Jordan’s Path to Stability: The Secrets of State Survival

Economic Difficulties Will Persist The Arab monarchies of the Persian Gulf--Kuwait, Saudi Arabia, Bahrain, Qatar, United Arab Emirates (UAE), and Oman--grouped in the Gulf Cooperation Council (GCC) face economic problems. Adjusted for inflation, their oil income is less today than 15 years ago, while their populations are 50 percent larger. During the oil boom years from 1973 through 1984, the false impression was created that the GCC countries were world-class economic powers. For the moment, they were important in world financial markets, when the oil revenues were flooding in faster than could be spent. The image of this period remains in the minds of many, even though the reality has long since changed. The only GCC state with significant foreign assets, above the normal needs of a central bank for smoothing out fluctuations, is Kuwait. And those assets are endangered by the large deficits in Kuwait's budget. Nor are the GCC countries fabulously wealthy any longer. At the height of the oil boom fifteen years ago, they were the world's richest countries: per capita income in the GCC states exceeded that in the United States then. The situation is entirely different now. In 1995, the six GCC states have a collective GDP of about $210 billion, and a total population of 24 million, giving them a GDP per capita of $8,700. That is one-third of the U.S. level and two-thirds of the Israeli level. To be sure, the GCC figures are distorted by the large numbers of low income foreign workers. Comparing the GDP to only the citizen population of 13 million, the GDP per citizen works out at $16,000, or two-thirds of the U.S. level and the same as for Israel's Jewish population. In other words, the GCC states are economically at the cusp between developing nations and industrial states--they are not at the economic level of the major industrial powers. The prospects for the GCC economies remain dependent on the world oil outlook. The International Energy Agency forecasts that the demand for oil will increase briskly over the next fifteen years, resulting in higher prices and in a sharp increase in GCC output, even factoring in Iraq's eventual return to oil markets. But similar forecasts of a recovery in GCC oil income have been made steadily for ten years and have been consistently wrong. The forecasts have consistently underestimated the steady expansion of oil output from non-OPEC sources other than the CIS, which looks set to continue. Indeed, because of advancing technology that reduces production costs and makes possible production from previously uneconomical fields (primarily in the Gulf of Mexico), U.S. oil output may increase in the next decade. Given the history of overly optimistic projections, the GCC states would be well advised to base their plans on cautious forecasts about future income. It is entirely possible that the current era of constrained resources will persist for the indefinite future. Even under the most optimistic forecasts from government or industry sources, oil income per capita will not return to the levels of 1973-84. Governments will have to continue economizing, spending less on services and subsidies than what the population has come to expect. While economists can readily point out inefficiencies and areas for economizing, the need to win acceptance of constraining changes will delay efforts to balance the budget. Following the experiences of other countries, GCC deficits are likely to shrink no more than two percent of GDPs per annum. That means Kuwait, with a deficit about 20 percent of GDP (the largest in the GCC), is not likely to have a balanced budget in this decade. Most of the GCC countries will have to borrow significant sums abroad by the end of the decade. Domestic Politics Will Become More Lively During the last twenty years, the domestic politics of the Gulf states were remarkably quiet for countries undergoing profound socio-economic changes. …

The United States and state and non-state actors in the Middle East have impacted and influenced one another mightily since the conclusion of the Cold War. In terms of economic exchange, political deliberation, and military engagement, the Middle East has left an indelible mark on American commerce, diplomacy, and security—and vice versa. America’s post–Cold War experience in the Middle East began during the first Bush administration following two events in 1991: The US-led liberation of Kuwait from Iraqi occupation and the dissolution of the Soviet Union. These heralded a unipolar world order where American values and interests promulgated via diplomacy on the Israeli-Palestinian conflict, deterrence of Iraq and Iran, and defense arrangements with Arab monarchies and select republics. Following the Clinton administration’s tenure in the 1990s, US hopes for orderly oversight of the Middle East crumbled on 11 September 2001. In the subsequent two years, the United States assembled coalitions of various strength and legitimacy to intervene in Afghanistan and Iraq. Despite insistence from Arab partners (aside from Kuwait) that an invasion of Iraq would destabilize the Gulf and augment Iranian influence, the Bush administration launched a war that contributed, in part, to the rise of the so-called Islamic State (ISIS). The Obama administration’s engagements in the Middle East were multifaceted, ranging from diplomacy and intervention during the Arab Spring regional uprisings and revolutions, coercion against ISIS through a global coalition, and the passage of the Joint Comprehensive Plan of Action (JCPOA) Iran nuclear deal. The Trump administration premised its Middle East policy on confrontation with Iran, embodied in Maximum Pressure, and Arab-Israeli normalization through the Abraham Accords. These twin policies interlinked the United States with Yemen, the monarchies of the Gulf Cooperation Council (GCC), Morocco, and—to some extent—Sudan. The Biden administration’s ambitions for a recalibration toward the Indo-Pacific region, showcased through its hasty withdrawal from Afghanistan, confronted the lingering realities of the Israeli-Palestinian conflict. The Hamas attack into Israel on 7 October 2023, and the Israeli response in the Gaza Strip, tested US diplomacy and deterrence. The United States navigates a strained alliance with Turkey and a Middle East becoming more multipolar as competition for energy resources and logistical routes ensues. A renewed Trump administration enters a Middle East wherein the United States is undeniably entrenched, but where numerous policy shortfalls have fundamentally eroded the power and prestige it enjoyed in the early 1990s.

