dependence (becausc of small native populations and shortage of local Nkills) oil rich Gulf countries have on expahiate labour, there is no *ay they can do without them, or by employing them in very small ltumbers. As development in Gulf countries moves from the construbtion to the project operation and maintenance phase, there will be a Sirowing need for skilled manpower. Countries like India, Pakistan an{ Bangladesh, with their large pool of qualified,professionals (and geQgraphical proximity) could easily meet these requirements and ch4aplY too, compared to Western Europe and the United States. Therefore, what is likely to happen is that the character of expatriate workforce will change from the predominantly unskilled and semi-skilled to skilled professionals; tlough the demand for the formef category will not disappear. Anotbef factor militating agai[rst a major reduction in foreign workforcc is the likely opposition to this of the native entrepreexpa ull sBres. ncuriat and business communitY df the Gulf states. With the expatncurial half and three' riate population in these countrie$ ranging between fourths of their total population, any signiffcant reduction in their numbers will further contract an already small market, thus seriously damaging their local manufacturidg and commerce. The local entrepreneurial and commercial interests, that have come to wield considerable influence in Gulf states bn powers that be, will not letthis happen easily. Therefore, barri6g some economic disaster, the prospects of labour emigration to the Gulf region do not appear that bleak as indicated by reports in nbwspapers of tbe exodus of foreign workers to their home countries. The situation, most likely, will stabilize by 1990 at a relatively lower number with the balance tilting in favour of tbe skillecl manpowef. Finally, despite tbe fall in oil rovenues, the income of Gulf states from this source is still considerable. Indeed, with appropriate reductions in their defence budgets gnd arms purchases, and adoption of other measures of economic rationality (such as, cutting on imports of luxury goods, checking the diversion of state funds for private uses of the royal households, adoption of sensible social welfare and medical schemeg in place df generous bandouts, etc), their

S.p. SsrH


current account deffcits could easily be bridged or considerably reduced, Even without this, the fall in oil revenues is made good, in varylng degrees, by returns on their investments. For instance, in the case of Kuwait, its investmeut income on foreign assets was estimated to reach between $8 billion and $9 billion in 1983 to equal


even exceed

its oil


Admittedly, other oil states have not bcen as judicious in their investments as Kuwait, but still they do receive considerable in. comes from this source. Coupled with so much scope for pruning their extravagant budgets, development prospects of Gulf countries remain largely undirninished. That being the case, the interaction between the oil rich Gulf states and major South Asian countries in the area of labour migration will continue to be quite extensivo. The recent labour agreement between India and Qatar, and similar Indian approaches to other Arab countries (importing Indian labour), would seem to suggest that New Delhi regards this as a continuing phenomenon for the foreseeable future. Manpower export, however, lucrative in terms of foreign exchange earnings, is not an enduring basis to build up a relationship. What
we need is a wide-range of economic relations to create interdepead-

ence between the oil rich Gulf states and countries in South Asia. An immediate area of economic concern to South Asian countries is their considerable dependence on Gulf oil, and the resultant strain on scarce foreign exchange resources- In India, for example, the gap between indigenous production and the total demand for crude oil is rising, thus necessitating more oil imports. This gap is ex' pected to widen futher during the Seventh PIan period, because of rising demand at the rate of about 8 per cent annua11y.68 The Sevcnth Plan envisages an increase in domestic production from the current level of 30 million tonnes to around 35 million tonnes a year by 1989-90. The total demand for petroleum, even after making due allowance for various measures of oil conservation is estimated at 52 to 53 million tonnes, some l0 million tonnes more than the current level of abaat 42-43 million tonnes. This, obviously, will further strain our scarce foreign exchange resources.
Already, there has been a sharp increase in India's overall imports; the largest being in oil imports. The demand for oil has increased at the rate of 7.5 per cent, while the domestic production rose by only 3.5 to 4 per cent.6e Since most of India's oil imports are from Gulf states, therc is



hnsren Gur,r lNo Sourls Aste

an urgent need to identify and efipand eoonomic relations with these countries to lessen this excbssive strain on our foreign exchange reserves. An obvious remddy would be to swap Gulf oil with India's primary and manufdcturing products. India is now a food surplus couf,try, while most Gulf states are large importers of foodgrains. Whethcr as part of swap arrangements or market deals, it should be possible for New Delhi to interest Gulf states to lift its food surpluses thus rcducing India's oil import bill. Similarly, in the Belds of consumer durables and manufacturing, India has the capacity to match its production to meet the requircmcnts of the Gulf region. According to former FICCI lFederation of Indian Chambers of Commerce and Industry) President, Mr. K.N. Modi, who recently led
tradc delegation to several Arab cbuntries (including Kuwait, Qatar and UAE), there are good prospecps of doubling Indo-Arab trade from Rs. 4,400 crores to Rs.8,000 Crores in the next five years.?o Mr. Modi reportedly told the Indian press that there was considerable

scope for diversifying Ind.ian expqrts to wide-ranging engineering goods, capital goods, metal products and consumer durables. He also pointed out that Arab countriles provided excellent scope for Indian entrepreneurs to set up Joint ventures in metallurgical, petrochemical and consumer indu6tries. India has already set up instltutflonal machinery by way of joint commissions with somc of the Gulf states to identify and promote commercial and industrial ventur€$. But the progress so far has not been that satisfying, In UAE (United Arab Emirates), for example, although a joint Indo-UAB semmission was set up in 1975, it has met only four times during the lbst ten years of its inception; its last meeting held in May 1985.?1 IF the last round of talks, a proposal to set up a joint investment pompany was mooted and examined with a view to step up tradq and expand industrial cooperation. If this were to naterialize (which seems likely), this could become the model for similar initiatives with other Gulf states. The proposed joint investment compa{ies could become a vehicle for promoting joint ventures for which there is considerable potential. Some such ventures have already Qeen floated; the largest number (13) being with the UAE. One suc[ project involves trilateral cooperation between India, UAE an{ Tunisia for setting up a petrochemical complex in India; with UAE providing ammonia, phos-

S.P. SsrH


phates being supplied by Tunisia and India providing the technical expertise and manpower. Indeed, petrochemicals and fertilizers are two areas where Iqdian technical expertise can be matched with Arab capital and raw materials. And since the Gulf countries are facing problems in marketing these products in industrialized West (because of over-capacity

thcre), India's expanding needs could provide a useful alternative market outlet provided it does not entail excessive drain on India's



ProjectslTrade Deals

Co ntries



$13.1 million

Provision and installation of steel containers

India and

November 1981 n. a.

Prbvision of 1.5 million tonnes of Indian iron ore annually
Management of a nitric acid and ammonia complex

India and


1981 $3 millio,n
$38 milliori

India and



Extension of sugarcane plantations

India and



$150 million


576 housos at

India and




n. a.
$39 million

Assembly of 5,000 jeeps

India and


Construction of a dam

India and

June 1982


millio! construotion of a sulphuric
acid plant

India and

Note: Ashok-Leyland group from India bagged an order, December 1985, for tbe supply of 130 buses to UAE. Earlier, buses from Tata had been supplied to most of the tratrsport companies in Dubai, Abu Dbabi and
other Emirates, excePt Sharjah.?s


THB Pnnstc,N Gur.r .lNo

Soutn Asre

drilling platforms. A look at some other projects and trade deals between India and Arab countries, will give us an idea of the direction in which economic relations might further be channelcd. Table I is illustrdtive.?2

foreign exchangc reserves. In othef words, Gulf project assistance could be tied with supplies for the lndian market, Another joint venture proposal irnder active consideration is for the establishment of a sponge iron plant in Sharjah (a constituent state of the UAE federation) to run on natural gas. Tie capacity of the proposed plant will be about qne million tonnes a yru., *hi"n will substantially meet thc requirejments of the Gulf Cooperation Council countries. Still another p|rdect underway, involving Indo. UAE cooperation, is for manufacturing ofshore and onshore oil

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

Projwts lTrade deals




$300 million

Constrrlction of an ammoniaT

Pakistan and

urea cbmplex at Lasbela in




$316 million

ConstrUction of 5,000 houses

at Najhn

Clprus, Libya Pakistan and
Saudi Aratia


1978 n.a.

a. Railway construction b. Supdly of 10,000 tonnes




of May


to Bangladesh


gI20 million


on delivery of

Sri Lanka and

tea oved 5 years


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

S.P.SETI{ 57
both in agriculture and industry-construction works, etc. These are the directions in which further avenues need to be explored. There are many more which could be tapped as indicated by a list of products recently supplied to the Indiau commerco minister by the visiting Iranian minister of industry and which Iran would like to buy from India.?6 It included iron and steel items, compressors and electrical goods, caustic soda, synthetic fibre, rayon yarn, asbestos, alumilium foil, cellophane, paper and chemicals. Another area covered in the talks with the visiting Iranian minister related to link deals to involve, for instance, Iran's non-oil export like sulphur against Indian exports equipment for projects. Bharat Heavy Electricals Limited is already tendering for three thermal power

projects in Iran.
To lessen the difrculty of foreign exchange payments,

India and

Irau signed, in March 1985, an agreement to set up a Special Fund. This Fund of $200 million, to be earmarked out of payments from Iranian oil exports, is iotended to act as a buffer for foreign exchange payments. The Iranian industry minister has assured that the Fund would be set up shortly. New Delhi could explore possibilities of setting up similar funds by Arab Gulf oil exporting
countries. The most ambitious joint venture todate, in which India and Iran have figured, relates to the Kudremukh iron ore project in India. This project was conceived under the Shah's regime. He had committed his country to meet tlle entire cost of financing the Rs. 600 crore Kudremukh project on the explicit understanding that iron ore concentrates produced there would be supplied to the Iranian steel mills.76 But with the Shah's overthrow (Iran had by theu already advanced $255 million) the project ran into difrculties because the new regime refused to honour the agreement. Nevertheless, India managed to complete the project but has been finding it difficult to find enough customers to buy its iron ore concentrates. With a production capacity of7.5 million tonnes of iron ore pellets per annum, Kudremukh project is operating much below its rated capa.

city for want of orders. Lately, howevor, Iran has agreed to lift some of the iron ore concentrates from Kudremukh. Initially, it will import 600,000 tonnes which might gradually increase (over an unspecifed period of time) to about 4 million tonnes. India already has fouod customers (Bahrain being the largest, with 1.5 m tonnes of iron ore supplies annually)?7 for neaiy 2 million tonncs of Kudre.


THs Pengen


eNo Sorrdn Asle,

mukh iron ore. ,Apart from Bahrdin,?s New Delhi might explore further possibilities of exporting (of swapping with oif iron ore to
the Arab Gulf region. If the impressions of a recent lirdian tradc delegation to Arab countries, led by Mr, K. N. Modi, are anything to go byn Arabs are said to be keen to intensify their contracts with Indian businessmen and regard India as the only country in the world which promises secure investments.?o This qay seem rather over-optimistic, but the recent American freeze of Libyan assets (and a similar action against lran, some years agof in the wake of the seizure of American embassy and its persodnel) is bound to make Arabs wonder if their investments in thd industrial world (particularly, the USA) are as safe as they led thdmselves to believe. This should
enhance India's potential as an outlet for Arab investments, especially now that New Delhi has conslderably liberalized Indian cconomy. The recent flurry of highJevql visits to Arab countries (Prime Minister Rajiv Gandhi's Oman visit was a poce.sotterleo ut" 'oU'cative of a new impetus in this direftion. A number of Arab delegations, comprising senior businessinen, are expected to visit India

shortly, according to Mr, K.N. Modi. India is also expected to sign agreements with the Organizati0n of Arab Pctroleum Exporting Countries (OAPEC) on oooperationr in the ffeld of petrochemicals, marketing of crride oil and naturhl gas, as well as training of personnel in the oil industry.sl Indian contractors, even as late-Ntarters. managed to win some handsome construotion contracts dgring the late-seventies. At the end of 1981, they had won contrarcts worth $5 billion.s2 But this compared poorly with South Korea whose share in the construction boom was as high as $44 billion.es Apart from being late-comcrs, Indian contractors' relatively poorshowingis "thought to be largely the result of (their) go-it-alone attitude." However, Indians have the twin advantages of proximity and technical manpower; and they now seem prepared to enter idto joint ventures or go in as sub-contractors. Even though the cdnstructioo boom is now over, this new approach should help the4 penetrate more Gulf markets, other than Libya and Iraq which hald provided 75 percent of their Middle East earnings. The prospects of doing more busilness with the Gulf could be enhanced if South Asian countries (palrticularly India and Pakistan) were to follow 8 regional approaoh in their dealings with the Arab

S.P. Sarn


world. With the formation of SAARO (South Asian Association for Regional Cooperation) and some improvement in Indo-Pak relations, this might not after all be an impossible task. India has an image problem in the Gulf region (particulary in Saudi Arabia) where it is seen an anti-Pakistan lwhich is a Muslim country) and not very protective of its Muslim population. It is also perceived as pro-Soviet. This is reported to have figured during the talks between Saudi leaders and Mrs. Indira Gandhi when she visited Saudi Arabia in April l982.sa How far Mrs. Gandhi was able to dispel this misperception is difficult to say. But lately, under Prime Minister Rajiv Gandhi, there has been some perceptible improvement in India's relations with both Pakistan and the United States; and tbis could not have but done some good to India's image with the Arab Gulf countries. A joint SAARC or Indo-Pak approach to relations with the Gulf region, however, is unlikely in the near future. Hence, India would have to act largely on its own to promote and expand economic and trade relations with the Gulf

India's political image has not been the only factor contributing

to its poor showing. Therc are other reasons too. These are:86 Firstly, Indian products are not comparatively as good as from
other coutrtries, Second, Indian suppliers'samples are different from real supplies. Third, contracted supplies are inordinately delayed.

poor quality. Prime Minister Rajiv Gandhi, during his Oman visit, conceded as much when he reportedly said that part of the problem (India's disappointing export performance) arose from lack of quality, competitiveness and salesmanship.86 Apparcntly, New Delhi is aware of all this and, hopefully, steps will be taken to rectify this situation. Apart from trade, India can do a lot in terms of helping to revive and, even expand, the dccaying agricultural sector of the Gulf economies, and to set up industrial estates based on small and medium industries to meet the regional needs oftbe GCC. It can also contribute significantly to the services sector.

Fourth, packaging is of


CurnrNr OrL


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


TflE Pmsrex

Gulr nno

Souirrr As[q,

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

Consequently, the OPEC oil cartel has developed cracks and its members have given up their feeblo attempts to regulate produotion

and prices. The Saudi oil ministqr, Sheikh Ahmed Zaki Vamanl has warned of a disastrous oil pribe war if non.OPEC producers werc to continue going their ownl way.01 Indeed, a very lively discussion has been going on for sonte time now regarding the extent to which the oil price will continue to fall, and whether the'rosy' OPEC days of tbe seventies will wer return. The American journal Foreign Policysz had invited two experts to debate this issue. According to Stephen Stamas, altftough the short-tcrm scenario of oil supply overtaking the demand ls encouraging, "the long-range challenge remains." Hc writes, "ahhough its (oil) share of energy is falling, oil will still provide almost one-third of all energy consumed at the eod of this century, and its irolume is projected to grow up by more than l0 MM8/D (barrels a day)."08 His arguments are as



Oil consumptioo has exceeded the level of new discoveries more than a decade; hence tte world is increasingly living off
that gap will likely grow in the
consuming areas

already discovered reserves and
years ahead.

of the world-the United and Japan-produce only a fraction of their oil needs. Even with some further increase in non-OpEC supplies, they will continue to dqpend heavily on OpEO imports for the balance of this century. Besides, developing countries will require growing oil imports to suplort their economic growth. 3. The volatility of the Middle East situation will continue to creete uncertainty about future oil supplies.
. The major oil
States" Western Europe,

S.P. SBm 6l
Some of the oil alternatives are now in doubt as a rcsult of growing environmental and safely concerns; thus sharply escalating investment costs and, in some cases, the difficulty of bringing on oew technology. This is certainly true of nuclear power' (Solar energy has also failed to develop on a wide enough scale to even marginally replace oil. Aud with the continuing fall in oil prices, alternative and renewable energy forms, including synthetic fuels might become less attractive in terms of investmonts involved and


their costs of production.) Fred Singcr, on the other hand, believes that OPEO's monopoly on prices is now over. He writes:

By uext decade, with the combination of price'ilducod energy
conservation and alternative eaergy development,



tion in industrialized countries will decline toward 20 million barrelles a day (MMB/D) or even lower-compared with 1978 consumption of 40 MMB/D, North America, including Mexico, will be producing at least 15 MMB/D and the North sea, perhaps 3-5 MMBiD. These levels of production mean that little oil will be required from the rest of the world to meet Western

He goes on to make, what (in hindsight) could

only bo called


prophetic assotion : Well before then (end of this decade), the combination of lower world oil demand and increased non-OPEC production will likely cause fierce competition among OPEC producets, even if Saudi Arabia were to stop production. If Saudi Arabia remains a producer, the crunch will occur much sooner. In either.case, OPEC would have to slash prices to sell oil.s8 As for the discussion effect of lower oil prices on investments in

oil alternatives, he opines: At the point (when oil prices have fallen sufficiently), industrial nations may not be willing to accept cheap oil because they will have made alternative energy investments. Political pressures within producing counfries, such as the United States, will lead

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

Asre perhaps along the liue

to calls for import quotas or tarrifs,

1959-73 oil import quota, to kgep out cheap Arab oil...sz


In a similar vein, Hobart Rowdn predicts a bleak future for the ph[lip K. Verlegcr Jr. (an American oil expert), from his testimony before a House energy sub_com_ mittee, who reportedly said that the real qucstion was not whether the slide in prices could be stopped at $20 a barrel or even $10. Verleger believes that some of the new industrial conservation practices and substitutions are frobably irreversible. But Daniel
O.PBC producers.rs He quotes

realities-will again give way to gpological realities-the concenrration of oil resources in OpEC alnd in the Middle East. And that will eventually put the era of surplus behind us."es However,
who urge that the risk of lower oil prices (weakening the resolve for conservation and substitution) can be ofset by import taxes.roo The British weekly, Economisflror 4ro sees a bleak futurc for the OPEC and is all for desrroying it permaneDtly. Itwrites,'.OPEC could soon be just another fi word, fading from headline to history book." It adds, .,Its fate rests with a few hundred politicians in Britain and America (whq) can turn an unseasonal fall in oil prices into permaneut gains flor the world economy."roz The Economist does not take the calls of OPEC leaders, who have warncd that non-OpE0 will not be able to win a price war if they persisted in no[ lining up with OpEC producers to stabilize oil production and It argues that since the contribution of oil to OpEC eco is disproportionately high (compared with, say Britain, whficb gets only 8 per cent of its revenues from taking oil production), any pricc war will inflict much more damage on them. Hpnce, it regards such threats from OPEC as ,.their most obvious bluF.,' The Economist is all for raising petrol and diesel taxes by the US Govcrnment. "By keeping up pQtrol prices to the motorist," it argues, "America (and other coun[ries too) would maintaln the pressure for conservitrg oil, so that OflEC could not regain its Darket ffxing power in the 1990s." fndeed, it sees in this (taxing themotorisr) a panacea to rid the American (and global) economy of all its curreut ills, The argument goes like this:
R_owen disagrees, He supports thcise experts

Yergin, another American expert Who heads the Oambridge Energy Research Associates, is not so slnguine, He argues: .o,..Market

S.P. SEIH 63
,..by passing a bill that increased petrol and diesel taxes in three by $l a gallon in all, it (US Congress) would raise $135 billion a year in new revenues before the decade was out...Interest ratcs would fall, easing the debt'servicing burdens (of many countries)...That in turn would reduce fears ofa banking crash' and also cut the federal goverments' bill for debt interest (as well as reducing its budget deficit;.'.."tos

The Econonistwarns, "If Congress docs not go for a petrol tax soon, it will have missed its best chance of returning the world to cheap oil, slow inflation, low interest rates and rapid growth." It scems rather all too simple. And as with most simple solutions, there are political problems when it comes to implementing them. For instance, how will the Congress explain to the American people (who have been fed on cheap oil far too long) that they must pay higher prices for their petrol and diesel when the price of oil in the international market is ridiculously low? It seems to assume an incredibly high level of motivation on the part of American citizenry, and that too in a non-emergency situation. Moreover, if the oil price were to continue declining, it will mean a continuing rise in petrol tax which is politically not sustainable. Whatever the Economist might say, OPEC producers (especially the largc Gulf oil producers) are better suited to withstand an oil price war because of their cheaper cost of production. In the case of non-OPEC producers, like Britain and Norway, the cost of production o[ the North Sea oil works out at about $15 a barrel.lor The Arab oil producers, on the other hand, were able to sell tbeir oil in the sixties at around $2 a barrel and still claim royalties

from the oil 'majors' working on their oil fields. Even assuming that the costs bave since gone up by 100 per cent or more, the Middle East oil could still be marketed at about or a little over $5 a barel.
Admittedly, this would cause a havoc on OPEC economies (especially its non.Arab members), but for Britain and Norway it could spell the end of their oil industry, and not just the tax receipts from oil. Even the 8 per cent tax which Britain gets from its oilthough seemingly small as a proportion of its total revenues-is crucial to its ailing economy. Therefore, it is sheer bravado to suggest that OPEC would be the main loser in an oil price war.

il Tw


Gurn eNo Sotfnr AsH

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



This would broadly explain the Sbviot interest in cultivatitrg India, sincc Eid-fifties. For a detailed discusslon of lado-soviet rclations during the fifties and sixtles, see S.p. SGth, .iRussia's Role in Indo-pak politics,',
Asion Surtey, August 1969. According to Chenery, from 1950 tp 1920, new oil discoveries in ttre Middle East and elsewhere far exceeded th€ increase in demant! and oil prices


actually decliqcd by 50 per cent ib real tems. As a result, oil rapidly replaced coal and, by 1973, wa| supplying half of the world's energy requirements. Furthermore, in lfre period 1960-73, oil from OpEC countries (of which the Gulf oil producers were tle main suppliers) supplied 40 per cent of the total in world's primary energy. See

Holis B.


Foreign Afairs (New York),

the World Economy: Round
1981, pp.1102-?0.


Ifazem Beblall".i. The Arab Economy in a Turbulmt Age, (Ctam Helm, London, 1984), p.175. 4. AMul Mqiid Farid, (ed.), Oil and, Securit! in the Arabian Qutf, (Cl:oom Helrn, London. t98l), p.15. .'Oil and Decline of tho West," Foreign Affatrs, (N. y.), Summer 1980,



See in this connection Arab Leagrle's pledge of support to Libya in tbo wake of tbreatened Amcricaa and Israeli armed retaliation against Libya-s

alleged involvoment in the terroridt mids (believed to be rhe work of a Palestinian faction 1ed by Abu l{idal) at Rome and Vietrna airports in December 1985. Tines of India at,d Indian Express,6 January 1986. 'f Sec








Fred Singer, "An End to OPEC? Bct oD tho Market" (Debating the


OPEC), Foreign Poticr, Wirter 1981-82 (No. 45), pp.1l5-2t;

see also

Walter J. LaW, "Oil: An Agenda for dre L98Os," Foreign Afabs,



'.The Oil Turmoil," (editorial), Tribune, 14 Decernber 1985; "Crude Werfaro," (editorial), Hind stan Times, 72 Deoembcr 1985, ard "A

Ca.rtel Crapks," (editorial), Times of Indla, 11 December 1985.



11. .'Arab 12. 13.

Petrodollars I Where did All the Money Go?," South (edixorial), London, Sepiember 1985 (No. 59), pp, 1G-11' r.3, p.132. Jiang l{ong, "Arab Countries: Hard Times Spark Readjustment," Beijing Reviev) (Berjinc), 15 July 1985 (No. 28) pp,ll-12'

14. See n. 11. 15. See S.P. Seth, "Saudi Arabia's Security: All Eggs in the US Basket"'
and "Contradictions in Saudi Situation," Times of India,

and 13 May

16. n, 11. 17. Tim Niblock, 18,

(ed.), Social and Econontic Derelopment in the Arab Gulf (Croom Helm, 1980) (for an indicative list ofbeavy industry projects operating, under constructio! andi or planning, sea pp. 102-5). For a detailed a@ount, see M.S. El. Azhary, (edJ, The Impact of Oil Reton es on ,4rab Gulf Developrnent (Croom Helm, London, 1984), pp.



9l-106, also n. 17, pp. 95-105. Azhary, qn. 18), p. 96. 20. lbid., p.97. Estimat€ by the Gulf Organization for Industrial Consulting (GOIC) (quoted in Azhary, Ibid., p.91).

. *The

Trado Politics


Middle Eastern Industrialization," ForcEn

p,249, 24. Ibid. 33. 25. S6e !. 18, p.102. 26. Ibid., p.103. 27. Ibid., pp.103-4 (cCC consists of Saudi Arabia, Kuwait, Qatar,
Oman and United Arab Emirates).

Affairs, Y'lintet 1978-79, 9.309, South (London), September 1985,


28. S€e n. 11 aod n. 13. 29. .'The Years that the Locust hatb Eaten: Oil Policy and OPEC


ment Prospects," Foreign Afairs, Wintet 1978-79, p.287. Partha S. Ghosh, "World Oil Outlook: Some Policy Implications for lndia," India Quarterl! (New Delhi), October-December 1983 (Vol'

)Q(XIX, No. 4),


. Ibid 33. n. 11.

32. n. 29, pp. 29243.
34. Ibid.

35. The Arab Ecornmy, Past
18, p. 39.

Pethrmanca and Future Prospects (Oxfotd Univ€rsity Press, Oxford, 19821, pp.136-37. "Philosopby of State Development Planning" (Chapter 4) in El Azhary'

37. Ibid., p.52. 38, Ibid., pp. 39-'{0. 39. n. 3, p.86. 40. Ibid., pp. 86-87. 41. Ibid. p.140. 42. lbid. 45. Ibid. 43. Ibid., pp. 1,{0-41. 44. Ibid., p. lzt. 46. "International Migratiori: ImplicatioDs for Labcur Exporting
The Middle Edst


Josnal (Wasbington), Autumn 1984 (Vol. 38' No. 4)




Gur,r nno So{rn Asn

pp.668-84. Ttis issuo of tfu Wddb Eatt Jowtal, is devotad to an €xamimtion of issuos relating tb manpower migration into West Asia and North Africo. Tbese and othor facts relating to rpigration arp drawn (uohss otherwis€ specifed) from Shahid Javed Bur(i's above sfiidy. 48. Ibid., Table 4,



49. Ismail Seragel{in, et al., "Some l$sues Relatcd to IJabor Migration in the Middle E4st and North Afriga," The Midille East Joamal, Ltlyrmn

(Vol. 38, No. 4), Tablo 3,

p1 636. 1984), Chapters



46, p.674.

5t. World Developwnt Report 1984 (Washiqron, D.C.,
4 and


a,46, p.


53. Ibid., p.
55. r.


54. Ibid., pp.

49, p. 623.


1986. 59. n. 49, pp. 62f25. 60. Indian Express,24 October 1985. 61. n. 49, p, 626. 62, ..culf IndiaNi Tte Exodus," Indla Today (New Delhi), 15 Novembcr 1985, pp. 70-71.
of India, 19 January
Times of India, t7 Deccmber 19B5. 64. Naiem A. Sherbiny, ',Bxpatriate n,abour Flowsto the Arab Oil Countries in the 1980s," The Middle Easi Jdurml, Autumn 1984 (Vol. 38, No, 4), p. 648. 65. Ibid., pp. 652-53. 66, rbid., p. 656. 67, Sortt (LondoD), January 1983, p. 39. 63.


lbid., p.624.

68. For facts and figures

of oil productior and oil fulporte,

Infra,28 D€oembet






fanuary 1986; also Hind ttan Tirt4s,

31 December 1985, of India, 20 Jaruary 1986.

70. Hlrldustan Titiles, 19 ,afliary 1986i 71. For an account of Indo-UAE relitions, s€e the special feature on United Arab Emirates in Ttnos of India, p0 January 1986. Achilli, Michele aud Mohamed Khaldi (eds.), The Role of Amb Davelopntent Fmds tn the World Eanany (Cfqom Helm, London, 1984), Table

73. Ibid., p. ll1. 74. Ibid. 75. Hindastdn Times, 26 Nwember n. 72. p.




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


78. Bahrain has oontracted to buy, iron ore frm Kudremukh Plant. f9. Etndustan Ttnu s. 8 R ebf'nry

fiv€ y€aB, 7.5 miliotr tonnes of Times, 7 laarnry 1986.

S.P. Ssrtr 67



in this coonection, S.P. Seth, .,Promisitrg Gulf Links," Hindastan

81, 82, Sauth (London), 1983 lune p, 64. 83. Ibid. 84. n. 30, p.4O5. 85. R, Sikka, "Procp€cts of Greatcr
(special feature on

Times, 12 December 1985. Times of India, 8 December 1985.

Cooperation," The Tlmes of India, UAE), 30 January 1986.

$60-80 billion, see Robin Lustilg, .,Riyadh's Economic Future Ubcertait!" Tirus of India, 6 February 1986. 90. Gwynne Dycr, "OPEC: .Vagrant Beggars)' Hindasian Times,l2 Novnbof 1985; see also lrttes ol India, ll December 1985, and editorials ia Times of Indb, 11 Dec@ber 1985, Etndastan Times, 12 Deccmber 1985 *d, Tibune, 14 Decemtler 1985. 91" hdist Express, ll Novmber 1985i Times of India,27 laruary 1986. 92. Fr€d S, Singpr, "Ar End to OPEC? Bet on the Market; " Stephen Stamas, "More is N€eded," Forcign Poltct, Winter 1981-82 (No. 45),
pp. 115-25.

86. n.80. 87. The lndian Express (editorial), 10 February 1986. 88. El Azhary, n. 18, p. 50. 89. Ibid. A recent report has put Saudi Arabia's foreign cash feserv€s


93, Ibid., p. 123; see also Sumithra, "Depleting Oil


100, 104.

Tfines,lI Februaf,y, 1986, andG.K. Pandey. ,'Falling Oil Prices: Iodia's Op{i@s," Timet of India, 12 February 1986. Sineter, n,92,pp. 123-24. 95. Ibid., pp. It9-20. Ibiit., p. t2O. 97. Ibid. Ilashington Portl reproduced in The Guardian Weekly @Iaachater), 28 July 1985 (Vol. 133, No, 4), p.1s. Quoied fron Nev York Times, ibid'.

Reserves," Eindasian

r, 98.

loz. Ibid.,

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

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

4, South Asian
Problems and

on to the Gulf:

South Asia has emerged as one supply to the Gulf countries.l

Lanka, have collcctively provi
region, thus appropriating a very closer look at the demand-supply slackening of the economic activi in oil prices, the region will contin

the leading sources of labour Pakistan, Bangladesh and Sri about 4 million workers to the


ment its labour force. In fact it is that in the oil recession situation, the sizc of labour of the rcgion may not grow but the relative share of Asians, from South and Southeast Asia, is likely to grow lly in medium and high-technology sectors. Conversely, the sent by the workers from the Gulf have acquired very share in the balance of payment account pf the labour g countries. Today maapower export accounts for single source of foreign exchange earnings for South Asian coun In case of Pakistan, thc remittances at one stage (1982-83) cx the total exports of the

t share ofthe market. A suggests that despite tho caused by the downward swing to need expatriates to supplers


fn a resource constraint faced by all the South Asian countries perhaps none of them aford to ignore remittances and leave them to the vagaries the invisible hands. But at the same time a growing compet among South Asians can lead to depress the wage structure t afecting the volumc of remittances itself. In other words a is emerging among the supplier countries of South Asia coordinate manpower export policier so as to maximize the Simultaneously, a new dimension of inter-regional cooperation between South Asian and Gulf countries has also emanatcd out of owing need of manpower and




The central concern of this paper is to projeot this inter'regibnal dimension of cooperation between the capital-poor South Asian and labour skill constrained Gulf economies in a broader framework of South-South cooperation. Obviously this calls for a study of the

labour market as well as the pattern of South Asian migration to the Gulf. The first section of the paper deals with the nature ofthe labour market; in the second section, a country-wise study of South Asian countries is undertaken, followed by the impact and signiflcance of the flow of remittances on the labour exporting countries. In the last section an attempt has been made to articulate the need for inter-regional cooperation for mutual advantage.


Gur,r LABouR MlmEr IN TRANSITIoN: Elr nncrNc TnnNps

The size and nature of labour market in the Gulf economies has been determined by four faotors: (a) volume of oil revenue; (b) sectoral priorities inthe plans; (c) the availability of the local manpower and skills; and (d) the rolationship between socio-political sensitivity ofthe region and tbe foreign workers. Though all these four' components are crucial but their criticality has been varying, tbereby shaping the policies of the labour importing countries and also

providing significant input for the labour exporting countries for preparing policy responses to the new situations. In terms of development stages, ten years since the oil boom constitute one phase of economic evolution. During this period the region has completed the task of laying the basic infrastructure and' initiated a process of skill generation both domestically as well as by providing facilities for training its manpower abroad. Ol the four factors, mentioned above, it was the size ofthe oil revenue which appears to be the key determinant in shaping thc labour market during this phase, With oil revenue providing the requisite purchasing power, infrastructure building became

the priority sector in the process of dcvelopment. Since infrastructure development required massive construction, which happens to be highly labourintensive sector, the demand for labour was inevitable.2 Flowever, the booming labour market demand could not be met by local supplies both due to small population as well as due to very low level of skill availability. Thus import of labour became necessary. As far as the sensitivity of the foreign workers' presence was concerncd, it can bo argued that in the initial phase it was not very

high, though it will be wrong to suggest rhat the system has been immunc to it. In fact the changing folicy responses and at time evon changes io preference for nationalities by the local regioes do
reflect on the seneitivity. The decisive impact of oil revenrte on the labour markct catr bc seen by looking at its expanding size. In 1975 the total employment in the Arab Gulf region was estirhated at 2,53g,300 which wss expected to have gone up to 3,259,800 by l98q registering an increase of 29 per cent, The wise break-up is given in







incredse between




299,800 296,500 75,800 66,300


Kuwait UAE Balrain

t< t 30.4 7)






tt qt

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

The Crisis of

the share of natlonals in tbe erhployment market during this period. Estimates are fhat betwee{ 1975-80, the annual growth rate of national work force has bee! 2.2 pr cent jn Saudi Arabia

The increase has been lowest in dase of Bahrain (22.3 per cent) and highest in case of Qatar (60.3 fer cent).s From the point of view of the demand for the expafriates, it will be relevant to see


Pnvr ?l

as against tbe rise of labour markot by 5 per ccnt. In case of Kuwait, national labour accounted for 5 per cent growth as against the average of 4.7 per cent, in UAE the national labour force grew by 3,2 per cent as against the average of 5.4 per oent, for Bahrain and Qatar these growth rates have been 4'5 per cent against the averagc rise of 5.4 por cent and 4.2 per cent re' spectivcly. The corresponding changes in tho share of nationals is given in Table 2. In Saudi work force the share of nationals has gone down from 57 per ccnt to 49 per cent. In case of Qatar and UAE also the expatriates took greater proportion in rise of employ'

ment opportunities than the nationals, but in Kuwait and Bahrain the national work force retained its share.


NU\DE& or NArroNar, AND TrtErB, PEBcENTAGE rN TorAl WoRK FoRcE.










1,026,500 91,800 45,000 12,s00



49.3 31.1

Kuwait UAE

15.2 18,9





SouRcE: Birks and Sinclair, op. cit.

Projectioos of the future demand for expatriates in the Arab Gulf region have been made under three different scenarios of bigh growth, medium growth and low growth for 1985 and 1990.4 The
projections have been summarized in Table 3. In case of three countries, namely, Saudi Arabia, Kuwait and the UAE, the demand for expauiate workers is likely to be between 3985 thousand to 4088 thousand under low growth and high growth scenarios respectively. What remains tho significant featuro of the labour market of the region is thc dominant share oftho foreign workers. "By comparison with 1980, tbe expatriate labour ratio in


Trln Pnnsuu Gulr eno






1985 AND




High Growtlh Medium Growth



Low cro$th

fSaudi Arabia, Kuwait aDd UAE.

classified as sub-professional and

Bank study suggest a tilt in favour of skilled sector. The projection for 1985 is basqd on high growth assumption which is not valid in view of the recession, yet given the demographic structure, skills and the kind of economic activities undertaken by the$e countries, in tlLe low growth situation only the magnitude of tbe trend will vary. thus these ffgures can be read with some precaution but they c$ntinue to remain relevant in showing the occupational of the market. At aggregate level, the region's dependence on labour power seems to be increasing in the professional technical category (A-l) by around 3 per cent; in the categorj called A-2 it shows a rise by Z per cent. Wbilc a marginal decline {an be seen in case of category

While the demand for f workers is likely to continue, of the elonomic pac€, the occupational structure of the market is to undergo somo qualitative changes, with tho graduation of thq market to the second phase of development. The projections for the market made by a World
despite the slowing down

1990 is likely to be higher. In Sdudi Arabia from 53 per cent to 62 per cent; in Kuwait from 79 pef cent to 82 per cent, in UAE frorq 89 per cent to 90 per cent."o

(B-l). The country-wise

break-up suggests wide variation.

DBMAND FoR ExpAtnr.qrs LABoUR rN CouNTRrEs, 1980-85 (NUMBERS).



Wrsr AsuN








Professi onal and


149,179 159,195 170,730 184,073



(6.7) (7.2) (7.8) (1.2) (7.6) (7.2) (.6) (6.7) (8.3)


380,960 (12.9)

Otherprofessional 252,636

271,614 29r,234 313,506 337,300

Sub-professional and




221,327 23E,261 254,173 275,317



Other sub-profes-



125,245 130,577 133,078 138,399



@.3) (t.e) (4.0) (6.4) (6.4) Q.3)




Skilled office and

858,594 914,0& 973,108 1,U3,997 1,1s2,784




i-skilled and

6@,478 721,9t9 793,m2 882,674

(10.2) (e.4) (10.0) (rr.2) ( 7.4) (2.7t Q.2) (3.0) 16.9) (6.7) (8.2)




487,994 497,994 512,6s9 547,874 ssl,946


2,582,140 2,7 7 3,481 2,953,24s 3,15t, 156 3,409,6? 4 3,76,140








brackets indicate perc€ntage incr€as€ over the pr€vious

SouRcB: World


74 Tw

PK$AII Gwr lwp

such as India, Sri Lanka From the point of dcveloping: largely to the semi-skilled and Pakistan, whichhave been it appears from Table 4 and the unskilled segment of the for semi-skilled (C-2) jobs, market is shrinking even under that and Kuwait, but shows ,signiffhigh growth assumption in (from 3f.2 per cent to 55.00 per cent), cant rise in Saudi Arabia VLE (77 per cent to 80.5 per pent) and Qatar (75.4 per cent to 81.00 per cent), In thc unskille$ categories Bahraiu, Qatar and Saudi Arabia were expected to sliow favourable changes. The nationality-wise break up of the projected demand ofthe expatriates suggests that in comp{rison to 1975 when the Southeast Asian workers provided 1.3 per cdnt of foreign work forcq in 1985 their share is likely to be 9.5 pef cent under high growth scenario and 10.9 per cent in low rate scenbrio showing a rise of around 34

per ceot. South Asian work forpe is likely to enhance its share uarginally from 21.6 per cent toL2.7 per cent in high growth and 21 .7 per cent io low growth scen4rio registering a rise by about l0 per cent. In contrast to this the sfare ofArabs is estimated to decliae to 48.4 per cetrt and 50.5 psr cent respectively in high and low-growth scenario. Among dhp A'rabs, it is the Yemen Arab Republic that is likely to bear the brunt most severely because their sbarc is likely to go down to l0 to ll percentin 1985as agarnst 20,4 per cent in 1975.6 It is reported that of late the Gulf Governments have oncc again tdken on an official position to eocourage the inflow of Arabs in plhco of Asians because there has been pressure spccially from the fress expressing concern about the Asian presence. "The intenso public debate of the issue is centred on Asian component of the wolk foroe, whether from the Indian subcontinent or South East Asia.'I7 At tle official level, a number of measures have been conceived to enbance the Arab sharo in work foroe. The UAE has introduced a [aw that envisages that 30 per cent of the block visas issued for thf foreign workers be reserved for to providing credence to the Arabs. But the trends do not between the offcial policy and the official policy. Tbis the trends can be explained by lofking at the politics of the demographic trassformation. The policy and attitude of Arab Gulf governments towards Arabs and Asians in particular the expatriates in general and to is determined by their strategy evolve a system in tho region the political ctatus quo is maintainod deryitc tho ohauging where

Gnrrxn Pr,ur


economic profile of the region. This has been attempted so far by "exploiting the expertise of immigrant labour to serve the functions of dependency while isolating their political involvement and maintaining the legitimacy of clan power when the tribal base of legitimasy is diminishing. Policy responses to this problenr have been, on the,

one hand,

to control the immigrant population by a system of

insecurity in terms of their tenure, on the other hand thrbugh patenalistic policies tbwards the local population, to engendet dependence on the ruling class aud status distinction between the nationals and
non-nationals.o'8 From the above premise it beoomes very apparent that the Gulf states will be trying to maiotain the market for the expatriates, their choice towards a particular nationality would be governed by the

fact that which of these nationalities and their homc government help them in manipulating the labour market, Between the Arabs and Asians, taking various attributes together it would appear tbat Asians are likely to meet the reguiremetrt in greater measur€s. Moreover, a larger proportion of Asian work force is with the private sector where the employer enjoys freedom to choose tle source. Since Asian labour is relatively cheap and also said to be more efrcient and less troublesome, they are likely to retain their sbare with the private sector, In countries li&c Saudi Arabia where
the thrust is to enlarge the private sector participation in the economy

the Fourth Five-Year Plan indicates, the Asians are likely to withstand the pressure created against them. However the public pressure against the Asians could bs used for further modifying the immigrant policy. For instance, thc labour camp formula of Koreans may be made obligatory because such a formula serves the purpose for mceting the public pressurc without making any substantive change. Camp formula is preferred because in this the work force is "isolated, they are easily controlled, the minute they have finished their job they leave."s As pointed out earlier the market for the expatriates is also likely to be influenced by the new economic priorities of the Gulf Governments specially in view of the oil recession and the availability of thc local skills at the wages acceptable to the expatriates, From tbe point of labour market, perhaps the key sector which has been affected by the oil recession has been the constructioD sector. However, in assessing the magditudc of this adverse impact, it has to be reiterated that even in oil bouyaot regimo, the rete of erpanas

76 TrB PERsTAN Gur,r eNo
sion would not have been eighties. "The phase of deyel


le to tho

25 per cent of the expatriates According to the study reported of no objection certificates for market salesmen, workers in
Perhaps the sectors where the

centred on the creation of infrastructure construction of schools and hospitals and housing which is the most labour tensive and it is completed in most Gulf states. And even in normal coursc, the construction industry workers would have beg to thitr out. Now in the absence of more new projects coming u there would be less occasiou for laid off labour to hang back."ro is reported that in Saudi Arabia with the decline in construction infrastructure building, upto one million expatriates, i.e, a ximately one-third of the expat riate work force will leave the om by the end of the decade.ll Estimates suggest that in recent the construction sector has started losing the lead sector it enjoyed in the initial years of thc oil boom.lz In Kuwait, to the census of 1980, only



and earlv


the construction


is the maintenance well as in the high technology
growiDg indigenous population is not outlined below. During the last one decade

Khaleej Times about 80 per cent triates are for jobs such as super rants. tailors, bankers, etc.re iates market is likely to remain operation and service sector as r, because in either case the

to be available for the


of il prosperity; the state pursued a policy through which the natio ls were provided employment opportunities in state-run sector. It is argued that such a policy has been devised with a to maintain the status quo in the domestic power structure "a substantial administrative sector strengthens a ruler vis-athe family, tribal and religious personalities whlch had consti competition beforo oil was
vization, it will be difficult to wage structure is so tilted.rs Moreovef, "the modern educa system adopted by Saudi Arabia and the Gulf states" ha not been the type of system most suited to the needs of such raoidl developing economies; indeed, it has served to accentuate the disinclination of the population to undertake jobs other administrative posts in government service. Technical and v tional training is considered markedly inferior to general education which is the onlv
discovered."la Understandably subjccted to a process of transfer the work force even the national work force getting





means of achieving a university place."rz Yet another dimension


this employment pattern would be that the skill generation is likely to be stunted which will affect the very development process of the region. A study of skill formation in Saudi Arabia points out that though the government has launched a number of schemes giving special emphasis on vocational training, upgrading and on the job training but "relatively few of the measures introduced by the government to improve the quality of education aud training have met with success."l? Given the diverse naturc of political regimes, demographic profiles and the economio plans in the region, there can be variations in estimating the size of the labour market, Yet the sheer need for the maintenance and completion of the on-going projects, retains the expatriates as critical component of the labour market. Therefore, the policy of the Gulf States will be to take a tough posturc and regulate the market in a way that minimizes the cost element, be it economic, political or social. In the semi-skilled and unskillcd sector of tho market, non-Arabs are likely to be in greater demand. In the skilled sector, the Arab suppliers are having second views despite tbe glamour of remittances. View is gaining strength that 'ointernational migration selects the most able members within each skill level ofthe labour force. The loss to the source country is greater than the numbers alone suggest .... Remittances do not make up for the investment in labour which the poorer country has 1ost."18 In other words, tbe Arab countries will be ffnding it difficult to spare skilled manpower for the maintenance and operation sector in the Gulf countries which means the market is likely to go to the Asians" Moreover, Arab expatriates are vulnerable to intra-Arab feuds. Reccntly, the way Libya expelled the workers from Tunisia and Egypt has disturbed other labour suppliers. It is reported that "most of the deportees appear from countries that are on bad terms with Libya.... If Nimeri was still President of Sudan, the . Sudanese would have been the first to go."re Of the non-Arab Asians, the prominent suppliers of the work force have come from Pakistan, India, Korea, the Philippines and Thailand. Countries like Bangladesh, Sri Lanka and, of late, China, too have been exporting their cheap labour to the Gulf. It is reported that with the wages going up, the Japanese contractors are looking for alternative to the Koreans, and Chinese appeer to


TrrE FmsnN

Gurr lNo

share and pattero of these Asian

be the substitllto.e However.

nigraot workora has been


Perrnnn oF SouIII AsrAN
countries shows marked vana-

Manpower export from South tion in volume, So docs the

flow of remittances.
features in its composition. The to each of these countries.

But tte wor* force shares remittances are of critical i While this open$ up a situation so in recessionary market es the rationale for cooperation. South Asian workers in the billion to tleir home countrv. debt burden to tbe tune of $37 revoaue to ffnancc the thc largest sto€* of the has migrated from Pakistau,

intra-regional competition, more at the same time it also providare approximately 4 million East remitting about $4 to 5 South Asian region is facing a with only gl4 billion as export needs. As Table 5 suggests, from South Asian subcontinent account for more than 65






(nillton $)


2,5001000o 91310000

3044a 2700q


270 .7b

Sri Lanks



4-1982 , Annual Supplements,

FIA QlanetA Estomic


per cent of the South Asian migrants' A country-wise survey will perhaps provide better insight of the increasing significance, of manpower export and remittauces fort he individual countries as well as for the region. The importance of remittances for Pakistan'o economy can be appreciated by the fact that the Sixth Five Ycar Plan (1983-88) out' lay has been concelved on thc projectcd workers' remittanoes at the level of $4221million in 1987-88. It assumcd l0 per cent risc in remittances from estimated net-migration of 550,000 duriog the plan period. However, the data for 1983-84 and 1984-85 indicate a decline in remittances after reaching a figure of $2886 million in 1982-83. Trends in the workers' remittances can be seen from Table 6, In ten years'time remittances bave inoreassed from $124 million in 1972-73 to $2286 million in 1982-83 showing a pheno' menal eighteen times rise during the decade. However, between


RrurrrAucgs sv PaxBrAm Wonxens (rN MrLLroN DorrAR!).


