A truck cruising down Qasr al-‘Ayni Street dressed as a blue papier-mâché boat. A belly dancer clad in a silver lycra dress and a blonde wig, upper body undulating out of the window of a white sedan. Tahrir Square, lit up like a local wedding, crowded with thousands, their faces painted red, white and black, sounding horns and waving flags.
These jubilant scenes filled downtown Cairo on August 6, a national holiday marking the opening of the New Suez Canal, actually an expansion of the existing one, a project heralded as “Egypt’s gift to the world.” In the record time of a single year, a team of engineers shook sky and earth to dig a new channel that allows ships to pass through at a faster rate. Prior to the grand opening, the media featured coverage of widows parting with wedding gold and children breaking their piggy banks to buy Suez Canal bonds. Ordinary citizens, many of whom are not wealthy, bought these symbols of nationalism, thus contributing an estimated 64 billion Egyptian pounds (over $8 billion), according to the Central Bank of Egypt, or 88 percent of the total project cost. Promising 12 percent returns in five years, the bonds sold out in two weeks. Signs plastered around the country, and even as far away as Times Square in New York, reminded Egyptians of their achievement. They had changed the map of the world. The canal’s revenue would more than double by 2023. Egypt would be great again.
Economists, however, have their doubts. The Suez Canal is not operating at full capacity. Shipping companies welcome the reduction of wait time at the locks from 18 to 11 hours, but they are not as enthusiastic as the government claims. Plus, doubled revenues are contingent on major increases in global trade, something that the new waterway cannot create by itself.
So why, then, are people celebrating? The August 6 parade seems like an absurd victory for statist propaganda in the “new Egypt” of President ‘Abd al-Fattah al-Sisi. It is easy to dismiss the celebrants as brainwashed masses, high on nationalist opium, descending into the streets to rejoice over a dubious feat funded with money that they might lose, for how or whether the government will make good on the bonds is particularly unclear. Critics of the state project suggest that the money would have been better spent improving the education or health care infrastructures that are in disrepair.
In light of these criticisms, we decided to get an on-the-ground sense of what people were celebrating. Walking through downtown Cairo from ‘Abdin to Tahrir, we asked Egyptians—men and women who were carrying flags or signs, or wearing face paint—“What makes you so happy today?”
One woman we talked to on Muhammad Mahmoud Street, grandmother of a girl around 7 and a boy around 10, both with their faces painted in Egypt’s national colors, toed the party line. She said that she is happy because the new canal project will shower Egypt with blessings. The grandmother added, “I am happy so long as Sisi is my president.” She was pleased with the presence of police in full force in Tahrir for the celebrations and called them “beautiful.” The boy, however, cautioned us to stay on the periphery of the square and away from gatherings of males, indicating his knowledge of the possibility of sexual harassment and assault.
Other interviews also elicited responses that hinged on hope for a better future. A young man in his early twenties, from the working-class neighborhood of Sayyida Zaynab southeast of Tahrir, beamed with pride. “The whole of Egypt’s population is standing with its president,” he boasted as he waited tables at a local fish shop. “No one could have done what Egypt has done in a year.” The waiter stressed the economic benefits to Egypt—the canal would bring in more tourists and greater income, generating job opportunities, so that the country could stand on its feet again. He only wished that the fees for passing through the canal would be collected in Egyptian pounds rather than US dollars. He said his excitement was in line with the opinions of 95 percent of Egyptians. He called the remaining 5 percent “terrorists” who were unhappy about Egypt’s success.
For another woman, walking with a couple of other women and several children near the McDonalds in Tahrir Square, the potential for economic success was deeply personal. “I’m a head of household,” she explained, using the feminine pronoun. “Perhaps the wealthy don’t know my struggle,” she said, but “products have gotten expensive.” She is happy today, she explains, because economic growth means a better life, if not for her than for her children. We were interrupted by her adolescent daughter who, with shining eyes and a radiant smile, chanted, “Taqaddamna! Taqaddamna! Taqaddamna!” (“We have progressed! Progressed! Progressed!”)
Perhaps most revealing, however, was an exchange between two older men sitting in front of a print shop across the street from ‘Abdin Palace. We stopped to ask about a poster on which was written, in bold, red Arabic letters, “Masr bi-tifrah” (Egypt Rejoices). In response to our question—“What makes you so happy today?”—the shop owner explained that he was happy for his children and that the canal project is something that his generation is passing on to future generations. The man sitting to his right scoffed. Pointing to the garbage piles in the street, he said, “We’re right around the corner from the district office,” alluding to the lack of interest in infrastructure shown by the authorities. He continued, “Nothing has changed. State mismanagement is still the same.” Instead of projecting prosperity, he worried that the economic situation would continue to worsen. The shop owner called his friend a pessimist.
The hope and concern juxtaposed in this conversation reflect an ongoing debate around the meaning of the canal. While the young waiter, the concerned mother and the print shop’s owner see the canal as ushering in a bright future, the minority voice of dissent questions to what extent this new era is a departure from the past. The shop owner’s friend insisted that, like always, it’s the businessmen who stand to benefit the most. He explained that the logisticians for this project and its overseers are the same as those during the overthrown Husni Mubarak’s time, and that they are the ones who will reap its rewards. Meanwhile, no one is picking up the trash.
Seemingly far from these concerns, a young mother walking with her son in Sayyida Zaynab told us that in these difficult times Egyptians are looking for something to make them happy. “I am happy when I see you happy” was her immediate response to our question. Karima was much less preoccupied with short- or long-term economic gains, promises of political stability, renewed diplomatic relations with other countries, or any number of other benefits that the canal expansion is purported to portend. Instead, when we asked her why she was celebrating, she responded simply with “bi-nitlakkik” or “we’re looking for any excuse.”
Even though the street parties seemed over-the-top and strange, the motivations are familiar. People want their children to be able to make a living, their country to be prosperous and their fellow citizens to have something to glory in. While it is questionable that the current government’s means will advance these ends, on August 6 many Egyptians reveled in the dream of a better tomorrow.
Sisi and Suez
On July 26, 1956, Gamal Abdel Nasser nationalized the Suez Canal. With this action, the young Egyptian president was catapulted to world prominence as a recognized leader of the Arab nationalist and Non-Aligned movements of the time. The nationalization secured for Nasser a reputation for resolute anti-imperialism and commitment to national autonomy. It also dealt a devastating blow to what was left of British and, to a lesser extent French, hegemony in the Middle East.