Oil and gas are key energy sources in the Gulf Cooperation Council (GCC) region. The present study examines the asymmetrical environmental effects of these energy sources and also tests the environmental Kuznets curve (EKC) from 1975 to 2019. In the long run, the EKC is corroborated in Kuwait and Saudi Arabia. But the EKC is not validated in the GCC Panel. Increasing oil consumption raises carbon dioxide (CO2) emissions in all investigated GCC countries, and decreasing oil consumption reduces CO2 emissions in Kuwait, Oman, Saudi Arabia, and the United Arab Emirates (UAE). The effect of oil consumption is found asymmetrical in Qatar and symmetrical in the rest of GCC countries. Increasing natural gas consumption (NGC) carries a positive effect in all investigated GCC countries, and decreasing NGC reduces emissions in Oman, Qatar, and the UAE. Moreover, NGC's effects are asymmetrically in all GCC countries except Qatar. In the panel estimates, both increasing and decreasing oil and NGC have positive effects on CO2 emissions. The long-run effect of oil consumption on CO2 emissions is larger than the effect of NGC in most GCC economies and panel results. In the short run, increasing and decreasing oil consumption and NGC have a positive effect on emissions in all investigated economies except Saudi Arabia. In the long run, coefficients of decreasing oil consumption are found significantly greater than coefficients of increasing NGC in Kuwait, Oman, Saudi Arabia, the UAE, and the whole GCC. This finding corroborates that increasing CO2 emissions with increasing NGC is lower than decreasing CO2 emissions with decreasing oil consumption. Hence, we recommend these countries switch from oil consumption to NGC to reduce overall CO2 emissions.

Brief Synopses of New Arabic-Language Publications

PurposeThis study investigates the presence of risk–return trade-offs in the Gulf Cooperation Council (GCC) stock markets. As emerging financial markets, GCC economies exhibit distinct structural characteristics, such as limited international participation, high dependence on oil revenues and evolving financial regulations. While conventional finance theory suggests a positive risk–return trade-off, empirical evidence on this relationship remains mixed, particularly in less developed financial markets. This study aims to examine whether higher risk is rewarded with higher returns in the GCC stock markets.Design/methodology/approachWe analyze data from all six GCC stock markets over 15 years (January 2009–December 2024), utilizing nine distinct risk measures derived from three dimensions: mean-centered risk framework, downside risk and investor tail risk sensitivity. Additionally, a portfolio-level analysis is conducted to provide a comprehensive understanding of risk–return dynamics in the region.FindingsThe results indicate that the GCC market outperforms the US Treasury bond market at the aggregate level, with the UAE stock market exhibiting the highest return performance, followed by Saudi Arabia, Bahrain and Qatar. However, the findings reveal an anomalous risk–return relationship in several GCC markets, where increased risk does not correspond to higher returns. Notably, the Kuwait market offers a lower risk premium, while Oman exhibits negative excess returns, penalizing investors rather than rewarding them for taking additional risks. The absence of a positive risk–return relationship challenges financial theories in the context of GCC markets.Practical implicationsThese findings carry significant implications for multiple stakeholders Investors and portfolio managers: The lack of a clear risk premium in certain GCC markets suggests that investors should adopt selective market exposure strategies rather than assuming a uniform risk–return trade-off across the region. Regulatory authorities: Policymakers should focus on enhancing financial market efficiency, addressing market inefficiencies and improving investor confidence to attract foreign capital. Academia and financial research: By documenting a deviation from the conventional risk–return relationship in the GCC region, this study contributes to the growing literature on emerging market anomalies and calls for further research into market microstructures, investor behavior and economic policy implications in frontier economies.Originality/valueThis study is among the first to comprehensively examine the risk–return trade-off in the GCC stock markets using a multidimensional risk framework. The findings challenge traditional asset pricing models and provide valuable insights for investors, regulators and researchers interested in the dynamics of emerging and frontier markets.

The article examines the policies of the Gulf Cooperation Council (GCC) members during the period of sharp tension in the Middle East region caused by the Israeli armed operation in Gaza. These states interested in ending the war and resolving humanitarian issues. Their main focus was to prevent the conflict from expanding and the outbreak of a full-scale war, for the implementation of their plans for economic reform. Their contacts with Arab and Muslim states and the USA and the EU, were dictated by the desire to achieve these goals. Saudi Arabia, as the leader of the GCC, used diplomatic tools to stop the negative developments. After diplomatic relations between the Saudi Kingdom and Iran were restored in 2023, direct contacts between the two countries leaders became possible. Official representatives of two countries maintained constant contacts to abandon a direct military conflict, both between Israel and Iran, and between Israel and other “resistance forces” supported by Iran. The author analyzes the approaches of GCC states to achieve de-escalation of regional tensions by resolving the Arab-Israeli conflict based on the parameters set out in the Arab Peace Initiative and UN Security Council resolutions, which provide for the creation of an independent Palestinian state within the 1967 borders and with its capital in East Jerusalem. To create a reliable system of regional security, the Arab monarchies considered it necessary to pay close attention to the activities of armed groups not controlled by state power, as destructive and threatening regional security.