Remittances (Toisl)

Ratlttiance for Mtddle East



1972-73 1976-77

578 1396 1748


1096 1363 1667

78 78 80
83 83


2886 2403





ll. a.

SouR.cE: .'Pakistao Eoonomic Survey, 198t[-85," guoted Econorrtist, 11 January 1986.

in Pakittan and GUU





1982-85 and 1984-85 The growing dependence of can be seen by the cushion it pr balance of payments deficits. accounted for merely 14 per cent halfofthe total exports in l97G Pakistan's total exports were
$2886 milion

have declined by about economy

18 pcr



easing the pressure on 1973-74 workers' remittances exports but its share exceeded and the total exports in 1982-83. million while remittances were


in 1982-83.
nt PArrsr,q,r's









Debt servicing

Ret tittances


In view of tbe fact that the trade deficit has increased to an alarming proportion, suggesting thaf merchandise exports are not in a position to underwrite the impott need along with rising obligation to serve the foreign borrowing, the increasing reliance on remittances is understandable. But as if has been pointed out in a seminar organized by Karachi Chamber of Commerce and Industry on 'Export of Manpower, Iovisible parnings and Home Remittances' the economy could not afford {ny decline in manpower export. Therefore all efforts were needed fo gear up manpower exports from Pakistan to the Gulf region,zl belause about 85 per cent of remittances havs been coming from thf Gulf rcgion, It is estimated that about l0 per cent of Pakistani ldbour force is in the Middle East2r accounting for 70 per cent of ovefseas workers. In terms of skill composition, rpnskilled and semi-skilled workers engaged in manual works consti]tute about 83 por cent of the expatriates. Of tho remaining, 6 pei cent are reported to be salesmen, 4 per cent injprofessional sectors,] 2 per cent iu service and remain. ing 3 per cent in other s€cto$. Nfiost of the Patistani labour force


Penr 8l

is in Sauali Arabia, accoutrting about 60 pcr cent of it, followed by
the United Arab Emirates with 15 per cent, Qatar 8 per cent, Kuwait 5 per cent and Bahrain 3 per cent.a It is estimated that there will be a net outflow of Pakistani workers in the range of 52,000 to 58'000 pet yerir. About 70 per c€nt of the Pakistani migrants are from Punjab, followed by Sind with 14 per cent, NWFP 12 per cent and Bahrchistan 4 per cent, It is obscrved that though the Pakistani workforoe has some advantage over tbe workers from other countries but "there is a lot ofspeculation about the possible change in the demand for Pakislan labour fotce in future'"84 Indians are the s€cond largest community from the sub-continent in the Gulf region. In 1975, 150,000 Indian migrant workers were in the Middle East and their size increas€d to 800,000 by 1983 register' ing a growth rate of about 25 per cent per annum' The pattern of gro*th rate when studied in terms of time interval shows that it was after 1979 tbat it grew at a faster pace raising Indian share fron 8 per cent to 20 per cent of all the expatriates working in the region.$ With the annual net flow of 180,000, Indians are likely to rcduce the gap with the total Pakistani stock in the region because the arnual net flow of latter has been 15Q000 per year. The country' wise break up of the Indian workers is given in Table 8. TABLB 8.




Seudi Arabia



270,000 (38.3)
115,000 (15.3)

Kuwait UAE
Qatar Babrain

2r,500 (17.t 5t,500 (50.0)
16,000 (13.0)

250,000 (35.5) 40,000 (

e,000 (


30,000 ( 4.3)


123,000 (100.0)

705,000 (100,0)


Figures in parantheses are percentages of the total.

82 Tiu


Gur"r ll.rp

orce has risen from 123,000 to wing an increase by more than up shows that in Saudi Arabia 1975 and 1983, in Kuwait it went up by four times while has bcen morc than three times. total workforce in the region,

In the Gulf countries Indian
705,000 between 1975 and 1983

ffvo times. The country.wiso Indian workforce went up by


the increase was ffve times, in U in Qatar and Bahrain the However, in ternas of dispersal of it shows greater degree of In the individual labour market, Indian share is estimated more than half of the workforce in the UAE and Bahrain. bout 45 per cent in Qatar,2l.7 per cent in Kuwait and 7.5 per in Saudi Arabia. Tbe skill composition of the In workers bears resemblancc

with the Pakistani workforce
unskilled and scmi-skilled wor some differences also. "While unskillcd workers is signifcantly India; Pakistan and Bangladcsh

wing dominant proportion of
But at the same time there are

proportion of the oompletcly in the case of migrants from to a markedly greater extent, possessed some skill. Even the of Kerala, which has by far ihe highest literacy rate in So Asia, has $ent more unskilled workers to the Middle East Pakistan and Bangladssh."zo Though the country-wise data of skill composition of the Indian workforce are not available, yet tbe basis of the data for Qatar and the sample of the Indians from Kerala can provide the broad idca of the skill levels of Indian expatriatos. In Qatar the stock of Indian workforcc is at 45"000 for 1984. As Table 9 shows about half of the w brce consists of unskilled and
semi-skilled labourers, The sector-wise employment of the data on Bahraln which show ing construction and transport per cent).t? Indians are also staff in department $tores, hotels, them owned by the private skill of the Indian labour force Kerala migrants.rs However, it i

Indians can be obtained from
50.4 per cent are with the build. followed by service sector (22.9

to be employed as supervisory
banks, oil companies, most of . The unskilled and low levcl of supported by thc studies on found out that the skill level of
'oThe averago skill level of tban the skill level of migrants cent of Kerala's migrants were teohnical education, the

the Indian workforce is i Kerala's migrants in 1980 was from India in 1975. In 1980, 18







INDIAN WoRKroRcE rN QArAR,, 1984.

Sktll lewl


Pacentage share



47.2 6.8 16,5 6.6 20.4

Skilled Higbly


skilled stafr


' Working as admidstsative






SouRcEi Indlan l.abour Year Book,1984. corresponding proportion for Indian workers in Kuwait in 1975 was 14 per cent.zo Emigrants from India arc distributed over scven States-Kerala,

Andhra Pradesh, Punjab, Gujarat, Goa, Maharashtra and Tamil Nadu. Of these states, Kerala accounts for more than 50 per cent of Indian emigrants. However, their share has gone down due to proportionately greater outflow of emigrants from other parts of India, particularly since reducing the sharc of Keralites .to the level of 33-40 per cent. Though remittances do not constitute that high proportion of Indian exports as in Pakistan, but its share has been of critical signiffcance to the Indian cconomy speoially in financing the rising oil bill after the oil price hike. Remittances are recorded under 'privatc transfer' head of the invisible in current account which includes other receipts like donation from religious and charitable organizations, etc. From the computation done by Gulati and Mody summarized in Table l0..it can be seen that after making impressive rise till 1980-81, there has been marginal decline in l9g1-g2 but again in thc following year there has been a spurt by 15 per


TEB Purf,AtI

Gurr lHo

cent"s According to the same the Middle East io 1980 were 75 per cent of ths total \Yorld Bank Resident Mission at
tances at $2.3 billion TABLE


. the Indiao rcmittances from $2198 million accounting for cstimated at $2930 million. The Delhi has projected remit-


RBcErPr (Rs. MrLuoN).



Growth rdte



1,982 7,927





23,688 5






SomcE: I.

of Indao MigrBnts S. Glulati ald A. ModY, tho Middle Bast," CDS brktng Papsr, No. 182, 1984.



1977-78, thc renittasoes

Indian exports but in 1982-83 for only 7 per ccnt of to the oil pricc-hike remittaDces ncedg to bc apprcciated iq share of sxlrorts. Thc rising in tbe seventies. Today whca the contert of rising Indiao a glaring proportion rpecially tbe tradc deficit has increased and exports are not moving after the opening up of the obligatirma are rounting (dcbt up at tle desired pace, the servking for 1984-&5 hae beofi cahulatcd at Rs 1115.0 crore)

for 20.8 pcr ccnt oftho accour ed for 30 per cent. Prior




the signi0cance of renittaaces io tho bahrce of paymeot account is too obvious to be statcd.


INDIA'$ TRADf DBFIcrr AND REldmANcs (Rs. CboRxB).





defiait DeU














SttreY, 1984-85.

Baogladesh and Sri Lanka havc been late-comers to the labour market of the Gulf, but their dependence on remittances has enhanced the signifioance of the market for their manpower exports. Of the three lakh Bangladeshis working abroad, 2.4 lakh are reportcd to be employed in the Middle East constituting about 80 per c€nt of the total. About 35,000 are reported to be in Saudi Arabia.El From Table 12 the recent trend of overseas migrants and TABLE





Brrrployment abroad


1981-82 1982-83 1983-84

68"362 63,551




Sn,aun.fi. Baegl4d6h F&tortic ,Srrv€l, 198rl-€i







ionsequent flow of remittances be seen. It appears that since 1980-81 there has been decline in annual overseas employment compared to the trend of last ten During last ten years, the average foreign employment per year is recorded at 55,000 to 60,000. The corresponding fall in remittances can also be seen. The amount for 1984-85 is equi to thc amount for l98l-82. From Table 13 lt appcais that rr ittances account for 75 per cent of the exports and 38 per cent of t trade deficits. In view of thc mounting debt, debt-service is estimated at about 15 per cent of total exports. In view of composition, Bangladesh's workforce again shows the of unskillcd and semi-skilled workers constitutitrg 58 per ccnt of migrants to the Middle East, followed by skilled (31 .3 per cent), ofcssiooals (5. 6 per cent), subprofessional and tochnioal (5. I per ).rn





1983-84 1984-85
1990,19 2375.00 5852.00 7155.00 3861.81 4780.00




Growing imFortance of for Sri Lankan economy can be seen by the fact that its export eafnings from manpower exceeded the principal foreign exchange for last hundred years-tea. In 1981, tea fetchcd Rs. 6.4 while remittances accrued to Rs.6,5 billion to the balance.of gayment account, It 1977, the , remittances accounted for only 2 plr cent of total foreign exchange eatnings but in 1982 the share ( million) has reported to have gone up to 20 pen cent. More 70 per cent of these earnings come from the Middle East, The ooncentration of Sri Lanka migrants seems to be in Saudi with tle estimated figure of 30,000. Unlike other South Asian couhtries, in Sri Lankan workforce, women consist more than 50 per of the total, working as maids, nannies and domestic servants. largest section of thesc migrants are unskilled labours-52

Skilled and semiskilled




contribute 38 percent and middle level cadre.83



of migrants

belong to



MeNpowen ExpoRT RBrrlrrre.rgcns AND DBVBLorMENT:
IMPACT oN THE ExpoRTrNc SocrBrns

Given the prospect of exports in the Gulf market, and the critical significance of remittancss as the leading source of foreign exchange earnings as outlined in the preceding section, it is understandable if thc Govcrnments of South Asian countries have been pursuing various policy mechanisms to increase the manpower exports. The issue that needs to be evaluated at this juncture bcfore articulating the oeed for intra and inter-regional coopcration is: whcther the experience of last ten years makes a case for augmenting cooperation in the context of development. In evaluating and estimating the dcvelopment impact of this transaction it will be necessary to state at thc outset that manpower exports cannot be equated with a commodity export in a mechauical manner. For importing as well as exporting country it involves political, social and psychological dimensions which in case of plural societies showing fragile modern social structure with regional disparities can prove to bc counter-productive. Secondly the migration from the developing countries of South Asia to the oil rich Gulf States diflers in more than one sense with thc migration taking place from the dcveloping countries to the developed world. Both in terms of naturc of the migrants-income as well as skills and tho duration of stay, this migration differs conoeptually as well as in its developmcnt con-

notation. If migration can be divided into two categories-settlement and contract migration, then it can be argued that South Asian migration to the Gulf region is of latter kind. ,.It is chafacterized by a job contract that is concludcd on behalf of the workcrs by the employers for whom the workers are to work, and a single visa authorization is usually given on behalf ofa single employer. The duration of the stay is explicitly specified in the contract, normally one year, and the workers usually travel without dependants. Once they arrive in the host country, i.e. the country of employment, the workers usually stay together in accommodation that is provided by the employer."s Deflned this way a cootract migrant will have diflercnt connotation of remittances. His propensity to save and

88 Tru

Perst,rx Gur,n eNp

oDs having its own impact importing eouDtry. In othq of foreign exchange to the

spend is guided by differeot

on tle development profile of words while at the gross level
economies perpetually facing

crisis is a positive gain but the

net gain from subh transfer upon the utilization of the money "whether they will be to augment the investment capital resources of the country is largely by consurnption behaviour of the families of workers and by tbe institutior al struoture that help mobilize do caoital for iovestment...."8t The difference between the grors d net benefit is accounted for by the social cost or negative econo externalitv that results from migration and the impact of on the economy of the community from which the workers come. Ia other words to appreciate the net gains from trancactioo to ths South Asian countries it will be relevant look at the empirical evidence of the utilization of these along with its social dimenslon.

The South Asian experience of wer export shows greater degree of similarity ttran diversity, To look at this experience in a holistic frame, it will be relevant to classify it into its various Broadly spcaking th$e aspects and examine their can be following dimensions:



by the workers and its impact Utilization of the on local economy; i Impact of migration on labour market at aggr€gate and
sectoral level ;


Extent of skill generation an{ the absorptive capacity of the
exporting economy;

(iv) Stability of the export market and remittances inflow; (v) Institutional structure for mopilization of romittancer; and (vi) Impact on the social system,
In the absence of any comprehensive study either at regional or at national level it is difrcult to pro{ide adcquate data support and evidence to quantify the net gains frqm the transaction. Yet an effort is made here to look at tho proble@ based on the fragnentary information and sone studies lookilg at ooe or two aspects of tbe problem. From the different sourcEs the availablc accouat on the utilization pattern of remiltances sllgge$ts a comrnon behaviour in




all oountries of South Aeia. It shofls that the lbrge share of these earnings has so far gone to moot either oonsumption demand' or to wriie-off indebtedness and for the purchase of land and building. Since more that half of the expatriates have gone from low

to satisfy the pent up demand, to rehabilitate the household or to

income cetegories,

it is understandable if the money

was used either

clear the debt burden. It is interesting tbat while these workers show high lxopensity to save during th€ir overscas stay, their propensity to consume goes up in tbe home country. Noticeable imiract of tha remittances induced consumption has been o served in case of local

commodity market and more pronouncedly on the land price' It is apprehended that "rapid changc in houschold consumption pattern nay disrupt the €conomy at the local leveland result in domand'led inflation. In addition, the incrcase in foreign exchango earning may


prove illusory, if it is also accompanied by a corresponding large ioc..ur" in the &mand for imported con$umer goods."m The cmpirical ovidence in support of above contention can be found in these countries. Tbe study of Kerala State in India suggests that "tbs land prices in Kerala, particularly in districts and villages of high migration have registered an increase of 100 pet cent a year since the mid seventies, but th€y cannot easily be documented at the macro-level because of increasing tendency to under' statc the value of land transactions in documents of tranrfer to avoid taxation."s? Similar evidences have been found in BangJadcsh where 56 60 per cent of the earning has been reported to be spcnt on land, construction of houses and buying coosumer durablcs's In Pakistan "in urban areas where housing conditions are extremely poor and millions live in miserable conditions, some of the foreign iemittances have created an extra demand for housing and so urban landowners have made €normous profits, There is a superflcial booo' in construction industry, but 'it has only increased the propensity to import, because Pakistan, produces very little steel and other capital goods of the kind required in building' As a con' seguence house-rents in major cities have increased sharply and land prices have gone up dramatically"'8r In Kerala too, the feudal elements are reported to have gained due to the inflated land prices'ao The impact of labour migration to the Gulf region on the domestic labour market can bc better appreciated at the tevel of disaggregation Being labour abundaot economies, South Asian countries view migration as a sourc€ of employmeot. Since the major scg'


Tns Prnsr,c,N Gur.r ano


What is signiffcant is that adverse impact of tho migration
cording to Paklstan Economic

ment of the expatriates have significant scarcity bas been have gone up of semi.skilled wo

generated shortage of middl unskilled labour in rural areas at within Pakistan underwent a selective nature of out-migration

in human capital logy."!r In India too while tne but at the samc time a few segl perience scarcity of manpower..It team came to recruit nurses in I pitals and other places with large for lucrative foreign jobs. .,This thc important departments and o this thc Law Ministry had to External Affairs Ministries."a2 skill flight was reporred by ON More recently drdin of trained Madras Atomic power proiect 64 engineers and highly skilled su go to Gulf countries. skills such as plant operation and
ment pattern maintenance."43 Unlike the migration to the did not contributo in a signlficant the emigrants, Yot it would be' no change in the skill upgradation been done to cstimate this. going to yet another dcveloping ture within which their workers are working with the multinati do acquire skills even if engaged challcnges when the workers capacity becomes relevant. So far felt this problem in a big way but be one ofthe key issues. In

from ttre unemployed people no , yet there are cases where wages like masons, carpenters, etc. all the economies have felt the f skilled and professionals. Ac. (1983-84), ,,out migration has technicians in urban areas and season. The wage structure transformatio n because of the hich has also affected the investemploycr's choice of technotion did help in providing jobs, ts of labour market did exis reported that when a Saudi a nearcrisis came to Delhi hosumbors of qualilied staff rushing feared to affect the working of on theatros. Perturbed over up the case with Labour and scarcity and complaint of regarding its offshore drillers. and technicians was felt by Kalpakam. It is reported that rs had left the projcct to , "there was shortage in specific entation and control or
countries, Gulf migration developing the skills of to conclude that there will be



far no work seems to have can be argued that despite untry, the organizational struc-


been working specially if they from the developed world, they small jobs, this will create new . Here the question ofabsorptive Asian countries havo not is not very far when this will this problem has started be-


PeNr 9l

coming visible. The issue is reported to have been raised in a seminar organized by the Karachi Chambsr of Commerce and

of stability in the onward-flow of remittances has acquired importance because of increasing dependence of South Asian countries on the remittances. The declining trend in the inflow of remittances has been causing corcern and the governments are taking measures to augment its flow. Evidently an economy like Pakistan cannot even aflord fluctuations in the remittancos' flow. Thus, it is not surprising if a scries of steps have been recommended by the Karachi Chamber. Some of the signiffcant steps are
as follows:{6

Industry.da The issue

1. 2. 3.



Pakistani engineering, construction organizations and consultants in forcign countries should be persuaded to employ Pakistanis. The Government should enter into a package deal with foreign countries employing outside manpower. The counter-trade arrangements can be cxtcnded in this area also. The Bureau of Emigration and Overseas Employment, Government of Pakistan, has fixed a monthly salary of 640 riyals for unskilled Pakistani workcrs. However, thc unskilled workcrs from Bangladcsh, India and Korea arc being employed at a monthly salary of 300/400 riyals. Bmployment of Pakistanis at lower salary be allowed.

Liberal package for import




migrants be

To a greater extetrt the net gains from the remittances can be enhanced if suitable institutional mechanism can be conceived for not

only augmenting the inward flow of the remittances but also for providing suitable channe! for productive investment. While the governments in South Asia do pursue policy for the former, not adequate efort has been made for the latter. In Pakistan like in the Philippines and Thailand, it is obligatory for an emigrant to open bank account before he leavcs the country and a minimum ratio of the earning will have to be remitted through official channels. These countries also provide favourable rate of exchange on remittances and higher interest rate on bank deposits made out of these remittances. In some cases these workers are allowed to open foreign


T\fr Pnnslu Gulr nqo


a facility not available otherwise. Financial instruments are afso uscd fol channelizing remitted savings. In Bangladesh wage scheme was introduced rn 1974 based on the Pakistani Voucher Ssheme. The scheme allows a migrant worker to sell ttie foreign exchange to Bangladesh rate, thus supposedly acting importer at a promium over the ls for scnding money home. In as an incentive to use official . Scheme, custom duty Pakistan under Non-Reoatriable is levied at a concessional rate. Id Iudia too, incentives are giveo t Scheme, and some attractive under NopResident Indian exchange ac€outt at a domcstic


and Unit Truet of India. offers are given by Government The issue that seems to have ncirt received sufficient attcntion by the policy planners and is likely tO emerge as formidable challengc is the question of rehabilitation of the expatriates after they como

back. As pointed out eailier, tbcsb migrants go only for a limited period with the intention of earnifg but settling back in their home country. Already tle ilflow of these expatriat€s has started becoming visible. In this context, it is essential to stress that tho migrant may be the same individual Uut his flnanoial pro0le altogether changes when he retutns. Witb tbe new money powcr he seeks a
correspooding equivalence.in socibty and also in the polity. In other words he would like to assert hir bponomic strength. This assertion can be utilized by providing suitable channels of investucnt, thus

AlternativelY, he may acquire

properties of 'foot loose' popu-

lation having adequate staying chialism- In a socially differen


etbaic oonfliot, parochialism, One regional


wer and seeking refuge in faresociety it may acquire ttre feuds and even growth


Indian Muslims from

in this direction. It observee, Hyderabad does provide somc breed of rich Muslios with petro-dinars is '.Now a whole new pay ary price for land and building in the old city of ready to ntal expansion of tle Marul,ari I{ydcrabad. This break on ttre for community was one roason communal riots in Hyderabad dtring November-December I ,... Incidcntally, the communal the Gulf moneyed Hyderatension was conflned to localitiec
badis lived or where Marwaris Palistan where a good

in majoritY."eo Similarly in of expatriates have come froo





of Hyderabad, Sukkur, Quetta, Multan' Peshawar' the social AtUottuUuO, the stress of nEw wealth is being felt in
fabric.{? The point made here is that while such
a a stress is


what is needed is to make suitable institutional mechanism, opening aveoues for investment for thcse returnees which minimize the
social disruPiion'

The inf,ow of remittances ln shaping the development pattern towards dependency or sclf-reliance has been a matter of debate' It is argued that manpower export has been used by the ruling class of tf,e hbour-."po"tiog countries to acquirc liquidity which is increasingly getting diffioult to obtain. It helps the ruling classes of thc Gulf as will as the international capital looking for cheap manpow€r. In case of Pakistan manpower export has created a trew kind of dependence by changing the orientation of the economy overwhelmilgly in favour of external market. The Pakistani eoonomy has goi ieduced to merely a service platform to be ueed for the needs of cxternal market specially the Gulf'




The relationship between regional cooperation and development needs to be sein at two levels. At one level, regional cooperation global can be seen as response or reaction to either regioual or context, while at other level it can bc viewed as ao effod to meet the structural inadequacies of the domestic system. In the former scnse regional cooperation, in fact, becomes a bargaining strategy for better terms of trade, access to market, larger flow of cxternal c&pital and technology. Io tle second case it becomes a process to pool the resouroes and markct for reaping the advantage of scale' [Io*"o.t, in either case it can lead to development only if it can contribute in reducing external dependence and help in creating internal resilience. Thus regional cooperation by itself cannot ini' tiate any development process. It acts merely as a catalyst in the ongoing pr@css. Viewed in this context intra'rcgional cooperation among the South Asian countries and inter-regional cooperation among thc labour erporters and importers of Gulf and South Asia can be conceived for better exchange of manpower'remittances' From the preceding account it is clear that irrespective of the size and volume, all the South Asian countries arc tryiog their best to pronoto th€ export of manpower' What is interesting ig that io





by intensifying competition.

doing so they are cutting each

market, they arc trying to rcduce their w4ge level . This can prove to be counterproductive. The volume of depends upon the number ofworkers, the wage level and propensity to remit. This objectivc can be bettor served if the countries coordinate their manpower policy, bargain for wages rather than cutting each otber and help each other in the leakage of remittances. Thc rationale for inter. cooperation between the supplier and importer of manpower from a wider premise for promoting relationship to reducc respective dependence ln thc global system. With the myth of power getting over, perhaps it will be easier for the of the Gulf countries to see thc advantages in coopcrating the fellow developing countries. From tho first section of tbis it should havc become clear that even though the labour shows signs of transition in terms of its denoand, the of local manpower to run and maintain the system is not very b ght at least in the short run. In other words, their dependence on manpower will continue. And, of the given suppliers, Asia will continue to remain the cheaper sourco. So far, the la importers have pursued a policy of obtaining South Asian man to the extent they could do, in interacting with the local rce, and have pursued a mechanical view for looking at them pure as bardware. If it is agreed that the development of society cann be obtained by acquiring merely hardware but equally important is the growth of software also, then the Gulf states will have to that an increasing interaction between the workers from the ou world contributes in developing the skills. Here we are to that segment of market which is skill-oriented. The Gulf srates this time should learn from other developing countries' that by training manpower in the latest levet of technology not a sufficient condition for the growth of indigenous skills. hout developing indigenous skills no society can move to self-reliant development. In the global market fon skills, South countries, speciatly India, have acquired a level of to.develop skills indigenously at least at intermodiate lcvel. resources development policy of the Gulf States at present is red either to increase the literacy level or to trbin manpowef sending them to high-skill sectors. There are npither evidences nor the prospects at the givcn

id a not




pattern of development to see the growth of this intermediate skill sector at the wage level which the oconomy can sustain. Though South Asian couotries thcmselves bave sectoral limitation, a cooperative plan between the two regions can be mutually advantageous, ki other words, what is suggcsted here is that in the field of human resource development, particularly skill generation, there is a scope for inter-regional cooperation. This can be achieved by estimating the regional demand and supplies and coordinating their respective policies. It is pointed out that the concept of tumkey contract is gaining currency in the Gulf market, "Unlike traditional recruit. ment agencies a turnkey labour contracting frm will take part in all stages of project, from tender to completion, including providing their own executives to administer the workforce supplied by them. With their knowledge of the most suitable and cost-cffective sources of labour, such Srms can contribute to a bidder's competitiveness because ensuring the supply of an adequate workforce is now one of the important factors in successful bidding. Contractors using labour contracting term. cau enjoy tle advantage of knowing that they can provide the required labour efficiently and quickly."o The growth of tbe turnkcy companies can be a positive step in promoting inter-regional cooperation. In the Gulf countries a number of local companies have come up undertaking the task of construction work in a wide-variety of flelds. In fact there is growing pressure for the protection and promotion of these companies. And there is no denying that unless, a class of entrepreneurs develops in the Gulf, these economies cannot achieve the goal of developing a market-oriented 'Islamic system'. As pointed out above one of thc criteria to bid successfully is to have adequato availability of manpower for thesc contracts comprising of various skills of different hierarchy. A turnkey company is supposed to provide assorted package of skills. In this context a joint company operating at interregional level can be of advantage to both the regions, while it will ensure to the local company from the Gulf to bid at a competitive level because of ensured availability of skills. It would be of benefit for the South Asian region because a company operating at a re-

gional level will have workforce of various nationalities of the region without disrupting any sector of the labour market. In other words, a complementary role of skill supplies is visualized here bctween South Asian and Gulf companies. These companies can be from the state sector or a joint sector. Obviously tle process of





collective efort$ cannot be left tb the market forces. It will have to be initiated by the governments $hich in turn mcats it requires a greater degree of understanding 4mong the go.vernnents of the two regions.

NOTES 1. For


paper Gulf States mef.n Saurli Arabia, Kuwait, UAB, Qatar


and Bahrain. R.P. Shaw, *Dligration and Em$loymeot in tbe Arab World: Construe

tion as Key Po{icy Variablc," llnternatlonal Labour Rzview, vol.


J.S. Itirks and C.A. Sintle,)t,


Manpo*er: Tfu Crisis of Dewlop

nent (I'andoa, 1980), p.358. 4. N . A. She'rbiay, "Expa8iate Labdur Flows to the Arab Oil Countries the 1980s," Tha Middle Eatt Joufnal, Yol. 38, NG 4, 1984.
5. Ibid., p.667. 6, n.4, p.636. ,7 ,.The New Nomads; Manpower ih trc
1983, p.29. 8. J.S. Ismael, 9. n. 7, p.30. 10. 11.



The Middle East,Febrwry


wait Soctal CIanAa ln Htsto cal Perryecttte, p,125,

limei, Zu Apfil rY6t. Khaleej Times 2O APril 19E3. Saudi Construction, MEED Spedal Report, Octob€r 1985, p.2, Sbaw, Mobillsiag 12, R. Paul Sbaw Mob lsias Eflntei Resowces tn the Arab World (Lotdon,


Khaleej Zlnes, 6 MaY 1983.

14. T.C. Niblock, Oil E@tonu at d

tue ln the GBtf Area,

Impoct of, Social and Polttlcal Str$cpaper).

,.Oil for







18. 19.


Novemb€r 1978, I.S. Birks and C.A. Sinclair, " Aspoct of thc Labou Market in tbe Middle East with Special to the Gulf States," The Journal of Development Areas, Apfil 1979, I.A. Sirageldtrn et al., "saudis Transition 3 The Challenges of a ChangPublicatlon, 1984, p.53. ing Labour Market," World I.A. Sirageldln et al., and Int€rrational tabour Mi$ation in thc Middle East and North " World funh Publlcation, p,68. Middle Et*t Economic Dtgesi, 7 1985, p.21. Mid.dle East Economl. Dtgest, February 1984. Pakittai and GuIf Eeononlst, October 1985.
Pa*tstan Ecaaomic SrPrey,






23. Far Eastern Economic Review, 13 September 1984, p. 60. 24. lbid. 25. I.S. Gulati ard A. Mody, ',Remittarc€s of Indian Migrants to the Middle Bastl An Assessment with Special Reference to Migrants from
Kerala State," CDS Working Paper No. 182, 1984.

26. Ibid. 27. Indian Labour Year Book, 1984. 28. R.R. Gopinathan Nair, ',Asian Emigration

to the Middle East: Emierations from Kerala," Centre for Developmelt Studies Working Paper No.

29. n.25, p. 13. 30. Ibtd 37. Mid.dle East Review, Annual Number 1984. 32. W. Mahmud aod S.R. Osmani, .'Impact of Emigrant Workers'


tano€s on Bangladesh Economy," The Bangladesh Development Studies,

33. The Middle East, February 1983, p. 32. 34. Udam Kerdpibule, "Remittances from IDternational Imigration: A Summary of Findings and Issues for Labour Exporting Developing
Countries of the ESCAP Region," Econoitic Bulletin for Asia and Pacific,

Vol. )OO(N, No. 2, 1983.

35. Ibid. 36. J. Addleton, !'The Impa€{ of International Migration oD Economic
Development in Pakistan," Asion Survey,Vol. XXIV, No. 5, May 1984.

37. Gulati and Mody, n. 25, p.33. 38. A.R,M. Anwar Hussain, .'Remittances from Intemational
and J. Rashid (eds.), Pakistan: The Root of Dictatorship.

Labour Migra-

tion: A Case Study of Banglailesh," Mimeo, 1984, p.46. 39. J. Rashid, ..Political Economy of Man-Powex Export," in M. Gardezi

4O, C.


Achuta Menon, "Kerala's Bett€r Gold," Patriot, 27 July 1983. Paktsian Econontic S nel, 1983-84, p. lO.

42. Indian Express, 18 September 1983, 43. EconomicTimes,6 October 1984. 44. Paktstan and Gulf Eunonrirt, 12 October 1985. 45. Ibiil., p.20. 46. Syed M. Hasan, ,.Indian Muslim and Foreign Bxchange Remittances: A Sample Survey," in fowtal of Institute of Muslim Mlnority Afairc,
(Jeddah), Vol. 3, No. 2, 1981,


47. Iamil Rashid, ..The

Political Economy of Manpower Export" in Gardezi and Rashid (ed.), Pakistan: The Roots of Dictatorship. Pakistan-Grlf Economist,lT August 1985, p. 547.


fslam as a Cohesiv$/Divisive Factor in Gulf-South Asia Copperation

Muoh has been said about religion especiatly Islam, being a cohesive force. But this talk has bben, more often thdn not, on ao emotional level, not on a rigoro[s lntellectual level. Religion, at times, might prove a cohesive or a,t timos a divisive forcc depending on maoy factors. Nobody can rej$ct out of hand the proposition that in certain situations religion froves to be a uniting force. On the other hand, it would be equ[lly untenable to throw out the hypothesis that rcligion emerges af a divisive force. This can best be understood if one bears in min{ that often religion is made to play an instrumcntal rather than a determinativc or a causative role. Of all the present world religio{s, Islam is more oftcn claimed to bc an integral part of Muslim polity, the two being, according to this hypothesis, of inseparablonesf of religion from politics. Islam ls not taken in the sense of providNr of certain guiding values; it is rather taken in the sense of religidn with all its doctrinal paraphernalia including rituals. Thus an Islamic state is expected to enforce salat (prayer\ and, saum (fasting) {s well as a set of other rituals. In certain cases the concept has bcbn so stretched that as long as a ruler, howsoever tyrant hc may bd, enforces sclaf, rebollion against him is prohibited.l There is a whdle corpus of hadith from which diferent functions ofa state could be, and have been derivcd. It is another question altogether as to how reliable the corpus of these ahadith (sayings and doings of the Prophet) is. There has been a dissenting view as well. According to this vicw it is rot doctrinally correct to $aintain that religion and politics are inseparable fmm cach other. ft points out that the Quran does not give the concept of a state bu! only the concept of a society. Similarly 'Ali Abd alRaziq of Egypt also believes that development of Islamic statc was a historical faqit, not a doctriual or theological

requirement, However, one must admit that overwhelmiog majority maintaias the proposition of inseparableness of the two. The recent attempt at revival of religion in the Islamio world has further strengthened the view that religion is mainstay of Muslim politics and that it is a great cohesive force. However, the concern here is oot to prove or disprove whether religion is mainstay of Muslim politics, the concern is its being cohesivs or divisive force in Gulf-South Asia cooperation. The recent developments in West Asia have provided interesting dimension to this issue. 'cohesive nor diviReligion, or aDy other ideology can be neither sive foroe per sc. Much depends on objective developments. Theo' logical or ideological view not only reverses reality, it also gives it an air of finality, On the other hand, an empirical view takes into account all the relevant factors, including changing situation, Truth is an integration of the ideological and the empirical, unlike reality which is mere empiricism. On the other hand, if truth is divested of empiricism, it becomes pure theology/ideology. Empiricism does not provide cohesiveness, though it may bring about divisiveness. For cohesiveness, theological/ideological dimen-

sion is necessary and it is in tlis sense that Islam and Marxism claim to cstablish international solidarity. It is theological/ideological, not empirical, which has an emotional appeal. However, it must be clearly understood that theological/ideological cohesiveness cannot be sustained in all empirical circumstanc€s. With the changc in empirical circumstances cohesiveness may yield to total divisiveness. A developing/dynamic situation, therefore, is hardly expected to retain religious cohesiveness. Quite often even intra-regional cohesiveness cannot be sustained under pressurc of developing events, let alone inter-regional cohesiveness. Divisiveness might emerge either on sectarian linguistic or on cultural lines. No religion has ever remained incessantly monolithic under pressure of events. The best example one could provide is that ofPakistan. All Muslims, or most of them, if not all, seemed to be united before the formation of Pakistan. There seemed to be tremendous emotional upheaval among the Muslims. However, soon after the formation of Pakistao, clcavages began to develop, first along the linguistic and then along sectarian lines. Jinnah was shown black flags on Urdu being made thc national languagc of Pakistan whcn be visited Dacca in 1948.8 Cleavage along sectarian lines was also to follow soon. Riots against Qadianis in Lahore and other parts of Punjab broke out in

100 TIG


Gwr er.lp Sotrm Asn

March 1953. Justice Munir report baid : "In thc beginning of March 1953, widespread distrubances brdke out in the Punjab which in some places continued till the mid{le of April 1953. These took so alarming a turn and assumed such a mcnacing form that in several places the military had to be called in, and in Lahore Martial Law had to be proclaimed whioh reqained in foroe till the middle of May 1953,"4 The feelings ran so hlghtbat even certain district units of Muslim League disqualified Ahrlnadis frorn its membership. The City Muslim Lcague, Kamoke, foi example took such a step and it decided to rusticate from the Lealue all the Ahmadis and that no Ahmadi should in future be eligible for membership of the League."E The League took this step whoso president Jinnah after the fordation ofPakistan had declared : "In any case, Pakistan is not going to be a theocratic be ruled by priests with a
divine mission. We have manv
us, Christians and

Parsis-but they are all Pakistanis. will enjoy the same righrs and privileges as any other citizen,"s ( rasis supplied) Ahmadias may or may not deserve to be called .s, they certainly deserved to be citizens of Pakistan. Ho equal , the religious cohesiveness certainly showed signs of strain under the impact ofthe developing came under more and situation, proving our thesis. This changing. more strain as the situation kept position of Urdu, it ultimately East Bengal not only resented itself to be an indepenbroke off from West Pakistan and and culture. This violent dent nation with its own distinctive West Pakistan was the result of snapping ofties with a coroligio great deal of socio-economic which occurred in Pakistan not a sudden development in any since the partition. It was case. The matter of Ahmadis also not remain where it was. Thev also came to be persecuted more more, Today they are cvet banned to recite kalima (the holy ormula of Islam) and call th€ir places of worship as mosques. General Zia issued a martial ordinance in April 1984 which forbids the members of the community to call their places of worship mosques, to use azan (call to prayer) as call to prayer and to use other M symbols. The present ordiit a criminal offence r thc Ahmediyas to practice their nance makes r€ligion according to their belief.? are arrested for displaying kalima arcrund their neck or their place of worship mosque. The sectarian conflict the Shi'a-Sunni form as well.

The Islamic revolution in lran has given it a sharper edge. Thus in the month of Muharram in 1984 the city of Karachi cxperienced violence between Sunnis and Shi'as during which several persons wcre killed and property worth lakhs of rupees dcstroyed, ShiaSunni riots have bccome an annual feature. "Even if the govcn-

ment were not directly responsible," says the pamphlet of the Pakistan Democratic Forum, for instigating the strife, it cannot escape the blame because such clashes become inevitable in the climate of religious particularism and fanaticism which has been engendered by the regime's policies and pronouncements.s The divisiveness is not conffned to .heretical sects' like the Qadiyanis and the Shi'as. It has spread to various orthodox Sunni sects also. The pamphlet goes on to say, ..The clash betwcen groups of Deobandi and Barelvi Sunnis in Lahore during the past ycar (1983, A . E.) also had a ring of mystery about it, for despite their age-old doctrinal diferences the two groups had never resorted to this type of violence, Many political observers have suggested that these sectarian conflicts have been promoted by the government itself to keepthe population embroiled in base issues rather than participate in political protests"0 Be it as it may, one has to agree that these sectadan conflicts have been developing under the impact of changing political situation. Religion, which is sought to be used as a cohesive foroe, turns into sharply divisive one in the face of uncontrollable empirical developments which cannot be controlled ideologically. Under certain situations before and immediately after partition, religioo did prove to be a cohesive force, But economic and other developments induced nationality-consciousoess, especially among those who have been left out in tbe economic race. Mainstream religion being one, polarization begins on the lines of nationalities based on region and language and theological idiom begins to be replaced by nationality idiom. During my visit to Pakistan in 1986,10 I clearly felt that the people were more concerned about nationality question rather than religion. People of smaller nationalities like Sindhis and Baluchis are acutely aware oftheir being discriminated against in economic and political sphere. They did not seem to be very much enamoured of their common Islamic bond with the Punjabis whom they saw as their oppressors though of course they have profound respect and regard for their religion. My observations are also borne out by a rocent report from Balu-


102 Trs

Psnsretlr Gur-p



chistan. According to it "After of quiet enforced by military rule Baluchistan is witnessine a re-emetgence of nationalist demdnds that made the orovince the 'soft underbellv' of Pakistan... One of the most dynamio natiohalist revivals is by the Baluch Student Organization (BSO), has demanded autonomy for the vast province bordering Iran add Afghanistan. The BSO is still banned. But mor@ than 5,000 of it$ members held an open convention here last May....'We are not treated equal citizens of Yasin (Newly elccted Pakistan', of BSO) told Reuters in

a university hostel, 'We



slavcs. We are asked to

from other provinces are coming find jobs in the Gulf, while here and taking work away from us', he said."u is quite well known. Sindhis The question of Sindhi natr Pakistan. To quell the recent upriding, Zia's martial law regime did to the Sindhis what Bhutto had dcine to Baluchistan. Thus Pakistan Demooratic Forum's booklet on Pakistan says:
The Sindhi natlonality has been a special target

of the military

regime's oppression ever since the latter came to power in July 1977. However, this oppressio4 has been heightened markedly
since the Sindhis rose in a mili[ant matuer in response to the MRD's call for civil disobediencd in the fall of 1983. The 'mopping up' operation launched in rural Sind to punish the population for participating in the movement stlll continues. Army troop strength in Sind has been markedly incrlased, military installations have been erected and the province lopks like an armed camp....A reign ofterror has been let loose in rurdl Sind. The Sindhi weekly Hidayat has cited several incidents in lwhich Sindbi women have been arrested by security forces and bleld as hostages in order to force the male members of their families to come out of hiding.tz

Religion in such acute situatiqns not only loses its cementing power but also its legitimacy in tde eyes of the people. This feeling was epitomized in his Delhi speec$ by Abdul Wali Khan, leader of Pakistan's NAP and son of Khan Abdul Ghafar Khan when he said that, .,the so'called Islamic sjstem being imposed on the people of Pakistan was against the tenets of Islam and was supported by a handful of mullahs who were in tle pay of the Government drawing salaries equivaledt to that of the $hief Sedretary Grade." Launch-


Alr Excrxrnn


ing a crusade against the paid 'mullahs' who were earlier in the pay of the British empire and now drawing their beneffts from US imperialism, Wali Khan blamed them for the partition of India and that of Pakistan and for all the miseries attending the Muslims in the.Indian subcontinent.ra Similarly writing in The Star (Pakistan) Bulleh Shah says very pertinently: "Pakistan has been ripped apart on religious grounds. What is keeping it together is not religion, but politics, culture, and history. What thc Ulema have bcen preaohing is not the deen of Allah as revealed to His final Prophet, but fanaticism, violence, and bigotry, of the Jahiliya (pre-Islamic period of ignorance;. Islam has been reduced to 'ritual prayers, harsh punishments, atd holy levies recovered arbitrarily from the middle income groups. Or the desecration of other peoplc's places of worship, or thc denial of human rights to the minorities and weaker sections ofthe Pakistani so'



would be patently wrong to think that religion, in all

circumstanccs can be a cohesive force. Its cohesiveness yieldstothe

development, both political as well as economic. This as brittle as that brought about by any other factor. It is neithcr superior nor infcrior to any other factor. Whilc framing any policy towards Pakistan or any other Islamic country, this fact is to be borne in mind. It is though necessary not to ignore religious sensibilities of masses.of people, one need not be needlcssly overawed by religious games that politicians play. It may be, on the other hand, necessary to call the bluff and this certainly would bo in the interest of thc people.
cohesiveness can be

As pointed out earlier, Bangladosh violently broke off from Pakistan, Right from the day of formation of Pakistan, religion provided very tenuous bond in case ofthis region. Regional culture and language, rather than religion, was a cementing force in case of East Pakistan. Religious cohesion was only a temporary phenomenon. At the end of 1950 Fadul Haq, the lion of Bengal, wrote to a friend in a letter: 'oThe gods of Karaohi seom convinced that the people of East Bengal are no better than goats and may be slaughtered with impunity..,. They think that East B€ngal contains only milch cows aud that tie Royal Bengal Tiger is dead...."15

104 Tns Prnsnn Gur,r exo Sours


The above lettor gives clear indi$ation of the minds of the leaders of East Bengal towards West Pdkistan rigbt from its inceprion. During the war of cessation the pgople of East Pakistan were really slaughtered like goats by the ,god! of Karachi' as put by Fazlul Haq in his above letter. Religion thu$ in oase of Bangladesh stood no better chance of $aving the crumbling unity between the two units of the then united Pakistan. It is also intenesting to note lhat Fazlul Haq called himsclf a "proud member" of the "great Bepgalee race" while paying tribute to Rabindranath Tagore in August I94l.lu The experience of many Muslim countries in recent times c[early shows that linguistic and cultural bonds are far stronger thpn those of religion. The Bengali Muslims, any observer would be4r it out, are quite religious and very faithful to Islam. Yet, cultur{lly and linguistioally thcy are so

different from other Urdu speaklng Muslims of north India that they were always looked down upgn as some kind of second class Muslims not deserving equal sta{us with them. Whether it is due to their backwardness, poverty and low caste status is a matter of another debate. Oultural and linguistic bonds ndt only prove more cohesive, they also reduce the impact of religiqus fanaticism. Though Bengali Muslims are, as pointed out highly religious, one would conspicuously notice absence of us fanaticism among them. What is termed as 'religious talism' also did not find fertile ground there. Fundamentalist could achievc aggressive postures in Pakistan but the Gover.'ment, deppite some eforts, could not give it that turn, Even a comparison between official Islamic literature published from Pakistan atrd that published from Bangladesh also clearly this out. The Islam projccted by Bangladesh litorature.is far morb human and lacks fundamcntal doctriaaire approach and "theoldgical correctness", though it is more true to Islamic teachings. it should be noted that there was no attempt to enforce, unlike the Islamic punishments in Bangladesh. It is also a fact that political misuse of religion has been far greater in Pakistan than in tle latter country, To provide empirical for this is a stupendous task and it is not the subject of this pa . However, one can make one or two observations. When an rcligion becomes an important ingredient and an operative factor the formation of a native cultural tradition, such tradition is re likely to yield to religious

pressures than a native tradition which absorbs certain values and rituals of an alien religion without yielding its nativity' The Muslim Bengali culture is, by and large, of latter variety whereas the north Indian Muslim culture is, of the former one, The South India Tamil

Muslim and Kerala Muslim cultures resemble the former. The South India Tamil Muslim and Kcrala Muslim cultures and North eastern Kashmiri and Assami Muslim cultures also fit into tho latter category of well established native culture absorbing alien religious traditions. It would also be worth nothing that like the Bengali Muslims, Tamil, Kerala, Kashmiri and Assami Muslims are also deeply religious and faithful to Islam. It is a wroDg pcrception that cultural nativity reduces religious faithfulness, or even religious orthodoxy, for that matter. Nertvs Cur,rr;nr Hvpounsts

I would like to propose a hypothesis which can be empirically tested that whcnevcr a native tradition absorbs an alien religious values and rituals, the synthesis is likely to produce more humane and less fanatic religional cultural tradition than otherwise, i.e. when thcological religion seeks to play a dominant role and absorbs native culture as its passive ingredient. In the latter case fanaticism becomes a dominant trait. I am also of the view that fanaticism is as irreligious as irreligion itself. Fanaticism ismore socio-political than religious in orientation. Orthodoxy can also not be always cquated with fanaticism. The distinguishing line may often be thin, but it is nevertheless there. There would always be some variants and exceptions but that does not falsify the above hypothesis.
TnB Gur-r CounrntBs

For an outsider Muslims are a monolithic community and all the Gulf countries are united by virtue of their religion. It is far more true if the observer happens to be hostile towards Muslims' Two hostile communities, it is interesting to note, always look upon another community as monolithic and one's own community as deeply divided. The impression of unity and solidarity among Muslim Dations has increased since the emergence of fundamentalist Islnm. The whole Islamic world is seen as united. However, any shrewd observer of the Islamic scene knows this is far from true.



