Most recently, in 2011 the College of William and Mary, one of the oldest higher education institutions in the US, accepted a gift from Oman’s ruler to establish an endowed professorship—the Sultan Qaboos bin Said Academic Chair of Middle East Studies. Meanwhile Harvard University now appears to have accepted a $1 million donation from the Abu Dhabi Crown Prince’s Court, despite its earlier rejection of Abu Dhabi ruling family funds. The gift, made out to Harvard’s John F. Kennedy School of Government, has helped set up a graduate training scheme at Harvard for Abu Dhabi’s top public officials, while also helping to ‘advance the mission of the School’s Middle East Initiative, a nexus for convening policymakers and scholars on the region’. Upon signing the agreement, the Abu Dhabi crown prince’s court stated that ‘this… echoes President His Highness Sheikh Khalifa Bin Zayed Al Nahyan’s steadfast belief that the progress of nations is built on education, and Crown Prince His Highness General Sheikh Muhammad bin Zayed Al-Nahyan’s unwavering commitment to education and the constant development of the future ranks of leaders’.106
In an almost mirror image of the funding of cultural institutions strategy, the Gulf monarchies’ funding of Western universities and research programmes has now also been taking place in reverse, with several leading US and British higher education institutions having been invited to set up branch campuses in the region. It is important to differentiate, however, between those Western universities (usually mid-or low-ranking institutions) that have set up campuses in free zone operations—such as those in Dubai’s Knowledge Village—which have sought commercial success and have usually not received financial inducements from the governments involved,107 and those higher ranked institutions that have been building much larger, more lavish campuses—most notably in Abu Dhabi and Qatar. It is the latter category of universities which matter, as these are receiving massive funding from the governments in question and are now tied in to these monarchies’ soft power strategies. After all, if a monarchy can claim to have a working and highly visible relationship with a big brand university from one of the world’s most established democracies, one with a powerful military, then any reputational price that is being paid—no matter how high—is certainly deemed to be a wise investment. In Abu Dhabi both New York University and La Sorbonne have established operations, with one of Abu Dhabi government’s key personalities now sitting on the former’s board of trustees back in New York.108 While in Qatar a whole host of universities are establishing themselves in ‘Education City’—a giant complex funded by the Qatar Foundation, the aforementioned vehicle of the ruler’s wife. Described as ‘five star universities imported profectus in totum from abroad’,109 these currently include Georgetown University, Texas A&M University, Virginia Commonwealth University, the Weill Cornell Medical College, Carnegie Mellon University, Northwestern University, and University College London. In many cases, with generous salaries to offer, they have attracted leading academics in their given specialities. It is difficult to ascertain the real running costs of these campuses; however it is likely that Education City’s total cost is about $33 billion dollars, with the individual campuses costing between $100 and $200 million each.110 While there are very few UAE national students attending NYU111 or La Sorbonne in Abu Dhabi,112 there are at least a modest number of Qatari nationals attending the various Education City institutions.113 However, most students are expatriates (either those from families resident in the Gulf states or the wider region or, in Abu Dhabi’s case, those flown in on very generous scholarships),114 and with the exception of Georgetown University115 very little academic attention is currently being paid to the Gulf monarchies themselves—especially in the field of political science.
Soft power in the East: China and Japan
Although the Gulf monarchies have little shared modern economic history with the principal Pacific Asian powers116—notably China and Japan—their economies are now becoming increasingly intertwined. What began as a simple, mid-twentieth century marriage of convenience based on hydrocarbon imports and exports is rapidly evolving into a comprehensive, long-term mutual commitment that is not only continuing to capitalise on the Gulf’s rich energy resources and Pacific Asia’s massive energy needs, but is seeking also to develop strong non-hydrocarbon bilateral trade and is facilitating sizeable sovereign wealth investments. Although this increasingly extensive relationship does not yet encompass the Gulf monarchies’ military security arrangements—which remain predominantly with the Western powers—and although few serious attempts have been made by either side to replace or balance these with new Pacific Asian alliances, there is nonetheless compelling evidence that the Gulf monarchies are seeking to strengthen their non-hydrocarbon economic ties and even non-economic ties with these states. Indeed, an abundance of state-level visits, often at much higher levels than with western powers, and a plethora of cooperative agreements, gifts, loans, and other incentives are also undoubtedly helping the Gulf monarchies build up a soft power base in the East as well as the West.