Since 1956, the Suez Canal has carried great political weight in Egyptian discourse. Soon after the nationalization, the French, British and Israelis conspired to seize the canal from Nasser by military force. While the three powers won on the battlefield, they were routed in international public opinion. Then US president Dwight D. Eisenhower, fearing that such a transparently imperialist venture would encourage newly independent states to side with the Soviet Union in the Cold War, forced the withdrawal of British, French and, eventually, Israeli forces from the Canal Zone. Nasser hailed the retreat as a great victory over outside aggressors, elevating his personal status and further convincing Whitehall that he posed an existential threat to British interests in the region.
Nearly 60 years later, another Egyptian president, ‘Abd al-Fattah al-Sisi, is seeking to channel the charisma of Nasser, and the discursive power of the Suez Canal, to strengthen his position in domestic, and perhaps regional, politics. The sycophantic fanfare that has flooded Egyptian media is eerily reminiscent of the pandering seen in Nasser’s time, but the analogy ends there.
The latest expansion of the Suez Canal (there have been several enlargements before) is neither economically nor politically equivalent to Nasser’s nationalization in 1956. Moreover, while state-encouraged propaganda was relatively new and effective 60 years ago, today it speaks more to the weakness than the strength of the government. The canal hype may begin to sow doubt among fence sitters who see a government celebrating victory while the day-to-day hardships of ordinary Egyptians grow rather than dissipate.
The increasingly over-the-top theatrics meant to cement in the eyes of the Egyptian people the great import of this latest national project have largely reduced the canal expansion to an object of international ridicule, causing a degree of discomfort to many Egyptians. Seeing supposedly independent newscasters wearing sailor suits or camouflage headscarves and saluting a stream of ship-shaped cakes hurts the credibility of any attempt at a sober account of the expansion’s potential benefits.
In reality, while the government’s wildly optimistic revenue forecasts are unrealistic, the expansion likely will protect if not expand the Suez Canal’s market share in international shipping. The 9 percent annual growth projections are almost certainly impossible. The Panama Canal is undertaking a decidedly more studied expansion to allow larger container ships to pass through in the hope of stealing traffic from Suez. That Egypt has widened and deepened its canal may, however, erode Panama’s ability to lure shipping companies away.
The more important question, however, is this: Given the enormous challenges facing Egypt and the country’s financial straits, was this expansion the right use of over $8 billion? Probably not. Given the dilapidated state of public hospitals and the abysmal quality of public education, it’s difficult to doubt that Egypt has many higher priorities.
What’s perhaps most frustrating, though, is that this question was never publicly debated before the decision to expand the canal was taken. Indeed, the lack of transparency in decision-making has been the problem with a regime dependent on strongman politics ever since the days of Nasser. A “president,” with deep roots in the military, has a self-aggrandizing vision. He works to realize it, often with little or no advance study, and the makers of Egyptian opinion rally behind him. The clairvoyance of the leader is to be trusted without question.
Now more projects are being announced without serious and public discussion of whether they fit Egypt’s priorities. The failure to settle on a parliamentary elections law that could provide Egypt with an independent legislature to review and debate the president’s decisions is a gross disservice to Egypt and its long-term interests. Without a national assembly, Egypt continues to be ruled by decree with no one in the position to exercise oversight or demand accountability.
This lack of thorough planning is a key reason for the shambolic performance of government in Egypt over the course of several decades. To stir up excitement for the economic conference held in Egypt earlier this year, the government announced plans to build an entirely new capital city in the middle of the desert between Cairo and ‘Ayn al-Sukhna. An interview with Dan Ringelstein, director of urban planning and design at Skidmore, Owings and Merrill, the company given the new capital portfolio, revealed that his team had come up with their scheme in a mere two months. Such a grandiose project should not be greenlighted without a great deal more research. Moreover, all of the planning happened in secret. There was no open conversation about the wisdom or the feasibility of the idea.
In the end, the memorandum of understanding with the Emirati company that was meant to bankroll and build the new capital was canceled. Now a new deal is being negotiated with an entirely Egyptian group of companies whose source of financing is thus far unknown.
With the overwrought ceremonies inaugurating the latest expansion of the Suez Canal, President Sisi is attaining neither Nasser’s prominence nor his significance. He is, however, following very carefully in Nasser’s footsteps of haphazard and opaque authoritarianism. There is no shortage of research on the consequences of that trajectory for Egypt.
Yemen's Imposed Federal Boundaries
With the war in Yemen well past its hundredth day, confusion persists as to the underlying causes of the conflict. Far from a sectarian proxy war between Shafi‘is under the patronage of Saudi Arabia and Zaydis backed by Iran, as the mainstream media would have it, the hostilities are rooted in local quarrels over power sharing, resources and subnational identities. These wrangles, in turn, are part of a broader negotiation process among domestic forces over a new social contract after the 2011 removal of the long-time president, ‘Ali ‘Abdallah Salih. At the core of this struggle lies a dispute about the future state structure, which provided the catalyst for the breakdown of the post-Salih transition road map sponsored by the Gulf Cooperation Council (GCC) and the ensuing escalation to full-blown interstate war.
The continuing failure to bring the adversaries to the table recalls the civil war in North Yemen in the 1960s, when rivalries for regional hegemony between Egypt, Saudi Arabia and Britain prevented a local settlement between Yemeni royalists and republicans. Much to the same effect, today’s international support for President ‘Abd Rabbu Mansour Hadi fuels the adamant insistence of his locally untenable government-in-exile on the implementation of the lopsided UN Security Council Resolution 2216, which calls for the unilateral withdrawal of Houthi fighters from captured territory and the resuscitation of the GCC initiative as preconditions for, rather than objectives of, talks. In order to break the deadlock, it is crucial to reopen a dialogue about the six-region federal division, which was rammed through, over the objections of the Houthis and others, at the National Dialogue Conference (NDC) that was intended to be the showpiece of the post-Salih transition.
Though hailed as a forum for averting Syrian-style civil war in Yemen, the NDC did not live up to expectations. As a Yemeni friend of mine sarcastically remarked after its conclusion in early 2014, “the NDC resolved all of Yemen’s problems—except for the secessionist strife in the south, the Sa‘da conflict in the north, national reconciliation, transitional justice and state building.” In other words, it failed to overcome every major stumbling block on its agenda.
The lack of genuine consensus on a new state structure proved the most salient shortcoming. As the NDC approached its original closing date in September 2013 with no agreement in sight, a subcommittee with eight representatives from each of north and south—known as the 8+8 Committee—was charged with finding a solution to the southern question. In its Agreement on a Just Solution, the working group, which included one Houthi delegate, unanimously affirmed that the Republic of Yemen—a unitary state with 21 governorates—should become a federal entity. This agreement was never revisited or approved by the NDC’s 565-member plenary, but simply accepted as a fait accompli.