Gur.r eNp


Emotional unity must not be with the unity of interests, The former unity crumbles as as the cause of emotional upheaval vanishes. The countries the Gulf region like Iraq, Iran, Kuwait, the two Yemens as well other countries of West Asia like Saudi Arabia, Syria, Le n, etc. are deeply divided against each other and if some of are united, it is more because of their common interests tlan on religion. The countries of the Gulf Oooperation Council IGCC) also bound together by their common interests. Otherwise whv should they not include Iran, the largest country in the area. Islamic fundamentalism itself is not a homogencous phenomenon. Its lranian variety is not merely from the Saudi one; the two confront each other directlv Again, tle former one poses powerful ohallenge to the hegemony in the region whereas the latter one pcrceives it to its main ally and hence befriends it in all possible ways. Writing t thc Iranian fundamentalism Claudia Wright says: ,.They (i.e. udi Arabia and its allies) believe that Islamic fundamentalism. at in its Iranian Shiite form, is a subversive and expansionist ogy that can only be stopped by force, and that sectarian conflict Iraq's Sunnis and Iran's Shiitc made war inevitable in I and, flve years later, impossible to halt. Ever since the Islamic was establisbed, statements by the Ayatollah Ruhullah Kh and Iranian Government ofrcials have helped to reinforce this tion,"r? In fact Claudia Wright is not cofrect io saying that it is mcre sectarian conflict between Sunni and Shii lran. To any keen observer it would not take long come to the conclusion that it is essentially conflict of interests. otherwise could one explain close cooperation between Sunni bya and Shii Iran? Even Iraq is not wholly Sunni. Nearly sixty of its population is Shi'a. Despite six years of war with Iran nitiated by Iraq there have been no serious signs of revolt by the hi'as of Iraq against its Sunni reginie led by President Saddam Nation statcs have come to and it is national interests, not religious or sectarian itrterests determine cooperation and alliances. Only those who close eyes to reality would deny this fact. Pan Jslamism in the f rm of slogan has always been with us. But it has been a tro mote, no less. Communist internationalism also did not any more viable. Islamic inrernationalism, like Communist earlier, aay be a




highly desirable phenomenon for the ideologues but

in a world which is highly unevenly developed economically, empirical moment dominates ideological momeDt. In fact no ideologue should ignore
this empirical reality. Here it would be quite important to take into account the increase

in the volume of sale of armaments in the Gulf region in order to understand tbe true dimension of the problem. Robert C. Johansen and Michael G. Renner say:
Indedd, far from being a static flow to the region, US arms sales have multiplied. In the first half of the 1970s, they averaged $3 .2

billion per year-more than the total accumulated sales ($2. 3 billion) ovcr the previous fifteen years. From 1975 to 1979 arms
sales tripled to an average of $8.9 billion per ycar. Annual arms imports to the Middle East jumped from $2 billion in 1972 to ovet $15 billion by 1982 .... In recent years, the Middle Eastern count' ries have spent $50-60 billion for military purposes each year. Syria, Libya, Iraq, Egypt and Saudi Arabia have occupied the ranks ofthe world's five leading weapons importers since 1979'18

It is undoubtedly true that Amcrican machinations are largely responsible for this scenario in thc Middlc Eastre but one cannot completely exonerate these countries of guilt. They entertain deep sense of insecurity against eich other. All thcse arms bave been
piled up not to fight against Israel, the common enemy of the Islamic world; they have been and would be used against other Islamic countries. Iran today is most dreaded by all the Arab countries and siucc the revolution in Iran there has been a fundamental change in alignments. Iraq which was a sworn encmy of Saudi Arabia has moved close to it and receives from it generous financial aid. Saudis see it in their own interest to finance Iraq to fight awar
of proxy against lran, Again, it is common interest, not commonality

of religion which have brought the two erstwhile arch


together. Today Pakistan and Saudis are quite close to each other for no other reason than commonality of interests. Both are in American orbit of influcnce and both desire Americao presence in the region. Pakistani soldiers, it is common knowledge, provide personal security to thc Saudi rulers though it has been officially denied by Zia. Pakistan has not been as close to any other Islamic country in tbe

108 Trc PBsrlN Gur.r eNp
region. The Zia regime most Palestinian cause in order to

and blatantly betrays the
Americaa aid, both flnancial

and military, With the change regime in Pakistan, which is likely, the relations with Saudis cool off as perception of interest may not remain tbe same beforc. Also, had religious cohesion an effective foroc the Palestitrian cause would not have been so tantlY betrayed by many Arab countries. In case of Palestine it not only common religion but also common language and cul Even then it would be no exaggeration to say that as many Palestiniaos were massacred bv Jordan and Syria as by Israel. J turned anti-Palestinian wheu its stability was threatened and the Palestinians in September 1969-for that reason it came be knswn as Black Scptember. Similarly Syria tried to decimatc when its hegemony was in peril in Lebanon, The and the Shi'a Amal are killing each other these days, though stand for revolutionary change in the region. Thus one can see that religion ig not a predominant factor in cooperation between Gulf countries hnd South Asia although by no means it is an unimportant factdr. While common interests are ccrtainly most important in cooperiation and alliances, religious sensitivity should not be ignored. It ip one thing to take real interests into account, it ls quite another to respect religious sensitivities. One cannot forget that whatever t$e behaviour pattern of the elite, masses are deeply religious and po ruler or regime, howsoever powerful, can ignore tbe religious sintiments of the common masses, This remains the common deoomi{ator in all the situations. Aoart from other things the Shah was thrown out as he repeatedly offended the religious sensibilities of the Muslim masses in lran. Tbe shrewd rulers are those w$o judioiously combine material interests with religious sensitivity aE one or the other might become an overriding factor in a fast chanling situation. It is not always possible to prescribe any recipe for it. It is only shrewd judgement wbich helps. Even an ovordoze of religion in a fast deteriorating situation may not help as the oase irf Numeri in Sudan shows. In order to save himself Numeri began td impose Shariat most rigorously. However, the game was seen throug! and he was thrown out through a massive revolt. On the other hand at the height of prosperity the Shah of Iran was thrown out as he did not respect the religious sensibilities ofthe people. These tnio contrasting cases clearly show

AscHAR Ar-r ExcrNnm. 109

how necessary it is to have a shrewd judgement and a judicious combination in such matters,


See Asghar


Engineer, Islarrtic State (Delhi, 1980).


Qamruddin Khan, Al-Mawardi's Theory of the Siate, BazE€ Iqbal, Lahore, n. d., p.4.

3. C.M. Naim (ed.), Iqba!, Iinnah and Pakistan: The

Vision and Reallty

(Syracuse University, 1979), p.98. See Report of The Coart of Inquiry to Enq ire into the Punidb Distutbances

(Lahore, 1954). p.l.
The Emergence of Pakistan (New

5. Ibid., p.94. 6. Chaudhry Muhammad Ali,



7. Se

Pakistan: Severe Detelioration in Euman,Rigfrts, Pakistan Democfatic Forum, November 1984, Jamaica, USA, p.10.

8. Ibid., p.12. 9. Ibid' 10. I was in Pakistan during March 1986. 11. See Reuter's repot "Baluc,histan revlves natiooalist
India,12 June 1986 (Bombay edition).





12. See n.7, pp.l2-13. 13. See his reported speech "Islam Misused by Pak Mullahs" in Times of India,2 laatrary 1986 (Bombay edition). t4. S'ee Bulleh Shab "A Pak View of Ayodhya lssue," The Star, reproduced ir Times of Indn,8 April 1986 (Bombay edition). 15. Quoted by Rajmohan Gandhi ir Eight-Lives: A Stud! of the Hindu-Muslim
Enco un

r (D elhi, 1986r.

16. Quoted by Rajmohan Gandhi, Ibid., p.203. 17. Claudia Wright "Rcligion and Strategy in ths Iran-Iraq Wat," Third World 18. Robert C, IohanseD and Michael G. Renn€r "Limitiog Conflict in the
Quarterly (London) Vol. 7, No. 4, October, p.839.

Grlf," Third World Quarterly, Vol. 7, No. 4, pp.807-8, cf. Joe Stork, "Tho Carter Doctrine and US bases in the Middle Basf '. MERIP Reports, 10(7) S€ptemb€r 1980, p.4 and World Military Expenditures and Arms Transfers 1972-1982, United States Arms Control and Disarmament Agency, Washington D.C,, April 1984, p.55, Figures in current dollars, 19, Joe Stork and Martha Wenger, "US Ready to Intervene in Gulf Wat," MERIP Reports, lU (G-7) July-September 1984. It has been suggested that Iraq's decision to go to war was encouraged by the United States, which wanted to takc advantage of the revolutionary chaos in Iran in order to replace Khomeini by Shahpur Bakhtiar who was in Baghdad at the time of the Iraqi invasion. cf, Third World Quarterly, op. eit , p.810.


Political Economv

the Gulf States


The Gulf states became they decided collectively to followed by a rapid capitalist which has no parallel in world poured in from oil revenues has Invcstment has been made not o ture but also in some of the surplus money has also been in integrated the Gulf economie s small private capitalist sector states. Thus has started the merchants and tbe tribal regimes constituted by kings an experienced by Saudi Arabia, Arab Emirates and Oman. The oil price hike of l9?3 was against the imperialist powers. and Iraq forced nationalization control over hydrocarbon did not opt for nationalization. greater participation in oil levels of participation achieved the foreign companies aro not the The two methods of struggle, against the imperialist powers are ence cao be traoed only to the

t for the first time in

oil prices.

1973 after Independence was

ormation of their economies . The enormous wealth that bstered capitalism in the Gulf. in construction and infrastrucmodern industries. A lot of in foreign banks, which has the world capitalist system. A developed in some of the Gulf

of embourgeoisment of the , and also of the monarchial princes. This process is being
, Qatar, Kuwait, the United

after a prololged struggle rise of nationalist forces in Iran and gained partial to full The other states in the Gulf r strategy was to demand from the oil companies. The tbe 'existing relationships with

in each ofthe Gulf states. nalization and participation, y different. The differstructufes of the respective




One major determinant in state formation is the role of Islam. Islam has manifested itself in disparate ideologies. In lran, Islam has been informed with a revolutionary character. It claims to reject authoritarianism and identifles with egalitarianism, respecting, at thc same time, the right to private property. In Iraq, the Baathist



pan-Arab nationalism is

the ofrcial doctrine of


regime, In Saudi Arabia, both the monarchial state and the ulema are ardent supporters of Wahhabism, In Oman, the state religion is lbadism, the tbird as well as the smallest of the three major divisions of Islam. Each of the different maoifestations of Islam ls reflected in the changing inner structures of Gulf societies and iu the capitalist transformation of their economies. Islam also acts as a contradiction between the rapid formation of the capitalist base of these societies and the sharp lag in the corresponding evolution of a capitalist ideology and its psychological manifestations. An analysis of capitalist transformation, the process of embour' geoisment and the role of Islamic ideology is necessary to under' stand the process of state formation in the Gulf region. State formation in the Gulf is not homogeneous in style and character. Each state has an ideology of its own and a history quite diferent from the others. And ideology and history are meshed with the pro@ss of embourgeoisment and the nature of the regimes. This paper attedpts to study the political economy of statcs in the Gulf, The ffrst section is devoted to an overview of various Marxist and new-Marxist tbeories of the state. In the second seo' tion, the oil factor and the rise of nationalist forces are analysed. A comparative a ssessment of state formation in the Gulf is attcmpted in the third section.
PoLrTrcAL EcoNouv

or Stetr

Marx did not work out a systematic and formally complete theory of the state. Lenin's most famous pamphlet, 3'The State and Revolution," written on the cve of the Bolshevik Revolution purports to be a restatement of the Marxist theory of the state. Lenin viewed the State as au instrunmnt of a ruling class, so called by virtue of its ownership and control over means of production. The new Marxian tbeories reject the instrumentalist state oflenin. These theories also challenge the idea of a universal theory of the state or a single version of capitalist state. They argue for specifc historical analysis




Gulp eNp


within the univetsalistic relating to the state and to oapitalist societibs. The new Marxian theories of thp capitalist state of the developed oocieties are derived from epistemology rooted in class major clntribution on the theory of the The Poulantzas theory is based on the crucial social of class struggle, and not independent of ig as perceived by other new Marxiao theorists.s The statc is the materialization and condensation of class relations. The state is a class state. The t class makes conscious attempts to influence and control the state as an obiect of its socio. economic power. But becausc ofthe existence of class struggle, tle state must appear to be a us from dominant class power in order to retain its very legitimacy as a state. Thus the state can, at one and the same time, represent tle interests of a conscious dominant class and still be a site for clfss struggle. Tbe new theories of the capitaliFt state perceivc the c'lass struggle in terms of its historical applicalbility. The attribute of historicity is totally contrary to either abstr{ction of the state: Althusserian structuralism or Leninist imperiallsm.s The most valuable contributions on centre-periphery linkag4s aid hence the evolution of a dependent state are made by Gun{er Frank and Samir Amin.a In the dependency view of Fradk and Amin, the stete in thethird world is seen as an €ssential instrtrment for administration of the dependent role of these economles in the international division of labour and the capitalist world process of capital accumulation. Amin difers frour Frank in ond important respect. Frank argues that the metropole monopolics the transition from the first to the seoond phase of im i.e. from raw material exploitation to industrialization in the due to contradictions in metropole development. Amin the Frank thesis and argues that industrialization in the is a result of national liberation movements wherein the pcri bourgeoisies won from imperialism, tbe right to ind The most important ofthe dependent state in analyses madc by Frank and Amin is the local bourgeoisie is relatively weak and the state is relatively and autonomous in regard to local bourgeoisie. Frank thc that the local bourgeoisie is in relation to the compared to the imperialist subservient tho metropolis, bourgeoisie of
oapitalist state is made by Nicos
perspective analysis.



Bnmceve ll3

Cardoso and Faletto have critically reviewcd Fraok's and Amin's theses.6 Thcy agree that periphery development is conditioned by capitalism as a world system. But they reject the theory of dependetrt capitalist development and the idea of permanent stagnation of the periphery due to narrowness of internal markets, They provc convincingly that internal markets are not constricted in the peri' phery and the wages in the periphery tend to rise and the looal bourgeoisie tends to strengthcn. This brings Cardoso and Faletto to postulate that the state is the instrument of imperialist penetfa' tion but only to the extent that the exploiting bourgcoisie can



hegomonic bloc that ovetcomcs resistance to deepening


The theory of the capitalist state, as postulated by Poulantzas and the dependency theoristsn converge at one point-the rise of authoritarianism. According to Poulantzas, alrthoritarian statism indicates "intensifiod state control over every sphere of socio'economic lifo

ooubined with the radical decline of the institutions of political democracy with draconian and multiform curtailment of so called 'formal' liberties." Authoritarian statism is bound up with tbe periodization of capitalism into distinct stages and phases. It corresponds to the current phase of imperialism and monopoly capitalism ia the dominant coutrtries, in the way the liberal state oorresponds to competitive stage of capitalism and the various forms of the interventionist state to the previous pbases of monopoly capitalism. The implications of authoritarian statism aro a decline in importance of legislatures and a transfer of power to the executive; decline in the rule of law and a fusion between various apparatuses of the state-legislative, executive and iudiciary; declining role of political parties. In the periphery, the authoritarian state comes into existence because of a weak local bourgeoisie which fails to establish its hegemony and hence cannot maintain power through democratic forms ofthe state. The strength of foreign capital and m€tropole states and their unwillingness to allow atrti-imperialist control of demo' cratic states pusheis and helps the local bourgeoisie to establish bureaucratic authoritarian regimes, regimes that are much beholdcn to the real powor of foreign tath€r than to local capital. From the above roview of the Marxian and neo'Marxian postulations of the capitalist and the dependent state some important formuluious €merg€ that can be helpful in analysis of the Gulf


Tnn PsRsrAN Gur,n aNp Sourn


States: The capitalist state is a product of ctass struggle representing the interests of a conscious dohinant class; the capitalist statc is seen in terms of historical applidability of olass struggle. The de_ pendcnt state is scen in terms of a historical evolution of a depen_ dent centre-periphery relationship; lndustrialization in the periphery is a result of national liberation mlovements; there is no permanenl stagnation in the periphery due to dependent capitalist development; the dependent state is an instrumedt of imperialist penetration but only to the extcnt that the peripherhl exporting bourgeoisie can organize and resist deepening dependenoy. Finally, authoritarianism has manifested itself ditrerently in lhe capitalist state and the dependent state.

statc formation. The Gulf states can neither be as capitalist stato lor a dependent state as the fo array of facts and ana. lysis will itself prove, The Gulf statbs may encompass characteristics of both. Foreign companies that have played an important role in Gulf capitalist development have gevertholess only partially been able to push through a dependent capitalist development, One of the main roasons behind this is the rise of nationalist forces manifested directly in oil nationalism.

A major omission in the above review is that of the pre-capitalist structures and their role in state-fof mation. All the above theorists have given marginal impottanceto the pre-capitalist structures. If a state is seen as a condensation of class relations, the classes in .pre-capitalist structure will have to be included in explaining the state. For example, both the dominant and dominated classes of the tribal structures an important role in the Gulf

TnB Rlse oF OrL NArroNALrsM
The political and economic history of Arab oil is vertically cleavcd between two diferent coufses traiversed by a nation state*the courses of nationalization and garticipation. The unrestrained imperialist robbery of oil resources was challcnged by thc emerging nationalist forces, ffrst in Iran and b decade later in lraq, leading to nationalization of the oil ffelds a4d termination of concessionary arrangements. Iran and Iraq werc joined in tbcir anti-imperialist struggle by other countries outside the Gulf region: Algeria, Libya and Venezuela. The second course, itaken by Saudi Arabia, Kuwait,




Bahrain and United Arab Emirates, was more moderate, though it also countered the robbery by a checkon the continuing drop in the

oil prices through equity participation with the oil companies. Thus, the unrestrained robbery was put under lesser or greater control by each of the Gulf states. The 1970s can readily be aocorded the distinction of being the most significant decade in the history of Arab capitalism. The shift in the locus of policy and decision making*from foreign companies to national governments-is by far the most sigliffcant structural shift marking the state building processes in the Gulf. Three major factors explain the structural shift: first the rise of nationalist forces leading to nationalization in Iran, Iraq, Algeria, Libya and Venczuela; second, rise of the Organization of Petroleum Exporting Countries (OPEC) and its ensuing collective bargaining power and third, the Arab-Israel wars of 196? and 1973.8 None of these events alone can explain the major changes in the 1970s. The three events reinforced each other to make it possiblc for the nation states to stand united against imperialism, The most notable fact in anti-imperialist struggle is that lraq, Algeria and Libya in the 1960s were not only convinced that nationalization was the only practical way to get equitable terms for tho oil extracted but they also prepared themselves for nationalization. "Essentially, the preparation was intellcctual and psychological, in the sense that there had to be a reasoned conviction of this position, and that there had also to be readiness of the measure that would turn conviction into fact, Coupled with this the three countries prepared their public for the objectivo and mcasures it necessitated and for the confrontation it was expected to bring about."e The founding of OPEC in 1960 had tittle to do with the antiimperialist struggle in lraq and Algeria. Its primary aim was to counter the continued drop in posted prices, which the companios had been justifying in the name of an oil glut-created by themselves. By the mid-60s OPEC was able to check this decline and continued to resist until the great oil price shock of 1973 when OPEC began to exerciso almost full control over hydrocarbon exploitation. The 1973 oil price hike, leading to a world crisis, became the most signiffcant event in the history of Arab oil. The crisis also made the heated debate of the 1960s between advocates ofnationalization and participation almost redundant. As all the nation states started showing strong signs of anti-imperialist policies it was thought that

116 TIg PsRshw Gur"r nNo Sorjrn
thcy had achieved some parity



their ideological/political and

socio-economic orientation. However, the ideology of nationflization and the intellectual and psycbological preparedncss ofthe Seople of lran and Iraq for thc expected confrontation with tle imperialist powers and their proteges within these states eventually led to a state building process different from other Gulf countriles. On the other hand, equity participation proved to be a rather modest effort to ffght against imperialist robbery. This modesty Was reflected in the state building processes which characteristically rBtained their monarchial character. Even within the group of nati$n states opting for participation, thc political and ideological comBitments vary as do the socioeconomic conditions. This is reflected in the diverse nature of the economios and of capitalism tbat the Arab states have espoused in the last 13 ycars following the l97t oil price hike. Bcfore the 1973 crisis none of the Arab oil exporters had majority control over the oilfields. By the ehd of the decadc, however, all came to have majority control aSd some full cotrtrol, The picture varied between 60 per cent to 100 per oent ownership and control. Oil nationalism was not confinbd to cxercising control over oil ffelds but made inroads into ups[ream and downstream oil operations. These inroads proved tb be a threat to the oil companies and the .imperialist powers. While the interests of the oil companies are more of a financful nature and are now increas. ingly rcstricted to downstream the imperialist powers
have long term strategic interes

in upstream operations so that
political aspirations of the Gulf

they can contain the

In spite of oil nationalism and

by 1979, tle Gulf economies

of tle world capitalistisystem. were led into tho inescaoable The economies were urged to ce more oil so as to fulfil their .'international responsibilities" 16lher than preserve their self-interests. Very high production levels were reaohed in the latter part
of thc decadc which led to the buil{ing up of embarrassing surpluses. The surpluses were ploughed badk into the foreign banks of the world capitalist system. The oil ppoduction levels had to be sustained then, for a cut would haFe been damaging to the world capitalist economy in which most of thc surpluses had been invested. Another important constraiut irn production was a strong linkage betwecn marketing via foreign oil companies. Only the oil com-

Pnaossp BHARGAvA


panies posscssed the technical capabilities to undertake exploration and production, A concerted effort to overcome these constraints by some of tbe nation statos was noticed in the 1980s. In the 1980s there have been drastic changes in the world oil economy. Thc demand for OPEC oil crashcd. OPEC's share in net world oil exports declined from over 90 per cent in 1974 to a little below 66 per cent in 1984. The fall in demand is attributed to: conscrvation in energy use; substitution of oil by alternative fuels, economic recession in the West and growth of non-OPEC oil supplies. In 1983, the benchmark crude fell to $29 a barrel with Saudi Arabia agreeing to act as a swing producer. The prices fell further with several countries including Iran undercutting OPEO priccs. The spot market prices in Fobruary 1986 plummeted to around $17 a barrel. Tho prices were roported to be as low as $8 a barrel in July 1986. Since OPEO's October meeting the prices have remained stuck around $13-15 a barrel. While demand for oil fell till 1985, it staried picking up aftcr that. It is likely to rise further, but not to the level expected by Saudi Arabia, Their frustration to maintain their quota and a price level of $18 a barrel

ended up with sacking of Sheikh Yamani as oil ministcr in October 1986. The excess supply, howevet, may turn out to be a short run phenomenon till North Sea oil is exhausted. The success of OPEC lies in holding together at this time of the crisis and excrcising some controls in domestic expenditures. OPEO has realized the necessity of produotion programming to modulate the wild fluctuations in spot market priccs. The present price crisis will turn out to be a short run phenome' non. In the long run, the shape of the Gulf economies will be deter' mined by downstream operations: refining and transport of oil and production of petrochemicals. Ineachof .these activities, the cost effectiveness of the projects has been established in favour of the Gulf States. A comparison of total cost of production shows that the new Gulf reffneries, given the present transport arrangement, are com' petitive with the existing OECD refineries and are significantly more cost effective than new refineries that the OEOD may set up.ro However, cost effective refining does not ensure a market which remains dominated by the oil companies. To gain this type of security in the oil market the Gulf countries will havc to go further downstream to dlstribution networks in the maln matket overseag,


Tns Pnnshl.l Gur.F


Solrrn Asn

service stations, dealership, etctll Only Kuwait has so far made any practical and successful hca{way io acquiring and operating refining and distribution facilities <irverseas. It may be difrcult for other countries to follow suit for certain conditions need to be fu16led : requisite spare cash, political endofsement, ability to negotiate with commercial flair and the capacity tp absorb, manage and direct the new systems otrce they are acquired.ls The petrochemicals industry in tbe Gulf could be doveloped only after the mid-70s when financial co[ditions improvcd considerably. In spite of the easy availability of fuel and feedstock required for ttre industry, the Gulf countries had to wait till the ftst main price hike. Thcy did not possess the technical capability to build fertilizer plants. ADd they were dispouraged f;pm undertaking these ventures by the oil companies wlich were themselvcs among the ' giants producing petrochemicals.ls The oil companies argued that the Gulf companies were technicalfy and managerially unprepared, that they could not face harsh cqmpetition, and would benefit by sticking to the then existing interngtional division of labour leaving downstream operations to the oil companies. However, in the mid-seventies, tfle Gulf countries plunged into the giant petrochemical industry. the economic advantages for such an industry already existed. Tbe main advantages pertained to location. A petrochemical industry ne0r an extractive industry which producos crude oil or a refining ind$stry wtrich produces reffned products and a gas treatment industry which produces gases needed as feedstock makes more economic anld technical sense because each industry is linked to the other. Thc other main advantage complementary to the first is the fact t[at fuel and feedstock needed by the petrocbemical industry constituie an inordinately large proportion of production variable costs. Flor example, in the ammonia industry, 65 per cent of production is accounted for by feedstock,. available in plenty locally; in case o[ethylene,8l per ceot production cost is aocounted for by fuel ald feedstock.la The cost of fuel

and feedstock is so low that it dore than comnensates for hiEh capital cost of plant construction, ipsufficiently trained manpolier and iruderdeveloped infrastructure. As a rssult, in spite of an unsure @arket, the petrochemicals industry made headway in the Gulf. fhose industries have been commissiooed, except in Kuwait, as joint ventures with oil companies and other multinationals including those from Japan. In most of

Pneorsp BHARGAVA 119
the cases, marketing is undertaken by the foreign partner. Kuwait has entered into joint ventures with foreign ffrms only for marketing purposes. The Kuwaitis have realized the importauce

of maintaining their own control over

domestic coupanies. All


CdF-Chimie regarding a joint venture plastic and resin plant in France,r6 with Tunisia to expand Tunisian fertilizer capacity. Kuwait is also building up capacity to manufacture chemical products for domestio consumption, Realizing ttrat consumption of specialized consumer products based on petrochemicals will increase in the Gulf, Kuwait has entered into joiat ventures with Saudi Arabia and Bahrain to set up such industries. When the industries were launched it was clear that marketing the petrochenical products to the US and Europe would be difficult because of the protectionist policies they may adopt. Yet it was expected that the oil companies would be able to export at least their share of the products to their parent country. Based on this thc Saudis stated that their market distribution in the future would be 20 per ccnt to United States, 22 per oent to Western Europe, 20 per cent to Japan and 38 per cent to the rest of tbe world.r0 The protectionism expected from the US and Europe is now well confirmed. The Saudis now expect to sell only 15 per cent each to the US and Europe, 32 per cent to Japan, 26 per cent to the Far East and 12 per cent to rest of the world.l7 The protectionist mcasures of the west are thus driving low cost products to the East. This may rcsult in some turmoil in the industries of the East. The imperialist powe rs may be able to protect their industries in the short run. But the beginning of a slow shift of production facilities away from developed market areas towards
developing, resource-rich ones has taken place. Transition from the stage of crude oil export to advanced stages of development means greater diversification for Arab oil economies. The integration of downstream operations with national economies is associated with backward and forward linkages into many more industries. Simultaneously, the cxport of surplus financial resources to industrial countries for placement or investment is minimized.

other states bavc given upto 50 per cent shares in their petrochemical industry to foreign partners, On the other hand Kuwait, realizing its own contraint of technology and infrastructure, is entering into joint ventures in other countries. In this arrangement feedstock would be provided by Kuwait. Ncgotiations have taken place with

120 Ttre hsrAN Gurp eNo Sobrn Asl,l
Dependence on industrial countdes, and loss of real purchasing power, arisiug fiom inflation and curren€,y depreciation the,re, is greatly reduced. This release of prpssure spills ovEr to the area of power politics whercin the role of fhe Gulf is greatly enhanced, and which enables tho Gulf states to t{ke relatively more independent politico-economic decisions and pr{rsue a more self-reliant develq> ment.

third world countries. The oil r has had a complementaritypromoting influence betwcen thc Gulf states as is evident from cooperations. However, operation and coordination in oped within a collective Arab downstream operalions have not framework. Somo recommendatio1s have been made by the OAPEG regarding coopcration in the development of downstream opera' tions. OAPEO has urged action leading to more Arab consultatign, cootdination of p implcmentation of projects, of information and develmarketing and crodit facilities, operation, maintenance, opment of skills-designing, recommendations have also researoh and product adaptation. urged collective action for tho pr@otion of skills in dealing and for attraction of investment inoegotiating with other regions,
ing and research aimed at developdcnt of downstream industries.rs Some joint companios or projegts are sponsored by the OPEC in some areas both upstream aod downstream. The advantages of joint action-pooling and better al]location of regources on thc basis of national and international mar&ets with a drive to cut a place in

will have two more eflectsthe regional level and the o{her enhancing relationships with one at The petrochemical

the world export refining and petrochemical and fertilizer indus' up of coordination and tries-will probably lead to the

The Arab share of around 5 to 8 per cent when the prices as compared to world will determine their ability to compcte is amply reflected in
downstream operations has been To zummarize, the 13 Year otd teresting twiste and turns. It ist struggle againot unrestrained

in world output would


ustries come on stream. The and the qualitY of Arab outPut

in the market. The will to
nranncr the infrastructure for

ulf history of caPitalism has in. with a srcccsdul anti-imporialofoil. The 1973 oil price



hike, a major achievement

for the Gulf, brought in


and unimagiaablc oil revenues which were investcd back into the imperialist banks. This brought the Gulf back into the infalliable trap of imperialism. The advancement of refining capabilities and energy intensive industries such as petrochemicals, though in their initial stages, have proved that the Gulf is not and will not be a periphery of the imperialist powers but will emerge as a competitor in the economic field of world capitalism' In fact the future of the Gulf economies lies in thc energy'intensive industries alonc' The flow of petrochcmical products began in the 1980s and almost coin' cides with the first recession for the Gulf economies, caused by a

drastic fall in oil prices. Gulf economic problems are further accentuated by the piotectionist measures adopted by the imperialist powers against Gulf products. The protectionist trend has made the Gulf economies turn to other pastures though returns will come only in the long run. Tho Gulf economies are now trying to achieve intigration at the regional level and also trying to enhance rela-

tionship with third world countries wherc the future markets for Gulf products lie. be Considering the above sequence of events, the Gulf states can analysis of state-formation' First' divided into three groups for an Iran and Iraq which opted for nationalization of oil resources and for antimore importantly prepared their peoples psychologioally the Gulf monarimperialist struggles. The second group includes chies of Saudi Arabia, Bahrain, United Arab Emirates and Oman'

They chose the path

prepared their p.opl. fot anti'imperialist struggles. Their dependence on foreign -compaoir. for petroleum extraciion and other downstream indusonly tries is far mori than tbat of the third group, which includes chosen to be rclatively independent of foreign Kuwait. Kuwait has

of participation and hardly

"o.puoi", downstream roads into

and the multiqationals' Kuwait has built far more in' operations than any other monarchy' Why has Kuwait alone been able to build inroads into down' countries lie stream operations while the surpluses of other Gulf countries so docile? Why is the relatively dormant? Why are these particip;tion of foreign companies still so high in some countries? ih" uort.r, to such questions lie in the inner structure of the Gulf

122 Tsnpm.srlN Gurr ero Sotnn hsrl



the state emerges as

talism. State monopoly capitalism refer! to thc third stage of capitalism following the earlier two stages i of competitive capitalisni and monopoly capitalism. The state in this stage plays an active role in afecting the structure of the econofly and in coordinating the social division of labour. State interventio! is manifested in large public sector production of goods and sdrvices, corporatist planning and a wholc range of Keynesian moqletary and fiscal iolicies. The capitalist state also supports internationalization of productive capi_ tal with the help of multinatioual dorporations. Most importantiy,

twentieth century with the discove{y of hydrocarbon resources. Bv mid-century, the rentier statcs with their hydrocarbon linked internationalist capitalist linkages wepo deeply shaken by emergent nationalism, Tbis markcd the begiinning of capitalism. In the Gulf monarchies, capitalism has carvedl out its own history, a history different from that of western societies, Capitalism has penetrated the castles of monarchy built on tribal aristocratic linkages and/or mercantilism. In the last 13 years, $ince the emergence ofoil power, the rentier state has grown into itate monopoly capitalism in a manner which hag practically no analogy in the hisiory of capi_

Monarchies built on societies whic! werc largely tribal or mercantile assumed the charactcr of a rentilr state in the first decade of the


In the Gulf, state monopoly caditalism derives its strength from the oil revenues over which the statd has 100 per cent control. The investment of oil rcvenues in diderent ventures-industrial and sewices-has fostered capitalism. lvlodern industrics being highly capital intensive and requiring hugb investments have been com_ missioned in the statc sector. A lot Of construction activity has also been undertaken by the Gulf stateq. The role ofthe private sector in the Gulf economies has been minimal. Thus the Gulf states are significant economic powers concernid with accumulation ofcapital. The states are structuring the ecodomy and also supporting the internationalization of capital throu$h muttinationals. The diffeience is that some states like Kuwait are rdss dependent on murtinationals capable of taking their own decisions while others like 1nd ,are Saudi Arabia are intertwined in thQ cobwebs built by the multina_

the accumulation of capital.rs

significant eoonomic power concerned with


tionals. The states also have complete control over monetary and
ffscal policies,

to state monopoly capitalism the economic history of the world. lt bas bypassod is unique in the competitive stage and monopoly capital stage of capitalism. The lower stages of capitalism are now in the making as state monopoly capitalism has inevitably led to embourgoisment of kings and princes and also other classes faithful to the monarchiesthe merchants and the tribal elements. The history of capitalism in Gulf begins from a stage which the developed countries have now reached, after startiog from their industrial revolution. To maximize gains from the export of hydrocarban products, the long term policy of the Gulf states entails product line diversification in both upstream and downstream operations and exploring new markets both within the Gulf and in the third world. To pursuc these policies, state owned companies have been set up. Industrial activity other than petroleum-based-such as refloing, gas liquefaction and petrochemicals -is given low priority by the state. And the state owns the key petroleum-based industries. The states stimulate private investment in intermediate industries to service the petrochemioal plants or further downstream: manufacture of petroleumbased consumer products. The Gulf monarchies are systematically avoiding the setting up of high cost, import-substituting industries, the bane of development in many a developing country of the world. In fact, state apathy has been reported towards private sector's attempts to set up these industries. This means that an industrial bourgeoisie will develop only under the direct control of the state and in industries which fall in the hydrocarbon product line diversification. A section of bourgeoisie emerged during the construction boom bythe investment made in construction based industries' The construction boom was simulated by the state. Thus, monopoly and non-monopoly capital has grown and in the future will grow ouly under the boundaries of the economic ffeld demarcated by the state, The share of ruling families in oil revenue has been substantial. No authentic estimates are available. According to one estimate, the share of ruling families iu oil revenue during the period 1952-1971 has been 2.7 percent in Kuwait, 32.4 percett in Bahrain,40.6 percent in Qatar and 25.0 percent in the UAE. According to Newsweek, 700 Saudi princes have become multi-millionaires and foreign deposits of the Saudi royal family total 80 billion dollars.ro
This transition from rentier state



Gur.r auo


out of the ruling families and the trading dynasties. Tbe con and none too advanced commercial activity, intertwined with the commercial interests of thc multinationals led to the m m growth of a parasitic bourgeoisie in Saudi Arabia, UAE, and Bahrain. Private busincss did not venture into challenging proposals. They mostly opted for immediately pro operations such as contracting, importing, marlteting and real {state devclopment. The governments havc helped the local coftractors by making it obligatory for a foreign contractor to suDaround 30 pcrcent of thc value of the project to a local industrial firm. The growth of a parasitic bourgeoisie is su by the state by issuing shares of government owned companies to ihc public. The situation is totally t in Kuwait. The Kuwait state gives more credencc and to the developmcnt of a commercial bourgeoisie over the induNtrial bourgeoisie, The state involvcs foreign contr&ctors in govcrnhrent projccts but Kuwaiti agents are required on purchasing contraots. Only Kuwaiti firms are allowed to import and opeculate in the local market. Interest-free loans are available to Kuwaiti merchrints. By these and several other measures, the state has helped thd Kuwaitis to establish thcmselves

Monopoly capitalists are

as formidable businessmen in thbir own country and also abroad, thus strengthening the old Kutwaiti tradition of trading. The Kuwaiti private sector handles Kulvaiti real cstate investments in the US. These include apartment and office complexes in Washington D.C., top hotelb and commercial centres in Atlanta, Georgia, and office buildings in Houston and Tlexas. The merchant bourgeoisie have organized themselves in thb Kuwaiti Chamber of Commerce and Industry (KCCI). The KCCI is in some respects more powerful than the national assembly of Kuwait. Besides the growth of nonopoljr and non-monopoly capitalists, a middlc class has also emerged in the Gulf. In Bahrain and in other city states and also in the urban cbnglomerations of Saudi Arabia, quick politicization of thi popula$e has taken place, Education has broadened the horizons of the poflulace and allowed penetration of ideas such as Nasser's pan-Arabi{m and the Baath ideologies combined with rapid economic devqilopment. Thus has a powerful middle class come into existence. In the United Arab Emirates a{d also in other countries of the Gulf, free cducation for nationals is available upto university level




and the education system has been largely expanded and improved' A younger generation with an outlook different from the parochial outlook of the monarchs is slowly making its presence felt' "The older leaders whose original loyalties were heavily rooted in narrowly contrived interests find it difrcult to maintain fcderal loyalties than do members of the younger generation. It is this second.group'

comprising nearly half

of the citizenry and cutting politically'

socially and economically across all segmcnts of population including rural households and other families and tribes, that most of the positions of prestige and influence in the UAE-and also in many cases those of real power-are increasingly being transferred."2r Thc description of the educated nniddle classes for the UAE is also true for Kuwaiti and Bahraini societies. In addition, in both Kuwait and Bahraio, petty bourgeois nationalism is emerging as a

Palestinian population has'played a catalyst role in politicization of the middle classes' The professional groups of doctors, engineers and architects maintain a continuous dialogue with the Palestinians who fill the middle ranks of the state administration, headed by the Kuwaitis' In lgTT,thcPatriotic Club of Kuwait, (al-Nadi-al-Watani), the mecting group for Palestinians and Kuwaitis who fclt inclined towards pan'Arabism.and Palcstinian struggle was closed down. There is considerable discontentment among the Palestinians working for the state as there is a discriminatory wage structure. In strong force.

In Kuwait the

an establishment, a Kuwaiti junior to a non-Kuwaiti may



a higher salary. This hurts the Palestinians more because they have not come on a contract like most othd expatriates and most of them have been there for more than twenty years. However, the avowed support that the Kuwaiti state has given to the cause of the Palestinian Liberation Movement brings some relief to the deprivcd Palestinians. Al-Fatah is allowed to collect taxes from Palestinians residing in Kuwait. In addition, tlc Kuwaiti Government also con' tributes directly to al-Fatah. In this manner, tbe Palestinians console themselves at least as long as the PLO reccives assistance from the Kuwaiti state.2z While in Kuwait, petty bourgeois nationalism is simulated by the presence of Palestinians, in Bahrain the militant working class was inspired by the penetration of ideas such as Nasser's pan-Arabism and thc Movement of Arab Nationalists (Hareka). Way back in

126 Tun


Gur.r exp


demanded expulsion of foreign Ieum company. In tbe post-War mcasures and political control of oil resources. The militant were made to tum into Shia.Sunni riots by the m . Howovcr, in an anti-sectarian meeting a Committee of National nity (Lajnat al-Ittihad al-Wataili) was set up under the slogan .,No and no Shi'ism from now on."ss It reflected the heightened of a working class movement rising above The working class movement h4s since then matured. The ,,General Committee for Bahraini Workirs', is the only officially recognized body of labour and the only democratic institution of its kind in the Gulf. The frst election to {his body took place in 19g3. In each of the eight major compatries of Bahrain ,,joint consultative committee" between managemeot and labour were set up. The employees have adopted a cautiotus approach to deal with a highly repressivc regime but they see to [t that the labour law is strictly enforced. The term .,trade uniod" is not used either by tho regiml or by labour. Political afrliatioas are also not allowed.sa The formation and recognition, of the General Oommittee for Bahraini Workers is the culminati]on of several years of struggle by the workers beginning with the [emand for expulsion of foreign workers from the Bahrain Petroleum Oompany io 193g. It also ensures Shia-Sunni amity at least between tle workers. Another important class in Gulf societies is that of the expatriat_ cs. They become important by thqir sheer number. They come from a number of countries including A{ab, South Asian and Soutl-East Asian. According to an estimate inade in l9g0 the expatriates costi_ tute over 50 per cent of the work force in Saudi Arabia, around T0 per cent in Kuwait and around 85 per cent in the United Arab Emirates and Qatar.2r A large number of the expatriates are construc_ tion workers and are likely to go $ack. But a large number of skilled workers will remain there pcrm+nently to man the various indu.stries. The local population is found only in sorvice and trade sectors. The expatriates are an enslaved tion, largeiy disorganized and alienated from the state except in Kuwait where the expatriate

1938 the militant working workors from the Bahrain period they demanded more

Thus in the capitalist of the Gulf societies, among the dominant classes are the ruling lbmi the emerging monopoly and non-monopoly oapitalists and lthe commercial bourgeoisie. Then

Palestinians have radicalized the


Preosnp BHARGAVA, 12?
there are ths middle classes enthused with petty bourgeois nationalism. And finally there is the dominated, sometimes described as

now raised on cultivated fodder. Therc is a shift from breeding camels to breeding shcep, a small size animal, The state assists in the cultivation of fodder and the bedouin is now tied less to ex_ ploitation of natural resources and more to the state oriented farms. Due to these changes there is a change in breeding practices.as The progressive detribalization oftribal space at the expense of the bedouins is also marked by maldistribution of arable and irriga-

of expatriates. The prc-capitalist structures are of significant importance in state formation in at least Saudi Arabia and Oman. In the city states cf Bahrain, Kuwait, Qatar and the UAE, they are of marginal importance. The bedouins in Saudi Arabia have not been absorbed by the modern economy thriving on oil revenues, Only a small minority of them have settled in towns, many serving the White Army of the Kingdom of Saudi Arabia, whose task has been to counter.balancc the regular army. The White Army also known as the National Guard is under the control of Prince Abdullah since 1963. This was founded to give employment and cash to Najdi leaders. The Guard is the royal family's defencc of last resort against internal opposition and one must presume that its views are heard on subjects other than subsidies and salaries. A small number of the bedouin population has not directly beneftted from the oil revenues but their social history is changing as a result ofrapid developments sinc€ the seventies. The bedouins maintain their tribal identity, But a process of detribalization has becn initiated by rapid economic development. The first step in this direction is the sedentarization ofthe pastoral nomads. The pastoral nomads maintained the productive continuity between the desert and areas ofpermanent settlement. The introduction of motor vehicles has caused a real change in the relationship between the bedouin and. pastoral space. The pastoral lands which were the exclusive rights of the tribes, called the diras, have been virtually abolished by the 1968 law on the distribution ofland. In fact, progressive dispossession of tribal space is part ofa long established d etribalization programme. Ugo Fabietti has rightly perceived that the detribalization policy is directed towards strengthening the centralized state. This has altered the nature of available resources and the modes of access to them. The diras are facing ecological degradation and animals are
enslaved, class




Gwr lxo



ted land. The land distributiou is based on tribal ownership. Actual land allocation depends on !uo4 factors as closeness of parentagc to the local amir dealing with thc land distribution, and possession of influcntial friends inside the erf irates or in al-Riyadh ministries'z? Land is being purchased by ricf businessmcn or by farmers who wish to enlarge the area of landl thcy already possess' The land is cuhivated using salaried importqd labour from Egypt or Pakistan, The right to private propcrty sdbstitutes the traditional collective right ofaccess to land, In fact, the 1968 law makes possible the €mergence of a market for land i[ a society where once there were

only collective rights.28 Detribalization has favoured thb tribal leaders who are iu a better

position to cxploit their conneo{ions with the state. At the same time it has deprived the bedouins dfcollectivc ownership and exploitation of natural resources. In othpr words, the bedouins have been deprived ofthe qontrol over their means of production. The means of production are now owned tiy the new landlords. Collectivism t, in an attcmpt to streng' has now coBe to an end. The go state, has marked the beginning then the ceutralized, based on a new social divi of a new kind of social sion of labour. afrected bedouins is passive but The resistarco, if any, from Harad projcct, for example, was not unheard of. Tbe failurc of partly due to bedouin reluctance take part in cnterprises in which factions are given the possibility to individuals belonging the others.2s of obtaining greater benefits At one end of the social , there is the bedouin, alienated production, an unprivileged strata from his means of having olose family links with of the kinedom. The tribal crust of society. King Abdul the Al Saud family form the y links betwecn tribes and the Anz had in the past established divorced daughters of tribal royal house. He married and up to be the spokesman of the heads. The son of ttre king now eitter lead the National tribe of the majlis. Tho tribal The landlords have been used as Guard or have become landlo oil largesse to the bedouins. The a conduit for the distribution programmes both for the bcdouins has taken up several state and the urban populace. The Gulf states, like wcstern societies, have attempted to Play have injorvcned in a numbcr the role of a wclfare rtate. The


BHARoavA 129

of onoe-marginal spherer sucL as tran$poit, hsalth, environm€nt and community serviccs. Thosc wclfare serviceg are iategrated with and at tle same time erpnd.ing tho spoce for the reproduction and ac.rmulation d oapital, "This rcsults in considerable politicizatior of popular struggler rclatcd to these sphercs. Tb popular masses ars row directly confronted with the stale. In a period of economis crisis such state iotcrvcntioo sheds its alluring aspect of'social policy'. Its conlec'tion with tbe inierests of capital is revealed and the $tats incurs a sizeable loss of legitimacy in the eyes of the popular oasses.- Authoritarian gtatism is tbe reality which cmerges from the ruios of the welfare gtate.s The welfare statism ofthe Gulf stat?s has had betu created and
15 year period. Hospitals and schools were programmes were undertaken, people were given free borxes. Loans to build houses wcre allowed. The major facilities were subnidized, Jobs were created in govcrnment. There were opporfunities for making moncy while doing no work. The recession hss slowcd down the welfarc programmes. The statc can tro lo[ger atrord sobsidies whicb people got uscd to, jobs have bccome few aad noney-making a difrcult task, possible only thromgh hard work. The ruling families are now worricd, for people do rcsent the money that ruling fanrilics make.8l Some of the rulers are being acsused of ehed
lens thao



built electrilcation

helping pnt the merchants out of business-bhaviour which does eadear them to the te$t of the trading community.sg No apression of thcse reseotments in public bas bcen roported. Nwerthelees, due to thE welfare programmes, popular masses are now direstly confronted with the statc, but they have no institution or orgaoization through which to express their rescstment, except in Kawail Thc ffrst major recessioir has on the one hand revealcd the interests of the statc in capitalism, and ia monopoly capitalism in particular, and a sizeable loss of legitimacy of the state in the eycs of popular masses on tie other. In westenr societies authoritsria[ statisff emcrgcs from the rrdus of thc welfare state. In monarchial societies, the first recession itself has been a big blow to wclfarism, The wcakening of welfarisn rcquires state suppression of aroussd e,xpeclations and formal liberties of tlc populace to maintain ruling class hegsmony. Moreover, there is a sharp lag between the rapid transfornation of a capitalist base and the corresponding evolution of a capitalist ideology and its psychological manifestation, The gap is filled by religious fuodameatalim.