China and Japan now have the second and third greatest oil consumption needs in the world, behind only the US, while Japan still has the fifth greatest gas consumption needs in the world, ahead of Germany and Britain.117 According to the Organisation of Petroleum Exporting Countries although Japan’s demand for oil is likely to fall by 15 per cent by 2030, China, South Korea, and other Pacific Asian economies are likely to make up 80 per cent of net global oil demand growth over the same period.118 Most of this increased Pacific Asian demand is already being met by the Gulf monarchies, with their total hydrocarbon trade now close to $200 billion per annum119—a figure likely to increase dramatically over the next decade. The Pacific Asian economies do little to disguise their dependency on hydrocarbon imports from the Persian Gulf, in contrast to many Western powers which are openly trying to reduce their dependency and diversify their sources. Although the non-hydrocarbon trade that takes place between the two regions is on a much smaller scale, there has nevertheless been an historical precedent for the importing of certain goods from Pacific Asia into the Gulf monarchies, especially textiles and electrical goods. And since the substantial rise in per capita wealth on the Arabian Peninsula following the first oil booms, the demand for such imports has increased correspondingly, along with new demands for cars, machinery, building materials, and many other products associated with the region’s oil and construction industries. In total, the Gulf monarchies’ imports from Japan, China, and South Korea could now be worth as much as $63 billion per year.120 Moreover, there is no longer as much of an imbalance in non-hydrocarbon trade between the two regions as there used to be, as some of the Gulf monarchies’ export-oriented industries—especially those producing metals, plastics, and petrochemicals—are now gearing their sales to Pacific Asian customers.
While the Gulf monarchies’ sovereign wealth investments in the Eastern powers remain much more modest than in the West, this is also slowly changing as investments in Pacific Asia become regarded as realistic and more hospitable alternatives to the more mature western economies. Such an alternative was viewed as being particularly necessary following 9/11, after which many western governments and companies did little to disguise their distrust of Gulf sovereign wealth funds, with many commentators arguing that Gulf investments were not merely commercial and that power politics could be involved.121 With regards to Japan, Saudi Aramco has, for example, been holding a 15 per cent stake since 2004 in its fifth largest oil company, Showa Shell Sekiyu.122 In 2007 Dubai International Capital purchased a ‘substantial stake’ in the beleaguered Sony Corporation—the first ever major UAE investment in Japan.123 And in summer 2009 the Japan External Trade Organisation named the UAE as one of its top three target countries for sourcing FDI.124 Since JETRO’s drive began, Abu Dhabi’s International Petroleum Investment Company has taken a 21 per cent, $780 million, stake in Japan’s Cosmo Oil Company125 Although Kuwait’s sovereign wealth investments in Japan are more modest, the Kuwait Investment Authori
ty nonetheless recently stated that it intends to increase by threefold its investments in Japan.126
In 2005 China’s Ministry for Commerce revealed that investments from the Gulf monarchies in China totalled $700 million,127 most having come from Kuwait. Back in 1984 a subsidiary of the Kuwait Petroleum Company took a 15 per cent stake in China’s Yacheng offshore gasfield, while the following year KPC set up a joint venture—the Sino Arab Chemical Fertiliser Company to invest in the Qilu petrochemicals facility in China’s eastern Shandong province.128 In the 1990s the Kuwait Investment Authority increased its portfolio share in Chinese investments from 10 to 20 per cent,129 and it is now the largest foreign investor in the Industrial and Commercial Bank of China.130 This has effectively made the Kuwaiti government the biggest investor in one of China’s first major public offerings. The relationship between the two countries was also strengthened greatly following the setting up of a $9 billion joint venture between the Kuwait Petroleum Corporation and Sinopec in 2005. Since then, the two companies have been jointly financing the construction of a massive 300,000 barrels per day capacity oil refinery and ethylene plant in China’s southern Guangdong province. When the project comes online in 2013 it will be China’s largest ever successful joint project.131 But the most innovative and symbolic aspect of the investments between the two countries has been the establishment of the Kuwait-China Investment Company. Set up in 2005 and 15 per cent owned by KIA, the KCIC now has a capital base of about $350 million, about half of which is held in cash in order to facilitate rapid responses to strategic opportunities. It has specialised in investments in Chinese agribusinesses, particularly those producing crops with a high export value such as rice, wheat, corn, and sorghum. Meanwhile Saudi Aramco now has more offices in China than in any other country, and has taken a 25 per cent stake in a major joint venture with Sinopec and the China National Petroleum Corporation’s Petrochina subsidiary in 2001.132 The venture, named the Fujian Refining and Petrochemical Company, has involved the two companies expanding an existing refinery in China’s southeastern Fujian province along with building a brand new ethylene plant. Moreover, Aramco is now the largest shareholder in the Thalin refinery project in China, and in the near future it may embark on another joint venture with the two Chinese companies to build a refinery in the Chinese coastal city of Qingdao, again with Aramco taking the majority stake.133 This could lead to the building of one of the largest oil-refining facilities in the world and may require as much as $6 billion to complete.