Though united behind the principle of federalism, the 8+8 Committee failed to settle on the number of new federal regions (two, five or six) or their boundaries. Instead, the committee outsourced these decisions to another fairly unrepresentative committee, handpicked and chaired by President Hadi, which was to study the parameters of a federal order. Established shortly after the release of the NDC’s final communiqué, this 22-member Committee of Regions took less than two weeks to delineate six new federal regions—Azal, Saba’, al-Janad, Tihama, Aden and Hadramawt. The process violated NDC rules, lacked broad consultation and was too short for the detailed studies that should have been commissioned. Nevertheless, its conclusions were referred to the Constitution Drafting Committee.
Even though all but the Houthi representative had signed off on the new map, most major political movements, including the Yemeni Socialist Party, the salafi Rashad Union and the southern hirak, as well as the Houthis, publicly rejected or expressed reservations about the six-region federal division. The Houthis argued that the plan distributed natural wealth unevenly. It deprived the Azal region, in which the Houthis’ historical homeland of Sa‘da is situated, of significant resources and access to the sea. Here the Houthis were referring, respectively, to the hydrocarbon-rich governorate of al-Jawf and the Red Sea province of Hajja, both of which the movement has traditionally considered within its sphere of influence.
Riding a wave of popular discontent with the transition, the Houthis radically altered the political landscape when they took control of the capital, Sanaa, in September 2014. The conquest fell just short of a coup, as the Houthis signed the Peace and National Partnership Agreement (PNPA) with President Hadi and others to relieve tensions. Articles 8, 9 and 10 of this agreement called on Hadi to reconstitute the National Body for the Implementation of NDC Outcomes, which was to revisit the state structure to align it with the NDC, rather than the Regions Committee, agreements.
Even before the draft constitution was released in January 2015, the Houthis reiterated their rejection of the six-region federal structure contained in the document. When Hadi nevertheless attempted to move forward the constitutional process by circumventing the PNPA, tempers flared. On January 17, the president sent his office director Ahmad bin Mubarak to deliver the draft document to the National Body, which had not been reconstituted. Enraged by this political intrigue, the Houthis flat-out kidnapped Mubarak to thwart the six-region federal order. The move set in motion a chain of provocations that culminated in the overthrow of the Hadi government, his escape into exile and the Saudi-led bombing campaign.
A crucial, albeit frequently overlooked fact is that the Houthis have repeatedly stated their acquiescence to a federal system—be it jointly with the hirak, in the form of a two-region federation, or in the form of a six-region division based on a sound political process. Rather than a rejection of federalism per se, the Houthis’ refusal of the six-region division is as much grounded in the lack of a genuinely inclusive decision-making process as in the specific parameters that undermine their interests. While none of this background serves to justify the Houthis’ recourse to arms, it does highlight the need for a new transition process based on equitable power sharing and sincere ownership across Yemen’s diverse political and geographic landscape as the only way out of the crisis.
Youth in Turkey’s 2015 Elections
On June 7, Turkish citizens went to the polls to elect the 550 members of the Grand National Assembly. Although the ruling Justice and Development Party (AKP) won 41 percent of the vote, it lost its majority in the parliament for the first time since 2002. It was a major blow for the party’s founder, President Recep Tayyip Erdoğan, whose plan to become a more powerful executive with fewer checks and balances seems to have been vetoed by the electorate. On the other hand, the deciding factor in the elections was the impressive success of the leftist, Kurdish-majority Peoples’ Democratic Party (HDP), which won 13 percent of the votes (up from 6.5 percent in 2011). The HDP received this additional support mostly from conservative Kurds who had previously voted for Erdoğan’s AKP, as well as from many progressive Turks.
The AKP came to power in 2002 with the support of millions who had been marginalized by the oppressive Turkish state. Over the past 13 years, the country has witnessed the transformation of the AKP from a peripheral political party into the very embodiment of the state. During the 2015 campaign, the AKP marshaled the economic and administrative resources of the state to an unprecedented extent to boost its own chances. President Erdoğan, who is supposed to be above partisan politics according to the constitution, stumped on behalf of the AKP, holding daily hours-long rallies that most of the major television channels (state-run as well privately owned) were told to broadcast live. Large state-owned companies such as Turkish Airlines ran lengthy TV commercials reminding people of the AKP’s achievements. Yet, despite all of these efforts, the AKP lost 20 percent of the support it had in the previous legislative elections.
Along with Kurds, who steered away from the AKP for various reasons, including the government’s stance on the Kurdish resistance to ISIS in the Syrian town of Kobane, youth seem to constitute another social group that increasingly sees its future elsewhere. According to an opinion poll conducted right before the election, 29.5 percent of voters below the age of 23 backed the AKP. More surprising, the HDP came in second among youth with 23.8 percent support.
Two summers ago, thousands of young people took part in the Gezi Park protests against the perceived rise of authoritarianism. One outcome of Gezi is the organization called Oy ve Otesi (Votes and Beyond), which mobilized tens of thousands of volunteers to monitor the integrity of the June elections. The example of Oy ve Otesi points to the rising importance of active participation by youth in electoral politics.
While the Gezi uprising was a point of departure for some youth to look collectively for alternative ways to make political change, it was also a point of comparison for the AKP’s politicians to define the values they find desirable in youth. President Erdoğan repeatedly announced that his party’s aim is to cultivate a “pious generation,” and opined that “this country’s youth are not the vandals at Gezi.” Reflecting a decades-long Islamist tendency, the AKP government has allocated extensive resources to generate youth-led social change through its educational and cultural policies. The AKP’s recent emphasis on reviving the “authentic” Turkish-Islamic civilization (medeniyet) reflects this project. As an overarching framework, the idea of giving new life to “our civilization,” through the cultivation of “the medeniyet vision” among youth, increasingly informs the AKP’s cultural policies aimed at youth as well as the policies of Islamist-oriented foundations with ties to the AKP government. But the relatively low level of support among young people for the AKP suggests that they have other, more pressing concerns.
In a country with high rates of youth unemployment and youth poverty, it comes as no surprise that young people are making political choices that are different from those of the general electorate. Turkey may have to hold snap elections in the upcoming months if a coalition government cannot be formed, but the results of the 2015 balloting point to several significant shifts in the political choices of the Turkish people, especially of youth, although the AKP continues to be the most popular one.
The Multiple Wars in Yemen
With UN-sponsored peace talks in Geneva involving the usual suspects and only a few new faces, it is time to raise the question of Yemen’s future as a state.
The talks involve exiled President ‘Abd Rabbu Mansour Hadi, the Houthi movement Ansar Allah and minor figures from the long-time ruling General People’s Congress (GPC, now split into factions tied to Hadi and former President ‘Ali ‘Abdallah Salih), the leading Sunni-identified Islamist party Islah and its ally in Hadi’s government-in-exile, the Yemeni Socialist Party.