Following their initial integration in the early 80s’, the Gulf Cooperation Council (GCC) members made a strategic move in 2001 by planning for the launch of their own common currency in 2010. This paper analyses the likelihood of this project by comparing key critical economic components using a t-test and putting them in correlation with those of the European Union countries prior to the launch of the Euro currency in 1999. Without considering other important exogenous factors implying political, social and religious cohesion, the results show that despite their wealth accumulated over the past four decades and their relative strong economies the GCC members haven’t reached a full state of integration yet. Moreover, a decision regarding the choice of exchange rate regime for their currency is to be made as well. Converging their fiscal policies and reaching consensus over the role of the GCC Central Bank and its location are other key milestones to achieve to date. The recent events in Europe and the political and economic disparities observed there over the past few months may also leave uncertainty about the launch and sustainability of the future GCC Currency Union.

Click to increase image sizeClick to decrease image size Notes I would like to thank Andrew Baker, Eric Helleiner, Jonathan Kirchner, Hubert Zimmerman, Paul Bowles and the anonymous reviewers for their comments on earlier drafts. See Ronald I. McKinnon, 'The Euro Threat is Exaggerated', The International Economy, Vol.12, No. 60 (1998), pp. 32–3. Ed Blanche, 'Iran takes on US but at what cost?', The Middle East, March 2006, p. 23. International Institute for Finance, Regional Briefing Gulf Cooperation Council, 31 May 2007, http://iif.com/emr/emr-af See Louise Story, 'An Oracle of Oil Predicts $200-a-Barrel Crude', The New York Times, 21 May 2008. IMF, Regional Economic Outlook: Middle East and Central Asia (International Monetary Fund, 2008), p. 44. http://www.imf.org/external/pubs/ft/reo/2008/MCD/eng/mreo0508.pdf IMF, Regional Economic Outlook, 2008, p. 61. International Institute for Finance, Regional Briefing Gulf Cooperation Council. George Magnus, 'Petrodollars: Where are they and do they matter?', UBS Investment Research, 19 July 2006, p. 5. Siddiqi Moin, 'Gulf Cooperation Council Goes for Growth', The Middle East, 1 December 2006. McKinsey & Company. 'The New Power Brokers: How Oil, Asia, Hedge Funds, and Private Equity are Shaping Global Capital Markets', The McKinsey Quarterly, October 2007, http://www.mckinsey.com/mgi/publications/The_New_Power_Brokers/ International Institute for Finance, Regional Briefing Gulf Cooperation Council Ewe-Ghee Lim, The Euro's Challenge to the Dollar, IMF Working Paper no. 06/153, IMF, 2006, p. 20. Eric Helleiner, 'Political Determinants of International Currencies: What Future for the US Dollar?', Review of International Political Economy, Vol. 15, No. 3 (2008), pp. 354–78. See Danske Bank, 'Will the decline in USD become disorderly?', FX Crossroads, 14 November 2007. The IMF has also argued that the high oil prices cannot be explained by the 'fundamentals' and points to market speculators as a key factor in higher prices. See IMF, Regional Economic Outlook, p. 27. Musa Essayad & Ibrahim Algahtani, 'Policy Issues Related to Substitution of the US Dollar in Oil Pricing', International Journal of Global Energy Issues, Vol. 23, No. 1 (2005), p. 75. Government Accounting Office (GAO), The US–Saudi Arabian Joint Commission on Economic Cooperation', GAO, ID 79-7, 22 March 1979. Edward Morse, 'A New Political Economy of Oil?', Journal of International Affairs, Vol. 53, No. 1 (1999), p. 4. David E. Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Cornell University Press, 1999), pp. 105–26. Musa Essayad & Donald Marx, 'OPEC and optimal currency portfolios', Oil, Gas, and Energy Quarterly, Vol. 49, No. 2 (2001), pp. 363–84. See also Oystein Noreng, 'Oil, the Euro, and the Dollar', Journal of Energy and Development Vol. 30, No.1 (2004), pp. 53–80. See Bessma Momani, 'Reacting to Global Forces: Economic and Political Integration of the GCC', Journal of the Gulf and Arabian Peninsula Studies, Vol. 38, No. 128 (2008), pp. 46–66. Oystein Noreng, 'The euro and the oil market: new challenges to the industry', Journal of Energy Finance and Development, Vol. 4, No. 1 (1999), pp. 29–68. Gregory Gause, 'Relations between the Gulf Cooperation Council States and the United States', Gulf Research Center, Dubai, 2004. Simon Bromley, 'The United States and the Control of World Oil', Government and Opposition, Vol. 40, No. 2 (2005), p. 244. Essayad & Marx, 'OPEC and optimal currency portfolios', pp. 364–84. Essayad & Algahtani, 'Policy Issues Related to Substitution of the US Dollar in Oil Pricing', p. 72. See Noreng, 'Oil, the Euro, and the Dollar'. Benjamin Cohen, 'The Geopolitics of Currencies and the Future of the International System', Paper prepared for a conference on The Geopolitics of Currencies and Oil, Madrid, 7 November 2003, pp. 18–9. Russian President Putin first alluded to the idea of using petroeuros instead of petrodollars in 1999 during an EU meeting in Helsinki, and again in a news conference with the German Chancellor in Yekaternburg in 2003. In the later meeting, Putin remarked: 'We do not rule out that it [petroeuro] is possible. That would be interesting for our European partners … but this does not depend solely on us. We do not want to hurt prices on the market.' Quoted from Catherine Belton, 'Putin: Why not price oil in Euro?,' Moscow Times, 10 October 2003, p. 1. William Clark, Petrodollar Warfare: Oil, Iraq and the Future of the Dollar (New Society Publishers, 2005), p. 31. As US rationales for war in Iraq have continued to be exposed for naught – weapons of mass destruction, Iraqi connection to 9/11, spreading democratisation in the Middle East – radical critics have charged that the real motivation behind the war in Iraq was to prevent other OPEC members from also selling oil in euros. See Clark, Petrodollar Warfare, p. 31. 'Iran Ends Oil Transactions in US Dollars', The Associated Press, 30 April 2008. Gause, 'Relations between the Gulf Cooperation Council States and the United States', pp. 17–8. Morse, 'A New Political Economy of Oil?', p. 13. Kamran Dadkhah, 'Futures market for Crude Oil', in Siamack Shojai & Bernard S. Katz (eds), The Oil Market in the 1980s (Praeger, 1992), pp. 210–11. Morse, 'A New Political Economy of Oil?', p. 21. Elitza Mileva & Nikolaus Siefried, 'Oil Market Structure, Network Effects and the Choice of Currency for Oil Invoicing', Occasional Paper Series, European Central Bank, 2007. See Katherine Stephan, 'Oil Companies and the International Oil Market', in Svetlana Tsalik & Anya Schiffrin (eds), Covering Oil: A Reporter's Guide to Energy and Development (Open Society Institute, 2005), pp. 47–60. Robert Looney, 'A Euro-Denominated Oil Bourse in Iran: Potential Major Force In International System?', Gulf Research Centre, Dubai, 2006, p. 8; Noreng, 'Oil, the Euro, and the Dollar', p. 40. Javad Yarjani, Head of the Petroleum Market Analysis Department, OPEC, 'The Choice of Currency for the Denomination of the Oil Bill', Speech given at Oviedo, Spain at a meeting on The International Role of the Euro, convened by the Spanish Minster of Economic Affairs, 14 April 2002. Mark Irvine, 'Long Shot: The prospects for a Conversion to Euro Pricing in Oil Markets', Elements, Vol. 1, No. 1 (2005), pp. 63–8. Mark Irvine, 'Long Shot'. Yarjani, 'The Choice of Currency for the Denomination of the Oil Bill'. Iran has already started to trade oil in euros in bilateral contracts with the EU and has a US$70 billion gas deal with China (the second largest oil consumer), but pricing remained set in US dollars. In December 2006, Iran also announced that its Central Bank would replace all dollar assets and future foreign transactions with euros. Looney, 'A Euro-Denominated Oil Bourse in Iran?', p. 8. Ibid., p. 8. It should be noted that because oil pricing is more market-based, the kind of state bargains used to decrease oil prices are now less successful and oil markets are more vulnerable to political crises and risk in oil-producing states. So, oil markets can lead to steep increases in oil prices despite consistent supply because risk is factored into oil prices. Irvine, 'Long Shot'. Spiro, The Hidden Hand of American Hegemony. Spiro, The Hidden Hand of American Hegemony, p. 37. Government Accounting Office (GAO), 'Are OPEC Financial Holdings A Danger to the US Banks or the Economy?', GAO, ID 79-45, 11 June 1979. See Looney, A Euro-Denominated Oil Bourse in Iran, p. 8. See GAO, The US–Saudi Arabian Joint Commission on Economic Cooperation. Ibid., p. 36. Ibid., p. 48. See 'Saudi Arabia: Current Issues and U.S. Relations', Congressional Research Service, Library of Congress, 2006. Don De Marino, 'How Can the U.S. Reopen For Business To The Arab World?', Middle East Policy, Vol. 13, No. 2 (2006). Heather Timmons, 'Asia finding rich partners in Mideast', The New York Times, 1 December 2006. Lawrence Summers, 'Funds that shake capitalist logic', The Financial Times, 29 July 2007. See Henry Paulson, 'Paulson Remarks On Open Investment Before the US–UAE Business Council', US Department of Treasury, 2 June 2008, http://www.ustreas.gov/press/releases/hp1001.htm 'The Petrodollar Puzzle', The Economist, 9 June 2007, p. 86. Moin, 'Gulf Cooperation Council Goes for Growth'. Christian Menegatti & Brad Setser, 'Are GCC Dollar Pegs and Impediment to Global Adjustment? And Does Pegging to the Dollar Make Domestic Sense?', Roubini Global Economic Service, 2006. See 'Gulf Investments and Its Trends', Gulf Industrial Bulletin, GOIC, 2006, http://www.goic.org.qa/relatedDocs/GIB/GIB66_E.pdf See Andrew Cooper & Bessma Momani, 'The Challenge of Re-branding Countries in the Middle East: Opportunities through New Networked Engagements versus Constraints of Embedded Negative Images', Paper presented to the International Studies Association Annual Conference, San Francisco, 26–29 March 2008. See Matteo Legrenzi, 'Did the GCC Make a Difference? Institutional Realities and (Un)Intended Consequences', in Cilja Harders & Matteo Legrenzi (eds), Beyond Regionalism? Regional Cooperation, Regionalism and Regionalization in the Middle East (Ashgate, 2008), pp. 107–24. IMF, Regional Economic Outlook, p. 8. Moin, 'Gulf Cooperation Council Goes for Growth'. Economics Intelligent Unit (EIU), 'Near East meets Far East: the rise of Gulf investment in Asia', September 2007. Ibid., p. 5. Ibid., p. 7. Ramin Toloui, 'Petrodollars, Asset Prices, and the Global Financial System' Capital Perspectives, PIMCO, January 2007, p. 6. Institute of International Finance, 'Regional Briefing Gulf Cooperation Council', p. 4. Ibid., p. 4. Ugo Fasano & Zubair Iqbal, 'Common Currency', Finance and Development, Vol. 39, No. 4 (2002), pp. 1–7, are optimistic that with added institutionalisation, like the creation of a regional central bank, the GCC's currency unification should produce positive results. For GCC currency unification to succeed, as some economists have argued, the GCC needs to liberalise capital and labour mobility, have flexible prices and wages, and have a fiscal transfer system. See 'Lyons Raises Doubts over GCC Common Currency,' Middle East Economic Digest (MEED), Vol. 50, No. 6 (2006), p. 24. See Brad Sester, 'The Case for Exchange Rate Flexibility in Oil-Exporting Economies', Policy Brief, Peterson Institute for International Economics, November 2007. Kuwait which had used a basket of currencies, aligned its currency closer to the dollar in preparation for the currency union in 2003 and then again de-pegged its currency in 2007. 'The Dollar: Time to break free', The Economist, 22 November 2007. IMF, Regional Economic Outlook, p. 3. Jeffrey Frankel, 'A Proposed Monetary Regime for Small Commodity Exporters: Peg to the Export Price', International Finance, Vol. 6, No. 1 (March 2003), pp. 61–88. See 'UAE Rejects calls to drop the dollar', Khaleej Times, 29 February 2008. See 'Countdown to lift-off', The Economist, 22 November 2007. Outside the GCC, moreover, Syria also announced that it would use euros in government transactions as opposed to dollars and a number of other Middle East central banks hinted of adopting similar policies in reaction to the failed ports deal. See Philip Thornton, 'Arab central banks move assets out of dollar', The Independent, 14 March 2006. Veronica Brown, 'DIFC CEO sees more Gulf FX moves away from dollar', Reuters, 25 March 2007. See Sester, 'The Case for Exchange Rate Flexibility in Oil-Exporting Economies'; Gerard Lyons, 'Middle East must loosen ties to the dollar,' The Financial Times, 6 December 2007. The name for the proposed currency has yet to be decided upon. Some media reports have referred to it as the Khaleej Dinar, although this will be a contested term. 'Regional Currency Areas and the use of Foreign Currencies', BIS Papers, No. 17 (2003), available at http://www.bis.org/publ/bppdf/bispap17.pdf Emilie Rutledge, 'Gulf Monetary Union is a cracking project?', Gulf News, 16 December 2006; see also Menegatti and Setser, 'Are GCC Dollar Pegs and Impediment to Global Adjustment?' Gaurav Ghose, 'UAE Doubts union deadline', Gulf News, 18 December 2006; see also Rutledge, 'Gulf Monetary Union is a cracking project?' Mohammed Abbas, 'Bahrain to ditch dollar peg, report claims', Reuters, 11 December 2007. Andrew England, 'Saudis urged to revalue riyal', The Financial Times, 13 January 2008. Simeon Kerr, 'Qatar considers dropping dollar peg', The Financial Times, 30 January 2008. Noreng, 'Oil, the Euro, and the Dollar'. Henner Furtig, 'GCC–EU Political Cooperation: Myth or Reality?', British Journal of Middle Eastern Studies, Vol. 31, No. 1 (2004), p. 30. Furtig, 'GCC–EU Political Cooperation', p. 30. Bessma Momani, 'A Middle East Free Trade Area: Economic Interdependence and Peace Considered', The World Economy, Vol. 30, No. 11 (2007), pp. 1682–700. Bessma Momani, 'Reacting to Global Forces: Economic and Political Integration of the GCC', Journal of the Gulf and Arabian Peninsula Studies, Vol. 38, No. 128 (2008), pp. 46–66. Agata Antkiewicz & Bessma Momani, 'Pursuing Geopolitical Stability through Interregional Trade: The EU's Motives for Negotiating with the Gulf Cooperation Council (GCC)', CIGI Working Paper 31, Centre for International Governance and Innovation, 2007. Daniel Hanna, 'A New Fiscal Framework for GCC Countries Ahead of Monetary Union', International Economics Programme, Vol. 6, No. 2 (2006), p. 7. See Marc O'Reilly & Wesley Renfro, 'Evolving Empire: America's 'Emirates' Strategy in the Persian Gulf', International Studies Perspectives, Vol. 8, No. 2 (2007), pp. 137–51. Furtig, 'GCC–EU Political Cooperation', p. 30. Eckart Woertz, 'The Role of Gold in the Unified GCC Currency', Gulf Research Centre, Dubai, 2005.