Similarly to Aramco, SABIC has already helped to initiate three petrochemicals projects in China as part of its ‘China Plan’, which aims to facilitate mutual investments between the two countries by supporting China’s economic development and, as its premier supplier of petrochemicals, helping to satisfy its ever-increasing demand.134 And in 2009 SABIC entered into an agreement to build a fourth petrochemical complex, costing $3 billion, in China’s northeastern Tianjin province.135 The Qatari Investment Authority is also becoming active in China, and has recently followed Kuwait’s lead by signalling its intent to purchase $200 million worth of shares in subsequent public offerings from the Industrial and Commercial Bank of China.136 It has also opened a permanent office in China with the intention of pursuing further sovereign wealth investment opportunities in the country, with QIA’s CEO having explained that ‘China and Asia are growth markets for Qatar—we are really serious about finding the right opportunities there’.137 Most significantly perhaps, it was announced that Qatar Petroleum would enter into a joint venture with Petrochina worth $12 billion. This deal, if followed through, would eclipse even Kuwait’s investments in China and would lead to the construction of a new petrochemicals plant in China’s eastern Zhejiang province, along with an oil refinery, an ethylene plant, and a port for oil supertankers.138
Much like its neighbours, the UAE, and more specifically Dubai, is also investing in China, and has been since the late 1980s following the establishment of the Dubai Oriental Finance Company.139 More recently Dubai Ports World has made significant investments in Chinese coastal cities, and now operates seven container terminals in the country, three of them in Hong Kong. Crucially DPW has faced none of the opposition it experienced in its 2006 bid to operate ports in the US, and its success has been attributed to its well developed partnership with China’s Tianjin Port Group Company.140 In the near future the joint venture will also open a terminal in China’s northeastern Qingdao province and in 2009 it announced that it would also take an 80 per cent stake in a joint venture with both a Chinese company and Vietnam’s state-owned Tan Thuan Industrial Promotion Company in order to build yet another Asian container port outside Ho Chi Minh City.141 Abu Dhabi has thus far been more cautious than Dubai with regard to investing in China, but there are nonetheless some proxy examples: IPIC has a 65 per cent controlling stake in Borealis142—a plastics company based in Austria that has links with the Abu Dhabi Polymers Company—and in turn Borealis is investing in a polypropylene plant in China, to help boost the supply of plastics for its booming automobile industry,143 which now comprises more than forty-five car manufacturers, including Beijing Automobile Works and Chery Automobile.144
With regards to building non-economic soft power ties, a part of the strategy seems to have been regular and high level diplomatic visits from the Gulf monarchies to Pacific Asia. While economic and trade matters are certainly discussed at these carefully staged events, the meetings are nonetheless also valuable opportunities for rulers and their ministers to convene with their Pacific Asian counterparts and consider a range of other matters. Often substantial gifts or interest free loans are granted during these meetings—especially to China, in an effort to build more sturdy political and cultural understandings, and undoubtedly to generate further goodwill. The frequency of these visits has greatly intensified, but more important has been the increasing seniority of the visitors, which now eclipses that of those dispatched to Western capitals.145 A report published by the US-based Middle East Institute in 2009 also identified the trend, stating that there has been a ‘steady, incremental process in the building of personal and institutional relations—the essential latticework of Gulf-Asia economic interdependence… [and the diplomatic visits] have been capped by a slew of ambitious cooperation programs and joint ventures’.146
In 2006 the Saudi king visited China to sign several new agreements that were intended to ‘write a new chapter of friendly cooperation with China in the twenty-first century’. As a gesture of goodwill he also agreed to grant China a substantial loan in order to build infrastructure in the oil rich Xingjiang province.147 This was his first international trip as the newly-installed king—before visiting any western states—and the Chinese president declared that the visit ‘would begin a new phase in partnership between the two countries in the new century’.148 Following the Abu Dhabi ruler’s visit to China in 1990 the UAE has made many large donations to China, including grants to establish an Arabic and Islamic Studies Centre at Beijing Foreign Studies University and the financing of the expansion of a printing factory for the China Islam Association. Subsequent visits also led to China being granted permission to set up UAE branches of the Xinhua News Agency and the People’s Daily newspaper.149 And soon the UAE’s Zayed University will establish a Confucius Institute as a result of an ‘imaginative new partnership’ that is being developed with China’s Xinjiang University.150 Meanwhile, Kuwait has been one of the most generous suppliers of low interest loans to China, with the Kuwait Fund for Arab Economic Development having provided China with over $600 million in such loans since the 1990s.151 There have also been several large gifts, including a disaster relief package in 1998 following serious flooding in China.152 The poorer Gulf monarchies have been less active in providing gifts and development assistance to China. Nevertheless, in 2001 Oman’s ruler donated $200,000 to assist the Guangzhou Museum of Overseas History build a new Arab and Islamic exhibition room.153
4
MOUNTING INTE
RNAL PRESSURES
Despite the Gulf monarchies’ internal and external survival strategies, many of which have contributed to their relative stability over the past few decades, there are nonetheless several weaknesses and pathologies that have been undermining their polities. These have often been under-reported or ignored, given the various rulers’ ability to continue buying acquiescence from their people and cultivating legitimacy. Moreover, they have often been subtle problems, and have rarely led to violent protests or headline-grabbing incidents. But given that most of these weaknesses are deep-rooted, structural, and seemingly unsolvable, it can be argued that they cut to the very core of the Gulf monarchies’ political and economic structures, often exposing the vulnerability and unsustainable nature of the current practices. As the later parts of this book demonstrate, the Gulf monarchies are not immune to the Arab Spring, which is undoubtedly serving as a catalyst for reform and revolution in the region, but it is perhaps these domestic, Gulf-specific problems which are most central to understanding the monarchies’ looming challenges.
After the Sheikhs Page 15