130 Trc


Grnr euo


the family of Muhammed bin Abdul Wahhab, the founder of
Wahhabism, are closely allied occupy high positions in the and can influenoe people thro tions.83 There is no evidence to ulema among the bedouin and

The monarchies have so far used religioo to their own advantage. In collaboration with the ulema repressive methods are given religious sanction. The between the monarchy and the ulema is the strongest in Saudi bia. The meobers of al Sheikh.

since its inception, been a state tribal loyalties and to unleash In the mosaic Iraqi society Kurds, Shia and Sunni, the Sunni regime proclaims itself to secular. The lraq-Iran war has sbarpened the Shia-Sunni co in lraq. The conflict is aggravated an element of Sunni orthodoxy further, because the Baath party built into it, The Sunni orthodo is an outcome ofan historical continuity, that took the lraqi Baath in its fold, that had an appeal for Arab nationalism. The helped the Baathists, consisting primarily of petty bourgeois e to overthrow the monarchY, though with the support of the Iran is different from all other ulf states in the matter of reli. gion. The Iranian ulema were divided in two groups-th€ Tawhidi and thc not-Tawhiili. Tawhidi did not separate religion from polirics while the non-lawhidi showed deference to monarchy and played the same role as the Wahhabi ulema in Saudi Arabia. The Tawhidi ulema led al revolution against the monarchy and overthrew it and the power of the mostazafeen

Saud. Thc ulema reportedly they are judges and lawyers mosques and educational instituthe influencc of Al Sheikh the countryside. Wahhabism has, ligion and has been used to bind


capitalist growth but it is and Soviet. Both the s the Iranian regime as Islamic orthodoxy is not tical movemeuts is not a new openly supported Aquino in the and Mahatma Gandhi have also
peoplc. Bishop Tutu is

y against imperialism-American


It is not fundamentalist.

proteges have described

lism. Use of rcligion in poli.
omenon. The church, for example,

Philippines. Martin Luther King
the force of religion to mobilizc

struggling against a U$ protege,




the racist regime in South Africa. Ayatotlah Khomeini successfully used religion to overthrow the Shah who was strongly supported by US imperialism. In Iran a revolution led by religious leaders involving the masses and in lraq a petty bourgoois military alliance guided by the revo' lutionary Baathist ideology overthrew parochial monarchs supported by imperialist powers. Both Iraq and Iran now being engaged in a futile and a meaning' less war is only an irony of modern world history. The war holds back the great possibility of the spread of the revolutionary ideologies that the two regimes are posscssed of.

State monopoly capitalism

ofthe western societies has entered into relationship with the state monopoly capitalism of a symbiotic Gulf monarchies. The authoritarian statism of the west is wedded to the authoritarian monarchies of the Gulf. In the west democracy is on the decline, in the Gulf democratic institutions arc meaningless postulations. Petty bourgeois nationalism is suppressed in both the societies. Petty bourgeois nationalist states are suppressed by the West and by Gulf monarohies. Petty bourgcois nationalist states of Iran and Iraq aro pitted against each other. This endless Iran' Iraq war is a strategic success of the imperialist'monarchy symbiosis. The contradictions within the symbiotic relationship have also emerged, The recent recession due to a fall in oil prices and proteo' tionist measures adopted by the imperialist powers against imports from the Gulf, continuation of the Palestinian struggle for their homeland are a result of these contradictions. Nevcrtheless, these contradictions have initiated integration within the Gulf countries and also a search for new markets in the third world. Authoritarianism is underwritten in Gulf societies. State monopoly capitalism and monarchial institutions are happily wedded to' gether. The future holds an intensifed struggle for state power between the emerging monopoly capital and non-monopoly capital. The Suq-al-Manakh stock market crash in 1982 in Kuwait indicated thc hostilities between the two capitals: The old ruling families and the merchant dyansties on the one hand and a new class of educated youflg men who have recently acquired wealth on the other. Petty bourgoois nationalism and its aspirations have made a small dent in

132 Tffi Psnsilx Gurr,c,No


Bahrain and Kuwait, manifested a workers' uuion and anational assembly respectively. To create divide in petty bourgeois nationalism the ruling classes turn to methods such as the use
ab a binding force as far as the educatEd middle class is coocerned. ft remains an efective adhe,sive to bind bedouins and keep them It also remains an efrective instrument to create a Shia divide in any petty bourgeois nove6€nt. It has proved to be a]n efective weapon to engage the

of religious fundamentalism. Religion has lbst its meaning

anti-imperialist and anti-no revolutionary zeals of Iran atrd Iraq in an incessant war. Reli as a revolutionary force exists only in Iran. Other statcs never had the religious institutions like masjids and madrassas, that the rallying point for the revolutionary ulema. The zeal of the mostazafeens (the oppressed) is lihely to percolate to tha mostazafeens in the Gulf monarchies and not be restricted to thc Shia community alone. Only the war holds back such oossibilibies. What does the future behold f$r Gulf state-formatiotr? In westera
societies, in their present stagc has more effective power thau stagc of state monopoly capi uents will have little meaoiDc.



statism, the cxecutive In the present

in the Gulf monarchies, parliaoan only function as an elected

powcr. Hence a pafliametrt s only help the authoritarian ruling classes to legitimire their Io state$ other than Kuwait, tbe kings hold a majlie (audicacc)lwhere grievances from local people are hcard. Saudl Arabia has ys looked at tle institution of parliamcnt with contedpt. It been responsible for dissolution of parliaments in Bahrain aid at one time in Kuwait. Ncvertheless, the Gulf states m.iry have to set up parliaments in the long run witlout weatening executive, which presently is by and large the ruling family itself. A large national assembly building has already beca built ia Saudi A{abia. The state will thcar rotr resenr

Pnlpnep Bslnoeve


the interests ofthe conscious dominant class and stlll be a site for class struggle, a site where the working class can win incrcased democracy and yet be out of power, Authoritarianism will continue as the executive, judiciary and ttre military will rcmain in the domain of the dominant classcs. Democratic institutions may be built without allowing evon a small segment of political power to non-monopoly capital or its allies.



Nicos Poulantzas, State, Power, Socialism, NLB, London, 1978. A critique of the Neo,Marxist theorists of State is done by H.C. Srivastava, "N€o-Marxiau Paradigms in a Capitalist Statg," Social Science Probings, June, 1985, pp.749-62. Accor{ing to him, tbe neo-Matxian bourgeois State theorizing collapses otr two vital points: who is the agent of class struggl€ and what is the social mechanism of traosition to

Iouis Althusser, Lenin and Philosophy ond
Press, London, 1971.

Other Essays, Monthly Review


Amin, Class and Nation, Hisroticalb and Monthly Review Press.


the Current Cisis,

5. 6. 7. 8, 9. 10,

Ibid. Femando
ment in


Cardoso and Enzo Faletto, Dependency and Develop1979,

latin America, University of California Press,



Sayigh, Arab Oil Policies in the 1970s, Ctoom llelm, London,

p. 9.

Fereidum Fasharaki and David T. Issak, OPEC, the Gulf, and the World Petroleam Ma*et, A Study in Government Policy and Downstream Operations, Ctoom Helm, London, 1983,

11. Ibid. 12. rbid. 13. This kind of advice


came from diferelt quarters, itrcluding United Nations Economic Commission for Westem Asia (ECWA), "Basis for the formulation of strategics pertaining to development of tbe petrochemical industry in the ECWA region." Paper submitted to Expert Groups meeting on the Petrochemical Industry in the ECWA region, 9-12, June, 1981, Vienna, Austria, sponsored jointly by BCWA atrd United Nations Industrial Development Organization, UNIDO, Paper No. E/ECWA/ID/ wG/5/3, May 1981, pp. 2-3. .'Future Looking Bleak for Buropean Chemical Industry," Petroleum
Intelligence Weekly, 15 June 1981, p. 8,

134 Tw, PrnsreN Gur-r eNo Sormr Asre
15. "Kuwait," Mlddle East Economic Survey,3 September 1979. 16. "Saudis Preparing for Second Ph{se of pehochemical plan,', petrole m
Intelligetrce Weekly,3l August 1f81, pp.2-3. "Products of tbe Desert going for a Song," Far Easten Economic Retiew, 20 Juns 1985, pp. 105-6.

18. 19. 20.

ECWA Workins Paper, 1984, pp 7-9. Dictionary oJ Marxist Thought, ed. by Tom Bottomor€, Harvard Univcrsity Press, Cambridge, Mass., 1983. During the period 7952 to l97o-7t!,, the family share in other countdes has been 32.4 percent in Bahraid, 40.6 percent in eatar and 25 percent in the UAE, as citeal in'Hazem Sl. Beblawi, ".The predicament of the Arab Gulf Oil States: Individual Gains and C.ollective Losses" in Malcolnc H. Kerr and El. Sayed Yassin, eds. Rich and poor Ststes in the Middle East: Egypt and the New )4rab Order, Wesview press, Colorado, 1982, p. 212.


Iohn Duke Anthony, .,Transfomation Amidst Tradition: The UA.E in Transition" in Sharman Chubin, qd. Securit! ln the PersianGulf: Domestic Political Foctors, The Interuiational Institut€ of Strategic Studies, Gower, 198I. p. 23. 22. Arnold Hottioger, ,.Political Instiltutions in Saudi Arabia, Kuwait and Bahrain" in Sharman Chubia, ofi. cit,, p. 8, 23. Fred Halliday, Ardbia Without Sgltans, Pengaifl, London, 1973, p.443. A, Middle East Rtview, 1985, p.73.


25. J.S, Birks


and C.A. Sinclair, ..Alrab Manpowef: The Crisis of Development", LoDdon, 1980, p. 358. VCo Fabielti, 'Sedentarisation as a Means of Detfibalisation: Some Policies of the Saudi Arabian Goverhments towards the Nomads," in Tim Niblock, €d. State Society dnd E|onomy in Saudi Arabia, Croom rlelm,

Inndon, 1982.pp. 10G14.

27. lbid, 28. rbid. 29. Ibid. 30. Nicos Poulaotzas, op, cit. 31, GCC Survey, Tle Economist, February, 1986, p, 25. 32. Ibid. 33. Ibid. 34. On the Iraniao Revolution an insfder"s view is avaitable in Asaf Hussain,
Islamic lran: Revolution anil Courlter-Revolution, Frances Pinter, London,

7. Gulf Cooperation Council and the Outside

A Sturly in Mutual


Perception is a highly subjective concept as it invariably incorpo' rates the perceiver's own personality and prejudices' Studying someone else's perception multiplies thc element of subjectivity as the perceivcr, consciously or unconsciously, brings in his own personal' ptejuaices into the exercise. And extending such an exer' ity "oO the realm of politics compounds the dangers. A politician oise to would have to be very unlike his species indeed, if he easily gives away his perceptions to external scrutiny. With all thcsc limitations, it would still be a worthwbile attempt

perceptions of the Gulf Cooperation Council (GCC) towards the key outside powers that infiuenc€ it and the perceptions of these powers of the GCO. Such an exercise would iender useful insights into the place of the GCC in global and regional power confgurations. It would also serve the purpose of assessing the evolution of the GCO in the last five years of its existence and of determining changes, ifany, that have taken place in its attitude towards the outsiders and vice-versa. This, in turl, may pcrmit speculation on the direction the GCO may take in the com-

to identify the

ing years. Two problcms that encounter the exercise may be stated at tle outset. One, the GCC is not a monolith. There are problems-even serious territorial disputes-among the GCC etates' There are divergent opinions on tle very nature and role of the group among its member.states. Their perceptions of the world and world politics are varied. This paper will, therefore, analyse thc general GCO conseDsus on major issues and indicate differences on other issues as may be required' Two, barring Kuwait, the GCC states-Saudi Arabia, Kuwait, Qatar, United Arab Emirates (UAE) and Omanpermit no disscnting opinion on any major domestic or external

136 Tsr PnnsuN Gur.r ewp
matter. Therefore, only the to examination. However, the


dissent occasionally makes itself d. These utterances are taken note of when aveilable and An astor's Wteranccs aJrd arc tbs oaty guider to undcrstanding his peroeptioos Sinc,,e actors in question .are ja oo way patients on a psychiatrist's couch the utterances are no unadulterated truths either. Again, a 's actions are morc constrained and at times more devious than individuafs, and as such, more difrcult to interpret. Action, in y case, is better than exclamation-and that will bc the guid in the following analysis.

of thc ruling elites are open und and across-the-border

The two supetpowers and Israel and the People's have been singled out for the six powers on the criteria of their preoccupation with thcm in a doubt start with lran. The superpowers and then takes uB flow of narratiou. Iran, Iraq aa the end in view of their crucial juncture. GCC ano rns UNTTEp Srarus

rcgional powcrs--Iran, Iraq, Republic of Yemen (PDRY)-

If one were to take up tbese pactonthe GCC and theGC€
ing order, onc would no however, begi ns with tlre two regional pow€rs to retain the the Gulf war are dealt with at bearing on the GCC at this

Tbe United States relied heavlly the "two-pillar" policy in West Asia to sail through the stormy In thc aftermath of the Iranian revolution and the loss of one of the pillars, the US tended to depend even more n Saudi Arabia-thc remaining pillar. US sfficials and authors t to great lengths to claborate the "two-way special between thc US and Saudi Arabia-without mentioniug even the minor irritants betvracn the two. President Jimmy Carter the chorus, when he proclaimed: "The futuro of Saudi Arabia the future of the Unitcd Stares are tied together very closely in an irr€vocable uay."l The special bilateralism gave to a selccti,se unilateral commitneft, when toryatds the end hic terure, Carter enunoiated what came to be known as tl€ C Doctrine. In a State of the Union message od 23 January I he said: "An attempt by any outside force to gain contrrrl of thc GuIf rrgion wi{ bc regarded as an assault on the vital of tie l-Brited gtates of

Gur,ssn'r Drsf,L


Ammica aod will be repelled by a'ny mcans n€cessary including military forco." Its implementation was the creation of the Rapid Dcployment Force (RDF)-I 10,000 strong, fast-m.oving, hard-hir ting, elite troops. The Reagan Administration marked a radical departure from the past. Whereas Carter's policics evolved in response to the local issues as they emerged, tbe Rcagan Administration started off with a global str&tegy. Local issues werc to be takcn up astheyfellwithin the preconceived global design, Tbe demarcation between tbe Arab core and Gulf/Southwest Asia was brushed aside in favour of an enlarged strategic entityof the Middle East, in which Pakistan, Turkey and the Horn of Africa formed the outermost limits. A "Skategic Consensus" was to be evolved within the whole area and countries as far apart as Egypt, Oman, Sudan, Turkcy, Pakistan, Kenya and the wholc of the Gulf were euclosed wirhin it. The debate orer a unilateral versus aa alliance approaeh was tentatively settled in favour of the latter although tbe capability for unilateralism was not neglected. The RDF was converted to Central Oommand (CENTCOM), reporting d,ireodly to the Secretary for Defcnoe. Its combat strength was doubled and seven tactical ffghter wings werc added to it. The Gulf Cooperation Council did not cover the entire designat. ed area of the Strategic Conseasus. Its twin merit lay in the fact that it covered the rnost crucial chunk of that area and took up the challenge of lran. If one can identify the broad US goals in the Gulf as ljmiting the fallout of the Iranian revolution, rcassuring the pro-US Arab regimes and keeping Gulf oil and waterways seburethen the GCC can be easily accorded a role in their implemcntation. The US did not greet the GCC with cxuberance. In facl, its response was rather cautious and delayed. John Tower, the Chairman of the Senate Armed Services Committcc, praised its forrnation saying, "Given the various challenges to Gulf sccurity, thisstep towards regional cooperation is important."2 Later, the Secretary for Defence, Casper Weinberger, said the US "welcomed the esfablishment" of the GCC "since its inception" and commended its role in the area of "mutual defence and security cooperation among its members." He went on to reemphasize bilateralism in US military cooperation with GCC member countries and said. 'there havc been



no occasions for aollective GGC dlscussions with the United Stat€s on military matters,"s The ffrst significant interaction bttween the US and the GCC was the spectacular controversy over thQ Airborne Warning and Control Systems (AWACS). In Gctober lP8l, Reagan personally steered the sale of five AIVACS planes wofth $8.5 billion to Saudi Arabia through the US Senate. During thq monthJong debate in various US forums, two facts came out with startling clarity. In answor to a question, the Administration expfained that:



Force provides one Avionics Intermediate System

(AIS)-a sort of all-purpose dipgnostic test centre-for each of its F-I5 wings (three squadrons per wing), In contrast, the RSAF (Royal Saudi Air Force) is one AIS unit for each of
its threc F-15 squadrons, plus ode spare. These fourRSAF F-15 units could, in the event of a US deployment, support four US savipg the United States the F-l5 wings (12 squadrons),
need to devote scarce


to carrying tho AIS


from European or US bases to
A second revealing fact came Haig, who said that US "

the Secretary

of State Alexander


1990s for "the support of ff statement was amazing in view of

plete their trpining progr:lmme

would be necessary well into Saudi AWACS aircraft."s The fact that NATO trainees comthree to fifty-five weeks, with

the average time of about sixteen Put together, tht two facts the US use of the AWAOS by and training. Besides, the US put The Saudis had to agree to

point at a likely eventuality of to the tactics of overselling conditions on its sale. all intelligence gathered bY the only within the geograPhic AWACS with the US, deploy of such intelligence to a bar anY borders of Saudi Arabia' ition was partially set aside, and, so on. The last third country, thc AWACS data transfer to when the US agreed to autho peak of the war in June 1984. The data are Kuwait at the waiti air-defence radar screens now being transmitted directly to to Saudi bentres.o simultaneously with tleir are already operating in Oman In vicw of the fact that US and Bahrain, and Qatar, at best, only a small territorial adjunct




to the sprawling

Saudi land-mass, US air cover extends ovtr the entire GCO air-space barring the southern areas of the UAE. The GCC perceives the US role favourably, although there are built-in asymmetries in the relationship, The US, a global power by definition, is globe-watching and globe-managing and its security perceptions and concerns are global. The GCC, on the other hand, displays far more restricted, regional security concerns. In a conflict-ridden area, where national sovereignty has not yet taken firm

roots, where national power-sharing is not yet institutionalized

and where ethnic and sectarian rifts are tearing national identities apart, security considerations are bound to be inward looking rather than tailored to global doctrines. GCO dependence on the US is so overwhelming and the GCC need to appear independent is so great that the GCC is constantly on the horns of a cruel dilemma. On the eve of the formation of the GCC, Crown Prince Fahd was

quoted as admonishing the superpowers to "quit poking their noses" into the internal affairs of the Gulf region. He said that the Gulf nations do not need foreign help in maintaining their security because "Gulf security is exclusively the affair of the Gulf nations" and they would soon bo developing "a collective Islamic strategy" for defending the legitimate rights of the Islamic peoples.? The GCO Secretary-General, Abdullah Bishara, strove to drive home the same point in an address before an American gathering. He complained that he was both surprised and shocked that the US Administratiol still approached the Gulf in the same way as it did before the creation of the GCC and had not yet realized the changes the GCC had brought about not only wilhitr the Gulf but also in the wider Arab region. He proclaimed that "the day when the US or other powers could send their boats to the Gulf with total disregard to the wishes and determination of its people are over."8 Thus, the GCC rulers are neither wholesale converts to US strate' gic perceptions nor are they likely to totally merge their security interests with US strategic doctrines. The advantages of a formal security alliance with the US arc far outweighted by the political disadvantages. To enumerate some of the irritants in US-GCC relations and the factors that pull the GCC away from an outright security alliance with the US: (l) It would further erode the already weak internal legitimacy of the rulefs vis-a-vis the dissent groups. (2) It would expose them to an already shrill chorus of accusations of being the lackeys of US imperialism from countries like Libya,

140 Tue hRsrAN Gur,r .rNo
Syria and Iran. (3) It would sensus comprising otatcs like

Asn jolt the moderate Arab conJordan, Iraq, Sudan, besides

of the GCC. (4) It would bf seen to be an indirect security link-up with Israel in view of tic US,Israel Strategic Understanding. (51 It would ioevitably raise thd Soviet stakes in the regional developments. (6) fne fear that thc US may gain all the advantages out of an alliance while the going is good and wriggle out at the The memory of the US be. first alarm of an approaching of the Shah has still not (7) The open debates in the trayal to seize the oil fields are US about its willingness and seen as depicting the GCC rulers as utterly dispensable and oil as the sole policy consideration. (8) Publicity given to the internal wranglings withio the ruling familfes and doubts cast upon the sulvivability of their political syrterhs do not lead to a relationship of trust. (9) When Israeli jets ove{flew Saudi airspace on their mission of destroying the Iraqi Osirak nuclear plant, the US-manned AWACS in Saudi .Arabia did not ralsc an alarm. Even if onc argues that the Saudis would have preferi'ed to remain ignorant and, in any case, were in no position to do anything if informed, it docs indicate a state of affairs in which the Americans decide what information to share intelligence the Saudis. (10) The US is generally perceived to be keeping thc Gulf states vuldependent on and amenable nerable so that they continue to the quality and quantity to the US. (11) US hesitation in of weapons that the Gulf states would like to purchase is yet another strain in relations. (12) The Sarldis perceived the Camp David Accord as a US movc to isolate Egybt which could have been of assistance to thcm in modernizing armed forces and providing military training. Within tbe GCC, Oman and Kuw{it present two poles in their attitudes towards the [JS---Oman bein$ the most pro-US of them all and Kuwait striving to maintain a bflance between the US and the Soviet Union. In Jnrne 1980, befor$ the formation of the GCC, Oman entercd into an Economic an{ Military Cooperation Agreement with the US under which Ohan permitted Americans to stockpile supplies on its territory anld to use its defence .,facilities,' in times of crises in exchange for w$ich the US agreed to spend large sums on developing Omani airfields and harbours. In contrast to the rest of the GCC members, O(an is explicit in welcoming US intervention in rcgional affairr, trn a {Vnicat interview, Kiag eaboos


Drrrr, l4l

said, "we are the gateway to Arabia and the oil route. Any aircraft in the Horn of Africa, Kabul or Tashkent is capable of covering a distance of 450 miles to drop mines in the Strait of Hormuz, closing the Strait and scvering the West's economic artery. What prevents such an occuffence is thc knowledge that we are fricnds of the West."e Kuwait, oa the other hand, has had several problcms with the US in the past few yeafs. The most serious ore comes in summEr 1984 when the US Congress agreed to sell Stinger missiles to Saudi Arabia, but turned down a similar request from Kuwait. The

Kuwaitis retaliated by purchasing $327 million worth of Soviet missiles. A second serious dispute cetrtred around the nomination of Brandou Grove as the US ambassador to Kuwait in carly 1984' Kuwait refused to accept him on the groudd that his previous post as the consul-general in Jerusalem made him suspect as pro-Israeli. The US ultimatcly backed down and appointed a State Departmeot

sider military action iu conjunction with other f,ations if Iran carried out its threat to blockade the Hormuz strait. That implied Oman's readiness to pafticip.rte in a joint military action with the

or6cial. The tarker war in sunmer 1984 wben tbe closure of the Hormuz strait seemed imminent, provided interesting insights into the degrce of cooperation that each of the GCC statcs was willing to accord to US intervention in the region. The Onraui Minister of State for Foreign Affairs, Yousef al.Alawi, said that his country would con-

US. Sheikh Salem al-Sabah, the Kuwaiti Defence Minister, viewed the closure as an "act of aggression" and endorsed the view that

thc closure would provide foreigr powers with a "pretext to interin and control the Gulf region." The UAE stressed the need for a "speedy and serious search for outlets other than the Hormuz." Bahrain's Sheikh Khalifa bin Hamed said the "superpowers, with their military might, will ensure for themselves freedom of navigation for tbeir vessels and oil supplies" and expressed the view that protection ofthe strait was "a joint responsibility of all world states, especially those benefftting from that sea lane."lo So while

the GCC states were all worked up over the Iranian threats, Bahrain and Oman seemed to openly iuvite the United States to defend thc Strait. Ilassan Ali al.Ebraheem provides almost tbe only anti-US, anti GCC opinion from within the Gulf that is free and open and quite

142 Tw Pmsrelc Gur.r aNo


influential. In a book entitled Kulvait andthe Gaf(Croom Helm, London, 1984), he recalls the overghrow or assassination of Nuri Said iu Iraq in 1958, the Shah in fran in 1979 and Sadat in Egypt in 1981. His conclusion is obvious [nd yet extraordinary, '....popular suspicion of the US in the re[ion is sufficiently deep that any close rclationship or identification On the part of the Gulf governments with American interests or sscurity projects will in the long run only result in the alienation pf populations from their own governments, witb consequencos tlhat might well be similar to what happened in fran."Il Opposition movemcnts in the Grilf castigate the GCC as the lame. duck child of the United States, Gbnerally, these movements vent their anger in badly-printed leaflet$, pamphlets and books. One such book entitled Sauili Defence Speniltng: A Case of Misuse of Muslim Wealth 1n,p., n.d.) relying solely on tbe data given in the Military Balance, claims that: (l) the per capita defence expenditure ofSaudi Arabia in the year l98l was no! only by far the highest in tlc world, but exceeded also the combipeil per capita dcfence expenditures of the US, Britain, West Ger{any, Pakistan, Malaysia, Jordan, Spain, Turkey, Morocco, Egypt, lAlgeria, Indonesia, Sudan and Nigeria. (2) The defence expenditfrre per person in the armed forces of Saudi Arabia is more tha{ four times that of the US. (3) Tbat for just two-thirds of Saudi dpfence spendiog, eleven countries (Ttrkey, Algeria, Egypt, Jordan, Morocco, Sudan, Pakistan, Libya, Indonesia, South Yemen and North Yemen) together are maintaining defencc forces numbering 2,3f0,850 against 52,200 of Saudi Arabia, operate 2,366 Combat aircpaft against 128 of Saudi Arabia, and hold 12,877 tanks against 450 bfSaudi Arabia. The book ends with the sweeping charge that all Saudi decisions are made in





The Soviets have legitimate interesls in the Gulf. Their proximity to the region, more than fifty-milliqn Muslims in the Soviet Asian rcpublics, the strategic and oil imp$rtance of the area, and American interests in the region, all tend to e[hance Soviet anxiety about the happenings in the Gulf. Way back in 1921, the Soviets concluded a Treaty of Friendship with lran, qhder the articles five and six of which they gained the right to sendl troops into lran should a third




party intervene there or use lranian territory as a base for an attack on Soviet territory. The Arab Gulf states were more or less insulated from Soviet influence till 1972 when the treaty of Friendship and Cooperation with Iraq gave the Soviets their flrst home-port facility at Basra. On the eve of the British withdrawal from East of Suez and the tentative regional initiatives at putting together a local security alliance, the Soviets reacted sharply. They announced their firm

opposition to {oreign military bases and military presence in the to support people's liberation struggles. "This applies completely to the national liberation struggles launched today by the peoples ofthe Persian Gulf region," a commentator wrote.rs After the Iran-Iraq reconciliation in 1975 wheo the idea of a regional grouping gained fresh momentum, the Soviets reacted even more sharply. Moscow radio called it an attempt to maintain the status quo in an alliance between "imperialism and local reactionary forces" that sought to make the region an "imperialist protectorate" in service of counter-revolution in thc area.l{ The Soviet reaction to the GOC, therefore, was predictably hostile. Soon after the idea for a Gulf grouping was mooted, the Soviets brbnded it as an old attempt by the US to form "an aggressive military bloc in the Gulf to draw some of these states into the orbit of its hegemonistic policy and to cause a split within the ranks of the Arab countries."16 They also accused it of being directed against the "national liberatlon movements.'016 A third charge levelled against it was that it was aimed at the overthrow of the Iranian Islamic Reoublic.u The ofrcial Soviet position on the Gulf was formally presented in a proposal by the then Soviet President Leonid Brezhnev in an address before the Indian parliament on l0 December 1980. It proposed: (l) Not to set up foreigu military bases in the Persian Gulf area and on the adjacent islands and to deploy nuclear or any other weapons of mass destruction there. (2) Not to use or threaten to use force against the countries of the Persian Gulf area and not to interfere in their internal atrairs. (3) To respect the status of nonalignment chosen by the states of the Persian Gulf area and not to draw them into military groupings with the participation of nuclear powers, (4; To respect the sovereign right of the states of that area to their natural resources, (5) Not to raise any obstacles or pose threats to normal trade exchanges or to use of sea-lanes linking the
area and promised to continue

144 Tas PEe$rAN Gur.r


ia the world. To date, t&c
densed Soviet position on the secure the rcgion from outsidc stability, guarantee its sove. the same time take care of tbo

states of that area with other Brezhnev propostls remain tle affairs of the Gulf, Thcy purpod itrterfefence, provide it with reignty over its oil resources and

thenirg of the solidarity of the nltional Iiberation movements, in
thc intensifcation

treaty which was widely sE€tr as a Eounter ard a challenge to the GCQ. Pravda greeted the evedt as hn ..important stage in the streng-

tim."b It

of their

was reported that not only was a Soviet

against imperialism and reacthe deliberations of the trc6ty,
pres€nt at all meetings, but he and took the chair at meetings blished clauses iu the treatv

also assistrd in geparing the on all matters of foreign policy. command under Soviet zu Adeo and subsidiary headquartcrs planc for a campaign desigoed to The Sovict position on the coDmentary on Radio Moscow perception of the various mem was seen to be the chicf oulprit.

were said to inoh.rde provisiotr for fhc setting up of

joint military


with its main

headquar0ers in

it at length:

Tripoli and Addis Ababa, and the GCC.{ seemed to rel€nt aftef that. .d fo reflect a differentiated within the GCC as Oman It woulcl be worthwhile to quote

..,the represeotative of the lackej rcgime in Omau was unablc to

pretbxt of defehce against the Sovi€t tbreat. The participants reaffirmed afresh that the of the Gulf's security wae their privato duty. They as they had at the previous conference in Abu Dhabi, any attenpts aimed at iutsrference frm outside, and protested tbe fmoigu military preser@ and called for the liquirlation $f foreign military bases in the Gulf, Arabia ard Red Sea and the Isdian Occan. Thie part of

persuade tbe participant$ to acc€pt the plan for tie *tablishmetrt of a military-political bloo under Washington'e supervision outhe




the statement read like a direct condemnation of the actions of Sultan Qabus, who has presented the USA witl territory for US military bases. Many observers pointed out that the demands of tle participants regarding the security of the Arabian Gulf coincided with the Soviet proposal on this issue.z2

Tho Soviets sought not only to approve selectively the GCC postures but also to highlight the similarity of approach between themselves and the GCC. Thc Omani regime was singled out for attack with the aim of preventing further US military penetration into GCC territory. , GCC perceptions of the Soviet Union are equally hostile. Till very recently, Kuwait was the only GCC state that had normal diplomatic relations with the Soviets. Kuwait was also the only GCC stato that gave a cautious and conditional welcome to the Brezbnev proposals. The Kuwaiti Emir said he hoped, "the Soviet President will back up his plan with goodwill and decide to withdraw from Afghanistan"'rs The rest of the GCC memtrers reactcd unfavourably. The Omani reaction was outright hostile as Yousuf al-Alawi declared the pro' posals to be "insincere" and accused the Soviets of having "strategic plans to annex the Gulf area to its sphere of influence and hegemony."t4 Prince Sultan, thc Saudi Defence Minister said, "inter' ferencc of any sort by any party not belonging to the area in the a.ffairs of this vital part of the world is rejected as unacceptable to the leaders and peoples of the area."26 Abdulla Bishara considcrcd the proposals "unacceptable" saying: "It would be futilo to neutrali' ze the Gulf while the Soviet troops are in Afghanistan, atrd the Soviet naval forces cruise the Indian Ocean or the Arabian Sea, or maintain facilities in various Red Sea and Arabian Sea ports."ze The Soviet attacks on the GCO evoked responSes ranging from defensive to counter-offensive. An official Kuwaiti source denied thc Soviet charge that thc GCC had links with the US, and argued that it only served the interests of the six founder states' It criticized Pravda fot taking what the Amcrican press had said as a basis for its commentary in the knowledgc that oertain American newspapers tended to distort genuine attitudes.2T The Soviet move to send thc warships to South Yemen in May l98l also did not go uunoticed. A GCC foreign minister denounced the timing as an 'ract of provocation." "How can we ask ttre

146 Tw


Gur.r ll.ro Soufir Asu

Americans to leave the Gulf when the Soviets appear to be flexing their muscles in nearby Yemen," asled another.ra The Kuwaitis continued their efforts at placating the hostile Soviet perception of tbe GCO. Oq the eve of the frst summit, the Kuwaiti foreign minister, Sheikh Salbah al-Ahmad, visited Moscow and pleaded with the Soviet leaddrs to restrain South Ycmcn and thereby remove what Oman saw as a constant security threat. He the agreement with tho US if the Ybmeni threat could be neutralized. The Soviet foreign minister, Aqdrei Gromyko, suggested in return that if the Gulf states wanted better relations with Moscow, tho obvious first ste p was to establigh diplomatic relations.2e A few months later, the Kuwaiti Emir hidsclf visited Rumania, Bulgaria, Hungary and Yugoslavia. At the ehd of the visit, he openly advooated a policy of even-handedness letween the East and tle Wcst, aad said he would ask tho GCC to establish diplomatic aud economic rclations with the Soviet Union and East European countrics.so

informed them that Qaboos had promised to consider cancelling

The question of diplomatic relatibns with the Soviet Union acquired an important place in intra-GCO parleys. Abdullah Bishara, an astute politician, made a majol blunder in his career when he expounded his views on Soviet-GOC relations, "The absence of relations with the Socialist states dqes not mean that the Gulf states are aligned against them, Nor does the absence of relations mean tbat the Gulf states are in the edbrace of the US and the rest of the Western worldr" he explained. The main reason "is a GCO conviction that the East bloc countfies have no initiative in world affairs." He said the Soviet Union wh.s "involved in problcms directly afecting the GCC member countties" and cited an Omaai complaint that the Soviets were "playing a role in the Sultanate's dispute with its neighbour South Yemen."sl The Kuwaiti parliament immediately took up the issue. It charged him of being pro-West and calle{ for his immediate resignation for violating the Kuwaiti constitution. The resolution was adopted by 35 votes in the 50-member assemlbly. It had no executive eflect as the Kuwaiti government opposedl the call.sr The incident indicated a strong sentiment in favour of a more balanced global posture in at least one of the GCC membef-states. Since the others permit no sueh expression of dissenting oplnion, it may not necessarily be non-existent,




From time to time, the Saudis have also been promising/threatening to resume diplomatic ties with the Soviets. Rapidly deteriorating Soviet relations with Iran must certainly have contributed to thc initial Saudi rethinking on improving ties with the Soviets. Later, the leaks of secrct Soviet-Israeli talks added a fresh input to Saudi calculations. As early as January 1982, Hashem Abdu Hashem, editor-in-chief of the government-guided daily Okaz and a political commentator on Radio Riyadh, strongly indicated that the Kingdom might accept diplomatic ties with Moscow if it ended its military presence in the Red Sea and the Horn of Africa and withdrew its forces from Afghanistan.se In December 1983, Prince Saud alFaisal, the Foreign Minister, visited Moscow as a member of the Arab League delegation to canvass support for Palestinian participation in the peace process. In mid-1984, amidst controversy over the sale of US Stinger missiles Prince Bandar, the Saudi Ambassador in Washington threatened that if the US was unwilling to oblige, the Arabs have the option of taking their '.arms business to Mos. cow, Paris or London."ra Two days after that, he hosted a widely. publicized banquet for Anatoli Dobrynin, the Soviet ambassador and the dean of Washington's diplomatic corps.36 Around the same time, Prince Saud gave an extensive interview in the course of which, in reply to a quostion if Riyadh would shortly open relations with Moscow, he said, "there are in fact relations and contacts with tho Soviet Union. What has been suspended is diplomatic representation, and this will come in time."s A year later, it was a Soviet source that made a contributioo to
the on-going speculation. The leader of a Soviet delcgation to South

to have told his hosts that Soviet and Saudi diplomats had been secretly meeting in Kuwait and that negotiations were underway for a resumption of formalities,sT Then, out of the blue came the Soviet-Omani announcemen! at the United Nations on 16 October 1985 that the two countries had agreed to establish diplomatic relations. Even as the shock-waves generated by the event were spreading wide, Sultan Qaboos made a much harsher indictment of the Soviet role in the Gulf than ever before in an interview, he granted on the Omani national day on 19 November. "The Soviet Union, or Russia before, has always been expansionist, That is a fact of history. We are concerned about the Soviet presence in Afghanistan. Perhaps if the Soviet Union understood that further expansion is not in its interest, it will stay

.Yemen was reported

14S Trrr


Gur,r'eNP SoPrH AsIl

out of trouble in tho region"'s Si{ce Oman seems to have retained its origional perception of the S$viet Union, the move towards a diplomatic rapprochement,could oply be explained as purely tacti' cal-probably at the urging of the GCO' Tho fact that Oman was scheduled to host the next GCC sdmmit in a few days' time could also have been a factor behind the move. On the evc of the GCC summit [n Muscat in November l985,the Kuwaiti daily al.Ray al'Amm reforted that the meeting was to discuss a new initiative for the estdblishment of diplomatio relations with Moscow.80 All through the summit deliberations, rumou$ were rife and a concerted GCC initiative in this directiotr was con' sidcred immincnt. Nothing happefcd. And yet, few days after the summit camc tho announccment from thc UAE forcip ministry that it had cstablished diplomatic pclations with Moscow with effect from 13 November 1985. In Mosdow, Tass madc a sioilar annoutr'

As rt came ou the heels of the summit, the UAE decision was I[ made ihe UAE the third country within the GCC to have ties with Moscow. The Saudis may follow suit in their own characteristio foof'dragging fasbion; and thoy may do it sooner than expccted. Once fhat happens, Bahrain atrd Qatar would immediately follow them. {he three may also decide and aot on the matter together. However, iinspite of the tremcndous diplomatic and symbolio sipiffiance of such a move, it may not neccssarily herald a political change ou either side.
seen as a GCO-m:otivated move.

TsB GCC AND THB Pnopr,s's Dsil{ocRArtc REPuBLIC oF


On the theoretical lcvel, the PDRY poses the greatest challenge to the GCC. Whcreos Iran threatens fhe Gulf 's hereditary monarchies with revolutionary Islamic and re$ublican ideals and Iraq appeals to the pan-Arab, socialist and reprf blican aspirations of Gulf politi' cal consoiousnesss the PDRY qucsfions almost everything that thc GCC desperately strives to preserye-hcreditary rule, Islamic cthos, the status quo and pro-Western o{ientation. On the practical level, the PDRY challenge is mainly strqtegic. It is located on the side of the narrow month of the Rcd Sea at Bab al-Mandab and has a long coastlinc in thc north of the lndian Ocean. Aden, its port'city capital, is considered the Gibral{er of the east, the best harbour between Suez and India. The isladd of Perim sits on the southern




200 miles of-shore, is just off the Arabian peninsula and commands the traffic located between the peninsula and the African Horn. Any development in the Arab-Israel conflict or strife in the African Horn or superpower rivalry in the Indian Ocean inevitably affects the PDRY. Its borders with Saudi Arabia, North Yemon and Oman add to the country's role in rcgional devclopmeuts. The PDRV-Saudi border is more or less quiet, but the National Democratic Front's (the North Ycmeni Iibcration movement based in PDRY) forays into North Ycmen and the Popular Front for the Liberation of Oman's incursions into Oman have repeatedly dragged South Yemen into conflicts with its neigbbours, South Yemen is the only Marxist Arab statc and the influence of the Soviet Union is pervasive-idcological, political and strategio' Inl979, thc then President Abdul Fattah Ismail signed a l5-ycar Treaty of Friendship and Cooperation with the Soviet Union and a year later got observer status in thc Warsaw Pact and in the COMECON. Aden, Perim and Socotra are important Soviet naval bases and the Khormaksar is an equally important Sovict airbase in the country. The party-to-party and state-to-state ties bctween South Yemen and Soviet Union are close. In April 1980 Ali Naseer Muhammad replacod Fattah Ismail and by the cnd of June set out on a tour of Saudi Arabia, UAE, Kuwait and North Yemen. The trip was widely seen as the beginning of the "Arab option" in South Yemeni foreign policy and yiclded noticeable rcturns by way of liberal grants from Arab Gulf sources. Soon after thc GOC idea was mooted, Muhammad met King Fahd and Prcsident Saddam Husgein and made a proposal for an urgent conference of Arabian Gulf, Peninsula and African Horn states to discusg ttre means of removing all foreign bases and fleets from the region.'r The GCC, on its part, tried to soothe rufred Yemeni feelings. The Kuwaiti Emir made a flying visit to Aden and agrecd to hold a .'Gulf summit conference to consider Gulf security" and called for the Red Sea to be turned into a zone ofpeace.a2 He also visited Sana, the North Yemeni capital. Abdullah Bishara visited Adcn and Sara soon after that and proclaimed emphatically that the two Yemens are "part and parccl of the people of the Gulf. They cannot be left out in the cold as we embark on an ambitious programme for Gulf development."ns During the visit, Muhammad was reportedly favourable to the idea of the GCC. "You in the GCC are now coming

tip of the Red Sea and the island of Socotra,



Gur.r ,lxo Sourn A$.l

to mc with a message on ending the tension and think that is a
constructive approach. I think yor{r common approach to political issues would make it easier for {he tension [with Oman] to disappear," he hoped.aa Bishara protrised to start an economic assistance programmc and to bring it cf oser to the GCC.TE Soviet hostility to the GCC and the South Yemeni disillusionment about entering tbe exclusive grogping changed the situatign. In August 1981, South Yemen, hoste{ a meeting where South Ycmen, Ethiopia and Libya drafted and approved a Tripartite Friendship and Cooperation Treaty. The Treaty e4visaged a Supreme Council composed of the three leaders and a Ministerial committee charged with its implementation, Under it, ag$ression against any one of the three would be considered as direct aggression against the other two aid all means would be used to prcitoct the aggrieved party. It called for developing cooperation in miliftary and security felds so as to consolidate their defence forces tO safeguard the independence sovereignty and revolutioDary character of their countries.46 The Soviet role in bringing the three togethtr was openly acknowledged as Muhammad declared that "we ccinceal from no one our interest in developing and 'expanding coopdration and friendship with the socialist countries lcd by the US$R and in establishing the closest and deepest militant relations with the rest of the world's rcvolution-

afy movcments."{7 The Tripartite Treaty was percpived to be a hostilc act by tle GCC and its foreign ministers cpmmented unfavourably on the attempts by outslde powers t6 ,,bpild up positions in the Gulf area to threaten its security and sovefeignty."as Relations with South Yemen steadily worsened after that. In February 1982, the GCC foreign ministers convoned an e$ergency meeting in Manama to consider tle Omani accusation tbat the PDRY was plotting with the Soviet Unioo to destabilize thq regimes in the Gulf.ae In Aden, the government claimed to have unearthed a sabotage plot and 'made a number of arrests. It a4cused Oman, Saudi Arabia and North Yemen of conspiring to inrriade its territory and to bombard
targets deep inside the country.so By the end of the year, Kuwaiti tnediation had succeeded in bringing about normalizatioo of reladions between South Yemen and North Yemen and also between Sbuth Yemen and Oman. The situation from then on coqtinued to remain normal betwecn tho GCC and South Ye.men till a bloody civil war broke out in the


DIml l5l

latter half of January 1986 in South Yemen. Abdul Fattah Ismail who had been in exile in the Soviet Union since 1980 had returned home in 1985 and the power struggle between him and Muhammad had resumcd, A confusing sequence of events revealed that Fattah Ismail had plotted Muhammad's murder, who was alerted and had Fattah Ismail executed; the pro-Fattah lsmail forces gave an open call to revolt, a few of Muhammad's own collcagues joined in and the war spread like wild flre throughout the country; Muhammad fled the country; and the former Prime Minister Hyder Abu Bakr Attas who was in India when the storm broke out, left for Moscow and returaed home to take over as the new President. Thc GCC did not have time for collective deliberation. Saudi Arabia and Oman, the states with vital stakes in the happenings inside South Yemen, reacted differently to the situation. In Riyadh, King Fahd and his Oouncil of Ministers reviewed the situation "in the sisterly state and prayed to God that the leadership in that country may sooD be able to put an end to the bloodshed and fghting to spare the lives of innocent Arabs and Muslim peoples."6r On the other hand, Oman was accused of siding with the forces of Muhammad. An unidentified aircraft reportedly bombed Aden airport held by Defence Minister Salih Muslih Qasim who had gonc over to thc rebels and there were inevitable rumours that the airoraft belonged to Oman.ta Kuwait, as usual, was active on the diplomatic front with the aim of minimizing the damage to Yemeni-Gulf relations. The Kuwaiti charge d'Afaires in Aden, Fadhel Salem Bougaith, met Yemeni Foreign Minister Abdul-Aziz-al-Dali and secured a tentative assurance that the Ycmenis would continue their foreign policy of imploving relations with other countries in the Arabian Peninsula.ss




During the 1970 Black September clashes in Jordan, the US assigned a role to Israel in a worst-case contingency. Since then, Israel has increasingly taken over regional operations on behalfof the US and has violenfly opposed US attempts at spreading its stratcgic bets in the region. In the seventies, it threw its full weight behind Iran visa-vis Saudi Arabia within the US-sponsored ,,two-pillar" security arrangemont, After the Iranian revolution, Israel continued to object to the US security understanding with the Saudis and the salc of

152 THe


Gur,r eNo Sormr Asrl

US military systems to them. The FCO tlerefore

did not

evoke a

favourable respon$e in Israel.
Menachem Begin, the then Prime Minister, was cmphatic in assert-



that "Saudi Arabia is not capable of playing any useful role It is one of the most states in the world."e