The only representatives outside the competing would-be regimes of Hadi and the Houthis at the talks come from two recently established parties, including the salafi Rashad Union, whose popularity in Yemen remains to be seen. Hadi insists on implementing UN Security Council Resolution 2216, which would compel the Houthis to withdraw from major cities, including the capital of Sanaa, reinstate himself as head of state and continue the transition toward a federal state, as agreed at the GCC-brokered National Dialogue Conference last year. The Houthis oppose the six-part federal plan but agree on key transition issues decided upon at the Conference. From their perspective, Hadi’s regime has failed to execute the agreed-upon policies and, in any case, the situation became entirely different after Ansar Allah took over Sanaa last September. In the eyes of many Yemenis, whether they support the Houthis or not, they are right: Since the conclusion of the $24 million conference, very little has been done to address the demands put forward in the rallies gathering millions of Yemenis throughout the country in 2011.
The questions one has to ask at this stage: Is the National Dialogue Conference plan still viable as a road map for Yemen’s future? And do the delegates at the talks have the authority in the first place to set the country on this path? Many factors point in another direction. Of the Geneva negotiators, only the Houthis seem to have a strong base of political support on the ground, at least in the areas where the movement hails from. Excluded from the talks are representatives of the South, who are battling Houthi aggression under the label Southern Resistance (al-muqawama al-janubiyya). As for Hadi, his term as transitional president ended in February 2014, and amidst the current warfare, in the eyes of many Yemenis, he is a man who invited the Saudi-led coalition to kill civilians while kicking back in the luxury of a Riyadh palace. There is considerable reason to believe that he lacks the local support to return to power in Yemen.
Still, in the international media the war in Yemen is characterized as fighting “between forces loyal to the beleaguered president, ‘Abd Rabbu Mansour Hadi, and those allied to Zaidi Shia rebels known as Houthis, who forced Mr. Hadi to flee the capital Sanaa in February.” The expression “Hadi loyalists” misleads the world about what is happening in the shadow of the Saudi air strikes. This dubious category groups together forces as different as the eastern tribes, popular committees in various regions, the Southern Resistance and even al-Qaeda. Few of these forces actually engage in fighting for Hadi and his regime of failed promises. For some, Hadi’s return to power is downright undesirable; for others, it is simply irrelevant. In central Yemen, such as in Ta‘izz, the country’s third largest city, resistance to the Houthis springs from local motivations rather than support for Hadi. While the Southern Resistance supports the air strikes and receives military aid from the Saudi-led coalition, its ideas about post-war political solutions differ from the expressed Saudi aim of restoring Hadi. Basing the Geneva talks around the reinstatement of Hadi as leader of the country simply prolongs the suffering on the ground and generates a false sense of certainty about post-war stability.
The Houthi militias, assisted by units of the Yemeni army loyal to Salih and stationed throughout the country, are facing armed confrontation in eastern and central Yemen, and in the entirety of the South. The South is the territory that, prior to Yemeni unity in 1990, formed the independent state of the People’s Democratic Republic of Yemen. In Marib, the province east of Sanaa, local tribes have united to stop the Houthis from taking over the oil fields, motivated by the tribal ethos of self-rule and alliance with similar-minded state leadership. Further to the southeast, the tribes in Shabwa have formed a coalition with the Southern Resistance.
As applied to the South, the expression “Hadi loyalists” stems from three misconceptions. First, the fact that Hadi is originally from the southern governorate of Abyan makes some believe he must have the fealty of his fellow southerners. The second error is to read too much into the fact that Hadi fled to Aden, of all places, in February and was initially welcomed there after the Houthis introduced their five-man presidential council. That body deposed him de facto, though he had already resigned. Once in Aden, Hadi withdrew his resignation.
The Southern Resistance, the militias fighting against the Houthi-Salih invasion of the South, consists of Popular Committees and groups of local vigilantes who pledge themselves to defend “the people of the South.” The Resistance is part of the pro-independence Southern Movement that has grown steadily since 2007 with the mission of reclaiming the full independence of the South. Activists in this movement consider Hadi and his regime (which includes many southerners) responsible for the years-long marginalization of the South and the erstwhile state’s violence against peaceful demonstrators there. That violence claimed hundreds of victims in the South while the world was focused on the dialogue in Sanaa. For many, the war in the southern governorates is a replay of the 1994 civil war that ended with President Salih conquering the South and sealing Yemeni unity by force. Southerners call it “occupation.” While the Southern Resistance lacks a central command, it has unified the various territories of the South in an unprecedented way. This is a popular resistance movement that organizes locally, involves all sectors of society, men and women, and has fended off the much better equipped Yemeni army and Houthi militia for weeks. Victories in al-Dhali‘ governorate prove the steadfastness of the fighters, many of whom have no military training as a result of systematic discrimination against southerners in the army and security forces.
Here is the third misconception that gives rise to the term “Hadi loyalists.” Some assume that because the Popular Committees were initially set up by Hadi’s government to take care of security in areas without an army or police presence, and remained on the state payroll, they must support Hadi’s comeback. In central Yemen, Popular Committees fight for local concerns, too, allied with tribes and other social forces. The common denominator is resistance to Houthi-Salih aggression and protection of local territories—not an affinity for Hadi.
One of the dramatic consequences of the fighting on the ground, as opposed to the Saudi-led air strikes, is the division of the country. For the Southern Resistance, it is a war between North and South. There is no money or might in the world that would bring southerners back to “unity” under a regime in Sanaa, whether headed by the Houthis or by Hadi. Acknowledging that fact might bring the international community closer to lasting solutions to the Yemeni crisis.
The narrative of “Hadi loyalists” is propaganda aimed at lending legitimacy to the Saudis’ project in Yemen. According to this rhetoric, sadly adopted by the Saudis’ allies and the world media, the Saudis are simply “assisting” Yemenis who want to bring back the proper government. Saudi Arabia has been militarily and non-militarily involved in every single political crisis in Yemen over the past five decades, simply to ensure that a regime on its leash prevails. Yet its strategy of bombing has largely proved counterproductive as more and more civilians die and the blockade of aid convoys exacts a heavy humanitarian toll. What the Saudis could do is to sever the link between their former man in Sanaa, ‘Ali ‘Abdallah Salih, and the Houthis. The war in Yemen has a lot to do with power struggles in the capital. But for Yemenis elsewhere in the country, the fighting is about protecting their neighborhoods from invasion by the troops of the Houthis and Salih and achieving a decent standard of living, something Hadi and his government were never able to deliver.