Arab Authoritarianism, Arab Uprisings, and the Future Saliba Sarsar (bio) Authoritarianism–a form of government that favors a strong chief executive; a limited separation of power; reduced rule of law; constrained voting; and weak pluralism–is alive and well in many Arab countries. Their transitions to democracy remain stalled.1 This article will examine this reality by first distinguishing between authoritarian regimes and democratic rule, second by examining three of the main causes of the Arab uprisings during the 2010-2020 period, and third by suggesting a more promising future in ruler-ruled relationships in Arab countries. Authoritarian Regimes versus Democratic Rule In authoritarian regimes, a single leader, usually supported by a small elite group, has wide control over state institutions and its processes. Constitutions are followed to serve and secure the governing body, not challenge it.2 The judiciary is present but there is no guarantee that the rule of law is applied in [End Page 121] an equitable and impartial manner. Legislatures or parliaments, if they exist at all, are more likely limited to have advisory and ceremonial functions, hardly impacting their governments' crucial decisions. Political rivals, potential or otherwise, are commonly neutralized. Opposition parties and movements rarely have wide latitude to cause major changes in policies. Civil liberties and political rights are restricted, and the public has little to no influence on state decisions. While elections are not always free or fair, they are held regularly for presidents and national parliaments. The executive branch closely monitors the status of election districts and those running for office to ensure results are always in its favor. Pluralism that makes room for citizens' differing choices–cultural, economic, political, religious, and social–and for inclusion is not fully embraced. Obviously, not all authoritarian states are alike. Two main regime types are monarchies and republics. In the context of the Arab Middle East, while the former is best illustrated by the presence of a king, sultan, emir, or sheikh, the latter is demonstrated by a president or prime minister.3 Both types have a monopoly on the instruments or mechanisms of military and financial power structures. In monarchies, political tenure is normally secured through heredity and lasts for life. In a presidential republic, acquisition of power is reached through the avenue of a political party win or a military overthrow of government. Political tenure is or becomes prescribed by the constitution but sometimes is extended through controlled elections or constitutional means. This occurred in Egypt in 2019 when the constitution was amended to prolong the tenure of President Abdel Fattah el-Sisi and ensure his consolidation of power. If a major leadership change is to happen before its due time, it results mostly from the abdication, overthrow, assassination, or death of the king or president. Arab monarchies are found in Bahrain, Jordan, Kuwait, Morocco, Qatar, Oman, Saudi Arabia, and United Arab Emirates. Among the Arab authoritarian republics are those found in Egypt and Syria. In contrast, democracy enables citizens to utilize their public potential through civil liberties and political rights. It gives individuals space to practice their freedoms–political, religious, social, and economic. Citizens are empowered through voting, joining of political organizations, and holding public office. Their voice matters, as popular consent is a central element to [End Page 122] the legitimacy of rule. Essential attributes of a democracy are well-functioning legislatures, independent judiciaries, and a free media. It is suggested that "the more that people are free to govern and actualize themselves, the more democratic they become."4 The more that their democratic participation and human rights are respected, the more dignified they feel.5 Arab Countries and Arab Springs While Arab countries have engaged over the years in various efforts at liberalization or political reform toward good governance, political accountability, and transparency, which are among the key elements of democracy, these have been inconsistent or weak at best. In his evaluation of political reform in Arab countries two years prior to the Arab Spring, Marwan Muasher wrote: Though ad hoc programs to expand certain political freedoms had been undertaken here and there, no Arab country could claim a systematic process of political reform that would encourage the kind of...