The Israeli Labour Party leader, Peres, perceived things party's aiq at making Israel ao indigenous differently in view ofhis Middle Eastern state. IIe saw merit ln the formation of a "resional anti-terror set-up to counter Soviet pr alien penetration and fanatic forces" and proposed that the US, Egypt, Jordan and Saudi Arabia participate in such a set-up. Barely a month after the frst summit, Israeli air force planes flew over Jordanian and airspace and struck at the Iraqi nuclear facility at Osirak near Baghdad. The Israeli violation of Saudi airsoace and an aerial on lraq-far away from its national borders-served as a fresh of its aggressive intentions in the region and showed the itv of the Gulf states in the face of such a policy. The Israelis then drummed up a campaign for securing an explicit and exclusive strategic bctween the US and Israel. The American-Israel c Affairs Committee, the apex pro-Israel lobby in the US, and publicized a special report that strongly criticized the US policy of reliance on strategic airlift and highlighted, instead, the advan of US-Israel cooperation political stability, political in view of Israel's geostrategic reliability and advanced society. Thq report advocated the preposigrounds of; l) Force efectivctioning of material in Israel on the grc ness; as the material prepositioned i[ Israel could be redeployed to the Gulf 66 days sooner than from the continental US, 2) Cost; as

it would save $9 billion in additional C-5 aircraft needed to achieve the same results from bases in the US.66 The US-Israel strategic agrecment was signed on 30 November 1981. It openly assigned a rolc to Israel in the eventuality of U$ intervention in the Gulf. The GCO, a minor partner in the US secubity doctrine, was pushed under the US-Israel protective umbrella. The GCC states, on their part, b]ave always nurtured deep suspicions oflsraeli willingness and caBability to strike, expand and occupy Arab lands. Their fears are further compounded by Israel's leverage in the US decision-making process, its consistent refusal to compromise on the Palestine issue aad its strident opposition to




US arms transfers to the Arabs and to a security understanding with them. Ahmad Zaki Yamani, the Saudi Minister for oil, reflected a general feeling ofthe Arabs when he answered a question as to which he considered to bc the greatest threat, Zionism or the Soviet Union. "Without a doubt Zionism. It is Zionism which has bitten off one of our hands," he said.6? And yet, the GCC has never attempted to take on the Israeli chaltenge. It did not deliberate over Osirak, preferring instead to participate individually in the emergency meetings of the Arab League and the United Nations Security Council. The Saudi royal
decree that it would bear the cost of rebuilding the destroyed Osirak facility was bardly an appropriate response. The GCO, instead, has opted for a political response to the

Israeli threat, On 7 August 1981, the Saudis proposed an eightpoint peace plan, the crucial seventh point of which guaranteed the right of all states in the region to live in peace. It was the flrst cver Arab initiative for a political solution to the Arab-Israel dispute. The GCC foreign ministers endorsed it in September' But the second GCC summit in November, where the plan was expected to sail through triumphantly only "reviewed the Arab and international reaction" to it and asked Saudi Arabia to include it in the agenda of the Arab League summit with a view to "achieving a common
Arab position."oa The Arab League summit that met in Fez, Morocco, on 25 Novcmber 1981 broke up the same day amidst hysterical denunciations of the Saudi initiative. The third GCC summit reiterated its full backing for the plan and called upon the Saudis to resubmit it to the Arab League at its Dext meeting. In September 1982' the Arab League finally approved the plan with minor changes. The Fez peace plan, as it is called, embodies the general Atab oonsensus on the Arab-Israel problem, Since then, the GOC has chosen to quietly support the MubarakHussein-Arafat option on the matter and issue statements only on specific instances of Israeli threats and related matters. Thus' the Israeli aggression on Lebanon in mid-1982 was discussed by the GCO foreign ministers who urged the United Nations Security Council to apply sanctions against Israel for refusing to pull out of Lebanon, asked the United States not to hinder the execution of the United Nations resolutions on the matter, and reaffrmcd its support for Lebanon's sovereignty and territorial integrity and for

15.t TnB





the Palestinians and the PLO.6J In May 1983, the GOC forcign ministers rejected the 17 May 1983 kbanon-Israel accord and once again called for the unconditi withdrawal of all Israeli forces from Lebanon.9o At the peak intra-Plo fighting in November

"deflnitely and whole-heartedly sppport Vasser Arafat as the leader of the PL0."81 And finally, after an unprovoked Israel attack on the PLO headquarters in Tunis, Abdullah Bishara warned against
underestimating Israel's capacity for aggrossion and spoke of deterrent plan, without speciflyin* it.03


GCC lNo Inee "The lake of oil now seems to be on the brink of a volcano, and everybody is looking around fearful of their positions and future* except for Iraq, which is strong alrd confident of itselfand its future, and this enables it to play the malin role in stabilizing the region.,' So proclaimed a secret circular of lraq's ruling Baath party soon after Khomeini came to power in February 1979.6s The circular was leaked out, sending shivers dpwn the spines of the Gulf rulers. Iraq's population is bigger than the entire GCC population put together. Its Baath ideology, bastid on Arab nationalism, secularism and socialism, is anathema to the conservative monarchies. fts re-

publican protestations are abhotred by them. And not havlng a common border with Israel, it htrs taken up the most strident anti_ Israel stances and accused any fr$ntJine state of ..treasou,' at the slightest instance of moderation, [n addition, its regional ambitions and territorial claims on Kuwait hlave not endeared Iraq to the Gulf

tion, Iraqi ambitions got a further boost. In July 1979, Saddam Hussein replaced Ahmad al-Bakf as the president of Iraq and launched his own Ostpolitik in two successive phases. In September, he gave a call for the creatio$ ofa collectivi Arab Gulf Secur_ ity Force and the establishment of a joint Military Command to control it. The Force was to har,ie an autonomous status and an independent budget to be contributed by the participating states, each according to its financial resburces. He said Iraq was prepared to conclude a bilateral defence agfeement with any state intcrested

After the lraq.Iran reconciliation of l975,Iraq became an enthusiastic supporter ofa regional groirping, After the Iranian revolu_

Gursruu DtBtr, 'I55
in it and offered to send troops to Bahrain and Kuwait in the event of internal uprising or external attacks.sd When the plan failed to evoke a respotrse, Saddam followed it up by a vaguely worded eight-point "Arab National Charter" that called for the termination of all foreign military presenc€s in the Arab world and unity among its members. The Charter was announced with a lot of fanfare on 8 February 1980. Saadoun Hammadi, the Foreign Minister, was $ent to Kuwait, Bahrain, Qatar, UAE and North Yemen, and Ezzet lbrahim, the Vice-Chairman of the Iraqi Revolutionary Command Council (RCC), was sent to Jordan and Saudi Arabia to enlist support for it. The Iraqi exclusion from the GCC, in the circumstances' was humiliating. It meant the negation of all its earlier attempts at put'ting together a. Gulf-wide grouping and was seeo as a deliberate affront. Saddam gave full vent to his anger in an interview in which he blamed Saudi Arabia as the moving force behind the forination of the GCC, criticized Sheikh Zayed for his failure to send a delegate to the Arab parliamentarians' emergency meeting held in Baghdad in July 1981 to condemn the Israeli attack on Osirak, and put Iraqi relations with Kuwait under strain by renewing his deniand for a
lease on the Kuwaiti islands.os Saadoun Hammadi called for strength'

ening the Arab League rather than creating other forums



Iraq-Kuwait mutual peroeptions deserve special treatnrent in view of their bearing on Iraq's relations with the rest of the GCC. Irads coastline on the Gulf is only 40 miles long and its only outlet to the Gulf is through the Shatt al-Arab estuary which isalmost entirely blocked by Kuwait's Bubian and Warba islands. This single fact of geography has largely shaped Iraqi policy towards the Gulf. Till 1963, it continued to claim Kuwait as an integral part of its territory on the ground that historically the Sheikhs of Kuwait derived their powers from the Governor of Basra in Iraq who io tum was appointed by the Ottomans. On Kuwait's independence from Britain in June 1961, Iraq threatened to march in, but was prevented by British and Saudi forces. In 1973, there was a second Iraqi threat to Kuwaiti territory. In 1981, Saddam reopened tbe issue by asking for a 99-year lease on the Kuwaiti island of Bubian and stating his purpose to build a naval base on it to defend both the countries. In a misplaced gesture of magnanimity, he acknowledged Kuwaiti sensitivity on the matter


THB PrnsrlN Gur,r l,r.tp Sotrur

0? nrnl'|.Problem.oz Iraq was at war with Iran and I{uwait was in the process of evolving the GCC. On both these the timing of the Iraqi demand was terribly wrong. Prince Fahd senr an urgent message to Kuwait warning that the leasin$ of the island would greatly promote Baghdad's hopes of g the Gulf and would make the

and added tlat Iraq was willing t! acr accept ..anywhere else in Kuwaii to set up the naval base" if Bubiad pr lo presented a speoial sovereignty

the Kuwaiti Emir that Saudi Arabla would support

any attempt to seizc the island by force. The Iraqis did not give up on thc mattcr. Saadoun Shakir, the Iraqi Interidr Minister, was reported to have made a formal ofler during his to Kuwait a month later.es Iraq also wields considerable political influence :rmong the Kuwaiti elite. Ovcr the years, it has carefully nurtured a pro-Iraqi Baathist group in Kuwait that consistently championed the Iraqi cause within the limited of the Kuwaiti political process and freedom of expression. The Kuwaiti daily al-Anbaa generally reflccts Iraqi opinion and often carries interviews withlraqias well as pro-Iraq Kuwaiti leaders, Ahmad liussein, a vetoran retired Kuwaiti diplomat, in a front-page article h al-Anbaa, strongly urged the inclusion of Iraq in the GCC, whidh he said would create a force that could indicate limits to ,,th{se who have ambitions in the area."6e In another instancc of Eolidarity with Iraq, Jasem alQatami, a member of the Kuwaiii National Assembly, urged the government not to follow the GCG resolution on the Iran-Iraq war that was formulated at the sixth suinmit. The resolution, it may be noted, was a little more even-ha{ded vis-a-vis the warring parties
than previously.?o The controversy over the island Of Bubian was revived once again in April 1985 when Kuwait decldred it a military zone, offJimits to all civilians, and stationed ant[-aircraft units there to guard

arily, politically and financially


against the possibility of the Irari-Iraq war spilling onto its territory.?r Bubian could be a key-stratrfgic asset to either side in the Iran-Iraq war and the Kuwaiti fortlfications aroused anger on both sides. Whereas the move was gen$rally perceived to be a defcnsive measufe against Iraqi covetousnesJs,Ts Iran charged that it was designed to aid lraq.rs left out of rhe GCO

Gursnlx Dmrr,
remains strong, although


it is expressed more in terms of hurt pride rather than outright anger. A quote from Tariq Azizaptly summarizes the current Iraqi perception of the GCC.

...to deny lraq its role in the Gulf would be illogical. Iraq is the major power in the Gulf. It has to be accepted as a power. But one may ask: "A power for what?" Not to changc the govern' mcnts in the area. Not to impose policies. But, rather, a power which is an important partner in shaping tho security, prospcrity, and future of the 1980s, This is a legitimate and constructive




Relations between the Arab rulers on the western shore of the Gulf and the Shah on the eastern shore were never entirely devoid of rivalry and suspicion. Saudi Arabia and lran, thc two complementary pillars of the US Gulf strategy, were themselves regional competitors. The Shah's calls for a region-wide security arrangemente thereforc, could never take off as the Arabs were wary of his intentions of dominating the area. However, maintaining the status quo was the common broad aim within which thc rivalries were contain'

With the Shah's departure from the scene, the situation changed drastically. Whereas post-revolutionary lran retained thc elemcnt of dominance-with even an enhanced menacing posture the cle' ment of preserving the status quo was thrown overboard. The net result was an almost total estrangement of Arab-Iranian relations in the Gulf. The Iranian threat could be analysed in terms of its ideological appeal and political example and the willing and eager audience across the Gulf. Islam accords priority to the concept of umma (community) that cuts across national identities. The Iranian govern' ment terms itself the Wilayete Faqih, that is the statc of God, and claims to be only a precursor ofthe universal divine government. Tbe Wilayet-e Faqih, by togic, is duty-bound to uphold the ideal of divine rule and spread the mcssage to alltbe mustazafeen (exploited) to strive and get id of mustaqbareen (exploiters)' The export of revolution, therefore, is in the very nature of Iranian idcology. The Iranian claim to be the "true" example of an Islamio statp


THB Pmsr,Lu



Sourn Asr^l

would have been inconsequentiat i{ itself if it bad not found .large sections ofpeople across the Gulf lvho were ready to listen and convert themselves to it. Shias consiitute seventv-five perccnt ofthe population of the Gulf. Of this, nigety-flve percent of Iranians and sixty percent of Iraqis (the two host populous states in the Gulf with roughly forty million and thirteen million people respectively) are sbias. Within the GCC, seventj percent of people in Bahrain, twenty-four percent in Kuwait, eighteen percent in the UAE, sixteen percent in Qatar, eight percent in Saudi Arabia and four percent in Oman are shias. Compounding the above population fgures is the fact that most of the oil-rich ar,eas in the Gulf are shia-populated. Besides Iran and lraq, the caude in point is the shia population in the oil-rich al-Hasa province of Saudi Arabia. Again, the Gulf rulers are sunnis and the shias have alwavs been a minoritv who have felt politically and economically deprived. Add to this the region-wide family, business and relligious connections that the shias
have always maintained and one cahnot underestimate the impact


the sbia revolution in lran. The.Iranian appeal is not only thbt of a militant Islarnic state and is not confined only to the shia mabscs. Its articulation ofthe concept of mustazafeen touched a cofd in every heart that felt itself deprivcd and oppressed. Its defi4nce of thc United States has becn a source ofinspiration to natibnalists ofall hues in the Gulf. Its championing the cause of Palegtine was appreciated by the rest of the Arabs. Revolutionary lran strcceeded in putting tremendous pressures on the Arab Gulf regimed. Its appeal, though faded over the years, is not yet completely di$sipated and can very well reemerge if the regional balance of fdrces undergoes a major change. Tbe GCC was formed to stem thF tide of the Iranian revolution. Abdullah Bishara identified lran's qirest for supremacy in Gutf seourity as tle main source of threat to the stability of the GCC states.?6 Thefact that the GCC was mainly directed against it was not lost on lran. It promptly threatened to t.take action', if any political or military pact was directed against i! and alleged that the GCO was formed not for reasons of security, but in order to ..maintain Foreign military interests" in the area.?s Ira{ian Foreign Minister Ali Akbar Velayeti was even more explicit whdn he said it was ..necess:uy to remind the gentlemen bordering t{e persian Gulf that they should not forget that Iran is the greatest a4d the most powerful country in the region." He warped the GCO against aligning itself with the




US and reminded them that Iran considered America as the arch'

It would be worthwhile to briefly examine the relations of tle individual members of the GCC with lran. Bahrain has bcen a special target of Iranian anger. Iran's historical claim over it ard its big shia population have made Bahrain extremely wlnerable to Iran.ln 1970, the Shah renounced a 400-year old claimlo it, but soon after the revolution the claim was revived as Ayatollah Sadeq Ruhani gavc repeated calls for the annexation of Bahrain. Although Prime Minister Mehdi Bazargan and Foreign Minister Ibrahim Yezdi denied Iranian ambitions in this regard, the rapidly enhancing status of tbe clergy within the Iranian political hierarchy did not help in allaying Bahraini fears. In December 1981, when the Bahrain government discovered an lran-engineered plot to overthrow the Khalifa regime there, fears gave way to panic' The Prime Minister, Sheikh Khalifa bin Sultan al-Khalifa, said that the government had traced the sabotage network to Tehran and accused lran of sending terrorist groups to Bahrain.Ts Later, he identified Khomeini as the Gulf states' fundamental enemy and called on them to end trade and other dealings v/ith lran.?' The Bahraini Minister of Information, Tariq al-Muayyed even produccd evidence to show that a Shia mulla, Hadi Moderrasi, was expected to arrive from Iran during the disturbances and declare a Khomeini-style Islamic republic in Bahrain and Iranian naval vessels were to have crossed the channel and helped in consolidating the insurrection.s0 The GCC reaction to the Bahraini uprising was swift and effective, Within a few days, the Saudi Interior Minister, Prince Nayef, visited Bahrain and the two countries signed a bilateral security arrangement. Very soon after that, Saudi Arabia entered into similar arrangements with Oman, Qatar and the UAB. Arrangements co' vered provisions for coordination of information, cross-border pur' suits, extradition of criminals, etc. Kuwait held out on the ground that such an arangement would violate the Kuwaiti constitution. The Kuwaiti refusal prevented the bilateral arrangements from acquiring a general GCC-wide nature and role-although tho Kuwaitis are urderstood to have accepted their obligations under it without formalizing the same, Apart from the claim over Bahrain, the Iranian seizure of three Arab islands belonging to Ras al-Khaima and Sharjah Emiratcs of the UAE constitutes the second major territorial dispute between


160 Tru

PrnsreN Gur,r eNo Sotnu


Iran and the GCC. The Sbah caftured the islands on thc eve ofthe British withdrawal from the Gul[, Unlike tbe Iranian claims and negations of claims over Bahraln, the Iranian official position on the islands has remained unequfvocal and consistent, Bdni Sadr, the then Iranian President, categprically refused to relinquish thcm on the ground that Arab contrpl over them would in effect mean
US control.sl

Strangeln it was Iraq, rather tban the GCC, that took up the ofthe islands and made thelr return one of the conditions for stopping the war in its initial gtage. Sheikb Zayed,, the President of ttre UAE, has displayed a very cautious attitude over the matter. In a carefully worded statement, !e summed up the UAE position: "With regard to the issue of tte islands, we have announced our stald and proof exists that the Isfands are Arab oncs. We, however, shall not seek to seize tbese in a non-brotherlv manner. This is our intention and this ls what we have announced to our neighbours since the ffrst day. know our stand."8r In fact, among the GCC the UAE has maintained the most cordial relations with Iran. Its , specially lran-Dubai trade, has remained uninterrupted, UA$ press coverage is the least hostile towards Iran and links between the two have grown over the years. In March 1982, Iranian Deputy Foreign Ministef Ahmad Afifi visited the UAE qhich was followed by the visit of Ali Akbar Velayeti in August 1983. In mid-1983, the UAE together with Kuwait, took a lead in medilting between Iran and Iraq over the oil-slick issue. against lran. Months before the Qatar too nurtures GCC summit in Doha in N 1983, Qatari security precauyet, a cache of arms was distions were very much tightened. covered including haod-held missiles which muld havc been used to shoot down the of the incoming heads of state for the summit.88 Even during thg summit, an attempt was made to blow up the Sheraton Hotel, tho tvenue of the summit. There was no conclusive proof to implicate lran but the Qatari accusing finger fumly pointed at it. On 21 Dccember 19 83, six borirbs went off in .various parts of Kuwait hitting such targets as th{ American and French embassies, the airport and a ministry buildigg. In a swift sweep, the Kuwaiti government arrosted twenty-frve persons, all of whom admitted to being members of D6vra, the Shia opposiiion group of Iraq which




has sought shelter in lran. Sinoe then, the Dawa has made two serious terrorist attempts to get the convicted prisoners released. Thus, in December 1984, a Kuwaiti jetliner was hijacked to Tehran and in May 1985, an attempt was made on the life of the Kuwaiti Emir. Iran and Saudi Arabia remain the chief protagonists across the Gulf divide. On the tevel of rhetoric, both have questioned each other's Islamic credentials. On the level of speciffcs, thc major issue
has been the

Haj. Whereas Iran has accused Saudi Arabia of grave

neglect of the holy places and ill-treatment of haj pilgrims, thc Saudis havo alleged that Iranian pilgrims werc engaging in political propaganda and demonstrations thereby disrupting haj rituals and violating its sanctity. For the past two years, there is a perceptible thaw in Saudi-Iranian hostility. The 1984 haj passed off peacefully. For tho one minor incident that did take place, the Iranians accused Iraqi agents rather than the Saudis. In May 1985 Prince Saud visited Tehran and met Velayeti who returned the visit in December. GCC

lNo rrrB IRAN-IRAe


Whon Iraq attacked Iran in Soptember 1980, there was a general belief that the Gulf statcs had incited Iraq and promised support in its war efforts. Iraq's initial claims that it was leading an Arab war against Iran and labelling it as the modern-day "}adisia" lett further credibility to that version, It was also assumed that Saddam Hussein had consulted the Saudis during a visit he made to Riyadh a month before thc war began. On the other hand, there was a report that when Saddam complained to Prince Saud al-Feisel at the lack of Arab support, hc replied that Iraq should have told its Arab brothers what it was going to do and sought their support beforchand, In point of fact, he said,. they would never have agrecd to Iraq launching the attack.88 Whichever version one tends to believe, there is no denying tle fact that the Iran-Iraq war was greeted with a sigh of relief in the Gulf statcs as it diverted Iranian fury away from themselves. There was a general sensc of solidarity with Iraq and even instances of direct mllitary involvement as the first shots were fired. Iraq had sent helicopters, troops and aircrafts to Oman and was reported to have sought Omani permission to use its bases for an attack on the islands of Abu Musa and Greater and LesserTumbs, The Americans

162 Tsr

PEtsrAN Gur,r nNo Sorfnr Asra

and British took conoerted diplohatio action to dissuade eaboos fronr this course of action.sa Sinolilarly, Iraqi naval,units were reportedly anchored at UAE ports, thfcrats to destrov them anywhere in any port had the effect on the UAE.$ Sincc then, tbe Gulf states ha refrained from direct intervention although they have been grappling with problems.
Their role has been limited to go beyond a point in getting wield no influence on Iran and time, they are constantly they have not considercd it wise

lved and also because thcy

limited on lraq. At the samc with the eventuality that the war may spill over and drag into it. Even if that alocs not happen, any outcome of the wai have a far-rcaching impact on the regional power structure a]s well as domestic power-sharing arrangemcots. Iranian victory wou[d entail disastrous consequences. Iraqi victory could also prove danlerous. During the ffrst two years of har, Saudi Arabia, the UAE and Kuwait provided nearly 930 biltion in grants and loans to Iraq. The

of French weapons. From 1982 onwards, the direct nilitary aid stopped. Thq GCIS countries, instead, agreed to produce Iraq's quota of 1.2 million barrels of oil a day on its beballf and transfer tbe proceeds to

Saudis probably also financed the Idaqi purchase

The ffrst two GCO summits callCd for an end to the war in genertcrms. It was only after the Irairian offensivc in the spring of 1982 wbich cleared out the Iraqis from Khuzistan and led a march towards Basra that tbe GOO statc$ woke upto the urgency ofthe


situation and took up the mattcl at the Organization of Islamic Oonferences (OIO) and the United Nations, When tbe third summit
considerably. It criticizcd Iran for its international border with lraq," noted that such pments posed a threat "to thg safcty and security of the Arab nation and the violatior of its sovercignty," and asked lran to to the peace proposals of the OIO, the nonaligned and the United Nations.t! The Doha Summit in Novembei 1983, for the first timc, proposed a peace formula based on a by-step creation of neutralized zones. First to be taken out of thb war would be the Gulf including the Iranian ports and the main oil facilities at the Kharg island eipofting terminal. Having neutral the Gulf, attention was then to have been paid to the 3@-mile ruriding from the mouth of




tho Gulf in the south to the mountain peaks of Kurdistan in tho north.s? Also for the first time, Sheikh Zayed proposed a "Marshall Plan" to rccotrstruct both countriec.ss The summit marked an evolution in GCO thinking on the war. By then, Iranian revolutionary appoal was believed to have subsided, Iran's relations with the Soviet Union had worsened and had improved with the Americans. Ths chances of an outright victory for lraq had also dimmed. GCC statements from tben onwards reflected Its desiro to come to terms with lran without completely jeopardiz. Ing its relations with Iraq. In May 1983, the foreign ministers of the UdE and Kuwait had attempted mediation betwecn the two warring parties on the issue ofthe oil-slick and floated the idea of a s3teconstruction fund" that appearcd to meet one of lran's princi. pal demands- war reparation.rs Zayed's proposal of a "Marsball Plaa" was only an elaboration of the same idea to cover Iraq. By mid-1984 the situation had changed again with random attackg on the oil tankers by Iraq and the Iranian ultimatum to retaliate by

blocking the Strait of Hormuz. With attacks on two Kuwaiti and one Saudi tankers in thc Gulf tensions rose dramatically. The GOO foreign ministers held an emergency meeting and decided to tak€ the matter to the Arab League and from there to the United Nations Security Council. GCC shipping experts and naval officers began plotting ncw in-shore lanes close to the Arabian side ofthc Gulf for thcir tankers.se Saudi Arabia and Kuwait agreed on joint air cQver for their ships.oo And finally, on 5 June 1984, Saudi jets, guided by the AWAOS, intercepted and destroyed an Iranian F'4 fighter bomber, There was then a temporary respite in the bombing. Tbe fiftn summit in Kuwait once again called on lran "to partiaipate in the efforts which aim at findiog a solution basedon attaining thp rights of both parties."or Th9 resolution approved at the sixth summit reaffirmed GCO "roadilcss to mediate with the warring parties in order to put an end to the destructive war in a way to preserve the rights and legitim4tc interests of the two parties as a step forward to normalizing relatioos among the region's states."ez The novelty ofthe resolution was that tbe call to peace was not directed at Iran alone, but at both the parties-thus omitting the assumption behind tho eadier communiques that Iraq wanted peace whereas Iran was the intransigent party. Iran grceted the GCO cbange in posture, Velaycti welcomed thc

164 Tun


Gur,r.enn Sburn Asre

communique and added that IrAq would rcspond to tla friendly gesture.os Ayatollah Abdul Karirh Musavi, the Iranian Chief Justice, expressed the hope that the GCQ would take practical measures to back the realistic stand.ea And Rlafsanjani, thc influential Speaker of the Iranian Parliament said, .'[ve have believed all along that the countries supporting Iraq will change their policies and give up thcir support when they lose hope in thc Baghdad government." He added that the Gulf states trusted Iran because "they know well that lran has not harrned them although i{ has been capable of doing ss."o0 It was in this climate of expectations that Velayeti made a trip to Riyadh. It yielded no results; on the'contrary" it set the clock back. After the visit, Saud al-Feisal reported that he had notdeteoted any change in the Iranian stand that might lead to peace. Velayeti, on his part, was quoted as sayilg that he had not even discussed the conflict in his talks with King Fahd. The Iranian Prime Minister,

Mir Hussein Moussavi, dismissed the whole exercise by stating tlat Velaycti's trip had.'nothing to do with the iesue."00 In mid-February, Iran launched yet another ofensive and succeed. ed in reaching aud holding onto the Iraqi port ofFao. It brought Iranian troops within 50 miles of Kuwait City. Iranian President Ali Khamenei's message to tle Kuwa[ti Emir to maintain strict neutrality was followed by the charges that Kuwait had helped lraq by permit ting the use of Bubian island and by offering medical treatment to wounded Iraqi soldiers. The war, at this juncture, is viltually at the doorstep of the GOC. The GCC response has been an bnusually strong communique that was issued at Riyadh at the end of the emergency foreign ministers'. meeting in early March. In a veiled refcrence to the Gulf Rapid Dep. loyment Force. It said that the deflence chiefs of staf of the GOO, who coordinate deployment of troops and resources, would meet shortly to "take appropriate measures tb confront any possible tfueats." The communique then went back to its original position of praising Iraq for its readiness to end thd war and declared its resolve to intensify contacts with the United Nations and the nonaligned movement for renewing mediation attgmpts.0? If the Iranians take tle war into Kuwait, thc GCO as a wholp may get involved in a defensive operation, according to the abovie verbal commitment.





should be repeated at the outset that tle GCO is not a monolith. one end of the spectrum is Oman that has openly conceded military facilities to the US and is eager to tum the group into a security bloc. On the other is Kuwait that has maintained continuous diplomatic ties with both the Superpowers and is insistent on an expanding role for the group, especially in the economic fleld. The diverse political systems, economic structures and extemal orientations of the GCO membet-states have generally been accommodated within a broad GCO consensus. The Iranian threat and Saudi diplomatic genius have contributed in retaining and consolidating the consen$us, although differences oo maDy issues have been openly aired from time to time. Contrary to the prevailing general opioion that everything is milk and honey between the GCC and the US, a deeper analysis shows the situation to be otherwise. GCO dependence on tle US is so overwhelmiog and its need to appear independent is so great that it is virtually constantly on the horns of a djlemma. The Soviets did not take kindly to the formation of the GCO, but over the years, the two have come a long way in evolving a limited rapprochem;nt tbat is reflected in the establishment of diplomatic relations by the UAE and Oman with the Soviet Union. The Saudi trump card of resumption of diplomatic ties is yet to be played, but it is bound to come in the course of time. The GCC perceives the PDRY as an ideological threat as the latter questions almost every political value that the GCC desparately seeks to preserve and promote-hereditary rule, the Islamic ethos, the status quo in the region and the linkages with the United States. With the normalization of relations between the PDRY and Oman, the skirmishes over the border between the two have endedo although the recent change in leadership in South Yemen may alter the situa. tion oncc again. The GCO clearly perceives the Israeli ohallengc as military and has yet opted in favour of meeting it only at tJre political level. The Saudi-sponsored Fez peace plan is the first Arab initiative for the political solution of the Arab-Israe lproblem. The Iraqi ideology based on Arab nationalism, secularism, socialism and republicanism; its territorial claims over Kuwait; and its regional ambitions resulted in its exclusion from the GCC although


166 Tss


Gulp lNo Sourn Asu,

Iraq had consislently worked for a Gulf-wide organization sincc the mid-sevcnties, Through the war yBars, Iraq has been militarily sapped and ideologically bruised and may not be in a position to provide an
altcrnative centre of power in thq Gulf. It may still be an unwelcone claimant to membership of the qCC in the aftermath of the war. It would not be wrong to state that the GCC was put togcther primarily to serve as a shield against the Iranian threat. Although the Iranians have created crises ih the GCC states by resorting to terrorist attacks and inciting and supporting subversive plots, their challenge is mainly ideological. The GCC has attempted to placate Iran and at times, warn it, but hfu not directly confronted it. The Gulf states' role in inciti4g Iraq to attack Iran cannot be determined, but the fact remains ithat the war relieved thcm of tremendous pressures from lran. Tle creation of the GCC owes a great deal to the war as it removed two aspirants to Gulf leadership from the scene and provided a unique opportunity to Saudi Arabia to

quietly put together the group rirnder its own exclusive leadership.
The GCC has so far succeeded in steering clear of the war although it has financed the Iraqi war efqrt, attempted mcdiation between thc warring parties and held out pttractive financial rewards to Iran if it stops the war. At the momerit, the war has reached the very frontiers ofthe GCC security shield and the GCC posture has changed from one of mediation to that of preparing for a defensive engage-



Quoted in Steven t. Rosen an( Haim Shaked, "Arms atrd tbe Srudi Connection," Comtrentary (New lYork) vol. 65, no. 6 June 1978, p,33. The Views of Researches od Sqholars on the Establishrr.ent of the Gulf,

Coopention Coancil (Kw,tait, 198!), p.80. 3. American Arab ,4rairu (Washingtqn, D . C.) Fall 1983, no. 6, p.3. 4. The Proposed AWACSIF-L, Enhdqcement SaIe to Saudi Arabia 1A etatr Report prepared for tbe Committte on Foreign Relations, United States Senatc, Washington, D .C., 198I)l p.13. Indian Express (New Delhi), 5 Ostober 1981.

6. The Middle Ehr, (London), 9 Jul* 1984, p.11. 7. Internatianal Eerald Tribune (Parib), 19 January 1981. 8. Focus on the GCC (An Arab-BritiEh Chambcr of Comrnorce Publication,

Guunex DrBtrL



, Proceediss of a One-day Confcr€lc€ held on I983), p.16.


Decomtru 1983, Londoh,


Foreign Broadert Infortutton Service, 4 May 1981, p,3.

Arabia (Loodon), April 1984, pp.45-46,




al-Ebraheem, Kuwatt e,td the Gulf (Cronm l{€lm, L,onalon,

1984), p.62.

12. Saudl Deferce Spending: A Case of ldisse of Muslim Weahh (Dp, rd'r. 13, D. Dyoioy, ..Pcssian Gulf Countries at tho Cross-Roads," Intemttiorcl 14.
.dfairs (Moscow), Marqh 1973, p.57. Moscow Radio in Arabic, 29 Novembtr 1976. Quot€d in Shahram Chubin, ,,Soviet Policy Towards Irao and tLe Gulf," in Charles Tripp' elL, Regional Secafity in the Middle East (Intemational Institute for Strategic Studieg, Gower, London, 1984), p'39.
Pmvda (Moseos'), 16 December 1980.
?ass (Moscow), 31 December 1980.


1?, 18.


in the Perslln Gulf: Role of Outside Powers (International Instituto of Sarategic Studi€s, London, 1980)' p.150. New Yave $ew Delhi), 21 D€cember 1980.
Sbahra,m Chubin, Security Egypttan Gazette (Caito),26 May 1981.

Prmada, 23 August 1981.


Ian Greig, A New Shadow Over the G lf (Fopign Affairs Researoh Insti' tute, 1981), p.8. 22. Survey of World Broadcasrt, 6 Septemb€r 1981, p,Cl. 23. Iat€rvieru. of Sheikh Sabah al-Ahmad in Okaz, lBMarcb 1981. Quoted in M.S. Ef-Azhary, The Gulf CooPeration Council attd Regtonal Defence irt the 1980s (Udvcrsity of Exeter, Exeter' 1982)' p.101.

?.4. Foreign

Broadcast Inlormation Senice' 27 January 1981,


25. Ibid.,2 Aptil 1981. 26, Monday Momitte (Beir\t),

20-26 Julv 1981, pp.2F-26.

n.2,9P.75-'76. 23. Intenational Herald T bnne,26 May 1981. 29. Egyptian Mail (Cairo), 16 May 1981.


30. Emiruies Ners (Abu Dhabi)' 22 S'ept€mber 1981. 31. Egyptlan Gazette,22 March 1982. 32. Ibid., Z Marcb 1982' 33. Emirates lfelrs ll January 1982. 34. Dfltri K. SiDes, Soviet St/ategy in Syia and the Persian GzIl lMiddle

35. Juatith Perera, "Nding the Be4r!" The Mitulle fiast (June 1984), p'I3' 36. "Nyadh, sup€r Pow€rs and the Arab World," Mondav Morning' 14 May

East Institute, WashitreloD

DC' 1984)' p.9'


1984, P.54. Newsweek (New Yotk), 6 MaY 1985.

38. 39.

TrrB Pm,surl

Gulr nNo Sorfur Asn,
witl Altaf Gaubar, Joarl (Londol),
November 1985,

Qaboos's inton iew p.97.

. 41 .

Forcign Broddcast Infomation Sentlce, 28 October 1985. Kuwait Times, 76 Novemober 1985. The Arab World (Bc;itr:lt), 3 Februs{y 1981.

42. The Observer News Se/yice (Londrop), 9 February 43, Outlines of an Address of the Sepretary-Gercral

48. 49.

Abdullah Bithara at St I,oais Confercnae, 22-23 September 1983 lRiyadh, 1980), p.3. Abdullah Bishara, "The Gulf Coioperation Council: Achievem€nt arrd Prospect," Focus on the GCC, n.8, p.16. Ibid. 46. Times of India (New Delhi), 2 Septomber 1981. Aden Eome Radio Senice, 17 August 1981. International Herald Tribune (Paris), 3 September 1981. Egwtian Gazette, 7 February 1982. 50. Arab World, 26 Marcb 1982, Saudi Gazette (Jeddah), I7 January 1986. Obsener (I-oDdoD), l9 January 1986.


Kuwait Times, 27 January 1986.


Begin oa Israeli Radio on 18 May 1981, Quotod in tfu Ittstitute for Defence Stadies and Analyses Neys Review on llest Asia (N€w D€lhi), June 1981, p.131. Ibid., April 1981, p.39.

56. Stoven Rosen, The Strategic Yalae pf Israel (.{IPAC Paper, Washington,



59. 60.

Foreign Broadcast Information SeniPe, 4 March 1981, p.Cl. Times of India,ll November, 1981:



July 1982.

Forcign Brcadcast Informatian Senipe,

M.ay 1983, p.C1.




Guardian,? November 1983. Foreigt Broadcast Infotmation Semice, 23 October 1985, p,C2. Colin L€8um, "Husseil's Mission for Justice," The Obsemer News
rrce. 25 September 1980.


Middle East, January 1981, p.1?.



Arubia, September 1981, p.29. Sa'dun Hammadi, Iraq: Clear PolicVes and Firm Principles lPress Confcr€nc€ at Iraqi Cultural Centre, London, 1l March 1981).

67. "Lease Sought on Kuwaiti Islaird," Middle East Ecorcmic
(Iondon), l7 July 1981, p.21.

68. The Daily Telegraph llondon), 16 Marob 1981. 69. Financial Times (L@don), f 9 March 1984. 70. Tehron T tes, 71 Novomber 1985.


Janes Delence Weekly (Londotr), 6


1985, p.581.




72. Foreign Broadcast Infon ution &rvice,25 Marcb 1985, p.Cl. 73. Elizahh O. Colton, "Kuwait's Siegp Mentality," lfersreek (New York),


1985, p.29.



The lraqJrun llar and US-Iraq Relations: An lraqi Pe$pectire (National Courcil Reports, no 2, Washington D.C., 1984), p.38. Abdullah Bishaaa, Outline of the Seminar on the Secarity af GUU G.{ew York, 1982), p.7. Stat€ment by Hojatolislam Sayed Ali Khameini, The Middle fust , Januty

1981, p.17.

77. Financial firnes (Loodon), 28 January 1982, 78. Arab /Vews (Jeddab), 16 December 1981. 79. Egyptian Gdzette,24 Januaty 1981. 80. Intenstionnl Herald Tibune, 27-28 March 1982.


82. Al-Ittihad al-Usbui, 28 May

Financial Times,25 Ma,rch 1980. 1981. Quotod in M.S. El.Azhary, n.23, p,


.H, Janson, "The Attitudes of the Arab Gov€rim€nts towards tle Gulf Wa,r," in M.S, Bl-Azhary, ed, Tbe lran-Iraq War: An Histo cal F,conomic a d Political Anal/rts (Croom llekn, London, 1984), p.82.

84. Sunday Telegraph,5 Ootobor 1980. 85. Guardian, 30 Sept€mb€r 1980. 86, Fareign Broadcast Infoftiution Service, T2 Novcmber 1982. 87. Guardian, 3 No\tember 1983. 88. Nadia llijab, '.Gnlf Peace S€€k€rEi Patohing up Arab Quartels," fne
Middle East, Decembor 1983, p.l5. 89. Iohr Butloch, "Gulf Stat€s in Move to Unify Defenc€s," Daib Teleeraph,22 May 1984. N. Daily Telegraph,3 lvlay 1984' 97 . Foreigt Broadcast Inforrnation Semicezz Nov€mber 1984, pp,C;X42. 92. Kuwait Tines, 7 November 1985. 93. Tehran Tines, 7 Novemt er 1985.

94. Ibid.,9 Novemb€r 1985, 95. Ibid., 20 Novomber 96. Ktwait Times, Tl Dcccmbcr 1985.



Statesnan (New Delhi), 5 Maroh 1986.


Gulf Cooperation Cqlncih Royal Insurance against Pfessures from Within and Without

That old cliche-unity is strength--r-is not always applicable or workable among neighbouring nations. Neighbours may be more prone to friction than to fraternity. Yet, pommon perceptions and intercsts have brought neighbouring countries togethcr in the form ofregional groupings such as the European Economic Oommunity (EEO), tho Oouncil for Mutual Economic As$istancc (CMEA), thc Assooiation of South-EastAslan Nations (ASEAN), thoGulf Cooperation Ooun-

cil (GCC).r
Even a glance at these four regi[nal groupings ghowg that thcir member-countries share certain cfitioal concerns and perepectives. (SAARC is an cxceptional groufingln that iti members oftbn do not Se€n to sharc the same concefns,)


CoMraoN Tnnneos

The ffrst, and most important, of these joint concerns, is a shared threat to security from internal or external sources or from both
soutces. The second shared perspective is a common foreign policy percep-

tion which is closely linked with the first shared coucern regarding security. A shared foreign policy perception regarding the United States/Soviet Union and also regarding a proximate, major regional powcr like Vietnam or Iran acts ab glue forthe members of regional
The third is the advancement an{ joint protection of their economic assets and interests and trading terms. The fourth is some degree of silnilarity in political systems which extends to a broadly common political ideology. The flfth is consensus about thc rble of the important powor within




the regioual grouping, a cotrsetrsus shared by the importarit power. Usually, except in thc casc of thc Soviet Union within the OMEA, the importaot power voluntarily adopts a low-proffle, self-restrained role. The sixth is a broad ethno-cultural affinity, Westem European, Slavonic or Arab, Though tbere is a domioant Malay cultural strain in ASEAN, Thailand and the Philippines do no quite fft into tho mould, Among the GOO members, therc is the additional cultural adhesive of a common languagc, Arabic, Looking at the specific casc of the GCO,x these six common tbreads of regional goupings are clearly visiblc.


The six GCO members-Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and thc United Arab Emirates-clearly agree on their threat
percoptioas, though thcre are slight differences in emphasizing the threats. Thc intsrnal threats cannot be separated from the cxternal threats to the Gulf regimcs.2 Oommunism and even vaguely socialist-inclined groups like pan-

Arab Nasrcrists, the Iraqi and Syrian Baath parties or the leftleaning PLO (Palcstine Liberation Organlzation) factions have long becn vicwed as prime threats by ttre dynastic regimes of the Gulf countries.s (Gulf countries or Gulf states in this paper donote tho six member-countries of the GOO and exclude Iraq and lran, although thcsc two are part of the Gulf region,) Palestinian, Iraqi, Syrian, Yemeni, Egyptian and other pan-Arab leftist groups, soon after the British withdrawal from Aden in 1967, oxpanded their links with leftist groups witlin the smaller Gulf states. Adcn was renamed as the People's Democratic Rcpublic of Yemen and became the only communist-ruled country in the entire Arab world. The new Republic stepped up support to the Popular Front for the Liberation of the Occupied Arab Gulf (PFLOAG) which was involved ia a rebellion in Oman's southern province of Dhofar which was to last from 1965 to 1975 when it was crushed by a formidable combination of British, Jordanian and the Shah of Iran's fotces.a PFLOAG had links with the Popular Front ofBahrain and with the National Front for the Liberation of Bahrain both of


GCC war formally born oo 26 M8y 1981.

172 Tw


Gut.r er.p SourH Asn

which tricd to convert the Bahrain parliament into a forum for criticizing the ruling family of Bahfain. This could not be tolcrated and tho Emir (rulcr) of Bahrain didsolved the country's parliamertt in 1975 after a short existence of ohly two years,6 Kuwait's fourth parliament was also dissolved after a similar ex. perience it 1976, but unlike Bahraih, a new Kuwaiti parliament was established after fresh elections in 1981. The driving force behind leftist dissent in thc form of the Arab Nationalist Movement (ANM) weie Palestinians.c The largest segment of the Palestinian diaspora in the Gulf is in Kuwait. It numbers about 300,000 out of Kuwait's total population of 1,450,000. (1982 census-58.5 per cent indigenous, 41.5 per cent expatriate. The
Palestinians arc by far the largest expatriate group.)? The Kuwait government thereforre finds it necessary to be the most vocal among the Gulf regimes in demanding the restoration of the Palestinian homeland,8 But it is nolt willing to allow direct criiicism of the ruling family from any quarter. The dissolution ofthe fourth parliamcnt was prompted by such qriticism from thrce lcftist members,

Oriticism of the ruling family in any public foru:n is also taboo in the other four Gulf states which have nevcr cxperimented with parliaments.0 Dissent is pushed int6 subterranean channels and surfaces in unexpected (by the ruling lpgmes) and sha4r political and
iocendiary explosions.