Yemen Talks in Geneva
On June 8, Yemen’s (self-)exiled president, ‘Abd Rabbu Mansour Hadi, conveyed his ideas about UN-sponsored talks in Geneva, due to start on June 15, and downplayed their scope. The conversations are to take place mainly between politicians handpicked by him and his Saudi hosts, on the one hand, and Ansar Allah (or the Houthi movement) and members of the formerly ruling General Party Congress (GPC) who do not support Hadi, on the other. These two sides roughly correspond to the alliances that have been fighting in Yemen since March.
On al-Arabiyya television, however, Hadi explained, “These are not talks. It is only a discussion about how to implement UN Security Council Resolution 2216 on the ground.” UNSC 2216, passed in mid-April, endorsed Hadi as the “legitimate” elected leader of Yemen and invoked past resolutions backing the Gulf Cooperation Council initiative and the National Dialogue Conference it prescribed for ending Yemen’s internal conflicts. The April resolution also imposed an arms embargo on the Houthis and their allies.
Hadi was adamant in his television appearance that the Geneva parleys are not aimed at reconciliation between the warring parties. In his keynote address at a conference sponsored by the German government in Berlin on June 11, former prime minister ‘Abd al-Karim al-‘Iryani said, “We cannot [afford to] fail in Geneva.” Al-‘Iryani thus stressed the urgency of an agreement requiring the good faith and sincerity of the negotiators. Hadi and his sponsors, however, seem intent on defining the terms of Ansar Allah’s surrender rather than achieving a political settlement that leads to equal representation of all the country’s factions in a future government.
Yemen’s ambassador to the United Nations, Khalid al-Yamani, announced that the government-in-exile is sending seven representatives to Geneva, with two each for the anti-Hadi portion of the GPC and the Houthis, and three for the remaining parties, such as the Yemeni Socialist Party.
Hadi’s choice of delegates offers clues as to the Saudi agenda in Yemen. At last supporting “revolutionary” change, the Saudis seem to favor two new political parties that are to be prominently represented at the meeting. Perhaps the most revealing representative is ‘Abd al-Wahhab al-Humayqani, secretary-general of the salafi al-Rashad Union, founded in 2012 in the wake of the previous year’s nationwide uprising against former President ‘Ali ‘Abdallah Salih. He is one of just two party leaders slated to participate in the talks. Neither man has played an important role in previous governments. The selection of al-Humayqani may indicate the Saudis’ hope that Rashad can be propped up like the Egyptian al-Nour party to compete with the Muslim Brothers (now almost eliminated in Egypt and marginal in Yemen). Doubtless the founders of Rashad were inspired by al-Nour’s stunning success in the Egyptian legislative elections in 2011-2012, in which the salafi group garnered 25 percent of the vote. Al-Humayqani aspires to be a “clear Islamic voice.” At the National Dialogue Conference, Rashad was represented by five members who stressed the party’s commitment to peaceful negotiation.
In Yemen, the Muslim Brothers are the main component of the Islah coalition. Islah fell out with the late King ‘Abdallah of Saudi Arabia, who would not tolerate the party’s criticism of the Saudis for backing the ouster of President Muhammad Mursi in Egypt. Khalid al-Anisi, an Islah leader, stated that Hadi was incapable of solving Yemen’s problems. In the wake of the Houthi advance on areas west and south of Sanaa, ‘Abdallah’s successor King Salman appears to have partially rehabilitated the Muslim Brothers. No Islah leaders are to be present in Geneva, however. In their place will be Fahad Kafayan, the little-known pro-Islah minister of fisheries. He will be joined by his colleague Riyad Yasin, foreign minister in Hadi’s government-in-exile. A doctor whose forebears came to southern Yemen from India during the period of British rule, Yasin left Aden before Hadi (who came to Sanaa in 1986), and recently struck up a friendship with his son Jalal. At the National Dialogue Conference he spoke for the moderate southern independence faction headed by ‘Abdallah al-Asnaj, the only southern force that took part. In Hadi’s government he replaced the much more competent ‘Abdallah al-Sa‘idi, who was favored by al-‘Iryani. Many Yemenis are bewildered by Yasin’s presence in the Geneva delegation because he lacks experience in negotiations.
Another representative, ‘Izz al-Din al-Asbahi, who is Hadi’s minister of human rights, hails from the Hujariyya, a region south of Sanaa. He worked for NGOs for several years before joining government. Ahmad al-Maysari, who served as governor of Aden under Salih, is to attend as representative of the GPC faction that does support Hadi. The other party leader who was named is ‘Abd al-‘Aziz Jubari, secretary-general of the newly established Justice and Development Party. Jubari is a staunch opponent of Ansar Allah who has blamed Iran for the chaos in Yemen in interviews with Saudi newspapers. He went to Riyadh soon after Hadi arrived there about three months ago.
‘Uthman Mujalli, a shaykh from Sa‘da province (the Houthis’ geographic base and key constituency), once sat in Parliament as one of Salih’s most loyal henchmen. His family gained influence after being given land expropriated from Hashemite families in the aftermath of the civil war in the 1960s. When the Houthis took over Sa‘da in 2011, Salih ordered Mujalli to blow up his house and depart for Saudi Arabia. After returning to Yemen, Mujalli fled to Saudi Arabia once again when the Huthis took over Sanaa in September 2014. He is attributed salafi leanings and considered a Saudi protégé. It should not be a surprise to anyone if he is appointed governor of Sa‘da should that province become administered by a government hostile to the Houthis.
As for Ansar Allah, those who have been designated as representatives at the talks are Mahdi al-Mashat, Hamza al-Houthi, who negotiated with the UN envoy on behalf of his cousin ‘Abd al-Malik al-Houthi, Ansar Allah’s leader, and Muhammad ‘Abd al-Salam and Salih al-Samad, both of whom took part in recent negotiations in Muscat, Oman. Former foreign minister Abu Bakr al-Qirbi is to represent the anti-Hadi GPC faction. According to the Iranian Fars news agency, GPC secretary-general ‘Arif al-Zouka and his deputy Yasir al-‘Awadi have already gone to Geneva.
Though Ansar Allah had agreed to join the UN-led talks, they appeared to have second thoughts after Hadi’s statements. They did not board the plane that was to take them to Switzerland. One of their representatives told the Associated Press that they objected to the idea of two delegations—“one representing the embattled government, and one seen as representing a ‘coup.’” Rather than being pressured to withdraw from Sanaa, as Hadi seems to intend, the Houthis are keen to continue broader multi-party discussions.
It would seem that in recent weeks Saudi Arabia has accelerated its air strikes in order to be able to declare an end to its combat mission before the start of Ramadan. Thus far the kingdom and its allies have not even achieved a pyrrhic victory.