Adam Hanieh Capitalism and Class in the Gulf Arab States, Palgrave Macmillan: New York, NY, 2011; 266 pp: 9780230110779, $95 (hbk) Oil-rich countries of the Gulf are mainly conceptualised as rentier-economies characterised by the reliance on oil as the main revenue, and by the importance of oil as the overall economic activity (see Loslan 2010). Capitalism and Class in the Gulf Arab States, however, despite recognising some insights of this approach and the importance of oil for the region, delivers a critical way of approaching the countries of the Gulf Cooperation Council (GCC) composed of Saudi Arabia, the United Arab Emirates (UAE), Qatar, Bahrain, Kuwait and Oman. The book portrays them 'not simply [as] monarchies that sit atop an oil spigot' (p. vii), but as capitalist states representing a particular expression of class formation that 'has evolved alongside and within the development of a global capitalist system, and is best seen as a specific reflection of a global capitalist world market as a whole' (p. 16). This is illustrated by some crucial developments concerning the GCC region. First, with its increased demand for oil, the new political economy of postwar capitalism turned the GCC region, with its huge oil reserves, into a central part of the capitalist world economy. Second, the 'petrodollars' flowing from the GCC region to capitalist centres were recycled as loans to multinational companies, governments and other borrowers, and, since the early 2000s, constituted one of the cornerstones in 'propping up global markets [and] in the adjustment of global economic imbalances' (Morgan Stanley, cited on p. 98). Third, the industrial development of East Asia, especially that of China, triggered the export of oil and gas from the GCC region eastwards, creating important economic links between these regions, whereas the US-GCC trade is dropping. This is the reason why a chief economist in Dubai's International Financial Centre stated that the Gulf 'will be dancing to a Chinese tune; this is a tectonic shift in economic and political power eastwards ... this is where our future lies' (quote from p. 184). The fourth and last crucial development is the rapid industrial development of GCC countries, which turned them into an important market for world exports and services. A novel contribution of Capitalism and Class in the Gulf Arab States is the analysis of the formation of a capitalist class within the region. This class--termed 'Khaleeji capital' --emerged essentially through state-led redirections of oil revenues to leading merchant families and other elites. Based upon Marx's analysis of the circuit of capital, the book analyses the productive, commodity and financial circuits of 'Khaleeji capital' from the late 1960s to 2008. Through nationalisations of the exploration and production of oil in the early 1970s, the productive circuit mainly encompassed refining petroleum, distributing crude oil and gas, and producing aluminium, steel and cement. Since the 1990s, however, manufacturing and construction turned out to be important sectors as well. The dominance of the oil industry and the heavy reliance on imports is of special importance for the commodity circuit, as imports were only allowed if the products imported were represented by a local agent. And the states granted this representation right to leading merchants. During the 2000s, the Gulf region turned into a significant market for the import of consumer goods. But with the development of industrial manufacturing, the import of machinery and heavy equipment increased, too. The finance circuit, an integral part of the global economy since the late 1960s, was first characterised by flows of 'petrodollars' to capitalist centres. But especially since the early 2000s, the region attracted major capital flows, too. From 1997 to 2007, the Gulf region was the fastest growing region for FDI inflows in the world. This book argues that the rapid and ascending development of 'Khaleeji capital' is inseparably tied to the presence of temporary migrant workers. …