Therc have also been unsuccessful demands for reforming the Saudi monarchist system. The sttongest such demand came from within the royal family in June 1960 when a group of princes and some commoners proposed a draft constitution and called for a moro limitcd monarchy aud a partly elected parliament. This group was led by Prince Talal, a half-brother of the then ruling monarch, King Saud. When their attempts at reform were frustratsd, Talal and his group, popularly known as the .Free Princes', took rcfuge in Cairo and coalesced with the Front for ths Liberation of Saudi Arabia, a middle class froup established in 1958 and having communist links, From Cfliro, the Free Princes made regular broadcasts on behalf of the Ljiberation Front, calling for the overtlrow of the monarchy and its rcplacement by a conetitutional




democracy. However, in 1964, the dissident princes returnod to Saudi Arabia and were promptly pardoned for their wayward ways.rr A number of other small groups of Saudi emigres formed small and ineffective liberation fronts in the 1960s and early 1970s with the encouragement of thc Egyptian Nasserists and Iraqi Baatlists. But these groups could not muster support on Saudi soil.ls Early in 1966, 19 'communists'were jailed and 34 were given royal pardon. Later that year there were reports of bombings in Dammam and in the capital, Riyadh. They were ascribed to republican infiltrators from North Yemen, which was thea in the grip of a civil war between Saudi-backed royalists and Nasserist, Egyptian-backed republicans. In March 1967, 17 North Yomenis were executed for planting bombs at government installations and royal palaces, in' cluding that of Prince Fahd, the Interior Minister. The Nasserist threat to the Saudi regime was deflated with thc defeat suffered by Egypt at the hands of thc Israelis in the Junc 1967 war.le In.Tune 1969,300 Saudi Air Force personnel were arrested for conspiring to attempt a coup in collaboration with the Front for the Liberation of Saudi Arabia. The entire air force was grounded and underwent a massive purge. It is claimcd that the Saudi armed forces (cxcluding the bedouin-dominated National Guard) have nevcr regained the position of royat trust they had enjoyed till 1969.1{ A Western commentator with considerable experience of Saudi Arabia suggests: "If there is a lesson to be drawn from the unrest of tbe 1960s, the Saudi royal family (Al Saud) has learned it. The disfavour of radical regimes in the Middle East can be perilous for the internal stability of thc kingdom. The Al Saud's (radical; policies on tbe Palestine Question, its rather sub rosa relationship with the US and its response to the Iranian revolution have shown how well it recoCinizes this. Such a realization has been evident in Prince (now King) Fahd's refusal to providc public support cither for US use of Omani bases or for WashingtoD's quatrel (on the hostage issue) with Iran. Only in the ctucial area of oil policy has the Al Saud pursued actions that seem more in the interest of consumers than of its radical brethren in OPEC."r6 As briefly sketched here, Oman, Bahrain, Kuwait and Saudi Arabia witnessed leftist radical activity during the 1960s and early 1970s. In the other two Gulf states, Qatar and the UAE, there was negligible activity by leftist radicals. Most of this leftist radical activity was linked with countries out



Tns Ppxsex Gur.r aNo Soutn Asn

mote southern province, who harle always nursed regional senti. metrts, were the focus of a Marxist.,lled liberation front openly supported by communist-ruled Soutb Yemen. Babrain's leftists werc largely home-grown, though inspifed by Egyptian Nasserists and South Yemeni Marxists. ' To the conservative rulers of the Gulf, the leftist groups supportcd by the radical Arab states, seemed to bc acting as proxies for the Soviet Union and Sovielinspired communism, even if Moscow did not show any particular enthuslasm for overthrowing the Gulf regimes. The internal threats werb linkcd with the extemal threat of Sovlet communism.r. Till 1979, the six Gulf regimes harboured their common threat porception of leftist radical forces by Moscow and its Arab rclient'states. (Egypt was regarded as having teft the Soviet fold when President A"nwar Sadat abrogated the EgyptianSoviet Treaty of Friendship and on 14 March 1976.) The Gulf regim es' common threat perception was strengthened in 1979, though it came from a t dircction. Like thc US Ad. ninirtration and most other g the Gulf regimos were tribal regionalists and the leftist rcvolutionary Mujahideen-e-Khalq.l? The Soviet leaning Tudeh (communist). party backed the anti+Shah coalition from a distance. By August 1979, Khomeini's radicall Islamic forccs had turacd on middle class liberals such as thc National Democratic Front led by Matin-Daftary (grandson of Mossadeq who had been the natioqalist Prime Minister of Iran during th4 short-lived anti-We$tern ioterlude of l95l-53) pnd l8 other oelwly formed polltical partics. In
Spptember 1979, tbe Islamic forces grushcd Kurdish rebEls who had become disenchanted with Khomeini's growing authoritarianism. The climactic confrontation betwerirn Khoemini'e Islamic radicals and the leftist Mujahideen-e-Khalq was to come in 1981, ending in tbe defeat of the Mujahideen.rs The Tudeh party was later crush€d without any resistance. There was an immcdiate fallout ffom the ovorthrow of the Shah

ildo the Gulf aroa, particularly figypt, Syria, North yemen and South Yemen. Immigrant groups+the palestinlans in Kuwait and the Vemenis in Saudi Arabia-acled as detonators for leftist explosions in these two countries. Ia Oman, the Dhofaris of the re-

ary 1979 by radical Islamic Shia elass antl-royalist liberals, Kurdish





on thc Shias of Saudi drabia and Bahrain and a delayed ono on the Shias of Kuwait.lo The Islamic revolution in lran also had a demonstration cffect on puritanical Sunni groups in Saudi Arabia who regarded the Saudi royal family as corrupt, profligate and un"

.bligious oppositior to the throne in Saudi Arbia is ingraiaed in

the ascetic, puritan tradition of Abd al Wahab (1703-92) who called for a permancnt struggle against corrupt and unrepentant Muslims, including corrupt rulers. The tradition continued into thc 20th century when a section of the bedouin tribal fighters of Saudi King Abd al Aziz's army revolted and had to be put downwith tha aid of the British air force. Thesc tribal fightcrs were called thp iklwanzr (loosely meaning, defendcrs of the faith) and their zeal war exploited by Abd al Aziz to units the NajC atdHejaz areas into the Kingdom of Saudi Arabia in 1932. Large groups of the * hwanthen turned against Abd al Aziz as they felt that hc was not following thc Vlahabi percepts, although Abd al Azizand his family alwayr claimed---and continue to claim to this day-that they arc repositorieb of Wahabism.ss


The tradition of Wahabi revolt against corrupt rulers was embod. ied in.Juhaiman al Otaibl, the religious preacher who led the storm.

ing of the Grand Mosque in Mecca, Islam's holiest ohrine, in
November 1979, togcther with a band of around 400 followers. Tbe Grand Mosque was rccaptured after a long and bitter two-wcek battle by Saudi troops assisted by Jordanian, Frcnch and Pakistani military advisers. But in a country where rcligious opposition to the throne is deeply ingrained and whose borders are open to Islamic zealots from all over the world due to the annual laj pil.grimage, the puritan Sunni rcligious threat to tbe throne has not

Juhaiman al Otaibi was killed in the battle and 63 of his surviviog .followers were later beheaded. One-third of those beheadcd werg non-Saudis. Among the foreigners who stormed the Grand Mosque .werc Egyptians, Kuryaitis, an American Btack Muslim and a Guyanese from South Ar4crica.sg A religious pamphlet written and published by Al-Otaibi in carly 1978 provides a lfuvour of the ideology behiod thc Mecca updsing. Tbe pampblet proclaims: '.There, aro two classes of rulers. Qne who follows tbe Koran and the sunna, and the other who forces the people to do his witl. The

176 Tnr


Gur,r lr.ro Sdurn Asn

people are not obliged to obey thO second class of ruler even lf they rule in the name of Islam. "Thc royal family is corrupt. It worships monoy and spends iton palaces not mosques. If you acoept what they say, they will make you rich; otherwise they will porsbcute and cvcn torture you."4 In the same mouth of Novembor 1979, though without any joint planning with Otaibi's zealots, th* Shias who arc conccntrated in the oil-rich Hasa province in eastern Saudi Arabia, spurred by the Iranian revolution and the stridant calls of Radio Tehran, insisted on bringing out the banned Ashura religious processions. Jittery security forces opened ffre and rio$ng continued for 24 hourr, leaving at least 17 Shia dead, There was fenewed violence in Qatif, a key town of Ifasa province on I Febhuary 1980, the first anniversary

of Khomeini's triumphant return to Iran. The violence in Hasa province led to efforts by the Saudi regime to placatc the Shias by starting a rrumber of new public works and installing a new, relatively libersl, provincial governor. Though therc has been no renewal of vliolence since 1980, the Shias, who form 8 per cent of Saudi Arabia's population, remain a politically restive elemcnt. (The Shias of Hasa province are among the most politicized segments of Saudi society as they were among the ffrst to be employed in the Saudi oil industry and wcre activc in clandestine union activity against thc lrivileges eojoyed by the Amcrican cmployees of the oil companips.)t6 In Bahrain, which has a 70 ger cent Shia population, Shia'led protests against unemployment, thc rough behaviour of the security police, the pro-Western policies of the government, public drinking and oabarets, begatr on the lranian-inspircd (liberation of) Jerusalem Day, 17 August 1979, and continrled through the rest ofthe year.rc The protests were centred aroundl religious processions which included radical, secular elements. flusain Musa, an activist of tho Popular Front of Bahrain, a secular organization, has described the €ffect of the Iranian revolutisa erl people in the Gulf States: "The revolution has kindled a hew zcal a6ong the people and it has kiudled conflicts. It bas matlc the people hate those (Gulf) regimes. Their sympathy for change in the area exist€d but the revolution unveiled it. Thus, we obberved thc spontaneous movem€nt of tle people-not only solidarity with tho revolution in Iran aod the Palestinian tovolution-but an cxpression of local feelings,

Jlwo Lere


democratic feelings, feelings hostile toAmerica, to American principles and to the American presonce."zz

A secood wave of demonstrations in Bahrain followed in April Khalifa ruling family of Bahrain was plotting with Iraq to undo the Iranian revolution. Shia resentment against the pro-Western Sunni rulers of Bahrain was to culminate in a plot to overthrow the Khalifa regime. Tbc plot was discovered in December l98l and ?3 persons, 60 of them Bahraini nationals, were tried and convicted in 1982, Most of them were accused of belouging to the lranian-backed Islamic Front for the Liberation of Bahrain.se 'Xn Kuwait, where24 per cent ofthe population is Shia, expressions of Shia'resentment were temporarily forestalled by the deport.. ation to lran of some Shia leaders of Iranian origin. However, on 12 December 1983, tle French and US embassies in Kuwait werc . attacked with car-bombs. Other installations were also attacked.se Eighteen Kuwaiti residents of Iraqi and Lebanese nationality werc arrested for the attacks. The security authorities said that they were
1980, this time with tbe specific focus that the

Iranian-inspired Shias. The Kuwaiti authorities have claimed tbat Iranian inspired-Shias of diverse nationalities were also responsible for an unsuccessful bid to kill the Emir (ruler) of Kuwait on 25 May 1985 and behind blasts in two cafes on tl July 1985 which killed nine persons and injured 56.30 The continuing Iran-Iraq war, which began on 22 September 1980, initially caused concern that it may spillover and envelop the Gulf states or that Iranian successes may lcad to overt Iranian domination of the Gulf. But with the continuing stalemate on thc battle-front, the Gulf states are no longer too perturbed about the war, though no Gulf leader would openly prsclaim like Henry Kissinger tlat ..the ultimate American interest in the war is that both (Iran and lraq) should loso."sl Despite the weakening of Iran because of the war, Iran has, since 1979, replaced the Soviet Union and its friendly Arab states such ae South Yemen and Syria as the main threat in the perception of the Gulf regimes. It is not the military-strategic threat which worries Gulf rulers as much as the ideological threat posed by a radical, antidynastic, anti-American Islam which is a joint oause for concern
among the Culf rulers.38

The intemal troubles in Saudi Arabia, Bahrain and Kuwait


l?8 TIs


GI'LF .l,NP Sourn AsIe

ofr by the Iranian revolution of all six Gulf states which in foreign policy of these states and GOC in May 1981.
Fongow Por.tcv

to a subtle chango in the

to the formation of


The earlier joint pcrcepion wtich lastcd till 1979 of a leftlrt' pan' Arab, anti-imcrLan, Soviet insfircd threat had made the Gulf rulers (except the Kuwaitis) virtpal satraps of the US' The preseat joint perceftion of a populist, pan-Islamic, anti-American, anti' a fur ther cozyrng -ooot hitt, Ituoian-inspired thrcpt has not led to up with the United States but" oq the cootrary, to a eerious attcmpt to seek come degrce of autonomyl from US and Westem influence and pressures through greater co$rdination among the Gulf statesin effact a oonsc'lous attempt by the Gulf regimes to distance thes' popula' cclves from the Amcricans who &fe much hated by the Gulf wish to alienate tions This docs not mean that the Gulf regimes themselves from the Americans. They only wish to havg some freedom of manoeuvre and not be s*n to be connected with sucb poli' cies as US support for Israel agaipst the Palestine Liberation Organi' zation, US support for the Israetli control of southern Lebanon or the US dssire for deployment of its military forces in the Gulf which could instigato an adventuroug #ilitary response from Tehran and would cause further angry prote$ts among their own populations'88 Ia every summit of the GCC lpaders since the first in AbuDhabi in May 1981, when tho GCC wab eetablished, the Gulf rulers havc reiterated their opposition to sriperpower rivalry and inten'entioq in the Gulf area and have tried [o establish thcir nonaligoed crcrlantiq I c dentials. The Gulf rulors arc taking pa{ticular care to avoid being rcgardod by their own populations as Anierican stoogcs. The overthrow of the Shah of lran, in which one df the popular and highly cmotional ingredients was thc antipathy td a regime subservicnt to the US, has left a legacy whioh cautioqe against any open alliance with e dependence on the US. The only country in the Gulf arca which has allowed the US acccss to military facilitics, Od-an, is re-negotiating its dgreemctrt with the US and stipulating that aocess will only bc altowed on a ca3€-to-casc basis and dnly after prior pernission from




Oman. Tbe facilities which could be used by the US in an cmergency and .with Oman's permission are four air0elds at lvfasirah, Sib, Thumarit and at Khasab which overlooks the strategic Strait of Hormuz, the 23-mile wide channel which separates O.man from Iran, and through which passcs 20 per oent of the uon-comnunist world's oil exports.sa Following up its desire for widening its foreign policy options and horizons, in September 1985, Oman announced that it would be establishing diplomatic relations with the Soviet Union.86 Shortly thereafter, the UAE also decided to have diplomatic relations with the Soviet Union. This could be a prelude to the establishmcnt of diplomatic relations between Saudi Arabia and the Soviet Union. Hitherto, Kuwait was the only GCC state to have diplomatic ties with Moscow. Ifowever, in the flnal analysls, if any of the Gulf regimes was fac_ed with the prospect of being overthrown and could not meet the challenge with the assistance of its GOC partners, it would have to turn to US military power as its ultimate protector. This is clearly brought out in an interview given in November 1984 by the Sultan Qaboos bin Said al Said of Oman: Q: Oan you give your ourrent appreciation of the general security situation in the region? A: I think it has improved a gteat deal, largely because of an improved appreciation of the security imperative and the felt need for close cooperation among tic states in this region. For. instancen Kuwait, which was strongly opposed to military collaboration and any joint effort for security, is now in the forefront oftho

their concern alone and not that of any outsider. What aro your views on this subject? A: We want to look after our own afafts and have thc capaclty to do so under normal circumstances. After all, why have we bought
so many weapons?

The lran-Iraq war has been handled with some sensitivity by all concerned. Recently, when the Americans were greatly exercised by what thc Iranians were saying, I advised caution Fortunately, the US came to the same view. . . Q: Some of the GCC states insist that the region's security is

Ifthere should

be a noajor armed


180 Tsn Pnnsrell Gur-r eNo Ssufir Asln
wo would like to have advice on military planning and to borrow expertise from our friends. lVe ilo not want lheir soldiers. But in the uhtmate scenarib where all odds are against us,I do not see how we can avold asking our frienils from outside and all those who want to see this region stablc and peaccful. (Emphasis mine.)8o

EcoNoMrc INrsREsrs

More tlan seourity interests, id is the cconomic intcrests of the Gulf countries which have become lied to the US and the West. Oil and oil money have furt[er integrated the six GCC states with the world capitalist system, spfcially since Deoember 1973 when the Organization of Petroleum Ex$orting Oountries (OPEO) dramatically raised orude oil prices filve-fold aftcr the Arab oil-producing countries had demonstrated thq vulnerability and dependencc of the West on Gulf oil through thei4 shortJived oil embargo against the US,87 The embargo was meant to exert pressure on Washington to dilute its backing for Israel during thc October 1973 Arab-Isracl

Initially, the powcr of
was demonstrated


as a political-economic weapon

but the

became blunted as hugc sums


money from oil exports began were then recycled to the W government securities and of Western industrial goods, Fifty-fve per cent of the in the Gulf region (the six means that the economic

flow into the Gulf countries and

through investments in Western markets and imports into the Gulf items and armaments.s reserves ofcrudo oil arc located states plus Iran and Iraq)Ee which
between the West and the Gulf will sources such as the North Sea dec-

grow as production from

lines bccause of smaller of oil. (North Sea production is then decline sharply.) expccted to poak in 198G87 The attempts by oil outside the Gulf over the past five years (1980-85) to maximize and profits have led to a significant decline in Gulf oil ues. But this decline is likely to domand-and-supply probe short-term. Acoording to jections made at the World Congress in 1983, the prcsent period of slack demand for oil bound to be followed by a burgeonMainly the Gulf area, particularly ing world demand for oil by its large oil reserves, would be in a Saudi Arabia and Kuwait, r position to medt the additional for oil as other oil.producing


Lare tgl'

countries wou'ld be lowering thcir production due to their fast depleting reserves. The present phasc of dcclining oil prices is, thereiore, likely to be a short-term phenomenon, followed by a sharp rise in prices by 1990, if not earlier.ao Till the Novembor 1985 OPEO decision, pushed by Saudi Arabia, to increase oil production despite low demand, Saudi Arabia and the other GCO countries had faithfully allowed foreign (that is, mainly Western and Japanese) demand rather than their national needs to determine the rate of their oil production, This is the hallmark of

a dcpendetrt rclationship.rl

The Saudi-inspired decision ofNovember 1985, however, indicates that the Saudis who are being backed by the other GCO states (even though Bahrain aud Oman are not members of OpEO), are for the ffrst time sinoe 1973, attempting to follow a slightly independent path in the economic sphere by deliberately raising Saudi oil production from around two million barrels a day in the summer of 1985 to four and a half million barrels a day in the frst week of February l986.as The Saudis and their GCC allies are thus undercutting othcr oil producers and tryitrg to re-establish their primaoy in the oil market. This is creating shock waves among US and other Western bankers bocause some major oil producers outsido the Gulf may be unablc to pay their large debts as thcir oil revenues plummet as a result of oil prices declining drastically from 930 per barrel to around $17 per barrel, mainly due to the Saudis flooding thc market with

their oil.{3 Mexico, with a foreign debt of g96.4 billion, is likely to default on its repayments to Western bankers as its dollar earnings from oil plummet. Even a limited drop of $4 per barrel of crude will cost Mexico $2.2 billion in lost oil revenues in 1986, Venezuela (foreign debt $35 billion), Egypt ($30 billion) and Nigeria ($20 bi[ion) are the other oil exporters with large foreigo debts, whose drop in oil earnings could endanger Wcstern fi naocial institutions.{. The oil exporters with small populations and large foreign exchange reserves are all in the GCC. These countries are ableto cope with the decline in their oil revenues by drawing on their fnancial reserves and by slashing government spending. Despite lower oil revenues since 1982, the GCO states arc still estimated to have hcld $200 billion in financial reserves in the West in mid-I985,{6 Due to the dccline in oil revcnues, the aggregate current aocount surplus of gl7 billion of tho GCC countries in 1982 was transformod

182 TE


Gwr lxo Sbunr AsIr

into an aggregate ccffent accoualt deffcit of $5'7 billion in 19E3'Dua to corrective actiqns like prunibg development programmee and reducing imports, the GOO colrntries reduced tlcir deflcit to $3.3 billion in 1984.40 Thc belt-tightcniog measurea ty the GOC governmef,t$ arg howevrr, not very welcome in societibs whcre citizas have got used to viewing tlc state as a source df perpetual enrichment. Moct GeF citiaens would rcgard taxation as an unjust violation of their fundamcntal rigbts. Unlike in the rest of the world, governments in the GCC states do not levy any taxes (exoept a few marginal customs
dutier) on


citizens but instead directly channel governmcnt ftrnds

into citiz€os'hands by an extenslve system of easy loans, subsidics and evcn straight grants. The attcept is to create a super rich' reotisr socictY.4? Kuwait seem to have succeoded in this attempt with 70 psr cent of its nationals gettiug private inlcomes froD rents in 1979'0 Gulf rulere soem to beliwe that they can buy social co e'Dtncrt af,d political stablility for their subjects. Asked about tle ways and meais used for achieving stabilitjr, Bahrain's Prime llinister, Khalifa bin Salman at Khalifa, answered: By providing, for the Babraini tindividual, who is our truc resour@' in tie areas of eduoation, horlsing and eeonomic nceds. By giving him opportunities for work and growth. By distributing the wealth of tlis small country as a rccognition of the effort of the citizitn who helped produce this wcalth, ratber thal as a gift of the governmert. By the security which protects property and posscssionr ag wcll as libertics, it is the t ise government which achieves truc
stability.{e When furthcr asked to id€ntify the forces whicb thrcatmd thc Gulf's stability, the Bahraini Prime Minister exclusivelY blamcd

extcltal factors:
The entire world is plotting againct our stability. The Weetern ard world mcdia aro not interestdd in our accomplishments. . . World informbtion media cover our news if a group of boys throw a small ffrecracker at a buildiilg and broak the windows. Within a few hours you get a reaction fron Washington, and immediate$ a 'liberation front' is formed ahd claims responsibiliW for tbs in'

cident. The concem



of the world has


to wait for thg

emallest incidont to occur af,ong utr as

lity, so that all the

contains can be rcported by the vast world information media in order to shako coa8denc,c


if it

were a sigg of instabi-

the dependence-cum'defiance syn' Gulf rulers towards ttre West and towards Washington in drome of particular, a syndrome which is reflccted in the workings of ttrcGulf
These answers aptly illustrate

Oooperation Cor.lncil. Superpower rivalry and competition in the Gulf area is anothcr strongly felt concern of the Gulf rulers (and Gulf citizons). The ffnal comnunique of the second sumnit of the GCC held in Novcmber l98l expressed the GCC's "rejection of all attempts by superpowers to interfcre in tbe region's affairs."5l The Gulf states conc€rn about superpower interference in the

coupled with the realization that their vulnerability to fluctuating oil prices on the world market affects their enrichmcnt policics and, in turn, could spatk off social and political unrert. By a deliberate decision to boost oil production at a time when the world market'is already flooded with oil and by forcing oil priccs to drop by almost 50 per cent in three months' the Saudis and thcir GCO allies are dcmonstrating that it is in the interest of reglon


cll oil-producilg countrics and of Western fimocial institutions to

6 a comprehensive agreement to maintain oil prices at a stable ,.rcalistiC' level.52 (*Realistic" is a euphemism for a suitably and higb lcvel.) The Gulf states could then cootinuo their enrichmont

policies unhamPerod. The massive channeling of wealth into the hands of Gulf oitizens is regarded by Gulf governments as a major factor in ensuring social coGntment, ThE unstated assumption is that a contented oitizenry is averse to political change, speoially to any politioal change which would disinherit tbe ruliog families of the Gulf'68 Kuwait was ths pacc'setter in establishing a comprehcnsivc net' work of enrichment policies which are now followed, with local varia' tions, in all thc Gulf states. Gulfgovernmcnt$ assist citizens to acquire land and housing and to set up businesses through large subsidies and cheap loans without requiring muoh offort or investment from the citizen. Typically, tbe gov€rnment may buy private land at or above tho market prioe, develop the land by iostalling service$ and


l84i frIB Pgnsrlr Gu.r lNp
a slightly higher price than the co tho undevelopod land was bought in the first place. The will then provide cheap Ioans to thc private buyer to build which can be rented out at a high premium to immigrants looking for housing as immigrants cannot own land or houses.sa (198J was an exceptionally bad year for Grilf landlordb as land and pfoperty values dropped 25 to 50 p€r ccnt due to the recesssion in tbe area.) In oommerce, the Gulf states hllp tbeir citizens by restricting ownership of shares in public comphnies to citizens alone. Nationals. must owtr at least 5l per cent of any private business even though the business may be largely mandged and operated by expatriate pbrtners. Oheap loans are provided [o industr.ialists and contractors. (ki Saudi Arabia, cheap loans are dlso available to expatriate partners.)
bcing paid by foreign companies [o agents (citizens only) to win governmcnt contracts-even thoug! contract prices have at times

Qatar, Saudi Arabia and the {IAE tolerate big commissions

for the commissions.s Gulf governnlents will often bail out incompetent businessmel by ofeiing addibional loans or by buying shares in the faltering company. After ttc Souk al Manakh (Kuwait's unofficial stock exchange) crash iri 1992, the Kuwait government bailed out thousands of by doling out $7 billion from
been raised by over 20 per cent to alllow


businesses falter,


govcrnment funds,

Not only are cohmerce and ind but also agriculture, Farmers are provided with seeds, pow power, water and fuel at highly subsidized rates to make barren desert fertile. This is spccially so in Saudi Arabia which hds the largest tand area. Till 1985, the Saudi government was buying all available local wheat at g970 per toDne compared to the world et price of gl25 per tonne, resulting .in a Saudi wheat in 1985 of I .7 million tonnes while-domestic dcmand for wheat is only about 900,000 tonnes a year. The inflated trrrocurement pric{ of Saudi wheat has now been reduoed to $555 per tonne.66 and the UAE also encourage
Bahrain, Kuwait and Qatar, with thbir small land areas, are virtual city-states and have little scope for {griculture. Agricultural subsidies are meant t[ be a step towards food selfsufrciency while industrial subsidiep are meant to diversify Gulf
state-subsidized agriculture, though n]ot to the extent ofSaudi Arabia.



Lerq : t8'5'

policies is the basic cause of the current campaign led by Saudi Arabia and its GCC partners to regain their share in the world oil markct, As stated earlier, tbeso policies are expected to keep Gulf citizcns socially content and politically docile. The indications are that the opposite may be happening, specially in Saudi Arabia and Oman, where industrial and agricultural subsidies are creating new social potentially political-tensions by widening income disparities -and rather than narowing them. These growing disparities could be disastrous for the ruling families of Saudi Arabia and Oman.5? Another major destabilizing factor has been the erosion of ageold, traditional social networks due to the introduction of modern technology or causcd by deliberate government policies of centralization and national integration. In Saudi Arabia, 25 per cent of the indigenous population is of bcdouion origin, that is from desert tribes with pastoral or semiagricultural occupations. Io an attempt to wear down the social solidarity and political autonomy of each individual tribe, a royal decree of 1953 converted traditional tribal grazing reserves into public lands, thus reducing the importance of the tribe as a sociooconomio unit. This conscious detribalization policy was carried a step further with the 1968 law on distribution of land. According to the 1968 law, plots of land were allotted fdr the frst time to individual bedouins in an efort to convert nomads into property-owniDg settlers. But the productivity of the plots ofland varied according to

economies bway from thelr dependence on the single major resource -oil. They are also part of the enrichment policieJmentioned earlier which are coming under strain as the Gulf statos' oil revenues have dropped by 50 per cent since 1982. Tbis strain on their enrichmcnt


the availability of groundwater resourc€s and the depth at which the ' water could be reached. This led to some families within the previously homogeneous tribal unit (which used to regard water as a collective resource) gaining superior productive resourccs while other families were cut off from that most basic resource, water, This has created considerable resentment and social differentiation within
each tribe.68

The good intentions of the 1968 law, in that it was intended to improve the economic prospects of the bedouin, were belied in another manner. The bedouin who has bcen allotted a plot has the right to sell off his plot. Rich urban businessmen have bought plots


186 lllsPsRsuw'Gur mo SourF


from bedouins and amalgamated t{ese plots into big, capital'intensivc farms. Tbe capital is supptied tiy the goverument in the form of cheap loans and beavily subsidizedi agricultural inputs' The labour is also cheap and usually imported form Egypt and Pakistan'Er

This moans that tbe local bedoulo who previously had a oollective right to the land is completely aliqnated from the land, not cven being employed on it. Large'scalo migratioo of bedouins into the citiee, seeking job,e in government 4nd the National Guard or performing peripheral functions like tlaxi-drivers or hotel servantg has tribal solidarity. The bedouin reeulted in a new Phenomenon of as part of a single bedouin is increasinglY beginning to see rather than as a member qf a particular tribe.so identity Tbe growing bcdouin solidarity, coupled with the self-realization that thJy form a relativcly low-paid, unskilled strata ofSaudi society, specially in a societY whero the has profound Political prone to the prpritanical zeal of anti-materialist bedouin have been Wahabism. The Saudi National Guard of 25,000 men, consisting as a counter-force to the Saudi exclusively of bedouins, was ff military of 51,500 men whicb has bcen prone to radical Arab nation' alist influences. With the growing consolidation and alienation of the bedouin, who form 25 per ce4t of the Saudi population, the National Guard may itself become a focus of political instability.sl While the welfare and enrichmept policies of tbe Saudi state have raised the living etandards of tra{itional scctors like thc nomads and the subsistence farmers of bbdouin stock, the modero sectors in tradc and industry have leaped much farthcr ahead' thus widen' ing the income diffcrentials withi4 Saudi socicty. Even more ur' settJing, the right to private properqy has overwhclmed tho traditional collective right of access to laod aud water. Misguided plans to settle nonadic communities have led tq these goups losing control of

their means of ploduction.o This process of social differe$tiation and alienatioo has also occurred in Oman, though in a ditrerent form. Agriculture in the nortbcrn interior areas of Oman {'as rclatively more inteneive than in much of Saudi Arabia due to easier access to water: The backbole of agriculture was the traditlonal system ofcollective irrigation through an undepground network of channels flowing out of an oasis, a Erring, a well or a reservoil. Water from ttre channels (qanats) was distributed according to a cop.plex system of tribal laws which supplied water to all who providqd regular labour for tb upkeep

Iiwrr Lrtq
of tbe anciert


qanats. This traditional s1atcm of irrigation and its attendant laws are known as falaJ. Thc village societies built around it practieed a primitivc 'democtacy',6 The introduction of pump-sets end deep bore-wells end the large' scalo migration of male villagers to seek unskilled joba on the Oman coast or in the army of neighbouring UAE (85 per centof theUAE army's soldiers are from Oman), has all but destroyed the falai system, Primitire democracy has been r4tlaced by widetncomc md social imbalances within tbe villages of intcrior northcrn Oman. Government development programmes have often been monopolized by a few of the more grasping families in each village and the pump' sets supplied by the governmcnt have been uscd so indiscriminately as to deplete dangerously underground water resources which were formed through percolation over many centuries. Modcrn technology, which is destroying t}Le falai system, ifnot regulated, could atso destroy Oman's prccarious water resources.'4 Government development programmes, wclfare schemes, loatrs, subsidies-all fuelled by oil money-have damaged traditional socio' economic structures such as lhe falai arrd the tribe and have alieaated old communities from tleir traditional patterns of life without providing adequate alternative ohannels for redressal and expression of grievances. Oil monoy, which has been instrumental in creating many of the new social ioequities and tensions, is also regarded by tie Gulf ruters as tte antidote to the very tensions it has created. The Gulf rulcrs havc repcatedly shied away from political reform in the hope that oil money will subdue all tensions. This could well prove to a short-lived illusion, particularly in Saudi Arabia and Oman, which have developed sharply dualist economies with a modern, highly productivc sector and a traditional, Iow productivity, low income scctor. The Saudi Ministry of Planning estimates that 35 per ceot of the Kingdom's labour force (excluding nomads and women) is engagpd in the traditional low wagc sectors lite subsistence agriculture, petty trade, personal aod domestio service, some types of construction and transport.s The modern sector of industry, commercc and high fnance with worldwide dealing;s has spawned an ambitious new middle class, not only in Saudi Arabia, but in all the Gulf states, The new middle class comprises the upper reaches of the civil service, exccutives and technocrats ia industry and the men who run thc key banking and flnancial institutions of thc Gulf. Maoy of them have beeo educated

the old trading families of p of large cornmercial trading class has played a Gulf for at least the last political inffuence through before the advent of oil fnancirg the Gulf's royal families its initial fortunes mainly revenue$. This old middle class dobinated the economies of through the pearling industry four Gulf states till the international pearl market collapsed with the advent of pearl farming the Great Depression of 1929 and (cultured pearls) it Japan.o? Pearling (diving for pcarls) was t$e main source of income aod employment of Bahrgin, Kuwait, Qatfr and the Trucial States (now UAE) till the 1920s, Practically every adult male was involved in off by the flnanciers who pearling with most income being and lent money at usurious the. seasonal Pearl backed
The new middle class is distinot the Gulf who have expanded into and construction companies. The dominant role in the economies of two centuries and has been a
rates to build and Provision the close links with the Bombay boats. These financiers had

who bought the pearls and

UAE. Ar1. Tablc I shows the oxtent to which pgarling dominated employment in four of the Gulf states.Gs of the towns were instruIn Saudi Arabia, the trading Saud family which establish. in supporting the rise of the mental 1932.10 ln Oman, seafaring od control over pcninsular Arabia economy and polity. traders played a dominant role in the It is evident that the poPular noti that the Gulf statcs before tribal, nomadic societies of the exploitation of oil wero graziers is grossly wrong' dominant mode of producbedouin rather than tion in the Gulf states has been important peripheral role, though the tribes hevo played tribal, force. specially in Saudi Arabia, as a militr

and Western jewellery markets.0s The financiers evolved intQ traders who are now the old Kuwait, Qatar and the and oonservative middle class of

rosold them

at hugc profits to




MANpowB. rN THE SHETRqDoMS rN 1q)8.


I.abour force engaged in



of pow. in pearlinC


99,075 37,000

17,633 7,2W

20 48

Kuwait Qatar


Trucial States (now UAE)


The tribes have got largCly absorbed into the new middle class in the city-states of Bahrain, Kuwait, Qatar and the UAE, but not in Saudi Arabia and Oman, duo to the enrichment policies followed by Gulf governmeuts. As stated earlier, in Kuwait, 70 per oent of its nationals were gettitrg incomes from rents in 1979, Two Harvard professors, Mark Heller and Nadav Safran have

estimated that 8.1 per cent of the Saudi labour force is middle class.?l They have come to the stigltly bizarre mathematical conclusion after correlating middle class percentages witb political upheavals in other monarchies that the Saudi middle class has reached . the "critical mass" or approximate percentage at which the middle class has led rcvolutions in other countries. While this eccentric analysis need not be taken too seriously, observers have noted the restiveness of the new middle class in Saudi Arabia and in other Gulf states. In private conversatioqs, middlc class individuals often express their frustration and. resentment at having no say in the political decision-making process and having no public forum to present tbeir vieivs. The bomb explosions in Kuwait in 1983 and 1985, the attempted coup in Bahrain in l98l and a number of anti-royalist conspiracies in Saudi Arabia in the 1970s indicate that with no political reform and no representative institutions to provide a cbannel for discontent, there can be unexpected political upheavals in the Gulf countries aud specially in Saudi Arabia where oil mon€y has crcated a dual economy with

190 Trry PBRsIAN Gwr rNP Sourlr AsIe
marked social differcntiarion. Such politfoal upheavals could be set off by a temporary coalition dfdisenchanted middle classclements, puritanical Islamic forces aa[ leftist ratlicalsP Attempts at diveraifcation of the ecolomy away from dependence on oil rcvenues is also problematic. Iodoctrialization is regardod as the most direct method of diversi8cption. Lack of tecbnical skills, lack of adequate lodigenous manpotrer, lack of a big enough market to make industry profitable, are co$mon constraints in all the six Gulf states. The formatlon of the Gulf Oooperation Oouncil has been seen as a oeans to overrcome $ome of the constraints oo in' dustrial development and diversificati,on In March 1983, the six GCC stat€s abolished custom tariff barrierg betwcen themselvcr on locally manufactured goods, marking the first major stcp towards establ]isbing a common market. GOO nationals ar€ trotl, fr€e to 8et up indurtrier in aoy of thc six statce and to bid for industrial 8nd co mercial contracts on an equal footing.tE The GCC has also begun to nep[iate ar a tingle unit with guoh organizations as the European Ecotomio Community (EEC)' Tough negotiations have becn going on abbut a 13.4 pcr ccnt duty imporcd by the EEO on GCC petrochenical products sucfr as polyethylenc and methanol. Petrochemicats arc among thc few GOO industrial international market b€cauge products which aro competitive on gas in the Gulf, which of the low cost of petroleum and industrY.t' are the basic raw materials for the body to face other regional While the GCC has proled a groupings ard to create a larger than existed in the indivi' on indostrialization in dual Gulf states, the nost severe proved insurmount the Gulf-skilled indigenous in no way helpcd to ovencome able. The formation of the GCC this problem. to the UAE President, Somc Gutf officials, including Sheikh Zayed, havc suggcsted that only way to solve the Proto minimize iadustrialization. blem of dependence on immigrants a permancnt expatriate PoPuTLese advisers are keenly aware and run industrial plants and lation would be required to main this group of foreign settlers tbe transient forcigtr comtrucoutlets,6 tion workers) would require


Lnrc l9l

Pourrcer, Svsrrus
The sociat tensions arising from rapid and skewed economic modern' lzation, from the growth of a new subsidized middle class and

from the presence of ao alien segment of45 per cent ia thc GCO states'total population of 15 million in mid-1983,7e cannot be con' tained by the old' narrow-based, autocratic political structures of the Gulf gtates. Even the one country with an elected political body, Kuwait' restricted the right to vote to nairow group of56,848 "first class" citizens (3. 5 per cent of the total population) in its 1985 p&rliameqt' ary election.z? First class citizenship is awarded only to those whose families have been in Kuwait since 1922. Women of any category do not have the right to vote. The Kuwait parliament makes the laws but the Emir (ruler) of Kuwait cao veto ttrem. Parliament can be as oritical of the Cabinet as it wishes but it cannot throw out the Cabinet. However, parlia' oetrtary criticism can occasionally bring results. Justice Minister Sheikh Salem al Duaij was forced to resign io 1985 after parliament questioned him on sooc of his dubious financial deals.?8 The Kuwait ruler and his family are sacrosanct. They canaot be criticized in parliament, the press or any public forum. This rule applies to the ruling families of all the Gulf states.?E The power to make all major national decisions rests firmly with the royal families of the Gulf states' The council of ministers, even in Kuwait, is chosen by the ruling family and is packed with mdm' bers of the ruling family. In Kuwait, 6 of the 16 ministers and ministers of stato beloDg to the ruling Al Sabah family.so ln the UAE's fcderal council of ministers, I I arc from ruling families out of the total of 24.81 As the UAE is a federation of seven emirates, members from six of tho seven ruling families are accommodated in the council of ministers. In thc present Saudi council of ministers, 9 of the total of 32 are from the royal family.sr
Comm oners oftalent and highly-educated technocrats are coopted

into the decision-making process both as ministers and senior civil Bervants. The able oil ministers of Kuwait, the UAE and Saudi Arabia are all commoners. At the end of 1979, 19 of tbe 64 Saudi ministers, ministers of state and deputy ministers had Ph. D.s-[ror€ doctorates probably than in any othel sation's batch of ministers:€'



TIIB PsB.sraN Gur,r eNp Sodry Asre

Most of these doctorates were froh American universities. The ruling families, the coopted ministers aad senior civil servants
. aod the conservative old middle [lass (distinct from thc growing new middle class) of trading fa$ilies who now own vast business empires, form the small power eliles of the Gulf states. Each of these power elites has an interest in suflporting eaoh other through tbe political and economic linkages fdrmed by the GCC. . The highest authority of the GpC is the Supremc Council, comprising the rulers of the six statei. All major policies and decisions I ' ol the GCC have to be approved unanimously by the six rulers, The presidency of each s"ssion df the Supreme iouncil is rotated among the rulers according to {he alphabetical order of the six countries, The Supreme Council id assisted by a ministerial council . of foreign ministers and a sccretaiiat at Riyadh in Saudi Arabia.sa . Thc organizational structure of the GGC indicates that the GCC ls the apex body of the power elitds of the Gulf states. Insize, these power elites are small. The centre bf Saudi Arabia,s power elite, the Royal House of At Saud, is estim[ted to comprise 5,000 to ?,000 princes.86 The Al Saud is by fai the biggest ruling family in the



There are very fewreliable esti{ates ofthc proportion ofnational revenues which are directly alloc{ted to the ruling families. One

assessment about Abu Dhabi, whlch emirate has the highest per capita income in the world and iq th€ richest of the seven emirates which form the UAE, is that its rlrling family takes l0 per cent of Abu Dhabi's anoual oil income bhich was in the region of $9.g billion in 1984.86 Such concentrations of wealth, riven in societies with a basically ' high standard of living, create socipl tensions which the autocratic aad conflned political structures of the Gulf will find increasingly difficult to contain or to accommodate.




the extradition of harmless political individuals under the garb of an intemal sccurity agrecment.8t Due to a series of bomb blasts in Kuwait in 1985, there is now some rethinking on the issue of signing
an agrcement.

On this issue, as oD other issues, Saudi Arabia has followed a deliberate policy of underplaying its views-nevcr pushing its opi' nions or its interests too forcefully or too openly ooto its partners in thc GCC. Saudi Arabia,-with 10.4 million of the GCO'rtotal of l5millioa people, with 2,150,000 square kilometres of thc total land arerr of 2,564,N0 square kilometres, with $70 billion of thc total external rescrves of $200 billion, with 85,000 of the total of 20l,000nilitary and para-military porsonnel-ir accepted as lhe dominqtt power in the GOC but it has taken care to avoid being seen asthe douinating

The Saudi reluctance to dominate the GOC is most clcarly secn sccurity and defence. Saudi Arabia has repeatcdly indicated that it would like the GCO to adopt an Internal Security Agreemont (ISA) and to haw a unified defcncc affangn. metrt to cover all thc GCO states. But as Kuwait has been reluetant about the ISA and there has been no consensus about a uniffod defonco arrangemcnt, Saudi Arabia has been quitc happy to agrte to cooperatioD among thc GCC atates in the internal socurlty aad defence spheres. Joint military exercises, plansfor a ioint air defenco Detsork and the stationing of a small joint mtlitary contingent on Saudi oil, are acceptcd by Saudl Arabla as seoond-best substitutes for a GOO defence pact.8o In the economic sphere, Saudi Arabia has given up at lea$t ore of its prestigeous national projects so as not to haro tho interests of a GCO partner. It has dropped its plan to build a largc aluminium smelter at Jubail as this would have cut into the economio viability of thc existing aluminium smelting plant at Bahrain.oo More significantly, till November 1985, Saudi Arabia quietly allowed GOO partncrs like Oman, Qatar and the UAE to undcrcut Saudi sales in the world oil spot market and to kecp up their oil production levels while Saudi Arabia lost oil revenues by rcstricting its oil production in a futilo (and almost solo) bid to maintain world oll prices at around $30 per barrel. Sincc November 1985, Saudi Arabia has stepped up its oil produotion and let oil prices slidc down. Its GCO partners have had no altornativc but to back the

in the spheres of internal

194 Tm hnsnN


latest Saudi moves.or


It is apparent that the GCO is like ajoint stock corhpany in which the ruling families, thc leading buslness families and coopted sonior civil servants and technocrats sharg a common stock ofperspectives on internal and external security, fbreign policy, economic issues, political systems, the role of the dominant power and ethnicity. With the sole exception of ethni0ity, theso perspectives are zot necessarily shared by the peoples o[ the Gulf states, This makes thc GOO a fragile ofganization despite its successful joinf ventures in several fields. It afso appears that the potential for social and political instability in thB GCO states, and specially in Saudi Arabia, is noticeably great, Any major upheaval in Saudi Arabia, the GCC's pivotal power, hould destroy the GOO.


For a cogsrt comparison of ASEAN, FEC, GCC and SARC (now re. mmed SAARC), see Mohammed AFoob, .,The primacy of the political:
South Asian Regional Cooperation (SARC) in Comparative perspoctive," Asian Survey, Vol. )O(V, No. 4, April 1985, pp,M3457,

A. Kechichiar, "The Grilf Cooperation Council: Search for S€curity," Third ll/orld Qwrterly, Vol, 7, No.4, Octobel 1985, pp.853See Joseph



Jewo Larq




Fr€d llailiday, Arama lry hot, ,Snlfczr, Penguin, Ilarrrondsworth, 1974, pp.2l-31 and pp.499-51 2. Dilip Hito, Inslde the Middle East, Routledgo and Kegan paul, Iondoo,


Saudi Arabia. Kuwait and Bahrain," in Sbabram Chubin, ed. , Seczr ity in the Peuian Grf 1 : Domes" tic Political Factors, International Instituto for Strategic Studics, LotdoB, and Gowsr, Faraborowh, 1981, p.6. Politic,al Developmont and Stability, Int€rnational IDstitute for Stratogic Studies, London, and Gower, Faf,nborough, 1982, pp. n-78.

Arnold HottiDgpr, *Political In6titutiotrs in

6. Ibid., pp.8-9. 7, Avi Pfascov, Security in the Persian Gnf 3: Modenrization,
Allan G, Ilill, "Population, Migration atrd D€v€lopment Statps," in Shahram Chubin, n. 5, p.69, 9. Avi Piascov, n.7, pp.150-155. 10. Fred llallidan n. 3, pp.65-69.



the Gulf

Jamo Buchan, .'Stcular af,d Religious Oppositiotr h Saudi Arabia" io Tlo Niblock, ed., State, Society and Bcorcmy tn Satdi Arabia, Ctm, Ilelm, London, and C.entre for Arab Gulf Studies, Eret€r, 1982, pp.1l3114.

12, Ibid., p,114. 13. Ibid., pp.11/S-115. 14. Ibid., p,115. 15. Ibid., p.116. 16. Dilip lliro, u. 4 pp.2%-295, 17. For an insidcr's detailed accouot of the US Administration's


and confusion about the Iraaian r€volution, see Gary Sick, AII FaU Dowz.' A.merica's Fateful Encounter with l!an, I.B. Tauris, Iondoo,

18. Ibid,, pp,0o-204. 19. Avi Plascov, n.7, pp.27-tX. p.19. 20. Ibid,, 21. For an ac@unt of tfu ikhwan, seo Peter Sluglett and Marion


Sluglett, *The hecarious Monarchy: Britain, Abd al Aziz ibn Saud aad the Establishment of the Kingdom of l{ijaz, Najd ad its D€pendeDcies, 192132," in Tim Niblock, n. 11, pp.42-45. For a flrll€f, picture of Wahabiem, se€ Dorsk Hopwood, ..Tho ideological Basis: Ibn Abd al Wa.hab's Muslim R€vivalism," in Tim Niblock, n. 11,



23, James Buchan, n. 11, pp.120-123. 24. Jubaiman al Otaibi, '.Rules of 25. 27.


Obediace and Allegianco: Misconduct of Rulers," utrdated pa.mphlet, quoted in lames Buchan, n" 71, p.122. Janes Buchan, n. 1I, pp.118-120. 26. Avi Plascov, tr. 7, pp.28-33. During a discussion with m€mbers of other political organizations of ths Gulf, recorded in Al Safv (newspaper), Beirut, 18 November 1979. English version rn Near EattlNorth Africa Report, toral Publications Reeearch Service, 25 January 1980. 29. Ibid,, p.r25. Middle East Reiew 1985, pp.70-71.

31 .




3I). KhaIeeJ Times, Dubai, 12 July *The War between han and Kissingo is quoted in Walter joumal distinct from thG British Ilzq,l' Middle East Reriew (sr annual of similar name), Vol, 17 No. I, Fall 1984, p"48. This viele was reiterated by the Rpagar Richard lV. Murphy, US Assistant S€oretary of State Near Eastsn aod South Asian Affairs, said that it ic ..our basio that a victory by either side is neithcr militarily achlevable nor desirable because of its destabilizing cfect on the region." Quoted in Gulf. tbe War and US Policy" in Grea, Decisions 85, Forcign Association, New York, 1985, p.33, Shia percgntages of Gulf are: Oman 4, Saudi Arabia 8, Qatar


16, UAE 18, Kuwait 24, kaq "Resurgent Islam in tho Z, Fall 1984, p.120.

Bahrain 70, Irao 92.

See James


Gulf," Foreign l.f?lrs, Vol.



account, seo A Plascov, n. 7, p.25. Therc are several other detaile<l accounts of thc r olers hying to distance themselvcr from any obvious depsndenc: or suppoft fof the us. 34. The Statesman, New Delhi, 21 J 1985. 35. The Eindustan Time$ New 10 Oorober 1985. 36. Fot Edstem Economic Reyiew, 15 November 1984. tl. OPEC oil revenues jumped from .2 billion in 1970 to $75 biflioa ir 1974. See Frcd Halliday, "The betwe€n Two R€volutions" in Tim Niblock, ed., Social and

For a cogent

Ilelm, London, and Centre for

Development in the Arab Gulf, Croom Gulf Studies, Exeter, 1980, p.223,

38. Arms

sales to West Asia from fhe US alooo jump€d from g2 billiron in to gl5 billion in 1982. S{e .,World Military Expenditures and

A.rms Transfqrs 1972-1982," United States

Atms Control and Disarma-

m€st:Agency Washington,

D.C., April

1984, p.55.

39. Keith Mclacblan, ..Natural ReFources and Development ia tho Gulf States" in Tim Nibloc[, n. 3Z p181. rO. Consensus of €nergy experts at the round table discussion on ..Supply and Demand-Regional Stressesf' held oo 2l Septembe! 1983 at tle 12tb



Colgress of the World Energy Cfnference, New Delhi. Rosemario Said Zahlan, .,Hegemfny, Dependence and Development in tho

Gulf" in Tin Niblock, n.



42. The Eeonomisr,Iondon, 8 F€brubry 1986. 43. Ibid. M. Time, New York, [0 February 1986. 45. Indian Exyess, Bombay, 6 May !985. 46. Ibid. 47. 'Michasl Field, .,Economic Probldms of Arabian Peninsula Oil


in Shahram Chubin, n. 5, pp.5455. 48. Ibid., p.39. 49. Al Mustaqbal, Pafis, 12 Janua4y 1980. Exoerpts in Englisb quoed io Avi Plascov, \, 7, p,165,

50. lbid.,






.'From strcDgth to StreDgth," background
Dubai, 9 November 1982.
The Economlst,

paper on

GCc, MaleejTinieS,


London, 8 February 1986.