Conflict, Forced Migration and Property Claims
Amidst widespread fighting in Iraq and Syria, millions of distressed civilians have fled their homes. In Yemen as well, war has led to mass displacement as people try to escape threats to their lives and livelihoods. These instances of forced migration create overwhelming immediate problems such as the need for shelter, food and medical care. If insecurity remains a problem, then forced migration can lead to lengthy displacement of people within their own country or in a country of refuge. The longer displacement lasts, the more significant the problems that can develop with regard to land claims and property rights.
Yemen has experienced conflict-related property issues in the past, particularly in the south after the 1994 war, and these problems are likely to appear again as there is no national cadastral system. In Syria, land registries exist in the governorates, but the internal displacement that we see now, layered on top of what occurred in the past, has the potential to create a tangle of property claims that will be difficult to resolve given the complexities of public administration under contested sovereignty. Iraq already serves as an example of how conflict and population displacement can create a morass of property conflicts and compensation claims.
Property-related problems include:
- Absence of records. Not everyone fleeing an advancing army remembers to take the title to their house or land with them, or can protect documentary evidence during their displacement.
- Contested claims. As a conflict spreads, civilians move to avoid violence or to find protection under a particular group. This movement may lead to situations such as occurred in East Timor, in which people fled rural areas and settled in urban areas, often in the homes of others who had been displaced, creating overlapping property claims.
- Conflicting tenure systems. Many displaced people have customary rights to land rather than formal titles. If they are displaced for long periods of time they may find their property occupied by others. In some situations, such as northern Uganda, people have returned from lengthy displacement to find occupants of their customary land who have titled it in their own names.
- Loss of memory. If displacement is lengthy, older people die and surviving children may not possess knowledge of where the family property was, or know its extent.
The international community’s current approach to the homes, lands and properties (HLP) of displaced persons is to establish a statutory system to examine documentary evidence once hostilities end. But waiting until war is over marginalizes those who have lost important evidence over time, held property under customary or hybrid tenure systems or had precarious tenure to begin with. It also allows multiple claims to be derived over the course of the war as homes, lands and properties are used as spoils of war and ethnic cleansing. Ultimately these problems can make refugees reluctant to return from host countries.
A emerging project at McGill University seeks to establish ways to begin collecting and organizing HLP evidence in wartime, in order both to retain evidence that would otherwise be lost and to allow return programs to be tailored to evidence actually held, as opposed to what is ideal. The project seeks to work with refugees from the Syrian war to establish a digital archive for a wide variety of evidence useful for HLP reclaiming. Initial work with Syrian refugees in Lebanon, Jordan and Turkey found that very few have HLP documentation, because they fled quickly, or because being caught with such documentation while fleeing would provide information about their HLP and kin. The initial work also found that many refugees do not realize they already possess valuable forms of HLP evidence that could be organized and put in electronic documentary form, such as:
- remembered descriptions and histories of HLP, particularly knowledge of details and features that would come only with long-term occupation;
- photographs on mobile phones, including selfies, pictures of residential and farming areas and shops, streets and houses;
- participation in exercises with satellite imagery and aerial photography that involve locating one’s HLP and identifying the HLP of neighbors and relatives, and recording the network of neighbors, relatives and friends in a particular area.
The project looks at examining the primarily informal, hybridized and customary evidence that refugees do have and how this can be gathered, upgraded, combined and corroborated with other forms of evidence, and then inserted into useful types of cadasters for use in their return to, and restitution of, HLP.
Contested property claims can be a residual source of conflict long after violence ends. Families who lose assets face severe challenges in recovering economically from war and displacement.
The more that can be done to document the property rights of displaced people, the faster the recovery will be when the violence ends.
Letter of Support by Colleagues and Personal Friends of Emad Shahin
For those familiar with even the barest facts of the case, the provisional sentence of Emad al-Din Shahin to death seems appalling. Professor Shahin is a widely respected and accomplished academic who has taught at Notre Dame, Harvard, Georgetown, the American University in Cairo and George Washington University. He has no record of organized political activity. The list of the other alleged participants—a group that resembles a list of political opponents and associates and technocratic aides of ousted President Muhammad Mursi far more than it does a real set of plotters—makes the charges seem even more improbable.
We, the undersigned colleagues and personal friends of Professor Shahin, wish to add our voices to those who have expressed deep concern over the provisional sentence of death. But we do more: Based on our personal knowledge of Professor Shahin’s character, activities and scholarship, we state that the charges are so utterly alien to his character as to lack any credibility whatsoever. Professor Shahin is a figure known for his integrity and dedication to his work. Like many of us, he is not afraid to draw on his expertise to speak on public issues. He was also clearly distressed by the polarization that took place in Egypt and shared the aspirations of millions of Egyptians for a more democratic and accountable political order. These are not crimes by any stretch of the imagination.
Espionage and treason—the sorts of vague allegations included in the indictment of Professor Shahin—should not be associated with his name.
We provide this information to Egyptian judicial, security and political authorities in order to clear Professor Shahin’s name. We call on governments throughout the world to speak out and communicate their concern to their Egyptian counterparts and to rebuff any efforts to restrict Professor Shahin’s movements, speech and activities.