Korean Abstract: 본 연구는 최근 국제유가 하락에 따라 한ㆍ중동 경제협력이 위축될 것이라는 우려가 있지만, 유가 하락이 중동 산유국에는 오히려 경제 체질을 개선할 수 있는 기회가 될 수 있고, 우리는 이러한 기회요인을 적극적으로 활용하여 향후 한ㆍ중동 동반성장을 위한 지속적인 경협관계를 만들어나가야 한다는 점을 제시한다는 데 의의가 있다. English Abstract: The aim of the research is to suggest economic cooperation framework between Korea and the Middle East in the times of lower oil prices. A rapid decline of oil prices since the second half of 2014 has negatively impacted on economy of the GCC(Gulf Cooperation Council) countries which heavily depend on oil and gas sector. GCC countries are facing economic recession with the worsening of the financial situation, lack of liquidity and decrease of investment. The sharp drop in oil revenues due to lower oil prices caused government fiscal distress and made the GCC countries use accumulated foreign exchange reserves and sovereign wealth fund. They also prioritize projects focusing on social infrastructure including education and public services, leading to decrease of number of project contracts awarded in the GCC region. In response to the economic slowdown and fiscal burden, GCC countries have strengthened policy measures for economic diversification. They have promoted various supporting policies to nurture their strategic industries - most notably the renewable energy sector - and competitive small and medium-sized enterprises in the region. In order to regain fiscal soundness, GCC countries have been trying to cut their energy subsidies and revise the tax system, expanding government loans and privatization of their state-owned companies than the past. Moreover, they are making more efforts to increase foreign direct investment inflows with improvement of business environment and PPP(Public-Private Partnership) procedures. The economic difficulties facing the GCC countries due to lower oil prices is causing a significant concern over dwindling economic cooperation between Korea and the GCC countries. In response to this, a new cooperation framework is needed to strengthen bilateral ties for shared growth. Four fields of cooperation can be identified as follows. First, industrial cooperation should be reinforced to expand economic diversification and job creation in the GCC countries. Second, energy cooperation should be broadened into the fields of renewable energy development and energy efficiency technology other than energy trade. Third, investment cooperation need to be strengthened to facilitate joint investment in the region including joint ventures. Fourth, institutional cooperation between governments is needed to share Korean institutional reforms in the fields of tax, subsidy, privatization, FDI and so on, deepening mutual understanding of economic partners for co-development.