Avi Plascov, n. 7, p,167. 54, Michael Field, n. 47, p,51. Ibid., p.52. In addition, education is free till university level for citizens

of Gulf states. Medical care

is genorally free for the eEtirs poputatioH,

guaranteed a job. 56. Emma Duncan, "Growing Pains' The Gulf Cooperation Council Count ries-A Survey," The Economist, Loadon, 8 February 1986' p.38. For growing disparities in Sautli Arabia, see Arnold Hottinger, pp.l4-18. In passing, Hottirg€r quotes a Riyadh taxi-driver, "I ag€e with cuttiog

both citizeDs anal e;Kpatriates, Elochicity, water, telephonoo, basic foodstuffs are- subsidized by most Gtrlf govemments for tleir entire populations. Till thc receat recessioD in the Gulf, almost every citizeu was

off the hands of



60. Donaltt P. Colo, D' 58, ?.I1& Ugo Fabietti, n. 58, p.195 6I. Avi Plascov, B. 7, pp.704 and 110. 62. Ugo Fabietti' n. 58, p.197' 64. Ibid.' pp.l28-133. 5-3. J.C. Wilkinson, e. 57, p.197, 65. On Gulf rulers' teluctan!:e to allow political reforn, see Avi Plascov, n' 7, p.167. On Saudi dual economy, see Donald P' Cole, n' 58' pp'107-

ought to have no hands teft!" For disparitid in Oman, see J.C. Wil' kinson. "Chaoges in the Structur€ of Village Life in Oman" in Tim Niblock, a. 37, pp.l3t-133. S€e Ugo Fabietti, "sedentarisation as a Means of Detribalisatiotr: Some Policies of the Saudi Arabiatr Governmcnt towards tie Nomads" In Tim Niblock, n. 11, pp.l86-187. Also see, DonaldP. Cole, "Pastoral Nomad3 in a Rapidly Changing Economy: The Case of Saudi Arabia" in Tiin Niblock, n, 37, PP.1O6-121.


But in that

case the men

of the royal family



66. 67. 68.


Freit llalliday, "A Curious and Close Liaison: Saudi Arabia's Rslations with the United States" in Tim Niblock, n. 11, p.132. Rosemarie Said Zahlan, n.41' pp.6'l-{5. For a moving account of tlle tigours of pearl diving and of the lcv€l of exploitatiotr by both Indian and Gulf rnerchants, see Mohamed G' Runaihi, "The Mode of Production iD tbe Atab Gulf before the Discovery of Oil" in Tim Niblock, n. 11' pp.49-50. Rosennarie Said Zahlan' n. 41' p'63.

70. Tim Niblock, "social Structure and the Development of the Saudi Arabian Political System" in Tim Niblock, n' 11, pp'78-95' 71. Mentioned in Emma Duncan, n 56, P'20. '1J For the emergonce of the new middle class in the Gulf' see Avi Plascov' n, 7, pp.85-86. For possible marriages of convenience bctweeu middle
classes, Islamio forces and Maf,xists, see

lbid" pp.79-9.



Pnnsnry Gwp.nNp Sotrnr


into Being," Midille East Rettiew l98y'., pp.45-48, Khaleej Times, Dutrai, l August 1985. 75. Nao6i Sakr, ..Federalism in t$c United Arab Emirates: prospects and Regional Implications" in Tim tliblock, n. !7, p.lg4. 76. Inilian Express, Bombay, 6 May [985,

73. Iouise Denver, ..Gutf Cooperatidn Council: A Common Market Comes

78. Ibid.,

Bmma Duncan, n. 56, p.20. 79. Avi plasoov, n. 7, pp.I5(I-155.


80. Collated from


Peensylvania, and Croom 198t Table 2, p.123.

MEN Repori: fiuwait, Middlr- East R€s€arcb Institubn llcln, Dover, New Hampshire,

81 . Collated from MEN Report: Unlted Arcb Emirures, 1985, Table z, p.122. 82. Collated from MEN Report: Sarldi Arabia,1985, Table 3, p,123. 83. Collated from Saudi Arabia yealpook l97g-gl, Tbe Rssearch and publi.

shing llouso, Beirut, 1980.

84. Article

6 of the GCC foundiaf

chart€r si8oed at Abu Dhabi, 26 May

85. The estimato

of 5,000 princes fs in Emma Duncan, n. 56, p.18. The hiehcr estimate of 7,000 princes ib in John Duke Anrhony, .:Aspects of -Nblock, Saudi Arabia:s Relations with Other Culf Stat€s" in Tim n. 11, p.153.



Middle East Rcview 1985, p.265. Joseph A, Kochichiaa, n. 2, p.8g5.

88. Population figr.res are mid-1983 Qstimates ia South, Iondon, Septemhr 1985. Exterdl reserves figures *e n Tin", New york, il DecemUec 1985, for Saudl Arabia, aoLd r\ Indian Express, Bombaj,6 May 1985, fof all the GCC countries combidcd. Figures of armed personnel are i! -'---.Joseph A. Kechichian, n. z, pp.ds5-t56: 89. Ioseph A. Kechichiaa, n.2, pp.8J3_860. 90. John Duko Anthonn n. 35, p.15t'. 91. Time, New York, 17 Februsry f986.



for inst&loe, Nabil M. K4onfot, *Gulf Stat€s, Succ€ss througb Collaboration," Ki aleei Times, Dubai, 24 July fS8S.


GuIf International Banking

The rapid growth in oil revenues following the two oil-price hikes of 1973 and 1979 gave rise to increasing activity in the Gulf region's fnancial markets with a large number of international banks and Gulf Arab banks opcning their branches and the latter increasing their operations in the international financial markets, in particular the Eurocurrency markets, After the first oil price like, about $ 6 billion in petrodollar surpluses were utilized for the capitalization of wholly Arab-owned financial institutions (Muehring, 1985, p. 19e). The volume of syndicated Eurocurrency loans led by Arab banks increased gradually from $ 2.3 billion in 1978 to $ 3.6 billion in 1980. There was a sharp rise to $ 9 billion in 1981 and 1982. There was a decline thereafter in line with the general decline in the intcrnational credit market. The share of ArabJed syndications in total market' lending increased from very low levels till 1980 to over l0 percent from l98l onwards (see Table 1). Arab-banks lending to developing countries is higher than that to industrial countries, but MiddleEast borrowcrs account for over half of it. Their share increased from below 25 pcrcent in 1980 to about 55 pcrcent in 1984 (Bmtking World A'tgust, 1985, p. 4l). However thlee major recent developments in thc international financial markets, viz. gJobalization, securitization, and dcregulation, bave had their adverse impact on Arab commercial and invcstment banks. Arab banks could not competo with banks such as Oiticorp in offering a wide range of global services. This is in addition to the economic downturn in thc Middle East. In interna' tional banking, tcchnical expertise and a keen sense of the market have predominated ovcr oredit risk. tack ofthis expertise resulted

200 i\rg


Gunr lNp






Totdl narket


Total Arabled syttdi-

ttg -etrnties



1977 1978 t 979 1980



0.9 2.0 1.8


74 79 81

0.3 0.7



6.5 7.9 4.6



1983 1984


9.8 o.z

60 52

Sovncr: World Bank, World sourceg bf nhich wero Middle fust Eutmmic Dats aro fof Eurocurrercy q
more, publbly announced in

neport 11fi5, p.113, lhe babic

Firanctal Market Trends, and
with a maturity of on€ j&ar or
year giveD.



in which oae or1 more Arab ba[ks acted es load or
from 18 percent to 9 percent 1985, p. 194). high capital-asset raiios. Ia a ratio of 35.2 percont and exceeded l0 percent capitalrequirenent is i5 percent a rela$iv€ly less eftci€ot



in the return on qquity going
for a number of Arab banks (M Many of the top Arab banks 1984, Bahraio Middle East Bank ovcr 20 others in top 100 Arab ascct ratio (the US Primary caPitd/ (MeDougall 1985, p.147). Tbni

V.L Res 201
usc of tegourccs by tfte Arab banks cmpa,rcd

with other interoa-



The ffnancial linkages among the Gulf states arc few because of tbe nature of the Gu|f economics. Intra-Arab trede acoounts for only l0 percent of the reglon's total exports. Further, tho capital markots in individual countries are also not very wcll developcd (BankW World, A:ogast 1985, p. 4l; Kubursi, 1984).

Oqurmnqlr, AND INvEsrr\dBNr BANKINc Major intcrnational banks from the USA, Europe, Japan and othcr countries have partlcipated in a big way in the Middle East financial market. Many oountries opened ofshore banking units (OBUs) in Bahrain. Though the declining baoking activity In the Middle East in gencral and Bahrain in particular has led many banks to lesseo or withdraw their operations ln Bahrain, some international banks feel that the outlook for banks' operatlon in the Middle East is guitc good.
Scandinaviwt Bcn&r. Scandinavian Banking Group Managing Direc-

tor's viow is that it is a short-sighted policy for banks to be leaving Bahrain and that they would want to come back in 5 to l0 year timc. Scandinavian Bank, according to him, will continue to stay ln Bahrain since it camc to Bahrain to support major Scandinavian oompanics with investments in the regron (Wilson, 1985, p, 94),
Japanese Bankc. Nomura Investment Banking and Yamaichi International are among the major Japanese banks in thc Middle EasL Japanese presencc in Bahrain is mainly to servicc the ffnancial dcal-

ings between Japan and Saudi Arabia. Nomura Investment Bankiqg (Middle East) considers the Middle East sccond only to Asiaas thc company's most important fund managcmcnt area. Kuwaiti funds account for 35 percent and Saudi Arabia's 25 percent ofthe funds managed by the company (Wilson, 1985, p, 94). Inilian Banks. The recession in the Middlc East in the 1980s had its impact on the operations oflndian banks there. The Bank ofBaroda, whioh had cight branches in the UAE, decided to merge its regiona-l and zonal offices ia the UAE. The Bank of Baroda's only OBU in Bahrain has been taken out of tho jurisdiotion of the Abu Dhabi

2(D Tw knsrex Gur"rnwo
zonal ofrce end has been placed quarters in Bombay (Business


the direct control of its hoad12December 1985, p.4).

Arab Bo&s.In the UAE, the wellftnown Galadari episodc resulted in the takeover of the Dubai Bank (fbrmerly majority-owned by AbdulLatif and Abdul.Rahim Galadari) by the governmcnt-owned Union Bank of the Middle East (UBMED. Dubai Bank suffered substantial losses on real-estate projects in Sihgaporc after a slump in its property market. Abdul-Wahab had borrowed heavily from UBME to ffnance his gold speculations, lcBll above the bank's capital and reserves. The UAE government tbok control of UBME. The UAE Central Bank introdtced some remedial measures: it limited bank directors'loan to 5 percent:of total capital and reserves, and those of board me$bers to 25 percent. Banks were

to classify loans into fub-standard, doubtful and lossmaking. Also, banks wcie require{ to substantiate the size or existencc

of hidden reservEs (Banking World,1985, pp4344). The stock-exchange crisis of September 1982 in Kuwait still continues to have its impaot in the Middle East banking activity. The unofficial stock-exchange, the A1l Manakh, dealt with a huge total gross indebtedness of an estimalted 985 to $90 billion. The real problem in the stock exchange irash was that many of thc net crcditors on thc exchange were plso debtors to cach othel in busi. ness aud, therefore, any failure by the big operators, had a crashing impact on the small operators mdking the lattcr bankrupt (Banking ll'orld, 1985, pp. 4344).


Since 1982 the overall economic activity in the Middle East has in oil revenucs. Saudi Arabia's witncssed a decline following from 198U82 to 1984/85 oil income, e.g. declined by 50 percent from 1984/85 to 1985/86 and is estimatcd to dccline by
(B anktng Wor Id, 1985,


Arab banks are concerned, the bank assets and proffts, and AuthoriW (BMA)'s June According to the Bahrain M 74 offshore banking units (OBI) 1985 Report, total assets held in March 1984 to $54 billion in Bahraiu declined from $63 in early 1985 (Gabriel, 1985, P. 23).

As far as international banks and is characterized by fall in closures and mergers.

p. 94): Bahrain International Investment Centre Gulf Investment Oompany Pearl Investment Company

V.t. RAo


Net losses of some banks in 1984 were as below (Wilson, 1985,

$ 27


$ 70 million
$ 45 million

The losses were attributed to the fall-out from the stock exchange crisis of Septembor 1982 in Kuwait.

The overall performance of the Arab banking scctor



declined compared with 1983. Out of 92 institutions for which data could be compared, 48 improved their capital/asset ratios, but only 22 of 8l banks improved return on capital (McDougall, 1985, p. r27).

Bqtk Closures. Thc US bank, Security Paciffc, booked half a floor in the l2-storey Centre built by the privately-owned Bahrain Middle East Bank but the plan did not come through since its US head ofrcecalled in the OBU. The Bahrain Middle East Bank itself was looking for a buyer for the Centre, compteted in 1985. Other US banks which went to Bahrain looking for offsbore banking status left Bahrain (Gabriel,
198s, p.124).

Barclays, the British OBU in Bahrain, closed itshine-man dealing room in August 1985. Oontinental Illinois, Banco diRoma, and the Royal Bank of Canada also withdrew from Bahrain during 1985. The reasong for the slowdown in the ofshore banking activity in Bahrain are:


The depressed economies of the Gulf States since 1982 following revetrue decline thus reducing the demand for funds; Iran/Iraq cotrflict which closed two financial markets in the re-


Shifts in international financial markets from syndicated lending to bond issues and other instruments; Concentration of banking business in the London, New York and Tokyo financial centres,

Mergers. In May 1985 three banks-Khaleej Commercial Bank, Emirates Commercial Bank and Federal Commercial Bank-were




mcrged to form Abu Dhabi to be injected into the new bank provide new capital. A further in od neccssary as staf redundancice 'wcre envisagcd at that time fi€rgrrs and other rationalization in the Middle East have beeu

About $340 mlllio had the Abu Dhabi government to of new money was considerexpected and no dividends , 1985, p.58). Examples of by international banks

Funrr.s Pnospscrs
in the Gulf region resultThe declining coqmercial banking d consolidation. ed efforts towards divcrsification (BMA) maintains that, despite The Bahraid Monetary wal bv some international banks the reduction of activitY or in Bahrain for divcrsified ffnanin Bahrain, thcre is strong

cial activities. The BMA recentlY approved applications for ncw di Siena. Ycmen Bank for offices from ltalY's Monte Dci Citicorp Investment Bank, Reconstruction and DoveloPment ofrce covering thc whose licence is for a regional had an OBU in Bahrain since Middle East. Midland Bank, a branch ol Midland Bank 1976, established during 1985 to

Group Interoational Tradc
subsidiary lWilson, 1985, P.93).

a wholly-owned Midland Bank

Investment Banking, Iavcstment outlcts for the deolining ,a rccondary market for investors Euronotcs and FRNs has been of Bahrain as a fidancial centre. Arabian Invcstmcnt Banking specializes in investing and "acquisitions, bought Ncw York for 9134 million aad Packard

is roen as one



banking buslness. Creation of
buy and sell instrumenG such as to keep the importaace

rporation (Investcorp), which the placemot of hlghquality cr Tiffany & Company in 1984 in Philadclphia for $28 million


1985 (Wilsoo, 1985,


Div eqifi c ation. Asla Bank recently gaiued an indircct shareholding in a Chinese bank with outlets in If ong Kong to channel monev from the and Macau. The bank also in the Middlc Eastwerc Middlc Eaet to thp Paciflo Rim as lookiag for ep4a{iag,ttoh ri*.
G eo g raphic

Y.L. Reo 205
Daelopment of Regional Capitsl Mo?ket Thcrc are attempto to devclop a regional capital market in the Middle East. In re@nt years, lcading Middle East banks such as Arab Banking Oorporation and Gulf Intcruational Bank have moved away from basic lending-based business and have been increasingly involving themsclves in underwriting bond issucs. Longer term borrowing and lcnding, compared with the earlicr preference for the short term, is gaining in prominence. Further the governments of the countries participatiog in the Gulf Coopcration Council (GOC), viz. Saudi Arabia, Kuwait, Bahrain, UAE, Qatar and Oman have bcen actively elcouraging the market', development (Banking World, Lagtst 1985, p.4l). Oil Prlce, Futurc prospects for the ffnancial activity in the Gulf region and Gulf region's financial relations with tbe developing countries depend on whether and if so lby what magnitude and in what time-frame will there be a revival in thc oil prices. The reverse oil shock of 1983 lowered the oil price from $34 to g29 per barrel which again foll to $24 in 1984 and less than $15 in early 1986. It is speculated that the price may even come down to f 5 per barel. However, Gulf countrics believe that they would be able to withstand this hardJanding of the oil price eince: (a) they had diversifled their investments world-wide; (b) they had recovered most of the investments they made In the oil sector and (c) they would still makc a profit on each barrel of oil since their cost of production has come down substantially. It ie estimated that the cost of production in the Gulf region is $2 per barrel oompared with about $15 for countrieg like Britain and Norway (Financial Express, 24 February 1986, P'l)'
GULF-SourE AsreN Coopnn


OPEO's surplus funds are largcly placed in OEOD countries atrd about 20 percent of the surplus is allocatcd to the devcloping oountries. Beblawi (l984,pp.l20-l2l) argues tlat contiouation of placemcnt of OPEO surplus funds in the OECD countries would perpetuate its fnancial charaoter while investment in the developing countries, with all their shortcomings, can offer a chance of trane forming thc financial into real.wealth. Arab aid mostly goes to non-oil A,rab countricg whose share h

206 ifsr Prnsnw Gurr ano

SourEr Asu,

1982 was 80 percent of total Arab aid allocation is: Arab ries, and the rest of the developing cial cooperation with developing od Arab banks to finance pro (Wohlers-Scharf, 1983). The Arab ches in the South Asian countries Bank of Credit and Commerce International
Bank of Oman Dubai Bank

aid. Tho priority ranking of countries, other Islamic countThe other form of finanis for the business-orientin the developing countries
banks having bran1982) were:

Bangladesh, India, Pakistan aud Sri Lanka India, Pakistan, Sri Lanka Pakistan, Sri Lanka

Middle East Bank and Union
Bank of Middlo East

The South Asian countries' bank$ which had branches in the Gulf


1982) were:


Janata Baak (Abu Dhabi) State Batrk of India (Bahrain)


Bank of Baroda (Abu Dhabi)

Habib Bank @ahrain, Abu
Dhabi) National Bank of Pakistan (Bahrain, Saudi Arabia) United Bank (Bahrain, Abu
Dhabi, Qatar)

Arab investment in tle
scopc and number. Oountry-risk

arid lack of investment main reasons for this. A number Arab banks are investing in agro-industries, real estate and industries. However their operations are still concentrated the Arab region. The limited absorptive capacity in the Arab tntries points to the need for diversifying Arab investment to non-oil developing countries. Mallakh (1984) expressed the hope greater cooperation between the Gulf and the Indian should be possible putting

countries has been limited in limitcd trade potential in developing countries are the

industrializecl countries' technology and the skilted South Asian oountries in a three-way relationship. Another trilateral cooperation envisaged by Arab countries with developing countries is that of Arab aid complemented with multilateral aid and Arab financing and investing in the developing countries. Though there havo been some schemes operating on a countryto-country basis betweeu Arab OPEC and Soutl Asian countries on both the lines mentioned above, the prospects for cooperation (in particular financial cooperation) as between the two regions*Gulf and South Asia depend on the steps that are yet to be itritiated in a substantive way ia areas suoh as linking of clearanoe arrangements, tradc fnance, etc. However, greater economic oooperation within each regioo has to precede inter-regional oooperation.




The post-1982 recession in the Gulf region followi4g the oil price dccline had its impact on the international banking activity there. Many international banks withdraw or reduced their operations from Bahrain and efected rationalization (e.g. mergers) at other places. Banks in the Gulf are diversifying to activities such as invcstment banking. Efforts aro being made to develop a regional financial market. Greater economic cooperation with developing countries has been suggested as one way of converting tha present financial nature of tle surplus funds 1by placement in banks mostly in OEOD countries) to real-wealth. The coopcration with dcvoloping countries is envisaged in different forms such as combining the latter's skilled manpower with industrialized countries' technology in the dcvelopment of agriculture, industry and infrastructure in tho Arab region and combining Arab aid with multilateral aid and commercial lending by Arab banks in the developing countries in financially viablc projects. Gulf-South Asian economic cooperation on these lines exists to some extent on a country-to-country basis. Stcps have to be initiated to develop cooperation on a region-to-region basis.

208 frrnPmsIAN Gur.ralqo




Arab Emirates-

Suweidi," Dectmber 1985,

World, "M[ddl€ Eastern Bankibg," August 1985, pp'4144. Beblawi, Ilaz.em, The Arab Gulf Econotlty in a Turbalent Age (London; Crood


Helm, 1984).


Azhary, M.S. (ed.), hrtpact (London: Croom Helm, 1984).

of dtl

Revenues on Arab

GuIl Duelopment

Gabriel, Clare, "Offshore Banks io Cboppy Seas," Sonrfi, December 1985, pp.

Kubursi, Atif, The Eco omles of
(London: Croom Helm, 1984).

ihe \rabian GuIl:


Sidtistical Sou?ce Book,

Mallakh, Ragaei 81, "Tho Gulf Codperation Council and th€


Gulf Economic Coordination," io M.S. El Azhary (ed. 1984, pp.54-6l). McDougall, Rosamund, "Arab Banki4g: Top l0&--Retreat on Most Fronts," The Banker , December 1985, pp.l27 47 . Muehring, Kevin, "The N€w Look in Arab Deal Making," Institutinnal Investor, Juoe 1985, Dp.193117. Wohlers-Scharf, Tftute, Arab and Ishmic Banks: New Business P$tncry for Developing Co ntries (Patisi OECD, 1983). Wilson, John, "Gulf Banks Look for Birsiness Abrcad," The Ba*er, Vol; 135, No. 718, Decembor 1985, 93-98.

10. India's

Relations with the Gulf Countries : Issues and Responses

of feverish rivalry among thc mari' The Gulf* remained a powers of Europe "hotbed beginning of the 16th century till since the time the end of the Sccood World War. After 1945 two major factors brought the Gulf to the threshold of a new era which was characterized, firstly, by political dovelopments in India leading to the ouster of Britaln from the Indian subcontinent h 1947, thus marking the end of British colonial rule when the Gulf was essentially an extension of the British Indian empire. The second factor was thc discovery of large deposits of oil in the Gulf, the exploitation and export of which, in tbe light of evergrowing demand from all over the world, gave unprecedented financial power to those states. The independence of the smaller sheikbdoms of the Gulf, then known as the "Crucial States", in the wake of the announcement of the British withdrawal from east of Suez in 1970 added a new dimension to Gulf politics. The developments of 1973 leadiog to a substantial hike in oil prices and tbe consequent f,ow of wealth made the Gulf emerge as one of the leading oommercial ceotres on the face of the globe. The geo-strategic importance of the area both as a predominant supplier of oil and a fast expanding market went up considerably. This was quite obviously reflected in the massive flow of international goods and services to the Gulf, With a favourable balance of trade and accumulated funds, the Gulf states have initiated bold new programmes of modernization and industrialization to speedily buitd up infrastructures and divetsify their oil'bascd economies in desired directions. This has also resulted in the large scate import


The term

'Gulf is takcn h€re to m€an tte dCC staes (Saudi Artbie, Kuwait, the UAE, Babrain, OmaD and Qatar) and lraq,

210 Tnn





of manpower from East Asia and {he tndian subcontinent. However, developments at the g of the 1980s in the re. gion have had a marked impact on the cconomy and security of the Gulfstates. The recent glut in the qforld oil market has resulted in a sharp deoline in oil revenues to a slowdown in economic and construction activities the Gulf. All availablc cvidence points to a relativcly OPEO in the near futurc in er which the Gulf states have played f. dominant role so far. Except Oman, the oil revenues of all the Gulf states are declining and according to a study by the Utrited Bank, major oil producers like Qatar, Kuwait, Saudi and the UAE have earned $82.5 billion less from oil in 1985 in 1984.r The Soviet intcrvention in thc Iranian revolution atrd the return of the Ayatollah, tfe impact of Islamic fundamentalism leading to Shi'ite unrest inl many Gulf cities, the ongoing internecine war botween Iraq and Ifan since September 1980, a coup attempt in Bahrain in December 1981, a series of bomb explosions and other subversive attcmpts in Kuwait io December 1983 and Saudi Arabia last year have all the vulnerability of this region. In the light of these ominouir devclopments, six Gulf statesSaudi Arabia, Kuwait, the UAE, Oman and Qatar-foroed the Gulf CooDeration Oouncil to ofer a unified assuranoe agaitrst any external threat or subversion. In the backdrop of tlese devolo and the centuries-old ties betwcen India and the Gulf this paper attempts to briefly touch upon India's cultural and ercial relations with the Gulf from ancicnt timcs to 1947 when became independent. It also purports to present in a n the various factors and events which influenced and shapcd Indials policy towaids the Gulf in the post-independetrce era till 1971. $owever, the main thrust would be to highlight dwelopnents in the Gulf region and the Indian subcontinent sinoe l97l like the war of 1971, the ArabIsraeli war of 1973 and the oil crisis, its impact on India's economy and the various it took to absorb the oil shock. Finally, ttre working of Indian di in the post-1973 era till now would be exgmined,



Gurr: A


Indo-Arab relatidns have a long

Tha present friendly rela-

Arev N. Jire


tions between India and the Arab world in general and the Gulf region in particular have been buttressed by centuries of commercial ties and cultural confluence between two dynamic and creative civilizations-Arab and Indian. The nature, magnitude and signiffcance of thesc two civilizations on each other have been immensez through the ages. These ancient civilizations which flourished on tbe banks of the Euphrates, the Nile and the Indus may well be regarded as presenting a sort of relay race of human culture. Arabs and Indians have lived along the shores ofthe same Arabian sea which Ied to a considerable amount of cultural and commercial contact between thcm, The Gulf has acted for centuries as a bridge connecting India with the rest of the world in the West. History, culture and religion have all contributed significantly to strengthen the ties created by geography, The Persian Gulf is an extension of the Indian Ocean and is linked to it through the Gulf of Oman. Olose commercial and navigational contacts existed between India and Arabia Felix cven in the period prior to recorded history. Numerous excavatioos and archaelogical sources have established the occurrence of demographic movements, commercial intercourse and oultural communications between the two regions since the third millenium B. c.3 Contact was established between the merchants of the Kulli culture in southern Baluchistan and those of early dynastic Sumer, probably around 2800 B.c. There is evidencc pointing to the presence of Indian merchants from Makran and Baluchistan in the city of Elam and Sumer in early dynastic times. Mohenjodaro was a great port carrying on tradc by sea with Ur and Kish and Egypt.a Queen Hutshepsut's was one of the first commercialcum-diplomatic expeditions to India from Egypt in the ancient
period.6 These contacts continued in the centuries immediately preceding the advent of Islam, Whereas in West Asia, this period was marked by the political supremacy of Persia, in India it was marked by the rise and fall of the Guptas and the Mauryas, The north-eastern frontiers of Ohandragupta Maurya's empire encompassed the whole of Afghanistan. The fact that the existence of these two great empires whose boundarics touched each other must itsell have been a great cause for promotion of cultural exohange and commercial intercourse. However, the period of deeper cultural and commercial relations between thc Arabs and the Indians began after the rise oflslam and






its eastward exoaosion. The rise

spread of Arab power, particularly the foundation of the A basid empire which withir a few years of the risc of Islam, vast territories stretching from of Africa in the wcst to the the Canary islaods off the West C the Oaucasus in the nortl to borders of China in the east and in south,o This period has been the shores of the Arabian sea go perlod of Indo-Arab relations. identified by scholars as the the process of exchange Apart from intensive trade and in this period was rcciprocal and the-dissemination and fusion ge in tbe sciences and the arts, of the maximum amount of kn and cultural ideas, AstronomY religion and philosophy and ced in the academic circles of was one of the ffrst sciences in Bagbdad tbrough the translation f the works of Aryabhata and Brahmagupta apart from the Indian " Surya-Sidhanta", Tbe Indian numerical svstem and the ncept of zero becamc known to into Arabic tbe whole system of the Arabs and they also transla Indian medical science includine ' Chakara", "Susruta", "Nidana" of fction and philosophy too, and "A sthanghradaya".? In the there was a very rich interactio between the two regions. Indoat their zenith when Al-Baruni. Arab trade and cultural ties visited India at tho beginning the famous Arab scholar and sciences and to learn from their of the llth contury to study wisdom, He trantlated many Ara scientific works into Sanskrit and through his monumental book "Tahriq-ma-lil-Hind", he gave a very interesting account of ia's ancient culture and scientific Iegacy to the Arabic speaking wo d of his time. Ifowevcr. it was when India wi essed the beginning of Muslim conquests from the north that t Turks, Afghans and Mughals, and not the Arabs. became the mai instruments of Arab knowledge and education in India. The middle ages were marked by a general decline in trade and re both in India and the Arab world. This was the Deriod when Indo-Persian interaction became more intense. The Islamic influence since then has left oermanent impressions on Indian cul tradition, architecture, language, literature, att and science. ose cultural contact betwecn the Mughals and thd Safavids is well in the Indo-Persian fusion paintings and The Persian influence on in Indian g the reigns of Akbar to Shah Indian culture was at its peak Jahan. The Ta1 Mahal, described as the "Soul of Persia incarnate in the body of India," the Urdu language, are the

Arev N. Jna,
two living symbols of the fusion and synthesis




With the advent of thc European maritime powers and more in India and the march of colonialism in tbe Gulf region, active contacts began to dwindle and the flow of trade
particularly Britain
and ideas became a trickle as both India and the Arab world passed into British tutelage. This does not mean that there was a total cutoff in Indo-Arab trade and commercial relations. They did exist even then but it was neither the Arab world nor India tbat benefited directly by this trade. India's economy at tbat time \ryas primarily geared to British imperial interests. Indigenous industries and handicrafts were destroyed by the British while the export of raw materials continued to feed the industries of England. The benefts from Indo-Arab trade went directly into British pockets.s It was not until the dawn ofthe modern period that as a result of reawakening and socio-religious reformist movements that intellectual contacts between India and the Arabs were restored. At the beginning of this century, ties were restored in the form of emotional commitments to certain issues like religion (Kbilafat movement), anticolonialism, anti-imperialism and many others, It is significant to note that the era of western domination over India and the Arab world had more or less been the same and it was during this period that both were passing through the critical phase of their struggle against foreign dominance. Since contacts at national level were sporadic, India's support for the Arabs came in

the form of reiteration of Indo-Arab solidarity at the emotional level.o The Indian National Congress, which under the leadcrship of Mahatma Gandhi had been transformed into a mass organization dedicated to political emancipation and social regeneratiop, began to take increasing note of nationalist movements in neighbouring regions and to relate them to India's own struggle in the common fight against colonialism and imperialism, The Arabs on the other hand also saw that their own emancipation and independence was very much dependent on the success of India's struggle for freedom.ro


INDIA AND THE Gur,r arrsR Ir{tnpBNoBNcs

After independence, the political ethos generated by India's freedom struggle exercised a marked influence on free India's official policies



PsRstlN Gur.r .luo

An independent India and attitudes towards the Gulf felt emotionally committed to the aspirations of tbe Arab people. Its policies towards the Gulf equally determined by its political, economic and security One ofthe basic considerations the Gulf region was the importaoce of this region had times as the Gulf has been a between the anoient centres of the context of the maritime importance increased manifold. the British seizure of Aden and chain of protectoratcs in the Gulf governing India's policy towards


of security. The geo-strategic
truly emphasized from ancient I of trade and communication and the outer world. In
among thc European powers, its

ughout reocnt history, be it Egypt aod the establisbment of a area or Napoleon's expedition to Egypt or tle Czarist Russian drive to the Persian Gulf or Hitler's "drive to the EaSt", the purpose !f all the contending powers had been to seek a foothold in India b[ controlling the trade routes and communication lines. The British withdrawal from India along with
the creation of Pakistan and the pmergence of independent states in the Gulf region coupled with the rise of Soviet Union and the Utrited States as new global powei's no doubt changed the form but not the substance of international irivalries in the region. Even now,
goes through the Arabian about 90 per cent of India's region could have a tremenSea. Hence, any instability in the . The continued relevance dous impact on lldia's trade and of the region to India's security m[s undcrscored by Prime Minister ore the Constituent Assembly Jawaharlal Nehru in a statement in March 1949. "If you bave to any question affecting the Middle East, India inevitably' into the picture. If you bave question con to consider any South-East Asia, you cannot do so without India. Wbile the East may not be directly are connected with India."Ir related with South-East Asia, The second objective of Indiah interest in the region was the India, -hence, sought to build development of trade. with considerablc emphasis friendly relations with the Gulf to win the latter by its outspoken on Saudi Arabia and Iraq. It in the Arab-Israeli support, professedly on moral demands of the Arabs. As confiict over Palestine atrd the on Palostino, India did not a member of rhe UN Special the partition of subscribe to the majority Plan legitimately conccrned about Palestinc. Secondly, India also





Pakistan's rolo and constant strea.m of allegations by the Pakistani leaders, press and political ffgures to discredit India and its policies as being anti-Muslim and also that it was tbe biggcst threat to the existence of Pakistan. India's oonstant identification with the Arabs had its advantages.lt Thc insistonce on moral principles gave Indian diplomacy a measure of influence which canoot be explained in terms of its then available power and actual resources. Moreover,


prestigc in the Arab

yielded another political bonus in so far as it enhanced India's world which started looking up to India for

support. On the bilateral plane, efforts directed at laying the foundations of a mutual cooperation betwccn them were made by settingup and exchanging delegations and embassics at different levels with all the countries of the Gulf region. The same was also sought to be achieved by signing treaties of friendship as well as trade and cultural agreements with them, These efforts were further reinforced by exchange of visits and the holding of consultations on various issues, wbether bilateral, regional or international. In the wake of the formation of the Baghdad Pact, India's policy became so Cairo-centric that Indo-Egyptian rclations came to be represented as Indo-Arab relations. Tbis produced some unavoidable complications for India.lt led unnecessarily to the alienation of othcr Arab countries like Jordan and Saudi Arabia and, later, Iraq during Kassem's regime. A sharp division among West Asian


in the early and mid-sixties into

two groups-one as the

Islamic, pro-westcrn or reactionary and the otber as socialist, dcmocratic or revolutionary-presented a set of new problems to Indian policy makers. India found itself in the progressive nonaligned camp led by Nasser whereas Pakistan continued to exploit its reli' gious identity throughout the 1960s with the conservative states of the rcgion for support in its dispute with India. Thesc efforts, however, were only partly successful. TVhen the Indo-Pak war of 1965 broke out, India expccted these states to take a rational and impartial attitude towards the war waged on itsfrontiers. The Governments of the Gulf states, howcver, were neither unanimous nor united in their response and reaction to the situation as it unfoldcd itsclf in thc Indian subcontinent. But, the press of the region, siding with its co-religionalists in Pakistan, was nearunanimous in its anti-India stance all through thc war. All that India


TFE PnnsAu GuLF AND Sotmr Asu.

couldachieve wgs lraqr andKuw*i[ineu-trelity in thewar. Indiahad

certphly exp€ctidr more support,rt In thq afterpatb pf 1965 war, grir trade rclatioos did register a rigniffcant ripe a4d India sigped trade agreements and cultural pacts witb some Gulf states. Thi[ peasant state did Dot last long and thg precipitating factor onqc again was the detcrioratioq in Inds-Pakistani relptions in l97l foflowing the Pakistani arnycrackdown in East Pakistan (now Bangl{desh) aad the resultant flow of over l0 million refugees to India. Though there was general sympathy with India on the refugee {uestion, Gulf states .like Saudi Arabia, Kuwait and others wero its most vehement critics. These Gulf states strongfy denounced Indfia as tbe aggrossor and according to a Beilut N€wspaper, Al-N alpar (22 December l97l), ..duriog the firrt days of the war, Saudi Ar4bia, Kuwait and Abu Dhabi together collected a suq of 9200 millfion and passed it to tahya Khar, than Presidcnt oi Pakistan to hel]p him repulse the Indian invafg15."ra


Drvnr,opuBNrs lN THE 1970s: Tusrn

lMplcr on lNora

The $,eginaing of the 1970s the emergence of some qualitative changes, appearing almost usly in the powcr structures of the Indiaq subqontinent an! the Gulf region. Thcse changos in the environment of the two regions had a profound bcaring upon their mutual forqign policy tions towards one another.

India's regional environment, wing the dismemberment of Pakistan aftel thq 1971 war, had uodergone a radical transformation. Thc emerggnce of a secular Bangladesh within the
change in tho state structur€ of South Asia, in the po within tbe region and in India's perceptions of its increasing role asl a whole. As a result of these eftanges, New Delti for the first time since 1947, was able to rid itself of itt rather unhealtby tion with Pakistan and the Indo-Pak powcr bplancel6-a pre tion which had kept India tied down to the subcontinent prevented it from pl,aying an cffectiyc role in ths wider arena of international afairs commensu_ rate with its size, geostratogic lodation and actual and potential rcsources. SUbcontinent, was a

This relolUtionary change in continent had followed quickly at

power structure of the sube heels of the completion in

Arev N.
November 1971



of th€ British withdrawal from the Gulf region. This withdrawal had thus simultaneously triggorcd off a similar multi-dimensional change i[ thr power shucturo of the Gulf regiotr. Witb the re$ultaat liberation of Bnhrain, Qatar and the UAE, it lod to a protiferotion in the number of regional actors. Lackitrg io any political or pilitary powcr, theso states could not be expected to play aqy oommanding role in the Gulf except to keep themselvos in tact and naintain their monarchical systems with the help and goodwill of the bigger and more powerful countries around and outsida. This convcycd tbe improssioa of the creation of a vacuum in the Gulf to many outside powers. The Shah oflrap, wfuo eince the British announcement in February 1968, had nurturcd the dosire of fflling up this imagined vacuum, in a military action, occupied three disputcd Gulf islands of Greator and Lesser Tumbs and Abu Musa at the critical choke-point in the Strait of Hormuz. The Shah's actiou amply signiffed that with the depafture of the Bdtish, Iraa had taken on the role ofa pre-eminent power in the regioa and ossumed the responsibility of policeman of the Gulf. This solf-assumed leadcrship of Iran and its self-help in anaexing the three Gulf islands mct with wider apprehensions throughout the region rcsulting in tho severing of diplomatic tios with lraq and othpr Gulf statcs. Those dcvclopmente in the Gulf scelario, when combioed with the affuane of the Gulf statog from their increased oil revenues, initiatcd the procees ofan arms race in the regton. Thc Shah of Iran, ootivatod by his desire to control the Gulf, embarked upon a massive armament programme. Its ropercussions were increasingly felt in Iraq, Saudi Arabia, Kuwait, the UAE and other Gulf states, who with thoir overflowing petrodollars also began shopping for
sophistioatod armoury. ro The huge piling up of arms in Iran and the Arab states of the Gulf was greeted with raised eyebrows in India. The possibility of these arms flnding their way to Pakistan in the event of any future war with India incrrased the anxiety of the Indian Government.l? This concErn was not wholly unwarranted in the light of their attitudes and their support to Pakistan in past Indo-Pak wars despite close economic and commercial contacts of these states with India. Moreover, the oil wealth of these Gulf states ensured their in-

creasing involvement

in internatlonal affairs. The value of their to the outside world assured them (especially since 1973)



Pmslx Gwr lNo


a degree of iof,uence and the <if mutual dependence betwcen the oil producet's and drew them increasingly into thc 18 Finally, their attempts at international areha as a powerful bringing tbeir newly found to bear on some speciffc issues, most importantly, to bring about redress to the Palestinians for

their legitimate rights, opened politics. Thus, the inflow of large weaponry into the Gulf by a six-fold increase in oil accumulation of petro-dollars divert these resources into
economies with massive oil reserves werc exhausted, Ied

new perspectives in international

scble, modern and sopbisticated with thc energy crisis, followed

by the OPEC, the


the desire of the Gulf states to for themselves more resilient
programmes well before the a significant change in the mutual Gulf towards one another.

perceptions of both India and
The Energy Crisls and India's perspective can be described as world in view of their ever is derived from a vast variety of

depletion offossil fuels

The energy crisis in a broad in the consumption, Though energy

began to rely more and more excessive dependence on oil till

the 20th century world oil as the primary source.lo Thc

was largely due to its cheap price as comparod to other sources. The pendulum swung to the othcr extreme with the steep ice revision made by OPEC after the Arab-Israeli war of 1973 S1.88 a barrel in January to $11.65 on lst December 1974). The increase in thc price of oil was only one facet of the Arab of the 'oil weapon' which also comprised (i) a progressive 5 per t cutback in oil production with 15 per cent cutback initially, and an embargo on the supply of their oil to the countries Israel in the war.zr These developments created numerous f about an impending catas-


To governments



recasting their budgets and

reframing their economic

of the proven oil, reserves great significance. This was worst-hit were countries like of about 23 million tonnes of annually and thus faced a gap of wheels of industry were to be by imports. The problems which

ated in and around it, assumed true of all countries but thc which with its total annual need produced only Tmillion tonnes about 16 million tonnes, If the moving, this gap had to be fflled country faced then were mainly

the Gulf with about 62 per cent


Arev N.



to ensure a steady supply of oil and to find resources to pay for the huge oil bill.rz The development of India's relations with the Gulf states in the post-1971 era could be examined in two stagcs. The first of these stages were the years 1972J4 dving which the main thrust of India's diplomaoy towards thc Gulf was directed towards repairing thofences and rebuilding the ties broken by the 1971 war. The second phase began with the oil price hike in the beginning of 1974 in which tbe economic obiectives overshadowed the political objectives of India towards the Gulf. Thus the working of Indian diplomacy towards the Gulf since mid-1970s has to be measured mainly by the cconomic. rod. India's involvement in Bangladesh afairs posed serious constraints on its policy towards the Gulf. Not only did this bring Pakista'n closer to the Gulf states but it also marked the ebb-tide of India's crcdibility in the region. Throughout 1972-73,lndia's main objective remained that of convincing thc Gulf states of its good iutentions and it was the Simla Agreement oi August 1972 which romoved some misgivings of tbe Gulf states aroused earlier and restored India's credibility to a considerable extent. The question of Bangladesh and the Pakistani POWs, however, continued to plague India's refations with the Gulf till 1973, It was the 1973 Arab-Israeli war and the subsequent oil crisis which posed new cballenges and problems pushing the Bangladesh question into the background and forced both India and Pakistan to evolve new policies in the light of the changed situation. India made efforts to solve the first problem by falling back upon the traditional polioy of support for the Palestinian cause and ex' pressing its all-out support for the Arabs at the UN and other international fora. It also supported the inalienable rights of the Gulf oil-producing states to bave complete control over their natural resourccs thercby acceptiog the legitimacy of the six-fold rise in the oil price and refused to join any consumer bloc to confront the oil producers. These gestures of India convinced the Arabs of its gen' uine friendship as a result of which it was not only exempted from the oil-embargo but also excluded from the oil-squeeze that was likely to result from the 5 per cent per month cut-back in the oil production. In order to pay tbe soaring oil bill, India had to ftnd ncw markets and strive for larger export earnings through a coucerted export

120 Tne


Gur,r aNo SoJnn Asn

drive in thc Gulf region. Indian di]ptomacy aftcr the

oil oisis


influenced by economic urgency add a variety ofpolitical considcrations which gav€ an altogcther nelv orientation to its Gulf policy. The mein thrust of this new oconQmic diplomacy was the emphasis ou India's emerg€nce as a country that could economically, techaologically and industrially play + vital rolo in contributing to the devqlopment of the Gulf. The of these Sheikhdoms. their dcsiro to divcrsify tbe economy {nd the relative absence of an industrial infrastruoture could be by a geographically contiguoua India stcpping up its of machinery, cemeot, iron and rtcel, engineoring and electrical appli besides traditional items like rice; vanaspati, tea, jute, spices, etc, In addition, the , teohnical advan@s made by could also be used in setting up joint ventures, jolnt industrial and cooperation, consultanolcs, cto. Forcign exchange could be earned from the remittancos through increases in export of manpower. In these objectlves India met remarkable success. The years which followed witnessed un cordiality and cooperation ia Indo-Gulf relations, Moreover, political developnen which took place in 1973-74 also convinced the Gulf states the genuine eforts of the Indian goverrmcnt in normalization of its ations with Pakistan. An agreement for the repatriation of the istani POWs worked out bythe Indian and Pakibtani in August 1973 followed by Pakistan's recognition of Ban in February 1974 and the Tripartite Agreement among the go ents of India, Pakistan and Bangladesh finally cleared the and political debris left by the in Indo.Gulf relations. l97l war and ushered in a new India cnjoys mhny advantages the Gulf market. Geographical proximity and India's fraternal ti with tbe Gulf states put it in a relativoly better position to a reasonably good place as their tradlng partner. There has been a acceptability of Indian goods in the Gulf. Indeed, in commodities like galvanized iron products and cast iron India enjoyed a near-monopoly in 1979 in the UAE and Kuwait in the field of construction materirls it has been accepted as regular supplier throughout the

Bilateral Agreemants and Joint C tant aspccts of India's increasing
. One of the most imDorin West Asia was to rasie

Ar,ry N.



relations from diplonratic-political cooperation to econouic-techni-

cal collaboration and to change its focus from Egypt, Syria ad the Lebanon to Gulf countries like Iraq, Saudi Arabia, Kuwait atrd the UAE. Thc setbacks tlat occurred earlier might be attributed to a learning proces5, especially when onc considers the speed with which new patterns of intertrational relations evolved after the oil

In its quest for building ties with theseGulf states, India signed a number of bilateral agreements and Joint commis3ions werc formed for promotion of economic and technical cooperation. Howevcr, it also increased its exports to the region roughly ffve-fold. Ir thc process, it also developed new economic structures and trade pattenrc, exploited and processed some of its raw materials with the he.lp of foreign capital and found ernployment for several hundred tbour and Indians which altogether resulted in a favourablc forcign cxchange balance. As a result, within a few years India's inagc ia the Gulf countries changed considerably, in fact more than anywhcre else because there was a sudden presence where forrncdy thete had been next to none. It is interesting to note that whereas in early 1976, the Bombay-based Economic and Politlcal lTeekly complairrd that in the Arab Gulf, India had ..no image" for its goods or iB knowhow,zs in late 1978, a joint Arab delegation from chambers orf trade, industry and agriculfure visited India to explore fresh arcas for joint ventures and other technological coopcrstioo as wc[ Es
India's capability to export agricultural products.a The new importance of Iraq as India's main source
lated with the general upgrading of bilateral eoonomic relatiotrs tht had started some years ago. India mct its first fir.m succxs iu lra{ in 1973 resulting in an agreement through which the letter agreed to supply India 30 million tonnes ofcrude oil over ten yearc.* Indo-Iraqi ties were enhanced with the visit oflraqi Vie-Prcgideat Saddam Hussein in January 1974. A major breakthrough came with the sigoing of yet another agreement granting a gl@ millioa soft loan to India with an interest of 2,5 per cent repayable ia l0 yerrg after an initial 5 year grace period to help India correr the cost ofoff imported from lraq. Moreover, it also agreed to give India croditr for setting up plants to produce alumioa and iron ore pellets ad to import Indian products on a long-term basis. Howcvef, the frst ever visit to Iraq of Indian Prime Minister Indira Gandhi in early 1975 proved to be the "real starter" in Indo-Iraqi tics lEvoolitrg s

of oil oor€'

222 Tan




two countries on various bilateard resulted in some more
then, nany a visit has taken
sides to facilitate more cooperaclose relations with other

close identity of views between ial, regional and lnternational agreements in various areas.8.
place by the top dignitaries of tion and collaboration in manv Eforts were also made to states and it was on the lines Gandhi's visits to the Saudi and Kuwait were undertaken in by some scholars as ,'bridging a


those considerations that Mrs

in April 1982 and the UAE
1981. Her visit has been termed

gap" and removing

many irritants that existed in ministers and presidents had been

but had India in economic and strategic much weightage to the personal que$tion of granting aid and
American countrics Gandhi's visit, apart from aiming geared to apprise the Gulf pledge India's support to them at ened to involve the area in a

rclations, Iodian prime visiting European and such an important arca for Moreover, the Arabs gave

of relationship so far as the was concerned. Thus Mrs oew economic deals was also of thc regional situatiou and
time when external forccs tbreatconflict. Quite apart from the ensue from a closer coopera. was successful in convincing and nonalignment werc proconsultation with each other on the formation of the GCO (Gulf

mutuality of economic benefit that tion, between the two areas, Mrs Gulf statesmen that tbeir tected orrly by clope cooperatlon
various issues. She also

Coopcration Council) as a historic and, above all, impressed upon the Gulf people India's to have close and genuinely friendly relations with Pakistan. One of the most tangibile of these visits was the signing of bilateral agreements and on joint ventures and other projects. Moreover, the t of India's offer of 26 to 40 per cent equity share to Gulf rs cngaged in joint venture projects resulted in many business from Gulf businessmen. Some 19 new areas were identifled or joitrt venlures and a team of 95 top industrialists from Saudi Kuwait and the UAE showed keen intercsts iu invostment in particularly iu petrochemicals, pharmaccutioals, fertilizers cement.s? . From 1973 to 1985, India had 22 fficial bilateral agreements with the seven Gulf states in fields of economic, scientific and technical cooperation. these agreements, India under-

Arev N.



took to assist the Gulf states with the supply of goods and technical services for various development projects such as railway ties, steel rolling mills, electric power transmission, shipbuilding and repair facilities, supply of iron ore for the manufacture of light engioeering goods, fertilizer, cement, agricultural equipment and many other.