(Names in alphabetical order, titles and institutions for identification purposes only)
Osama Abi-Mershed, Director, Center for Contemporary Arab Studies
Abdullah Al-Arian, Georgetown University
Walter Armbrust, Associate Professor, Faculty of Oriental Studies, University of Oxford and Albert Hourani Fellow of Modern Middle Eastern Studies, St. Antony's College
Holger Albrecht, American University in Cairo
Joel Beinin, Donald J. McLachlan Professor of History and Professor of Middle East History, Stanford University
Eva Bellin, Myra and Robert Kraft Professor of Arab Politics, Brandeis University
Jonathan A. C. Brown, Georgetown University
Nathan J. Brown, Professor of Political Science and International Affairs, George Washington University
Jason Brownlee, Professor of Government and Middle Eastern Studies, University of Texas at Austin
Sheila Carapico, Professor of Political Science, University of Richmond and formerly of the American University in Cairo
Elliott Colla, Associate Professor of Arabic and Islamic Studies, Georgetown University
Christian Davenport, Professor of Political Science and Faculty Associate with Center for Political Studies, University of Michigan
Rochelle Davis, Georgetown University
Larry Diamond, Director, Center on Democracy, Development, and the Rule of Law, Stanford University
Michele Dunne, Senior Associate, Carnegie Endowment for International Peace
John P. Entelis, Professor and Chair, Department of Political Science and Director, Middle East Studies Program, Fordham University; President, American Institute for Maghrib Studies (AIMS)
John L. Esposito, University Professor & Founding Director, Prince Alwaleed Bin Talal Center for Muslim-Christian Understanding, Georgetown University
Dalia Fahmy, Assistant Professor of Political Science, Long Island University
Khaled Fahmy, Professor of History, American University in Cairo
Ellis Goldberg, Professor Emeritus, University of Washington
Joel Gordon, Professor of History and Director, King Fahd Center for Middle East Studies, University of Arkansas
Nader Hashemi, University of Denver
Clement M. Henry, Visiting Research Professor, Middle East Institute, National University of Singapore
Amaney Jamal, Associate Professor of Politics, Princeton University
Daniel Kurtzer, former US Ambassador to Egypt
Mark LeVine, Professor of Middle Eastern History, University of California-Irvine
Abdel-Fattah Mady, Alexandria University
Radwan A. Masmoudi, President, Center for the Study of Islam & Democracy
Michael McFaul, Director, Freeman Spogli Institute for International Studies, Senior Fellow, Hoover Institution, and Professor, Department of Political Science, Stanford University
Roger Owen, Harvard University
James Piscatori, Professor of International Relations, Durham University
William B. Quandt, Professor Emeritus, Department of Politics, University of Virginia
Andrea Rugh Adjunct Scholar, Middle East Institute
Ambassador (retired) William A. Rugh
Hesham Sallam, Stanford University
Samer Shehata, University of Oklahoma
Robert Springborg, Professor of National Security Affairs, Naval Postgraduate School (retired)
Joshua Stacher, Associate Professor of Political Science, Kent State University
Alfred Stepan, Wallace Sayre Professor of Government, Columbia University
Judith E. Tucker, Professor of History, Georgetown University
John Voll, Professor Emeritus of Islamic History, Georgetown University
Michael J. Willis, St Antony’s College, University of Oxford
I. William Zartman, Professor Emeritus, Paul H. Nitze School of Advanced International Studies of Johns Hopkins University
Jordan's Longest War
More than any other Arab country, Jordan was linked to nearly every major twentieth-century war in the Middle East. War in the Arabian Peninsula propelled the kingdom’s future rulers, the Hashemites, to come to British-controlled Transjordan in the 1920s. The Palestinian Arab revolt in the 1930s and then World War II helped to solidify the nascent state east of the Jordan River. Jordan was an active combatant in the Arab-Israeli wars, which brought waves of Palestinian refugees and lasting change to Jordanian society. The country was rocked by a brief but bloody civil war in 1970 and belatedly entered the 1973 Arab-Israeli war as well.
In the four decades since, the Jordanian military has had no overt or sustained engagement in regional wars, meaning that Jordan is often portrayed as the only stable patch in a chaotic Levant. Thus, the country’s announced participation in the bombing of ISIS in Syria appeared to mark an historical turning point. But war is more than what the US military refers to as “kinetic action” or “steel on steel.” In fact, the bombing campaign is but a flashpoint in Jordan’s longest war, inaugurated by the Iraqi invasion of Iran in 1980.
That invasion set Jordan on the path on which it continues today. Spared involvement in the battles but not the consequences, the Jordanian state served as Iraq’s most important trading partner throughout the fighting. The war economy provided crucial support to the Hashemite political coalition in the lean 1980s: Urban merchants feasted on re-exports to Iraq while labor in the south, particularly the chronically restive town of Maan, took up trucking at a time when public-sector employment began to stagnate. The Iraqi invasion of Kuwait in 1990 and King Hussein’s initial stance against the US-led liberation marked the last time a Hashemite voiced real opposition to the policies of his patrons in Washington. The term “client state” is not quite sufficient to capture Jordan’s international position since that time.
With the new status came increased external funding, which invigorated the ruling elite and its clients. The notorious US-led sanctions of the 1990s decimated Iraqi society but also deepened the socio-economic ties with Jordan that lay outside state supervision. And even while official Jordan was wary of the US invasion of Iraq in 2003, important segments of Jordanian business welcomed the “opening” of the Iraqi market. More than a decade later, Iraq burns and Jordan smolders.
The effects of the short-term boost in exports to Iraq, followed by Iraqi capital flight into Jordan’s banking and real estate sectors, have gradually passed. The vital truck route from Maan through the Anbar province to the Iraqi river valleys fell prey to organized militias. While US forces battled the militias, Jordanian truckers paid those same bandit-insurgents to get through to Baghdad. Today, not much has changed. Trucking industry sources claim that while the Iraqi government mans the official border crossing, just beyond lurk ISIS fighters, who charge $200-300 per truck for passage. And ISIS is not alone. Other, lower-profile gangs along the roads extract their own duties and frequently redirect trucks to their preferred destinations.
The ebb and flow of war finance has only aggravated Jordan’s socio-economic decline. Massive public debt and declining public revenue increase the government’s dependence on Gulf and American capital. In return, Jordan is drawn farther into war, hosting more and more US soldiers and equipment. As the Jordanian state sinks deeper into financial crisis, military and civil service pensions, already stretched thin, hardly make up for the stress on a dwindling middle class. Along with unemployment, educational inequality affects nearly every Jordanian family. And corruption—well, that is perhaps the most dynamic sector in the country. The combined political effect is to hollow out the monarchy’s coalition of urban merchants and rural labor. The kingdom’s latest political intrigue concerns the sacking of the interior minister, Husayn al-Majali, over murky events in Maan. While local observers link the Majali firing to elite factionalization, it rests on a foundation of profound structural problems.
There is no easy way out of the Middle Eastern wars of the twenty-first century. Jordan’s divided opposition came too late to the 2011 uprisings. At the recent World Economic Forum, the monarchy and its ministers rolled out warmed-over 1980s rhetoric about increasing employment, engaging the private sector and educating youth for the future. Meanwhile, the best and the brightest flee to the Gulf, provided that the host governments there remain pleased with Jordanian policy. Jordan’s longest war looks far from over.
Breaking Even, Breaking Down or Going for Broke?
As of mid-May 2015, crude oil prices had fallen to the lowest level in recent years, under $60 a barrel for US domestic benchmark West Texas Intermediate (WTI) and about $66 a barrel for the international Brent benchmark. These market prices are compared to several types of “break-even” prices and affect decision-making by oil producers at several levels: whether price covers just production costs or incorporates a satisfactory level of profit, whether budgets balance and whether long-term capital investment is attractive. At today’s prices, fewer producers are breaking even, OPEC’s ability to act as a cartel is breaking down and some higher-cost operators in North America are closing down as they go broke while producers in Russia and Venezuela go into debt.