The creation of a monetary union has been the primary objective of the Gulf Cooperation Council (GCC) members since the early 1980s. Significant progress has already been made in regional economic integration: The GCC countries have largely unrestricted intraregional mobility of goods, labor, and capital; regulation of the banking sector is being harmonized; and in 2008 the countries established a common market. Further, most of the convergence criteria established for entry into a monetary union have already been achieved. In establishing a monetary union, however, the GCC countries must decide on the exchange rate regime for the single currency. The countries’ use of a US dollar peg as an external anchor for monetary policy has so far served them well, but rising inflation and differing economic cycles from the United States in recent years has raised the question of whether the dollar peg remains the best policy.Mohsin Khan considers the costs and benefits of alternative exchange rate regimes for the GCC. These include continued use of a dollar peg, a peg to a basket of currencies such as the SDR or simply the dollar and euro, a peg to the export price of oil, and a managed floating exchange rate. In light of the structural characteristics of the GCC countries, Khan considers the dollar peg the best option following the establishment of a GCC monetary union. The peg has proved credible and is easy to administer. If further international integration in trade, services, and asset markets makes a higher degree of exchange rate flexibility desirable in the future, implementing a basket peg could provide this flexibility. Regardless, the choice of exchange rate regime for the GCC countries need not be permanent: The countries could initially peg the single GCC currency to the US dollar and then move to a more flexible regime as their policy needs and institutions develop.

The creation of a monetary union has been the primary objective of the Gulf Cooperation Council (GCC) members since the early 1980s. Significant progress has already been made in regional economic integration: The GCC countries have largely unrestricted intraregional mobility of goods, labor, and capital; regulation of the banking sector is being harmonized; and in 2008 the countries established a common market. Further, most of the convergence criteria established for entry into a monetary union have already been achieved. In establishing a monetary union, however, the GCC countries must decide on the exchange rate regime for the single currency. The countries' use of a US dollar peg as an external anchor for monetary policy has so far served them well, but rising inflation and differing economic cycles from the United States in recent years has raised the question of whether the dollar peg remains the best policy. Mohsin Khan considers the costs and benefits of alternative exchange rate regimes for the GCC. These include continued use of a dollar peg, a peg to a basket of currencies such as the SDR or simply the dollar and euro, a peg to the export price of oil, and a managed floating exchange rate. In light of the structural characteristics of the GCC countries, Khan considers the dollar peg the best option following the establishment of a GCC monetary union. The peg has proved credible and is easy to administer. If further international integration in trade, services, and asset markets makes a higher degree of exchange rate flexibility desirable in the future, implementing a basket peg could provide this flexibility. Regardless, the choice of exchange rate regime for the GCC countries need not be permanent: The countries could initially peg the single GCC currency to the US dollar and then move to a more flexible regime as their policy needs and institutions develop.

Economic and financial developments in the GCC economies are interwoven with oil price movements. GCC economies are highly dependent on oil and gas exports. Oil price upturns lead to higher oil revenues, stronger fiscal and external positions, and higher government spending. This boosts corporate profitability and equity prices and strengthens bank balance sheets, but can also lead to the buildup of systemic vulnerabilities in the financial sector. Banks in the GCC are well-capitalized, liquid, and profitable at present, and well-positioned to manage structural systemic risks. However, oil-macro-financial linkages mean that asset quality and liquidity in the financial system may deteriorate in a low oil price environment and financial sector stress may emerge. The scope for amplification of oil price shocks through the financial sector suggests a role for a countercyclical approach to macroprudential policies. Countercyclical macroprudential policy can prove useful to reduce the buildup of systemic risks in the financial sector during upswings, and to cushion against disruption to financial services during periods of financial sector stress. The GCC countries have considerable experience with implementing a wide range of macroprudential policies, but these policies have not generally been adjusted through the cycle. GCC central banks implemented several macroprudential measures before the global financial crisis and have continued to enhance their macroprudential frameworks and toolkits to limit systemic financial sector risks. Although there is some evidence of macroprudential tools being adjusted in a countercyclical way, most of the tools have not been adjusted over the financial cycle. Further enhancements to the GCC macroprudential framework are needed to support the countercyclical use of these policies. A comprehensive and established framework, supported by strong institutional capacity, is essential for countercyclical macroprudential policies. This framework should provide clear assignment of responsibilities and guidance on how policies will be implemented to maintain financial stability and manage systemic risks over the financial cycle. Addressing data gaps and the further development of reliable early warning indicators in signaling potential systemic stress are needed to help guide the countercyclical use of a broad set of macroprudential policies. Expanding the countercyclical policy toolkit and its coverage can help address emerging financial sector risks. The implementation of countercyclical capital buffers and dynamic loan loss provisions could boost resilience in line with systemic risks faced in GCC economies. At the same time, using existing macroprudential policies countercyclically would prove useful to address emerging financial sector risks in a more targeted way. Expanding the coverage of macroprudential tools to nonbanks can help boost effectiveness by reducing leakages.

The Gulf Cooperation Council (GCC) of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) inhabits of one of the most water-scarce regions in the world, once comprised small impoverished desert principalities. However, since the 1970s, the GCC has witnessed rapid population growth and economic development, brought on by sharp increases in oil revenues. Population growth coupled with increased urbanization, industrialization, and agricultural output has placed tremendous pressure on the region’s scarce groundwater resources. GCC countries are all using hundreds to thousands times more water than sustainable recharge would allow. Their water footprints, among the highest in the world, are sustained by unconventional sources of water such as desalination, wastewater reuse, and the import of “virtual” water via agricultural goods. This paper analyzes the current state of water in the GCC using a water–energy–food (WEF) nexus approach. The paper discusses various proposals for meeting future water needs in the GCC such as renewable energy-powered desalination and foreign direct investment in agricultural land and addresses the various tradeoffs involved.