India also signed cultural agreements with most of the Gulf states (with the UAE in 1973, Bahrain iu 1975 and lr':aqinl977 aad Qatar in 1985) wfich envisagcd cooperation in fields of education, culture, sports, radio, TV and tourism. Thus it could be seen that
by the late 1970s, India had established multi-dimensional ties with the Gulf countries whioh were based on the complementarity of eco. nomic needs aod services and not merely on the identity ofpolitical
views and social objectives.

Joint Ventures, Consultancies Turnkey Projects. The award of a
number of prestigious projects, contracts, oonstruction and consultancy work to various Indian firms speaks of India's success in its quest for new vistas of technical coopsration. Trade between the two has also increased significantly (Tables 2 and 3), In Iraq, for cxample, some of the important contracts awarded to Indian companies are-construction of grain silos, roads and brid-

projccts, cxtension of Baghdad colour TV station. There are about 3t Indian companies presently engaged in diferent kinds of projects in lraq. In 198I, out of the total of 9? projects, 27 were with public sector companies and the rest with privatc scctor companies.2s About $200 million worth of Iraqi contracts werc secured by Indian companies in 1978 alone. EPI (Engineering Projects India) alone bagged contracts worth Rs. 43 crores from Technical Indusrics of Baghdad for a turnkey project. Another Indian ffrm (Conti.
ges, various sewerage

nental Construction) was awarded the Rs. 27.5 crore Nassirya Sewerage Projeot which was the 4th project awarded to India the same

Other contracts won by India in 1978-79 werc a Rs, 8.7 crore contract for building a bridge across the Diyala river in nortb castern fraq, a bridgo across the Khider in southern Iraq, a Rs. 42 crore contract for building silos in north.west Iraq by EPI. India also secured contracts to construct a 327 ka road valued at Rs. l0 crore and a treatment plant of tho Amara Sewerage and Drainage Project.so Moreovcr, the $276 million prestigious railway contractsr which India baggcd against stiff international comyear.2e


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pctition in l98l was also a rcminder of its preeminent position asa country with a well-developed railway system. This contract also included the construction of nearly 85 bridges including a major one over the Euphrates river. On the other hand, HMI (Hindustan Machinc Tools)and BHEL (Bharat Heavy Electricals Ltd) are set to takc up many projects in Iraq. A model township on the outskirts of Baghdad is coming up under a Rs 13,5 crore project undertaketr by a Bombay eqgineering frm.Ea The UP Stato Bridge Construction Corporation is among the public seotor companics with a fairly succcssful record. Rail India Tcchnical Economic Services (RITES) has secured a contract for oupervising the execution of the Akashas-al Qath railway linc worth $6 million while ITDC is planning to lend a big hand in boosting Iraq's ambitious hotel building programme in Mosul.ss India is also going to set up a machine tool unit in Iraq apart from helping in 22 nerry areas including tractor manufacture and electronics. In addi.r tion, other projeots includo thc construction of 2,269 housing units by Punjab Chemi Plant at Basrah-Um-Qasi aud Fas Khork water supply project by Continental Construotion, Al-Thawrn sewerage by Jai Prakash Assoclates, Minister's Building project by EPI and the Construction of Massayeb-Samakra Railway Line by IRCON.84 Further, Indian companies have also undertaken contracts for ser' viccs like management supervision, training and consultancy worth about $20 mi11ion.86 Of courso, the ongoing lran-Iraq war has seriously afected the Iraql cconomy resulting in a sharp decline in its cxport carnings. It has led to a massive cutback in Iraqi imports. However, the increasing success of Indian companies could be judged from the fact that dcspite tbc war, the contract valuc of Indian projects-civil, mechanical and electrical was worth 92.68 billion ln 1983 as compared to $I.E5 billion in 1980.8c In Saudi Arabia, Indian companies have been involved in construction and engineering projocts worth $400 million. Saudi Arabia's readiness to award India a $50 million contract for establishing a 50 MW gas turbine plant and for installing a 180 km long high tension transmission lines? was further evidence of Saudi appreciation of India's capabilities in tho power sector; By the end of 1984, there were six major joint vcnture projects in India's hands and some of them on the verge of completion. BHEL alone is ourrently involved in


TrrB PERSu,n

Gwr exo Soutn Asl

an electriflcation project in Wadi Gizan. Thc Dredging Corporation of India is assisting in the of the commercial port of Yanbu. EPI has been engaged in the construction of oil storage

tanks in Jeddah.88
Among joint ventures in the staff quarters at Riyadt U of a hotel in Dammam by East of a desalination plant by Tata
sector are the construction of by Howe India, the construction In{ia llotels and the commissioniug Company. KMA Interna-

tional of Iodia has signed a joint Venture agr€ement with tle Houso of Binadin, a reputed Saudi indusdrial conoern, for transfer of technology "in relzited . plants wot'th ('S|, 30 million.se Ohampaklat Investment and Financial Consultancy (OlfCO; is elso planning to set up a joint venture. Bank'of Baroda h4s evinced keen interdst in piomothg joint ventures ln the ffeld ofl banking. ln addition, Tatas are associated with threc 4ajor projectd-sale.and servicc. of Tata trucks, refrigeration equipment and sale abd fabrication ,of, profgb houses. AOC has won ths oonfact for tlc managemcnt of .Yaobu Cement Plant, Deccan Enterprise, Secundefabad, for producing rubber riogs and,Dcsein Private Ltd. of Delhi fdr consulting engineering and project contracting serviceg.ro In 1984 Saudi Arabia also decided to importlndian solar onergy systems fof use in hoteh, hospitale and defence establishmcnts and it awarddd the contract to Bharat Solar

university campus, hos" projects fave been bagged by EPlincluding the Rs 2,300million iya Houring Complep in joint venture witl a Japanesc company is said to be the largest turnpublic sector company abroad.aa key prqiect undertaken by Othcrs include the building of a defence camp worth Rs.

and residcntial complexes, school

pitals and office buildings.. Five


Arlv N. Jui


codtractcd to build roads, highways,.an oil refinery and g sponge iron plaat; ACC have built a gement factory.aa Anong private sector ooncpaniesr ' Parles have set urp and,are man' aging soft drink bottling plants in Kuwait. A plant fornanufactur' ing bulbs has already been set up with India and Hungary jointly' Biecco Lawrence havc established an electrical repah shop hnd West Iadia Erebtivrs and Fedders Lloyd irre'ersaged in insulation tiftherd&f $tatibns; fetilizcr complexos ard distillatiotr plad1s,.rF"r In the UAE, the importaDt Indian contracts aie civil works for a rdflnet'y.iri'the Ruwais ihdustrial area in Abu Dhabi by EPI of the valiie of $25.25 million, a tube-blending plant being set up by Balmcr Lawric, consultancy work for AbuDhabi National Oil'Company by ON'GC, a multi-purposc pipelioc by Engineers India and divil construction. work for'the aew international airport in: Abu Dhabi by

.,r., ' Eagineer,ing Construction Corporation.4o Besides, a number ofjoint ventures havc becn eet .trp'in Dubai

,.; ,,


pressure vessels, sulphirric acid, contairers, wire maoufac{urc pa'lbts; pld$tic' products, crofil works, tea bags; steel scaff' ropes, 0ldings; Most of these have gone into producfion arid the.rest are 6t thc verge of cbinpletion. These projects have been mtinaged by compaqies like Tatas, Kamanisr.SAIL, Dastur International andmany smaller business houses. Other projects which,have .been io various stagos o-f conpletion and .ippleqentatiqn nclude. technioal :aonsultancy, large landscaprng jobe,rfilm. procurement and distribution. In Shariah;. an Iadian company had a. sub'contract for building the Sharjah InternationalAirport which was inaugurated in April l979.az Sooe'other.plants being set u0 in Sharjah, Ajman, Umm'al-Qawain inpludo those for producing soft drinks; ice cream, pharmaceuticals, asbestos sheets, electrical conduit pipes and electrostatic dust pre-


Indian companies have also been engaged in smaller Gulf states in many areas.,In Bahrain, a.. cement faotory is . to be cstablished with expertise froo ladia. One joint venture-is related to sulphuric acld prodr:otion while 'auothor is the assembly, of ooaputer components at the Saota Cruz electrodic export processing zone.4e In Omatr;r thcro were'at loast sioiot Itdialr jotnt veotute proJeiits whioh ibcludcd ttading and constiuction consultancy services and wood 'the Royal Guest and panel productS. The Taj Group is managing House apart from its joint venturo in. an. Indian, reetaurant.60 Yet




been approved by the Indian

another joint veuture which has Government is for water-well Qatar, an Indian ffrm acquired couplo of years back.6s

and sprinkler irrigation.sr In worth Rs. 500 million a


Export, Yet


been the large scple export of with a huge pool of labour of

of Indian enterprisc hao to the Gulf states. India
kinds was well placed geographiof the multidimensional necds following the construction boom. began to win contracts in

cally and socially to take
and programmes of the Gulf

And when Indian construction

difcrent parts of the Gulf,
force wittr theq at a rolativcly to provide a largo number of necessary skills has been a cntropreneurs to win contracts

naturally took their own labour wage-rate. Indeed, the ability low paid workers with all the factor in thc ability of lndian

in the Gulf coutrtrics is be between 1.25 to 1.60 million. are pres€nt in different parts of the Gulf. By Deccmber 1983, were about 125,000 to 15O000 Indian workcrs in Saudi Arabia. 300,000 in the UAE, 90,000 to 95,000 in Kuwait,72,000 to 7 ,000 in lraq and about 98,0fi) iu Bahrain, Opan and Qatar Rs. 2,000 crores annually to tbe homc country.sa Thcsc remitrances reccntly wcre largo enough to boost India's foroign cxchange despite incroases in oil priccs. Indians working in tho Gulf mainly from thc western half of lndia, particularly from Kcrala, and Rajasthan. However, areas not previoruly associated immigration such as Bhopal in Madhya Pradesh, some arcas of U Pradesh and Bihar havo also started sending a large number of rkers, Kerala has beon the biggest supplier of labour to the According to unofrcial sources, thcre are about 135,000 Keralitcs abroad and most of thcm are in the Gulf countries.6{ Kcrala has only 1.2 per cent of India's total land area but it has the proportion of cducated unem.. ployed. A combiqation of such .unemployment and litcracy is an oxcellcnt brecding ground for political discontent and it could. well be that the employment oppo in the Gulf have acted as a safety.valve for pent-up that might havc othcrwisc re. sulted in activities of a different at home. Apert from these traditional pool centrcs, a considcrable

The exact number of Indian difrcult to compile. It ig estimatcd A large number of illegal w

Arly N. JHA


number of nurscs and maids from Pondicherry and Goa have also been workiog in the Gulf. Indian migrants have become a predominaat faotor in many, Gulf oil companies, banks, hotels, stores, fact. ories and in the clerical admiaistration of business. Indian exports, iacluding doctors and eagincers, are cmployed in a number ofSaudi Government organizations as well as privatc companics, hospitak and nursing homes. A good number of tcachers, professors and assistants have been workiug in such Saudi academio institutions as King Faisal University at Damman and King Abdul Aziz Univcrsity at Riyadh.ud In Kuwait Medical College, thcre aro 18Indian doctors and mcdical experts out of the total of l@ faoulty members.66 In other Gulf states such as thc UAE, Bahrain and Oman, many hotels and business concerns run atmost entirely by Indians. The Chairman of GulfAir (an airline jointly run by threo Gulf states) was an Indian uatil sometime back,6? In 1979, there was some problcm about illegal immigrants in tho Gulf states, lurcd by unscrupulous agents charging exorbitaot commissions without providing any reliable or secure employment. This led to a considerablc tightening of immigration laws, particularly in the UAE, atrd s substantial number of Asian labourers, including Indiang, were despatohed back home. In order to check thc infrltration of illegal immiglanls to the Gulf and to avoid such an unpleasant situation in future, the Government of India, for thc frst time, signed a Labour Pact with Qatar which sought to organize and regulate the entry of Indian workers to Qatar through government channels or through registered recruiting agents. It also provided for workers to be givcn employmcnt authcnticated by both governmertts.08 The Indian Govcrnment has also been persuading other Gulf states to eoter into an agreement of the same naturc on a "government to government" basis and the UAE has rcsponded posititely so far.

Arab Aid and lwestmmt in India. The Gulf states have given substantial economic aid to India for various plants and projects (Tablo l). Saudi Arabia gave a loan of Rs.589,51 million for thc Srisailam andNagarjunaSagarprojects in Andhra Pradesh.se It provided another $32 million for the Koel Jaro hydroelectric projeot in Bihaf.60 It also advanced Rs 900 million for the ffrst phasc of the Rajasthan Canal project in 1981 and it has also agreed to give another loan of $ 100 million for the second phase of the Rajasthan Canal besides


Tnn Psnflen Gur"p aNp

1985, India signed an agreemeat for a loan of SR 172 million

assistance to other projects.


with the. Saudi fund for'
(US $50 million) for the ing co4strucJpd,W NTPC. It aLso loan of,.SR ,l4lrnillion, (930
project.6r The Kuwait Fund,for Arab, economic aid to India, though in of Rs. 52,srores for.the ,A.npara This was in addition to two other crores given earlier for two po electric project in 1976 and a fourth in the series was a loan of

.thermalpower project II bein principle to provido, a.

for the Nhava

ShEva port.

,Dcvelopment has extordod, ways, In 1981,'it'gavea loan

project in Uttar .Pradesh.oz of Rs. 45 crores and Rs. 35 projects-the Kalindl hydro: project at Kopli in 1978. Thc I million by Kuwait to Indid in project.os Yet another develop 1982 fqr-tle Tha,l laishet ment in this direction was the isste of a 9107 milioq.bond inDec. ember.l9,$l (Xhq.highqst for.a codoercial borrower in. Kuwait) for Rashtriya- Qhomicals apd, FertilizgrJs, Bombay,ca In addition; aocor&" ing to fl{t,agxeo{4ept sigued iq oat0ber l-98.3,..Kuwait,,agreed,to: provide a loan wortb about Rs. 500 dillion to India for'phase.I ofithe South Basseiri Sias dsvelopment prpjoct.gs The Abu Dhabi Fund for, Arab Economic Devclopment gav$ a loan of Dhirams 68 mi ion to' India in January l98l to ffnance tfc ,construction of'the Garhwal hydroelectric project in Uttbr Pradeshe6 and at present it is considc6. ing some.s.peciflc new projects ia India for. ubstqlial. fnanclal aqs.


apoupl of goodwi,ll geqerqle{. in l98l an{, 198?.and.ber
investmpnt .policy .that- madc
has been

Gulf busincsspen eager to invesi public and private sector
showing tremendous enthusiasm ff carly as in 1980, two UAE banks the two countricg agreed to the vestmerit corporaiio!.ind the opel in Dubai. A decision was alsq tal finery on the west coast with 12 r capacity of ttre Mathura. rsfiqery). an offer fron the UAE for the a final. reporl is still awgited on.
reff neries.

joint venture projects with Indian
Particularly, the UAE

oapital investmcnt in India. As their branches in India 6nd

fng pq of ajoi4t IndolQ4F jn:. g oftb9 India Inyestmcn! Fe4tre, to set pp Indjals biggeFt c,il,re.? llieq to?pes oppacifiy.(double lSe

India has also bcen ,ggnsidering

up of two more refineries aad

Tentatively, Mangalore

location aod size of these two
the site. chosen ia,the soulh.

Arrv N.
with a capacity of



million tonnes. aud.the other at Karnal ip thE ., ' ' i 'r north with.o capaeity of 6 million tonnes. ' Gujarat and Mahararhtra'have At state level, thc governments of also been quite succeisful in trying to attract Gulf businessmen and" industrialists for majorjoint venture projocts. Guj arat has the ofrers of financial investmcnt worth Rs. 500 million'o? Dollars by industrial' ists in the UAE are bein! invested. Various petro'dollar projects have been identiffed and wbrked out by thd governmetrt of Maha: rashtra in collaboration with UAE partners' Two alumina plants'

rubber plantatious, high tension insulator and electrodes manufacttuing units are to be set up in the Konkan region of Mahalashtra' Vidarbha. will havetwo cement plants, Marathwada a blendedrspun' yarn mill, and agro-based units. In Aurangabad, a zip fastoner manuiacturing unit will be set up and two'housing projects are slatcd:for

thc Bombay-Pune region.68

Tho Dubai fransport Oompany signed a protocol with thc Maha'' joint ventures rclated to a rashtra Government in August l98l for Point in West Ooast Freeway ovdr'the sea strctching from Nariman an estimated cost of sooth Bombuy to Mahim in central Bombay at Rs' ?0 crore and a Thanacreek Inland watenvay adjqiniog Bombay at an estimated cost of Rs. 50 crores.oe Further' ITC in oollabgra:' compapy tion with Al-Futhqim, group of the UAE has set up a' oelY

international for"dsveloping rand maragingl ioi"rc oot iao rodia,in disaent parts of the world such as sriJ..auka,, BruneijoInGujarat,thestatc'slndustriallnvestment'Oorporatioo with the Al-Guhrair GUil ft sctting up projects in collaborationalumina plant . at an lrouo of the UAE for an export committed ;;,#"t.d cost of Rs. 400 crores 'and a Rs' 1'15 crore stoinless steol' beengiveo tbe€ontube planL?l The Italian firm Snam Progetti has equipment and material ;; i"; designing and supply of imported set i"t tl. p**ifo,i no" zno otore Indo''Gulffcrtilizcr plant to be ofthe in UP. if,he sub'contract for the supcnrision "p "il"gaitf-pur ptrant which has a'40 per cent Gulf sharcholding of 'the "6o.troiito to Piojects and Devolopment India Limited' Um U..o givetr

*tt.A a'lpItCORP


Tw hnsrn



India's response to thc war. suppliers of oil to this country. W.hen thc war began in 1980, India expected to rcceive 6.2 millioo tounes of crude from Iraq and 3 tonnes from Iran out of its total import requirement of 16.5 tonnes for that year. India was forccd to make expensivc spot in the wake of disrup. tion of oil supplies dus to the war. also had to suffer a considerable loss in tcrnr,s of its exports af least for the first 45 moirths. All exports of engineering goods sea to these two states had td be suspended at a time when India annual exports of eoglneoring goods totalled about Rs. 50 crorce Iraq and Rs. 30 orores to lrao..2 In addition, there were more than I 000 Indian workers working in the two countries. They an impressive amount to tbeir homc country. Above all, India had 500 crores lrorth of conrtruction contracts in Iraq and Rs. 100 id lran.?8 India's delicate position was as the majority of the Gulf states with whom it had recentlv oomprehcnsive eoononic, scientiffc and technical supported lraq. Any out-right sripport to Iran would ve rosultcd il the sevoring of, Indo-Arab culf ties in which India many stekes. , India's stand on the war has not, , been scoi by lran. ians as 'partisan' and pro-Arab. It becn allegod that sincc lhe debacle of the Sioo-Indian war of India's policy hac bcen to condcmn all aggresions aad to the fruits of "ggrersior is any part of the woild. Butlndiadid oondemo the Iraqi invasion of trran India also did not condemo Iraqi use of chemioal wea. ponc, as alleged b! Iran and man western countries, arouod the Ahwaz area in Khuzistan in early I l, despitc the fact it wrs oD6 of the signatories ofthe Gcneva I tocol of 1925 which ..outlaws the use of asphyxiating poisonous o othcr gas aad of all amlogous Iiquids, materials aud deviccs."zl bre, Iran has becn susplclous of the genuineocss of India's efforts as a part of the tronaligued initiative and it was aor that the lndian iuitiative

her by the UN, theArabLeagug Oonfercnce and many individual ttoth tbc warring dations are gravely coocerned about the si of the nonaligned movement, It war but with no success. Economic considcrations have Iraq and Iran havo besn the

nonaligned forum, the Islamic
have failcd. The fact that of the NAM has made India n as it has been the Chairmao bcer trying its best to €nd thi!

Arrv N. fi{A t3t
at thc ?th NAM Summit heldinDelhiinMarch l9S3dldncitachievo any breakthrough whatsocver.
The Balance Sheet : Need for a Fresh Petspec!ile. The ch^nges that have takcq place in the past twelve years in Indiao cxpoiling methods

aod abilities, the number of consultgacics, turn-kcy projects and joint ventures in which Indian companies have been invoived in th6 Gulf rogion, speak of the success of India's .,new economic diplomacy" to a great cxtent. India's increasing thrust to find fresh out. lcts in the oil.rich Gulf states to market its manufactured goods as well as primary commodities has met with tremondous success. Uotil a few ycars ago, Indian engineering cxports to thc Gulf, consistedt mainly of components and thcn developed into a growing mixturc of capital goods. By tle late 1970s, morc and more of them formed part of a project and by 1980 many Indian engineering, mechanical erection and turn-key projects were being completed. The infrastruo ture to support this sort of overseas activity has been considerably strengthened and there is every indication that both the Indian government and private sector companies have found that they erc able to compete successfully with prestigious Western frms and rrc dotermined to increase their stakes in the Gulf. It would, howeyer, be extremely nsive to feel satisfied about the quantlrm of cooperation already achieved. Seen in the backdrop of the overall proximity between India and the Gulf the area ofcooporation falls short of our pot€ntial. With all the goodwill and possibilities, con$idering the needs of the Gulf oountrics and the relativcly advanced state of teohnology and industrial oepability developcd by India in many ffelds, India has unfortunately not becn able to take maximum advantage of thc opportunities ofercd in the wake of the oil crlsis. The Gulf contributes nearly Rs. 2,500 crores annually by way of foreign exchange to India through remittances,, and imports. But even as a trading parttrer of the Gulf, India occupics a position as low as lSth or 19th and the worst part is that
since 1980-81

it has been constantly pushed downwards. So far as Iraq is concerned, one could agrec that because

of tle

ongoing war, Itrdia's cxports to that country have sufered. But surprisingly enough during the same period, India was involved in the largest number of construction projects in Iraq. But how about othcr countries? How miserable is India's trade performance can be gauged from the fact that India'e cxports to SaudiArabiawcroonly

236 TIu Hnsnx Gulr eno Sotmr Asrl
worth Rs. 180.13 crores wheothetbtal Seudiimportsaegregated Rs. 60,000 crores.?6 This is the situatioh despitethe fact tlat there has been a substantial incrcase in Indif's exports during last few years to tlte Kiugdqp. India's position is as low as 25th or 26th in the overall Saudi market. Almost the s4me situation prevails with Indiafs export$ to Kuyait, UAE and other Gulf Stats. Its exports to Kuwait peaked at Rs. 132.75 croresin 1981+82and came down to Rs. 117.08 crores, in,,1983-84. India's exportc to thc,UAE have been *tagnating 130;55 *orcs in 198 l-82 and R.s. 137.22 crores in I 983-84. The -Rs. has been thd case with samc India'b cxports to othcr Gutf statos as can be tcpn in Table 2. In terms ofoverallquantum oftrade between
these Gqlf states and the outside *orld, India's share comcs to less is not just restricted to, than 1.5 per cent. This poor perfo exports. which may bc suffcring froft various.types ofconstraints and bottlenecks, bureaucratic buo and administrativc lethargies but is equally reflbcted io the and, above all; Iaok of from our national serving dwindling foreign exchange in the Gulf, The Korcans and,the fapanese, ,for example, ,are fewer.

in number than Indians but they Save been earning two to thrce times mor€: t[ad us. ' In thc light of a slow-down in cbnstruction wcirk all along the Gulf, job' prospects are shriirking for thousands of Aslaas vlho see the region as a land of golden oppdrtunities. The Gulfcountries' oil revenues have deolined sharply.?6 This has impeded their expansiQn plans and economic growth rates. As a result, thousaods ofvorfters from the ladian subcontinent along with othcrs have started feeling the pinch. According to, MBED reports;'Indian drivcrs, Pakistaai clerks and South Korean building workers whose labours havc transf$rmed the Gulf are now leavlng in droveg as contrbits expire.?t Evc[ ifthe number oflndianworkors does not drop greatly, thcre are redsons to believe that the level of their remittanccs cciuld soon begif, [o do so. Inflhtion could eatinto migrant workers' savings and the rbduction in interest ratgs on tbeir bank deposlts could together re$rilt in a rapid slowing down of rcmittances. climate for Arab investment There now seens to.be a favo India as.the awareness of India' capabilities has been .growing in in allowing special rinvest: fast. The Indian Government's g countrios hds promptcd ment oohc'essions to: oil eiporting in India; Unfortirnately, some Gulf investbls td take' an





various advantages and facilities of this liberalized policy availablo to tle ilvestors are not iroperly and widely lnpwn ip the Gulf. Even now maiy of ttem do not seem to be futly aware about the xate of taxation".5ufeq.of,.investment, and repatriation, ratgs. of .return, banking and other infrastructural frcilities. There-is,urgcnt.need for proper publicitf," of the,',Indian .Governmeutls .schemes- for Gulf',inves0ors througb newspapers, magazines and other publicity media through. out the'Guff. Thbsd'schefues' shoirld also be eiplai'ned tit' th6'iepre. sentativcs of ihe leading Gulf business houses through frequent oxchange.of, delegatioas; personal visits by Indlan businessmen; bran. ches oflndian banks and bther'ageacies. Tbe FICCI ieport bf the


Industrial climate in India. and procedures for . repatriation of currency from India. iv) Return on'invcstment made in India, v) Market available for different types of products in India. vi) Type ofmanagebsnt control which any joint venture partner would be able to exercise in ioint ventures in India.



.', r i.,
..:. i 1


:tr '. 'l

The Times of tndia (Delhi), 31 May 1985. and World Ci'lilizationr (Catcutta, i972), pp.19-37; Shireen R;atnaga\ Encounters: The Wzsterly Tydde ofthe Edfapwn Civilization (Odord Univ Press, 1981), pp. 78-94, 3. S€o,,Magbul Ahnad, Mo.Arah Relattotls (New Delhi: ICHR, 1961); pp.

2. For detaits see, D.P. Singha| India



4. "Tbe

Harappa civilization may have established contacts with thc West. betweetr the years 2300 and 2000 B.c. Tbe Arabs were tbe maln agehts of trade between India.and Egypt. They supptied_ t9 ESypt pr€cious stones,. spices

and the inc€ilse'burnt at the altar of tie'ancient Egyptiaa Gods. From Indiri, Muglin and'siiicE$ wetti sirpplied wliich thiy eitliei fetched themielves
or brought from the Indian merchants at their ports on the Gulf

of Ailen.

It sitf'thfotlh this tr$de:'6nd iontacts itiih thd ancient civilizationsihEast, India and E ypt that the Arabs built a magoificient civilization whobe political,aid cultural cotrtre rras at SabseatDuritrE thc'relgn:of rKtng Sotomon
chandize brought from th€re con$isted of gold' silver' iswels,
B,C:) "voyages utero made


to Opbir every

thtoe ry€ars and th€ merwooal,



238 Tru PnsrNlGu,r

dlerchant rottlem€nts otr tbe lslaad A Hisiory of Perslan Navigation Arab Sea Faring (PriDceton,
apes, Indian elephants and In (860 B.C.) and tho preteak, black-wood aDd ebotry and in the palace of NebuchadB,c. sugg€st India's fairly invido S. Maqbul Ahmad,, Indo-Arab 73-14. empire fufther accelerated tb€ over. ter impetus to Indo-Arab sea-trado

ap€s and pcacocks. Thore werE

of Socotra". For details see Hadi (Londotr, 1928), pp 47-?6 and A.F.


1951), pp. 8-9. Archaslogical cvidonces such as ths Bachian Camels on the obelisk of


of copper, sanalal-wood, logs of

found iu the t€mplEs of Moon at nezzare, both belonging to the 6th timate relations with West Asian
.Rdratrbrrr (Now Delhi: ICHR, 1967), 6. "Th€ imlusion of Sind within the

land trado with IDdia. Ilowcver, tho
was givcn whcn Boghdad was

Mansur, Ths fonndation of Bagt history of Indo-Arab relatiotrs, for Arab ompire was directly linked by watcr systcm of tlD Tigris and ths Persian Gulf. The anci€nt potts of to play tteir role atrd in tim€, succeeding c€nturies acquired thc where the imports and exports of thc exchanged. Goods imported from


by Abbasid Caliph Abu-Jafar-Alwas an epoch-making event iD , for the first tinle, the capital of with the Arabian sea, through which joiDtly flowed into

the the the

Darayam and Sohar continued was also developed and during tbc of a Liverpool fo! the Arabs and the West were stocked and

Chim, Egypt, East Africa and
distributed to various centres of were carricd from here to anttrere loaded into boals bound for \Mest." Quoted in Maqbul Ahmad,
the Percian GulI Region (Bombay, 'ersian Gulf 1894-i914 (California, Arab s : 194 I- I 92 I (Berkeley, l97l), $an Gulf (Oxfotd, Univ€fsity Press,

othcl countries werc stocked hers and thc Afab ompire. Similarly, goods of othsr port on th€ Gulf called Sirat India, China and other countri€s of ibid., pp. 82-83. 7. For details, Ravindra Kumar, /zdra
1967); Busb B. CooW, Britain in ,he Univ. Press, 7967), Britain, India and and also J.B. Kelle:.!, Britain and the r968). Ravindra Kumar, n. 7, pp. 19-20.
agiainst colonialism,

8. 9. In their fight

Arab links had been first forged at
in Brusseh (February 1927) fron the two national liberation moveresolution on Mesopotamia (Iraq).
a large number

the Congress of OpFessed Nati, where Nehru emerged as a link ments. He bad even dfafted and doved This, Nehru thougbt, was his duty and were stationed in Mcsopotamia and employees wore taking part in up to us to demand the recall of the we wish to be no parties in this
Congress at its Calcutta sossioo

"Indian taoops had conquered of Indian clerks



India's full sympathy with tho Arabs

from the grip of
bet 1964, p.24,


Arab World", Indian and Foreign

exploitation of the country, it was of occupation and to say tbat adventure." The lndian National also paesed a r€solution exprcssing their struggle for emancipation : vide Syed Ayub, "India and the (Delhi), Vol. l, No. 24, 10 Octo-

tuav N. J'J,^ 239


Tbesg feelings were more than rociprocatcd by the Arabs. Reminiscent of tlis emotio[al affinity is a letter writtetr by an eninent Ifaqi statesm€n, Kamal-Al-Chatlrichi to Jawaharlal Nehru in Decembcr 1938' He wrote, '.We whole-heart€dly appr€ciate your strugglc and wish that we had the opportunity to share in it though in small measure, fot we both aro in th€ same boat. Tru€ endeavour iD the campaign against imperialism and ex.


ploitation must Dot be considered in separate units but tath€r tbat neither geographical frotrtiers tror political obstaclos caD supptess it," vide Jawaharlal Nehru, Duncft of OId Letiers (Bombay, 1958), pp.304-5. Jawaharfal Nehru, /ndia's Forelelt Policy: Seleeted Speeches (S€ptetnber

Delhi 1961, p,22. see, M.S. Agwani, "Ingredients of India's Atab Policy," Infran arrd Foreign Reviev, Vol. 10, No. 10, April 1973, p.13; K.R. Singh, "India aud IVANA," Interndtional St dier (Delhi), Vol. 17, Noc. 3-4, July-December 1978, pp.625-3t i "India and the Arab World: 1947-67," Indian Horizons, Yol. 22, No, 2, 1973, p.52: "Indo.Arab Relations," Weekly Rottttd Table (Delbi), Vol. 11, Nos. 2G27, 5 Aqust 1973, pp.1-21. 13. For dotails on fndian r€actio! s€€, Richarat K. Kozichi, .'India's Policy Towards the Middls East," Orbis, Yol. 11, No. 13, February 1967 aual Girilal Jain, "Disillusionment with the Arabs-A Shift in the lndiaa Opinion," Round Table (Londoa), No. 228, October 1967, p.435. i4. At-Uaha, (Beirut), 22 Deo€mber 1971; Najib E. Sabha,,'Impact of IndoPakistani War oo the Middls Ea8t, ' lltorld ,4fairs (Washington), VoI. 35, No. 2, Fall 1972, pp.l-31.



12. For details

15. Mohammad Ayoob, "Indo-Irani4D Relations: Strategic, Political and Eco lomio Dimeosions," India Q arterly (Naw Delhi), Vol. 33, No. 1, JanuaryMarch 1977, p.3,

16. Vide R. Jahtinen, An ts in the Perciaz Gzf(Washingfon, 1974), pp. 1-31.

17. Expressing his

fears on the arms race and th€ subsequent imperialism


in the region, Itrdia's External Afairs Minister, Sweran Singh, while speaking at the Commonwealth Conferencc at Ottawa on 3 August 1973, pobted to its "incalculable consequences for tho peoplo of those countrios and their neighbours," vide Indian and Foreign Revlew, Yol. 10, No. 10, 15
August 1973, p.6.

18. For details

Agy'atr;i, Politics in the Gulf (Delbi: Vikas, 1978), pp. Social and Economir Developmeni in the GuIf (Lcndon, Croom Helm, 1980), pp.l4-18; ]!Iay Zihar Daftari, /sszes tu Development: The Arab Galf States (London, Croom HeIm, 1982), pp.3-5.

9-I0; Tim Nimblock (ed.),


19. Of enorgy dema,nd iD 1960,

33 p€r cent was met by oil, by 1970, it rose to 43.9 per cent and by 198(F85 it was exp€cted to reach b€tween 47.8 to 52,3 per cetrt vide Pster llill and Roger Yielvoye, Etgrg, in Crisls

(London, 1974), P.18. (March 20, Annual RFport of thc Council of International Economic Policy Rustov and Joho F' Muogo, OPEC: Success and IS6$. n.158. vi<te A.M. ir"!ir",t lNew York, 1976), Table t' P'l3Z' Also soc' A'K' Ga!8ulv'

240 Tru Prnsnq Gur,r ero Soufn Asn





*E^eryy Crisrr: pouring,Oil oa @dhDr.Vol. 9' No. l, April-June "World Energ.i 'Crisis," IUAelcIy

Waters," Forelin /rade Refieat.


(N6ur D;ibi), No. roc,




12. In lditia'ij tasdj the enersy-criiid hi6 r . rof paymcots: Tbis is '€videbl from,

! becom,i'niorii of





',,SaQha D.eba@s, ,February:,24. dnd l 1E75 vid€'sreodhdf, ,.Wodd Enerry Crisis and tle Proposcd Consumor Bloc,:' Taorrtnn Ataiiilfepoft (New

only'by'0:6imillibi over thc 1973 figure of 13.4 creased f|om Rsl 244 clordd to Rs:'

in. 1974 incredsod

fact that'though rni'&nde impors
toddes td r€Xch IS.0 ririllion tonnes tonnes, the cbst of thd,iti"imports in-



in the saric pei{6'&


,,,,.,Qelhi,, {CWd},.Vot.,



2?., Ecoaomic axd Pollticat Weekly (f,om

, 27 S6ptbmber 1976; iii4.

Easterit "India's ':. :80; Nd. 21, Marctr.28, tb73,,-pp.r:.s

Baghdad Pact," Far



An:agreirient waiN signtd with tho' for deslgnitg ald cohstrrrctibn of ments wefe Sigued-one "bi ment, roil
servation, land

(CSIR) and tbe other by Indian traiabg Ilaqi students ard officials in

Vol. 13, No. 8,


F€bruary 1976, pl

28. Vide Giriiesh palrr: . ,.Iran''Ifaq Cotflict andlndia,. oss (Dblhi), vol, r,
r...,No,, 1, January







29., "Fruitful Indo-Laqi Econoniic Vol.72, Ndi 8, 23 Fobruary 1979,


Eastern Econdttti.ll

:' :..


30. Ibid.r'r'31;'Ibidl
32. July

34. 37.



Arlv N.
43. Ibid., 13 May 1981. 44. Ibid, 45. The Economic Times, 25 Rebrnzry 1982. 46. Vide Richard Thomas, India's Energena
Eastern Confiacts (LondoD, 1982), pp,I8-19.



as an Industrial Fower:


47. Ibid., p.57. 48. Ibid., p. 78. 49. The Statesrwn @€thi), 12 February 1981. 50. FICCI Report on the second nveting of Indo-Arab troint Commission,


5l . The Ecottomic Tlmes, 14 June 1982. 52. Economic Trends (EICCI,Delhi), Vol. 11, No. 14, 16 truly 1982, p.42. 53. Quoted in The Economrc Times,30 D€cemb€r 1983. 54. Richard Thomas, n. 46, p.44. I : 55. Financial Express (Bombay), 2A Aptil1982. 56. The Statesman (Dethi), 23 February 1982.


The Econamic ?rmer, 14 November


:. r

58. The ootable fcature of this agreement is tbat in case of a, disPutn, between an employee atrd th6 worker, there is scope for initial coqeili4tion by the Qatari Minister of Labour and Social Afairs and if an amicable Ecttlemcnt

is not arrived at, th€ compl4int can be refcrred to tbe aomi'etert judicial authority in that country. Tho agreement also provides for a joint committe€ to r€view the implementatiotr of the agr€em€nt. Attiched to th€ main agreement is a'specimen model cmployment conlf,act which covors all tbc essential t€trms and coflditiotrs for oEploymetrt like salat'y, working hours,,overtime, transport,.accommodation, service behefits€iidldoath and
disability compensation. Yide

59. Quoted, in Economic Times,22 November 7982, p.4, 60. lbid. 6i. Asicin Reairder,I985, p.18414. 62. FICCI Annual Report on Indo-Arab Jolnt Commisslonr, t981, pp'48-49.

p.2. -.

The Economic Tlmes

(Ddhl),l7 April






64- Ibid., P.56.

65. IIrc Hindu (Madras'1, 19 October 1983.

66. The Hindustan Thnes (Delhi), 12 May 1981. 67. Patfiot (Delhi)' 24 January 1982. 68. Bhtz (Bomb,y),5 December 1981, p.11. 69. Ibid. 70. Ibid. 7l . Ibid. 72. Pinaticial Express (Bombay), 30 November 1981.




The Economic?imes (Delhi), 27 Septemb€r 1981. (ed')' 74. Ouoted in Christopher Raj "Ferment in West Asia" in Satisb Kumar iearbook in India's Foreign Policy 1982-83 (Dclhi, Sage' 1985)' 1982' pp'17-24' 75. FICCI Report of Batuain and Saadi Arubia, Match 76. : The Times ol India (DeihD' 31 May 1985' 1985' pp'13-l '4 Mitutle East Ecowmtc DBeti (Lotdon)' 7-14 Novembcr

"" ', '. '


Afghanistan, 20; Soviet Military intervention in, 28-29; Iranian involvement in, 29 Ahmadis, 100 Airborne Warning and Control Systems (AWACS), 138 dlnmisium industry, rO Arab l€agw and Israel, 153 Armed foroee, 8 Arms race, Z 217
Baath i&oto€y, 124 Baath Parties of lraq and Syria,

Developmcnt strat€gies, 4+-45 Dhofar movemont, 3, 4

Diego Garciq 18
Eisenhower Doctrine, 15, 17



Frcct, 54,234
Gulf Cooperation Council (cCE)
div€rgsnt opiDions withi!, 135; formation of, 210; and Iraa, 157-61 ; and lraq, I 5rt-57; aad lran-Iraq war; 161-64; and Istael, 152-54; aad Security 171-80; and South
Yemen, 150-51; aod Soviot UD.io!', 742-46: a,nd strategio intorosts of the w€st, 2;
Supreme Council, 192; and US,

threat to cCC,


Eaath Socialiem iD Iraq, 2 Baghdad Pact, 15 Bahrain, Shia populatio! in, 177;

working class moyem€nt iD, 126; uprising in, 159 la'hrain Monetary Authority, 202 Baloch State, 3l
Baluchistan, 101-2 Baqlad€sb, and Islam, 103-5.

Gulf International Bankiag, 199-267 Gulf Maritime Authority, 26 Gulf Rapid Deployme l'or@,
28, 114, 1r7

@op€rati@ witn the Cruf, Se Bedouin, 128, t85
Bourgeoisie in the




regimos, threat p€roeptions of,

Carter Dootrine, 17, 28, 136 Cemeot industry, 40 Cetrttal Treaty Orga.nization

pulf.Soutb Asia Coopcration,



(CENTO),6, 15 CBNTCoM Strategy, 18 Oommunism in Afghatistaa, 2
Defence expendituro, 8

companies, 95

Gulf-war. Sae kan-haq war $ormuz Srait, ctosure of,


Defibd,lizatio\ W-28

Iodia1n1, Arab aid and investmrDt in, 228-30; banks, 20I; co-

operation with Gulf, 58-59; cooperation with Iran, 57, r€lation wit! the Gulf' 210-40;
workers in the Gulf, 81-83 Industrial alevelop ment, 39-41, 42'


Manpower exPort, impact on €xpolting societies, 87-93; and India,

Marxian theories of capitalist state'

t87-88 Internal Security Arrangpment' Investment banking, 203 IraD, hostage crisis, 17; ideological threat to Gulf


Migration, definition, 87-88; from South Asia to the Gulf'

States, 177; pre-eminent Power, 2l7i tbl3at to GCC, 157-61,

Middle class, 187-89 Mine Counter-Measure (MCM), 24 Mujaheedin, arms aid from CIA, 29
Nonaligned Movement and sscurity Perceptions, 21-23 Nonaligned Security, Doctrine, 20-27 Nasserism, 2


Iranian ulema and the revolution,

Iran-Iraq war, 16l-64, 177; and CCC, 5, 3l, 33, l3l ; and
India, 23O-32, and Oman, 1 61 : and Pakistan, 34; and United Nations, 162 Iraq, cr€dit to India, 221; and GCQ, 154--57; and IsraBl, 154; threat

Norrh Allantic Treaty Organization

o{Aro), le
based industries, 40

Oil incomes, 38, 46

to Kuwait,


Islam and Gulf-South Asia coopera-

Oil Nationalism, tbe rise of, I I zl--21 Oil prices, 37, 59-66,110, 117; and
South Asia, 64

Islamic fundamentalism, 5; in Iran,2 lslamic revolution end Shia-Sunni

Oil refineries, cost of production in,

conflict, 101 Israel and GCC, 152-54. agression
on Lebanon 152; and Japanese banks, 200



Oman, iffigation in, 186; militarY fa.cilities to US, 179 OPEC, 180; emergence of, 115, future of, 62; investment in

Third World, 46 PDRY (Yemen), 148-49 Pakistani, cooperation with Gulf: 56; tloops in the Gulf, 30 Palestinian, 173-74i c use and religion, 108; in Kuwait' 125 PLO, tbreat to GCC, t77 Pan-Arabism, assertiotr of national
sover€igntY, 37; in Bahrain' 125 Pan-Islamism, 106 Parliaments in the Gulf' 132 Petrochemicals, 42; cost efiectiveness

Kerala, Iand price in, 89 Kudremukh Project, 57 Kurdish movemont, 2-3 Kurdish rebels, 174 Kuwait and joint veotures' 119;

in' t72: Parlia'

m€nt, 191; and Soviet Union,

Labour market in the Gulf, 169-96 50-51 Labour migration to the Gulf' the Gulf' labour retrenchment in

Libya, 77

of industries, 118 187 Political tensioos and oil money' 'p.t"i"i ri".t for the Liberation of

('uu the OccuPied Arab




Bahrain, 1?7
Shia intellectuals

Popular front for liberation of Oman, 149 Protectiotrist policies of US aod Europe, 119
Qadianis, riots against, 99-100


Pakistan, 30

Sindhi nationalism, 102-3 Souk al Manakh, 184, 201 South Asia and the Qulf, 4--7;
forei€ln exchange eaming from the Gulf 68, and Iran-Iraq war, 28-35 SAARC approach to culf, 59 South Yemen, Soviet bases in, 149 Soviet Union, bases in South femen, 149; and GCC, 142-46, ls}t treaty witb Lan, 142-43; troops

Qatar and Iran, 160 Quran and concept of statc, 98 Rapid Deployment Force (RDF). See Gulf Rapid Deployment
Force R€gion, changing geo-strategic structures, 14-20 definition for security cooperation, 7, 13 Regional coop€ratiorl in the Gulf"

in Afghanistan, 16 Sri Lanka-Gulf cooperation, 56 State monopoly capitalism in the



Religion, revival, 99 Religious fundameltalism, Z, 104-5t and native culture hypothesis,

State, political economy of, 111-14 States, in the Gulf, 121-32
Steel making

in the Gulf,


Tripartite Treaty, 150
Tudeh Party, 16, 174 United Arab Emirates, federal council, 191; seizure of isla,nds by Irao, 159; ties with Moscow,

Remittances from the Gulf to South Asian countries, 48-49, 80, 84-86

Royal families, 188 Saudi Arabia, air force,
3'. agri182[-85; dominant power role, 192-93;




political conspiracies in, 172-73, ptiYate sector in, 75;
and Soviet Union. 147 Scandinavian banks, 200 Security in the Gulf, 4-7, 1.4-n: Pakistan's involv€ment, 30

United States, military bases in tbe Gulf, 19: and fall of Shah of Itan, 28; relations with GCC, 139-40, l4Z, 178, 180; warships in Karachi, 32

Wababism. 175
Weapons in tbe Gulf States, 9-12 lVelfaro State in the Gu[ 129

Shia population, in the Gulf, 158; and overthrow of Shah,l7 4--7 5; in llasa province, 176; in







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