In the most basic meaning of “break-even,” WTI and Brent crude oil prices indicate whether companies (privately or nationally owned) are covering their actual costs of production, including exploration, development, extraction, transportation and administrative expenses. That is, these prices are the minimum needed for revenues to equal costs, to “break even” without making a profit. This calculation affects decisions about how much product to bring to market in the short term, given existing productive capacity. When prices are low, only the oil that is cheapest to produce will be marketed while more costly operations are idled or shut down. A second meaning of “break-even” is when prices are high enough to both cover costs and provide enough profit to satisfy investors. For private corporations, the higher the potential profit, the greater the drive for new drilling and new technology.
As of 2009, onshore Middle Eastern producers using mainly traditional well technology were estimated to have had the lowest average cost of production in the world, at $27 per barrel, while onshore production in Russia and elsewhere in the world averaged around $50 per barrel. Deepwater and ultra-deepwater production (e.g., in the Gulf of Mexico) was somewhat more costly, between $52 and $56 per barrel, while costs of production from newer sources were much higher: $65 for North American fracked shale oil, $70 for extraction from oil sands and $75 in the Arctic.
Market prices for oil ride the rollercoaster of the business cycle and so fell steeply during the financial crisis of 2008 and subsequent recession to lows of around $40 a barrel for WTI crude and somewhat higher for Brent. At that time, Middle Eastern producers suffered from lower revenues that depleted their foreign reserves and led them to curtail big investment projects, but they were, on average, still able to cover their production costs, while other producers, such as in Russia, operated at a loss if they did not halt production altogether.
With the recovery in global economic growth after 2010, especially in large “emerging” markets like China and India, prices rose again, peaking in mid-July 2014 at about $105 per barrel for WTI and $114 per barrel for Brent crude. This long rise had made new exploration and increased extraction from shale, oil sands and exotic locales like the Arctic more attractive. Rising prices also induced more investment in innovation for non-traditional processes like slant and horizontal drilling and for more sophisticated fracking techniques. But as this new oil, especially from North America—the US in particular—flooded into the markets, with increases in supply outpacing the growth of demand, prices began to fall again, landing in March-April 2015 at a little more than half their peak.
Another version of the second type of “break-even” price is the “fiscal break-even price,” which incorporates “profit” that accrues to public entities rather than private corporations, in particular nations that depend mainly on hydrocarbon exports to fund their governments and balance their annual budgets. For the major Middle Eastern OPEC producers, including Algeria, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, hydrocarbon products (including crude oil, natural gas and their derivatives) account for between 25 and 50 percent of GDP, 50 to 95 percent of export revenues, and 50 to 95 percent of government revenues. When oil revenues are high and rising for a number of years, as they were from 2005 to 2008 and then again from 2010 to 2014, the surplus inflows can be used by governments not only to pay the bills but also to build up foreign reserves and invest in both domestic development and overseas portfolios. Hence the third type of “break-even price,” the one that covers production costs, balances budgets, and finances big projects and long-term investments.
Among the Arab Gulf exporters, according to Deutsche Bank estimates, the 2015 “fiscal break-even price” of oil was lowest for Qatar, Kuwait and the UAE ($77, 78 and 80, respectively), but above $100 for Saudi Arabia ($104), Oman ($110) and Bahrain ($138). The per-barrel Brent prices of the first quarter 2015 were sufficient to cover their production costs but insufficient to cover their fiscal needs, affecting not only public spending but also private economic activity, as shown for example in the sharply declining liquidity of local financial markets as private-sector confidence waned.
Gulf news sources report that, while Qatar and Kuwait sustained their high level of project development in the first quarter of 2015, the pace of project development slowed in the UAE, especially in real estate, and dropped by over 40 percent in Oman. Local analysts in Kuwait are predicting a budget deficit for fiscal 2015/2016, and describe this financial situation as “dangerous” in so far as the government is determined to press ahead with both its investment and economic reform plans. Following International Monetary Fund advice, the Kuwaiti government has raised some domestic fuel prices, ironic as that may seem given falling world prices, and may even impose a corporate income tax on domestic private companies in order to diversify its sources of revenue and reduce dependence on income from hydrocarbon exports.
Both the UAE and Saudi Arabia are fighting the flooded oil market with more floods. The UAE announced plans to invest $25 billion over five years to enhance offshore oil production, aiming to increase its total output from the current 2.8 million barrels per day (bpd) to 3.5 million in 2017/2018, and it will be drawing down on its foreign reserves to do so, even borrowing on international markets if necessary. The Saudis, meanwhile, increased oil production to a record 10.3 million bpd in March and April “in response to global demand,” with the aim of defending market share in the face of US surplus output. In order to increase public-sector wages and pensions in celebration of King Salman’s ascendance to the throne, and to cover its commitments to social and infrastructure spending, not to mention its record military spending as the biggest global buyer in 2014, the Saudis are allowing the budget deficit to widen dramatically, from 1.9 percent of GDP in 2014 to 14.5 percent in 2015 and covering it by drawing down on their accumulated foreign reserves.
Bahrain and Oman, the weakest of the Gulf producers, have no choice but to follow Saudi leadership, but have much less financial room to maneuver. With small foreign reserves, they will have to cut expenses sharply or finance their budget deficits by borrowing. Other members of OPEC, such as Venezuela, Iran and Nigeria, actively argued for cutting production to restore prices, but the Saudis refused. While OPEC’s ability to cooperate as a group has been eroding for many years, its cartel power seems to be breaking down entirely in this situation. The Saudis reasoned that higher-cost producers, especially the US, should be willing to cooperate to stabilize supply and prices. If not, the Saudis figure that they can just wait it out as many North American operators suspend operations or close up shop, a process they expect will stabilize supply by mid-2015 and enable prices to rise again as demand increases this year and beyond.
While some US-based analysts agree, not everyone is so sanguine about this calculation. According to the Economist in April, only small non-conventional producers in the US are going bankrupt. The big players—Chevron, Shell, BP, Exxon—are idling older and less productive rigs and have laid off thousands of workers, but they are busy consolidating by buying up smaller firms and vertically integrating their control over production, refining and distribution in the North American market in anticipation of better conditions by year’s end. Due to steady innovation that is raising productivity from those shale and sands operations still underway in North America—including by big foreign operators like the Norwegian company Statoil and the French-owned Total—the costs of production of oil there are falling, while the costs to traditional non-innovating Middle Eastern producers rise. The US Energy Information Agency predicts that, due to falling costs and ample supply, prices will recover to no more than 70 percent of the peak 2014 price in the foreseeable future. The agency estimates that US oil will account for 12 million bpd by 2017, 15 percent of global output, and that the US will take over from OPEC as the preeminent power in the world oil market.